 JOHANNESBURG (miningweekly.com) – The fledgling gold-mining company Aurora Empowerment Systems is suffering strain. It is headed by former President Nelson Mandela's grandson and President Jacob Zuma's nephew and it is shedding a large number of jobs. A total of 1 440 jobs are being shed "temporarily" at the Grootvlei gold-mine in Springs, and possibly more than half of that number at the Orkney gold-mine, which could take the total to more than 2 160.
When that news broke, National Union of Mineworkers (NUM) spokesperson Lesiba Seshoka reported that 2 000-plus Aurora workers downed tools at the Grootvlei operation to protest nonpayment of wages and job-loss threats.
Aurora won bids for liquidated Pamodzi gold assets on the basis of retaining full employment and at one stage Aurora was contemplating a listing to raise capital on the JSE.
But that is now remote. Aurora says in a statement that it is in the process of refining its mining operations at the Springs operation, where the Grootvlei gold mine is located, and that the process will result in the loss of 1 440 jobs in order to adjust to market realities. While it says the loss is "temporary", restoration of those jobs is unlikely to be quick.
The Aurora media release referrred to job losses at the Orkney gold-mine in the headline, but provided no detail in the body copy. NUM said Aurora Orkney workers were on Friday promised 25% of their February wages.
Aurora MD Zondwa Mandela told Mining Weekly Online that the omission might have taken place in the rewriting and that retrenchments at Orkney might be a little over one half the Grootvlei number. President Zuma's nephew Khulubuse Zuma is Aurora's chairperson.
"We haven't finalised the number at Orkney yet. We are still in discussion with unions, but it is also part and parcel of our plans," Mandela said.
The Orkney number could be more than 50% of the 1 440 at Grootvlei, which would take the Orkney retrenchment to a possible 720 and the total to 2 160.
"It's all temporary. We want to upscale production, but we really have to first take a step back and restrategise and grow from there and bring people on according to the performance of the operations," Mandela said.
"Aurora deeply regrets having to reduce its work force, but given the current trading circumstances, this decision was unavoidable," he said.
The restructuring would allow the mine to become profitable and cash flow positive from month May 2010.
Aurora would then be in a position to recapitalise shaft by shaft at Grootvlei.
Joint provisional liquidator Ever Motala said that Aurora had put forward a new plan to the liquidators because the mines had not been performing to expectation.
"Aurora is not making any profit at the moment," Motala told Mining Weekly Online.
He said that, as a consequence, Aurora had to shed jobs to make certain improvements and would bring in 200 people a month as the situation improved and in that way would retain all the jobs.
"They've told us that they want to shed 1 440 jobs at Grootvlei immediately, and far fewer at Orkney," Motala said.
Mining Weekly Online understands that capital for the Grootvlei and Orkney operations is coming in slower than envisaged and that the mine plans are flawed.
Harmony Gold's decision to gradually re-employ personnel at President Steyn in the Free State is proving the correct approach rather than Aurora's full immediate re-employment commitment.
Mining Weekly Online understands that Aurora wants to refurbish shafts, take remedial action and then recall personnel on an as-needed basis.
AM private equity fund of Kuala Lumpur, Malaysia, was to underwrite Aurora's proposed capital raising on the JSE, but the listing has not materialised and, given Aurora's current circumstances, is out of the question.
Certain portions were also to be paid in cash.
There are understood to have been five bidders for the Grootvlei gold assets alone and the JSE-listed Simmer & Jack Mines withdrew its R110-million bid for Orkney, ahead of Aurora's successful R215-million bid.
The R215-million Aurora offer was considered to be "on the low side", as the liquidators believed that the Orkney mine was worth close to R300-million.
The Aurora offer saved from R40-million to R60-million in retrenchment costs on the basis that there would be no retrenchments, and Aurora undertook to take over all of the employees as a going concern.
That approach was later repeated at Grootvlei.
Aurora undertook to establish a community trust that would include the provision of healthcare services and had also undertaken to provide in-house funding for housing development for first-time owners and bursaries and educational subsidies to employees' dependants.
The bid was subject to the formal approval of South Africa's State-owned Industrial Development Corporation (IDC), the major secured creditor.
Aurora is also having to deal with worrying water pollution fears at Grootvlei.
A reliable source close to the Grootvlei mine reports that acid mine drainage (AMD) from Grootvlei is going into the Blesbokspruit untreated.
The source adds that there is also concern that the mine's vital underground pump station may flood, as took place in 1996, with dire consequences for surrounding mines.
AMD-induced corrosion was also taking its toll on Grootvlei's steelwork.
The National Union of Mineworkers (NUM) alleges that Aurora underpaid the Grootvlei workers in February and has still to pay them for March.
NUM national spokesperson Lesiba Seshoka says that Aurora has not improved the working and living conditions of workers, as it had hoped.
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