ATC200826: Report of the Portfolio Committee on Mineral Resources and Energy on the Engagements with regards to Lilly Mine held in Parliament on the 23rd June 2020 dated 25 August 2020.

Mineral Resources and Energy

Report of the Portfolio Committee on Mineral Resources and Energy on the Engagements with regards to Lilly Mine held in Parliament on the 23rd June 2020 dated 25 August 2020.

 

The Portfolio on Mineral Resources and Energy (DMRE), having held meetings with stakeholders’ reports as follows:

 

1.         Introduction

 

On 11 February 2020 the Portfolio Committee of Mineral Resources and Energy received a briefing from the   department of Mineral Resources and Energy, Mr R Deveroux, the Business Rescue Practitioner (BRP), and Mr W Bloem, from Mkhabela Huntley Attorney Inc.  who represented the community of Lilly Mine in the investigation conducted following the incident that happened at Lilly mine and resulted in three workers (Yvonne Mnisi, Pretty Nkambule and Simon Nyerenda) being trapped underground in a container on the 5th of February 2016.

Based on the correspondence he sent to the Committee, the Committee resolved on the meeting held on 11 February 2020 that Mr F Arendse should be awarded an opportunity to make a presentation. A meeting was scheduled on the 23 June 2020 to receive an update from Mr F Arendse with regards to concerns raised in relation to progress on Lilly mine rescue efforts i.e. (retrieval of mortal remains of mineworkers as well as business rescue efforts)

 

2.         Background

 

Three workers have been trapped underground at the Vantage Goldfields Lily mine in Barberton since 05 February 2016. The Chairpersons of PC on Mineral Resources, PC on Labour and SC on Land and Mineral Resources were mandated to travel to the mine and give support and to understand the processes that were followed by the Department of Mineral Resources when there is such a mine disaster and how the provisions of the Mineral and Petroleum Resources Development Act (MPRDA), No. 28 of 2002 and the Mine Health and Safety Act (MHSA), No 29 of 1996, were applied.

 

On the 16 February 2016, the delegation from Parliament (Mr S Luzipo, Ms L Yengeni and Mr O Sefako visited the Lilly Mine in Barberton and met with the department of Mineral Resources, the CEO of the Lilly mine, the Representative from the union and the families of the three workers that were trapped underground in the container.

 

Subsequent to that, on the 29th of March 2017, the Portfolio Committee on Mineral Resources of the fifth parliament visited Lilly mine site where the container sunk. The mine management explained how the incident happened where three mine workers were trapped underground. The mine management indicated that it requires funding in order to start working on retrieving the container.

 

There was a plan to open another shaft that will lead to a sinkhole. The Business Rescue Practitioner indicated that R 200 million is required to sink another shaft that will be used to access the container from a safer and a more stable ground. Once funding is secured, the retrieval process is expected to take about nine months from the date of funding. The Committee was also informed about illegal mining taking place around the sinkhole area, where illegal miners are stripping the infrastructure of the damaged mine.

 

After the briefing the Committee visited the 3 families of the trapped mine workers. The meeting was so emotional and only one question was posed by the representative of the three families which is; when does the government plan to retrieve the container that sunk underground. Honourable Luzipo (the Chair of the PCMR) expressed heartfelt condolences to the bereaved families on behalf of the Committee. The Chairperson further indicated that in as much as he would like to commit to a particular time frame, the reality is that he cannot be able to achieve that without running a huge risk of misleading the families.

 

Given the geological situation in the mine as well as the parliamentary processes that have to be concluded before such a determination is made. It would be unethical for the Chairperson to raise expectations of the families before all the processes have unfolded and funding is secured. He assured the families that the Committee and Parliament will work very hard to ensure that the issue of Lilly mine is resolved to the satisfaction of every stakeholder especially the families concerned.

 

Given the stated background, the issue of Lilly mine is the legacy from the 5th Parliament and the current Portfolio Committee on Minerals and Energy is trying to recommend on the best possible way to resolve and close the matter, so that the remains of three mine workers who are trapped underground can be retrieved as to give families proper closure.

 

3.    Members in attendance

 

Name of Member	Political Party
Mr S Luzipo Mr M G Mahlaule Mr J H Bilankulu Ms V T Malinga Mr M J Wolmarans Mr S M Kula	African National Congress (ANC)
Mr K H Mileham Ms C Phillips	Democratic Alliance (DA)
Ms N Hlonyana Mr D Mthenjane	Economic Freedom Fighter (EFF) (Alternate)
Mr M Nxumalo	Inkatha Freedom Party (IFP)

 

 

4.     Submission by Department of Mineral Resources and Energy

 

