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Gold Fields to defend R11bn summons
Allan Seccombe
Posted: Fri, 22 Aug 2008
[miningmx.com] -- GOLD FIELDS was tightlipped on Friday after notifying the market that it had been served a summons by Randgold & Exploration (R&E) for fraudulent share dealings by its subsidiary that used to be the mining company called Western Areas, with claims running between R519m and R11bn.
In early 2007, Gold Fields bought the embattled Western Areas in an all-share deal to gain its 50% stake in the South Deep mine, which has one of the world's largest untapped ore bodies and lies contiguous to the Kloof mine.
Gold Fields also paid $1.2bn in cash and $325m in shares to Barrick for that company's 50% stake in South Deep, which has been taken back to the drawing board to develop a fresh mining strategy.
Western Areas had been led by Brett Kebble until August 2005 when he was asked to quit his position. It came at the same time he was told to leave R&E and JCI
because of fraudulent share dealings running into billions of rands.
The summons was served on Gold Fields on Thursday by R&E as well as African Strategic Investments.
"The summons claims that during the period that WAL (Western Areas) was under the control of Brett Kebble, Roger Kebble and others, WAL was allegedly part of a scam whereby JCI Limited unlawfully disposed of shares owned by Randgold in Randgold Resources Limited ("Resources") and Afrikander Lease Limited, now Uranium One," Gold Fields said in a statement.
"WAL's preliminary assessment is that it has strong defences to these claims and
accordingly, WAL`s attorneys have been instructed to vigorously defend the
claims."
The claims have been valued in a number of ways, with the highest claim of R11bn based on the highest prices of the misappropriated shares between the date of the transactions and March 2008. A second calculation puts the claim at R519m, which is what Western Areas is alleged to have received from the transactions to fund its operations.
"It should be noted that the claims lie only against WAL, whose only interest is
a 50% in the South Deep Mine. This alleged liability is historic and relates to
a period of time prior to Gold Fields purchasing the company," Gold Fields said.
No further comment was forthcoming from Gold Fields. "Until our
legal team has had time to assess the matter we will not be making any comment," said spokesman Daniel Thole.
Gold Fields bought Western Areas with all its assets and liabilities, said R&E spokesman Brian Gibson, who pointed out the three-prescription period was about to expire.
R&E has made it clear that it will be pursuing other claims and it's likely that these will be announced soon.
Peter Major, a fund manager at Cadiz Green, said the situation with the old Kebble companies was such a mess it would take years to resolve in court if Gold Fields decided to pursue that route. It's unlikely that new CEO Nick Holland would just roll over on this claim, he said.
"Holland is tough and he's been around the block a couple of times," Major said. "He will fight this. It's a lot of money. They're doing the right thing by not wanting to discuss this any more than they have to."
A mining analyst pointed out that Gold Fields was obviously not
the beneficiary of these fraudulent transactions and those who had benefited had long since left what was Western Areas.
"Mining companies are continually facing this kind of thing. I wouldn't think there is any specific risk for Gold Fields here, but it's an unwelcome distraction," the analyst said.
The suspended R&E said in a recent update to shareholders it was "the victim of widespread frauds and thefts, unprecedented in south African commercial history".
At the heart of the matter lies the sale of shares in London-listed Randgold Resources held by R&E but sold by JCI under instruction by Brett Kebble and other directors.
The estimated value of R&E's claims against JCI had swollen to R14bn before interest if the highest value of the misappropriated shares was taken into account. The value of JCI's assets barely tops R2bn.
R&E said in its update to shareholders it was chasing down third parties benefiting from these transactions as
it thrashes out a deal with JCI, which under a memorandum of understanding agreed on 21 July would result in a binding settlement agreement of the claims made by R&E against JCI and vice versa.
This agreement was to have been settled in 21 days, but both parties have extended that period by another 21 days.
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