Engaged Mining
Engaged BT adopts a stakeholder driven approach balancing South Africa’s complex needs in optimising the financial performance of mining assets. Our multi-disciplinary teams are able to focus on protecting value for shareholders; prolonging employment opportunities and paying salaries for staff, ensuring that surrounding communities continue to enjoy the benefits of economic activity in their region, and providing regulators with visibility on plans to support the asset and ensure it can maintain its socio-economic and legal commitments.
By conducting an independent business review or an in-depth “health check” on a mining business, we can provide a detailed assessment of the current business model’s efficacy, and how it may be adjusted to maximise profitability and outcomes for all stakeholders. This includes:
Detailed analysis of the income statement and balance sheet
“LTM” (Last 12 months) analyses of key financial trends that identify where and how distress commenced in the business
Insight into the operational business model
Review of key contracts in the business
Assessment of management skills and experience
Consideration of major risks to the business, including legal disputes
Deep dive into cash flow forecasts
Mining
A challenging environment
Comprehensive Support for Sustainable Mining
Engaged Mining Turnaround employs a multi-disciplinary approach to ensure mining assets’ sustainability and profitability
Operational Restructuring
Optimise efficiency and reduce costs.
Capital
Combining capital with in-house restructuring (balance sheet and operations), turnaround and credit underwriting expertise.
Legal
Restructuring support and regulatory compliance.
Technical Expertise
Specialist insights into geology, engineering, sustainability and stakeholders.
Strategic Sourcing
Addressing supply chain and capital expenditure.
Multi-disciplinary solutions /
Meet the team
Optimisation, turnaround and rescue – creating and protecting shared value for all stakeholders
Our tested approach to optimisation, turnaround and business rescue provides a framework that enhances value through better operations, asset realisation, and strategic financial management. This approach aligns closely with the longer-term return horizons of investors backing mining projects, and the need for shared value that many of SA’s stakeholders in the industry will continue to have for decades to come.
Optimisation and turnaround offer a range of benefits to operating businesses in mining, including enhanced free cash flow, better operating margins and lower G&A and cash costs. Should the asset need to enter business rescue, we have extensive experience managing this process for the benefits of all mining stakeholders.
Creditors
Business rescue usually results in substantially better returns for creditors than liquidation. This is primarily because businesses can continue to operate, potentially generating revenue that can be used to pay off debts. Liquidation typically yields lower returns for creditors, as assets are often sold at deeply discounted distressed prices.
Asset Realisation: Business rescue allows for the sale or transfer of valuable assets, such as mining rights, which can be executed with ministerial consent. In liquidation, such rights are extinguished and revert to the state, leaving creditors without asset recovery.
Binding Business Rescue Plan: Once a business rescue plan is adopted, it is binding on all creditors, and their claims are usually compromised as part of the process. The business rescue process is designed to maximise overall recovery for creditors compared to a liquidation.
Post-Commencement Finance (PCF): Business rescue allows companies to secure new financing during the process, which is prioritised over existing unsecured claims. This financing is crucial for maintaining operations and can significantly enhance the company’s ability to recover and repay creditors.
Encouraging Investment: The structured nature of business rescue can attract new investors willing to inject capital into the distressed company. This influx of funds can further improve the prospects for creditor recovery.
Tailored Recovery Plans: Business rescue practitioners (BRPs) develop specific plans that consider creditor interests and company viability. This collaborative approach inevitably leads to more effective restructuring than a straightforward liquidation.
Potential for Continued Operations: By allowing businesses to continue trading while restructuring, business rescue preserves jobs and supplier relationships, indirectly benefiting creditors by maintaining a viable customer base.
Shareholders & Investors
Shareholders
Potential for Recovery: Business rescue aims to rehabilitate financially distressed companies, providing a structured opportunity for them to regain solvency. This process can lead to enhanced recovery of shareholder value compared to liquidation, where shareholders almost always receive nothing.
Retention of Ownership: During business rescue, shareholders have the opportunity to retain their ownership stakes if the company successfully restructures. In contrast, liquidation usually results in the loss of all equity, as the liquidation framework is structured around selling assets, usually at deep discounts, to satisfy creditor claims.
Rights in Proceedings: Shareholders have specific rights during business rescue, including the right to participate in discussions and be consulted on the business rescue plan. This allows them to influence decisions that may affect their investment.
Voting on Plans: If a proposed business rescue plan alters shareholders’ rights, they have the right to vote on its adoption. This process ensures that shareholders can voice their opinions and shape the direction of the company.
Asset Value Realisation: Business rescue can facilitate better management of valuable assets, such as mining licenses, which may be lost in liquidation. The ability to sell or transfer these assets under a business rescue framework can help maximise shareholder value.
Post-Commencement Finance (PCF): The ability to secure PCF during business rescue provides liquidity for operations and restructuring. This support substantially enhances prospects for recovery, ultimately benefiting shareholders by improving overall business health.
Focus on Sustainability: Business rescue emphasises long-term viability and operational stability. By allowing companies to restructure rather than liquidate, shareholders benefit from a potentially revitalised company that can generate returns over time.
Mitigation of Job Losses: A successful business rescue can preserve jobs and maintain relationships with suppliers and customers, contributing to a more stable operational environment.
Investors
Potential for Increased Asset Realisation: During business rescue, assets can be valued and sold as part of a going concern rather than through forced sale in liquidation. This process often results in higher asset values because the company can negotiate sales based on its operational potential and existing contracts, rather than distressed sale prices typical in liquidation.
Strategic Restructuring: Business rescue allows companies to reorganise, renegotiate contracts, and address unprofitable areas. This strategy can result in increased efficiency and profitability, ultimately boosting investor confidence and potential returns.
