Chronicle Editor
Business Writer
FORBES and Thompson Bulawayo (Private) Limited, trading as Vubachikwe Mine, has been taken to court by its creditors seeking a court order to place the gold mining giant under supervision and corporate rescue proceedings.
The financially distressed gold mining firm in Gwanda District, Matabeleland South, was closed in November 2022 following a workers’ strike over unpaid salaries and poor working conditions.
The parent company, Duration Gold Zimbabwe, owes creditors over US$10 million, and the monthly debt increase is estimated at US$250 000 with no strategy to service it.
One of the creditors, Fawcett Security Operations, filed a court application at the Commercial Division of the Bulawayo High Court through its lawyer, Mrs Priscillah Da Silva-Gustavo of Masamvu and Da Silva-Gustavo Law Chambers seeking to have Forbes and Thompson Bulawayo (Pvt) Ltd placed under supervision and corporate rescue in terms of Section 124(1) of the Insolvency Act.
In its interim relief, the creditor also wants Mr Oliver Masomera of Obram Trust Company (Pvt) Ltd to be appointed interim corporate rescue practitioner to oversee the mining company’s operations in terms of section 124(5) of the Insolvency Act.
The court application cites the company’s financial distress as grounds for seeking intervention and corporate rescue proceedings.
The company owes Fawcett Security Operations US$170 000 for security services rendered between 2022 and 2023, following which the creditor dragged it to court.
Faced with the challenges of paying creditors and workers on time, operational challenges and declining profitability, Vubachikwe Mine eventually closed down a month after the worker strike. The mine suffered an operating loss of US$108 124 in Quarter 1 of 2023.
In papers before the court, Forbes and Thompson Bulawayo (Pvt) Ltd, the Master of the High Court, and the Registrar of Deeds, Companies and Intellectual Property were cited as respondents.
In his founding affidavit, Fawcett Security operations director, Mr Andrew John Laing, said the grounds for seeking the placement of Forbes and Thompson Bulawayo (Pvt) Ltd under supervision and corporate rescue emanate from the fact that it is financially distressed.
“This is a court application in terms of section 124(1) of the Insolvency Act for an order placing the first respondent (Forbes and Thompson Bulawayo (Pvt) Ltd) and its mining operations at Mining Lease 16, incorporating Vubachikwe Mine, under supervision and commencing rescue proceedings,” he said.
“First respondent is financially distressed and has failed to pay its debts to its creditors and there is a reasonable prospect of rescuing the mine.
“Further relief is sought in the form of an order appointing Mr Oliver Masomera as interim corporate rescue practitioner under section 124 (5) of the Insolvency Act.”
Mr Laing said his company provided security services to Forbes and Thompson Bulawayo (Pvt) Ltd on contract at its Mining Lease 16, Vubachikwe Mine in Gwanda for the past 10 years.
“Since 2022, the first respondent has had challenges paying for security services rendered by Fawcett Security Operations as and when such payments were due.
“On 21 December 2023, the applicant issued summons in this honourable court against the first respondent under case number HCBC2551/23 to recover the outstanding payments per acknowledgment of debt in a letter dated 20 April 2023, and the first respondent did not defend the action,” he said.
On January 26 this year, Forbes and Thompson Bulawayo (Pvt) Ltd passed a mortgage bond number 20/24 in favour of Fawcett Security Operations hypothecating three of its immovable properties as a continuing covering security for the US$170 000 debt.
“By virtue of the outstanding debt of US$170 000 owed by the first respondent to the applicant for security services rendered, as evidenced by mortgage number 20/24, the applicant is an independent creditor of the first respondent as defined in section 121(1)(g) of the Insolvency Act and an affected person as defined in section 121(1)(a)(i) of the Insolvency Act,” said Mr Laing
He said his company has the requisite locus standi to institute the present proceedings and to seek the relief of placing the mine under supervision and commencing corporate rescue proceedings in terms of Section 124 (1) of the Insolvency Act.
The respondents are yet to respond. According to Duration Gold shareholders’ report, Quarter 1, 2020, the mining firm realised increased net profitability compared to Quarter 4, 2019.
The report shows that Forbes and Thompson Bulawayo (Pvt) Ltd operated profitably during the Covid-19 period in 2020-2021.
However, it subsequently emerged that due to mismanagement of operations at Mining Lease 16 by former senior mine management, it became apparent that Vubachikwe Mine was beset by operational challenges and declining profitability.
This was attributed to poor mine planning practices, failure to replace depleted reserves and inadequate capital reserve development, unexplained gold losses and systematic high grading of ore reserves since early 2020.
Vubachikwe Mine started failing to pay its contractual and statutory obligations.
The mine failed to pay its workforce on time resulting in salary arrears. In October 2022, workers resorted to industrial action, which resulted in a riot involving spouses of the miners and management and police had to be called to restore order.
Infrastructure and mining equipment were damaged during the melee, and the mine eventually shut down a month later.
Online Reporter