New secretary right for the role – Clover
GREAT Basin Gold shares lost more than half their value yesterday after the company said it had suspended development and production at its lossmaking Burnstone mine near Balfour in Mpumalanga.
The troubled Canadian producer said it was looking for between $30 million (R249m) and $40m to fund the closure of the mine and ongoing monthly costs of about $1.2m for a care and maintenance programme once it was implemented.
“There is currently no certainty that such financing will be made available to the company,” the statement said.
The Burnstone mine was shut down following a recommendation by the company’s strategic review special committee last month.
“The recommendation is based on the company’s inability to continue to achieve cash flow breakeven, which would have taken until May 2013 at current ramp-up rates,” it said.
Great Basin also announced the resignation of director Philip Kotze yesterday.
“While it is disappointing that operations at Burnstone had to be suspended, especially given the recently improved progress there, the board had to take this step pending the completion of the strategic review process and potential financial restructuring,” interim chief executive Lou van Vuuren said.
He added that Burnstone remained a valuable asset with more than 6 million ounces of gold in proven and estimated reserves and a forecast 25-year life of mine.
On August 14, the company’s board began a review process to consider a range of strategic alternatives, which were expected to include the sale of all or a portion of the company’s assets, a merger or other business combination transaction involving a third party acquiring the company.
Last month chief executive Ferdi Dippenaar resigned following the release of dismal interim results.
Great Basin reported that revenue dropped to C$65.7 million (R551m) in the six months to June from C$83.1m for the previous corresponding period.
The company had a clash with Gold Fields, which unwound the R80m royalty agreement with Tranter Gold, Great Basin Gold’s partner. There is currently no certainty that financing will be made available to the company.
Gold Fields unwound the agreement after it did not receive credits from the Mineral Resources Department for a deal in which it donated R80m to Tranter. It was reported that the money was capital that Gold Fields had received from Great Basin for the cancellation of a 2 percent royalty agreement in 2007 over a portion of Great Basin’s Burnstone mine.
On March 12, Gold Fields gave notice of arbitration to the company.
“Other than legal fees, management does not expect this issue to have an impact on the company’s near term cash-flow, development or production targets,” it said previously.
Great Basin also owns the Hollister Mine in Nevada, in the US and has exploration projects in Mozambique and Tanzania.
Great Basin’s stock plunged 52.5 percent to close at 95c on the JSE yesterday, taking its loss this year to 89 percent. CLOVER deputy chief executive Mannie Roode was very comfortable recommending Jacques van Heerden to replace him as company secretary, describing him as “extremely impressive and independent”.
Last week, the dairy company announced that Roode, who had been the company secretary for 14 years, as well as an executive director, would be replaced by Van Heerden with effect from October.
Roode told Business Report yesterday that he had been mentoring Van Heerden for the past three years, during which time Van Heerden had served as his deputy. Roode was responding to concerns about the fact that Van Heerden is related, through his wife, to Clover chief executive Johann Vorster.
The King 3 Code on Corpo- rate Governance places considerable emphasis on the role of the company secretary and requires that the board should be “assisted by a competent, suitably qualified and experienced company secretary”.
Among the code’s recommendations relating to the company secretary is that as “gatekeeper of good governance, it is important for the company secretary to maintain an arms-length relationship with the board and its directors, as far as reasonably possible”.
Roode stressed that Van Heerden’s independence had “never been an issue”.
Roode said that since he had appointed Van Heerden as his assistant three years ago, Van Heerden had spent time at law firm Werksmans to broaden his corporate legal experience.
Van Heerden subsequently played a key role in the creation and running of Clover’s Centre of Excellence, which is aimed at informing the company’s managers about key public policy areas such as competition law and consumer rights.
“The processes involved [in the centre] are designed not just to ensure we reduce the risk of contravening legislation, but to sensitise management about consumer and competition issues, as well as public policy in general, which is constantly changing.”
Clover was one of several milk processors that faced allegations of anti-competitive behaviour by the Competition Commission back in December 2006. However, as a result of a technical legal challenge to the commission’s case and a Supreme Court ruling in 2010, the referral to the Competition Tribunal was abandoned.
The Clover website notes that the company is “committed to fully co-operating with the Competition Commission and takes reasonable steps to ensure that management and employees do not engage in conduct that would constitute a prohibited practice”.
The commission is understood to be continuing its investigation into the industry.
Yesterday, Clover’s share price closed 1.5 percent lower at R13.25, following the release of results earlier in the week. The share price is currently 22 percent higher year on year, although it has eased back from its 12-month high of R15.60.
In its results, the Clover board said that it was “bracing itself for another difficult year economically in South Africa”, but that despite this it was confident the group would maintain a healthy market share and strong balance sheet.