Rawas exception dismissed
Published: Wednesday, 19 May 2004 02:00
DRD today succeeded in the High Court of South Africa in having an exception relating to the Rawas Transaction dismissed.
355/04-idgJohannesburg, South Africa – 19 May 2004
– Durban Roodepoort Deep, Limited (JSE:DUR; NASDAQ:DROOY; ASX:DRD) today succeeded in the High Court of South Africa in having an exception relating to the Rawas Transaction dismissed.
Judge Marais ruled against an exception taken by the defendants, namely, Roger Kebble, John Stratton, Hendrik Buitendag and JCI Limited.
The judge ruled that the summons issued by DRD was not defective as claimed by the defendants.
Judge Marais ruled that the exceptions by the defendants be dismissed with costs including the costs of two counsel.
This matter will now proceed to trial.
Background on the Rawas Transcation as per Letter to Shareholders in April 2003.
On 2 May 2002, DRD issued a circular to ordinary shareholders that described in detail:
- the Rawas transaction;
- the circumstances under which DRD purportedly entered into the transaction; and
- the transaction’s consequences for DRD and shareholders.
DRD issued the circular in connection with the validation of DRD’s 1999 invalid issue of 8 282 056 ordinary shares, in two tranches pursuant to the purported Rawas transaction. pressed by its other creditors;
In brief, the Rawas transaction involved DRD:
- acquiring from Laverton Gold NL (an Australian public company listed on the Australian Stock Exchange) the assets comprising the Rawas mine in Indonesia at an attributed value of ZAR122.6 million; and
- invalidly allotting and issuing 8 282 056 ordinary shares directly to Laverton’s creditors in consideration of the acquisition.
DRD’s investigations revealed that the value of Rawas at the time of the purported transaction was far less than the attributed value of ZAR122.6 million. Indeed, in the 2 May 2002 circular, DRD’s directors considered that Rawas had no value at that time and none on the date when DRD issued the relevant shares.
In addition, DRD’s investigations revealed that the ostensible issue price of the shares and the consequent attributed value of ZAR122.6 million were not properly determined and could not be viewed as genuine amounts. Consequently, the invalid issue of shares diluted pre-Rawas DRD shareholders.
DRD’s investigations also revealed that:
- Consolidated African Mines Limited (since renamed JCI Ltd) indirectly owned approximately 19.5% of Laverton;
- JCI, other JCI group companies and an associate had funded Laverton to the extent of approximately US$11.5 million (ZAR70.3 million);
- Laverton was accordingly indebted to those companies for that amount, all of which was unsecured;
- Laverton was insolvent and was being hard pressed by its other creditors; and
- the trading of Laverton’s shares on the Australian Stock Exchange had beensuspended at its request, with effect from 6 October 1998, because of the uncertainty of its financial position.
When DRD issued the first and major tranche of the 8 282 056 shares, Laverton’s board included:
- Mr Roger Kebble, who was then DRD’s Executive Chairman; and
- Mr John Stratton, whom DRD had retained to advise it on its Australasian acquisitions and business, of which the acquisition of Rawas was one.
At the time of the Rawas transaction:
- Messrs Kebble and Stratton were also directors of JCI and other companies in the JCI Group;
- the Kebble family held a substantial shareholding in JCI and DRD believes them to have been in effective control of JCI.
In addition, DRD’s investigation revealed that:
- DRD issued slightly less than half of the 8 282 056 shares to companies in the JCI Group and an associate, which were creditors of Laverton; and
- those shares were later realised on behalf of the JCI group companies and the cash proceeds paid to those companies to settle Laverton’s indebtedness.
The evidence indicates that, but for the Rawas transaction, the JCI Group and its associate would have had to write off the sum of about US$11.5 million (ZAR70.3 million). Accordingly, DRD believes that its resources were used unscrupulously to benefit the JCI Group and its associates at the expense of DRD and its shareholders.
DRD wrote off its ZAR122.6 million ‘investment’ in the Rawas Mine, which amount was included in the ZAR590 million charge for the impairment of assets.
DRD has also been further compelled to discharge debts relating to Rawas to the extent of A$6 million (ZAR28.7 million).
Investor and Media Relations
Ilja Graulich, Durban Roodepoort Deep, Limited
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James Duncan, Russell & Associates
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Susan Borinelli, Breakstone & Ruth International
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Jessica Anderson, Breakstone & Ruth International
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Paul Downie, Porter Novelli
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DRD is the world’s 9th largest gold producer, with mines in South Africa as well as Australasia, a key target for growth. The company has a track record of success in extending the lives of older mines safely and profitably. For fiscal year 2003, DRD produced 870 000 ounces of gold, up from under 100 000 ounces a year in 1997, when current operations were amalgamated.
DRD has primary listings on the Johannesburg (JSE:DRD) and Australian (ASX:DRD) stock exchanges and secondary listings on NASDAQ (DROOY), the London Stock Exchange and the Paris and Brussels Bourses. Its shares are also traded on the regulated unofficial market of the Frankfurt Stock Exchange and the Berlin OTC Market.
For more information, please visit www.drd.co.za or www.durbans.com
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