| Mon 27 Mar 2006, 17:43 | | Simmers - Chairmans Statement Of 27 March 2006 |
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SIM
SIIF
Simmers - Chairman"s Statement Of 27 March 2006
Simmer And Jack Mines Limited
(Incorporated in the Republic of South Africa)
(Registration number 1924/007778/06)
Share code: SIM
ISIN: ZAE000006722
("Simmers" or "the company")
STATEMENT BY THE INDEPENDENT NON-EXECUTIVE CHAIRMAN OF SIMMERS
Synopsis
Following extensive media coverage last week of the dispute among shareholders
of Jaganda (Pty) Ltd, the controlling shareholder of Simmers, I decided to make
a clarifying statement so as to avoid uncertainty in the market arising from
statements made in the media relating to aspects of Simmers" present status,
particularly in relation to the application made to the Department of Minerals
and Energy ("DME") for the Randfontein Shaft 4 mining rights.
I have decided to give the full background to enable shareholders to form their
own opinions.
The matters I cover in the statement, which appears in full below, include:
- The events leading up to a meeting with the DME on Wednesday, 15 March this
year regarding the Shaft 4 application;
- The matters discussed at that meeting, and statements made by the DME;
- Actions consequential to the meeting with the DME;
- The public disclosures and discussion of that meeting.
Matters of particular concern to me as chairman of Simmers include:
- The unresolved dispute between the Jaganda shareholders, which is now
impacting the company and its relationship both with the DME and the JSE;
- The selective leaking of confidential information to the media without
going through proper company channels;
- Statements by Vulisango, the majority shareholder of Jaganda that it wished
to apply for the Shaft 4 rights in apparent opposition to Simmers;
- The stated attitude of the DME to the Shaft 4 application.
THE FULL STATEMENT
Background facts
I wish to make a statement to shareholders concerning, in particular, a meeting
with the Department of Mineral Affairs and Energy ("the DME") which I attended,
in relation to the application by Simmers for certain mineral rights.
On Wednesday, 1st March, 2006, a meeting of the board of directors of Simmers
was held to address the concerns of certain directors, representing Vulisango
Holdings (Pty) Ltd ("Vulisango") that the application for new order mineral
rights in respect of Ezulwini 4 Shaft was not in order insofar as it related to
disclosure of Simmers" BEE status, and that the executive directors responsible
for making the application had misled both the DME and the board in this regard.
This was not a new matter, as Vulisango had expressed the same concerns in a
letter to me dated 26 January 2006. I had immediately dealt with the matter at
that time by arranging for Advocate C Loxton SC to review all matters pertaining
to the disclosure of BEE shareholding to the DME with particular reference to
the issue of new Simmers shares from time to time, which had had the effect of
diluting the shareholding of Jaganda (Pty) Ltd, in which Vulisango holds 51%.
Advocate Loxton submitted his opinion to me on 6 February 2006, and concluded
that there was "no merit" in the allegations.
However, on 24 February 2006 Vulisango again wrote to me expressing the same
concerns, and this time including a legal opinion from Advocate G Grobler SC,
which appeared to draw the opposite conclusions from the opinion expressed by
Advocate Loxton. Vulisango requested me to call a meeting of non-executive
directors only at the offices of their advisers, Sovereignty Capital, to discuss
this matter and also "the continued employment" of the executive directors. I
declined to convene such a meeting and instead called an extraordinary board
meeting. This was the meeting which is referred to in the opening paragraph
above.
The company"s legal adviser was asked to attend the board meeting to attempt to
shed light on the apparent anomaly of two learned advocates coming to
diametrically opposed conclusions when asked to opine on the same set of
circumstances. An offer was made to the directors representing Vulisango to
invite their own legal adviser to attend the Simmers board meeting also and
consider the same issue. This offer was declined. The board was advised that the
two opinions were in fact reconcilable, the different conclusions being
attributable to the fact that Advocate Grobler had indicated that he had not
seen various items. The board was advised that the different conclusions were
clearly the result of different briefings of each counsel. The brief given to
Advocate Loxton was written, by me, and circulated to all directors. Details of
the brief to Advocate Grobler have not at any stage been disclosed to the rest
of the board.
It was at this board meeting that the executive directors informed the other
directors that they had begun the process for the compulsory winding up of
Jaganda. Following this notification the company issued a cautionary
announcement regarding the application.
At that meeting the only resolution taken was that a delegation consisting of
the two independent directors, Messrs Wakeford and Brown, the Vice Chairperson,
Ms Njenje and me, should visit the Pretoria office of the DME to ascertain the
status of the Simmers application. (This took place on Wednesday, 15 March,
2006.)
