Allan Gray's Western Areas buy may challenge Kebbl
June 20, 2003
Johannesburg - South Africa's top-performing money manager Allan Gray yesterday looked ready to challenge the Kebble family's control of gold mining company Western Areas, which owns half of the world's biggest gold deposit.
Allan Gray's investment, at about 25 percent, together with Anglo American's 17 percent holding and Gold Fields' 3 percent, knocks JCI Limited from its position as controlling shareholder of Western Areas.
A company within the Kebble family empire, JCI has a 36.1 percent stake in Western Areas.
The market expected the move to inspire confidence in Western Areas shares, which would go some way to removing the discount of up to 30 percent the shares trade to net asset value.
Allan Gray, which has a history of investing in undervalued companies and forcing management change, was ranked first in South Africa for its one-, three- and five-year returns in a survey by Alexander Forbes.
Stephen Mildenhall, the chief investment officer at Allan Gray, said the shareholding had been built up over the past 18 months.
Western Areas was the worst-performing stock on the JSE Security Exchange's nine-member gold index in 2001 and the second-worst in 2002
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"My attitude is that it is fantastic to have another large shareholder on board who shares our view on the value of its equity," Brett Kebble, the chief executive of Western Areas, said yesterday.
"We are only interested in increasing the value of the share."
Western Areas is poised to exploit a world-class ore body with a life of mine of 30 years plus.
Final commissioning of the R5 billion South Deep project, a 50-50 joint venture between Western Areas and Canadian mining firm Placer Dome, should be completed in the last quarter of this year.
The project has the potential to become South Africa's highest-producing gold mine in 15 years.
David Davis, the gold analyst at SCMB Securities, said that despite this, Western Areas shares had been depressed by negative sentiment associated with long-time uncertainty related to the corporate structure, hedge book and share liquidity. He said investor interest in Western Areas should increase as South Deep phase one moves into production.
Western Areas closed 7c firmer at R36.57 yesterday. - Sherilee Bridge and Bloomberg
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