| Wed 25 Apr 2007, 15:11 | | RNG - R&E - Statement by R&E in response to the st |
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RNG
RNG
RNG - R&E - Statement by R&E in response to the statement by Messrs. Blersch and
Dale
Randgold & Exploration Company Limited
(Incorporated in the Republic of South Africa)
(Registration number 1992/005642/06)
Share code: RNG
ISIN: ZAE000008819 (Suspended)
Nasdaq trading symbol: RANGY (delisted)
ADR ticker symbol: RNG
("R&E" or "the Company")
STATEMENT BY RANDGOLD AND EXPLORATION COMPANY LIMITED ("R&E") IN RESPONSE TO THE
STATEMENT BY MESSRS. BLERSCH AND DALE HANDED OUT TO R&E`S SHAREHOLDERS AT THE
COMMENCEMENT OF THE GENERAL MEETING OF R&E`S SHAREHOLDERS THAT TOOK PLACE ON 9
MARCH 2007
R&E refers to the general meeting of shareholders that took place on 9 March
2007 in accordance with the provisions of Sections 181 and 179(4) of the
Companies Act No. 61 of 1973, as amended ("the Meeting"). Shortly prior to the
commencement of the Meeting, Mr Blersch ("Blersch") and Mr Dale ("Dale"), two
directors of R&E then serving on R&E`s board of directors, handed out to the
shareholders of R&E, a written statement attached hereto as Annex 1 ("the
Statement").
What follows constitutes R&E`s response to the Statement. R&E denies the
assertions of Blersch and Dale, and emphatically denies that any of the alleged
misconduct or impropriety complained of has occurred. Whilst R&E endeavours to
provide a detailed response below, any failure to respond to any specific
allegation made by Blersch and Dale should not be deemed to be an admission of
such allegation. R&E expressly reserves its rights to respond more fully to the
Statement at the appropriate time, and to the extent necessary.
The numbered paragraphs below, correspond to the numbered paragraphs of the
Statement and the headings are summary descriptions of those paragraphs in the
Statement.
1. No Annual General Meeting Since August 2005 and No Opportunity for
Shareholders to Appoint or Re-Appoint Directors; R&E`s Major Shareholder is
also JCI`s Major Shareholder.
Prior to the meeting held on 9 March 2007, one component of which was
convened in terms of Section 179(4) of the Companies Act 61 of 1973, as
amended ("the Act"), there had not been an Annual General Meeting since
June 2004. This delay was occasioned by the ongoing investigations into
fraud at R&E, believed to have been perpetrated against R&E by certain
members of prior management and certain directors of the prior board and
others. The inability to produce audited financial statements, adversely
affected R&E`s ability to convene an annual general meeting. The Meeting
on 9 March 2007, consisted of two shareholders` meetings: the first, in
accordance with Section 181 of the Act, being in response to a requisition
by shareholders holding more than one twentieth of the share capital of
R&E, to have a shareholders meeting at which their specific questions would
be addressed by R&E; the second meeting (deemed an Annual General Meeting),
was held immediately following the first meeting and was held with the
approval of the Registrar of Companies and following it having been brought
to the attention of R&E by its legal advisors, that the Act in certain
special circumstances provides for a mechanism whereby a Company which is
unable to hold its Annual General Meeting, can do so, pursuant to the
provisions of Section 179(4) of the Act.
R&E had requested such approval in order to address the very concerns of
shareholders regarding the fact that the appointment of the then-serving
board of directors had not been confirmed or ratified by a shareholder
vote. The purpose of the deemed Annual General Meeting was to afford
shareholders the opportunity to appoint or re-appoint the directors of R&E,
a right not exercised by shareholders since June 2004. Approval for the
second meeting was received on 7 February 2007, and a notice thereof was
subsequently sent to shareholders. At the Meeting, voting on the election
/ re-election of Directors, inter alia, took place in accordance with R&E`s
articles of association and Company Law, and the Board of Directors of R&E
was re-constituted. (Subsequent to the meeting, the Requisitionists have
by way of application proceedings, applied to the High Court to review and
set aside the decision of the Registrar to convene the deemed Annual
General Meeting).
