Salungano rocked by mass board resignations

Junior miner Salungano’s share price fell more than 20% following the resignation of three board members, just days after the group said it would delay the publication of its financial results for the year ended March.

The group’s share price tanked 21% to 90c on Monday after the announcement that three members of the key audit, risk and compliance committee have thrown in the towel.

Salungano, formerly Wescoal, said Andile Mabizela, Nomavuso Mnxasana and Nonzukiso Siyotula have resigned from the board with immediate effect.

Mabizela also chaired the social and ethics committee, while Mnxasana headed the remuneration committee and was a member of the nomination committee.

Siyotula, the group’s lead independent director, chaired the audit, risk and compliance committee and sat on the remuneration, nomination and project and investment committees.

The group said the resignations came into effect on Friday.

“The board would like to extend its appreciation to Mr Mabizela, Ms Mnxasana and Ms Siyotula for their valuable contributions ... and wishes them well in their respective future endeavours,” the company said.

“The board has commenced a process of identifying suitable replacements and shareholders will be advised as soon as such appointments have been made and an update to the board committees will be communicated once these appointments have been finalised.”

Salungano’s board is chaired by Humphrey Mathe. The resignations mean that the board is now dominated by executive directors in the form of group CEO Robinson Ramaite, CFO Kabela Maroga and CEO of mining Thivha Tshithavhane.

The remaining nonexecutive directors comprise Cecil Maswanganyi and Eric Mzimela.

The resignations coincide with the group’s announcement on Friday that it will delay the publication of its financial results for the year ended March.

“Shareholders are hereby advised that due to an unforeseen delay in the finalisation of the audit process, specifically relating to the finalisation of its funding refinancing agreements as referred to in the interim results for the six months ended September 30 2022 released on December 9 2022, Salungano unfortunately has to delay the publication of the company’s financial results for the year ended March 31 2023,” the company said on Friday.

The group in its six months ended September results said it will start engaging financial institutions over the next six months to “secure long-term funding of between R350m and R450m.”

“The current forecast cash flows reflect that the business will be able to settle all debt should it be unable to refinance the debt on an unleveraged balance sheet. To mitigate the pressure on the business, it is critical to secure the finance and for the operations to generate the forecasted cashflows,” it said at the time.

As at September 30 2022, the company’s assets exceeded total liabilities by R732m.

The group’s subsidiary Arnot OpCo was placed into business rescue in October after months of financial distress and boardroom deadlocks.

Salungano has a 50% stake in Arnot Opco through its subsidiary Wescoal Mining,

The mine supplies coal to Eskom’s Arnot power station. The Arnot mine was previously owned by Exxaro. The other 50% of the mine is owned by former and current workers. This ownership structure has seen the workers and Wescoal Mining representatives on the board reach a deadlock on many issues, leading to a paralysis.

A 2022 report by SizweNtsalubaGobodo (SNG) Grant Thornton showed that no sooner had Arnot Opco risen from the ashes, a feeding frenzy took root at the company, with procurement processes flouted.

SNG Grant Thornton’s findings were scathing on the company’s executives, some of whom were found to have unduly benefited from the shift allowances system.

The probe also found that executives entered into contracts without the requisite board approvals and some service providers commenced work/services without valid contracts.

khumalok@businesslive.co.za