Randgold (GOLD): Kebble, Gold Magnate, May Lose Fortune After Ouster (Update1)
Sept. 5 (Bloomberg) -- Brett Kebble, the South African millionaire who helped create two of the country's four largest gold producers, may lose his fortune after resigning as chief executive of three companies.
Kebble, 41, quit on Aug. 30 as head of Western Areas Ltd., joint owner of a $24 billion gold deposit near Johannesburg, and two other gold-investment companies after Western Areas ran out of money. He faces questions from investors in Randgold & Exploration Ltd., one of the two other companies, over the whereabouts of shares worth $268 million and is the subject of fraud charges related to a takeover battle five years ago.
``Things could definitely get worse for Brett,'' said David Shapiro, an analyst at Sasfin Frankel Pollack Securities in Johannesburg who has traded stock in Kebble's companies for more than a decade and met him several times.
Kebble's troubles may end an 11-year career in the country's $5.5 billion gold industry that spawned Harmony Gold Mining Co., South Africa's No. 3 gold miner, DRDGold Ltd., the No. 4, and the development of South Deep, the world's largest gold deposit. Local newspapers Business Day and the Mail & Guardian have chronicled the downfall of Kebble, a patron of South African arts through an award that takes his name.
Kebble didn't return five messages seeking comment left on the voicemail of his mobile phone last week. The bell at the gate of his house in the Johannesburg suburb of Inanda wasn't answered. When his father, Roger, was called on his cell phone Aug. 31 he said his son was in a meeting and couldn't talk.
Out of Money
Kebble quit his jobs at Western Areas, Randgold and JCI Ltd. after Johannesburg-based Investec Ltd., South Africa's No. 5 bank, told investors it wouldn't free up a 460 million-rand ($71 million) loan to keep the companies afloat unless he left.
Western Areas and JCI said on Aug. 30 in statements to the stock exchange in Johannesburg that Investec insisted that their boards be changed before they made the loan. The companies announced the resignations that day of Kebble and non-executive director Sello Rasethaba.
``The reason Kebble is out is that the investment community has lost faith in his ability to deliver on South Deep,'' said Wayne McCurrie, who oversees the equivalent of $5.9 billion at Johannesburg's Advantage Asset Management. McCurrie said some of the fund he oversees may have small holdings in Western Areas.
Shares in Western Areas have dropped 25 percent in the past six months, the second-biggest decline on the seven-member FTSE/JSE Africa Gold Mining Index after Randgold, which has fallen 29 percent. JCI, which together with Randgold was suspended from trading on Aug. 1, has dropped 45 percent.
Gold Price Bet
The partnership with Placer began in 1999, when Kebble helped secure a $235 million investment from the Vancouver-based miner, ensuring South Deep's development. The project to dig the 3.3 kilometer (2.1 mile) mine went awry as it ran up costs of more than $1 billion. South Deep is 2 1/2 years behind schedule.
The delays at South Deep were compounded by Kebble's bet in June 2002, through futures contracts, that the gold price would fall. The price of bullion has since surged 40 percent.
``He took a view on the gold price twice and he was wrong,'' said Bernard Swanepoel, the chief executive of Harmony, in an interview in Johannesburg yesterday. ``That is his contribution to this dilemma.''
As a result of derivative contracts Western Areas holds, the company sold its gold at $308 an ounce in the quarter ended June 30, compared with a an average market price of $427.88. Production costs were $426 an ounce.
Clever Financier
Kebble was born in the gold mining town of Springs, east of Johannesburg, and schooled in the Free State province before graduating in law from the University of Cape Town in 1988. He entered business after his mining engineer father, who once worked for Anglo American Plc, sold his Cape wine farm and came out of retirement in 1991.
Teaming up with Adam Fleming, a relative of the James Bond spy-novel author Ian Fleming, Kebble joined Randgold, working initially under Executive Chairman Peter Flack. After accumulating a majority stake in the company, he fired Flack and installed himself as chief executive. He was 32 at the time.
``He was one of the brightest corporate financiers I ever met, and I've met some clever ones in my time,'' Flack said in an Aug. 17 interview from Johannesburg.
Harmony, DRDGold and Randgold Resources Ltd., all of which were spun out of Randgold during Kebble's period as a director, have a combined market value of 26 billion rand ($4.1 billion).
The family's possessions include multimillion-rand properties ranging from a three-storey house overlooking Cape Town's Atlantic coast to Melrose Place, a national monument in northern Johannesburg once owned by Gavin Relly, a former chairman of London-based Anglo American.
Criminal Charges
``He's bright, eloquent and can be very charming,'' said Mike Schroder, who oversees mining stocks at Old Mutual Asset Management, South Africa's largest money manager. ``The problem is that you needed two analysts just to follow him around because his strategy kept changing.'' Schroder doesn't hold shares in JCI, Western Areas or Randgold & Exploration.
Kebble's plan to weld together seven companies in which his family held stakes and trade the company's shares in Toronto was scuppered five years ago by Harmony's Swanepoel, a former mine manager under Kebble who started and won a hostile takeover for the biggest of the companies, Randfontein Estates Ltd.
The legacy of that contest is that Kebble faces charges of fraud, conspiracy and contravention of South Africa's Companies Act, Lucinda Moonieya, a spokeswoman for South Africa's Public Prosecutor's Office said in an e-mail on Aug. 31. The case will be heard in October next year.
On Nov. 3, 2003, Kebble said he would contest charges announced by Johannesburg High Court Judge Joop Labuschagne.
`Blatant'
``It is a blatant attempt to elevate technical breaches'' into fraud charges, he said in an e-mail that day. ``He is contesting the charges vigorously,'' said David Barritt, a personal spokesman for Kebble, in a Sept. 2 telephone interview from Greece.
Shareholders including Aflease Gold & Uranium Ltd., which owns 12 percent of Randgold & Exploration, are asking Kebble to account for stock the company owned in Randgold Resources.
``We want a strong executive in Randgold, with corporate finance experience, to go in there and see what's going on,'' Jean Nortier, Aflease's finance director, said in an interview on Sept. 1.
Shares Suspended
Mark Bristow, Randgold Resources' chief executive, says Randgold & Exploration owns 4.4 million Randgold Resources shares. Kebble said he has 18.9 million shares in a statement on Randgold & Exploration's Web site on Aug. 2.
Randgold & Exploration's shares were suspended from trading on Johannesburg's stock exchange on Aug. 1 after the company missed a deadline to submit annual financial statements.
``He's the kind of person who will get a second lease of life,'' said Sasfin Frankel's Shapiro. ``He may be out now, but he's the kind of person who has a definite knack of getting people to back him.''
To contact the reporter on this story:
Stewart Bailey in the Johannesburg bureau sbailey7@bloomberg.net
Last Updated: September 5, 2005 04:19 EDT