On 3 March, two days after the board meeting, the JSE notified Simmers that an
application for the suspension of Simmers shares had been received from
Vulisango and several Simmers directors, Messrs Mkele, Wakeford, Watson, Ms
Njenje and Ms Sisulu. No notification of this application was given to Simmers
or to me, and, at the board meeting which had been called specifically to
consider many of the complaints cited as the basis of the application, no
mention of the application was made at all. On receipt of the notification from
the JSE, Simmers requested and was granted seven business days to respond to the
application. This was complied with on time. Meanwhile, on the day following the
lodgement of the application to the JSE, its contents were extensively reported
in the newspapers. The seven days expired on 10 March, 2006. The grounds for the
application were reviewed by Simmers and its corporate adviser, Sasfin Capital.
There appeared to be no merit in them whatsoever, based as they were on a
collection of issues disclosing little or no cause for suspension,
unsubstantiated allegations and a legal opinion on the matter of the rights
offer held by Simmers in June, 2005, which reveals only a complete and almost
comical lack of understanding, on the part of the writer thereof, of the subject
of his opinion. In my view the basis for this application was entirely spurious,
and were the application to succeed, it would benefit nobody, including the
applicants. Nonetheless the threat of suspension of the share, at the time of
writing, has hung over Simmers shareholders since 6 March 2006, when the
newspaper report appeared.
The earliest date that could be arranged for the meeting with the DME was
Wednesday, 15 March 2006. One of the independent directors, Mr Brown, was
unable to attend, so that the Simmers delegation comprised Ms Njenje, Mr
Wakeford and me. The officials of the DME, represented by Mr Jacinto Rocha
(Deputy Director General "DDG"), made it quite clear that they regard the BEE
aspects of the Simmers application to be defective. The principal reason for
this view appeared to be that the level of control exercised by Vulisango over
Simmers, via its 51% shareholding in Jaganda, is insufficient to meet the "HDSA
50%+1 vote" categorization. The reason, in turn, for this conclusion was that a
shareholders" agreement exists between the Jaganda shareholders (that is:
Vulisango and the "voting pool" or management shareholders) which limits the
right of Vulisango in certain specified respects to act without consensus with
the voting pool. In short, the DME officials informed us that because Vulisango
cannot exercise control over Simmers without such limitation as is required by
the Jaganda shareholders" agreement, the application in its present form cannot
succeed. Further, the current structure is regarded as "fronting". Further, if
Jaganda is liquidated, the devolution of its shares in Simmers to Vulisango and
the voting pool and the cancellation of the shareholders" agreement will
exacerbate, rather than rectify the position unless Vulisango obtains a minimum
of 26% of Simmers" shares, plus board control, plus a management contract. When
I asked if other BEE entities might be included in the 26%, I was informed that
this would not be permitted and that the DME would protect Vulisango"s position.
We were instructed by the officials that we should resolve matters with
Vulisango so as to achieve the status described above, in which event our
application would become compliant.
We have not yet commented on the applicability of the statements by the DME
officials about the compliance of their stated conditions with their own legal
requirements, but will do so in the appropriate forum at the appropriate time.
It is interesting to me, however, that during December 2004 and January 2005
negotiations took place between Vulisango and the Voting Pool that culminated in
the signing of a shareholders agreement between them on 31 January 2005. It was
a requirement of Vulisango that the Department of Minerals and Energy vet these
agreements, to ensure BEE compliance.
On 2 February 2005, members of the Voting Pool and Vulisango met with the
Director General, and the DDG, to discuss the shareholders agreement. Their
requirement that the agreement be amended in order to make Simmers BEE compliant
was executed on the same day by signature of an addendum agreement incorporating
their changes.
After the meeting Mr Wakeford made some notes of specific questions and answers,
and faxed them to me. He also sent them to the officials that we met for
confirmation. I also made notes, incorporating the substance of Mr Wakeford"s
notes, and sent them by email to Ms Njenje and Mr Wakeford for comment. Ms
Njenje acknowledged receipt, but offered no comments. Mr Wakeford did not reply
probably because the two documents were substantially the same. I did not send
the notes to any other directors or indeed anyone else at all, since I had not
yet received the input of the other delegates, and I further wished to
investigate the legalities of the DME"s position. I discussed with Mr Watson and
Sasfin Capital the issuing of a further cautionary announcement, but concluded
that shareholders are already aware that Simmers does not yet hold the rights,
and that it may have to make further amendments to the application as this is
the usual process, so that other than having a clearer idea of what changes the
DME requires, nothing had changed. The need for communication to shareholders,
in my view, would arise when the board of Simmers took a decision on how to
react.
