- US$4,3m externalisation storm rocks group
Asa Resource Group Plc share price plunged 46% in Tuesday’s trade on the London Stock Exchange following disclosures US$4,3 million was unaccounted for at the group’s Zimbabwe gold operation, Freda Rebecca Gold Mine, after executives moved the funds illegally to China.
BY CHRIS MURONZI
Asa (formerly Mwana Africa Plc) shares plunged 46% to close at 1,125 pence on the announcement on Tuesday, but showed recovery signs the following day as investors assessed the impact of the news. The Asa stock had recovered 21,42% at 1,275p in Wednesday morning trade. The share price had recovered in afternoon trade to close at 1,44p, a 37% gain.
By yesterday afternoon, it had gained 11,86% to close at 1,65p.
In a statement on Wednesday, the Asa board said there was strong evidence of funds amounting to several millions being transferred from the accounts of Freda Rebecca to entities in China, without full value being received by Freda Rebecca.
“Further to the company’s announcement on 18 April 2017, the board provides further information on the group’s cash position,” the company said in statement.
“So far as its two principal mining operations are concerned, Freda Rebecca Gold Mine (FRGM) and Bindura Nickel Corporation (BNC) continuing cash flows from operations at each mine are expected to be adequate for the normal working capital requirements of these mines. Both Freda Rebecca and Bindura Nickel have their own banking facilities that are being utilised in the normal way.”
The disclosures point to potential problems in the country as it emerged the company could have been involved in unlawful siphoning of foreign currency at a time Zimbabwe is grappling with foreign currency shortages.
The London Stock Exchange mining junior has an 85% equity stake in Freda Rebecca.
According to the statement, Asa is also getting unquantified amounts in management fees from the Zimbabwean operation.
At group level, Asa had a number of outstanding creditors stemming from legacy litigation and unpaid directors’ fees and salaries, which the group hoped to settle in due course from management fees payable by BNC and Freda Rebecca to the London-listed mining junior.
“The board is satisfied that it has established that the total amount of Asa Resources funds that are unaccounted for is US$4,3 million. Of this amount US$2,7 million relates to the year ended 31st March 2016 and US$1,6 million relates to the year ended 31(st) March 2017. The sum of US$1,6 million in 2017 has been traced to two group companies administered from Hong Kong, but the board has yet to confirm whether any part of this sum remains within the two companies. The board has not relied on these amounts and any recoveries will improve the expected cash position,” the company said.
“The company continues to maintain its exploration permits in the DRC (Democratic Republic of Congo) and there is approximately US$500 000 due to creditors as at 31(st) March 2017. These sums are in line with the group’s normal level of creditors within the DRC.”
The change to reprocessing fine to coarse tailings at Klipspringer in the last three months has slightly lower cash inflows than originally anticipated, the company said.
“This has meant that certain creditors are in arrears and are expected to be addressed in due course,” Asa said.
Asa Meat in South Africa has no immediate need for cash and has a positive cash balance at its bank on 31(st) March 2017.
“Following recent management changes announced on 18(th) April 2017, the Board is now satisfied there are sound operational financial controls at FRGM and BNC,” said the company.
“Shareholders should be assured that the board is taking every measure possible to recover these sums and to restore confidence in its operations and across the group.”
Earlier this week, Asa fired its chief executive and financial director over financial mismanagement with millions of dollars being procedurally transferred from the accounts of its subsidiary FRGM.
In a statement, Asa said it had removed Yat Hoi Ning from his post as chief executive and Yim Kwan, the finance director with immediate effect.
Following an anonymous tip, the Asa board instituted an investigation, which found that funds “amounting to several million dollars” had allegedly been transferred from the accounts of its Freda Rebecca to entities in China, without full value being received by FRGM.
The group has appointed Toi Muganyi as its interim CE, Carla Mackay as interim FD and Batirai Manhando as interim executive director.
The group’s auditors, Ernst & Young, will undertake further investigations, according to the group.
“It is intended that a full procurement audit will be undertaken as necessary,” the group said.
The group said it has identified that funds are still to be accounted for by subsidiaries managed from Hong Kong.
“This is a matter that Ernst & Young will be attending to. The cash analysis reveals that there is a pressing need for cash at Asa, Freda Rebecca and BNC levels and that the matters now under investigation have prejudiced their normal cashflows.
“Steps are being taken to bring all cash management under the direct control of Carla Mackay and Jan Lampen (deputy finance director who already has been given a dual role of heading financial controls at BNC and Freda Rebecca).”
The group said it had informed the proper authorities of these developments.
The appointments made by Hoi Ning of Chinese managers and department heads are being “rapidly reviewed and are likely to change”, the company said.
Hoi Ning engineered a hostile takeover of the group that saw the ouster of Mwana Africa founder Kalaa Mpinga from the position of CE two years ago.
The group earlier this month received anonymous allegations on certain aspects of the financial management at the mine. At the time, the company said the allegations were “mischievous and their origins appear to have certain similarities to the previously notified lawsuit served on Freda Rebecca in January”.
Asa says there was no theft of gold from the gold room at FRGM. The developments at Asa could see the company in the eye of regulatory storms with evidence pointing to possible externalisation.