October 11th, 2005
JCI's chief executive, Peter Gray, may abandon plans to sell its 68% stake in the Letseng diamond mine in Lesotho, writes Business Report.
"The JCI board is reviewing all matters relating to Letseng. That would include the possible sale of any interest in Letseng and the raising of capital should that become necessary," Gray told Business Report, through JCI spokesperson Brian Gibson.
Brett Kebble, who was murdered on September 27 and who headed JCI until August 30, said in May that Letseng would be listing shares in London to raise 200 million rand to double its production.
Kebble made a decision a couple of months ago for JCI to exit its stake in Letseng and use the money raised from the sale to follow its rights in the Western Areas rights offer.
Kebble had decided that it was time for JCI to focus on its investment in South Deep gold mine outside Westonaria, which is the world's largest unexploited gold deposit of about 60 million ounces.
At the time, JCI only owned 40% of Letseng. Its holding was boosted when it converted preference shares held in Matodzi, its long-time empowerment partner, into equity.
The deal, which will simplify Matodzi's shareholder structure, will be voted on by Matodzi's shareholders on November 2, and will give JCI a 57% stake in Matodzi.
If Matodzi shareholders do not vote in favour of the conversion, Matodzi's going-concern status, which measures financial viability, will continue to be compromised. According to Matodzi's accounts for the year to March, its liabilities exceeded its assets by 240 million rand.
The shareholding in the Letseng mine is split between Letseng Investment Holdings (LIH), which holds 76%, and the Lesotho government, which holds 24%.
JCI holds 40% of LIH, while Matodzi, which is directly controlled by JCI, holds 50%.
It has been speculated that it would be unlikely that any new investor in the mine would not want to have control, especially if capital needed to be raised publicly, as Kebble said.
Last month Investec agreed to lend JCI 460 million rand to recapitalise the company. The loan is secured by various JCI assets, including its shares in Letseng and Western Areas. It has been speculated that Gray was hired as a condition of the recapitalisation.
Keith Whitelock, the mine's chief executive, said it was Gray's call "as to how to secure maximum value ... It's quite right he's looking at all options.
"If [JCI] gets a bid, which is enough money, they may choose to sell the whole 90%."
Previous attempts to get comment from Matodzi chief executive Sello Rasethaba on the sale of Letseng have met with little success.
Rasethaba claimed variously that the media was wrong and that it didn't matter what Business Report printed since the whole situation was a "comedy" and he needed "therapy".
Should JCI decide to dispose of a larger stake in Letseng than its direct 40% interest, this may put a squeeze on Matodzi's cash flows.
Matodzi's main sources of income are the royalties and dividends it receives from Letseng.