Debts push Metallon Corporation to the brink

A source close to Metallon says the mining concern was downsizing its workforce as part of a “broader plan to dispose some of its under-performing assets” to service its mounting debts.

PROPERTY belonging to Zimbabwe’s largest gold producer, Metallon Corporation, will be auctioned by the High Court to recover an estimated US$30 million owed to various creditors and workers, as the miner mulls disposing some of its under-performing mines to offset the huge debt overhang, the Zimbabwe Independent can reveal.

Tinashe Kairiza

Last week, the mining concern rolled out a massive retrenchment exercise at its four mines in Zimbabwe namely How, Shamva, Mazowe and Redwing in a bid to arrest mounting operational costs. The miner reportedly owes workers salary arrears running into millions of dollars, accumulated over the past few years.

According to a High Court order seen by the Zimbabwe Independent, Miracle Auctioneers will put under the hammer an assortment of movable assets at Mazowe Mine on September 8 to compensate 25 creditors. The miner’s “old plant and New Saints plant” will also be auctioned.

“Miracle Auctioneers duly instructed by the Sheriff of the High Court of Zimbabwe shall sell by Public Auction the following assets to the highest bidder on Saturday 8 September 2018 starting with items at our premises Stand 315, Station Road, Mazowe Valley Show Society and Goods at Mazowe Mine,” read part of the sale-in-execution notice.
“Steven Chifodya plus 24 others versus Gold Fields of Mazowe: In situ at Mazowe Mine, Mazowe: 1) Main Old plant 2) New Saints Plant.”

Movable property that will be auctioned includes various motor vehicles.

Last year, Metallon Corporation — owned by South African-based businessman Mzi Khumalo — disposed Arcturus Mine, which was reeling under financial losses, to prominent lawyer Tawanda Nyambirai’s investment vehicle TN Securities for an estimated US$10 million.

A source close to Metallon says the mining concern was downsizing its workforce as part of a “broader plan to dispose some of its under-performing assets” to service its mounting debts.

The miner is also battling allegations that it externalised US$31 million from Zimbabwe through murky dividend payments to shareholders and servicing foreign loans.

Metallon halted operations at its Mazowe Mine to reset the business unit on a firm growth path though market watchers pointed out mounting operational challenges.

“Metallon is owing close to US$30 million to various creditors who include (local authority) council, National Social Security Authority and consumables suppliers.

“The company owes close to US$6 million in salary arrears while the Central African Building Society (Cabs) is owed US$12 million,” a source said.

The source said Metallon had failed to meet a deadline agreed with senior managers to settle outstanding salary payments, prompting the High Court to place the miner’s assets under auction.

“The managers are the ones who took their matter to the courts and the company failed to meet that deadline hence that (court) order,” a source said.

At the time of going to print, Metallon had not yet responded to questions sent to them.

The four assets under Metallon’s investment portfolio in Zimbabwe are reeling under operational challenges, with the entity’s CE, Ken Mekani, leaving the troubled firm this month to pursue “personal interests”. Mekani was appointed in 2015 after serving Metallon for close to three decades.

Despite the operational challenges, the miner announced an ambitious restructuring plan to return its mines to profitability last year.

Under the restructuring plan, each of the four mines will be operating as independent business units.

The firm said in a statement it was trimming its workforce across its business units in Zimbabwe to contain costs.

“Bulawayo Mining Company (Private) Limited (BMC), the owner and operator of How Mine, Zimbabwe, would like to announce the modernisation and re-engineering of its operations, along with labour rationalisation,” Metallon said in its latest update.

“Alongside the mine re-engineering, there will be a rationalisation of labour. A number of positions will be placed on shifts/short time while reviews of operations are underway. In addition, as a result of the modernisation programme and subsequent mechanisation of operations, BMC expects to reduce the number of employees. These measures have been implemented in order to reduce costs, increase productivity, and ensure the long-term viability of BMC for the benefit of all stakeholders.”

Workers at the firm, who are opposed to the retrenchment, have said the downsizing exercise flouted the country’s labour laws.

However, Metallon has announced a growth plan at Shamva Mine at a cost of US$120 million which will see annual gold output shooting up to 100 000 ounces.

The entity also announced plans to explore for fresh gold deposits at Mazowe Mine, which accounts for about 15% of the group’s annual output.

Under its investment portfolio, Metallon has also announced plans to explore for additional resources in the Democratic Republic of Congo and Tanzania.

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