Liquidator speaks on BCL Group assets
Onalenna Kelebeile | Friday February 24, 2017 17:36
Government, which is a shareholder, would also lay claim to the money that was used to pay former employees terminal benefits as well as royalties, once the liquidation process is finalised.
The provisional liquidator administered the payment of terminal benefits on behalf of government and the debt now sits with government.
According to Dixon-Warren the process is still ongoing before the courts of law regarding the share purchase agreement that BCL and Norlisk Nickel and it is possible that the court may agree with Norlisk that it submits a claim as a creditor against BCL.
Again BCL was supposed to carryout rehabilitation of the environment upon closure, but it had no money saved for that purpose. In the event of the sale of the mine assets, if liquidation is finalised but does not raise sufficient money for rehabilitation, government would be required to rehabilitate the environment and submit a claim against BCL.
This would add to close to 700 creditors owed by the BCL Mine. Dixon-Warren said in an interview that on top of these there are other people showing up as creditors yet do not appear on record.
“We have to verify those claims first. There are also contracts that provided for when BCL operations stopped and now they can submit their claims. However, the value of all creditors will be known if it could be decided that the company liquidates,” he said.
BCL Mine was owed about P700 million by its customers by the time it closed down and a lot of it is old debt, Dixon-Warren revealed.
“BCL Mine used to supply matte to a nickel refinery in Zimbabwe that did not pay and BCL had to stop supplying. These operations have a symbiotic relationship such that the Zimbabwean nickel refinery cannot operate if not supplied with matte and without operations they cannot pay BCL,” he said. He added that the parties made a deal for BCL to take over the refinery to raise money in settlement of the debt and talks were on by the time BCL was liquidated.
“Now I need to assess whether it will be in the best interest of the creditors to recover the money and this would probably mean that I place the Zimbabwe refinery under liquidation. I do not know how expensive it is going to be and how much would be recovered,” he added.
Another debtor is Pula Steel that is understood to owe millions of Pula for the supply of scrap metals but the plant is not operating at the moment and is planning to restart operations soon.
“I am monitoring the plant to see how I can recover the money owed to BCL for the best interest of the creditors,” he said. He, however, noted that the normal trading debtors like Glencore have been very supportive and has even offered to pay stock that has been piled in the mine and want to see the mine fully operational.
He noted that P700 million BCL is owed is just too little to fund the mine operations.
“Already we have spent P700 million on care and maintenance to maintain and safeguard the company assets. Care and maintenance is a very expensive exercise that is why a solution must be found very soon. Equally, it cannot be avoided because any buyer must find the mine in good condition. The care and maintenance costs were increased by the upfront costs that were also high,” he added.
Dixon-Warren indicated that there had not been much increase on the number of potential investors expressing interest to buy the mine and said it is going to be a difficult undertaking to secure a buyer. He observed that no major players in the nickel industry have so far shown interest in buying BCL.
“They know BCL very well and fully understand the challenges it faces hence they want to see how it would be packaged to make it attractive. The more attractive it will be the more costs would be incurred. The future is just unclear but I have to reach a conclusion one way or the other,” he said.
On potential buyers of the smelter alone the provisional liquidator said the smelter is very unique in that it cannot operate profitably without any feed from BCL and Tati Nickel and said for it to operate fully the whole mine must be operational.
“The feed we get from other mines is different from that of BCL and Tati. Without the two we would have to get the feed from other regional mines and this would call for modifications of the smelter,” he explained.
He added that going on final liquidation does not necessarily mean that the mine is closing down but that it simply empowers the liquidator to get on finding a solution. He said nothing changes if a buyer is secured.
“Any potential buyer may buy assets out of liquidation. Alternatively, the buyer may buy all the mine assets and ramp up the operations without any worry about creditors and historical activities of the mine. Then the money he pays is used to pay creditors,” he said.
He further noted that in buying a company one would be buying the license that comes with terms and conditions and said to make the package very attractive to investors. He added that it would be in the best interest of creditors and every one else that BCL goes into final liquidation.
It is not yet clear how much creditors are likely to get upon completion of the liquidation process. The provisional liquidator said if the assets are sold the first thing to be paid is the costs of administration, which are very high followed by secured creditors until it gets to normal creditors. It is unclear if anything would be remaining by the time payment gets to the normal creditors.