Adv. T Mokoena, the DG of the department, stated that section 11 was granted in December 2018 to facilitate the transfer of ownership. The department acted promptly with an understanding that everything was in order. The department learned that there was a disagreement between the BRPs and the company issued with section 11 (permitting the transfer of mine ownership). The department raised it frustration with the fact that while the DMRE is responsible for the implementation of the Mineral and Petroleum Development Act) MPRDA, the Companies Act prohibits the department from performing its function as a regulator, as the BRPs have powers over the current mine management and creditors, since this is a judicial process the department has a very limited scope to influence the process. This matter went to court, it started in Nelspruit High Court and it is now in Bloemfontein (Appeal Court). In terms of law, the DMRE has done all it could do in terms of section 47 of MPRDA.   The DG indicated that the container was between 30 and 50 m from the surface area, furthermore it was difficult to foresee the incident (given that the mine is situated in the historical mining areas), the responsibility of the Mine Health and Safety Council is to ensure that such incidents are investigated and come up with findings and regulations. The main issue preventing the rescue was finances, once the mine is opened a decline can be developed. The department indicated that   SA industry utilizes services of a centralized mine rescue services which has a globally competitive rescue expertise (they also assisted in Chile), former Chamber of Mines, now Minerals Council of South Africa also assisted as well as other entities like the CSIR.

 

With regards to prosecution, the department indicated that the NPA has not prosecuted anyone yet, for the department to take any action someone has to be declared deceased before a criminal case is opened. The DMRE operates within a highly regulated environment, hence it cannot operate outside what has been prescribed by the court, as it can be held to be in contempt of court. As it was stated that this particular incident has never happened before, members wanted to know if it means it was impossible to foresee the eventuality of such an occurrence. The department responded that in terms of section 25 of the MHS Act, as part of a risk assessment exercise, incidents identified during the risk assessment stage when developing the mining works programme must be reported to the Mine Health and Safety Council (MHSC).

According to the department the outside assistance was sought in dealing with rescue efforts, namely CSIR, SANDF and Mine Rescue Services. According to section 47 of the MPRDA, cancellation of the mineral right can happen if there is no compliance with Social and Labour Plan (SLP), Mine Works Programme and Environmental Management Programme, it is a long process however it can be done if such provisions are not complied with.

The department indicated that the last inspections to Lilly mine before the incident was in 2015 and a section 54 notice was issued.

5.         Submission by Business Rescue Practioners (BRP)

 

Mr R Deveroux, BRP proceeded with the presentation, which focused on the following:

• Container search and recovery
• Lilly Mine decline and Rescue operation
• Current transaction
• Litigation outside the Business Rescue companies.

According to Mr Deveroux, the container was deemed to be between 30 to 50 m below the surface at the time of the collapse. He explained that various techniques were used to determine the location including sound, light systems as well as drones, as the area is believed to be unstable and dangerous. It was the responsibility of the BRP to retrieve the employees remains, however since the mine was no longer generating revenue, Vantage Australia (a parent company) decided not to continue financing the mine, which effectively cut funding for rescue efforts. Hence assets had to be sold and loans had to be made.

 

In the first court case the judge ruled in favour of Vantage gold SA, Flaming Silver appealed, SSC appeal decision was expected in March 2020. Arqomanzi was also appealing which was expected to submit papers by 20 February 2020. Arqomanzi approached VGSA with their offer, they were turned down. He also reported that there were structures around the collapsed area, the area was cordoned off.

 

The BRP was familiar with SSC and continue to work well with the company, however the BRP has no power to tell companies involved in various litigations, what to do.

It was indicated that both mines require funds to open and operate, however existing shareholders are not prepared to provide capital. An operation to clear the surface and underground area (of Illegal miners) has started. Mining assets at Lilly were not stripped but sold to another company and proceeds were invested into the running expenses of the company and paying for security in the mine. According to Mr Deveroux he has not been paid for the last four years, even attorneys representing the companies have not been paid. He has kept the company going on the basis that it can be run sustainably in the long run.

 

On the question about Mr Deveroux qualifications to be the BRP, he responded that he is a Chartered Accountant by profession with eight years’ experience as a business practitioner, having been involved in diamond and coal mining projects, he also works with experts in the field e.g. mining engineers.

 

It was noted that the BRP could not respond to the price tag of the mine as Mr Deveroux felt that was confidential and the mine owners should be the one responding to the question. The business rescue practitioner emphasized that the primary aim of the rescue process is the retrieval of the container and the secondary aim is for the mine to be operational. According to the BRP, the only way out of the impasse is for all the parties to cease litigation

 

6.         Submission by Attorney Representing Lilly Mine Community

 

Mr Bloem, an attorney representing the Lilly mine community was accompanied by three family members (Mr E Mnisi, Mr H Mazibuko and Mr S Mavuso) from each family of the mine workers who are trapped underground. Mr Bloem raised the following issues:

 

• Nothing has been done by both the BRPs and DMRE.
• He proposes that a committee comprised of DMRE, BRPs and family representative to meet weekly or monthly and report to the committee.

• Mr Herry Mazibuko who is an Ex-employee of Lilly mine added that there is no communication between BRPs and themselves.