2. No Audited Financial Statements Since August 2005.
No audited financial statements of R&E have in fact, been published since
June 2004.
The scope and complexity of the alleged frauds and misappropriations at R&E
are well documented, both in disclosures by R&E and in the South African
press. Both Blersch and Dale, as directors of R&E and members of its audit
committee following their appointment to R&E`s Board in August 2006 until
the time of the Meeting (Blersch in fact having been the chairman of the
audit committee), are well aware of the factors that have adversely
impacted upon R&E`s ability to publish audited financial statements.
At no stage during the course of their tenure as Directors of R&E, did
either Blersch or Dale, whether in their capacity as Directors, or as
members of the audit committee, take issue with the inability of R&E to
produce financial statements. (The audit committee is the committee of the
board of directors that is charged with overseeing the audit process).
In his capacity as the chairman of the audit committee, Blersch was
directly responsible for the activities of the audit committee and liased
directly with the financial team, auditors and forensic investigators at
R&E in regard to matters pertaining to the annual financial statements.
Accordingly, Blersch and Dale were acutely aware of all of the difficulties
that were being experienced in the production of audited financial
statements. (Shareholders are referred to the answers published by R&E on
its website in response to the questions posed by the Requisitionists, and
more particularly the answers furnished by R&E regarding the difficulties
experienced by it in finalising its audited financial statements).
Following the appointment of Marais Steyn on 13 December 2006, as R&E`s new
Financial Director, new revelations surfaced which have made it readily
apparent, that it is not going to be possible for R&E to produce any
meaningful or accurate Annual Financial Statements absent a resolution of
the claims between R&E and JCI.
3. R&E is the Largest Creditor of JCI and Amounts Owed by JCI to R&E May
Exceed JCI`s Net Asset Value.
Although it may ultimately be determined that R&E is the largest creditor
of JCI, the claims made by R&E by way of its Statement of Claim (which was
filed against JCI), have not yet been adjudicated. Any such adjudication
will involve substantial time and expense to pursue, and there can be no
assurance of recovery. It is premature for R&E to comment further on this.
4. Investec Has Had At Least Three Major Sources of Interest in JCI since the
Appointment of the New Board.
R&E understands that Investec had outstanding to it, a loan to JCI, of
several hundred million rand, plus interest, which was made in 2005 as part
of a "rescue package" at a time when JCI`s ability to survive as a going
concern was at significant risk. R&E further understands, that JCI entered
into a profit sharing arrangement to compensate Investec for making this
loan. The arrangement could result in a fee being payable to Investec of
several hundred million rand and is being contested by certain shareholders
of JCI.
R&E understands, that the loan has since been paid in full, together with
all interest due in respect thereof. However, pending the outcome of the
litigation in respect thereof, no amount has been paid in respect of the
fee raised by Investec. Investec also had exposure to a gold hedge at
Western Areas (a company affiliated with R&E and previously affiliated with
JCI), which has been expunged by Gold Fields Limited after JCI`s sale of a
large tranche of Western Areas shares to Gold Fields. Any issues in this
regard should be raised, if at all, directly with Investec. It should be
noted however, that the only member of R&E`s Board with any affiliation to
Investec is David Nurek.
5. There Are Several Conflicts of Interest on the Board of Directors of R&E.
R&E denies these allegations and reminds shareholders that during the
Meeting, a majority of shareholders who were fully aware of the allegations
of conflict, voted in accordance with South African corporate law, for the
retention of those Directors who were re-elected at the Meeting and against
the retention of those Directors who were not re-elected at the Meeting.
Insofar as it is suggested that these Directors are "Investec appointees",
R&E emphatically denies this. Investec offered a facility to JCI and
stipulated certain conditions in regard thereto as it was entitled to do.
Investec is not a shareholder of either R&E or JCI, and has no right to
appoint directors of either company. Moreover, lenders in crisis
situations often impose requirements or conditions that they be satisfied
with management and/or the boards of their borrowers and affiliated
companies.