“I must have enough money before I can say yes something will remain for creditors,” he said.
He could not rule out the possibility of BCL coming back as a different company like it happened with the now Botash but said the difference between the two is that Botash had operated for only three years before liquidation and its resource is fundamentally different from that of BCL.
He explained that Botash was operational, was attractive and made money even during liquidation while BCL on the other hand has been shut down.
“Because Botash made money during liquidation creditors made a deal to collect dividends and sell out shares in due course. BCL on the other hand has been operating for 40 years; it requires good market and highly efficient mining techniques to make money. The cost of its mining is also massive coupled with unfavourable market prices. For BCL to make money it has to completely change the way it does mining. But is there anybody who is going to take that risk?” he asked rhetorically.
He noted that it is too early to pronounce areas of concern that may have contributed to the closure of the mine. There had always been concerns of corruption, fraud, bad management and low metal prices, but Dixon-Warren said he must be careful about throwing creditors money on investigations.
His report will be submitted to the creditors and would have identified areas of concern and given his views on the cause of closure.
“Some may warrant further investigations but investigations in a liquidation can only be done if it is going to realise more money for the creditors. We are different from the Directorate on Corruption and Economic Crime who are there to investigate corruption right to the end without considering how much it will cost,” he said.
He added that the interest is to get money that is owed to the creditors back hence it is practically difficult to resolve to conduct investigations because it would mean using creditors’ money.
“Creditors are not interested in spending years and resources chasing after investigations while there is no money going to be realised from pursuing such. However, it is a commercial decision that creditors by creditors,” he said.
Dixon-Warren stated that though he was appointed by the High Court his employers are the creditors and said his interest as the liquidator lies with a whole body of creditors not only the one who went to court.
He added that the fact that government as a shareholder went to court does not change his legal responsibility. He noted that the High Court first considers if one qualifies to be a liquidator; one has to be a chartered accountant, attorney, be independent, have a track record and experience.
“These are critical factors considered. I am independent and I was not involved with BCL before liquidation as the law is very specific that I am not allowed to be a shareholder or a director of that company. The law is very clear on this regardless of who went to court,” he added.
“Expectations of what I am supposed to do as the liquidator are often misunderstood to an extent that I am expected to be answerable to what would happen to the ex-employees and what I am doing to assist them. It is not my job; the mine is to protect the interest of creditors. If I continue to assist employees with money to pay school fees, utilities and rentals it would mean I use creditors money. I am not allowed to do that hence I have to resist. Employees must speak to government after losing their jobs,” he clarified.
Government as the shareholder funds BCL when it runs out of money, but this time around government went to court because it felt it is in the best interest of creditors to place BCL under liquidation and dispose the company to any investor who would be interested.
On whether there are any assets sold yet the provisional liquidator said he has not sold any of the company assets except the company jet. He said the shareholder had long instructed BCL management to sell the jet way before liquidation because it was not fit for the purpose and was not appropriate for BCL business.
He said the nature of aeroplanes is that they lose value by just sitting on the ground hence it was necessary to dispose of it as soon as possible.
“I had to present before the master of the High Court reasons why it has to be sold and the value we can get from the sale. The permission was granted two weeks ago. I am currently assessing three offers and it is a bit complicated because selling an aircraft because the buyer needs a good maintenance plan. Again there is some money owed in the maintenance contract of BCL so I have to negotiate for it to be settled before the jet can be sold,” he said.
“My powers are very clear that I am only allowed to continue or discontinue portions of the business where I believe is in the best interest of creditors. So I do not have the permission of the creditors who are my employers to dispose of any asset. Before I sell I get permission during a meeting of creditors where I present proposals for approval or otherwise,” he said.
On Minister Sadique Kebonang being in Dubai to meet potential buyers of BCL Mine, the provisional liquidator said it is a high-level government decision and said he is not involved with investors directly and has not engaged them in terms of discussing a deal or transaction with them. He said it currently lies with government exploring to see if those interested are willing to do something with the mine.
“If it is something that we can look at I believe they will engage me so that we go through the normal process. There is nothing wrong in dealing with one person if that is going to be the quickest way to sell BCL so that it can start operating,” he said.
He noted that selling a mining company is very difficult, as it requires a lot of technical experience and full analysis of data.