| Thu 15 Mar 2007, 16:49 | | RNG/JCD - R&E/JCI - Shareholder Update and further |
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JCD RNG KRHT
JCD RNG
RNG/JCD - R&E/JCI - Shareholder Update and further Renewal of Cautionary
Randgold & EXPLORATION COMPANY LIMITED
(Incorporated in the Republic of South Africa)
(Registration Number 1992/005642/06)
Share code: RNG & ISIN: ZAE000008819 (Suspended)
ADR Ticker symbol: RNG
Nasdaq trading symbol: RANGY (Delisted)
("R&E")
JCI LIMITED
(Incorporated in the Republic of South Africa)
Registration number 1984/00854/06
Share code: JCD & ISIN: ZAE0000039681 (Suspended)
("JCI")
SHAREHOLDER UPDATE ON
THE SETTLEMENT AND/OR MERGER NEGOTIATIONS BETWEEN
R&E AND JCI
(COLLECTIVELY "THE COMPANIES" or "BOTH COMPANIES")
AND
FURTHER RENEWAL OF CAUTIONARY ANNOUNCEMENT
1. Background
R&E and JCI shareholders are referred to the joint cautionary announcement
published on 23 February 2007, wherein R&E and JCI shareholders were
advised that negotiations regarding a possible settlement between the
companies are in progress.
In the course of these negotiations the companies engaged with certain
major shareholders, some of which hold a significant portion of the shares
in both companies, with a view to determining their support for a possible
merger between the companies. Certain information was disclosed to such
shareholders, subject to Confidentiality Agreements which were binding
until close of business on 14 March 2007.
Pursuant to the lapsing of the Confidentiality Agreements, the companies do
hereby provide a summary of the information disclosed to such shareholders.
2. Summary of information
Proposed merger
Any proposed merger ratio between the companies will ultimately be
dependent on the actual Net Asset Values ("NAVs") of the companies. The
valuation of the assets of both companies will always be the subject of
debate amongst different interests, necessitating a compromise of values.
The boards of directors of both companies have disclosed the range of
valuations set out below to the companies` major shareholders solely for
the purpose of initiating discussions amongst the companies and their
shareholders. The boards, following the expiration of the companies`
Confidentiality Agreements with such major shareholders, are reporting that
range of valuations in this joint announcement solely for the purpose of
disclosing to all of the companies` shareholders the information made
available to the companies` major shareholders for such purposes. Such
valuations are qualified in their entirety by the fact that investigations,
valuations and negotiations are still in progress and such valuations are
subject to change.
Valuation disclaimer
The values provided below have been determined based on the information
currently in possession of the boards of directors of both companies and
have not been audited, reviewed passed upon or otherwise provided by
external auditors, appraisers, valuation experts or any other independent
third party. The valuations have been provided solely for the purpose of
progressing the merger negotiations requested by the mediators, and should
not be construed to be accurate representations of the actual value of the
assets. Furthermore, the valuations of some of the assets listed below are
inherently speculative due to the nature of those assets, particularly the
prospecting rights, the fact that no independent testing or analysis has
been performed on such assets, the extent of the alleged frauds, the fact
that investigations are ongoing, and the fact that information available to
the boards of directors of the companies may not be complete or accurate
and is subject to change. Neither of the companies can assume that the
values provided in the NAV statement will be realized in whole or in part,
and such values are being provided solely due to the fact that such
information has been provided to the companies` major shareholders in order
to facilitate discussion on a proposed merger as recommended by the
mediators. Such information should not be relied upon in any manner by
shareholders of the companies. The valuations provided below are not
compatible with the values that might be assigned to such assets in
accordance with generally accepted accounting principles, and may differ
materially from such amounts and the actual value of such assets.
1. Pre-Merger NAV
Unaudited unreviewed estimated NAV Statements
Refer to the directors disclaimer as set out above and in the Renewal of
Cautionary Announcement set out below.
