Village Main Reef (VMR) is in serious trouble. An internal document from late January 2020, circulated to staff, paints a bleak picture of chronic capital shortages and a board that is about to throw in the towel. The company did not respond to repeated requests by Business Maverick for comment. 

The note from CEO Owen O’Brien said the company had been hoping to list in Hong Kong but a decision was taken in late December 2019 to postpone because of a poor financial and production performance, Eskom stage 6 load shedding, and an accident at Tau Lekoa mine that killed four workers. One source said that incident had spooked investors who were considering sinking $150-million into the company.

“Due to the listing not taking place we don’t have funds,” the document says. “In 2019 we incurred a R664-million loss … As a result of these continuous losses, the board indicated they could no longer fund VMR.” 

It also pointedly notes that there are 7,200 jobs at risk and that VMR “cannot afford retrenchment packages”. Meetings have taken place with the DMRE and it is aware of the gravity of the situation.

A loan was secured in late December 2019 for the January 2020 period but it is unclear if the company can remain a going concern in February.

Gold prices are robust at the moment, near $1,600 an ounce, but VMR has been battling with declining grades and soaring costs and it is hard to see if there would be any buyers interested in its distressed assets. If it is not returned to profitability soon, the jobs bloodbath of recent years looks set to continue in 2020.

South Africa is currently hosting the Investing in African Mining Indaba, where the domestic mining sector is trying to sell itself to investors against the backdrop of persistent load shedding and rising costs, which has hampered its ability to take advantage of buoyant commodity prices. VMR’s woes are clearly a reflection of many of the challenges the sector confronts. BM