Senior managers of Metallon Corporation’s Mazowe gold mine have filed a new application for corporate rescue with the High Court, about three years after a previous bankruptcy protection order was overturned by a higher court.
Saddled with an alleged debt of US$25 million, primarily accumulated salary arrears, the managers contend that Mazowe Mine, said to hold some of the country’s largest gold deposits, is financially distressed.
Section 121 of the Insolvency Act defines a company as insolvent when it is unable to pay its debts as they fall due.
Mazowe Mine was first placed under corporate rescue in February 2020.
On October 7, 2021, the Supreme Court ruled that Mazowe, alongside its sister company Shamva gold mine, was unlawfully placed under the corporate rescue, setting aside the lower court order that had placed the mines under reconstruction.
The managers claim the company has suffered from poor operational performance over the past decade due to shareholder neglect. The management further argues that immediate rescue efforts are necessary to preserve the company’s going concern status.
In addition to Mazowe and Shamva, Metallon’s gold mining portfolio includes Redwing Mining Company and How Mine.
“That the company is financially distressed is not an assumption but a fact that can be gleaned from how the company has been operating over the past 10 years,” the management argues.
“There is no corporate vision at all. The company is moving without any guidance at all. Workers are being kept at the mine while their salary bill is ballooning and nothing is being done to manage the risk.
“The risk is that the company will be liquidated because there is no one to control” its affairs.
In its opposing court documents, Mazowe Mine argues that the managers are ineligible to file the corporate rescue application because they previously accepted mutually beneficial terms, severing their employee status with the company.
Court filings submitted by the managers reveal that workers are owed US$18 million outstanding in unpaid wages. This figure excludes any additional amounts owed in local currency.
However, Mazowe Mine contests the total, arguing that it includes a portion of the debt that has exceeded the legal limit for claims (become prescribed) and some wages denominated in Zimbabwean dollars.
“The figure is a thumpsuck and is disputed by the company,” argues Mazowe Mine.
Management alleges that a lack of proper oversight at the mine facilitated unauthorised mining activities, resulting in the tragic death of 13 people.
Earlier this year, a harrowing incident occurred at Redwing, a sister mine to Mazowe where 15 miners were trapped underground for about four days but fortunately, all were rescued.
“The company has resorted to selling essential mining equipment. This goes to show how deep in the pits of financial distress the company has fallen.”
Following the Supreme Court’s decision to remove the company from corporate rescue, the managers argue that the shareholders have not shown a commitment to restoring normal operations. Instead, Metallon allegedly hired 66 contractors to mine on its behalf, requiring them to remit 30 percent of the extracted gold to the company.
To save the business, management estimates a minimum fresh capital injection of US$10 million from an institutional investor is needed. These funds would be used to acquire new equipment, implement a staff reduction plan to manage costs, and conduct a headcount to determine the current workforce.
Mazowe argues that the proposed US$10 million capital injection relies on the assumption that the mine holds its own gold claims. However, Metallon, not Mazowe, actually controls the mining leases.
Mazowe claims that if placed under corporate rescue, Metallon could withdraw these mining titles, rendering the rescue process pointless.
Herald