In any event, the shareholders of R&E, acting in general meeting, have
reconstituted the Board of R&E and the Board which is currently in place
has been duly and properly elected by the shareholders of R&E. The
shareholders in general meeting constitute the highest organ of the
Company. A decision by the majority of the shareholders at such meeting,
binds the minority. Investec played no role whatsoever in the convening of
the meeting or the conduct thereof.
The Statement alleges that a conflict exists, by reason of the fact that
certain members of R&E`s Board are also Directors of JCI. Under the
stewardship of the late Brett Kebble, little regard was given to the
separate corporate personalities and corporate formalities of R&E and JCI.
To untangle the affairs of these companies as efficiently as possible, the
boards of directors of R&E and JCI determined that it was in their
respective best interests to appoint a common CEO and Financial Director.
The Statement also indicates that this CEO was formerly the CEO of a
brokerage firm that sold some of the assets that were misappropriated from
R&E. However, no substantiated allegations have been made by Blersch and
Dale based on this relationship, and for R&E to infer any wrongdoing in the
absence of any charges (or any evidence for that matter), would be
irresponsible. R&E`s CEO vigorously denies any wrongdoing on his part, and
continues to believe that he has acted professionally at all times and in
the best interests of R&E. Similarly, the other two directors referred to
in the Statement deny any wrongdoing on their part, and again, in the
absence of any charges and any related evidence, for R&E to infer any
wrongdoing by these individuals would be irresponsible.
Blersch and Dale, upon taking up their office as Directors of R&E sought an
opportunity to obtain independent legal advice in respect of the question
of whether or not a conflict of interest exists on the Board of Directors
of R&E. At the expense of R&E, Blersch and Dale obtained such independent
legal advice in the form of an opinion. This opinion reached certain
conclusions, disputed by the remainder of the Board of Directors of R&E, in
regard to the matter of conflicts of interest. R & E is of the respectful
view that among other things, the opinion may have omitted to substantively
address the effect of the provisions of Article 77(a)(iv) of R&E`s Articles
of Association, which expressly provide that a member of the Board of
Directors of R&E will not be deemed to have a conflict of interest, by
virtue only of his or her being a member of the board of directors of
another company that engages in transactions with R&E.
This point was specifically drawn to the attention of Messrs. Blersch and
Dale at the time. To date, this point has not been addressed by Messrs.
Blersch and Dale, either directly or through the medium of a supplementary
legal opinion.
Insofar as Blersch and Dale believe that a conflict exists in regard to the
mediation process in which R&E and JCI are engaged, R&E emphatically denies
this. R&E and JCI are involved in a mediation aimed at finding a
conciliatory resolution to their disputes. R&E and JCI are not embroiled
in adversarial litigation, but rather engaged in an attempt to find a
negotiated settlement through the mechanism of the Mediation Agreement.
Any solution which may be proposed, will not be binding on the shareholders
of R&E in the absence of the shareholders of R&E sanctioning the approval
thereof. Should this process fail, and the matter become litigious, R & E
will re-assess its position in the light hereof.
6. Board Decisions are Taken on a Simple Majority Vote Unless There Is a
Deadlock; If a Deadlock, the Conflicted Chairman Casts the Deciding Vote;
Four of R&E`s Seven Directors Were Approved by Investec.
A vote of the Board of Directors is carried by a simple majority. This is
common corporate practice. The directors of a company do not always
unanimously agree on matters brought before them for a vote and many board
votes are carried by a majority, contrary to the views of dissenting
directors.
Blersch and Dale were extended every latitude in making their views known.
Such views were considered by the Board, albeit that from time to time,
their views were not shared by the other members of the Board. In the
event of a deadlock, the deciding vote would be cast by the Chairman. This
is also common corporate practice and is embodied in a provision of R&E`s
Articles of Association which Articles were put in place long before any of
the present Board members were appointed.
