Who’ll switch off Afgem’s lights?

[miningmx.com] — FRIDAY’S announcement (October 5) that Afgem has had to throw in Bokang – its last remaining asset – with no adjustment to the purchase price it will receive in its transaction with New African Mining, leaves the company practically moribund.

Significantly, this adjustment has been made even before completion of the due diligence on the original terms, which can only mean that the quality of the first lot of assets didn’t meet the buyer’s reasonable expectations. One can only hope that no further “adjustments” to the price will be needed.

This will turn Afgem into a shell holding only shares in MEEPO (a one-for-one surrogate for New African) and a small amount of cash, together valued at 21c a share, as it has also written off its R4.9m loan to Rex Mining.

Afgem and Rex (a vendor of properties to Afgem) remain locked in litigation but as Afgem doesn’t think Rex has any assets, it’s not clear that anyone except the lawyers is benefiting. It’s a sad ending for a company that, after the sale of its original tanzanite assets (itself a deal I criticised strongly at the time) was left with a clean balance sheet and a liquid NAV of about 120c a share.

At least participants in the BEE deal implemented two years ago, led by Simeka, won’t suffer, as this was structured by way of the granting of options, which obviously now won’t be exercised.

Although Afgem now has a market cap of only R33.5m, in relative terms this is destruction of value on a grand scale. The company’s main remaining interest is probably as a listing vehicle for someone who can make use of what must be quite a handy tax loss.

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Meanwhile, shareholders’ only recourse will be to pitch up at the AGM on November 14 and give the directors a torrid time. That is, if there are any such.

Friday’s announcement doesn’t identify any and appears solely under the name of the company’s unlucky sponsor, Macquarie. Afgem’s website doesn’t seem to have been updated for over a year and still claims there are eight directors, but as I wrote on June 7, all except two of that bunch have resigned, and no replacements have been announced.

So it will be interesting to see who does turn up to face the music.