‘What debt?’

All hunky-dory at ‘op­er­at­ing’ em­pow­er­ment com­pany

Finweek English Edition - - Companies & Markets - SIKONATHI MANTSHANTSHA sikonathim@fin­week.co.za

IN­SIN­U­A­TIONS THAT Mve­laphanda Re­sources’ main share­holder and black eco­nomic em­pow­er­ment com­pany Afripalm Re­sources was sink­ing un­der the weight of a heavy debt load are com­pletely un­founded and mis­placed, as the com­pany is “as healthy as healthy can be.” That’s ac­cord­ing to Afripalm ex­ec­u­tive di­rec­tor Ragi Mun­sammy, who phoned Fin­week af­ter last week’s Di­rec­tors’ Deal­ings re­port.

“Brother, in no way are we fi­nan­cially chal­lenged in any form,” de­clared Mun­sammy a day af­ter the re­port was pub­lished. In our re­port we com­mented on a hedg­ing trans­ac­tion in Mve­laphanda Re­sources in which Afripalm com­pletely missed the share’s for­ward val­u­a­tion by ac­cept­ing a zero cost col­lar (set­tle­ment 29 March 2011) with a ceil­ing of 4 597c/share (to­tal con­sid­er­a­tion was R18m lower than mar­ket price at R137m) when the un­der­ly­ing price bolted 750c to 5 200c a day af­ter the hedge con­tract. We spec­u­lated the nag­ging ru­mours of Afripalm’s al­leged in­debt­ed­ness to Ned­bank were to blame for the “hur­ried trans­ac­tion”.

Says Mun­sammy: “In no way is Afripalm in breach of any of its debt covenants, brother. The com­pany is in good fi­nan­cial health.” Afripalm is rep­re­sented on the Mvela Re­sources board by its chair­man, Lazarus Zim, who is also the listed com- pany’s non-ex­ec­u­tive chair­man. Through a com­pany called New­shelf 947, Zim hedged 3m Mvela shares on a fa­cil­ity “against which Afripalm has raised work­ing cap­i­tal and will re­deem li­a­bil­i­ties”.

Even though no shares were sold dur­ing the hedg­ing trans­ac­tion, Mun­sammy says the rea­son for the hedge was to “gen­er­ate cash flow for the op­er­a­tions of the com­pany (Afripalm) as rev­enue (re­al­i­sa­tion) is a long and te­dious cir­cle” for the kind of long-term min­ing in­vest­ments Afripalm un­der­takes.

A for­mer An­glo Amer­i­can CE, Zim di­rectly owns 20% of New­shelf 947. “New­shelf has a block of un­en­cum­bered shares in Mvela that it’s sold to meet cash flow needs,” says Mun­sammy. Those have noth­ing to do with Afripalm’s 43m shares in Mvela Re­sources. Mun­sammy also says the cash from the hedge flows to Afripalm as “fruits of our labour, brother”.

Whereas Fin­week pub­lished the ex­is­tence of ru­mours that threat­ened Afripalm’s ex­is­tence and al­leged fi­nan­cial dif­fi­cul­ties un­der a gen­er­ally de­pressed eq­ui­ties (and there­fore un­der­ly­ing em­pow­er­ment deals) mar­ket Mun­sammy cor­rected us, say­ing Afripalm was “one of few op­er­at­ing com­pa­nies still stand­ing in this global eco­nomic re­ces­sion storm”.

Mun­sammy says Mvela Re­sources is Afripalm’s pri­mary in­vest­ment – but not the only ma­jor one. “Brother, Lazarus Zim gets up ev­ery day and goes to work. He’s one of very few hard­work­ing ex­ec­u­tives. We look at a lot of (pos­si­ble) trans­ac­tions on a daily ba­sis.”

Mun­sammy says Afripalm has been an op­er­at­ing en­tity for the past three years, with an­other ma­jor as­set be­ing Mi­caw­ber 469 (Pty) Ltd. How­ever, ac­cord­ing to Afripalm’s web­site, Mi­caw­ber is an ex­plo­ration joint ven­ture with An­glo Amer­i­can on 19 593ha of farm­land in the Bela Bela district of Lim­popo. “We’ve put on hold the ex­plo­ration of Mi­caw­ber – we haven’t aban­doned it,” ad­mit­ted Mun­sammy. With­out com­mit­ting to the fu­ture of the project, Mun­sammy says Mi­caw­ber’s min­er­als ex­plo­ration didn’t yield “promis­ing” re­sults.

“Brother, in no way are we fi­nan­cially chal­lenged in any form”


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