[miningmx.com] — SUSPENDED mining and property holding group JCI may resume its listing on the JSE towards the end of this year, but it faces working capital constraints that may compel it to sell assets or seek funds elsewhere, CEO Peter Gray said on Friday.
In a circular to JCI shareholders, the company made it clear it did not expect to have enough working capital to see out the next six months and that it was investigating a number of options to address the matter.
Friday was a big day for both JCI and Randgold & Exploration, both formerly run by the now deceased Brett Kebble, who, along with a number of other company officials, perpetrated fraud on a scale unheard of in South African corporate history.
Both companies were suspended five years ago for failing to submit financial accounts. Forensic investigations subsequently revealed fraudulent and irregular transactions totalling around R20bn based on the current share price of London-listed Randgold Resources, whose shares were siphoned out of Randgold & Exploration by Kebble.
Kebble was shot dead in mysterious circumstances in September 2005.
Randgold said it could claim up to R19bn from JCI because of fraudulent transactions using Randgold’s holdings in Randgold Resources by JCI during Kebble’s time as CEO. The value is based on recent Randgold Resources share prices rather than their value when the deed took place, a major bone of contention between JCI and Randgold.
It has taken five years of painstaking unravelling of unbelievably complex transactions to reach a point where JCI, the beneficiary of Kebble’s wrongdoings, has passed over R1bn worth of Gold Fields and JCI shares to Randgold & Exploration as well as control of the Free State Development and Investment Corporation.
Randgold will distribute Gold Fields shares and the JCI shares to its shareholders, retaining R500m in cash and Gold Fields shares as liquid assets to grow the group. It also has a number of gold, platinum and iron ore prospects.
Randgold resumed its listing on Friday and its shares traded up to R18 each from a suspended price of R8.90.
JCI remains suspended, having not yet compiled audited annual financial results that will allow the JSE to lift the suspension.
JCI shareholders, some of whom in the past have blocked any deal with Randgold, voted overwhelmingly on Friday in favour of the transaction with Randgold.
“We are very happy with this outcome. Randgold and JCI can each go their own way now,” said Marais Steyn, CEO of Randgold after the JCI shareholder meeting.
So which way will JCI go?
One JCI shareholder asked about a resumption of the listing. “Our intention is to relist JCI, but only once we’ve held our AGM, wich is only likely in the fourth quarter of this year. The listing will only take place after that,” said JCI chairman Peter Thomas.
After previous JCI meetings, where shareholders asked a lot of questions and there was always a combatative spirit, this gathering was almost dull by comparison and over quickly.
At a lengthy and fractious meeting in July last year, one key shareholder, Letseng Holdings, represented by Monty Koppel, held out and scuppered a deal. Key to winning his support for this deal was a payment of R40m to Letseng for its efforts in contesting the repayment of a loan and interest to Investec, which bailed out JCI under Kebble.
One cynical source said it was cheaper and quicker to give Koppel what he wanted rather than let more value evaporate because of Randgold and JCI remaining at loggerheads.
The issue of working capital is one that JCI will address during the course of the year and the board will present its plans as well as its intentions for the company to shareholders either at the AGM or before then, CEO Peter Gray told Miningmx.
An estimated “R1bn plus” was lost in Kebble’s dodgy dealings, but it’s difficult to say exactly how much was stolen from the company, he said.
JCI has a number of claims it is working on to recover some of this money while avoiding drawn out legal battles.
“We are looking for where we can get cash as quickly as possible rather than fighting a claim that will get tied down legally,” Gray said.
Once JCI has resumed trading, that could be another option for raising funds, he said.
Another option is the sale of non-core assets. Boschendal, a piece of prime real estate in the Cape is considered core. There are a number of smaller assets that JCI may consider selling.
An interesting observation was the evidently frosty relationship between Gray and Steyn. The latter went over to shake Gray’s hand and say ‘well done. Gray barely acknowledged Steyn.
Gray in the interview with Miningmx later made it very clear that Randgold had a completely different way of assessing the value of the fraud perpetrated by Kebble and others compared to JCI, which measured it at the value of shares at the time rather than their current worth like Randgold has done.
The conclusion of the transaction between the two companies on Friday marked “full and final closure”, said Gray.
Steyn said every month that the actions of Kebble and others were left unchecked related to a year it took to unravel and investigate the complex transactions.
The problems in Randgold and JCI were uncovered in September 2005. “If it had been uncovered just six months earlier the damage would have been so much less. Every month counted as lost money,” Steyn told Miningmx. Kebble went short on Randgold Resources shares, betting the price would drop, but the market went the other way.
“It ran away from him. Brett kept playing roulette and shorting the market and he lost,” Steyn said.