On the same day that we met with the DME officials, it was reported in the
morning newspapers that Vulisango intended to procure that Jaganda call a
general meeting of Simmers shareholders in order to implement the dismissal of
Mr G. Miller, the chief executive, and Mr J.P.Schumacher, a Swiss director
representing TopGold, a gold fund that invested heavily in Simmers in the early
stages of its reorganisation. In their places Vulisango intended to put Mr
Valence Watson, currently alternate director to Mr A. Mkele, and Mr Barry
Davison, a prominent business leader connected with Vulisango"s corporate
adviser, Sovereignty Capital. On the afternoon of the same day I received a
letter from Jaganda confirming this. Both Mr Watson and Mr Wakeford raised the
question of when the board should meet to consider the visit to the DME, and in
each case I replied that I was not yet certain whether such a meeting would
precede or follow the general meeting.
Two days later, on the 17 March, 2006, a Friday, I received written notification
from Vulisango that it intended, "in order to protect all shareholders", to
apply in its own name for the mineral rights sought by Simmers both in respect
of Ezulwini and Transvaal Gold Mining Estates Ltd ("TGME"), which, if awarded,
would be "vended" to Simmers. It was immediately clear to me that this put those
of Vulisango"s directors who were also Simmers directors in a gross conflict of
interest situation vis a vis their responsibilities to Simmers.
On the same day I received a letter from Messrs. Wanblad and Kebble, writing as
directors of Jaganda, alleging that the request for a general meeting of Simmers
shareholders was a "nullity" because it followed a Jaganda meeting, chaired by
Mr Barry Davison, which was improperly constituted. I wrote on 21 March 2006, to
the Jaganda directors, asking for instructions as to whether I should call the
general meeting. I also wrote, on 21 March, 2006, to the three directors of
Vulisango who are also directors of Simmers, advising them that they were in
danger of being caught in a conflict of interests in the matter of the Vulisango
application for mineral rights. On the following day (22 March, 2006) I received
a letter from the three Vulisango directors. They informed me that the
application for mineral rights in Vulisango"s name had been withdrawn. They also
wrote that:
"1. we find it incomprehensible that you, as Chairman, who de facto carries a
casting vote, has failed to respond positively to the request for a
shareholders meeting, as such meeting would be the determinant of the
concerns as expressed by both yourself and ourselves.
2. We again express to you our extreme concern as to your partiality in
relation to the matters in issue, particularly given your attempts to take
unfounded technical points to delay a decision regarding the requisition
for a shareholders meeting.
3. What the Companies Act requires is for the directors of Simmers to make a
decision in this regard. Please advise us why you have not, in response to
the requisition, simply called a meeting of the Simmers directors to make a
decision in relation to the requisition."
That same evening Mr Davison, in an interview broadcast by Moneyweb stated that:
..." I"m absolutely staggered that the chairman ... has not called an urgent
meeting of the board to rectify the situation as far as this application (for
mineral rights) is concerned. It is seriously flawed. That has been confirmed by
very eminent senior counsel in this matter. It"s been confirmed in a meeting
which ... Mr Burnett had with the Department of Minerals and Energy. And,
looking at his own notes on that meeting, it"s quite clear that the department
informed them for the reason of the dilution of Vulisango and Simmers, for the
reason of the sham that the shareholders" agreement in Jaganda between Vulisango
and ... the so-called management group which makes it impossible for the BEE
partner to exercise any control. And also because of the route which the
management group has taken in order to try and get Jaganda liquidated. And that
will be the kiss of death, the combination of those three things. And Mr Burnett
has been told this quite categorically by the DME, according to his own notes of
the meeting. So they hold a board meeting, get on with it, put a crisis force
together."
Asked by the interviewer why he thought that the DME"s requirements had not been
disclosed, Mr Davison replied that: ..."Well you may be aware that the majority
shareholder in Jaganda, or Jaganda itself, has passed a resolution asking for
(Simmers) to requisition a meeting of shareholders to air these issues and other
issues of corporate governance contravention. In addition to that it has been to
the Johannesburg Stock Exchange, it has communicated these issues to the JSE and
has requested that the share be suspended. ... I might also add ... that the
conversion of Simmers" other existing mining rights, no matter what bluster you
might get from the so-called management group, they will also be dependent on
the BEE status or the Department being satisfied about the BEE status of
(Simmers) through Vulisango. Now the Department is terribly concerned about
fronting in the transactions, and the agreement that exists between Vulisango
and the so-called management group and Jaganda really ensures that the BEE group
is totally emasculated, without wishing to differentiate in a gender fashion in
any way it"s inappropriate. And these matters need to be rectified and rectified
very quickly, and I"m absolutely staggered that the chairman of the company is
not calling for an urgent board meeting." ...
