Watchlist Click-a-company Sens Indicators Subscribe RSS MINING IN AFRICA Barry Sergeant|08 December 2010 17:12 Inside Nkwe Platinum
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Nkwe Platinum: between the JSE and Xstrata A strange silence falls over 68.5m ... Kebble, Stratton: the whole ninety yards. JOHANNESBURG - Since the South African Constitutional Court, in a lengthy judgement, last week blitzed (set aside) prospecting rights to two (of five) of Australia-listed Nkwe Platinum's supposed properties, Nkwe has moved mountains to vigorously portray itself as cool, calm, and collected; as some kind of an innocent victim.
Much of the propaganda has come from Nkwe executive director Peter Landau, who switches mainly between Perth, Australia, and London. Landau is a long time associate of John Stratton, who was the closest confidant of the late Brett Kebble, who was infamously murdered in Johannesburg on September 27 2005.
Back in August 2008, I asked Landau for an update on the connections: "I am unaware of any history/association involving the late Brett Kebble and the Nkwe/Genorah transaction". Genorah is a so-called black economic empowerment (BEE) entity, and the single biggest shareholder in Nkwe.
Andile Nkuhlu, who can speak for 16% of Genorah, was chairman of an entity called Itsuseng, which in 2008 reached a settlement with Randgold & Exploration (the entity that Kebble and his gang looted more than any other) in respect of R20m that had gone walkabout in the bent and twisted 2003 Phikoloso deal.
To give it the full name, Itsuseng Investment Holdings: it was led by two ANC Youth League members, Lunga Ncwana and Andile Nkuhlu. Kebble really fancied the ANC Youth League.
Phikoloso was one of Kebble's more crafty creations. Sharif Pandor, who can speak for 6% of Genorah, was, during the latter Kebble years, husband of education minister Naledi Pandor. Sharif Pandor was listed as head of one of several BEE companies linked to Phikoloso, which was set up, so to speak, by ANC Youth League executives Lunga Ncwana and Songezo Mjongile.
An entity called Ikamva was apparently headed by Sharif Pandor, purportedly with "interests in platinum and holding mineral rights". Official records indicated no ready trace of Ikamva. (Among Kebble's BEE fantasies: Inkwenkwezi (which translates roughly to "star"), Masupatsela (road signs/signals; tour guide); Itsuseng (rise), Koketso (increase), Ikamva (future), Marothodi (droplets), Umoya (wind), Dyambu (sun), Qaqambile (clever/smart), and Leswikeng (rock).)
Back in 2008, Landau stated that: "Genorah is a broad based BEE vehicle; Mr Nkuhlu and Mr Pandor have minority shareholdings in the company". Nkuhlu and Pandor can speak for 25% of Genorah. As for being a "broad based BEE vehicle", the records show that just six individuals speak for 80% of Genorah: Nkuhlu, Pandor, MW Mphahlele (the CEO of Nkwe), Mrs S V Sithole, and a P Mackenzie, and a Mr J van Schalkwyk. If anyone has any information on the latter two names, kindly contact the writer.
GENORAH RESOURCES
Shareholders Directors Stake
Mr P Mackenzie Mr P Mackenzie 15.0%
Mazw Trust Mr MW Mphahlele 15.0%
J van Schalkwyk Mr J van Schalkwyk 15.0%
Sunset Trading 375 (Pty) Ltd Mrs S V Sithole 10.0%
Njeya Investments Mr A N Nkuhlu 3.0%
Njeya Trust Mr A N Nkuhlu 10.0%
Ayanda Nkuhlu Family Trust Mr A N Nkuhlu 6.0%
Mr S J Pandor Mr SJ Pandor 6.0%
Elizabeth Makhele
5.0%
Starfair CC
4.0%
Mr J K Makwetla
2.0%
Mr P F Mogale
4.0%
"Communities"
5.0%
100.0%
Source: Court filings
Just 5% of the shares in Genorah were (apparently) reserved for communities living on the farms: there is no evidence that any of these shares have ever been distributed. There may be some poetic justice from the Constitutional Court case, in that it was the community on the two southern properties which (legally) blitzed Genorah. The Bengwenyama have lived there for more than a century.
