South African group to consolidate under JCI banner

South Africa’s JCI group has unveiled a massive restructuring that will consolidate its various gold assets under a single entity, named JCI Ltd., which will be listed and domiciled in Toronto by next fall.

The restructuring, which has yet to receive regulatory approval, will involve eight public companies.

In the first of two phases, Johannesburg-listed Western Areas will acquire the South African companies Randgold & Exploration Co. (RANGY-Q), Randfontein Estates, Barnato Exploration and Free State Development & Investment, as well as the remaining assets held by JCI Gold. Western Areas will then be renamed JCI Ltd.

In a separate deal, South Africa’s Consolidated African Mines will acquire the entire share capital of JCI Gold. However, to ensure that the new JCI will hold all the gold assets, Western Areas will acquire JCI Gold’s South African mineral rights, as well as its investments.

The merged Consolidated African Mines may then be folded into the new JCI, or unbundled as an independent company that would own about 33% of JCI Ltd. Anglo American (AAUK-Q) would hold 16% of the new JCI, though it has committed to sell its holding or place it with institutional shareholders.

In the second phase, JCI will move its primary listing and domicile to Toronto. Mangement has cited several reasons for the move, including:

– an improved share rating and enhanced access to capital markets;

– Toronto’s recognition as “the strongest home” for gold companies; and

– the raising of JCI’s profile and value through its inclusion in the TSE 300 index.

In terms of production, JCI would become the third-largest gold company in Canada and reside in the top quartile of the TSE 300.

Also in the second phase, JCI would boost to 100% its ownership in London-listed Randgold Resources. It currently holds 61.6%

Management estimates that the new JCI will be the world’s ninth-largest gold producer, with output next year projected at 1.4 million oz. gold, produced at a cash cost of US$238 per oz.

As its main operating assets, the company will have a 100% interest in Randfontein and a 50% stake in the Western Areas mine — the other 50% being held by Placer Dome (PDG-T). In total, the new JCI’s reserves are pegged at 36 million oz. gold.

JCI will also hold substantial interests in two major development projects — South Deep at Western Areas and Morila in Mali — as well as exploration projects in Africa.

The transaction ushers in a new era for the venerable JCI mining house, which ran into financial difficulties in early 1998 after becoming South Africa’s first black-owned mining company.

Current Randgold Chairman Brett Kebble, who will become JCI’s chief executive officer, says the new company will focus on developing low-cost gold projects, as well as on acquisitions.

The restructuring, he says, “creates a substantial gold business with a balanced portfolio of operating assets, development projects and exploration projects. It gives the group a simple, investor-friendly structure, and it will increase the free float of shares, which should enhance trading liquidity.”

In addition to Kebble, the new JCI will have the following executive directors: Roger Kebble, operations; David Kovarsky, finance; John Brownrigg, technical; and Mark Bristow, new business development (Bristow will continue as CEO of Randgold until it is incorporated in the new JCI).

Anglo American executive director Hank Slack will become JCI’s non-executive chairman. The remaining non-executive directors have an international background: Wiseman Nkuhlu, current chairman of JCI Gold; Rupert Pennant-Rea, former deputy governor of the Bank of England; Tokyo Sexwale, former premier of Gauteng province; Frank McKenna, former premier of New Brunswick; William Nairn, technical director of Anglo American; Mark Wellesley-Wood, a British banker; Royden Richardson, former partner in Richardson Greenshields (now owned by Canada’s Royal Bank); Vaughan Bray, former CEO of Johnnic; and John Hick, Placer Dome’s former business development director.