Harare Bureau
The High Court has granted Zindico Consortium’s application for an order to sue Asa Resource Plc and Mwana Africa Mauritius in a dispute in which Zindico is claiming $20 million as compensation for breach of contract.

The agreed contract gave Zindico Consortium the right to acquire 26 percent of Freda Rebecca, the local gold mining unit of the Asa Resource, which has assets in Zimbabwe, South Africa and DRC.

Zindico is demanding compensation from the two mining companies arguing that they refused to acknowledge a share purchase agreement signed in 2013 with Asa Plc.

This comes after Asa Resource Plc last week issued a statement that Zindico had failed to present their heads of argument meaning that its technically barred from being heard by the court and can no longer file an answering affidavit.

This statement however prompted, a response from Zindico Consortium which saw the High Court granting an order to sue, Asa Resource and Mwana Africa Mauritius Limited.

“The applicants who brought a claim by Zindico Consortium in January this year failed to present their heads of argument within the prescribed time set by the law.

“FRGM filed heads of argument in time, which technically means Zindico is barred from being heard by the court and can no longer file an answering affidavit,” said Asa in a statement last week.

According to the order granting service to Zindico lawyers under case number HC/4091/17 5/23/17, Asa Plc had written to Zindico through their United Kingdom lawyers maintaining that they don’t have registered offices in Zimbabwe.

Zindico then filed an application for edictal citation (permission to sue a foreign based person) and it is that application which precipitated the delay of the main application’s paperwork which was later mistakenly interpreted as abandonment of the suit by Zindico.

“It is however important to state that Asa lawyers were quite aware that we had taken the route to sue the so-called foreign based respondents,” read part of the application.

The application was granted on May 19, 2017 and Zindico is yet to serve the 1st and 2nd respondents in UK and Mauritius respectively, a process which will take us almost a week.

“It is not true that we are barred for failure to file heads of arguments as same could not be filed before properly serving all the respondents in the application.

“The statement published by FRGM management only discloses how good they are in leading the market and shareholders up the garden path. It is salacious and we are determined to prosecute the matter to finality,” said a source who requested anonymity.

“The first and second respondent who were the key players in the deal will have to respond and after that we file our answering affidavits and heads of arguments.”

In a statement on operations, Asa Resource Group said its revenue and earnings increased in the end year end to March 31, but warned it may be forced to take impairments following the removal of some of its directors and the disappearance of $4.3 million in funds.

In April, the company removed Chief Executive Yay Hoi Ning and Finance Director Yim Kwan from their roles, after discovering evidence of funds transferred to entities in China, and launched an investigation by auditors. The group’s revenue for the year rose 0,6 percent to $122 million from $121.3 million the prior year.

Earnings before interest, tax, depreciation and amortisation fluctuated to $20.5 million from an earnings loss of $300 000 the prior year.

The resources group said its cash balance at the end of the year stood at $2.1 million, down from $7.4 million the prior year, primarily due to mismanagement of cash flows and capital expenditure across its operations.

“There is no doubt that this last quarter’s performance at Freda Rebecca has been adversely affected by the policies and financial mismanagement imposed by the previous executives. Demoralisation among the workforces was a clear effect of imposed changes.

“However, the rapid reaction to events and a thorough review of financial controls by Carla Tait at group level and Jan Lampen at operational level gives the board confidence that it can manage its exposure and stabilise its finances,” said chairman David Murangari.

Asa also said that it may need to take impairments on its total assets, which stood at $235.5 million at March 31.

The group said it is satisfied that not more than $4.3 million in funds is unaccounted for, of which $1.6 million has been traced to two of its companies administered from Hong Kong.

Asa Resource Group also said that the mismanagement of capital at its Freda Rebecca gold mine in Zimbabwe has led to production issues, including contractors not being paid and staff threatening to strike.

This led to a fall in revenue in the final quarter of its financial year to March 31, to $15.5 million, down 16 percent from $18.4 million the prior quarter.

Tonnes milled at the site decreased 27 percent to 231 739 tonnes, while production dropped to 12 462 ounces of gold from 15 365 ounces quarter-on-quarter.

All-in sustaining cash costs increased 22 percent to $1 291 per ounce from $1 055 per ounce.

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