Back in 2008, Landau stated: "John Stratton is not a shareholder (direct or indirect) of Genorah; we are aware of a small indirect shareholding in Nkwe (less than 1% of issued capital)". Stratton was all over the place, as a director from 1998 to 2005 of JCI, Kebble's mothership.
Public-domain forensic reports published by Randgold & Exploration show that R&E alone was looted by Kebble and his cronies of R1.9bn in cash, by way of shares stolen from R&E, laundered mainly through JCI, and then sold on the open markets for cash. According to R&E, it was effectively looted of a further R1bn in other ways, such as selling fresh shares in R&E for cash, and allocating the cash for looting. The sum total of R2.9bn in cash was, and remains, of industrial proportions.
Not a single person has been arrested, never mind prosecuted, for these interesting activities. On August 21 2008, R&E and its parent entity issued summons out of the High Court of South Africa against Stratton, and two other Kebble cronies, Chris Lamprecht, and Hennie Buitendag. The action involves an amount of R389.8m; so far as is known, the case is being defended.
Back to Genorah: it's as clear as mud as to who may be hiding away within the shareholder structure. Starfair CC appears as a 5% shareholder of Genorah; there is no straightforward identification of beneficial parties. Nkwe's financial records show that in 2009, Starfair was engaged by Nkwe "to facilitate the settlement of the Anglo Platinum claim against the award of prospecting rights on the Genorah Farms by the South African Department of Minerals Resources (DMR)". For this, Starfair was paid A$1.25m.
While Genorah stands as the major shareholder in Nkwe, Nkwe has issued Genorah hundreds of millions of shares, giving the effect of Nkwe "buying" into Genorah's purported mineral rights. In 2009, separate to one such transaction, Nkwe issued a further 6.3m shares "to an unrelated party as facilitation fees", for a value of A$6.2m. Who is the "unrelated party?"
Given Genorah/Nkwe's political connectivity in 2006, it comes as little surprise that it was rapidly awarded prospecting rights, as if the DMR was running on rocket fuel. The Constitutional Court effectively found that there had been little, if any, consultation (as required by law) on the two southern properties. As such, the applicable legislation had been violated.
If that were not enough, while Genorah was awarded prospecting rights on the five properties in September 2006, environmental management plans (EMP) were only filed two months later. A prospecting right may simply not be issued without an EMP. Genorah's luck creates any number of suspicions.
The Promotion of Administrative Justice Act (PAJA), which requires civil servants to do their jobs, played a significant role in the Constitutional Court's findings. What emerged this week is that Anglo Platinum is now busy with two separate sets of action over nine farms on the eastern limb of the Bushveld igneous complex, which includes the five purportedly in the Genorah stable.
As early as 2007, Anglo Platinum applied for a review over each of the nine farms to the DMR. To reserve its legal rights, it far more recently also initiated a potential of judicial processes in terms of PAJA. This does not necessarily mean that judicial action over each farm is certain; but, rather, indicates a possibility.
Anglo Platinum had "old order" prospecting rights over the nine properties, which were required to be converted to "new order" rights by April 30 2009. Instead, the DMR handed out new order prospecting rights to other parties, across 2006, long before Anglo Platinum had the opportunity to fully attend to conversion requirements.
Back in 2008, Landau told your correspondent that "Xstrata are fully aware of the status of the granted prospecting rights and any possible claims in the future. Currently there are no land claims against either the Nkwe or Genorah properties; on two of the Genorah properties there are two spurious (in our opinion) applications for DMR review by applicants who were not successful in the original granting of the prospecting rights (if successful it will trigger a formal review process).
"Note that the two applicants did not go through with the formal objection process at the time of the awarding of the rights and they are outside of the legally established objection period".
As it turned out, these actions were hardly spurious: the Bengwenyama's claims were given full life by the Constitutional Court, which (effectively) blitzed Genorah's prospecting rights over the two southern properties.
