A lengthy battle between miner Kalagadi Manganese and its lenders over outstanding debt amounting to billions of rand is heading for arbitration after the creditors scored a legal victory.
The Supreme Court of Appeal (SCA) on Friday ruled the matter must be settled by arbitration as per the agreement between the parties when they initially entered into the business transaction.
The manganese miner, run by Daphne Mashile-Nkosi, has yet to pay back any of the more than R7bn in loans provided by the Industrial Development Corporation (IDC), the African Development Bank (AfDB) and Absa.
The SCA dismissed Kalagadi’s argument that the IDC is precluded by law from entering into arbitration agreements.
“Kalagadi contends that the IDC’s constitutional and statutory obligations preclude it from entering into an arbitration agreement. This contention is unsustainable. The IDC’s primary mission is to promote economic growth and industrial development in SA,” the SCA said in a unanimous ruling.
“Lending money is a key tool for achieving this objective. There are no legal barriers that preclude the IDC from agreeing to the arbitration process to resolve disputes when concluding loan agreements. Public bodies routinely enter into such agreements and participate in arbitrations in SA.”
Kalagadi operates a manganese mine in the Northern Cape. It obtained various loan facilities from a consortium of lenders for operations, now amounting to more than R7bn. Besides being a major creditor of Kalagadi, the IDC has a 20% shareholding in the company.
Business rescue headwinds
An application brought by the IDC to place Kalagadi in business rescue four years ago is still tied up in legal arguments after interlocutory applications.
Kalagadi has opposed the business rescue application because it is of that view that its assets, fairly valued, exceed its liabilities; that the lender-approved mining contractor underperformed and, in the circumstances, the debt should be restructured.
The IDC and AfDB are owed R3bn each and Absa almost R1bn.
Business Day understands the debt has ballooned to about R8.5bn, including interest accrued so far. Kalagadi mines manganese in the Kalahari basin in the Northern Cape, which is home to about 80% of the world’s known land-based manganese reserves.
The mine lies on a stretch of three farms on which it holds new-order mining rights and is believed to overlay more than 960-million tonnes of manganese ore.
According to the IDC’s 2024 annual report, the IDC’s nonperforming loan ratio remains high despite improvements in recent years.
“Kalagadi Manganese notes the SCA’s decision to uphold the appeal brought by the African Development Bank to, in the main, confirm its immunity from legal proceedings in SA,” Kalagadi said.
“The company is currently studying the judgment in detail and will consider all possible legal avenues, including the possibility of a further appeal. Kalagadi remains committed to following due legal process as the dispute continues to unfold.”
Manganese assets have become attractive as consolidation in the sector heats up.
Exxaro Resources last month moved to buy a portfolio of such assets from an entity led by Saki Macozoma in a landmark deal worth nearly R12bn that would propel the coal miner into the manganese sector on a big scale.
South32, the world’s largest manganese producer, has called for further consolidation of the segment in SA and an improvement in Transnet’s rail performance to increase the country’s output of the metal.
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