R&E JCI
(R million) (R million)
Goldfields Limited 230 1,644
("Goldfields")
R&E - 186
Matodzi Resources Limited - 51
JCI 78 -
Other listed investments 12 29
Boschendal wine estate - 140
Other long-term assets 154 133
Prospecting Rights 400 350
Jaganda - 284
Investec Loan Agreement - (388)
Profit Share
Taxation (16) (220)
Net current assets 4 (163)
Post Retirement provision (34) -
-
Sub Total 827 2,046
2. Assuming a settlement figure of R1.2 billion
R&E JCI
Total (carried from above) 827 2,046
Settlement 1,200 (1,200)
Total after settlement 2,027 846
3. Assuming a settlement figure of R1.5 billion
Total (carried from above) 827 2,046
Settlement 1,500 (1,500)
Total after settlement 2,327 546
4. Estimated number of shares (millions)
R&E JCI
Ordinary shares in issue 74,8 2,224,8
Estimated number of shares (3,0) (317,0)
to be cancelled
Net shares in issue 71,8 1,907,8
5. NAV per share calculation (Rand per share)
R&E JCI
NAV per share at settlement 28.22 0.44
of R1.2 billion
NAV per share at settlement 32.40 0.29
of R1.5 billion
6. Illustrative merger ratio (Percentage
respective contribution to consolidated NAV)
R&E JCI
- Assuming a R1.2 billion 71% 29%
settlement
- Assuming a R1.5 billion 81% 19%
settlement
Important notes to the NAV statements:
Settlement of R&E Claim
Flowing from the mediation process, the Mediators prepared a Statement and
Postscript thereto of their interim findings and recommendations on 28
February and 5 March 2007, respectively, and which publications are
available on the websites of both companies. The Mediators Statement
recommends that an overall settlement be pursued between the companies on
the basis of a merger. The boards of directors of both companies have
unanimously agreed that a merger between the companies is in the best
interests of shareholders and have agreed to further explore the benefits
and risks of such a merger to shareholders.
Shares in issue
The companies anticipate they will be in a position to cancel some of their
shares that were previously issued for little or no value. All legal
avenues are being pursued to advance the companies` prospects in this
regard. Current estimates are that R&E will be able to cancel 3 million R&E
ordinary shares and JCI will be able to cancel 317 million JCI ordinary
shares. (Excludes shares that may have been previously issued for little or
no value, but which are not currently traceable or identifiable).
Listed Assets
The value of the listed assets of both companies are based on the 30-day
volume weighted average price ("vwap") as at 23 February 2007. The value of
the Goldfield`s shares included in the unaudited unreviewed NAV statements
was R 122.40 per share.
R&E and JCI`s cross-holdings (post-settlement)
The cross-holdings between the companies are stated at the mid-point NAVs
(post-settlement) per share, for illustrative NAV purposes only and
quantified in the following table:
JCI`s share- R&E`s share-
holding in holding in
R&E JCI
number of shares (millions) 6.2 223.4
Share value in Rands 30.00 0.35
Valuation (R`million) 186 78
It is important to note that the share prices as published by JSE, at the
respective dates of suspension, was R8.90 for R&E and R0.16 for JCI
respectively.
JCI`s interest in the Boschendal wine estate
The valuation of JCI`s interest in the Boschendal development is based on
the most recent offer received. JCI`s board of directors are of the opinion
that the valuation of R140 million may be fair, however, the JCI board has
indicated that the long-term value of the investment could be in excess of
this amount. Due to various uncertainties, the JCI board is not able to
further speculate on the valuation of this asset.
JCI`s investment in the Jaganda Preference Shares
The investment in Jaganda was made by JCI as seed capital for the black
empowerment vehicle to invest in the share capital of Simmer & Jack Mines
Limited ("Simmers"). As a result of this investment, JCI acquired the right
to 357 374 000 preference shares in Jaganda, at a face value of 25 cents
per preference share. The preference shares carry interest at the bank
prime overdraft rate in South Africa, only in the event and to the extent
that Simmers pays dividends to its shareholders. In addition, on
redemption, 20% of the 30-day vwap of a Simmers quoted share price on JSE
above 25 cents per share becomes payable to JCI in cash. At a Simmers share
price of R5.69, the total value of the Jaganda preference shares is R478
million. The preference shares mature in June 2010.
