/ 3 April 1998

Probe into the Amalia puzzle

Mungo Soggot

The liquidators of mining company Amalia want to undertake a forensic audit into how the company raised money from the public, how the money was spent and whether insolvency laws were broken.

Auditors Coopers & Lybrand were called in to liquidate the company last month after a high court order which followed Amalia’s spectacular collapse on the Johannesburg Stock Exchange. The share was suspended after it had lost more than 90% of its value.

In his first report-back to the company’s creditors, liquidator Basil Nel says: “We consider it necessary at this stage to conduct an inquiry into the affairs of the company. It is our intention to conduct a forensic inquiry into the books and records to establish the basis on which shares in the company were offered to the public.”

The high court ordered Amalia Gold Mining & Exploration’s liquidation after an application by one of its largest creditors, Standard Bank, which is owed almost R7-million.

Nel’s initial investigation shows that Amalia’s main creditor is a company controlled by Amalia’s directors – Amalia Corporation.

Amalia directors set up an elaborate funding scheme using companies run by the same directors, which ensures they are first in line for the proceeds from the company’s liquidation. The complicated web of companies that make up Amalia includes two management companies, run by the same directors, which received the proceeds of shares sold in Amalia and its offshore branch, Commonwealth Gold.

ComGold owes Amalia more than R4,5-million – Amalia’s largest single debtor. It is listed on a small exchange in London called the Offex. ComGold’s share has collapsed after it emerged that its main drawcard – an exclusive deal to develop the mineral resources of Liberia – is unlikely to materialise.

Other than Amalia Gold Mining’s gold mine in Schweizer-Reneke, North West, its main asset is 63-million shares in ComGold.

“It is our intention to establish the negotiability of the 63-million shares in ComGold, taking into account the large number of shares and the bad publicity the Amalia Group of companies have received locally and abroad,” Nel says.

Amalia’s fate now appears to hang on a visit from representatives of Commonwealth Gold’s substantial Swiss shareholding, who arrive in Johannesburg on Monday.

Directors have raised the hope that the Swiss Bank will put together a rescue package. Director Gerhard Potgieter says one of the conditions for such a lifeboat would be a shake-up of the current board – including the departure of finance director Peter Trickey. Nel says he will hold fire on the liquidation until he meets a representative from the Swiss delegation.

Meanwhile, local shareholders in Amalia are preparing to pump more money into the company. An Amalia director confirmed this week that “various shareholders” were discussing bailing out the company.

Most mining analysts have laughed off the company, which has a large number of farmers as shareholders.

Fred Rundle, a representative of some of the shareholders and an Afrikaner Weerstandsbeweging representative, said this week: “It is ludicrous to put more money in with a board that has no credibility. All they did was start a maze of companies which confused the shareholders.”

The police are investigating the possibility of fraud by the company, which insists it has been sabotaged by rogue employees and rival players keen to hijack its lucrative Liberian rights.