| Mon 1 Aug 2005, 9:46 | | JCI deal will put Matodzi in the black |
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JCI deal will put Matodzi in the black
August 1, 2005
By Nicky Smith
Johannesburg - The Kebble-run mining finance group JCI would hold 57 percent of Matodzi Resources, a listed empowerment company, if Matodzi`s shareholders voted in favour of converting R338 million preference shares owned by JCI into ordinary shares, Matodzi said on Friday.
Preference shares give the holder a fixed rate of interest rather than paying dividends out of profit, as is the case with ordinary shares. They are seen as debt rather than equity.
Sello Rasethaba, Matodzi`s chief executive, said he was excited by the possibility that the proposal published on Friday on the Stock Exchange News Service (Sens) would rid the company of its debt, moving the company back into solvency.
As its stands there are questions surrounding the company`s status as a going concern, as its liabilities, including the JCI-held preference shares, exceed its assets by R263 million. Through this proposed deal, Matodzi would be solvent again, with net assets of R75 million.
The company said: `Should the company not be successful in the proposals ... there is a significant doubt that the group will be able to meet their obligations in the normal course of business and therefore a material uncertainty exists that the group may be able to continue as a going concern without undertaking further borrowings and or the partial disposal of its assets.`
JCI would also buy Matodzi`s wholly owned subsidiary, Witnigel, for R1 and would assume its R155 million debt.
Rasethaba said that if shareholders voted in favour of the scheme he would have unwound the complicated preference share agreement with JCI, which was something he had set out to achieve when he was appointed chief executive in 2001.
He explained that his efforts to promote Matodzi to investors had been hamstrung by the perception that it was controlled by JCI and that there would be no protection for other investors.
He said that the company would use its stronger balance sheet to acquire more assets and that JCI had indicated it would be willing to dispose of its controlling stake.
`Once all of this is approved, we will announce plans to undo [JCI`s] 57 percent shareholding,` Rasethaba said. He was not concerned about the future prospects of the company because Matodzi controlled the Letseng diamond mine in Lesotho, which gave it access to the mine`s cash flows.
Earlier this year the Letseng diamond mine produced four flawless diamonds, which weighed 112 carats, 105 carats, 76 carats and 71 carats. According to the Sens announcement, the financial effects of the proposal to restore Matodzi to solvency, if approved by
shareholders, would lift the net asset value per share from a negative R1.764 to a positive 15.9c. It would also narrow the loss per share of 74.3c to a loss of 23.5c. On Friday Matodzi also published its year-end results to end March.
Revenue during the year rocketed from R153 000 for the year to end March last year, to R280 million for 2005.
There was a swing in the cash flow from an outflow R5.1 million last year to flows of R66.5 million.
JCI`s chief executive, Brett Kebble, was not available for comment on Friday. Matodzi`s shares closed at 60c on Friday, up 5.26 percent. The mining finance sector closed down 5.88 percent.
