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Author: Julius Cobbett|

16 April 2010 00:20

IDC's R120m AltX "loan" stinks

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Did Matthews Phosa’s ANC presence lead the IDC to break its own rules?

JOHANNESBURG - State-owned Industrial Development Corporation (IDC) has some tough questions to answer regarding a payment of R120m it made to suspended AltX-company Alliance Mining Corporation (JSE:ALM).

The loan, ostensibly to fund a proposed BEE transaction involving ANC Treasurer Matthews Phosa, was paid to Alliance Mining before the deal even went to shareholder vote.

Many people will conclude that the IDC paid the money because of Phosa's involvement. Phosa is chairman of Alliance Mining and one of the three remaining directors there.

Alliance Mining insiders tell Moneyweb that the R120m has been squandered. Alliance Mining has applied to the High Court for voluntary liquidation, suggesting that the loan is largely unrecoverable.

Alliance Mining's proposed BEE deal was announced by the company on July 14 2009. It was described as a "broad-based" deal, yet it would have resulted in Phosa becoming the company's largest shareholder.

Phosa's close friend, Matilda Gaboo, who had no prior involvement in Alliance Mining, would have ended up with more shares than the company's entire combined workforce.

Gaboo was appointed a director of Alliance Mining by virtue of her stake in the proposed BEE entity Dartingo. However, her appointment was premature because the deal never went to shareholder vote.

Meanwhile, reports that Alliance Mining's financial results are allegedly inflated raise questions about what kind of due diligence the IDC conducted before approving the deal.

Indeed, Moneyweb is aware of a company that had plans to merge with Alliance Mining, but ran for the hills after discovering eye-popping contracts for difference positions.

Steven Firer, an audit professor who was appointed to the Alliance Mining board after the troubles surfaced, says he "cannot believe" that a due diligence investigation would not have uncovered the AltX company's skeletons.

"How could the IDC lend the money without the conditions being satisfied?" asks Firer. "Why pay the money to the company instead of Dartingo? It defies belief."

Moneyweb asked IDC for comment on Tuesday. Our requests were acknowledged, but to date no response has been received.

The questions posed to the IDC include:

  • Did the IDC conduct a due diligence into Alliance Mining before agreeing to fund the BEE deal?
  • If it did conduct a due diligence, why did it not discover the problems that prompted other suitors to give Alliance Mining a wide berth?
  • Does the IDC view the loan as recoverable?
  • Will the IDC pursue the BEE investors for repayment?
  • Why was the money paid to Alliance Mining and not Dartingo?
  • Why was the R120m paid when the deal had not even received shareholder approval?

The latest news to come out of Alliance Mining is that Dartingo has persuaded the IDC to cough up even more money in an attempt to save Alliance Mining from liquidation. Taxpayers, who are the ultimate funders of IDC deals, will have good reason to question whether they are conducted unemotionally and free of political influence.

Write to Julius Cobbett: julius@moneyweb.co.za

Topics: Industrial Development Corporation; Matthews Phosa, AltX, IDC, Alliance Mining, loan, bee, Matilda Gaboo




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