| Mon 4 Jun 2007, 16:21 | | AFG - Afgem Limited - Disposal of Simolotse and Af |
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AFG
AFG
AFG - Afgem Limited - Disposal of Simolotse and Afgem Diamonds to Meepo
Afgem Limited
(Incorporated in the Republic of South Africa)
(Registration number 1998/007292/06)
JSE share code: AFG
ISIN: ZAE000067757
("Afgem" or "the Company")
DISPOSAL OF SIMOLOTSE MINE (PTY) LTD ("SIMOLOTSE") AND AFGEM DIAMONDS (PTY) LTD
("AFGEM DIAMONDS") TO MEEPO INVESTMENT CORPORATION (PTY) LTD ("MEEPO")
1. Introduction
Afgem shareholders are referred to the announcement dated 8 March 2007
wherein shareholders were advised that management was actively seeking
purchasers for both the Bokang and Simolotse mines. Accordingly, the
directors of the Company are pleased to announce that agreement has been
reached in terms of which Afgem will, subject to the fulfillment of the
conditions precedent set out in paragraph 2.4 below, dispose of its entire
shareholding in Simolotse and Afgem Diamonds (together "the companies")
("shares") and claims on loan account against the companies ("claims") to
MEEPO, a South African company that will ultimately be held by New African
Mining AG ("NAM") for an amount of R5.2 million and Euro2.1 million ("the
transaction").
NAM will seek a listing of its shares on an international stock exchange
within 6 months of the effective date, as defined in 2.9 below.
2. The transaction
2.1 Settlement of the consideration
The transaction consideration of R5.2 million and Euro2.1 million will
be settled as follows:
- R2 million in cash on the signature date of the agreement;
- R3.2 million in cash on the effective date; and
- Euro2.1 million settled via the issue of 4.1 million MEEPO A-class
shares ("MEEPO Shares") issued at Euro0.50 each on the effective
date.
2.2 Information relating to Simolotse and Afgem Diamonds
Simolotse is the owner of the Simolotse mine, an underground fissure
diamond mine located in Kimberley. The mine was placed on care and
maintenance during 2006.
Afgem Diamonds` sole asset is the processing plant associated with the
Simolotse mine which is held in terms of a finance lease agreement
with Stannic, a division of the Standard Bank of South Africa Limited.
2.3 Rationale
Afgem acquired Bellsbank Consolidated Diamond Mine (Proprietary)
Limited (now Bokang Mine (Proprietary) Limited), Loxton Exploration
(Proprietary) Limited (now Simolotse) and Rex Diamond Corporation
(Proprietary) Limited (now Agisanang (Proprietary) Limited) ("mining
companies") during 2005 from Rex Diamond Mining Corporation and its
wholly owned subsidiary, Rex Diamond Mining Corporation Limited ("Rex
Mining").
Subsequent to acquiring these companies, Afgem was faced with numerous
challenges including the implementation and funding of a Section 311
Scheme of Arrangement with creditors of Rex Mining to avoid the
possible liquidation of the mining companies, the non-payment by Rex
Mining of funds loaned and advanced by Afgem to Rex Mining, and
disputes with the National Union of Mineworkers ("NUM").
These challenges, which were further compounded by operational
difficulties arising principally from the flooding of the Simolotse
mine, resulted in Afgem having insufficient funds to properly
commission the Simolotse mine. As a result, Afgem began seeking
suitable purchasers for the Bokang and Simoltse mines during December
2006.
2.4 Conditions precedent
The transaction is subject to fulfillment or waiver of the following
conditions by 31 August 2007:
- MEEPO conducting a due diligence to its satisfaction on the
companies;
- approval from the Department of Minerals and Energy being obtained
by MEEPO;
- MEEPO reaching final agreement with NUM and any other relevant
applicants in the legal case J917/06 that the applicants will
accept payment of R1 million or less as settlement for all amounts
claimed (in the event that the claim is not covered by the
settlement agreement dated 20 February 2007);
- shareholder approval and board approval being obtained by Afgem,
MEEPO and NAM;
- the necessary regulatory approvals including stock exchange and
Competition Commission approvals being obtained by Afgem and MEEPO;
- signature of all documentation to implement the externalisation
structure
- Afgem conducting a due diligence to its satisfaction on MEEPO; and
- approval of Stannic to the sale of the shares in Afgem Diamonds.
2.5 Use of proceeds
The cash portion of the purchase price will be used by Afgem to
discharge existing liabilities and the MEEPO Shares will ultimately be
distributed to Afgem shareholders.
