Depth of Ongopolo’s woes revealed in court

THE High Court this week glimpsed the depths of the financial crisis that has brought one of the largest employers in the Namibian mining industry, Ongopolo Mining and Processing, to the brink of bankruptcy.

In March 2000, Ongopolo resurrected the copper mines and smelter of the former Tsumeb Corporation Limited from two years of closure and the threat of liquidation. But the mining company itself came close to suffering the same fate of being declared bankrupt until a British-registered company, Weatherly International, clinched a takeover proposal in late April that is claimed to be a rescue package.With Government having guaranteed large loans that the mining house has been unable to repay, the company’s near-demise is set to cost the State Treasury tens of millions of dollars.This is revealed publicly for the first time in documents filed with the High Court.The documents form the basis of an application in which Weatherly International asked the court on Monday to approve the holding of a meeting of Ongopolo’s creditors.These creditors will be asked to approve Weatherly’s take-over scheme and the proposed arrangement through which Ongopolo will undertake to repay the debts that have brought the company to its knees.Judge Kato van Niekerk gave the go-ahead for the meeting to be convened.In an indication of the seriousness of the financial crisis that Ongopolo is finding itself in, part of the order that Judge Van Niekerk issued at the request of Andrew Corbett, counsel for Weatherly International, is aimed at safeguarding Ongopolo from the danger of bankruptcy proceedings being launched against it in the meantime.In terms of that part of the order, Ongopolo will be given breathing space until the planned meeting of creditors has had a chance to approve or reject the proposed scheme of arrangement for the company’s takeover by Weatherly and the rescheduling of Ongopolo’s debts.The court ordered that until there is an outcome on the scheme of arrangement, no creditors of Ongopolo may apply for the winding-up of the company or to have it placed under judicial management.This is an unusual order to ask for, but it is necessary in the circumstances where the survival of a key employer in the regional economy of Tsumeb and the Namibian mining sector, the continued employment of more than nine hundred Ongopolo employees, and a takeover deal involving close to N$1 billion, are at stake, Corbett told Judge Van Niekerk on Monday.BLEEDING RED INK Ongopolo’s most recent annual financial statements, covering the year to the end of June 2005, are part of the documentation filed with the court.The statements show that Ongopolo has been teetering on the brink of bankruptcy until a N$40 million financial helpline that Weatherly extended to it to enable it to keep its operations going turned Weatherly as well into a major creditor of Ongopolo.An affidavit from the Chief Executive Officer of Weatherly, Rod Webster, was also filed with the court.In it, Webster states that despite “initial fairly successful trading”, Ongopolo has over the last few years found itself “in a parlous financial situation”.Over the last financial year, the situation has deteriorated with “an exponential increase” in the company’s losses, Webster states.This has been the result of higher than anticipated costs of extensive exploration and mine development activities that Ongopolo has been engaged in over the past few years, as well as delays in bringing new mining shafts into production, the court was informed.By the end of June 2005, the Ongopolo group’s liabilities exceeded its assets by more than N$212,8 million, Webster quoted from the financial statements.By the end of March this year, the flood of red ink engulfing Ongopolo had become even deeper, with unaudited accounts showing that the group’s liabilities (at some N$603 million) exceeded its assets (valued at some N$303,8 million) by more than N$299,2 million.According to the annual financial statements of Ongopolo Mining and Processing for the year ending June 30 2005 – the audited statements are dated June 13 2006 – the Ongopolo group suffered a net loss of over N$195,8 million in the year to the end of June 2005.In the previous financial year, the group had suffered a loss of N$67,1 million.Out of the group’s liabilities of N$520,9 million at the end of June 2005, interest-bearing borrowings total N$329 million, the financial statements show.Of this, N$95 million was at that stage owed to Standard Bank Namibia, with Government having issued a guarantee to cover this loan.Some N$50,5 million was also owed to the Government Institutions Pension Fund (GIPF), the Minerals Development Fund was owed more than N$58 million, and the EU-Sysmin loan programme was owed a further N$19,5 million.Ongopolo also had bank overdrafts of over N$54 million at that stage.According to Webster’s affidavit, Standard Bank Namibia has called up the Government guarantee on Ongo­polo’s debts to it.In terms of an agreement that has been reached with the GIPF as part of a debt restructuring exercise, Ongopolo’s debts to the GIPF will be satisfied with the issuing of shares in Ongopolo to the GIPF, Webster also states.He added that Weatherly would further acquire the debt to the Minerals Development Fund at a discount, with this then to be turned into Ongopolo shares that would be issued to Weatherly.Weatherly is in essence offering N$120 million to the remaining creditors to cover their claims, in return for which Weatherly wants at least 56 per cent of the shares in Ongopolo, Webster further states.In addition to that, he claims, Weatherly has N$150 million available which it will invest in Ongopolo as working capital that it believes will be sufficient to get the group back onto a profitable track.In terms of the proposed arrangement that the remaining concurrent creditors will have to consider at their planned meeting, they will receive a first instalment of three cents in each Namibia dollar Ongopolo owes them if the restructuring proposal is accepted.The proposal goes that