Following the initiation by the Industrial Development Corporation (IDC) of business rescue proceedings against Kalagadi Manganese, the miner reports that it welcomes a court ruling that the application is not urgent.
On May 29, the Johannesburg High Court struck the IDC’s application off the roll, saying it was not urgent and advised the parties to approach the commercial court for a special hearing.
The IDC filed for business rescue of the mine, through the Johannesburg High Court on April 29, claiming that Kalagadi urgently required the restructuring of its business and its liabilities, as well as a moratorium on debts and other liabilities.
However, Kalagadi says the May 29 judgment enables all parties to continue discussions on the restructuring of the mining company’s facilities.
Kalagadi founder and executive chairperson Daphne Mashile-Nkosi says Kalagadi believes the IDC’s attempt to place the company under business rescue is “thoroughly and comprehensively misguided”.
Towards the end of May, IDC divisional executive for strategy and corporate affairs David Jarvis stated that although Kalagadi was trading, it was financially distressed and was incurring significant monthly expenses. “At the moment, it is unable to service its debt obligations and will probably not be able to honour all of its debts - due in six months.”
At the time, he also stated that while Kalagadi argued in a responding affidavit that it is able to cover its costs, Jarvis said the company owed just over R3-billion to the IDC and R2.9-billion to the African Development Bank (AfDB) and that both these were in default.
However, Mashile-Nkosi says that because of the negative impact on operations caused by the poor performance of its mining contractor, the company had initiated means to restructure its facilities with lenders, including the AfDB and the IDC.
Since July, 2019 she says Kalagadi has communicated to the lenders that the company’s facilities may need restructuring. “We submitted a formal proposal in December 2019 in this regard, and as recently as March 13, we submitted additional information as requested by the lenders.”
Mashile-Nkosi adds that negotiations were progressing until, without any warning and instead of responding to Kalagadi’s application, the IDC took it to court on frivolous claims based on inaccurate information.”
She states that Kalagadi is not insolvent, its employees and creditors continue to be paid and its financial position has stabilised.
Mashile-Nkosi states that Kalagadi does not believe it was necessary to engage its shareholder and lender through the courts. “This matter can be resolved through the negotiations we had already begun.”
She states it was shown to lenders that Kalagadi’s business case is sound and that it is in fact outperforming projections. "We have shown this to our lenders and trust the approval for the restructuring can now be fast-tracked.”
Mashile-Nkosi adds that there is little risk or downside for lenders because their respective investments continue to incur interest and, in particular, Kalagadi is not seeking any cash injections, only a deferment. “Moreover, the assets of Kalagadi far exceed the amounts loaned by the lenders.”
However, she also notes that while Kalagadi remains committed to the negotiations with its lenders, it will unequivocally oppose the IDC should it persist with its “mischievous and unwarranted” court application.