Gye Nyame creditors vote for $20mln capital injection


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Creditors of the defunct diamond mine, Gye Nyame Resources on Monday voted in favour of a $20 million capital injection by a potential investor but failed to resolve the issue of who should repay the $5 million owed to Ecobank.

The insolvent mine, whose assets are estimated to be worth $6.6 million, owes creditors $13.5 million of which $5 million is owed to Ecobank through a loan borrowed by one of the shareholders, Bill Minerals at the inception of the project.

Gye Nyame Resources, a joint venture between the state-owned Zimbabwe Mining Development Corporation (ZMDC) and Bill Minerals, represented by Ghanaian businessman William Ato Essien, had its licence revoked last year due to insolvency and failure to adhere to environmental requirements.

The company, which was granted mining concessions in Marange in 2011, was subsequently placed under provisional liquidation on March 26 at the behest of some creditors and final judicial management on June 25.

During a four-hour scheme of arrangement meeting on Monday at a local hotel chaired by former High Court judge, Justice Moses Chinhengo, creditors voted in favour of the $20 million capital injection by Damo Resources Private (Limited) pending regulatory and other approvals.

At least 85 creditors, or 98 percent, voted in favour of the scheme in a poll conducted by chartered accountants – BDO Zimbabwe.

As part of the arrangement, creditors agreed to defer payment of liabilities by 12 to 36 months pending recapitalisation and resumption of operations at the mine.

Creditors further agreed to convert debts to preference shares where a special purpose vehicle would be created to carry out mining exploratory work and related mine development.

The SPV would issue cumulative redeemable preference shares to the creditors with interest payments at a coupon rate of 10 percent per annum while payment would be made every quarter after an initial grace period of 12 months from date of implementation of scheme.

The preference shares would be redeemed in full during a period of not exceeding 36 moths.

Some creditors wanted the period to be reduced to between six and 12 months respectively and for the interest rate to be increased to above 10 percent but provisional judicial manager, Winsley Militala of Petwin Executor and Trust asked the creditors to accept the offer saying it was higher than the statutory six percent provided for by the law for insolvent companies.

ZMDC which was represented by acting general manager, Wilson Chinzou said they were “happy” with the new potential investor although vetting processes would be conducted before recommending Damo to the mines ministry.

“The minister has not yet given us his position. ZMDC has not yet engaged the investor,” he said.

At the meeting, Justice Chinhengo declined to acknowledge Ecobank as a creditor as it did not appear on the creditors list.

“Ecobank is not a creditor of Gye Nyame. ….I am very legalistic, you are either a creditor or not,” he said, adding that the capital that had been borrowed by Bill Minerals to inject into the mine which benefited Gye Nyame indirectly hence the bank could not vote.

Justice Chinhengo said the scheme report which is open for inspection by creditors would be presented to the High Court on February 11.

Gye Nyame came under the spotlight last year when President Robert Mugabe accused former ZMDC chairman, Godwills Masimirembwa, of soliciting a bribe worth $6 million from the company’s Ghanaian investors. Mugabe eventually recanted, saying it was the Ghanaian investors who had misled Zimbabwean authorities.

It is alleged that the Ghanaian investor injected only $8 million out of an agreed $110 million into the business, with further claims that no due diligence was carried out to ascertain his company’s financial capabilities.- The Source

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Charles Rukuni
The Insider is a political and business bulletin about Zimbabwe, edited by Charles Rukuni. Founded in 1990, it was a printed 12-page subscription only newsletter until 2003 when Zimbabwe's hyper-inflation made it impossible to continue printing.

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