The interviewer asked: "But as a substantial shareholder, why does Vulisango not
call for an extraordinary general meeting? We"ve seen it happen often."
Mr Davison replied: "We have called for that. Jaganda passed a resolution last
week which has been sent to the chairman of the board of (Simmers) with the
certified resolution requiring the board ... to call an extraordinary meeting of
shareholders, at which the alleged governance contraventions and these other
issues will be aired. But I would just emphasize that this is a very urgent
matter. I am very familiar with the mineral rights environment situation in this
country, and this board needs to get off its backside, needs to put a group of
people together to in fact approach the DME and rectify the situation - in the
interests of all shareholders of Simmer & Jack."
Interviewer: "Barry Davison talking in his capacity as a non-executive director
of Sovereignty Capital, an adviser to Simmer & Jack"
On the evening of 23 March 2006, I spoke telephonically to Mr Watson. He asked
that a board meeting be called and I agreed to do this. This was the second
request from any director for a meeting, the first being expressed by Mr Watson
in his letter of the day before. The following day (today, 24 March) Mr Brown
faxed a request for a meeting. I telephoned him, we discussed the matter, and I
confirmed that I would attend to the matter on Monday, 27 March 2002, when I
will be at Simmers" offices. No earlier request had been made by any party for a
board meeting, which is not surprising, given the number of matters in issue
during the one week comprising four business days, which elapsed between the
meeting with the DME and the aforestated communications with me.
This rather lengthy relation of facts and timelines is, I believe, necessary in
order that shareholders can clearly grasp the issues facing Simmers.
The issues
There are two interrelated matters. The first is a longstanding dispute between
the Jaganda shareholders which relates to their respective shareholdings, the
existence and terms of the Jaganda preference shares (which were created in
order for Jaganda to be able to acquire its shares in Simmers) and to the terms
of the shareholders" agreement (which imposes certain limitations on the
majority shareholder, Vulisango, in its ability to deal with and exercise rights
arising from the shares in Simmers). This dispute is not strictly a matter for
the Simmers board, but because almost all of the parties to the quarrel are
Simmers directors, it is difficult to avoid it.
The second dispute concerns the Simmers application for new order mining rights
relating to Ezulwini in particular, but also certain rights sought in respect of
TGME. This matter quite clearly requires the consideration of the Simmers board,
and the facts set out above show that it has been the continuing focus of board
attention. It is inextricably linked, however, to the dispute between the
Jaganda shareholders, because Vulisango has more than once attempted to
interpose itself between the DME and Simmers as the recipient of the mining
rights, proposing to then "vend" them on to Simmers shareholders in exchange for
additional Simmers shares, thus rectifying most if not all of the difficulties
it perceives in its present position. The first such instance that I am aware of
was openly proposed at a board meeting held on 24 November 2005. The proposal
did not succeed for obvious reasons. Vulisango then argued that unless the
dispute about the control of Simmers was resolved in its favour, the application
to the DME would not succeed, as it would not be BEE compliant. Management
disagreed, and Vulisango attempted to demonstrate that management was misleading
the board and the DME. At best this proved inconclusive because of the
conflicting legal opinions. Finally the meeting with the DME dispelled all
doubts that unless Vulisango obtains the control that it seeks, without any
consensual arrangements with its partners, the founders of the present day
Simmers, the rights will not be forthcoming. This appears to vindicate
Vulisango"s contentions. The problem, however, is that in order to "rectify" the
application, the underlying dispute in Jaganda must effectively be resolved in
favour of Vulisango. This implies the founding partners foregoing their right to
deal by consensus in the various matters covered by the shareholders" agreement.
Actions to be taken in the immediate future.
As indicated, I will call a board meeting in the very near future. I suspect
that the sudden urgent calls for this emanate mainly from a desire to rectify Mr
Davison"s procedural error in attempting to requisition a general meeting of
Simmers without first ensuring that his ability to do so was legitimate. However
the DME"s stance, the legitimacy of its interpretation of the applicable laws,
and the calling of a general meeting will all be placed on the agenda.
I have been publicly excoriated by Mr Davison for my supposed dilatory handling
of these matters. My only defence is that several important matters coincided in
a period of nine days, which includes a weekend and a public holiday. I note
that during the same period my chief critic achieved a flawed requisition for a
general meeting and a radio interview, the transcript of which I have included
virtually in its entirety, because I believe it speaks for itself.
Nigel Brunette
Chairman
27 March 2006
Sponsor
Sasfin Capital
(a division of Sasfin Bank Limited)
Date: 27/03/2006 05:43:11 PM Produced by the JSE SENS Department
