Marange Resources (Pvt) Ltd is now technically insolvent with the company’s current liabilities exceeding current assets by a staggering US$74,7 million, an audit report shows.
According to a report by the auditor-general for the financial year ended December 31 2014, Marange Resources posted a net loss of US$1,5 million compared to US$30 million in the prior period in 2013. The auditor-general said in light of the company’s financial position charecterised by technical insolvency, there was doubt over the diamond mining company’s ability to continue as a going concern.
“As at that date (December 31 2014), the company’s current liabilities exceeded its current assets by US$74 749 172 (2013: US$73 920 980). The company’s total liabilities exceeded total assets by US$54 789 290 (2013: US$53 296 505),” the auditor-general said.
“As disclosed more fully in note 9.1 to the financial statements, the total assets exclude the value of the mineral reserves.
Exploration and evaluation of the Mineral Resources has been initiated with the involvement of external consultants. These conditions along with other matters disclosed in Note 29 indicate the existence of a material uncertainty that may cast doubt about the company’s ability to continue as a going concern.”
The auditor-general also noted that while Mines minister Walter Chidhakwa had last year ordered an investigation into the affairs of the company, the results of the probe were still pending. “The results of the investigation are still pending and we were unable to determine whether there may be additional issues which may require adjustments to the results of operations for the year ended December 31, 2014,” the report said.
While seven officials of Marange Resources were sent on forced leave last year to pave way for the investigation sanctioned by Chidhakwa, they had pocketed more than US$1,166 million to December.
“Full salaries were being paid to these managers and as at December 31, 2014, a total of US$1 166 472 in gross earnings had been recognised in respect of salaries and wages relating to management on special leave,” the report said.
The report noted that the company was incurring financial losses due to payment of salaries to non-productive employees. The auditor-general urged management to consult the Ministry of Mines and Mining Development on the status of the investigation and the action to be taken.