www.miningmx.com | mining_fin Aflease role in Western Areas' future

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Neal Froneman, CEO Aflease Gold

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� JSE:AFLEASE GOLD LIMITED:
114c

Aflease role in Western Areas' future
Allan Seccombe
Posted: Fri, 23 Jun 2006

[miningmx.com] -- AFLEASE Gold is to acquire up to 13 million shares in the suspended Randgold & Exploration (R&E) in a share swap with Trinity Asset Management, which has a ripple effect on JCI and Western Areas.

Aflease CEO Neal Froneman said under the agreement, which will give junior gold miner Aflease between 10% and 17.4% stake in R&E, Trinity would cease its liquidation proceedings against R&E and JCI, which is also suspended from trade on the JSE.

�We�ve spoken to (R&E and JCI CEO) Peter Gray. We believe this (share swap) proposal has the support of most shareholders and managers,� he said.

Fund managers Allan Gray hold 25% of R&E. American Depository Receipt holders and JCI also hold shares in the company.

JCI will disappear

If Froneman�s plans pan out the way he thinks they will, he will play the kingmaker role in the brewing tussle between Harmony and Gold Fields for control of Western Areas because together R&E and JCI hold 28.4% of Western Areas.

Harmony has 29% of Western Areas and is floating the idea of putting its quality assets into the company to unlock their value. Arch-rivals Gold Fields owns 15.5% of Western Areas and has plans to use its own assets to leverage growth and value in the South Deep project.

One of the key conditions precedent in the fulfilment of the share swap transaction is that JCI�s board confirms the debt of that company to R&E is not less than R1.1bn. R&E and JCI are currently undergoing a process of mediation to resolve the exact amount.

�This transaction is an incentive for the mediation process to reach resolution around those numbers,� Froneman told reporters, adding it could take up to eight weeks before the mediation was completed.

There was a high level of certainty around what JCI owed R&E, he said, adding it could be as high as R1.2bn.

This is important because JCI, which has a net asset value of about R1.8bn, might issue shares to R&E to settle the debt, giving R&E control of JCI.

�Irrespective of how it is done, JCI will disappear,� Froneman said, adding it could either be folded into R&E or its assets sold and closed.

JCI is investigating a number of options to raise the money, including the sale of the Letseng diamond mine in Lesotho, which it effectively controls. Figures circulating the market put the value of the mine at around R1bn.

Froneman said he was fully supportive of any JCI moves to sell the mine, which JCI controls indirectly through its majority holding in Matodzi and a direct stake in Letseng�s holding company.

Matodzi CEO Sello Rasethaba said recently his company would control the destiny of Letseng and it appears there is reluctance on Matodzi�s side to sell its only operating asset.

JCI could also sell its 24.9% stake in Western Areas, but Froneman reckons a fire sale of those shares is unlikely to reach the full value of what he estimates those shares are worth.

Shares in Western Areas, which owns half of one of the world�s largest untapped gold deposits, are worth at least R50 each, he said, adding he would be unwilling to sell any Western Areas shares acquired in the transaction for less and that he was quite prepared to hang on to them.

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The share swap transaction will be a significant capital raising exercise for Aflease that would provide funds enough for all its project requirements, as well as increasing its asset base, he said.

Aflease, together with its 79% shareholder sxr Uranium One, will jointly hold up to 29.4% of R&E, which will either be re-listed or liquidated to realise value, Froneman said.

Aflease will issue Trinity with between seven and 10 of its shares for each R&E share depending on the net asset value (NAV) of R&E once audited financial results for the suspended company are released. If the net asset value falls below R14.70/share then the deal falls away, while the maximum 10 shares will be issued if the NAV is R21/share or more.

Among the conditions that have to be met before the share swap can go ahead, Aflease shareholders need to approve an increase in shares in issue to not less that 1.225 billion from 475 million, which would bring sxr Uranium One�s share down from 79% to around 60%, increasing liquidity in the gold company.

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