Heavily indebted Kalagadi wants a debt restructure

Manganese miner Kalagadi has yet to pay back a dime on the more than R7bn debt it took from the Industrial Development Corporation (IDC), the African Development Bank (AfDB) and Absa — with relations between it and the lenders having reached their lowest point.

An application brought by the IDC to place the company in business rescue four years ago is still held up in the court process, after interlocutory applications.

The South Gauteng High Court ruled on Monday that the business rescue application launched by the IDC, which holds a minority stake in the miner, must be expedited.

Kalagadi was also appealing against the South Gauteng High Court’s decision in 2023, which dismissed its application to compel lenders to accept a restructuring arrangement, which it argued would negate the need for business rescue. Kalagadi’s interlocutory application also concerns whether the IDC board had authorised either the launching of business rescue proceedings or its opposition to Kalagadi’s application for debt restructuring.

The lenders’ appeal to the 2023 decision concerns the judge’s stance that he could not hear the business rescue application without having regard to the considerations raised by Kalagadi.

Judge Brian Spilg dismissed both appeals.

“It is likely that even with the parties updating their papers, the applications can be finalised by this court in their entirety before any appeal on the present points would be heard by an appeal court. The unsuccessful party can then seek to take all issues where a decision was given against it on appeal,” said the judge.

“To do so now does not achieve the objective of business rescue. The IDC must appreciate that it is dominis litis [the person who derives the benefit of a favourable judgment] in the business rescue proceedings and AfDB cannot disassociate itself from the actions taken by IDC to bring and pursue those proceedings or the consequences of doing so, which include this court considering the contentions advanced in the Kalagadi application.”

The IDC and AfDB are owed R3bn each, with interest accumulating, while Absa is owed nearly R1bn. Business Day understands that the debt has ballooned to about R8.5bn, including interest accrued so far. Kalagadi mines manganese in the Kalahari basin in the Northern Cape, which is home to 80% of the world’s manganese ore body. Its mine lies on the stretch of three farms on which it holds new-order mining rights and is believed to overlay in excess of 960-million tonnes of manganese ore.

Daphne Mashile Nkosi, executive chair of Kalagadi Manganese, said the company opposed the business rescue application because it is of that view that its assets, fairly valued, exceeded its liabilities; that the lender-approved mining contractor underperformed; and, in the circumstances, the debt should be restructured.

Operational challenges

“The various litigation matters remain pending in court, with the high court handing down judgment on interlocutory issues on May 20. Though Kalagadi has encountered operational challenges resulting in financial constraints, the mining company is able to pay its liabilities as and when they fall due other than for the senior debt facilities,” she said.

“We can confirm that Kalagadi is solvent and is currently experiencing greater revenues on the back of strengthening manganese prices. Monday’s judgment gives the lenders and Kalagadi the time to find an amicable solution focusing on the stability and longevity of the mining operations.

“The relationship with Kalagadi and its lenders has improved and the parties are working together to find a mutually beneficial solution.”

According to the IDC’s 2023 annual report, the impairment charge (including write-offs) in the year under review increased from R3.4bn to R4.7bn, due mainly to write-offs of long-outstanding non-performing exposures — with the bulk of this made up by the Kalagadi debt.

The IDC could not be drawn to comment on the specifics of its legal dispute with Kalagadi. Tshepo Ramodibe, head of corporate affairs at the IDC, said: “Kalagadi is currently servicing its debt to its trade creditors but has not yet repaid its lenders, including the IDC.”

Absa declined to comment.

khumalok@businesslive.co.za