Acronym for ‘Are you gullible too’?

Acronym for ‘Are you gullible too’?

[miningmx.com] -- THE “easy money” at UG2 Platinum – an unlisted junior mining venture based on the “Trompsburg anomaly” – looks as if it’s sitting in the hands of a number of related parties. UG2 has already milked R4m from public shareholders in an initial “share-for-cash” effort pitched at 30c/share. Miningmx understands that another prospectus is being registered, suggesting a second tranche fund-raiser is under contemplation.

Finance Week previously reported on the initial fund-raising efforts by UG2. But at that time the identities of the parties behind the major shareholding groups – Midnight Masquerade Properties 73 and Born Free Investments 115 – weren’t known.

The key issue in the first report was that Midnight Masquerade and Born Free secured about 40% of UG2 Platinum for a nominal consideration. The prospectus showed that Midnight Masquerade and Born Free each received 20,84m shares at a fractional value of R0,00001c/share as a “consideration for providing unsecured preliminary funding”.

Shares (16m this time) were also offered to Emit General Investments, cited as UG2’s empowerment partner.

The rub is that shareholders participating in the share-for-cash issue would have forked out R4m (presuming the issue was fully subscribed) for a minority stake in the platinum venture. On the other hand, the parties behind Midnight Masquerade and Born Free take a majority stake at a nominal cost.

But UG2’s balance sheet showed only R117 563 in loans raised – stemming from unlisted share-peddler Silver Seed capital and GVRM (Proprietary) Ltd (a company associated with Exxoteq prime mover Gerhard Muller).

It’s suspicious enough that some shareholders appear to be enjoying the cheapest possible entry into UG2. However, it’s even more worrying when the parties behind the nominee companies are identified as related ones.

A CIPRO search identifies three directors behind both Midnight Masquerade and Born Free: Derek Francois, David Marcusse and Connie Myburgh.

Readers may know Francois as the head of Silver Seed Capital, which has been involved in a number of unlisted investment projects – including Exxoteq.

Marcusse is a lawyer based in Cape Town and a former director of unlisted venture Africavend. He’s also listed as a director of UG2 Platinum. Myburgh is a well-known corporate lawyer who features strongly in FW’s ongoing attempts to delve into mystery conglomerate Garek (formerly MATRIC/ RSI).

Myburgh has resigned from both Midnight Masquerade and Born Free and tells FW that he’s not aware of any “related party issues”. We understand that Myburgh was replaced by Stefan Coetzer – another executive at Silver Seed.

The possible related party issue revolves around why the identities of the individuals at Midnight Masquerade and Born Free Investments were not revealed in UG2’s prospectus.

Marcusse is a director of UG2 (holding 400 000 shares in a personal capacity) and, as such, his involvement in nominee companies with a majority shareholding in the platinum venture carries some weight. Marcusse says that he’s not a director of either Midnight Masquerade or Born Free but rather a “public officer”.

It could be argued that Francois is a related party, in that UG2 is considered “one of Silver Seed’s projects” (in the words of a company receptionist) and the company prospectus is available for download on www.silverseed.co.za. The same goes for Coetzer.

Myburgh is the corporate lawyer for UG2, which means – until his resignation – that he could have been considered a related party.

Whether such “related party issues” should have been disclosed to investors is debatable. Some companies that listed on the JSE Securities Exchange in the past few years have also been reticent regarding such matters.