It is relevant to note, that the Chairman was never called upon to exercise
a casting vote, at any time whilst Blersch and Dale were members of R&E`s
Board.
Insofar as it is again suggested that several of R&E`s Directors are
"Investec appointees", as described above, R&E emphatically denies this.
As previously stated, Investec made a loan available to JCI, subject to
certain conditions. The Directors of R&E were never appointed by Investec,
rather they were appointed in accordance with the provisions of the
Articles of Association of R&E to fill casual vacancies that arose on R&E`s
Board. R&E believes its Directors have throughout their tenure, acted
independently and in the best interests of R&E and its Shareholders.
Shareholders are also referred to the answers posted by R&E on its website
in response to the questions raised by the Requisitionists.
7 Blersch and Dale Were Invited to Join the Board due to Minority Shareholder
Dissatisfaction with Conflicted Directors, Alleged Lack of Compliance with
Fiduciary Duties by Conflicted Directors and Alleged Standards of Corporate
Governance.
Blersch and Dale were proposed as candidates to serve on R&E`s Board by a
minority shareholder, namely Trinity Asset Management (Pty) Ltd. That
shareholder has expressed its belief that there are conflicted Directors.
R&E however disagrees that its Directors are conflicted (as described
above), and does not believe that there has been a lack of compliance with
fiduciary duties by any of its current Directors, or a poor standard of
compliance with corporate governance at any stage after its Board was
reconstituted on the 25th of August 2005. The appointment of Blersch and
Dale came about as a consequence of a call for nominations for additional
Directors made by R&E in June 2006.
8. Creation of a Perception That Blersch and Dale Were Trying to Obstruct a
Potential Merger.
R&E denies that it has created any perception that Blersch and Dale were
standing in the way of a merger between R&E and JCI. Blersch and Dale
indicated their support for a merger, albeit subject to certain conditions,
including (i) R&E obtaining a legal opinion in regard to the Investec Loan
Agreement and (ii) R&E making full disclosure to Shareholders of all
relevant facts that have a bearing on the determination of a merger ratio.
R&E is in the process of obtaining the legal opinion referred to in clause
(i) and will assess its position once it is fully advised by counsel. R&E
has every intention of making the disclosure referred to in clause (ii) at
the relevant time in any merger process that may proceed.
Dissatisfaction with Standard of Corporate Governance; Prevented from
Speaking, Ignored or Outvoted as Directors.
R&E denies that Blersch and Dale have not been allowed to speak and denies
that they were ignored as Directors. These allegations are entirely false.
They were given every opportunity to make their views known and were, on a
number of occasions, invited to place matters on the agenda for discussion,
which they did.
Every matter raised by them, was discussed by the Board. They were never
once prevented from speaking or ignored. Blersch and Dale were however
outvoted on a number of occasions. This is common-place in a democratic
process and is simply due to the fact that the majority of the Directors on
the Board did not share their views. The Board approached all decisions
democratically and recorded the vote of Blersch and Dale on each and every
occasion, even where they were in the minority.
R&E does not believe that it has failures regarding standards of corporate
governance. In fact, R&E has actively pursued actions that are
irreconcilable with such a conclusion. In this regard R&E has, among other
things, instituted a claim against JCI of a magnitude and caliber that has
brought JCI to the table in contemplation of a merger that was supported by
Blersch and Dale (subject to conditions), and has also methodically and
systematically identified other persons who have wronged R&E and either
made a recovery against such persons or is taking steps in an effort to
hold such persons accountable.
R&E, the members of its Board of Directors and its management believe the
allegations made or implied in the Statement are without merit and, if any
claims are made against them in regard thereto, intend to vigorously defend
them. R&E and such persons reserve unto themselves all of their rights and
repeat that any failure to respond to any of the allegations does not amount to
an admission.
BY ORDER OF THE BOARD
ANNEXURE 1
STATEMENT TO THE SHAREHOLDERS OF RANDGOLD & EXPLORATION COMPANY LIMITED
("RANDGOLD") BY JOHANN BLERSCH AND TOM DALE
Dear Randgold Shareholder
We are making this statement in our capacity as directors of Randgold. The
purpose of the statement is to appraise you of facts regarding your company of
which you may otherwise have remained ignorant.
