HomeBusiness DigestSA's Metallon faces $67,2b suit

SA’s Metallon faces $67,2b suit

Chris Goko

SOUTH African mining house Metallon Corporation Ltd, which acquired Independence Gold Mining, allegedly breached at least four agreements with Stanmarker Mining (Pvt) Ltd who are now claiming US$1

2 million (about $67,2 billion) in damages, businessdigest can reveal.

Metallon, owned by South African tycoon Mzilikazi Khumalo, had mutually chosen Stanmarker for its local empowerment subscription and participation in the five-mine gold group buy, but later opted for Manyame Consortium, another empowerment grouping, thus triggering the current High Court challenge.

Apart from being sidelined in the final make-up of the deal, Stanmarker cites “bad faith negotiations” and ill-treatment at the hands of co-defendant Khumalo and Metallon, which later courted other parties in the negotiating process, not least that Indepgold’s transfer bargaining process was reached within the three-month September 2002 restraint period.

The Harare company also charges that Metallon went on to hand over the 30% mandatory empowerment quota to other parties virtually uninitiated about Indepgold’s disposal by its former owners, Lonmin plc of Britain.

Metallon completed a cut-price US$15,5 million (about $86,8 billion) purchase of the Zimbabwean miner in late 2002, with British Virgin Islands-domiciled Pemberton International Investments Ltd (Pemberton) as the finally buyer.

On its part, Stanmarker claims entitlement to as much as 40% shareholding in the acquired group – to be consummated by the formation of a pre-determined joint venture firm – and in line with an earlier agreement between the parties.

In its catalogue of queries and main argument for legal recourse, Stanmarker says the defendant infringed four key “legally enforceable” aspects of their June 2002 Heads of Agreement by nominating third parties and not serving joint venture interests and finally courting Manyame.

The plaintiff’s declaration says: “On 24th June 2002 (being the date of the last signature) the parties entered into a written agreement… in respect of their intended acquisition of the acquisition of the shares in Independence Mining (Private) Ltd… to be effected through a company to be incorporated in Zimbabwe (Newco) in which the plaintiff was to be the owner of 40% of the shares and defendant 60%.

“The agreement entered into between the parties provided that save for clauses 2.3, 9, 10 and 11 its terms would not constitute legally binding rights and obligations on the parties.

“But for defendant’s breach of the agreement and had it acted in good faith towards plaintiff, as was its duty, the shares in Cableair would have been acquired by Newco of which plaintiff would have been the owner of 40% and defendant 60%,” it said.

Cableair was the company through which Lonmin owned Indepgold and was also registered in the United Kingdom.

Indepgold, at the centre of the row and revalued to some US$300 million, owns Arcturus, How, Mazowe, Redwing and northern Shamva mines. How, about 30 kilometres outside Bulawayo, is the flagship of a company touted to have been accounting for nearly 40% of Zimbabwe’s yellow metal output onward to the sale.

And having won jurisdiction rights for the hearing of the matter in Zimbabwe earlier this year, Stanmarker laid the monumental $70 billion compensation claim also on Supreme Court motivation and finding that there was undeclared palpable beneficial interest between Metallon and Pemberton, suggesting defendants’ opposing affidavit smacked of perjury.

Noted Supreme Court judge Wilson Sandura in his January ruling: “…Metallon pursued negotiations with Lonmin, which resulted in an agreement of the sale of shares in Cableair to Pemberton International Investments (Pty) Ltd (Pemberton), a company incorporated in terms of the laws of the British Virgin Islands… Regrettably, in its opposing affidavit Metallon did not indicate what its relationship was with Pemberton.”

Notwithstanding that Metallon had averred that the Cableair scrip had been acquired by Pemberton on November 5 2002, Khumalo – the then Metallon chief executive – also wrote to the Mines ministry that “this serves to confirm that Metallon Corporation Ltd, a black-owned South African company controlled by myself, has acquired 100% of Indepgold from Lonmin plc”.

“It does appear, therefore, that either Pemberton was a wholly owned subsidiary of Metallon, or that it acquired the shares in Cableair for and on behalf of Metallon,” observed Sandura.

With a trial date for the latest suit anticipated soon, Sandura’s ruling and other discoveries pose a stern test for the defence, especially in the wake of Khumalo’s sworn statement that he was “neither a director of Pemberton nor was it a subsidiary” of Johannesburg-based Metallon.

Harare law firm Kantor & Immerman represents Stanmarker, with seasoned lawyer Chris Andersen as its counsel.

Khumalo, a tenacious businessman and resources magnate, is not new to business-related controversy, as was evidenced by his recent out-of-court settlement with mining finance company JCI Holdings. The Durban-based entrepreneur once headed JCI.

The protracted legal wrangle, pitting Khumalo and former managers of the firm, was resolved two months ago after a hefty R30 million settlement.

When reached for comment this week, Metallon chief executive Gregory Hunter said he would rather the court process winds down first.

Efforts to contact Stanmarker principal Lloyd Hove proved fruitless.

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