[miningmx.com] — IT’S unsurprising that Uranium One’s continuing (escalating) problems at its Dominion Reefs mine overshadowed its plan to sell its controlling interest in Aflease Gold.
However, the transaction raises serous issues of corporate governance that must not be passed over.
In the first place, it’s simply unacceptable for minority shareholders in a listed company not to know who controls it. For new Uranium One CEO Jean Nortier to say that confidentiality was a condition of the deal is just not on.
Fortunately, in this case not much harm was done, as the buyer identified itself within days as African Global Capital, a fund controlled by Mvelaphanda and two foreign groups: Och-Ziff Capital Management and Palladino Holdings.
But the two announcements should have been made simultaneously, and it was Uranium One’s responsibility to see that was done.
Then the terms. Nortier has said that the sale was at a loss to book value. It was actually at a profit, because Aflease Gold had originally been bought for $15m and revalued for the purpose of the reconstruction last year.
Even if that’s true in an accounting sense, in reality its nonsense.
Uranium One never meaningfully bought Aflease Gold, which to a practical man was the original gold firm from which, after various corporate deals, the uranium interests were unbundled.
However, it’s sad but true that despite soaring bullion prices the JSE gold share index is lower than it was a year ago. So initial suspicions that Aflease Gold’s value was inflated for the purposes of the deal are probably unfounded.
On the other hand, the two-phase nature of the deal – with 152 million shares in the first tranche (29.04% of the equity according to African Global Capital) and 187 million in a delayed option – raises suspicions that the offer was structured to obviate an immediate bid to minorities.
Not that those might have been in a hurry to accept. Though the official announcements don’t indicate any per share price both tranches reduce to 26.2 cents to 26.3 cents/share (US). At the current R7.80 exchange rate, that converts to around 205 cents (South African). That’s less that the ruling 225 cents. A year ago it as 400 cents.
And even in mid-year, when Uranium One first said it wanted to sell down its stake, it was 300 cents. So this is hardly the best moment to sell.
Does that indicate just how badly Uranium One needs the cash?