they will thereafter for 18 months receive a three cent dividend each month, followed by 42 months of additional dividend payments until their claims against Ongopolo have been paid in full over five years.But the mining company itself came close to suffering the same fate of being declared bankrupt until a British-registered company, Weatherly International, clinched a takeover proposal in late April that is claimed to be a rescue package.With Government having guaranteed large loans that the mining house has been unable to repay, the company’s near-demise is set to cost the State Treasury tens of millions of dollars.This is revealed publicly for the first time in documents filed with the High Court.The documents form the basis of an application in which Weatherly International asked the court on Monday to approve the holding of a meeting of Ongopolo’s creditors. These creditors will be asked to approve Weatherly’s take-over scheme and the proposed arrangement through which Ongopolo will undertake to repay the debts that have brought the company to its knees.Judge Kato van Niekerk gave the go-ahead for the meeting to be convened.In an indication of the seriousness of the financial crisis that Ongopolo is finding itself in, part of the order that Judge Van Niekerk issued at the request of Andrew Corbett, counsel for Weatherly International, is aimed at safeguarding Ongopolo from the danger of bankruptcy proceedings being launched against it in the meantime.In terms of that part of the order, Ongopolo will be given breathing space until the planned meeting of creditors has had a chance to approve or reject the proposed scheme of arrangement for the company’s takeover by Weatherly and the rescheduling of Ongopolo’s debts.The court ordered that until there is an outcome on the scheme of arrangement, no creditors of Ongopolo may apply for the winding-up of the company or to have it placed under judicial management.This is an unusual order to ask for, but it is necessary in the circumstances where the survival of a key employer in the regional economy of Tsumeb and the Namibian mining sector, the continued employment of more than nine hundred Ongopolo employees, and a takeover deal involving close to N$1 billion, are at stake, Corbett told Judge Van Niekerk on Monday.BLEEDING RED INK Ongopolo’s most recent annual financial statements, covering the year to the end of June 2005, are part of the documentation filed with the court.The statements show that Ongopolo has been teetering on the brink of bankruptcy until a N$40 million financial helpline that Weatherly extended to it to enable it to keep its operations going turned Weatherly as well into a major creditor of Ongopolo.An affidavit from the Chief Executive Officer of Weatherly, Rod Webster, was also filed with the court.In it, Webster states that despite “initial fairly successful trading”, Ongopolo has over the last few years found itself “in a parlous financial situation”.Over the last financial year, the situation has deteriorated with “an exponential increase” in the company’s losses, Webster states.This has been the result of higher than anticipated costs of extensive exploration and mine development activities that Ongopolo has been engaged in over the past few years, as well as delays in bringing new mining shafts into production, the court was informed.By the end of June 2005, the Ongopolo group’s liabilities exceeded its assets by more than N$212,8 million, Webster quoted from the financial statements.By the end of March this year, the flood of red ink engulfing Ongopolo had become even deeper, with unaudited accounts showing that the group’s liabilities (at some N$603 million) exceeded its assets (valued at some N$303,8 million) by more than N$299,2 million.According to the annual financial statements of Ongopolo Mining and Processing for the year ending June 30 2005 – the audited statements are dated June 13 2006 – the Ongopolo group suffered a net loss of over N$195,8 million in the year to the end of June 2005.In the previous financial year, the group had suffered a loss of N$67,1 million.Out of the group’s liabilities of N$520,9 million at the end of June 2005, interest-bearing borrowings total N$329 million, the financial statements show.Of this, N$95 million was at that stage owed to Standard Bank Namibia, with Government having issued a guarantee to cover this loan.Some N$50,5 million was also owed to the Government Institutions Pension Fund (GIPF), the Minerals Development Fund was owed more than N$58 million, and the EU-Sysmin loan programme was owed a further N$19,5 million.Ongopolo also had bank overdrafts of over N$54 million at that stage.According to Webster’s affidavit, Standard Bank Namibia has called up the Government guarantee on Ongo­polo’s debts to it.In terms of an agreement that has been reached with the GIPF as part of a debt restructuring exercise, Ongopolo’s debts to the GIPF will be satisfied with the issuing of shares in Ongopolo to the GIPF, Webster also states.He added that Weatherly would further acquire the debt to the Minerals Development Fund at a discount, with this then to be turned into Ongopolo shares that would be issued to Weatherly.Weatherly is in essence offering N$120 million to the remaining creditors to cover their claims, in return for which Weatherly wants at least 56 per cent of the shares in Ongopolo, Webster further states.In addition to that, he claims, Weatherly has N$150 million available which it will invest in Ongopolo as working capital that it believes will be sufficient to get the group back onto a profitable track.In terms of the proposed arrangement that the remaining concurrent creditors will have to consider at their planned meeting, they will receive a first instalment of three cents in each Namibia dollar Ongopolo owes them if the restructuring proposal is accepted.The proposal goes that they will thereafter for 18 months receive a three cent dividend each month, followed by 42 months of additional dividend payments until their claims against Ongopolo have been paid in full over five years.