1. Since August 2005, when the Randgold "prior board" led by the late Mr Brett
Kebble, was replaced by the "new board", with the consent of Randgold`s
major shareholder, no annual general meeting has been held and accordingly
shareholders have had no opportunity to appoint or re-appoint any director
of the company. Randgold`s major shareholder is also the major shareholder
in JCI.
2. Since August 2005, no audited financial statements have been presented to
shareholders to enable them to objectively judge the stewardship of
Randgold by its directors.
3. Randgold is the largest creditor of JCI, and the amounts owed by JCI to
Randgold may exceed JCI`s net asset value.
4. Investec has had at least three major sources of interest in JCI since the
appointment of the "new board" -
a) A loan to JCI of several hundred million rand, plus interest thereon,
which has been repaid.
b) A fee or profit share related to the above loan of possibly several
hundred million rand, which is being disputed by some shareholders.
c) An exposure to a gold hedge at Western Areas Limited of several
billion rand, which has been expunged by Gold Fields Limited after
JCI`s sale of a large tranche of Western Areas shares to them.
5. There are several conflicts of interest on the board of directors of
Randgold. These include the following:
- The Chairman of Randgold`s new board since August 2005 in a full time
employee of Investec and is also the chairman of JCI.
- The CEO of Randgold`s "new board" was the CEO of T-Sec, when that
brokerage firm sold the bulk of the assets pillaged from Randgold on
behalf of various parties other than Randgold, and is also the CEO of
JCI.
- Groups headed by two of the remaining directors of Randgold were
shareholders of Phikoloso Mining (Proprietary) Limited, to whom new
Randgold shares with a value of R260 million were issued in exchange
for no value. One of these directors is also the executive Chairman
of SAFCO, a Cape Town fishing company which was funded by Investec,
and JCI bound itself as surety in favour of Investec.
The above four conflicted members of the new board were approved by
Invested in terms of the conditions of the loan (4(a) above) which
potentially would entitle Investec to a fee or profit share (4(b) above) of
possible several hundred million rand.
6. Decisions at Randgold board meetings are taken on a simple majority unless
there is a deadlock, when the conflicted chairman has a casting vote in
terms of the company`s Articles of Association. Four of the seven Randgold
directors were expressly approved by Investec.
7. We were invited to join the Randgold board due to minority shareholder
dissatisfaction with conflicted directors, alleged lack of compliance with
fiduciary duties by conflicted directors, and alleged poor standard of
corporate governance.
8. A perception has been deliberately created that the legitimate work
requested by ourselves to ensure that a sound commercial basis is provided
to shareholders to enable them to assess a merger between JCI and Randgold
is somehow obstructive of such merger. Johann Blersch suggested such a
merger to co-directors in writing as long ago as November 2006. A merger
fully enjoys our support, but we require that:
- An independent legal opinion be obtained by Randgold about the
enforceability, fairness and quantum of the Investec fee or profit
share in terms of the loan made to JCI; and
- Full disclosure is made to Randgold shareholders of all relevant facts
and reports which may be material in determining the exchange ratio
between Randgold and JCI. To date KPMG`s forensic investigative
report into JCI dated 8 May 2006 has neither been disclosed in whole
or in part to Randgold`s
shareholders. That report contains certain key conclusions which may have
a material bearing on the terms of the proposed merger, in favour of
Randgold.
9. Since our appointment in August 2006, we have become totally dissatisfied
with the standard of corporate governance at Randgold. Throughout our
period of tenure as directors we have endeavoured to act independently and
in an unconflicted manner and have exercised our discretion when called
upon to do so in the best interest of the shareholders of Randgold. We
have taken independent legal advice and documented our views extensively to
co-directors. In a majority on instances, we have either not been allowed
to speak, ignored, overruled or outvoted.
