Sale of Pula Steel kicks off
Mbongeni Mguni | Friday November 23, 2018 14:26
Built at a cost of P130 million, the company operated in fits and starts due to financial and technical challenges, including shortage of its raw material.
The company, majority owned by BCL Mine and with shareholding from CEDA and founders, the Verma family, was placed in liquidation last October, owing creditors an estimated P100 million. This week, WH Auctioneers, a South African firm experienced in disposals involving liquidations, announced that bids were now open for Pula Steel.
The mothballed company is being auctioned as a going concern with assets including 4,710 hectares of land, four furnaces, pumps and generators as well as associated equipment.
Buyers will also gain access to Pula Steel’s scrap metal stockpile of about 2,000 tonnes, to kickstart production. BusinessWeek is informed that another 2,000 tonnes of scrap metal is available at BCL Mine, which was also Pula Steel’s biggest source and single largest creditor.
“Bidders are expected to demonstrate their business plans for the plant, proof of funding and statement confirming they will pay 20% of the winning bid, if selected, within 30 days of the award,” the notice from WH Auctioneers reads.
Earlier this year, Pula Steel liquidator, John Hinchliffe disposed of movable items from the plant, ranging from vehicles to desks, chairs and mattresses. The proceeds from the sale were used to help finance the liquidation process and reduce storage costs.
Hinchliffe told BusinessWeek the idea was to sell main plant whole. “We have proposed that the plant be sold as a going concern and not piece-meal. Assessments are ongoing by experts who have experience in disposing of similar plants,” he said. The winning bidder for Pula Steel will be expected to secure an arrangement for the scrap metal at BCL Mine. At one point producing 100 tonnes daily, Pula Steel was amongst BCL Mine’s Polaris II projects, which were designed to extend the mine’s life through diversified investments. BCL injected a total of P111.2 million into Pula Steel, prior to also shutting down in October 2016. CEDA is believed to be Pula Steel’s second largest creditor with outstanding dues of about P15 million, followed by the Botswana Power Corporation with P10 million.
Pula Steel is estimated to have at least 100 creditors on its books waiting for recovery of their dues.