| Wed 7 Mar 2007, 11:28 | | RNG/ JCI - R&E/ JCI Limited - Statement by the Med |
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JCD RNG
JCD RNG
RNG/ JCI - R&E/ JCI Limited - Statement by the Mediators
Randgold and Exploration Company Ltd ("R&E") Claimant
(Incorporated in the Republic of South Africa)
(Registration number 1992/005642/06)
Share Code: RNG (suspended) ISIN: ZAE000008819
ADR Ticker Symbol: RANGE
("R&E" or "the Company")
and
JCI LIMITED ("JCI") Defendant
(Incorporated in the Republic of South Africa)
Registration number 1984/00854/06
Share code: JCD ISIN: ZAE000039681 (Suspended)
("JCI")
STATEMENT BY THE MEDIATORS
IN THE MEDIATION BETWEEN:
RANDGOLD AND EXPLORATION
COMPANY LTD ("R&E") Claimant
and
JCI LIMITED ("JCI") Defendant
STATEMENT BY THE MEDIATORS
The mediation agreement in terms whereof we were appointed
"... to mediate the disputes and insofar as is possible make recommendations to
the parties as to how the R&E Claims and the JCI Claims should be resolved"
provided, as a precursor to the mediation process, for an exchange of pleading
in the nature of High Court pleadings, accompanied by all documents relied upon
by each party to support its respective claim and the exchange of comprehensive
reports from forensic accountants for both R&E and JCI.
In view of these comprehensive procedures, the optimistic timetable to address
and try and resolve the issues between the parties soon turned out to be
unachievable and led to an amended timetable.
R&E filed a statement of claim. In its plea thereto JCI denied that it was, in
terms of the mediation agreement, liable for debts which may be found to be due
by any of the JCI subsidiaries or by JCI, other than the debts of JCI Limited.
That raised a question as to the scope of the mediation agreement and our powers
thereunder. In addition, JCI notified an amendment to their original plea to
seek a rectification of the mediation agreement to accord with its
interpretation of that agreement. JCI did not submit a counter-claim.
We called for written submissions on the above issue from the lawyers
representing the respective parties. We also interviewed current directors
Messrs Gray and Nurek and erstwhile director Mr Lamprecht during early December
2006 in order to come to grips with the matter in issue.
A second important preliminary issue was raised by R&E. This related to the
method of quantification of damages: R&E is seeking to recover damages
allegedly due to thefts by or for the benefit of JCI. The question that was
raised was how quantification should take place in our law in the event of a
theft, as opposed to breach of contract or delict. Again, we called for written
submissions from the respective legal teams.
Having considered these preliminary issues, we are in a position to give
guidance to the parties as part of the mediation process. We do not consider it
presently necessary to call for any further submissions regarding the legal
issues.
By the end of 2006 it had become obvious to all involved in the process that the
mediation would not be finalised before the end of the first quarter of 2007.
Various meetings have since been held between Professor Wainer and the forensic
accountants representing both parties in order to attempt to narrow and to
crystallise the areas of difference between the parties.
We also met separately with the representatives from the boards of both R&E and
JCI on 9 February 2007 in order to, inter alia, obtain their thoughts regarding
the disputes and possible resolution thereof.
We have recently also held meetings with the financial directors of both
companies, inter alia, to obtain an understanding of the present financial
position of the companies and the actual cash and benefits received from the
transactions which are the subject of the dispute.
Having considered the various R&E claims and taking into account the areas of
agreement and disagreement in relation to the underlying cash flows, it appears
to us that the value of sustainable R&E claims might well exceed the net asset
value of JCI.
In our view, a protracted arbitration between R&E and JCI followed by the
spectre of a liquidation to satisfy any judgement is commercially and
practically unattractive and will be value destructive for both sets of
shareholders. The ultimate outcome of litigation would be uncertain and valuable
management time will be sterilized in the process.
Litigation is also likely to be time consuming and expensive, create share value
inhibitions during its duration and be significantly value destructive on a
liquidation - both by the realisation of fire sale prices for assets and due to
costs of liquidation.
Any settlement proposal which leaves no value for JCI shareholders is in our
view unrealistic and would, for JCI, be a poor alternative to the litigation
process, irrespective of its probable outcome.
Central to the determination of an overall settlement would be an assessment of
the fair net asset value of both companies, particularly of JCI.
To ameliorate the difficulties in making an accurate assessment of the net asset
value, it is recommended that an overall settlement be pursued on the basis of a
merger between the companies. On a merged entity basis, at least any under/over
estimation of the asset values will be captured within the shareholders`
shareholding in the combined entity. Thus if, for example, certain assets
ultimately yield a value of Rx more than the amount estimated for the purposes
of the overall settlement, that amount will inure for the benefit of both sets
of shareholders (albeit in diluted proportions).
Parallel to the mediation process, the chief executive and financial directors
of both companies have explored and quantified various alternatives of possible
amounts to be used for the purposes of a settlement figure - which would
ultimately drive the share swap ratio between R&E and JCI. We have been apprised
of these efforts.
Having regard to all of the above, a settlement figure in the range of R1.2
billion to R1.5 billion appears at this stage and on the figures available to us
to be a realistic starting point to resolve the disputes between the companies
-the basis being that the settlement figure be used to ultimately drive the
merger ratio between the shareholders of the companies. The current balance
sheet position of both legal entities should be available to the shareholders to
facilitate agreement on a settlement figure.
The mediators remain available to assist in achieving an acceptable settlement
within the parameters outlined above.
S F BUR&ER SC
CHARLES NUPEN
PROF H E WAINER CA (SA)
28 February 2007
Date: 07/03/2007 11:28:33 Produced by the JSE SENS Department.
