An ambulance leaves the Lily mine, which is owned by Vantage Goldfields, near Barberton, east of Johannesburg, February 5, 2016. Almost 90 miners were rescued and three were still missing after a cave-in at a gold mine in northeastern South Africa on Friday, the firm that owns the mine said. The collapse at the mine's main entrance trapped 87 workers underground, all of whom were rescued, Vantage Goldfields said in a statement.Siphiwe Sibeko/Reuters
It was a saga that riveted South Africans: rescue workers blasting through tons of rock in a dramatic effort to save three miners who were trapped underground when they plunged into a giant sinkhole.
Despite weeks of struggle by the rescue workers, the miners were never found. And then the mine itself was closed, leaving 900 workers jobless – until a Canadian company emerged as a "white knight" to invest in the gold mine and restore it to operation.
But today the planned $11.3-million (U.S.) investment has fallen apart in a storm of recriminations, and the Vancouver-based company is facing an onslaught of criticism from South African trade unions and the mine owner.
The investor, AfroCan Resources Gold Ltd., says it is the victim of unreasonable demands and political tensions in a local election season. But its critics accuse it of deceptive behaviour and the attempted exploitation of "cheap labour" at the gold mine.
One of the key issues is whether AfroCan should pay for the estimated $11-million cost of recovering the bodies of the trapped miners, before resuming production at the Lily gold mine. South Africa's mining minister says it should. The company's president, Brian Barrett, says the demand is "insane."
The controversy is the latest illustration of political and cultural sensitivities in South Africa that many investors have failed to grasp. Planned acquisitions can face scrutiny and delays that investors are often unready to face.
Negotiations for the investment in the Lily mine could still be revived, and the obstacles are not necessarily "insurmountable," Mr. Barrett said. But so far there is little indication of how the dispute could be resolved, even if talks resume.
Under the terms of the original deal, AfroCan would have provided the first tranche of $2.5-million by the beginning of last month to the mine's owner, Vantage Goldfields Ltd., an Australian company. But the money never materialized, and Vantage has vowed to take legal action against AfroCan, accusing the company of breaching its agreement.
"The breach is a setback for the Lily mine, which remains in business rescue," Vantage said in a statement this month. "The AfroCan funds were urgently required to commence the business rescue plan and to pay workers' salaries."
A leading South African trade union, Solidarity, said the Canadian company had misled the mine workers and created false hopes for the mine's future, causing a further delay in the process of finding an investor. In a statement this month, it said Mr. Barrett had a history of making exaggerated promises in his company's transactions – a charge he strongly denied.
Another union group, the Congress of South African Trade Unions, said the plan to reopen the mine without recovering the dead bodies was evidence that the mine owners saw the workers as "cheap" and "disposable." It insisted that the bodies of the trapped miners must be recovered before production resumed. The same demand was made by the mineral resources minister, Mosebenzi Zwane.
In an interview, Mr. Barrett said his company was the victim of a "perfect storm" of controversy because of pressure on South African politicians in the campaigning for the country's Aug. 3 local elections. He said it wasn't reasonable for the government to demand that his company spend $11-million to sink a shaft to search for the trapped bodies, since there was only an "off-chance" of finding them.
In a separate statement, AfroCan also noted that the government has promised an estimated $300,000 in compensation payments to the families of the dead miners and to several dozen other miners who were rescued after the collapse in February. The lack of clarity about who will pay for this compensation was another reason for AfroCan's withdrawal from its investment in the mine, the company said.
It said there was also a dispute between Vantage and AfroCan over who would pay $700,000 in total monthly salaries to the mineworkers while the mine is shut down.
AfroCan complained that Vantage was "malicious" in its "media attack" on the company. "AfroCan shall not be coerced by the recent media reports nor will it succumb to threats of continued intimidation," it said. "AfroCan was forced to make a decision in the interests of its shareholders."
Geoffrey York