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Seven bids lodged for Letseng
Brendan Ryan
Posted: Thu, 17 Nov 2005
[miningmx.com] -- FINAL bids are due today (Friday) from the seven contenders short-listed to buy Letseng Diamonds, the entity that owns Lesotho's Letseng Diamond mine.
The bid process is being run by Investec Bank which is intimately involved because of its role in the refinancing of JCI. JCI controls Letseng Diamonds jointly with Matodzi Resources and the Lesotho government.
JCI’s stake in Letseng Holdings - which owns 76% of Letseng Diamonds - sits in the special purpose vehicle (SPV) to which Investec lent R460m. Also in that SPV, are the 200 million preference shares JCI owns in Matodzi which holds 50% of Letseng Holdings.
All the assets in the SPV are pledged as collateral to Investec Bank for the funds it is putting up to refinance JCI.
Investec executive Dennis Tucker - who is running the bid process - declines to name the seven parties that are still
in the running for ownership of Letseng.
But market sources believe they are: De Beers; a consortium made up of Royal Bafokeng Resources (RBR), the Industrial Development Corporation and diversified Canadian junior miner Etruscan; Trans Hex; Canadian junior diamond company Aber; a consortium led by Clifford Elphick; a Russian consortium, and a Beny Steinmetz-led consortium.
Elphick was the MD of Oppenheimer family company EO & Son who resigned this year after deciding to go into the diamond business for himself and recruiting a number of De Beers executives to join him.
Steinmetz is predominantly a diamond trader and cutter. Aber owns 40% of Rio Tinto’ s Diavik diamond mine in Canada’s North West Territories.
Apart from the identities of the bidders, the other burning issue is precisely how the sale of Letseng Diamonds will be handled because the logistics are intricately entwined with whatever is going on in the JCI saga.
Letseng
is, in fact, one of JCI’s few material assets. One mining industry source points out that it qualifies as "Schedule 1" asset in terms of JSE regulations.
That means JCI is required to publish a circular to shareholders concerning the financial impact of the deal on the company and then win approval for the sale of the asset at a special meeting of shareholders.
As part of that circular to shareholders, JCI would have to publish its latest financial statistics to illustrate the effect of the disposal.
Those corporate governance mechanisms are simply not possible at this stage because of the on-going uncertainty over JCI where, on November 10, CEO Peter Gray announced a further delay in publication of the results for its financial year to end-March 2005.
He said the forensic audit process being carried out was proving more time-consuming than originally anticipated and would be completed only at the end of December. Auditors KPMG would then
review the draft financial statement for publication as soon as possible after that.
Gray repeated his previous comment that shareholders should not rely on the previous year’s financial statements until the forensic audit and internal investigation were complete.
Asked about the corporate governance steps required of JCI for the disposal of its holding in Letseng, JCI spokesman Brian Gibson replied that: "JCI will act only within the rules of and with the approval of the JSE."
One other point raised by the industry source concerns Investec’s role in deciding the fate of the funds from the sale. Estimates on Letseng’s worth range as high as R900m. JCI’s share would flow into the SPV.
Said Gibson: "Should any funds be raised through the approved sale of any assets, these would be applied in terms of the facility arrangements as set out in the announcement to JCI shareholders on 30 August 2005."
Tucker said that: "All due processes
will be observed in terms of the rules and regulations of the JSE, the SRP and and the Companies Act. That’s the only way this can be done."
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