The High Court will finally hear arguments in the ongoing litigation surrounding shares worth billions of rand that were allegedly misappropriated from Randgold & Exploration (R&E) around 2004 when Brett Kebble was CEO of various gold mining companies and his father, Roger, chairman of the same companies.
The court date has been set for early next year.
The collapse of the Kebble mining empire and unusual death of Brett Kebble in 2005 sprouted several books, metres of newspaper articles, even a movie, and culminated in the suicide of Roger Kebble in 2015.
Now the circumstances surrounding the movement of shares between the related companies in the Randgold group will come under scrutiny once again.
In short, R&E alleges that shares it owned in the listed Randgold Resources (RRL) and The Afrikander Lease (Aflease) were effectively stolen and sold to prop up Johannesburg Consolidated Investments (JCI) and Western Areas, both of which were close to bankruptcy.
At the time, newspaper articles claimed that signatures on share transfer documents were forged to facilitate the movement and subsequent sale of the shares.
R&E initiated several claims for damages against JCI and Western Areas during 2008. The claim against the erstwhile Western Areas eventually ended up as a claim against a Gold Fields subsidiary due to its acquisition of Western Areas in May 2006.
At the centre of the claims is the disappearance of 94 million Aflease shares and 21.8 million RRL shares. At the time of the alleged theft, the shares were worth R1.65 billion. They are worth probably 20 to 30 times that today.
Randgold merged with Barrick Gold to form one of the largest gold mining companies in the world. Randgold shareholders received 6.128 Barrick shares for every Randgold share, meaning that the 21.8 million shares that went missing became 133.7 million Barrick shares.
Barrick traded at $17.20 this week, valuing the missing RRL shares at R33.6 billion.
Value of the missing Randgold Resources shares
|Shares (million)||Value at highest price after event (R million)|
|RRL #1||1.8||3 356|
|RRL #2||7.26||13 538|
|RRL #3||7.3||13 612|
|RRL #4||5.46||10 181|
|Total RRL||21.82||40 687|
|Value at time of event (R million)||Dividends declared since event (R million)|
|Total value||1 651|
|Total dividends||2 456|
|Total claim||4 107|
Source: Compiled from R&E figures, relevant circulars and market prices.
Uranium One Inc was acquired by the Russian state-owned Rosatom nuclear business in 2013. Rosatom is described as the world’s leading nuclear energy company.
Russian President Vladimir Putin is credited as the founder by way of signing the relevant legislation to create the enterprise. Putin remains a keen proponent of the company.
R&E management told Moneyweb that the value of the Aflease shares at the time of the alleged theft was more than R160 million. The value at the highest price a few years later shot up to more than R1.9 billion (when Rosatom started showing an interest in buying the Canadian uranium mining group Uranium One Inc).
R&E wants back what is sees as its dues and is claiming around R43 billion from Gold Fields.
R&E is still listed in the gold mining sector of the JSE, although mining and exploration activities were suspended years ago. Its assets amount to a bit of cash and around R164 million invested in unit trusts. All the funds are earmarked for pursuing its various legal claims, and defending just as many legal claims against it.
The latest annual report disclosed its net asset value at R2.16 per share at the end of January 2018, which is decreasing bit by bit as money is spent on legal fees. The share currently trades at around R1.80 and a few thousand shares change hands every week or so.
That might change quickly if the case against Gold Fields goes to court.
There is as much as R43.6 billion at stake.
Gold Fields added a note to its financial statements under contingent liabilities to warn shareholders of the potential damages. It noted that R&E computed different claims, with the largest amount (the nearly R44 billion) based on the value of RRL and Aflease at the maximum share prices during the period under consideration.
An alternative claim is based on the prices of the shares at the time of the alleged theft plus any dividends that would have been received, as well as interest up to the date of a court ruling. The amount is provisionally calculated at R26.9 billion, according to the Gold Fields annual report.
The total claim against Gold Fields equates to between R376 and R609 per R&E share, but it is highly unlikely that the claim will be settled for anything near these figures, if settled at all.
Lawyers usually start with the highest possible claim, seemingly following a mantra that the defendants will never negotiate to settle a claim higher.
A lot of affidavits have been filed by both parties – and other parties – of which several have dealt with the procedure of the court case itself.
One issue is whether to allow people who stay abroad to testify via video link.
Other filings have dealt with whether the companies can be held responsible, or whether claims should be brought against the people involved in their individual capacity.
Another issue at stake is that R&E pursued similar claims against JCI, stockbrokers and auditors. Some of these cases were settled, which brings up the issue of how to offset these settlements against the amounts claimed in the Gold Fields case.
Different court cases against multiple parties is one of the reasons the case against Gold Fields is only heading to court now. The parties agreed to finalise some issues and claims before proceeding with this particular case.
For instance, claims against JCI were settled nearly 10 years ago. JCI’s latest annual report discloses that the R&E claim was settled in 2010 and finalised in 2011. By then, JCI shares had been suspended on the JSE for nearly six years. It was delisted in 2013.
JCI is in the process of final liquidation, with the most important outstanding issue being that the registrar of companies, the Companies and Intellectual Property Commission (CIPC), wants audited financial statement for the last three years before allowing the process to proceed.
It seems auditors are not too keen to delve into those books.
That JCI reached a settlement with R&E indicated that R&E is open to offers.
R&E would not answer specific questions about the current court proceedings or the likely outcome as the matter has been formally brought to court with the appointment of Judge Ingrid Opperman of the High Court to manage the case and hear the trial.
When to tune in …
The legal report contained in the R&E annual report states that the parties were notified of the appointment in February 2019, while Gold Fields told its shareholders that a date for a hearing has been set down in January 2020.
“A provisional trial date of 29 January 2020 has been allocated to this matter, but it will only proceed to trial on this date if the trial is ready, which seems unlikely,” says Gold Fields in its annual report.
Gold Fields says it has sustainable defences to the claims and will vigorously defend the claims. However, it immediately took steps to join other parties to the legal action, including JCI and the estates of the late Brett and Roger Kebble, in order to enable Gold Fields to claim compensation if any of the R&E claims are successful.
R&E submitted five separate claims for several different blocks of shares. Alternative claims to each of these were also lodged, as is the case in legal matters.
Relief for R&E shareholders
The eventual outcome and relief paid to R&E shareholders, if any, will depend on whether the court accepts all the claims, and which of the valuation alternatives is accepted.
The legal proceedings started nearly 12 years ago, when R&E first called in the lawyers in 2008, and they might be far from finished. A trial of this magnitude –involving many players and uncertainties, together with possible appeals after a verdict – might take years to finalise.
The best that R&E shareholders can hope for is that the parties reach a quick settlement. R&E has settled most of the cases to date and has recovered R1.3 billion for its shareholders since 2003. Every R1 billion in a settlement is worth R14 per R&E share – before legal fees and tax.
January promises to be an interesting month for R&E, as well as for Gold Fields.