Regulatory Support: Business rescue is often viewed more favourably by regulators compared to liquidation. This can enhance investor confidence, as it demonstrates commitment to maintaining operations and regulatory compliance during restructuring.
Acquisition Potential: Business rescue can attract third-party investors looking for opportunities to acquire distressed assets or businesses. Business rescue allows for accelerated M&A processes to take place in order to transfer ownership in a significantly reduced timeframe for the benefit of both investors and existing stakeholders. Investors may benefit from this if they hold equity or debt in the company, as successful restructuring can lead to increased company value.
Market Confidence: Successfully navigating a business rescue can enhance investor confidence in the company’s management and operational viability. This renewed confidence can lead to increased investment opportunities and potentially higher stock prices as the market reacts positively to recovery efforts.
Unions & Labour
| Benefit | Details |
| Job Security | Business rescue aims to preserve jobs, allowing employees to retain their positions during the restructuring process. |
| Continued Remuneration | Depending on the circumstances, employees can continue to receive their salaries and benefits throughout the business rescue proceedings, ensuring financial stability. |
| Participation Rights | Employees and unions have the right to participate in the business rescue process, including being notified of developments and voting on the rescue plan where employee debt exists. |
| Protection Against Retrenchments | Any proposed retrenchments must comply with labour laws, providing a level of protection against sudden job losses. |
| Access to Information | Employees can access financial information about the company, enabling them to understand its situation and advocate for their interests. |
| Potential for Improved Conditions | The restructuring process may lead to enhancements in working conditions or employment terms as part of the turnaround strategy. |
| Collective Bargaining Power | Unions can negotiate on behalf of employees during the business rescue process, ensuring that their rights and interests are represented. |
Communities
Job Preservation: Business rescue efforts aim to keep mining operations running, helping to preserve jobs. The stability this provides is crucial for local economies that often rely heavily on the employment provided by mining companies.
Continued Local Economic Activity: By maintaining operations, business rescue supports local businesses and services that depend on the mine’s workforce. This can help sustain community livelihoods and prevent economic hardship associated with mine closures.
Involvement in Decision-Making: Business rescue processes often encourage greater engagement with local communities. Mining companies may seek input from community members regarding operations and rehabilitation plans, fostering a sense of ownership and collaboration and leading to improved relationships between companies and communities.
Focus on Sustainable Practices: Business rescue plans may include commitments to environmental rehabilitation and sustainable practices, which can benefit mining communities by mitigating the negative impacts of mining activities. This may also lead to improved mine closure and rehabilitation strategies, ensuring that land is restored in a way that benefits the community after mining ceases.
Skills Development and Training: Business rescue provides an opportunity for companies to focus on skills development for employees and community members. Training programs can enhance employability and prepare individuals for future job opportunities within or outside the mining sector.
Mitigation of Illegal Mining: By keeping legitimate mining operations active through business rescue, communities may see a reduction in illegal mining activities that often occur in abandoned or distressed areas. This can lead to improved safety and security for residents.
Case studies
Working closely with our partners Adamantem, Engaged BT has developed a strong track record in optimisation, turnaround and business rescue across Southern Africa’s mining sector.
Kareevlei Mining (Pty) Ltd
Key deliverables:
- Cost rationalization measures put into place to reduce cost base over time
- Assessed various options for sale of shares and claims in the mine
- Mediation of director disputes as well as stakeholder management
- Engagement with all regulatory authorities on the status of the Business Rescue process
- Sale of the company to a buyer with the correct5 balance sheet to complete the clean up process
Emerging Coal Miner
South Africa
Key Deliverables:
- Advisory on BEE shareholding agreements and structures
- Capacity building to insource mining operations and exit contract miner
- Development of a working capital model based on offtake and marketing agreements
- Determining new plant & equipment requirements factoring in the mining plan and required output and determining the capex budget
- Developed a comparative analyses of required plant & equipment and requisite cashflow modelling
Basil Read Mining
Contract mining in South Africa, Lesotho, Botswana and Namibia
Key Deliverables:
- Review of overhead structure, head office and project specific costs
- Developed cost optimisation strategies at both head office level and various mining projects
- Initiated discussions and strategies for short and medium-term revenue enhancement activities
- Review of plant and determination of machine availability and capacity to meet required output
- Renegotiating supplier contracts to yield value for money and improve terms
- Undertook investment in new plant and negotiate financing thereof
- Sale of plant, including plant repairs for improved valuations
Renegotiation of contract with mining company for revised terms to improve profitability
Diamond mining company
Lesotho
Key deliverables:
- Reviewed financial models and cashflow forecasts prepared by management for restart of mining operations
- Assess reasonability of proposed restart funding based on future performance of the mine and commodity prices
- Motivate for the refinancing and restart of mining operations following a period of care & maintenance
- Review drawdown requests in line with the agreed refinancing plan
- Working capital – capital structure review and debt restructuring with various options provided to lenders
- Engagements with regulatory authorities
- Mine visits before and after restart of mining operations including both mining and plant processing operations
Investment Holding Company
Iron ore mining & processing
Key deliverables:
- Provided restructuring advice and plans to shareholders of an investment holding company for the restructuring of the Group and its underlying subsidiaries
- Review of group structures and shareholding arrangements
- Develop a restructuring plan for the unbundling of certain group companies
- Provide advisory on various regulatory processes available to deal with financial distress in certain group companies including business rescue, liquidation and accelerated M&A sales process.
- In addition, provide comparative analysis of SA restructuring options against UK and US processes to non-resident shareholders
- Initiated and manage work performed by other professionals including legal advisors, engineering experts, liquidators and M&A professionals