| Wed 7 Mar 2007, 16:39 | | RNG / JCD - Randgold and Exploration / JCI Limited |
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JCD RNG
JCD RNG
RNG / JCD - Randgold and Exploration / 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")
JCI LIMITED ("JCI") Defendant
(Incorporated in the Republic of South Africa)
Registration number 1984/00854/06
Share code: JCD ISIN: ZAE000039681 (Suspended)
("JCI")
IN THE MEDIATION BETWEEN:
RANDGOLD AND EXPLORATION
COMPANY LTD ("R&E") Claimant
and
JCI LIMITED ("JCI") Defendant
The announcement released earlier on SENS did not contain numbering
STATEMENT BY THE MEDIATORS
1. 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(1) and the JCI Claims(2) 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.
2. In view of these comprehensive procedures, the optimistic
timetable to address and try and resolve the issues between
the parties(3) soon turned out to be unachievable and led to
an amended timetable.
3. 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(4) or by JCI,(5) 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.
4. 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.
5. 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.
6. 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.
7. 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.
8. 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.
9. 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.
10. 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.
11. 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.
12. 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.
13. 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.
14. 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.
15. Central to the determination of an overall settlement would be an
assessment of the fair net asset value of both companies,
particularly of JCI.
16. 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).
17. 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.
18. 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.
19. 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
(1) "the R&E Claims" is defined in the mediation agreement as being all and any
claims of whatsoever nature from whatsoever cause arising which R&E alleges it
enjoys against JCI.
(2) "the JCI Claims" is defined in the mediation agreement as being all and any
claims of whatsoever nature from whatsoever cause arising which JCI alleges it
enjoys against R&E.
(3) Clause 8.5.4 provides: "The Party shall require the Mediators to make
recommendations to the Parties as regards the resolution of the R&E Claims and
JCI Claims as soon as possible, but within no more than 30 (thirty) days of the
Party`s first meeting with the Mediators or such longer period as the Mediators
in their sole discretion, at all times acting reasonably, may suggest."
(4) Defined in the mediation agreement as meaning all and any subsidiary or
associated companies of JCI or in which JCI has an interest, whether direct or
indirect, including its interests in CMMS
(5) Defined in the mediation agreement as JCI Limited
Date: 07/03/2007 16:39:15 Produced by the JSE SENS Department.
