Slain Kebble's Randgold & Exploration eyes ‘unfilled space'

4th June 2010 By: Martin Creamer - Creamer Media Editor

JOHANNESBURG (miningweekly.com) – The share price of diversified miner Randgold & Exploration (R&E), which was R8,90 when suspended in 2005, rose 68% on its relisting on the JSE on Friday, as the company eyed an "unfilled space" in the South African mining scene.

The interlinked R&E and JCI, which operated under the late Brett Kebble, have been under a cloud since he was killed in a still unsolved shooting five years ago, but that cloud was lifted when 99,95% of JCI shareholders on Friday afternoon voted in favour of the R950-million settlement with R&E, following a marathon five-year battle.

R&E, which has two major shareholders in Allan Gray and Investec that collectively make up 55% of the holding, is targeting what it perceives as an interesting market gap.

R&E CEO Marais Steyn – who told Mining Weekly Online that the first R18 a share trade of the relisted share surprised on the upside with the price finally settling on R14,95 a share – said that R&E  had identified an opportunity to occupy the resource-funding space that it saw existing between the full equity operational participation in mining ventures and the traditional role that banks played. This funding opportunity fell outside of the private equity model.

He said that R&E was looking at a number of opportunities that would enable the company to participate within that unfilled space, owing to the current difficulty that companies experienced in accessing capital and the general reluctance of shareholders to accept equity dilution, which resulted from banks minimising their risk.

"We see oursleves as unlocking enormous value by participating in that space," he told Mining Weekly Online.

In the next few days, the company plans to embark on a road show to seek shareholder approval to be allowed to step into this space.

R&E has an unencumbered R500-million cash and a spectrum of prospecting rights across a diverse range of commodities.

If shareholders backed the idea, the company saw an interesting future for itself.

Much thought and research has reportedly gone into the company's participation in the form of resource funding envisaged.

"We have tangible opportunities. My desk is full of them," Steyn told Mining Weekly Online.

In terms of R&E's works programme agreement with the Department of Mineral Resources, it is obliged to execute a number of prospecting and exploration programmes.

In complying with these, R&E has embarked on a "best of breed" approach of engaging the most appropriate specialist to assist in the final decisions on whether to go operational on a prospect right, or whether to joint venture or sell it.

The company has an exploration-drilling core yard in Randfontein containing geological information that can be used in future bankable studies, and sees itself as a participant that will seek to reduce greenfield risk ahead of project development.

It does not see itself as the final operator of resource opportunities.

"There are so many ways to participate in a resource opportunity without spending the entire amount of money that you have to build a mine," Steyn commented.

R&E has observed the success of royalty businesses in Canada, where companies have built successful resource groups as nonoperational resource-industry participants.

Such businesses have been able to obtain royalties by being part of business start-ups. R&E is understood to have various models that simulate royalties and it would like to use these as instruments of participation.

It is not looking for 100% of the equity upside, but is also unwilling to settle for the value of bank lending rates and sees itself as reducing risk by participating at a level that lies between those two extremes.

Many of the opportunities currently being offered to R&E are brownfields opportunities, requiring only moderate boosts for them to ascend.

R&E wants to participate in that upward trajectory, on the basis that without its intervention, creativity and cash there would not be the same level of upside.

It is prepared to operate in a risk environment that banks preceive to be biased in favour of the equity participants.

Meanwhile, it can be reported that R&E has recovered R218-million from other liquidated estates and settlements, including R41-million from Kebble's estate, and, with the JCI settlement, will distribute R1-billion to its long-suffering shareholders.

Further recovery of misappropriated assets remains a high priority, with several large claims against Kebble-era executives and service providers remaining.

"We will carefully balance between investing in litigation and preserving and growing the current asset base," Marais promised.