Zuma and Mandela go gold mining

buying pamodzi's orkney assets via a second listed company for r215m.

the joint provisional liquidators (jpl) on monday announced that aurora empowerment systems is the preferred bidder for pamodzi gold's (jse:pzg) orkney assets, although the enver motala lead jpl will retain control and supervision over the operation initially.

not only is aurora, with khulubuse zuma as chairman and zondwa mandela as managing director, buying an asset it won't initially control, but it will share 50% of any net profit with the pamodzi gold orkney estate. zuma is the nephew of president jacob zuma and mandela the grandson of nelson mandela.

the pamodzi gold orkney estate is currently under jpl control.

the well-spoken mandela assures moneyweb that operating with the jpl pulling the strings is a short-term arrangement which should be concluded by year-end. the jpl gets to continue collecting its fees in the interim though.

simmer and jack (jse:sim) originally offered r110m for the orkney assets. motala describes that offer as "audaciously low" for assets valued at r300m by independent auditors.

the purchase price of r215m is split as a r200m rights issue underwritten by a malaysian private-equity fund and r15m in cash. the rights issue will be undertaken once the assets are reverse listed into the existing listed company identified by aurora. the name of the company has not been disclosed, but it is not zuma and mandela's other listing, cenmag (jse:cmg). the reverse listing is subject to the idc's approval as it is the major secured creditor to the assets. mandela says that aurora will gain access to the assets via the private-equity fund.

the r150m capex funding will be from the same malaysian equity fund. this funding is seen by aurora as fundamental to the future success of the assets. capex will be staggered over five years. motala says that the capex should take the assets to production of 260kg of gold per month.

production from the mines will be run by an experienced management team, says mandela.

this will not include r80m required for a planned mill, being organised through a zimbabwean contact.

deon van der mescht of simmer & jack mines says "those operations have been standing idle for a number of months, and it's going to take very deep pockets to be able to change that to make any sense. and at the current rand gold price the challenge is going to be even greater".

mandela believes that the r150m available for capex investment will be the firepower required for success.

aurora has committed to retaining all 1 500 orkney staff. mandela says that operating capital, the source for all those salaries, will come from the sale of mined gold. in fact, aurora says it has arranged for pricewaterhousecooper to implement an aggressive share incentive scheme for employees

breakeven for the mine has been calculated at a 192kg of gold at r240 000 per kilogram. the current gold price is approximately r261 000 per kilogram.


chris blaine