'What debt?'

2010-05-06 00:00

<p>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. </p>
<p>"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". </p>
<p>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 company'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". </p>
<p>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. </p>
<p>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". </p>
<p>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". </p>
<p>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." </p>
<p>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. </p>