Jaganda disputes the validity of the preference shares based on certain
technical issues. It has, however, placed 80 million Simmers shares in
trust with its attorneys to be held pending the final resolution of the
dispute. Jaganda acknowledges that it is indebted to JCI for R89.3 million
but denies further obligations. The litigation continues.
The boards of directors of both companies are not able to place value on
the Jaganda asset due to the uncertainty regarding its holding but, for
purposes of the merger discussions only, the boards have assigned a value
of R286 million to the Jaganda asset (this being the mid-point between the
face value of the preference shares of approximately R90 million and the
current value of approximately R478 million.)
Prospecting Rights
Prospecting Rights contiguous to the South Deep gold mine
Both companies have indirect stakes in the prospecting rights contiguous to
the South Deep gold mine, effectively owned by Goldfields. The interests of
both companies are held through a joint investment in Free State
Development and Investment Corporation Limited. The boards of both
companies are currently negotiating with potential suitors on the value of
these prospecting rights and therefore, it is not prudent at this stage for
the boards of both companies to indicate any valuation of these rights.
Other Prospecting Rights
The additional parcels of prospecting rights could be attractive to further
explore, exploit, joint venture or alienate. It would not be prudent at
this stage to disclose the break-down of the value of these rights, other
than to provide shareholders with what the companies believe to be a
conservative valuation as disclosed in the NAV statement.
The Investec Loan Agreement ("the ILA")
JCI entered into a Loan Agreement with Investec Bank Limited in August
2005. The ILA provides for a Profit Share to be paid to the bank on certain
selected assets of JCI. Full provision has been made in the NAV Statement
for the bank`s Profit Share based on the assumed asset valuations contained
in such NAV Statement. Two shareholders of JCI, namely Letseng Diamonds
Limited, represented by Mr M Koppel and Trinity Asset Management (Pty)
Limited, represented by Mr Q George, have filed applications to have the
ILA set aside. Should these actions be successful, the NAV of JCI will
increase correspondingly.
R&E Claims
The Mediators` Statement records and recommends t6hat on the basis of the
figures that were disclosed to them a settlement figure between R1.2
billion to R1.5 billion is a realistic starting point to resolve the
dispute between the companies.
Third Party Claims
Any additional recoveries not reflected in the NAV statements will further
contribute towards both companies financial position, and will be addressed
in subsequent financial statements.
Previously published NAV Statements and results
Shareholders are referred to the provisional unaudited and unreviewed
results published by R&E and JCI on 31 March 2006 and 7 April 2006
respectively. These results included estimated NAV statements for the
companies, for which no definitive reconciliation has been prepared to the
NAV Statement disclosed in this joint announcement.
Furthermore, a description of the assets, liabilities and additional
information on the companies contained in the abovementioned results are
available on the companies` websites.
3. Merger
The boards of both companies believe that the NAV statements provide a
range of ratios which could form the basis of a merger of the companies.
Based on the NAV calculations provided in this joint announcement, an
indicative merger ratio of the combined entity of between 71% to 81% of
value should be ascribed to R&E shareholders and between 29% and 19% of
value ascribed to the JCI shareholders. There can, however, be no assurance
that the valuations contained in this joint announcement will ultimately be
proved to be accurate or acceptable to the shareholders of the companies.
The boards of both companies intend to further explore the possibility of a
merger. Should an agreement be reached between the companies, a merger in
all likelihood will be proposed in the form of a scheme of arrangement in
terms of Section 311 of the Companies Act. This will require 75%
shareholder approval and High Court sanction. In the interim, the companies
remain bound by the terms and conditions of the mediation and arbitration
agreement signed on 7 April 2006.
RENEWAL OF CAUTIONARY ANNOUNCEMENT TO R&E AND JCI SHAREHOLDERS
Further details will be provided as and when they become available and
shareholders will be informed of any further developments in this regard.
Notwithstanding the reasonable endeavours of both boards of directors
concerned, shareholders are advised that the NAV calculations used are
based on estimates of the boards of directors of both companies as at the
date of publication of this joint announcement. They have not been
independently verified and are subject to a number of inherent
uncertainties as described herein. The NAV valuations used have not been
audited or reviewed by the companies auditors. Accordingly the directors of
both companies disclaim any liability in respect of the accuracy,
correctness and/or completeness of the information provided herein.
