South African government backs asbestos claim

South African government backs asbestos claim

by David McKay & Stewart Bailey, Jonannesburg

Miningweb (1st October 2002)

The South African government has thrown its weight behind a multi-billion rand legal claim against Gencor and has promised to apply for an interdict to block the unbundling of the $164 million (R16.4 billion) former mining house if the matter is not settled. The legal claim comprises 37 summonses brought by employees of an asbestos company in which Gencor was once invested.

Legal counsel for the employees says Gencor is liable for claims with potential to total billions of rands in respect ofasbestos-related diseases.

Currently, R37 million of claims have been received and although Gencor has denied liability it has said it will hold R409 million in cash after its unbundling to cover any contingencies. Gencor, once a company consisting of platinum, gold and other metal assets, stood surety for certain Billiton financial instruments. These were fulfilled and now the group is to distribute cash and its only remaining holding, a 46 percent stake in Impala Platinum [JSE:IMP], the world's second largest platinum producer.

The South African government confirmed a Reuters reported today (1st October) quoting minerals and energy minister, Phumzile Mlambo-Ngcuka, as saying: "We will combine with miners' lawyers because we also want to launch an interdict. We don't think that Gencor can get away with this kind of arrogance". The statement sent shockwaves through the local market.

Minerals and energy director-general, Sandile Nogxina, told Miningweb that Gencor had not set enough aside to deal with the liability: "The thinking is that before there is any unbundling we must be assured by Gencor that it will be able to meet all environmental liabilities including these asbestos claims.

Once we have that, we will not have a problem," he said.

Cash set aside not enough

Nogxina said the R409 million which will be left in the kitty by Gencor after their proposed unbundling was "definitely not enough".

"We will not be in a position to say how much is enough until we have done a thorough assessment. Once responsibility cannot be assigned to anybody, because the company does not exist anymore, it becomes the business of government and taxpayers to carry the company's liability," Nogxina said. He added that the government had been in discussion with Gencor but had had "no joy" with the company on the matter.

Gencor spokesman Johan Marais said his only contact with the Department of Minerals and Energy had been a request from the ministry for a copy of Gencor's unbundling circular late last week. Marais would offer no comment on the government's decision to join the legal action.

Class action pending

Earlier today Gencor postponed a meeting originally scheduled for tomorrow (2nd October) - where shareholders were to have voted on the unbundling of Gencor's stake in Impala - until an as yet unspecified date.

Richard Spoor, the attorney representing the claimants in their case against Gencor, said he was "delighted" by the government's decision to throw his weight behind the case. He said the support by the state for his interdict to halt the unbundling, would smooth oversome of the technicalities relating to the case.

One of these technicalities included his right to try a case on behalf of future sufferers of asbestos-related lung diseases which are alleged to have contracted the illnesses while working at Gencor's Gefco and Msauli asbestos producing subsidiaries between1963 and 1984. Spoor said Mesothelioma, the most deadly of the diseases contracted by claimants, had a 38 year latency period, which meant new sufferers would have a claim on Gencor for decades to come.

"Now with the government on board, it obviously has a right, on behalf of its citizens, to seek relief and protection for people we don't represent, those who will become sick in 20 to 30 years," said Spoor.

Gencor a sitting duck

"What we would like to see is Gencor sitting there like an insurance company paying out claims for the next 50 years. We could continue litigating against them for the next 30 or 40 years, but once they've lost one case they will effectively become an insurance company," he said.

Spoor said, however, that he would welcome a counter restructuring proposal from Gencor, in which it set aside sufficient cash to cover future liabilities. "They could form a fund and in that case nobody would oppose the unbundling," he said.

Spoor would not give an estimate of what figure he would be likely to settle on, but gave this example: "You could be talking about a couple of billion rand. In that case you will have R200 million in interest payments each year to pay out claims without eating into your capital." Spoor said in the case of a settlement offer by Gencor, the onus would be on the mining company to estimate the extent of its own liability.

Spoor is currently representing claimants on a 'no win-no fee' basis. His case currently focuses on employees who worked for Gencor between 1964 and 1983. Spoor said the initial claim value of R37million lodged by 37 claimants was well below the final amount that was likely to be claimed once he had processed "a huge backlog" of summonses.

"What we're looking at here is not individual cases but working toward a class action," said Spoor. He said persuading the court to allow a class action would be painstaking, in that no precedent for a similar case existed in South African case law.