Skorpion blasting, drilling on track

Ogone Tlhage - Skorpion Zinc remains on track with blasting and drilling activities at its Pit 112 mining project, which it hopes will provide the necessary capital for the conversion of its refinery plant.

Skorpion Zinc general manager Irvinne Simataa said operations remained on track while full mobilisation had been achieved.

Simataa did not see how Basil Read’s current cash-flow woes would affect its work at Skorpion Zinc, as appropriate risk management had been carried out.

“We have no reason to believe that this will impact the Skorpion Zinc mining project (Pit 112) as the financing is ring-fenced accordingly. I am glad to inform you that as of this month of September, we have achieved full mobilisation and are set deliver the highest mining output since the inception of Skorpion Mine,” said Simataa in conversation with Market Watch this week.

According to him, Skorpion Zinc and Basil Read both remained poised to deliver a great project.

“We are set to deliver a world-class project. We remain open to sharing with you the elegant model of business partnership we have created with this project,” Simataa said.

Basil Read

Earlier this year, 278 jobs were on the line when workers objected to the outsourcing of the drilling and blasting work to Basil Read.

As part of the restructuring process, Simataa explained that Skorpion would have to mine a new ore body, which lies deeper than the current ore body that is being mined. The existing ore body and current mine, Pit 103, would be depleted soon and Skorpion would need to start stripping away as much as 72 million tonnes of waste to access Pit 112 as soon as possible to reach the new ore body.

The new mine will fund the conversion of its current refinery when the Gamsberg mine, situated in South Africa's Northern Cape province, starts mining operations.

“Our fleet is inappropriate to access Pit 112. We approached a number of mining contractors and Basil Read Namibia was selected.

“There is definitely a need to restructure; the business decision has been taken. The urgency of the restructuring cannot be overemphasised. If we do not start in the next three months, the validity of this project will be in jeopardy and 1 500 people will definitely be jobless and the port of Lüderitz will be affected,” Simataa said.

Results

Basil Read plans to raise capital through a rights issue, dispose of non-core assets and reduce overheads as part of a restructuring after it swung to a half-year loss, Reuters reported recently.

Basil Read, which had headline earnings per share of 48.92 cents in 2016, reported a loss of 295.16 cents per share for the six months to June. Its net operating loss was R474.1 million, compared with a R34.4 million profit a year earlier.

South Africa’s construction industry has slowed since the country hosted the 2010 soccer World Cup as infrastructure spending by President Jacob Zuma’s government has stalled and weak commodity prices curbed outlays from the mining industry.

In response, Basil Read, which has operations in six countries, has merged some of its businesses, cut costs and exited loss-making operations.

Acting chief executive Khathutshelo Mapasa said the firm would step up restructuring, which also includes exiting major distressed contracts, adding that this was likely to bear the most fruit next year.

Raising capital

“We are looking at raising capital through a rights offer, also disposing of some of our non-core assets and looking at right-sizing the business in light of trading conditions,” Mapasa told Reuters in a telephone interview.

“We need to reposition Basil Read for the current and future market.”

A poor performance by its roads division, along with the need to invest in new contracts at its mining business, had severely depleted liquidity, the firm said.

“On a longer-term basis, we are in the process of raising capital through a rights issue. It is anticipated that total funds arising from this will be in the region of R200 million to R300 million,” the company said in a statement.

In the short term, it has secured R90 million from the Industrial Development Corporation for the mining division and an initial R61 million bridging facility, it said. – Additional reporting by Nampa/Reuters