No hope for Mvela

Jim Jones

Jim Jones

Something drastic was obviously needed to save Mvelaphanda Resources from drowning as its ability to service and repay mezzanine finance debt of R2,1billion due on March 17 was being called into question.

A last minute scramble has put off the evil hour for the group established by Tokyo Sexwale, who once declared his ambition to become South Africa's black Harry Oppenheimer. But the death knell has been sounded.

The idea is to cash in Mvela's investments or to distribute them directly to shareholders and then, over the next year or so, to wind up the group.

Kicking this off, the mezzanine debt has been rolled over, but only on the basis that Mvela gets around to raising cash by selling assets. Not that this makes Mvela any different from other over-extended mining groups around the world, but not all have announced sales and eventual closure.

Mvela's strategy is to convert its holdings in Gold Fields' South African operating mines, acquired in terms of black empowerment requirements of the Mining Charter, into some 50million shares in the Gold Fields group itself.

The interest at the operating level was not tradable, the shares in the group are.

And at Gold Fields' current price, those shares are worth somewhere in the region of R5.5billion.

So, if the shares are dribbled out onto the market without upsetting the share price or sold to a single investor with deep pockets and an eye on Gold Fields itself, Mvela should emerge clean.

The surplus can then be directed towards helping finance the development of the Booysendal project owned by Mvela's 63percent-owned Northam Platinum subsidiary - to get that operation on the road before distributing the shareholding in Northam to Mvela's own shareholders.

The idea is for Northam to have a rights issue that Mvela would follow using its own assets and those left over from the Gold Fields sale.

Mvela's travails underscore the problems facing mining groups today. Its holdings in Northam are hardly generating cash flow and its hopes of having Impala step in to acquire Northam and, afterwards, Mvela itself came to nothing in January when Impala walked away from that proposed deal.