Simmers and First Uranium on deathwatchSimmers and First Uranium on deathwatch
Ostriches come home to roost, as USD 1.2bn in market value evaporates this year.
Author: Barry Sergeant
Posted:Wednesday,09 Dec 2009
JOHANNESBURG -
Depending on where you start, it can be hard going destroying USD 1.2bnin market value in a year. That's the nutshell combined story fromSouth Africa's Simmer & Jack, a brownfields gold digger, and First Uranium,which treats uranium-containing gold tailings. In Johannesburg, theSimmers stock price is down 51% for the year, leaving it with USD 281mof market value. In Toronto, First Uranium has shed 71% of its value,leaving it with USD 364m in market value.
Go further back, and the picture darkens further. First Uraniumtopped out at CAD 13.00 a share in 2007, and has declined 80% since.The two entities are essentially managed as one, under CEO GordonMiller, who relocated to Toronto and runs the South African operationsremotely. First Uranium was spun out of Simmers and listed in Torontoon 20 December 2006, raising CAD 219m. At that stage, Simmers held 67%of First Uranium, but thanks to one dilutive issue after another, thestake is now down to 34%.
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EVAPORATING VALUE
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Stock
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From
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From
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Value
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price
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high*
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low*
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USD bn
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Simmer & Jack
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ZAR 1.74
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-51.3%
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12.3%
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0.281
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First Uranium
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CAD 2.32
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-71.0%
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42.3%
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0.364
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* 12-month
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For its part, Simmers has diluted the daylights out of its blackeconomic empowerment partner, Xelexwa, which now holds 22% of Simmers,down from 50.9% in 2005. Both Simmers and First Uranium haveoverpromised, and under-delivered, time and time again. In its 30 March2007 pre-listing statement for entry onto the Johannesburg bourse,First Uranium stated that it believed "that its existing uranium andgold projects can be placed into production in the near-term. The firstgold from Ezulwini is expected to be produced by October 2007 whilsturanium production is expected to begin in June 2008. The first uraniumand gold production from the Buffelsfontein Project are expected bymid-2008".
That turned out to be heavy rot. The latest quarterly results fromFirst Uranium show that Ezulwini produced 7,952 ounces of gold, and MWS(including Buffelsfontein) a princely 13,422 ounces, for the quarter.It seems that First Uranium may produce some uranium by the end of thisyear. There have been hints, meanwhile, that First Uranium may put goldahead of its uranium ambitions, which, in turn, may inspire a change inname.
At this point in time, Simmers is one of the worst performing goldstocks in the world, and First Uranium is the worst performing uraniumstock. For all this, Miller was paid ZAR 9.2m, apparently includingundisclosed bonuses, in the fiscal year to 31 March 2009. Miller nowseems to be sheltering deep in some or other bunker.
This week saw yet another skirmish with Xelexwa, which applied tothe High Court in Port Elizabeth to be taken out of provisionalliquidation. Miller, plus Simmers director John Berry, and formerSimmers director Graham Wanblad, intervened, in a bid to halt the move.The judge was sufficiently moved to award costs against the threegentlemen, along with an emphatic rejection of their motives andbehaviour.
Xelexwa wants to vote its shares, which are now unencumbered, toremove Miller, in particular, and the Simmers (and First Uranium)chairman, Nigel Brunette. This collection of characters - Miller,Berry, Wanblad and Brunette - were, of course, at one or other timedirectors of various companies in the Augean stables of Brett Kebble,who was murdered on 27 September 2005.
According to summarized forensic reports published by Randgold & Exploration(R&E) in the public domain, R&E alone was looted by Kebble ofZAR 1.9bn in cash, by way of shares stolen from R&E, launderedmainly through JCI, and then soldon the open markets for cash. According to R&E, it was effectivelylooted of a further ZAR 1bn in other ways, such as selling fresh sharesin R&E for cash, and allocating the cash for looting. The sum totalof ZAR 2.9bn in cash is impressive.
Miller was a director of R&E from November 2003 until 6 May2005, and was appointed CEO of Simmers on 8 November 2004. On 31January 2005, Simmers announced that it would seek to raise ZAR 129m byway of a rights issue; to cut a long story short, it raised cash ofonly ZAR 59.4m At the same time, it introduced Xelexwa (then Jaganda)as a BEE partner, where Xelexwa would take over ZAR 89m debt owed bySimmers to JCI, Kebble's mothership.
Most of the cash and other assets stolen from R&E knocked around in CMMS, a slush fund owned by JCI. As a quid pro quofor taking over ZAR 89m in Simmers debt, Xelexwa was issued 357m newSimmers shares; Xelexwa for its part then issued 357m preference sharesto JCI, which contained a 20% kicker, should the Simmers stock pricerise in the future.
Vulisango, Xelexwa's owner, has for years contended that thepreference shares Xelexwa issued to JCI sit uncomfortably on a taintedpremise, and require full and fair unwinding. At least two independentforensic investigations have been undertaken into events during andaround 2005 at Simmers, but Miller & Co. are yet to react. Thisweek's attempt to keep Xelexwa's Simmers shares sterilized has failed,and Miller & Co. are more vulnerable than ever. Simmers and FirstUranium are on deathwatch.