[miningmx.com] — AFTER 18 months of waiting for the publication of audited financial statements for the year to end February 2009, shareholders in Kimberley Consolidated Mining (KCM) are now being told that the unbelievable delay was due a cash crunch caused by outside forces.
Simply put, the company did not have enough money to pay for an audit. And the reason for this – at least according to acting CEO Phemelo Sehunelo – was not a poor operational performance or lack of fiscal discipline, but rather an investor defaulting on a R20m investment deal.
On Tuesday Sehunelo, who chose to publish on the JSE’s Stock Exchange News Service a report scheduled to be read to shareholders at an extraordinary general meeting on Friday, blamed would-be investor Nehawu Investments for the long delay in publishing its financial statements.
KCM, which is currently suspended on the JSE, sits in the invidious position of not being able to present its shareholders with audited financial statements for the period ending February 2009.
At this point the diamond mining company’s year to end February 2010 statements are also overdue, and the company’s suspended listing is now under threat of termination by the JSE.
Sehunelo said to date KCM had spent R900 000 on audit costs and hoped the auditors, Moore-Stephens BKV, would complete the audit within the next month.
More interesting, however, is Sehunelo contention that the long delayed financials came about as a result of illiquidity stemming from Nehawu Investments defaulting on an investment agreement worth R20m.
Sehunelo said Nehawu had defaulted in taking up 65 million shares “for which it had subscribed under an agreement dated 15 July 2008”.
To date, the alleged Nehawu investment has not been bandied about as a reason for financial stress at KCM.
The only mention of Nehawu is in KCM’s last annual report (released in September 2008), which mentions briefly that the company had “approached Nehawu Investment Company to take up 65 million shares”.
Sehunelo, however, maintained the Nehawu default hit the company particularly badly. “This capital injection, had it occurred, would have certainly allowed us to keep mining at Rietsdrift (a section adjacent to KCM’s Bo-Karoo mine) going ourselves during the downturn and, just as importantly, to turn our attention to further bulk sampling the highly promising Carters Block project.”
Sehunelo said the company had instituted proceedings against Nehawu in the Cape High Court.
Claims dismissed as ‘rubbish’
Phillip Dexter, the COPE member of parliament and former Nehawu director, dismissed Sehunelo’s claims as “absolute rubbish”.
“To place the blame on Nehawu is opportunistic. KCM’s mine is supposedly operational so how can there be no money for an audit?”
Dexter, who has been nominated to KCM’s board, said Nehawu walked away from a possible deal with KCM after the company could not present a convincing dividend policy and when the real value of the company’s mining assets became apparent.
Dexter reckoned Sehunelo’s statements were being used to drum up support for the board ahead of Friday’s meeting.
Friday’s meeting will see a group of disgruntled shareholders – led by former executive Johann Cilliers – attempting to dismiss the majority of the current KCM board.
