/ 20 December 2005

Aveng and Aquarius: The gloves are off

Construction group Aveng will be consulting its legal representatives and respond later on Tuesday to platinum miner Aquarius Platinum’s move to sue the group for R1-billion in damages, Aveng CEO Carl Grim said on Tuesday morning.

Aveng will issue a statement on the JSE’s Stock Exchange News Service, Grim added.

Earlier on Tuesday, Aquarius’s 50,5% owned subsidiary Aquarius Platinum South Africa announced that it has rescinded the Marikana mining contract with Moolman Mining, which is a division of Grinaker LTA — an Aveng subsidiary — and will sue the group for damages of R1-billion.

The decision is based on an “actionable misrepresentation on the part of Moolman”, Aquarius said in a statement on Tuesday.

Moolman Mining is Marikana’s principle mining contractor.

During Aquarius’s September quarter, Marikana opencast mine produced 27 322 platinum group metal ounces, or just more than a quarter of the company’s production for the three-month period.

Moolman Mining currently has a R169,3-million claim against Aquarius, which is still outstanding, Grim said.

The claim by Moolman Mining centres on the application of the terms of the “rise and fall” price-adjustment mechanism in the opencast mining contract between Moolman Mining and Aquarius, he added.

The “rise and fall” formula adjusts the payment made by Aquarius to Moolman Mining according to the rand/dollar exchange rate as well as other costs factors such as fuel, Grim said.

Aquarius Platinum CEO Stuart Murray was on Tuesday in Perth and wasn’t available on his cellphone.

A Johannesburg analyst said Aquarius appears to be going for broke with its R1-billion claim for damages, with both Aquarius and Aveng adopting desperate measures.

The dispute is likely to cause a lot of harm to both parties, and the fact that the case has become so drawn out indicates that it is not clear-cut, the analyst added.

In October, Aveng announced that auditing firm KPMG had finalised and issued its assurance report relating to the contract expenditure and the actual weightings of the cost elements in respect of the dispute.

Based on the cost weightings, a revised claim of R169,3-million, excluding value-added tax, had been submitted to Aquarius for the period May 2002 to September 2005.

In addition, a claim had been submitted in respect of interest for the corresponding period, Aveng said.

Aquarius interpreted the findings of the KPMG report quite differently from Moolman Mining.

“KPMG has inferred that the weightings inserted in the mining contract by Moolman Mining were materially defective and, significantly, KPMG disclaimed any view on Moolman Mining’s explanation for the gross ‘error’ in their calculations,” Aquarius said in its September 2005 quarterly report.

In its report, KPMG disclaimed its conclusion and said it did not express an opinion on the calculation and determination of the original expense weightings for “fuel”, “local” and “foreign” in the contract.

Aquarius said in its last quarterly report that it viewed KPMG’s disclaimer “in a very serious light”.

“The disclaimer in the KPMG report, suggests that there may have been a material misrepresentation of the facts by Moolman Mining at the time when the mining contract was concluded, which induced AQPSA [Aquarius Platinum South Africa] to agree to the terms proposed by Moolman Mining,” Aquarius added.

The contract between Moolman Mining and Aquarius Platinum was entered into more than three years ago and is for a five-year period, Grim said.

Moolman Mining’s 50 or so employees will cease mining at Marikana immediately, he added.

Grim said the value of the contract between Moolman Mining and Aquarius Platinum isn’t public knowledge, but that Aveng could include the information in the group’s news statement later on Tuesday.

At 11.45am, Aquarius’s shares were untraded from its previous close of R52,89, while Aveng was quoted down 2,2% or 40 cents at R18,20. — I-Net Bridge