The late Brett Kebble’s mining empire may end up in the knacker’s yard, according to analysts who have been following it closely.
”My sense is that JCI and Randgold & Exploration [two Kebble-controlled companies] won’t exist in their present form a year from now,” says Georges Lequime, an analyst with RBC Capital Markets in London.
Others believe that JCI, a once-proud mining and industrial conglomerate founded by Barney Barnato more than 100 years ago, may not survive much longer, if only because of shareholder pressure to collapse and simplify its corporate structure.
Kebble resigned from both these companies just weeks before he was murdered last week in Johannesburg. Both companies have been suspended by the JSE for failing to submit financial statements on time, suggesting Kebble had something to hide.
A team of 20 KPMG auditors are trying to unravel the murky financial dealings orchestrated by Kebble, who claimed his family had more than 50% control of mining investment company JCI, though this is not evident from the share register.
The financial audit, due to be completed by year end, is expected to shed light on what many believe could turn out to be South Africa’s biggest corporate scandal.
Analysts say they gave up watching Kebble companies — with the exception of Western Areas, which has an independent board — because they could not follow their complex web of dealings. They say the auditors’ report will answer long-
standing questions over JCI’s solvency, and whether or not it has a future.
Kebble’s murder leaves a trail of unanswered questions. Moneyweb reported this week that JCI pumped up to R2-billion in cash into a subsidiary called Consolidated Mining Management Services (CMMS), which JCI says functioned as the group’s corporate treasury, but may have been a vehicle for sluicing funds out of JCI, beyond the glare of JCI shareholders. Where these funds ended up is not clear. Kebble reportedly bankrolled more than 40 black empowerment transactions, many of which may now be in jeopardy.
”Because the market gave up watching JCI, Brett was able to get away with what he did,” says Lequime.
Curiously, the share price of Western Areas, in which JCI has a 39,3% interest, picked up immediately after Kebble’s murder. Market talk is that, with Kebble gone, Western Areas could become a takeover target or joint venture partner for the likes of Goldfields, which shares a common boundary with Western Areas.
Western Areas, specifically its 50% share in the South Deep gold mine, was the principal asset in the Kebble business empire. Goldfields’ share price picked up immediately after Kebble’s resignation from JCI, R&E and Western Areas.
Ian Liddle, an analyst with Allan Gray, whose clients own about 25% of JCI, says it became increasingly difficult to ascertain the extent and nature of JCI’s assets and liabilities. ”We put questions to the previous JCI directors on these matters, but did not receive satisfactory answers,” he says. ”The new JCI directors must produce audited financial statements before they can make recommendations for the future of the company.”
A hard-nosed Investec appears to have demanded Kebble’s resignation from JCI as a condition for pumping R460-million in cash into a special-purpose vehicle. The loan is secured by 15-million Western Areas shares, JCI’s Letseng diamond mine in Lesotho, a share in JSE-listed empowerment group Matodzi and other JCI assets.
Investec also charged a ”raising fee” of at least R50-million. This, says Lequime, limits Investec’s downside and gives it an attractive upside.
This cash injection will allow JCI to follow its rights in the R640-million rights issue now under way at Western Areas. But there could be trouble ahead for JCI if Western Areas makes further cash calls on shareholders, which seems likely in light of the operational difficulties at its South Deep mine.
Hugo Nelson, an analyst with Coronation Asset Management, says JCI will probably have to sell assets or raise further debt to hang on to its stake in Western Areas.