The eagerly awaited report on the financial affairs of Randgold & Exploration Company Limited (R&E) reveals that massive fraud took place during the so-called “Kebble Era”.
Peter Gray, who was appointed CEO of R&E when Brett Kebble was forced to stand down in August 2005, told shareholders last night that R&E is solvent to the tune of at least R1.5 billion.
He was announcing the provisional financial results for R&E following the withdrawal of earlier published statements.
“There is no doubt that there was massive misappropriation and mismanagement of shareholder’s assets over an extended period. Fortunately, we have been able to unravel some of the ‘Enron style’ transactions entered into in the past. Some were well intentioned but ill informed, many were dubious and others simply dishonest.”
Gray said that more than 20 forensic accountants, auditors and lawyers had been trawling through the affairs of R&E for the last six months.
“The new board opened a veritable Pandora’s Box,” said Gray. “When we lifted one layer of transactions, we found layer after layer of misrepresentation. Some of these structures turned out to be legitimate but unwise while others were fronts for the misappropriation of shareholders’ assets. In almost all cases the value of the underlying assets had been over-stated.”
“We have been successful in identifying claims and recoverable assets worth more than R1 billion. We have already recovered some assets. There is more to come.”
Dealing with the major issues that have caused intense speculation over the past few months, Gray confirmed that R&E’s entire 48,2% shareholding in Randgold Resources Limited had been disposed of since 2002.
“This was not always with shareholder approval and most of the proceeds were misappropriated.”
R&E had so far initiated liquidation proceedings against five entities that had benefited from R&E’s assets. Two companies were co-operating and the assets still held by them would be returned in full. Further court actions and confidential enquiries in terms of the Companies Act would lead to further recoveries.
Substantial claims would be lodged against the estate of the late Brett Kebble while numerous civil claims would follow against the perpetrators: “We will pursue them with vigour,” he said.
All available information would be provided to the relevant authorities (such as the JSE, Financial Services Board, and the relevant prosecuting authorities) for consideration of criminal or other sanctions.
Gray said current management had rescued substantial value since the low point when R&E had been suspended from the JSE and delisted from NASDAQ in August 2005.
R&E was now in “reasonable shape”. In addition to a claim against JCI of some R1,1 billion, it had a 5% holding in Western Areas worth about R230 million and various mineral rights.
“When R&E was suspended from the JSE, the share price was about R9. According to the provisional statements released today the net asset value per share is about R20,” he said.
“The boards of R&E and JCI have resolved to mediate their claims before respected independent counsellors whose recommendation will be put to shareholders. A full-on legal battle would cost millions and take many years to reach finality and would be in nobody’s interest.”
Gray observed that the process of rescuing R&E had been fraught with difficulty. One of the most frustrating aspects had been the complex legal and disinformation campaigns adopted by those who were trying to “get out of the firing line by spiking our guns”. There were also commercial predators who were trying to exploit the perceived weakness of R&E.
“But perhaps the most aggressive manoeuvre is the attempted liquidation of R&E. Defending this application is essential although it will be costly and time consuming. We will oppose it aggressively.”
Gray said that shareholders would be offered the opportunity to discuss both the published provisional financial results and the forensic investigation findings at a general meeting to be held in June 2006.
He was confident that the actions of the boards would enjoy the support of shareholders at the upcoming general meeting. Shareholders would have the opportunity to nominate new directors at the meeting.
“This has been the most exhilarating and challenging period of my business life, made more difficult because of the immense pressures brought by parties with alternative agendas. Nonetheless, I am pleased that we have rescued significant value for shareholders.
Media statement issued on behalf of Randgold & Exploration Company Limited by Brian Gibson Issued Management. Contact Brian Gibson (011 880 1510 or 083 253 5988)