This document discusses business rescues in the South African mining industry and analyzes two case studies: Blyvooruitzicht mine and Southgold Exploration. It notes that while the business rescue framework provides protection and time to restructure distressed companies, the process is complex and faces challenges from other laws and reluctant regulators. The case studies show that business rescue can extend a mine's life and preserve value compared to liquidation, but only with experienced advisors, cooperation from stakeholders, and if the underlying asset value supports reorganization. Overall the business rescue environment in South Africa remains young and complex.

1. Business Rescues
in Mining ( so far ?! )
Peter van den Steen
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2. Chapter 6 v 1.0 (needs to evolve – v1.1 etc)
 The BR environment in SA is young and undeveloped
 BR legal framework offers protection and 'space to put
together a deal or a plan’.
 The legal framework does not ‘gel’ with other laws in
SA such as:
 LRA.
 TAA.
 Minerals Act.
 OHS Act
 Banks and institutions such as SARS and other
regulators have not geared themselves for Ch6 – even
after more than 3 years since the Act came to life.
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3.  If there is some sort of investment deal, its not
ordinary M&A. Very technical from a legal perspective
 Can be litigious - militant creditors, shareholders
Regulatory environment in SA is a deterrent already.
Within BR its emphasised.
 In BR all stakeholders interests need to be balanced to
avoid failure due litigation and/or unnecessary delays
or 'no' votes.
BUT – the alternative has always been almost total
value destruction and no sustainable solution forward
– liquidation.
 Complexity is an acceptable price
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Chapter 6 creates layers of complexity

4. Blyvooruitzicht 1
 Key challenges
> Burning millions per month – old operation - 1937
> Eskom escalations and winter tariff exacerbated situation – Jun/Jul/Aug
> Labour and Unions
> Creditor confusion
> No PCF – despite some begging (IDC)
 Mitigators
> Creditors were not militant
> Shareholder support – minimal attempts to interfere, easily managed
> Good management support … mostly (see below)
> Many opportunities to improve and turn it around

5. Blyvooruitzicht 2
 BRP
 Senior Management
> Departure of 2 senior officers
> Resulted in initial shock with the others – later heightened level of
activity and improved morale
 Labour/Unions
> Court interdict against illegal strikes
> Eventual cooperation
> Two firsts in the industry – blanket incentives – 3 year deal

6. Blyvooruitzicht 3
 Operational issues
> Loss making operations were allowed to continue without intervention
> Tail was wagging the dog re unions
> Management was tired
> Old and over-populated structures
> Housing estate – no measurement, no idea
> No plans or strategy
> High risks of safety incidents – due to low morale
> Overtime abuse

7. Blyvooruitzicht 4
 BR Plan
 Shut down loss making operations – reef picking and potential 6
shaft and 4 shaft
 Improve technology (SAG milling, Hydraulic vs pneumatic drilling,
better density control)
 Prove viable more tailings retreatment opportunities
 Reduce staff compliment by minimum 10 %- 189 process was
started in parallel (without closing shafts) – total potential lay-offs
up to 2000 (35%)
 Change mining plan at loss making shafts – focus on the richer
CLR (carbon leader)
 Huge rock dump opportunities that had not been properly
investigated or exploited in the past
 Savings in electricity consumption – reducing wastage, village to
pay contribution, technology – 3%
 Business Rescue Initiatives forecast > R600mil positive swing in
FCF
 After settling with Eskom – no vote was required – Plan was still
produced and handed over to mine for implementation

8. Blyvooruitzicht 5
 Section 141(2)b
• Gold price had surged
• No longer reasonable grounds to believe that the
company was distressed
• BRP filed to take it out of rescue
• Plan was still produced
 From potential collapse in June 2011 to the sale of the
asset to Village in Feb 2012 for R194mil.
 The Plan was handed over to Village in November 2011.
 ……………..and then?

9. Blyvooruitzicht 6
Questions:
 Should Blyvoor have remained in BR?
 Was it possible to keep it in Rescue [Section 141(2)b debate]
 Did Village use and implement the plan? (they were not obliged to
do so)
 The gold price never dropped as low as the original gold price
assumptions in the BRPlan. Could it have been the gold price?
 Were the deals with labour honoured?
 Were their further unforseen events that broke the “old lady’s
back” such as catastrophic seismic events, flooding, a.n. other?

10. Blyvooruitzicht 7 - Post BR. positives and
learnings:
 Kept the place going for another 2 years instead of collapse in June
2011
 Fed a few thousand families for two years
 Multiplier effect on the Carltonville economy huge
 BR can squeeze more life out of businesses.
 Chapter 6 is far from perfect.
 Chapter 6 helped buy more time – at the very least (s136)
 Chapter 6 added real value
 Post Chapter 6-life of the Co is out of the hands of the BRP
 PCF was and has since proven to be a significant challenge

11.  PCF providers
 Standard Chartered
 Credit Suisse
 Combined Exposure R2.6bil --> secured
 Why BR?
 Care and Maintenance costs --> approx. R200mil SA only.
 Other Creditors
 Note holders --> R1.0bil
 Trade --> R0.3bil
 InterCo/Shareholders loans --> R7.0bil
 TOTAL --> approx. R11bil
 BRP creates a team to assist:
 Webber Wentzel - BR legal, M&A legal
 JPMorgan - Transaction advisory
 KPMG - Financial modelling, creditor verification, advisory
 Terra Consulting - valuations
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Southgold Exploration 1

12. Southgold Exploration 2
 Regulators and Gov:
 DMR (6 to 7 months)
 Comp Com (2 weeks for Wits deal, 3.5 weeks for
Sibanye/Wits deal)
 DWAF
 NNR
 SARS (more than a year to settle)
 SARB
 Local municipal and community structures
 Witsgold Offer
 R 75mil on deal closure
 Fixed repayment schedule to lenders for R 600mil over current
LOM
 R1.2bil flex payment schedule to lenders based on FCF
 Further R680mil to lenders based on 10% FCF participation
over any additional LOM (if any).
 Option to settle without penalty
 36 month interest moratorium
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13. Southgold Exploration 3 It lives!
 So Witsgold bought an asset which swallowed an
initial investment of R11bil before it went into rescue
for approx. R1.9bil (PV)
 Discount --> 83%
 Duration--> 21 months
 Level of Complexity --> Extremely!!!
 Various jurisdictions, Swiss, English, Canadian, USA
 Canadian CCMA and Receivership
 USA Chapter 11
 Time zones --> conference calls with callers various time
zones - (worst was Vancouver, NYC, Toronto, London, JHB,
Zurich, Singapore, Beijing) --> ITS a KILLER!!
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14. Brief Summary
 BR can keep distressed company whole as opposed to non-BR
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solutions.
 Big becomes Complex becomes Expensive --> underlying value
is essential.
 Time consuming and resource hungry.
 Deep discounts are made possible for investors with appetite for
risk.
 Ultimately builds goodwill with stakeholders.
 Young law – needs to evolve. Experienced advisors and BRP's
are essential and also scarce – time.
 Every rescue presents its idiosyncrasies --> there is no 'cookie
cutter' approach.
 Regulatory environment and other laws do not speak to BR -->
need to know how to navigate the 'waters’
 PCF remains a challenge and will do so until distressed
investment (debt and equity) market develops