Mine’s ‘Iron Lady’ fights for control
Daphne Mashile-Nkosi, the "Iron Lady" of South African mining, is fighting to maintain her hold over the R21bn manganese mining company she started in the Kalahari 20 years ago, after her oldest and biggest funder went to court last month to force it into business rescue.She says the Industrial Development Corporation (IDC), which has demanded she step down as executive chair of Kalagadi, is trying to use business rescue to "usurp control" of the company from her.But she's not going anywhere, says Mashile-Nkosi, 62. "I have skin in the game. I have R4bn of my own money in this business. I've run it for 20 years with sweat and blood."The IDC says the Northern Cape miner is in deep financial trouble with a debt of R7.1bn it is in no position to repay. It owes the IDC and African Development Bank R3bn each and defaulted on an initial R241m repayment in March. Mashile-Nkosi says they haven't been able to repay because the mining contractor IDC appointed has not met its production targets."We finished the mine at the end of 2017. We had Murray & Roberts Cementation [MRC] in January 2018. By November 2018 we could see they were not reaching the production targets they'd given us."This meant Kalagadi was not able to take forecasted manganese products to the market and earn enough revenue to service its debt obligations.She says the IDC refused her request to use another contractor in spite of a provision in the contract that if MRC didn't meet its targets, "we can terminate"."March 2020 was our first instalment with the IDC. We told them if MRC don't meet the target it means we cannot pay."Without consent from the IDC as the lender there was nothing Kalagadi could do, she says.In a court affidavit, MRC says it missed its production targets because it first had to fix the mine's badly designed and incomplete infrastructure."What they're not telling you is that the Kalagadi mine design was done by M&R [Murray & Roberts]. We were confident that because they did the design they'd give us the numbers we were looking for." Mashile-Nkosi says the mine was slapped with five section 54 stoppages by the department of mineral resources because MRC was working in an unsafe environment."As a result we lost 1.8Mt with a value of R4.3bn. For a company that is new in the industry it cannot take that. We've actually done very well that we are still running."MRC said they'd encountered more complex geology than what was contained in the geology model Kalagadi provided them."The issue is not whether the geological model was correct or not," she says."The issue is you looked at the model, at all the research papers, and you gave me a plan. If you don't meet your targets it's your problem. You analysed the model, you didn't raise problems with it then."Kalagadi wants to bring production in- house, but the IDC says they don't have the capacity to mine the manganese on their own. Mashile-Nkosi says when Kalagadi saw that MRC was not delivering they capacitated themselves to do the job by bringing in technical expertise from outside."We realised we're in trouble. We decided to get technical advisers to advise us how to do it. We capacitated the Kalagadi team so we can take over. That's why we told IDC to bring in another contractor."The mining sector is going the route of own mining, so we want to go that route."The IDC says business rescue is necessary because Kalagadi's debt burden is growing and they're unable to service their existing loans. In its court papers it says the payment crisis has been coming for a long time."Then it means they were negotiating with us in bad faith," says Mashile-Nkosi. At a meeting in February "they kept on saying it's a good business, it can be fixed". The same month Kalagadi received a business rescue application "while we were on a call with them. They took that decision in February even before we defaulted on the first instalment, so it had nothing to do with that."The company sent the IDC a debt restructuring proposal which they barely acknowledged. In a letter to her in September 2019 they demanded she relinquish her position as executive chair and made it clear they'd only agree to restructuring the debt if she left or took up a nonexecutive role within two months.She believes they want to use business rescue to control the company because as a 20% shareholder (she owns 67% of the shares) "they know they don't have the numbers, they're a minority. So they use business rescue so they can remove the board."Along with the African Development Bank the IDC is the biggest creditor."If you're the biggest creditor you choose the business rescue practitioner who will do what you want. You suspend the board and you determine where the company is going."She says the IDC's determination to place the company in business rescue has "nothing to do with a distressed business because not once did we not pay our staff, our contract miner, our suppliers".The bottom line for the IDC, though, is that in spite of assurances in the past, Kalagadi has not repaid any of their debt."If they'd given us consent [to 'terminate' contract miner MRC] in March or June last year, we would have recovered and paid the first instalment of R97m to the IDC because this business is making money," Mashile-Nkosi says.So why has the IDC lost faith in her and her board? "There's new leadership in the IDC, a new management team. They don't understand the projects," she says.She believes the IDC's treatment of her is a betrayal of its developmental mandate to fund and support black business.As a black woman entrepreneur and founder of a mine which employs more than a thousand people, she should be the "poster child" of the government's broad-based BEE and black industrialist programme rather than the victim of an attempt to "usurp control", she says.