With BHP predictably lighting a fire under Anglo American, the local resource sector is again alive with possibility. So it seems slightly vindictive for this column to revisit the local mining industry’s rotten past. But until the ghosts of Brett Kebble’s complicated corporate tinkering are completely exorcised, there won’t be peace ... at least not for long-suffering shareholders in Randgold & Exploration Company.
Randgold held its AGM on Monday, and it seems there has been some tangible progress in the company finally getting its day in court to present a huge claim dating back 20 years. For those who need reminding, back in 2004 Kebble, then the CEO of Western Areas, and his cohorts unlawfully disposed of 22-million shares in London-listed Randgold Resources that were held in Randgold Exploration. These shares were purportedly used to finance Western Areas’ joint venture with Placer Dome, repay Investec loans and to back up a JCI rights issue at Western Areas, now part of Gold Fields. Randgold director Hilton Gischen says the group wants its shares back, along with dividends that by now top $144m.
(Kebble exited the scene in September 2005 when he was shot dead in Joburg, as part of an assisted-suicide plot.)
Randgold Resources was merged into Barrick in 2018 in an $18bn mega-merger. At a share price of about $16.50, Barrick carries a market value of almost $30bn. That puts some perspective on Randgold’s claim — which ranges between $229m or 139-million shares in Barrick. This is a fair whack for little old Randgold, whose market capitalisation has dribbled down to just R38m.
Of course, the hitch with sizeable and contentious legal claims is that well-resourced companies — which would clearly prefer not to be dealing with such a prickly matter in public — can afford to stall proceedings no end. Should that happen, it would be extremely frustrating and costly for Randgold. The cash pile has eroded to R71m, with the company’s six directors accounting for R8m in total remuneration in the most recent financial year. Randgold’s NAV has dropped from 121c a share in 2022 to 81c at the end of 2023. Five years ago, NAV was 216c a share.
Former asset manager James Gubb noted at the AGM that Randgold was burning cash each year at a five-year average of R18m. He stressed that the need to conserve cash for the Randgold Resources share claim is crucial and questioned the need for the company to retain its JSE listing.
Buying out minority shareholders and delisting does seem justified. But there are complications — most notably the spectre of appraisal rights, which could be intriguing to apply, considering the quantum of the claims on the Randgold Resources shares. Frankly, it’s difficult to see the claim being settled anywhere near the huge numbers being inferred. But at a quarter of that number Randgold presents a risk/reward payoff profile second to none.
Of course, it’s binary. If Randgold loses the court case, or court cases, then shareholders stand to lose practically everything. Even a settlement at a fraction of the claim could be good for Randgold shareholders.
To most casual observers, it seems clear Kebble illegally snatched the Randgold Resources shares to fund the expansion of Western Areas. The matter is more than a slight irritant to Gold Fields (the JSE’s top-performing gold share of late), an innocent party inadvertently embroiled in an underhanded transaction initiated by Kebble all those years ago.
How the court views this will be fascinating. Gold Fields acknowledges the Randgold claims in its latest annual report — noting the claims have been computed in various ways and that the highest value of the current claims is about R43.7bn (or $2.4bn). Gold Fields’s attorneys, unsurprisingly, have been instructed to vigorously defend the claims.
Now, I don’t want to fixate on the foibles of the liquor sector (the topic in last week’s column), but I don’t suppose Remgro shareholders fretting about the fortunes of newly formed and hiccupping Heineken Beverages could have missed AB InBev’s first-quarter report for financial 2024. AB InBev’s South African divisional review noted that record high volumes delivered “double-digit top- and bottom-line growth with margin expansion”. What’s more, revenue increased by the mid-teens, driven by pricing actions and continued premiumisation. The group added that local volumes grew by mid-single digits, and claimed a continued outperformance of the industry in beer and beyond-beer categories. Earnings before interest, tax, depreciation and amortisation grew, wait for it ... by the mid-20s “with margin expansion”.
Interestingly, the frothy South African performance was driven by AB InBev’s super premium portfolio, which grew volumes by double digits, sparked by Corona and Stella Artois as well as the core brands (which also delivered double-digit revenue growth). Corona and Stella Artois are not brands that drinkers would associate with the “old South African Breweries”, which centred on the familiar Castle and Black Label. It suggests an extremely fluid beer market. This might or might not be a good sign for Heineken Beverages, which has the added advantage of competing in the segment with two of the most popular cider brands, Savanna and Hunter’s Dry. Heineken’s next financial report should be intriguing.
Speaking of intrigue, I wonder what the executives of security barrier specialist Trellidor will make of rival Xpanda, owned by JSE-listed Argent Industrial, using a wrecking ball — replete with painted bandit face and named Jack — to show the resilience of its roll-up security door. Older readers may remember Trellidor’s famous television ad, in which former provincial cricketer and then marketing director Peter Rawson stood stoically behind a security gate as a wrecking ball smashed into the steel structure. Whether it’s a cheap shot or not, the smooth functioning of the Xpanda door, even after being bashed by the wrecking ball, might help sell a few units. If Argent CEO Treve Hendry had stood behind the door as Jack came a-knocking, there would probably have been many more sales.
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