1. Submission by Mr F Arendse              

 

Mr Fred Arendse, who is the Executive Director of Vantage Goldfields, provided a background history to the current state of Lily Mine explaining who Siyakhula Sonke Empowerment Corporation (SSC) is and gave a brief explanation and timeline on the Vantage GL-Flaming Silver SPV transaction with Vantage South Africa (VGSA), he highlighted the 25th of March 2019, as the date when the transaction was supposed to be completed. He stated that VGSA had continually frustrated efforts to sell the mine to allow operations to start by reneging on agreements, promises and undertakings.

 

He explained that the BRP was conducting an abnormally protracted process and lacked independence as witnessed by their filing of supporting affidavits in VGSA’s defence in the Arqomanzi matter while not doing the same to support the Flaming Silver case. He stated that VGSA’s real reason for reneging on the R10m Flaming Silver deal was to accept a R50m deal from Real Win Investments. He listed a number of transactions relating to Lilly Mine purchase that had been cancelled. He also spoke about the existing company structure around Lilly and Barbrook Mines.

 

He proceeded to detail the latest offer from Arqomanzi and the new amended rescue plans as well as Vantage GL’s assets and investment strategy. In conclusion, he surmised that for the last four years VGSA had no intention to conclude the business rescue process, the reason being to avoid prosecution by keeping the evidence buried underground. He reported that the chances of the Lily Mine company being rescued were slim under the current BRP. He viewed Lily Mine as an extra-ordinary matter that required extra-ordinary intervention and asked the Committee to assist the Department in holding the BRP accountable for the ongoing rescue of the mines.

 

Mr Arendse clarified that he made the presentation in his capacities as a director of VGL and of Flaming Silver. He was not representing Arqomanzi, the company that made the bid on which the new amended plan published the previous day was made.  He said he was appointed as a director of VGL in 2018 because of an investment of R32m in Lily Mine. He said, he was not approaching the Committee in terms of a commercial transaction, he understood the Committee had limitations, but this was an extraordinary matter and he appealed to the Committee to assist the Department to bring the matter to a conclusion. There had been a five- year delay in the process, leading to thousands of people suffering as a result. He said the opening of the mine would bring employment to vulnerable communities.

 

Subsequent to the presentation received from Mr Arendse, the CEO of Vantage Goldfields, (the majority shareholder of Lilly Mine) Mr M McChesney wrote to the committee requesting to make a presentation to the Committee as he was distressed that after 4 years of appointing BRPs nothing has been resolved.

 

The Committee further acknowledged the letter received from Mr Bloem on 01 July 2020 where he also wanted to brief the Committee on latest developments.

 

1. Observations

 

Having listened to the presentation the Committee observed the following:

 

• After the accident stakeholders agreed that it was dangerous to proceed with the rescue and retrieval process as the ground was unstable.

 

• The Department has finalized the inquiry into the Lily mine disaster and the report has been forwarded to the National Prosecuting Authority.

 

• Presentations made before the Committee dealt more with the commercial aspect of the disaster as opposed to the retrieval and recovery process.
• The estimated cost of the retrieval process is R 200 million.
• There is no clear legal clarity on what the department can do in order to fast track the process of retrieving the three miners.

 

• Gaps in the Mineral Petroleum Resources Development Act (MPRDA) and the Company’s Act, prevents the department from acting decisively in ending the impasse on the sale of the mine, which will ensure a speedy retrieval of the three miners.

 

• The department has not fully utilized provisions of section 47 of MPRDA, which allows for the cancellation of the mining licence. 

 

• The very same company which is implicated in the incident is the same company which continue to be an obstacle (repeatedly reneging on undertakings to accept purchase offers) in finalising the transfer of mining assets to prospective new owners.

 

1. Recommendations by the Committee

 

The Portfolio Committees having heard the presentation recommends the following:

• There should be a bi monthly report session on progress made on recovering and retrieving the three mineworkers.
• The Business Rescue Practitioners should finalise and send the business rescue plan to the Committee by 12 September 2020.
• The Committee should consider a joint oversight visit with the Select Committee and request a permission from the House Chairperson to visit Lilly Mine in Mpumalanga as a matter of urgency.
• The Department of Mineral Resources and Energy (DMRE) should send a full report of inspections on Lilly Mine between October 2009 and December 2014 by 12 September 2020.
• The Committee should seek legal opinion on the possibility of expropriation of the mine with reasonable compensation in the public interest, so as to ensure closure for the families of the three miners.
• The Committee should seek legal opinion on possible declaring of the Lilly Mine site as disaster area.
• Having received the information requested from the department, the committee will be able to make conclusion on whether the department should have applied or should apply section 47 of the Mineral Petroleum Resources Development Act (MPRDA).
• The DMRE in consultation with the Department of Trade and Industry (DTI) should look into making recommendations to the Committee on the harmonisation of the MPRDA and the Company’s Act during the business rescue process, in order to facilitate decisive intervention by the DMRE in regulating and transferring assets of mines under business rescue.

 

Report to be considered.