2.6 Warranties
The transaction will be subject to normal warranties and indemnities
relating to transactions of this nature.
2.7 Other significant terms
MEEPO shall appoint an independent technical adviser to conduct an
investigation into the environmental liabilities of Simolotse. In the
event, and to the extent, that such assessment results in a higher
environmental liability than that estimated in the 2005 Snowden Mining
Industry Consultants (Proprietary) Limited Competent Persons` Report
which report included the mineral assets of Loxton Exploration
(Proprietary) Limited and which amount was provided for in the interim
financial statements as at 30 September 2006, then the share portion
of the purchase price shall be adjusted accordingly and the associated
number of shares shall be transferred back to MEEPO.
Afgem, Simolotse and MEEPO will enter into a contracting agreement in
terms of which MEEPO will be appointed as the manager at the Simolotse
mine during the period from the signature date of the agreement to the
effective date ("interim period") commencing upon execution of the
contracting agreement. Afgem and MEEPO shall form a joint management
committee during the interim period and all costs and expenses at
Simolotse mine shall be jointly authorised by Afgem and MEEPO.
MEEPO will bear the costs of managing and operating the Simolotse mine
during the interim period, however in the event that the conditions
are not fulfilled or waived and the agreement does not come into
effect, Afgem shall reimburse MEEPO for the costs incurred by it
arising out of managing and operating the Simolotse mine during the
interim period. As security for such costs, Afgem shall cede its
shares in Bokang Mine (Proprietary) Limited to MEEPO.
2.8 Financial effects
The unaudited pro forma financial effects of the transaction, for
which the directors are responsible, are provided for illustrative
purposes only to show the effect of the transaction on losses and net
asset value per share as if the transaction took place on 1 April 2006
and 30 September 2006 respectively.
Because of their nature, the unaudited pro forma financial effects may
not give a true reflection of the Company`s financial position and
performance. The unaudited pro forma financial effects have been
compiled from the unaudited consolidated interim results for the 6
months ended 30 September 2006 and are presented in a manner
consistent with the format and accounting policies adopted by Afgem
and have been adjusted as described in the notes hereto:
Before the After the %
Notes transaction transaction change
Loss per share (cents) 1, 2, 4.67 5.70 22.2
4, 5
Diluted loss per share 1, 2, 3.57 4.36 22.2
(cents) 4, 5
Headline loss per share 1, 2, 4.67 5.70 22.2
(cents) 4, 5
Net asset value per share 3, 6 19.78 21.20 7.2
(cents)
Net tangible asset value per 3, 6 0.15 5.47 3,493.3
share (cents)
Actual number of shares in 257,622 257,622 -
issue (`000)
Weighted average number of 233,968 233,968 -
shares in issue (`000)
Diluted number of shares in 306,275 306,275 -
issue (`000)
Notes:
1. The "before" loss per share, diluted loss per share and headline
loss per share figures are based on the weighted average number
of shares in issue at 30 September 2006.
2. The adjustments to the loss per share, diluted loss per share and
headline loss per share are based on the weighted average number
of shares in issue at 30 September 2006 and are stated assuming
that the transaction is effective 1 April 2006.
3. For net asset value and net tangible asset value calculations, it
is assumed that the transaction is effective 30 September 2006
and based on the actual number of shares in issue at 30 September
2006.
4. A loss of R18.2m was recognised against income as a result of the
proceeds of the transaction being less than the carrying value of
the investments.
5. An amount of R8.2m was credited to income as a result of the
reduction in the amount provided for royalties to Rex Mining due
to royalties being calculated on the proceeds received in terms
of the transaction as opposed to the amount that was provided for
based on a discounted royalty stream assuming that Simolotse mine
continued in operation.
6. Net asset value per share increased as a result of the reduction
in royalties payable and a reduction in environmental liabilities
due to the disposal of Simolotse.
2.9 Effective date
The transaction will become effective on the 2nd business day
following fulfillment of the conditions precedent set out in paragraph
2.4 above.
2.10 Categorization of the transaction
The transaction is a Category 1 transaction in terms of the Listings
Requirements of the JSE and a section 228 disposal in terms of the
Securities Regulation Panel`s Code. A circular will be sent to
shareholders in due course including a notice of general meeting to
vote on the transaction.
Melrose Arch
4 June 2007
Sponsor
Sansara Independent Sponsor Services (Pty) Limited
Date: 04/06/2007 16:21:08 Produced by the JSE SENS Department.
