| Wed 17 Dec 2008, 15:55 | | SNU - Sentula Mining Limited - Cautionary announcement and lifting of suspension |
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SNU
SNU
SNU - Sentula Mining Limited - Cautionary announcement and lifting of suspension
of trading
Sentula Mining Limited
(Formerly known as Scharrig Mining Limited)
Incorporated in the Republic of South Africa
(Registration number 1992/001973/06)
Share code: SNU ISIN: ZAE000107223
("Sentula" or "the company" or "the group")
CAUTIONARY ANNOUNCEMENT AND LIFTING OF SUSPENSION OF TRADING
Shareholders are referred to the audited abridged financial results for
the year ended 31 March 2008, released on SENS on 22 October 2008, wherein
it was disclosed that "During the year, the internal control systems of the
company and Scharrighuisen Open Cast Mining were overridden or failed in
certain instances as a consequence of either being inadequate and/or the
result of collusion between past senior members of management. This resulted
in a restatement of the 2007 financial year`s results and the raising of a
debtor of R242 million for a probable misappropriation of company assets. As
the recovery of the debtor is uncertain a full provision of R242 million was
made in the 2008 financial year."
Shareholders are subsequently advised that Sentula has made significant
progress in respect of its forensic investigation into the above. This
forensic investigation centres on an undisclosed bank account ("the account")
in the name of Scharrighuisen Open Cast Mining (Proprietary) Limited ("SOC").
A total of R584 million was deposited into this account, of which, R302 million
was then transferred into the legitimately recorded bank account of SOC. An
amount of R282 million, which was apparently misappropriated out of the
account, therefore remains unaccounted for.
The forensic investigation has revealed that the abovementioned R282
million transferred from the account comprised:
1 approximately R172 million due to SOC resulting from the revaluation of
plant and equipment;
2 approximately R70 million due to SOC resulting from the trade-in of plant
and equipment which was paid into the account; and
3 an amount of approximately R40 million which was transferred into the
account from identified third parties. It appears as if this amount was not
owed to Sentula and is currently recorded as a creditor until such time as
the correct course of action is determined. A debtor of an identical amount
has also been raised, representing the extent to which funds were
transferred out of the account.
The provision of R242 million, made in the 2008 audited accounts therefore
fully provides for the extent of the misappropriations identified in points
1 and 2 above. The remaining R40 million detailed in point 3 above will either
be refunded to third parties or set off against the misappropriated funds once
the forensic investigation determines the correct course of action to take.
Based on the progress made in the forensic investigation, only R24.1 million
of this R40 million has not yet been directly linked to the individuals or
entities that were recipients of the proceeds from the account suggesting
that set off against misappropriated funds will be the likely course of
action and therefore, management does not believe that this amount represents
a further liability to the company. In the unlikely event that the R24.1
million is unrelated to the recipients of the proceeds from the account it
may represent a potential creditor/s and a further liability to the company.
However, since the closure of the account on 5 March 2008, no claim has
been lodged against the company for this amount, which indicates that it is
likely that this deposit is linked to the recipients of proceeds from the
account and, accordingly does not represent a further loss to the company.
In conjunction with the forensic investigation into the account, and not
directly linked to the amounts disclosed above, KPMG forensic has also been
canvassing financial institutions that provided funding to SOC in the form
of instalment sale agreements ("ISAs") for the acquisition of plant and
equipment acquired via an intermediary company. The proceeds from these
ISAs were paid to the intermediary company by the funding institutions
and allegedly deposited by the intermediary into inter alia the account.
The forensic investigation is in the process of determining whether the
instalment sale proceeds paid to the intermediary by the funding institutions
reconciles to the deposits into SOC`s bank accounts by the said intermediary.
Of the total instalment sale proceeds of R594 million deposited into the
accounts of SOC by the intermediary company, supporting documents in respect
of an amount of R526 million have been received from the funding institutions,
leaving an unreconciled amount of approximately R68 million. Based on the
progress made in the forensic investigation, management believes that the
evidence collection process, which is not yet complete and for which ISAs
in excess of R68 million are still being sourced from the funding
institutions, will substantiate the remaining balance and that this
unsubstantiated difference does not represent a further potential loss to
the company. Furthermore, management believes there is no risk of undisclosed
ISAs and extensive impairment testing has been done to ensure that the
underlying assets are fairly valued. In the unlikely event that these ISAs
are not fully reconciled and the potential creditor/s who has/have not
lodged a claim against the company since the account was closed on 5 March
2008, now lodges a claim the amount of R68 million may represent a further
liability to the company.
From the information available to it to date, the board believes that the
full financial impact of the accounting and transactional irregularities has
been provided for in the 2008 financial year-end accounts. As the forensic
investigation continues and further information becomes available, amounts
which have been written off will be reclassified to the correct line items
in the income statement.
Although the known impact has been fully provided for, as detailed above,
the investigation has not been finalised. Accordingly, shareholders are
advised to exercise caution when dealing in the company`s securities until
a further announcement is made in this regard.
The JSE Limited has confirmed that the suspension of trade in Sentula`s
securities will be lifted with effect from Thursday, 18 December 2008.
The company would like to reassure shareholders that it will endeavour to
resolve these matters as soon as possible and will keep shareholders
informed.
Johannesburg
17 December 2008
Sponsor
Merchantec (Proprietary) Limited
Date: 17/12/2008 15:55:29 Produced by the JSE SENS Department.
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