Wesizwe Platinum wracked by coup allegations

Allan Seccombe & David McKay | Wed, 25 Nov 2009 11:51
[miningmx.com] -- WESIZWE Platinum is in crisis amid claims of a carefully orchestrated coup by an external adviser who is allegedly manipulating shares owned by the platinum firm’s empowerment partner.

According to documents in Miningmx’s possession, the principal of Musa Capital, Antoine Johnson, has been using shares owned by Wesizwe Platinum’s empowerment partner, the Bakubung-Ba-Ratheo community, to build himself a stake large enough to affect a clandestine takeover of the platinum firm.

The Bakubung-Ba-Ratheo resides near Wesizwe Platinum’s currently mothballed R6bn Frischgewaagd-Ledig platinum project in the North West province. It became a 33% shareholder in Wesizwe Platinum when the firm listed on the JSE in 2006.

The allegations have been rebutted by Johnson and Wesizwe non-executive Disele Phologane, who both feature prominently in the documents.

In a detailed response to questions from Miningmx, the actions of Musa Capital have been defended as having added value to the Bakubung which stood to see its empowerment shareholding diluted to between 4% and 6% after debt and interest payments.

Johnson is no stranger to Wesizwe Platinum. In fact, Johnson’s Musa Capital was appointed by the Bakubung in 2007 to advise it on crystallising its wealth following the listing of Wesizwe Platinum in which it then had a 33% stake.

the community has no obligation to repay monies to anyone

Johnson persuaded the Bakubung through its representative, Disele ‘DJ’ Phologane, to transfer some of its shareholding in Wesizwe Platinum to an off-the-shelf company he created called Newshelf 925.

The directors of Newshelf 925 are Johnson, Musa Capital and John Doidge. The community does not appear to hold any stake in the company. The documents Miningmx has question whether the Bakubung ever knew Johnson had an interest in Newshelf 925.

Moreover, the transfer of the Bakubung’s shares into Newshelf 925 was allegedly done at a price well below the R10/share at which Wesizwe Platinum was then trading.

Phologane is a non-executive director of Wesizwe Platinum, and sits on the Bakubung-Ba-Ratheo’s Traditional Council. He is also chairperson of the Advisory Committee to the Kgosi (king) of the Bakubung.

According to the documents, Johnson and Phologane then raised up to hundreds of millions of rands with an unnamed bank using the community’s Wesizwe shares as collateral. Johnson then used the funds to buy more shares in Wesizwe.

The net effect, according to the allegations, is that part of the Bakubung’s heritage, a stake in the R1.25bn Wesizwe Platinum, is now encumbered.

In a written response to Miningmx, Phologane and Johnson said that no loan was taken out against shares in Newshelf 925. “The transaction was a structured investment … The structured investment delivered over R220m to the community, without recourse to capital”.

They also said that as a result of the Newshelf 925 scheme, the community had more wealth. “It is notable that as of today, the community’s original holdings would have a total value of approximately R240m as opposed to the community’s current asset value of well over R700m.”

Phologane’s accusers contend, however, that the Bakubung is left with a shares in another company, Newshelf 925, that is carrying debt and interest the Bakubung cannot repay.

That’s because the Bakubung’s sole source of wealth is in Wesizwe Platinum shares which, by dint of the financial crisis, is now trading at R2/share.

Said Phologane: “Nowhere in connection with this structure does the community have any obligation to repay monies to anyone”.

Directors removed

According to the document supplied to Miningmx, certain Wesizwe directors who opposed a second transaction to move yet more Bakubung shares into the shelf company were removed from the board.

These included Dawn Mokgobo, a former businesswoman of the year; Peter Gaylard, a former chief consulting metallurgical engineer for Impala Platinum; Mlibo Mgudlwa, a lawyer representing Wesizwe Platinum partner Africa Wide, and Mike Eksteen, the widely respected mining engineer and former CEO of Northam Platinum. Mgudlwa has subsequently been reappointed to the board.

Said Phologane: “They were not removed, their terms had expired, and a majority of the shareholders at the annual general meeting declined to re-elect them”.

In terms of this second transaction, it is alleged that an additional tranche of Bakubung shares in Wesizwe were to be transferred into Newshelf 925 to help allieviate the fact the first tranche of shares were now ‘underwater’, and to inject an estimated R250m into Wesizwe Platinum.

The bank that provided the funds insisted they find their way into Wesizwe but Mike Solomon, Wesizwe Platinum’s former CEO, nonetheless resisted this move.

Solomon was subsequently fired from Wesizwe’s board on November 3 along with non-executive director, Rob Rainey, formerly Wesizwe’s acting chairperson because, Miningmx’s sources say, Solomon cut an isolated figure on a board devoid of supporters following the non-reelection of the four other non-executive directors.

Solomon said he would fight his firing, but later withdrew his opposition amid a call by Wesizwe Platinum shareholders to convene an extraordinary general meeting to hammer out company problems.