Liquidators warn that an Eskom power cut could flood the mine within 48 hours - but Numsa questions why the alarm was raised immediately after it won a court order placing Ekapa Minerals in business rescue.
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A court battle intended to save hundreds of jobs at Kimberley’s Ekapa diamond mine has triggered a new crisis, with provisional liquidators warning that its underground workings could begin flooding within 48 hours if Eskom disconnects the electricity supply.
Ekapa Minerals and Ekapa Resources were placed in provisional liquidation on 3 March, following a catastrophic mud rush at the Du Toitspan Joint Shaft on 17 February.
About 60 miners were underground when water, mud and debris inundated part of the workings.
Five miners were trapped about 890 metres below the surface and died. Their bodies were recovered during a weeks-long operation in March that reportedly cost tens of millions of rand.
Business rescue plan
On 27 July, the Northern Cape High Court granted an application by the National Union of Metalworkers of South Africa (Numsa) to place Ekapa Minerals in business rescue, finding there was a reasonable prospect of saving the company.
The proposed restructuring envisages retaining around 500 jobs on a scaled-down operating model. The mine previously employed more than 1 000 people, while Numsa says more than 300 workers were laid off following the disaster.
Marius van Tonder has been appointed interim business rescue practitioner.
This week, the joint provisional liquidators issued a statement saying the mine faced renewed flooding if Eskom went ahead with a planned power cut on 4 August.
Moneyweb has established that Eskom did not cut the power, and maintenance operations were continuing at the mine.
Numsa says it initially approached management with a business rescue proposal in the interests of saving the company and jobs, but says this was rejected.
“Rushed liquidations disproportionately serve shareholders and directors while leaving workers destitute,” the union said in a statement.
Numsa’s Northern Cape representative Andile Zitho told Moneyweb he found it curious that the warnings of renewed flooding emerged after the Northern Cape High Court placed the mine under business rescue, halting the liquidators’ planned asset auctions.
The proposed rescue plan rests partly on movable assets valued at R141 million, a game farm said to be worth up to R30 million, and roughly R400 million in receivables reflected as owing by related companies.
The recoverability of those intercompany claims is disputed, particularly because Ekapa Resources is itself in provisional liquidation.
Liquidators raise alarm
The joint provisional liquidators dispute the viability of the rescue plan, arguing that the proposed focus on surface tailings would require the mine to spend more on electricity costs at its processing plant than would be generated in revenue.
They say the old surface dumps yield only four to five carats per 100 tonnes, while the processing plant requires about R30 million a month in electricity – an untenable commercial proposition without underground diamonds at a time when diamond prices are depressed.
They warn that a power cut would stop 114 boreholes and several shaft pumps that keep the historic underground workings dry.
Flooding could leave mining equipment and infrastructure beyond recovery and allow oil, diesel and other underground contaminants to seep into groundwater used by surrounding agricultural operations, they say.
They estimate the plant and machinery to be worth about R200 million, while replacing some of the infrastructure could cost as much as R2 billion.
“This would not be a managed and compliant closure; it would be an uncontrolled environmental disaster,” the liquidators say.
But the high court found enough evidence to give the mine an opportunity to undergo business rescue. “The liquidators and management should now cooperate with that process,” says Numsa’s Zitho.
Environmental risks
The liquidators say the Department of Water and Sanitation is concerned that rising groundwater could come into contact with additional underground ore bodies and geological formations, increasing the water’s salinity.
There are also fears that if Eskom cuts power to the mine, oil, diesel and other contaminants could infiltrate pathways into surrounding groundwater.
The situation is further complicated by the fact that the Ekapa operations are split between two legally separate but interdependent companies.
Ekapa Minerals, which is responsible for surface operations and employs the workforce, has been placed in business rescue. Ekapa Resources, which holds the underground mining rights and assets, remains in provisional liquidation.
The Eskom account is reportedly held by Ekapa Minerals, while the electricity supply is needed to protect the underground workings and assets belonging to Ekapa Resources.
This article was republished from Moneyweb. Read the original here.
