The hunt for the Kebble millions

On the night of September 27 2005, Brett Kebble climbed into his silver-grey Mercedes-Benz S600 and drove into the Joburg dark, heading, according to reports at the time, to a dinner engagement he would never reach. Near a bridge over the M1 in the city’s northern suburbs, he stopped the car and rolled down the driver’s window. Moments later, several shots rang out.

Kebble, the 41-year-old mining magnate, political fixer, arts patron, architect of empowerment deals and alleged author of one of corporate South Africa’s most notorious frauds, was hit six times while sitting behind the wheel. Gravely wounded, he managed to drive on for a short distance before crashing the car and dying at the scene.

The immediate suspicion was that the flamboyant tycoon had been executed — perhaps by a wronged business partner, a rival, or someone else from the shadowy world in which money, politics and mining had begun to overlap.

But forensic evidence and later testimony suggested this may not have been a conventional murder but an “assisted suicide” dressed up as a hit. Mikey Schultz, one of the men linked to the killing, later testified that he had pulled the trigger, saying he and others had been hired to help Kebble stage his own death. Glenn Agliotti, the businessman charged over the killing, was ultimately acquitted after the court found the state had failed to make out a prima facie case. In the end, nobody was successfully prosecuted for killing Kebble.

By then, the world around Kebble was already collapsing. For years he had sat at the centre of a tangled web of mining companies whose names once carried real weight on the JSE: JCI, Randgold & Exploration and Western Areas.

JCI was the old Johannesburg Consolidated Investment Company, a historic mining house originally founded by Barney Barnato, which Kebble and his associates turned into the hub of their empire. Randgold & Exploration was an investment company that held valuable listed assets, most notably shares in London-listed Randgold Resources, the African gold company built by Mark Bristow that would later become one of the great success stories of the sector. Western Areas, meanwhile, owned 50% of South Deep, one of South Africa’s great deep-level gold deposits — a mine of immense potential but with capital demands to match.

Through a combination of shareholdings, boardroom influence, debt manoeuvres and sheer force of personality, Kebble came to dominate all three.

The trouble was that the empire was running short of money. JCI needed liquidity to keep the broader structure afloat, while Western Areas required substantial capital to develop and ramp up South Deep — a burden made heavier by a disastrous hedge that left it exposed when the gold price rose.

The obvious source of funding was the valuable listed holdings of Randgold & Exploration (R&E). According to R&E’s later claims, those shares became the financial oxygen for the group. By the time Kebble was forced out of Western Areas, JCI and R&E on August 30 2005, a forensic investigation had revealed that about 14.4-million Randgold Resources shares were missing. R&E had also been suspended from the JSE and delisted from the Nasdaq after failing to publish its 2004 results.

Less than a month later Kebble was dead, and the companies he left behind began moving along sharply divergent paths. Western Areas, whose main asset was its 50% stake in South Deep, was acquired by blue-chip gold miner Gold Fields, which also bought the other half of the mine from Barrick Gold, then the world’s largest gold producer.

JCI, suspended from the JSE in 2005 and long suspected of being insolvent, was delisted in 2013 and eventually placed into voluntary winding-up and liquidation in 2021. R&E, stripped of the assets that had once given it economic substance, was left to seek recovery through the courts. That is why, two decades later, R&E is no longer a mining concern in any meaningful sense but a legal claim wrapped in a listed shell.

Over the years, some of those claims have been converted into cash and securities. The most important early recovery came through a settlement with JCI. Under that agreement, R&E received roughly R600m in Gold Fields shares and about R300m in newly issued JCI shares. Together with the unbundling of an existing JCI stake, that enabled R&E to make a distribution to shareholders of roughly R1bn.

There were smaller but still meaningful recoveries. In 2012 and 2013, R&E completed a $2m settlement with financier Paul Main. In 2014, auditor PwC agreed to pay R150m, without admitting liability, to settle claims arising from its audit work for the 2000-2003 financial years. Then, in 2018, R&E settled with another former auditor, Charles Orbach & Co, for R21.75m.

These settlements delivered some value back to shareholders. They also helped to keep R&E’s listing alive after its reinstatement in 2010, while funding the lawyers, forensic investigators and other running expenses needed to pursue the larger unresolved claims.

Some might argue that Gold Fields was unlucky to inherit the mess

The big remaining prize is the legal action against Gold Fields Operations Ltd — a Gold Fields subsidiary and the former Western Areas Ltd — which R&E and its subsidiary, African Strategic Investment Holdings (ASI), launched in the Joburg high court in 2008. As currently pleaded, the action is made up of five claims — four relating to the alleged misappropriation of R&E and ASI’s Randgold Resources Ltd shares, and a fifth relating to the alleged misappropriation of 94-million Afrikander Lease (Aflease) shares, a South African gold and uranium company that later became Uranium One.

R&E alleges that the directing and controlling minds of JCI and Western Areas conspired to misappropriate the shares, using them to raise funds for JCI, its subsidiaries and Western Areas. The alleged purpose was to provide working capital, settle liabilities and preserve financial stability across the structure, while also rewarding the individuals who controlled it.

