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R&E's claims against JCI balloon to R14bn
Allan Seccombe
Posted: Fri, 25 Jul 2008

[miningmx.com] -- THE claims Randgold & Exploration (R&E) has lodged against mining investment group JCI has ballooned in value to R14bn, but there are less expensive alternatives that would effectively drain JCI of all value left behind after a period of rampant fraud under Brett Kebble and other management.

R&E has 15 claims against JCI, and estimates the present value of its claim at R14bn, which is completely unrealistic given the amount value left in JCI, which is estimated at R2bn. This revised claim is higher than the initial one made against JCI in August 2006 of R5.8bn.

“R&E alleges that it was the victim of widespread frauds and thefts, unprecedented in South African commercial history,” R&E said in its latest update to shareholders, which spelled out current net asset value and what that would rise to if there was a settlement with JCI.
frauds and thefts unprecedented in South African commercial history
The increase in the claims comes from the rise in share prices of the stock R&E claims was stolen from it by JCI. R&E has suggested three alternative claim options ranging from R7bn down to R1.8bn.

These claims fall outside a possible settlement agreement the two companies are working on and could result in a smaller transfer of value to R&E.

R&E has also proved total claims totalling R2.7bn against the sequestrated estate of Brett Kebble, who was shot dead under mysterious circumstances in September 2005. He was CEO of JCI for eight years and CEO of R&E for one. He resigned when both companies' listings were suspended for failing to submit audited annual financial results.

R&E is also serving summons on Hennie Buitendag, the former financial director of JCI and R&E, John Stratton and Charles Cornwall, both former JCI directors along with a number of other company managers. Stratton lives in Australia and is fighting an extradition request from South African authorities.

R&E has also lodged a summons for R7.6bn in the High Court against PriceWaterhouseCoopers, which is defending the action.

“Actions will in the ensuing weeks be issued against various other parties whom R&E alleges acted in concert with the architects of the various schemes allegedly employed to denude R&E of its assets,” the company said.

Just this week, R&E and JCI said they had signed a memorandum of understanding to agree a binding settlement within 21 days from 21 July.
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Some observers reckoned this was the best chance at resolution they’d seen for the two parties which have been in dispute since the removal of Brett Kebble from their boards in August 2005.

In its update, R&E sounded a little less reconciliatory, holding the clearly visible stick of threatened arbitration, which would be expensive and time consuming, over JCI if there is no resolution.

The two companies had suggested a merger, but the regulatory authorities at the JSE blocked that suggestion because the two companies were unable to submit accurate annual financial statements. R&E blamed this on JCI’s denial that it owed it anything.

The binding settlement, if reached, could mirror the benefits outlined in the merger proposal, which saw a transfer of value to R&E from JCI of between R1.2bn and R1.5bn.

The nub of the dispute lies in R&E’s allegation that shares it held in London-listed Randgold Resources, DRD, Aflease and Simmer & Jack were sold, without R&E’s authorisation, by JCI and JCI’s treasury arm Consolidated Mining Management Services (CMMS), and that none of that cash flowed back to R&E.

Judging from the forensic work done for R&E, and included in the update, a lot of the cash raised from those share sales went, via convoluted and complex deals, into personal bank accounts of some JCI directors, into dodgy deals and otherwise frittered away.

R&E estimated its net asset value (NAV) as at the end of March 2008 at R603m or R8.39 per share against R589m or R8.20/share a year earlier. The calculation excludes any claims against JCI and other parties.

If the memorandum of understanding results in a settlement with JCI then R&E’s NAV will leap to R1.8bn or R27.70/share, the company said.

R&E said it would distribute significant assets – these are likely to be Gold Fields shares owned by JCI and constitute the bulk of that company’s value – to its shareholders if there is a resolution.

Combined with the claims it has against other parties, R&E said: “The board believes that the company will possess sufficient assets and contingent assets subsequent to the intended distribution, to propose a compelling business case to shareholders.”