Redwing revival hangs in the balance

REDWING Mine (Redwing)’s revival will take a little longer, as the company’s shareholder King’s Daughter has challenged the gold miner’s placement under judicial management on account of claims that it had paid off its creditors.

This comes as a prospective investor Probadek Investments (Probadek) – owned by Patricia Mutombgwera and Grant Chitate – has caused the arrest of Cecil Madondo on the grounds that he had signed two other tributary agreements with competitors, which had prejudiced the former of US$260 000.

“I pray that… that the appointment of the fifth respondent (Madondo) be set aside and that… the Associated Mineworkers Union of Zimbabwe (AMUZ) nominates another interim corporate rescue practitioner..,” King’s Daughter company secretary Hapson Makotore said, adding the desired relief was based on the administrator’s failure to publish a rescue management plan within 45 days as required by law, he did not have the backing of majority creditors and Redwing had requisite funds to restart operations anyway.

“In the event that the second respondent fails to nominate a qualified… practitioner… then the master (of High Court) should be directed to appoint a qualified (alternative) to perform the duties… in accordance with the law,” he said.

“…I submit that applicant (King’s Daughter) has established good grounds for the corporate rescue order to be set aside… Alternatively, applicant prays for the removal of the fifth respondent (Madondo)… for the first respondent (Redwing),” Makotore said.

And the Metallon Corporation (Metallon) subsidiary made the application after its Penhalonga-based producer was placed under Stone House Consultancy (SHC)’s control in July last year following an AMUZ filing, and also stating that the cancellation of corporate rescue proceedings was premature.

“There is no evidence whatsoever that it is out of the woods. It appears first respondent (Redwing) fell into a trap of trying to prove it has paid some of its creditors without seeking to prove its financial viability..,” Gideon Chirwa, the labour union’s secretary general, said.

Meanwhile, King’s Daughter is also challenging the validity of Probadek’s “exclusive contract” at Redwing.

“The applicant is alarmed to note that the fifth respondent (Madondo) has unlawfully signed a joint venture… with Probadek… without discussing the terms… with the shareholder and before corporate rescue plan has been… approved,” Makotore said.

“I submit that it is illegal… to enter into… agreements with third parties without seeking the approval of shareholders. This is particularly so where the third party seeks to acquire equity in the company,” he said, adding there was no justification for the SHC head to give preference to Mutombgwera and Chitate’s company over others and the practice of negotiating advisory fees with external partners, which would be converted to shares, was prejudicial to the company’s real owners.

“The fifth respondent’s agreement (particularly clause 45, 3 of the indefinite deal) with Probadek refers to transfer of shareholding… It is surprising that such issues appear… when the shareholder was not consulted at all. (Madondo) has acted illegally by undertaking to transfer shares… when there is no corporate rescue plan… approved by creditors..,” Makotore said, adding the Insolvency Act was explicitly clear that equity transfers must be okayed by the business owners.

“Even if one assumes that Probadek is entitled to acquire shares… which is denied, the agreement creates a mess at the company in that there is no provision stating how the (purported) capital injection will be converted… and how shareholders will relate..,” he said.

The Metallon outfit, meanwhile, says it has sufficient funds to pay off outstanding creditors subject to a verification process of the claims and an elaborate plan for Redwing’s revival, which will start with a dewatering process. Salary arrears, it said, had also been paid to the employees’ legal representatives.

“The first respondent (Redwing) is no longer distressed. The shareholder… has committed to provide funding to meet working capital requirements..,” Makotore said.

Probadek, which has chosen to aggressively pursue Madondo by filing criminal charges, was advised by the SHC founder in a November 26 letter that it needed “to accommodate other interested parties”.

In the meantime, another tributor Prime Royal Africa has been condemned for its “gold panning activities” at the mine after reports from the Environmental Management Agency, joint operations command and Mines ministry.