Johann Blersch and Thomas Graham Dale
Johannesburg
9 March 2007
FORWARD-LOOKING STATEMENT DISCLAIMER FOR R&E
Certain statements in this announcement, as well as oral statements that may be
made by R&E`s officers, directors or employees acting on its behalf relating to
such information, contain "forward-looking statements" within the meaning of the
U.S. Private Securities Litigation Reform Act of 1995, specifically Section 27A
of the U.S. Securities Act of 1933 and Section 21E of the U.S. Securities
Exchange Act of 1934. All statements, other than statements of historical facts,
are "forward-looking statements". These include, without limitation, those
statements concerning the value of the net assets of R&E and JCI; the ability of
the companies to successfully consummate a merger that is approved by the
shareholders and is acceptable to the necessary governmental authorities, the
fraud and misappropriation that are alleged to have occurred and the time
periods affected thereby; the ability of R&E to recover any misappropriated
assets and investments; the outcome of any proceedings on behalf of, or against
R&E; R&E`s ability to complete its forensic investigation and prepare audited
financial statements; the time period for completing its forensic investigation
and audited financial statements; the amount of any claims R&E is or is not able
to recover against others, including JCI, and the success of its mediation with
JCI; the likelihood and economic parameters of any merger arrangement between
JCI and R&E; the estimated valuations given to assets and liabilities in the NAV
statement; and the ultimate impact on R&E`s previously released financial
statements and results, assets and investments, including with respect to
Randgold Resources Limited, business, operations, economic performance,
financial condition, outlook and trading markets. Although R&E believes that the
expectations reflected in such forward-looking statements are reasonable, no
assurance can be given that such expectations will prove to be correct,
particularly in light of the extent of the alleged frauds and misappropriations
uncovered to date. Actual results could differ materially from those implied by
or set out in the forward-looking statements.
Among other factors, these include the inherent difficulties and uncertainties
in ascertaining the values of the net assets of the companies, particularly in
light of the absence of any independent valuations, the existence of any unknown
liabilities, the willingness of any governmental authority to sanction any
merger in light of the absence of independent valuations or otherwise; the
extent, magnitude and scope of any fraud and misappropriation that may be
ultimately determined to have occurred and the time periods and facts related
thereto following the completion of the forensic investigation and any other
investigations that may be commenced and the ultimate outcome of such forensic
investigation; the ability of R&E to successfully assert any claims it may have
against other parties for fraud or misappropriation of R&E assets or otherwise
and the solvency of any such parties, including JCI; the determinations of the
mediators and acceptance of any such determinations by the shareholders of R&E
and JCI; the ability of R&E to defend successfully any counterclaims or
proceedings against it; the ability of R&E and its forensic investigators to
obtain the necessary information with respect to R&E`s transactions, assets,
investments, subsidiaries and associated entities to complete the forensic
investigation and prepare audited financial statements; the willingness and
ability of R&E`s forensic investigators and auditors to issue any final opinions
with respect thereto; the ability of R&E to implement improved systems and to
correct its late reporting; the JSE Limited`s willingness to lift its suspension
of the trading of R&E`s securities on that exchange; changes in economic and
market conditions; fluctuations in commodity prices and exchange rates; the
success of any business and operating initiatives, including any mining rights;
changes in the regulatory environment and other government actions; business and
operational risk management; other matters not yet known to R&E or not currently
considered material by R&E; and the risks identified in Item 3 of R&E`s most
recent annual report on Form 20-F filed with the SEC and its other filings and
submissions with the SEC.
All forward-looking statements attributable to R&E, or persons acting on its
behalf, are qualified in their entirety by these cautionary statements. R&E
expressly disclaims any obligation to release publicly any update or revisions
to any forward-looking statements to reflect any changes in expectations, or any
change in events or circumstances on which those statements are based, unless
otherwise required by law.
Johannesburg
25 April 2007
Sponsor to R&E and JCI
Sasfin Capital
(A division of Sasfin Bank Limited)
Date: 25/04/2007 15:11:01 Produced by the JSE SENS Department.
