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BRC DiamondCore sues former BEE partner
Brendan Ryan
Posted: Wed, 18 Jun 2008
[miningmx.com] -- BRC DIAMONDCORE (BRC) has gone to the Johannesburg High Court for an order declaring the empowerment agreement with former partner Sefalana Mineral Resources to be void.
This follows BRC’s action last October when it declared the BEE agreement to be void as, “a direct consequence of the Sefalana consortium not having met the conditions precedent to the preference share agreement as well as other provisions.”
The BRC shares that had been issued to Sefalana “were recovered and cancelled pursuant to a deemed offer clause in the agreement.”
Sefalana CEO Lesedi Rakakgong said at the time Sefalana would “defend its interests at law” but nothing happened until April when both Rakakgong and Sefalana chairman Gordon Young told Miningmx that Sefalana intended suing BRC.
No legal action has been taken since then by Sefalana. Both Young and Rakakgong
have declined to comment on the situation since April.
Sefalana said this afternoon that it would defend the action and counter-claim against BRC.
Sefalana added that, "It is noteworthy Sefalana was invited in recent days by the Department of Minerals and Energy (DME) to attend a joint meeting of the DME, BRC and ourselves to resolve this dispute.
"We are surprised at BRC's attempt to pre-empt the outcome of this meeting."
When approached, Botoulas commented all he wanted to say was contained in the BRC media release announcing that its subsidiary, Samadi Resources, had launched the legal application.
In this he stated , “Sefalana has responded by repeatedly making threats in the media to litigate against BRC. No action has been forthcoming from Sefalana but we believe that these public threats have adversely affected investor sentiment towards the company and created an incorrect perception of the company’s commitment to BEE as required by South African legislation.
“Several efforts by the company, management consultants and other stakeholders to resolve the matter amicably have proved unsuccessful and we believe that Samadi’s approach to the High Court is the only recourse left to dispose of the on-going dispute with Sefalana and deliver a degree of certainty to shareholders.
“Company legal counsel has advised that the
application, if successful, will finally dispose of any future claims that Sefalana believes that it has against Samadi and will allow BRC to finalise an agreement with an alternative BEE partner, in compliance with South African legislation.”
Botoulas does not go into it but his comments on delivering “a degree of certainty to shareholders” and investor sentiment being “adversely affected” are probably more critical to BRC than the issue of perceptions about BRC’s commitment to BEE.
The BRC share price has collapsed in the wake of the Sefalana dispute and is currently trading on the JSE at around R11 compared with R36 in mid-February.
That has put the company in a difficult position. It needs to raise money to repay loans as well as fund on-going exploration work in the Democratic Republic of Congo (DRC) but the weakness of the share price severely limits the options open to management.
BRC has to pay back loans totalling C$6m to
shareholder Banro Corporation by the end of July.
In the 2007 financial review BRC’s directors said, “the company will need to raise additional capital in 2008 to fund its exploration programme for 2008 and repay the loan facility.
“The company has relied primarily on equity financings to fund its activities. Although the company has been successful in completing equity financings in the past, there is no assurance that the company will secure the necessary financings in future.”
Trying to raise funds under current market conditions, where negative sentiment has hit the share prices of junior miners and exploration companies across the board, is hard enough.
Having to do so with potential investors questioning the uncertainty posed by the Sefalana situation is even worse which is probably the main reason BRC management has decided to bring this issue to a head.
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