JCI GOLD-CAM START MERGER PLANS ROLLING
moneyweb.co.za
by David McKay
The aim is for JCI-CAM's assets be housed in London-listed Randgold Resources
JCI Gold and Consolidated African Mines (CAM) have raised the curtain on plans to simplify their structure which is expected to involve their merger and additional mergers with six other companies, including Western Areas and Randfontein Estates.
The ultimate aim of the proposal is to delist the companies and house them in UK-listed Randgold Resources, a gold junior which operates the Syama gold mine and is developing the Morila mine - both located in the west Africa's Mali. It is also intended that Randgold Resources will apply for a secondary listing on the Johannesburg Stock Exchange (JSE).
CAM and JCI Gold have issued a cautionary announcement warning shareholders that Western Areas, Randfontein Estates, Randgold Resources, Randgold & Exploration are involved in the proposals.
Barnex, which owns the Ghanaian Prestea gold mine, and Freedev (Free State Development and Investment Corporation) are also involved in the discussions.
JCI Gold and CAM have also proposed to spin-off their non-gold interests into New Mining Corporation, formerly Witwatersrand Nigel (Wit Nigel). These interests may include a hot briquetted iron ore project which JCI hoped to establish in Mozambique, property and some diamond interests.
If the multi-faceted transaction is successful, JCI and CAM will be the third major SA mining stock to relocate to London. Anglo American Corporation is to merge with Minorco and list in London in May.
The first mining group to move to the UK was Billiton which separated out the non-precious metal companies of Gencor and listed in London in 1997.
The proposed transaction will require Reserve Bank blessing. However, the proposal will first have to pass muster with the SA Reserve Bank. This could involve CAM and JCI explaining that London is the bourse in which to be involved as it has a growing commodity and resource board. JCI Gold and CAM will also gain greater international exposure and easier access to capital by shifting its assets to London, they will argue. They will also have to persuade the board of Randgold Resources that housing the SA assets of CAM and JCI is in the interests of the group.
Analysts have long called for a simpler structure between JCI and CAM which is currently a labyrinth of cross-holdings dominated by the CAM, JCI, Western Areas-Randfontein Estates hierarchy.
At the moment CAM owns 29% in JCI which in turn owns 45% of Western Areas. JCI Gold has a 12% stake in Randfontein which has a 7% stake in Western Areas. CAM has a 5,8% stake in Randfontein.
And this is just the central pyramid which JCI and CAM will, no doubt, wish to remove. In addition, CAM has at least a 20% stake in Randgold & Exploration which in turn has a 60% stake in Randgold
Resources. Interestingly, Durban Roodepoort Deep, in which Randgold & Exploration has a 10% stake, has been omitted from the merger talks, as expected.
In simplifying the structure, JCI and CAM aim to unlock the various discounts. But getting to this stage will be a massive undertaking because of the manifold transactions that have to be seen through.
A cash underpin for Western Areas' minority shareholders? For example, in taking out minority shareholders in Western Areas, CAM and JCI are thought to be preparing a cash underpin. This is owing to the fact that the main minorities in Western Areas - Amgold and Anglo American - (which own a collective 13%), are thought to want cash rather than paper for their stake.
Western Areas is an important link in the merger plans. JCI Gold earned $235m from selling half of the mine to Canadian group Placer Dome. This cash, held offshore, will be used to grow the assets in
Randgold Resources. The relatively mature and partly low-grade Randfontein Estates is the only mine in which JCI-CAM have operating control. Western Areas is managed by Placer Dome.
One analyst said that a merged JCI Gold could expect harsh criticism in London for its dearth of cash generating assets. JCI and CAM, which have appointed The Chase Manhattan Bank and Standard Bank Investment Corp to act as joint advisers, expect to make further announcements in July. |
