Great Basin Gold Ltd. (fka GBGLF)

[goldenpolarbear]

Agreed!
http://www.accountingperspectives.co.za/Docs/vol3.pdf

SOUTHGOLD OPERATIONS AND BUSINESS RESCUE
Southgold was a wholly-owned subsidiary of Great Basin Gold Ltd, a public company which was listed on the Johannesburg, New York and Toronto Stock Exchanges. Southgold’s principal asset was the Burnstone mine (the Mine) located in the Mpumalanga province. Southgold had been awarded a renewable licence during 2009 by the Department of Mineral Resources and commercial mining and production of gold ore commenced in 2011.

During August 2012, operations at the Mine were suspended due to Great Basin Gold Ltd’s review of the liquidity position of the company. e parent company decided to dispose of the Southgold operations in order to settle the various amounts owing to creditors.

In an attempt to seek protection from its creditors, Southgold was placed into business rescue. is was especially important for Southgold as, if the company had been liquidated, the mining right would revert to the South African government. e licence to mine was substantially the entire value of Southgold and without the licence there was no operation of which to dispose.

At a board meeting on 14 September 2012, the directors concluded that Southgold was nancially distressed and voluntarily commenced business rescue proceedings in terms of Chapter 6 of the Act. Shortly a er commencing business rescue proceedings, the parent company obtained a loan for USD35 million to service working capital requirements of the Burnstone mine and Hollister mine (a mining operation in the United States of America); of which USD11 million was utilised for the orderly suspension of the Burnstone operations and the placement of Southgold’s assets under care and maintenance.

During the last quarter of 2012, JP Morgan was appointed as a transactional advisor and the process for locating a buyer for Southgold or the Mine was commenced. Of the numerous pre- bid letters submitted, ve potential buyers were identi ed but it was ultimately Witswatersrand Consolidated Gold Resources (Wits Gold) that was identi ed as the buyer in the business rescue plan released by the parent company on 8 July 2013.

The business rescue plan incorporated the sale of the entire share capital to Wits Gold. e initial capital outlay required by Wits Gold amounted to USD7.5 million which was described as a ‘magic deal’ by the CEO of Wits Gold at an e ective 10 cents-to-the-dollar (Creamer, 2013). e business rescue plan also provided for the settlement of the amounts owed by Southgold to secured and unsecured creditors prior to the sale to Wits Gold.