VMR admits to "financial challenges" but says is confident about future

Village Main Reef (VMR) is in trouble but still has a future. 

That was what the company said in a statement after Business Maverick reported that it looked set to collapse, with over 7,000 jobs on the line. 

"VMR confirms operating and financial challenges - but remains confident about the future," ran the headline of the release, which also revealed that the company had a CEO, Jeff Dong. 

In the statement, the company confirmed the Business Maverick report that "operating and financial constraints" had led to the postponement in December 2019 of a planned listing on the Hong Kong Stock Exchange by its parent company, Heaven Sent Gold Limited. 

Dong said the postponement arose from poor grades and production at VMR’s Tau Lekoa and Kopanang mines, stage 6 load shedding in December, and four seismicity-related fatalities at Tau Lekoa in the same month. This also confirms the veracity of what Business Maverick reported on Monday. 

“Despite the postponed listing and challenging operating environment, we made the decision to continue to invest and support the VMR Group. Accordingly, we committed to a much more active operational involvement in the business, with new senior appointments, both in our Underground and Surface businesses during January 2020, and I am pleased to confirm that we have already seen improved performance in our operations,” Dong was quoted as saying.

An internal document dated from late January that was obtained by Business Maverick painted a bleak picture, saying the company had only received funding to keep it going through January, that 7,200 jobs were at risk and that it had no money for retrenchment packages. 

It also said that the parent board had decided not to provide any more funding to VMR, though Tuesday's statement said that support would apparently continue. 

“Provided that these positive results continue, and with the co-operation of all stakeholders in delivering the envisaged improvements in safety, production and costs – and thus in revenue and a return to profit – restructuring of the company’s operations, and possible job reductions, may be avoided. We plan to build from the successful turnaround of the VMR Group and expand our business, and to revisit a future listing,” Dong said in the statement.

Watch this space. VMR's assets have long been troubled - poor grades can sink a gold producer even at current prices, which are robust by historical standards - and it is unlikely that any other investor would step in to revive the business. But with over 7,000 jobs at risk in the current economic and political environment, the unfolding situation will be high on radar screen of government and labour. The Chinese link also has a political element to it, given the Asian giant's keen interest in African resources and perceived influence in African capitals including Pretoria. BM