Nkwe has been flirting with the possibility of a big financing from transnational miner Xstrata, which in August 2008 took up an exclusive option to acquire a 50% interest in the five Nkwe properties.
The option is exercisable within 90 days after completion of a bankable feasibility study (BFS) for Nkwe's Garantau project (located on the two northern properties). A crucial part of the deal is that Xstrata "will fund the total development costs of the properties from mining through to concentrating". The BFS for Garantau, expected in April 2010, was delayed and was "expected to be completed" in the fourth quarter of 2010.
The Garantau BFS has been delayed time and time again. In its 2010 annual report, Nkwe stated that following on from completion of the Garatau BFS, "work will begin on the Tubatse BFS which is envisaged to take approximately 18 months to complete". In reporting on the June 2010 quarter, Nkwe said "drilling also continued on the Tubatse Project, on the Farm Hoepakrantz".
This is less than half the story. On May 27 2010, Nkwe announced that it would also list in Hong Kong. At the same time, in conjunction with a relatively small capital raising, it announced that "The funds raised will be used to fast track [the] drilling programme and BFS on the Tubtase Project". What rot.
The two southern properties, Eerstegeluk and Nooitverwacht, are the richest in the five properties claimed by Nkwe, and form the rest of the Tubatse project. What Nkwe has totally failed to tell shareholders is that in 2007 Genorah was court-interdicted from accessing the two properties.
The interdict was ignored: the Bengwenyama went back to court and asked that the directors of Nkwe and Genorah be imprisoned, on contempt of court charges. Nkwe played innocent and dumb, even though its CEO, Maredi Mphahlele, is a director of both companies (and apparently holds 15% of Genorah).
Finally, by the end of 2007, Genorah removed all of its equipment and people from the two properties. Neither the equipment nor the people have ever been back, but Nkwe has created the illusion that the properties are being evaluated on an industrial scale. The Australian Stock Exchange was formally availed of the situation in 2009 and, in the great tradition of great regulators, did nothing.
Nkwe has also sought to create the impression that the Bengwenyama community is misrepresenting its status on the two properties. For the record, the Constitutional Court accepted that the Bengwenyama are owners of both properties. There is a single traditional council on the properties, in the form of the Bengwenyama Traditional Council, established as a statutory entity in 1964.
There is an uncontested land claim on Eerstegeluk; the community has been in continuous occupation of Nooitverwacht since 1859. The Bengwenyama have enjoyed occupation of the properties since 1859. There are no other communities on the properties; there are a handful of non-community people who reside there, with consent of the chieftain.
Nkwe's propaganda defers to the Bengwenyama-Ye-Maswati Royal Council (which is respected, but acts in no more than an advisory role to the statutory Traditional Council). As for the Roka Phasha, they are visiting residents. Nowhere, of course, does Nkwe explain why just a handful of people hold more than 80% of Genorah's issued shares, and why only 5% of the total has been reserved for thousands of resident community members.
The information war around Nkwe has also thrown up a big red herring around Bengwenyama Minerals, a company which was one of the applicants in the Constitutional Court, along with the Bengwenyama community. The four active directors of Bengwenyama Minerals are Mike Nahon, Zet Mphanga, Johan Odendaal, and Paul Musumuzi Mhlungu.
It was Mphanga (a member of the Bengwenyama) and Mhlungu who approached Nahon (a lawyer) and Odendaal (a mining professional), and associates, to deal with the prospecting rights issued on the two properties.
Bengwenyama Minerals entered into a deal with Rudolph de Bruin and David Twist, prior to the Constitutional Court hearing. In terms of this sub-deal, certain conditions precedent had to be satisfied: one condition was that the pair be appointed as directors. In the event, the deal did not eventuate and the funds paid to Bengwenyama Minerals were repaid. The parties were restored to the position status quo ante. The administrative removal of De Bruin and Twist as directors is now underway
NKP Price at posting:
45.0¢ Sentiment: Hold Disclosure: Held
