By JAMES ANYANZWA

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Liquidators of the collapsed ARM Cement Plc have written off the firm’s mining investment in South Africa over a legal dispute with the minority shareholders, effectively extending the creditors’ losses to $99.31 million, equivalent to 65.65 percent of total claims.

The regional cement maker, which was put into liquidation in October 1, 2021, owns 70 percent shareholding in South-African based cement dealer Mafeking, while the remaining 30 percent is held by local communities and trusts.

Mafeking’s main asset is a mining right for limestone deposits in Mahikeng in the North West province.

However, ARM’s joint liquidators – George Weru and Muniu Thoithi of PricewaterhoueCoopers (PWC) – in the latest update to creditors in January said it is “unlikely” that there will be any residual value realisable from Mafeking as even the underwriter of the mining business – Lombard insurance Company – has withdrawn its guarantee.

ARM bought Mafeking shares in 2009 for $1 million and incurred an additional $2.5 million as of August 17, 2018.

Set for delisting

The firm, which is set for delisting from the Nairobi Securities Exchange, also spent additional amounts on Mafeking during the administration/liquidation period.

Creditor claims

According to the liquidators, ARM’s creditors had lodged a claim of $151.26 million but have only been paid $51.95 million, accounting for 34.34 percent of their total claims. Claims by secured creditors are estimated at $71.06 million and by unsecured creditors at $80.2 million.

Payments to secured creditors stand at $46.51 million and $5.44 million for unsecured creditors.

Empty handed

So far over 6,300 shareholders are walking away empty handed after ARM assets failed to raise enough cash to cover both the shareholder and creditor claims.

The only beneficiary from ARM’s liquidation are preference creditors who have been fully paid claims amounting to $3.07 million.

It is estimated that ARM’s secured creditors will recover between 65 percent and 70 percent of their total reviewed claim amounts, while unsecured creditors will recover between 6.78 percent and eight percent from the sale of the company’s assets, including subsidiary interests.

“Considering the uncertain nature of the court case and how long it is likely to take to conclude and the fact that the key asset of Mafeking (the mining rights) could be lost after the withdrawal of the guarantee, and, further, that realisation of ARM’s interests in Mafeking is likely to prove unattractive to potential investors because of the existing shareholder conflict, there is little, if any, value for ARM in Mafeking,”  said the joint liquidators in a creditors’ report dated January 2023.

Sued ARM

The minority shareholders in Mafeking have sued ARM over obligations the cement maker should have fulfilled as per the shareholder agreement.

The minorities claim ARM did not complete a bankable feasibility study as required and sued the firm in the High Court of South Africa on February 19, 2019 seeking orders to terminate the shareholders agreement.

They also want ARM be compelled to sell its shares to the minorities at par value and ARM directors to be compelled to resign from Mafeking’s board.