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Lerala Mine dodged paying taxes – Liquidator

Bells up: BSE and CA Sales officials at yesterday's listing of the company. Over 419 million CA Sales shares were listed on the bourse with counter trading 7. 8 million shares on debut. The share price however remained unmoved at the listing price of P 3. 45
The provisional liquidator of Lerala Diamond Mine (LDM) says he is struggling to establish the amount of money owed to creditors as the company books were in shambles and little regard was given to payment of taxes, BusinessWeek has learnt.

In a report presented to the creditors last week, provisional liquidator, Kopanang Thekiso said total liabilities of the company are P615 million, noting that as far as he has been able to establish, there are preferred and concurrent creditors only. He noted that none of the creditors’ claims have been proven at this stage.

“What is clear is that there was very little compliance to tax and other regulatory requirements,” said Thekiso. According to him, government royalties, withholding tax and PAYE (pay as you earn) were not paid over extended periods of time and that there are no records locally to establish the extent of the problem.

He cited the June 2016 annual report of Kimberly Diamonds Limited (KDL), the ultimate shareholder of Lerala Mine, which also mentions a P6 million tax liability, which is not reflected in any of the LDM financial records.

“We are working with the Department of Mines on various issues relating to liquidation and one of them is to establish exactly how many royalties are due to government,” Thekiso said.

He indicated that he will also engage the Botswana Unified Revenue Service (BURS) to start the process of verifying other tax balances and any other compliance issues, which need to be attended to.

Also not included in the company’s trial balance, he said, is the demand from the Palapye Sub-Land Board for over P700,000 in mining lease payments, which had been accumulating from the Diamonex days. He said this amount is still to be proven as well.

Included in the liabilities is a total of P568 million in intercompany loan accounts. The liquidator said when he first got to the Lerala Mine site, there were no financial records on site to work with.

He added that there has not been any fully audited financials for the company since it started operations, noting that there was a breach of section 189 and 190 of the Company’s Act in terms of keeping proper accounting records as prescribed by law and keeping the accounting records of the company outside the country.

“As a result of this breach, it is almost impossible

to get accurate and up to date accounting records to evaluate the financial status of the company,” he said. He revealed that the local company director, Spencer Kaisara could not account for this anomaly, stating that the other directors are based outside the country.

Thekiso said at the time of taking over the estate, there was only P43,000 in the bank account, adding that BURS then paid a refund of P2.2 million which has been used to keep the mine secure and insured. “Currently, the balance is just over P748,000,” he said.

Other current assets, according to the liquidator, include consumables and inventory diamonds. He said there is also a stockpile of ore and capitalised tailings.

Thekiso indicated that valuation or realisable values for these cannot be verified either as there is no record of how the values were determined.

He said non-current assets, which are fully insured and secured at the site, include plant and equipment with net value of P131 million. He noted that verification of PPE is at the moment hampered by the fact that the last detailed fixed asset register (FAR) is dated December 2016.

“If we still cannot get an up to date FAR we will use the December one and update that as we do the verification,” Thekiso said.

Also included in non-current assets is mine development and rehabilitation assets totalling P76 million. Thekiso said no valuation or impairment report exists to verify the realisable or realistic values of these assets. He said the two processes of verification and valuation for both PPE and mine development and rehabilitation assets will require specialised skill to achieve.  “Given the cash constraints we have at the moment, this can only be carried out once we can sell off some of the inventory and other non-core assets to raise some cash,” he said.

Otherwise, Thekiso pointed out that he will then depend on due diligence performed by potential buyers on the premise that the highest bidder will approximate the actual value of assets. He said the total value of assets on site is estimated at P251 million.




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