Investors should not place any reliance on such estimates.
Shareholders are therefore further advised to exercise caution in trading
their shares over-the-counter until negotiations are finalised.
FORWARD-LOOKING STATEMENT DISCLAIMER FOR R&E
Certain statements in this announcement, as well as oral statements that
may be made by R&E`s officers, directors or employees acting on its behalf
relating to such information, contain "forward-looking statements" within
the meaning of the U.S. Private Securities Litigation Reform Act of 1995,
specifically Section 27A of the U.S. Securities Act of 1933 and Section 21E
of the U.S. Securities Exchange Act of 1934. All statements, other than
statements of historical facts, are "forward-looking statements". These
include, without limitation, those statements concerning the value of the
net assets of R&E and JCI; the ability of the companies to successfully
consummate a merger that is approved by the shareholders and is acceptable
to the necessary governmental authorities, the fraud and misappropriation
that are alleged to have occurred and the time periods affected thereby;
the ability of R&E to recover any misappropriated assets and investments;
the outcome of any proceedings on behalf of, or against R&E; R&E`s ability
to complete its forensic investigation and prepare audited financial
statements; the time period for completing its forensic investigation and
audited financial statements; the amount of any claims R&E is or is not
able to recover against others, including JCI, and the success of its
mediation with JCI; the likelihood and economic parameters of any merger
arrangement between JCI and R&E; the estimated valuations given to assets
and liabilities in the NAV statement; and the ultimate impact on R&E`s
previously released financial statements and results, assets and
investments, including with respect to Randgold Resources Limited,
business, operations, economic performance, financial condition, outlook
and trading markets. Although R&E believes that the expectations reflected
in such forward-looking statements are reasonable, no assurance can be
given that such expectations will prove to be correct, particularly in
light of the extent of the alleged frauds and misappropriations uncovered
to date. Actual results could differ materially from those implied by or
set out in the forward-looking statements.
Among other factors, these include the inherent difficulties and
uncertainties in ascertaining the values of the net assets of the
companies, particularly in light of the absence of any independent
valuations, the existence of any unknown liabilities, the willingness of
any governmental authority to sanction any merger in light of the absence
of independent valuations or otherwise; the extent, magnitude and scope of
any fraud and misappropriation that may be ultimately determined to have
occurred and the time periods and facts related thereto following the
completion of the forensic investigation and any other investigations that
may be commenced and the ultimate outcome of such forensic investigation;
the ability of R&E to successfully assert any claims it may have against
other parties for fraud or misappropriation of R&E assets or otherwise and
the solvency of any such parties, including JCI; the determinations of the
mediators and acceptance of any such determinations by the shareholders of
R&E and JCI; the ability of R&E to defend successfully any counterclaims or
proceedings against it; the ability of R&E and its forensic investigators
to obtain the necessary information with respect to R&E`s transactions,
assets, investments, subsidiaries and associated entities to complete the
forensic investigation and prepare audited financial statements; the
willingness and ability of R&E`s forensic investigators and auditors to
issue any final opinions with respect thereto; the ability of R&E to
implement improved systems and to correct its late reporting; the JSE
Limited`s willingness to lift its suspension of the trading of R&E`s
securities on that exchange; changes in economic and market conditions;
fluctuations in commodity prices and exchange rates; the success of any
business and operating initiatives, including any mining rights; changes in
the regulatory environment and other government actions; business and
operational risk management; other matters not yet known to R&E or not
currently considered material by R&E; and the risks identified in Item 3 of
R&E`s most recent annual report on Form 20-F filed with the SEC and its
other filings and submissions with the SEC.
All forward-looking statements attributable to R&E, or persons acting on
its behalf, are qualified in their entirety by these cautionary statements.
R&E expressly disclaims any obligation to release publicly any update or
revisions to any forward-looking statements to reflect any changes in
expectations, or any change in events or circumstances on which those
statements are based, unless otherwise required by law.
Johannesburg
15 March 2007
Sponsor to R&E and JCI
Sasfin Capital
(A division of Sasfin Bank Limited)
Date: 15/03/2007 16:49:01 Produced by the JSE SENS Department.
