Put your money where your mouth is

[miningmx.com] --

Trans Hex

It’s good to see a CEO reaching for his wallet to back up his words which is what Trans Hex CEO Llewellyn Delport has been doing in the past week.

Delport has spent R167,200 buying 70,000 shares in Trans Hex either directly or through an associate.

As anyone who follows the company knows Trans Hex has been a dog since 2001 when it went boots and all into Angola as a result of business initiatives put in place by former chairman Tokyo Sexwale.

The result was an unmitigated mess with Trans Hex losing money hand over fist on its Angolan mines because the management contracts and the commercial terms for developing the mines were weighted heavily in favour of the Angolans.

Delport inherited the situation when he took over from former CEO Calvyn Gardner who quit abruptly at the end of 2003.

He’s had a rough ride but it would seem that Trans Hex may finally have turned the corner after losing R797m in the year to end-March during which it took a R460m charge against its Angolan assets.

Plusses for Trans Hex are that it has around R200m in the bank and it has shut down the loss-making Angolan mines.

Delport has also put a cap on funds to be sent into Angola and vowed that management terms for the group’s next mine are going to be very different from those agreed for the first two.

Ipsa

On the other hand, Ipsa Plc CEO Paul Earl has sold 312,500 shares in the company at 16p each to realise ₤50,000 and drop his beneficial stake in Ipsa to 13,1m shares representing 13.8% of the company.

Earl could not be reached for comment but the sale follows a string of negative statement made by Ipsa chairman Stephen Hargrave in the interim results for the six months to end-March.

Ipsa is losing money and has had to stop running its Newcastle combined heat and power (CHP) plant because of extended delays in negotiating a power purchase agreement (PPA) with Eskom.

Hargrave effectively blamed Eskom management for the delay and commented that “it must be acknowledged that for Eskom the Newcastle CHP project is much less important than it is for Ipsa."

Hargrave pointed out that Ipsa’s financial position was “difficult” and the company had been kept going through funding provided by Earl through a company he controls called Independent Power Corporation (IPC).

Hargrave added, “this funding has kept the group alive but it is not a bottomless well. The current amount due to IPC is ₤0.63m following the conversion of ₤0.55m of existing loan into ordinary shares in the company in March 2009. In addition, interest payments of ₤0.58m are overdue in respect of the company’s senior secured bank loan.”

Eskom has not responded to questions e-mailed to it about the Ipsa situation as well as Eskom’s general strategy concerning independent power producers because Ipsa is not the first to encounter serious problems finalising a PPA.

Bidding

Tis the season for parsimonious bids judging by what’s been going on in the gold sector where DRDGOLD is after Mintails and Simmer & Jack (Simmers) may be after Pamodzi Gold’s Orkney division.

Both companies seem to be intent on getting a bargain although, in both cases, compelling investment cases can be made for acquisition of the assets that they are chasing.

The Orkney mines would fit will with Simmers’ nearby Buffelsfontein (Buffels) mine but Simmers first offer of R110m – which it subsequently declared was off the table – was described as “audaciously low” by provisional liquidator Enver Motala.

There were probably two reasons for that. Simmers is out to get maximum benefit for its own shareholders and not the creditors and former employees of the failed mine.

Simmers has also been through a steep learning curve on rehabilitating failed mines. It acquired Buffels after DRDGOLD put it into liquidation but turning Buffels around has proved to be a far more expensive and extended process than Simmers management initially anticipated.

That’s the background to comments by Simmers CEO Gordon Miller on the need for a speedy decision on Orkney because of the damage being done to the mine workings the longer the mine lies idle.

As for DRDGOLD - it seems to be viewing Mintails as a distressed seller with its offer which provides no premium for the long-term potential of the substantial volumes of dump material that Mintails owns.