Gold Fields denies liability and has argued, among other things, that earlier settlements with other alleged wrongdoers either compromised the claim or should reduce any damages, and that R&E’s own weak controls contributed to the loss.

Some might argue that Gold Fields was unlucky to inherit the mess. It acquired Western Areas in 2006 through a share offer, two years before R&E formally launched its claim against Gold Fields Operations. On that view, the immediate beneficiaries of the takeover were arguably the Western Areas shareholders who exchanged their shares for Gold Fields paper, rather than Gold Fields itself.

But that argument holds little legal substance. In a corporate transaction, the buyer does not only acquire the assets, it also inherits the company’s history, liabilities and litigation risks. Nor was Western Areas a clean, risk-free asset at the time.

By then, private forensic investigators had already identified missing Randgold Resources shares, Kebble had been forced out under a cloud and had died, R&E had been suspended and the collapse of the broader Kebble empire had raised obvious red flags around JCI, R&E and Western Areas.

Kebble had been CEO of Western Areas and his father, Roger, was a director. Gold Fields would therefore not have been blind to the risks of buying a company so closely tied to that structure. South Deep may have been attractive enough to justify the deal despite the legacy baggage attached to Western Areas, but a change in ownership did not make the company’s liabilities disappear.

The case has taken years to resolve, partly because of its complexity, partly because of external delays such as Covid, and partly because R&E’s litigation strategy has evolved over time.

One important turning point came in 2019, when R&E applied for certain foreign witnesses to give evidence by video link between the high court and venues in the US, UK and Australia. Gold Fields opposed the application, and it was dismissed with costs. After that setback, R&E appointed new counsel to take a fresh look at the case, ultimately deciding in 2024 to seek an amendment to its particulars of claim.

The proposed amendment would narrow the original claim — which related to the alleged theft of 22.72-million Randgold Resources shares and 94-million Aflease shares — to a more focused claim over 10.56-million Randgold Resources shares, together with the dividends that would have accrued on them. Because Randgold Resources merged with Barrick Gold in 2019, with Randgold shareholders receiving 6.128 new Barrick shares for every Randgold share held, those 10.56-million Randgold shares translate into 64.7-million Barrick shares that R&E says it would have received under the merger terms.

Gold Fields is opposing the amendment. As R&E director Hilton Gischen explains in an interview with the FM, Gold Fields has an obvious incentive to hold R&E to the original particulars of claim. In Gischen’s view, if the amendment is granted, “it will be a far simpler and easier claim for Randgold to prove”. A hearing to decide the application to amend the particulars of claim has been set down for October 19 and 20 in the commercial court. Gischen says it is hard to predict when judgment will follow (it’s “in the hands of the judge”), But, he notes, the application is interlocutory and should not require the court to wade through large volumes of evidence. The question is solely whether R&E is entitled to amend its claim.

If R&E succeeds, Gold Fields will have to file an amended plea. Assuming R&E raises no technical objections to that plea, pleadings would close, counsel would apply for a trial date and the parties would continue with pre-trial preparation. Much of the witness-statement work has been completed, but the timeline remains difficult to forecast.

If R&E’s amendment application fails, Gischen says the company will have to “relook the way the claim is phrased” and decide how else to prosecute the case. Until that decision is known, it is premature to forecast a final trial date or settlement talks with any confidence. As Gischen puts it, R&E is dealing with the action “one step at a time”.

At current market values, the claim against Gold Fields is eye-watering. The Barrick share component alone is worth about R44.5bn, before dividends or interest are even considered. That partly reflects the extraordinary rally in gold shares over the past few years, with Barrick’s share price up about 190% since the Randgold merger. It also reflects the potential force of condictio furtiva, the legal remedy for recovering the value of stolen property. In simple terms, R&E’s claim is not anchored to what the Randgold Resources shares were worth when they disappeared, but may be referenced to their replacement cost today.

Gold Fields has disclosed the R&E claim as a contingent liability in its latest financial statements. The note records that R&E’s summons claims were last computed by the plaintiffs in May 2017 at a maximum of R43.7bn, but Gold Fields points out that this figure is based on the older claim formulation. Gold Fields also notes that it has joined third parties to the action and, under the Apportionment of Damages Act, has notified them that it may seek a contribution if R&E succeeds on any of its claims. The group says it believes it has sustainable defences and has instructed its attorneys to defend the claims vigorously. No provision has been raised, as Gold Fields says the ultimate outcome cannot presently be determined and therefore no sufficiently probable, measurable liability exists for accounting purposes.

One potential complication appears to have fallen away with JCI’s liquidation in 2021. The 2010 settlement between R&E and JCI included indemnity provisions in JCI’s favour, which could have mattered because Gold Fields has joined JCI and other Kebble-era parties to the proceedings, seeking a contribution from them if it is found liable.

Had part of the blame been allocated to JCI, JCI could potentially have invoked the indemnity and argued that R&E had agreed to protect it against that exposure, thereby reducing what R&E ultimately recovered. But that issue now seems moot, since a clause in the settlement agreement provides that the indemnity falls away if JCI is liquidated.

There would still be tax leakage. After offsetting assessed tax losses of about R360m, any award would face capital gains tax at an effective rate of 21.6%. Even then, the claim would move only from enormous to slightly less enormous, especially when measured against R&E’s tiny market capitalisation of about R80m. Of course, if the claim fails, there may be little residual value left.

At current market values, the claim against Gold Fields is eye-watering

This is not a conventional investment case so much as a highly binary litigation play.

There may be another formal route to resolution besides litigation. Asked at the AGM if mandatory mediation would apply before the case goes to trial, Gischen said the matter was being heard in the commercial court and might be subject to a similar process once pleadings have closed and counsel has applied for a trial date. In practice, a favourable ruling on the amendment would therefore not necessarily send the case straight to trial but could first create a structured opportunity for the parties to settle.

That’s different from a voluntary settlement approach. Intriguingly, in response to a shareholder question at the same AGM, Gischen indicated that Gold Fields had already approached R&E about a possible settlement. R&E’s legal advice, however, was to hold off on those discussions until the amendment application has been resolved.

The logic for waiting is clear. Until the court decides what claim R&E is actually allowed to pursue, neither side has a clean basis on which to negotiate. But if either a voluntary settlement or a formal mediation process eventually produces an agreement, it would materially shorten the timeline to cash potentially landing in shareholders’ pockets.

Simple funding arithmetic may also make a settlement look appealing at some point. R&E has liquid investment assets of about R50m, against an annual cash burn of roughly R12m, implying about four years of runway at the current rate. That is not an immediate problem, but it does put a clock on the litigation efforts.

CEO Marais Steyn told shareholders at the AGM that the bulk of the legal work has already been completed and that costs are expected to decline, which should ease the pressure.

The directors have also indicated that they will not allow the company simply to run out of money, and have explored — and continue to explore — funding options, some of which are understood to be available. Given the scale of the claim, it is also hard to imagine shareholders refusing to support a capital raise if fresh funding were needed to keep the case alive.

In other words, cash burn may strengthen the commercial logic for considering a sensible settlement, but it should not force R&E into accepting a subpar one.

Smaller shareholders may also worry about a potential delisting, with the obvious argument being that cutting JSE listing costs would reduce R&E’s annual cash burn. But the share register does not point to a single dominant shareholder with an obvious incentive to force such a move. In fact, some of the larger holders may prefer the checks and balances that come with a listed structure, particularly in a company whose remaining value sits almost entirely in litigation.

Investec’s recent move to increase its beneficial interest from 4.4% to 28.3% briefly fuelled speculation that something was afoot, helping to spark a short-lived flutter in R&E’s share price. But the transaction may be less dramatic than it first appeared. Investec had previously held a blocking stake in R&E before selling a large portion to Pacol Investments in October 2011, a deal that saw it relinquish “negative control” — the ability to block special resolutions requiring 75% shareholder approval.

Seen in that context, the latest transaction looks less like a sudden strategic move and more like a reversal of the earlier sell-down.

Whether Pacol is linked to Investec is difficult to establish from public information. However, Investec has a controversial history with R&E. During the Kebble era, Investec was a lender to the broader structure, while David Nurek, then an Investec employee and director, chaired R&E after Kebble’s exit.

The controversy was that Investec was alleged by some minority shareholders to have protected or recovered its own debt exposure. Those shareholders later sued Investec, arguing in effect that the bank had benefited while ordinary shareholders were left nursing the losses. Investec denied wrongdoing and the minority shareholders ultimately lost the case.

Under a bonus scheme for executives, directors can receive a one-off cash award equal to 10% of the increase in R&E’s NAV above a base value of R75.2m, or R1.05 a share. For bonus purposes, NAV is capped at R1.5bn and is calculated before any distributions to shareholders. The executives must also still be employed by the company at the financial year-end when the NAV is calculated, and once the bonus is paid, the incentive falls away. The structure broadly aligns management and shareholder interests because the investment case depends almost entirely on recovering value from litigation.

After two decades, it is time for the matter to be resolved. R&E’s continued listing remains a reminder of one of the largest corporate fraud scandals in South African history. A final legal resolution, followed by a distribution to shareholders and the eventual delisting of what is now little more than a litigation vehicle, would be a fitting end to the saga.

The irony is that time has not necessarily worked in Gold Fields’ favour. In the current environment, the gold price has surged on the back of the dollar-debasement trade. That theme may be in a quieter phase for now, but with global debt levels elevated and the US fiscal position still under strain, the fundamental case for gold is unlikely to disappear quickly. If gold shares continue to rise, the value of the Barrick share component in R&E’s claim could rise with them.

That creates a risk for Gold Fields. The longer the matter drags on, the larger the potential damages number could become if the court ultimately finds against it. Had the matter been settled years ago, the quantum would almost certainly have been far lower.

Of course, Gold Fields is fully entitled to defend itself through the courts. But from here, the strategic question is whether it’s better to keep fighting a claim whose value may continue to inflate with the gold price, or to find a commercial settlement that finally brings down the curtain on the Kebble era.