| Mon 3 Sep 2007, 17:30 | | PZG - Pamodzi Gold Limited - Detailed announcement |
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PZG
PZG
PZG - Pamodzi Gold Limited - Detailed announcement
Pamodzi Gold Limited
(Incorporated in the Republic of South Africa)
(Previously Bema Gold SA (Proprietary) Limited)
Registration number 2002/013039/06
JSE Code: PZG ISIN: ZAE000088563
("Pamodzi Gold" or "Company")
DETAILED CAUTIONARY ANNOUNCEMENT REGARDING THE PROPOSED ACQUISITION OF PRESIDENT
STEYN GOLD MINE FROM THISTLE MINING INCORPORATED, FURTHER ANNOUNCEMENT REGARDING
THE ACQUISITION OF THE ORKNEY BUSINESS FROM HARMONY GOLD MINING COMPANY LIMITED,
ANNOUNCEMENT REGARDING A THIRD PARTY PRIVATE PLACEMENT AND A CAPITAL RAISING AND
FURTHER CAUTIONARY ANNOUNCEMENT
Pamodzi Gold is pleased to announce that the board of directors of Thistle
Mining Incorporated ("Thistle") has accepted its indicative non-binding proposal
("Indicative Proposal") to acquire the President Steyn gold mine in the Free
State gold fields for a total consideration of R300 million ("President Steyn
Transaction").
Further to the detailed cautionary announcement released on SENS on 24 April
2007, 28 June 2007 and 7 August 2007, Pamodzi Gold would like to announce that
the formal agreements in respect of the acquisition by Pamodzi Gold of the gold
mining business known as the Orkney Shaft No.`s 1 to 7 ("Orkney Business") from
Harmony Gold Mining Company Limited ("Harmony"), as a going concern ("Orkney
Transaction"), have been signed.
Upon implementation of the President Steyn Transaction and the Orkney
Transaction the annualised gold production of Pamodzi Gold will increase to c.
400 000oz per annum.
In addition, the Company has decided to meet certain capital development
objectives, for both its current operations and for the Orkney Business (Pamodzi
Gold envisages taking over operational control of the Orkney Business from 1
October 2007) through a private placement of up to 4,100,000 new Pamodzi Gold
ordinary shares with selected institutional investors ("Interim Capital
Raising").
Pamodzi Gold will, on behalf of a third party, privately place up to 3,700,000
existing Pamodzi Gold ordinary shares with selected institutional investors
("Third Party Private Placement"). The Company will not receive any proceeds the
Third Party Private Placement.
1. The President Steyn Transaction
1.1 Rationale
In line with the Company`s stated intention to grow its business by acquisition
as well as through organic means, Pamodzi Gold sent an Indicative Proposal to
the board of directors of Thistle in terms of which Pamodzi Gold offered to
acquire the President Steyn Gold Mine (Free State) (Proprietary) Limited
("President Steyn"). The President Steyn Transaction offers Pamodzi Gold:
- approximately 1.9 million oz of proven and probable reserves;
- a 100,000 tpm capacity processing plant;
- 5 established underground shafts;
- the Golden Triangle project targeting a block of ground immediately below
current infrastructure at the number 9 shaft. The feasibility study made
available to Pamodzi Gold indicates an estimated 2.77 million tonnes of measured
and indicated resources containing 1.04 million oz of in situ gold at a grade of
11.65 g/t using a 3.0 g/t cut off; and
- the Eldorado exploration project with potential to increase reserves and
profitable gold production.
(Shareholders are referred to www.sedar.com for further information on Thistle
and the President Steyn Gold Mine).
Pamodzi Gold is in a good position to secure capital to develop President
Steyn`s Golden Triangle project and to further explore the Eldorado reefs. The
President Steyn Transaction secures a foothold for Pamodzi Gold in the Free
State gold fields and is a further step in achieving the Company`s stated
strategy.
Pamodzi Gold is pleased to announce that the board of Thistle has accepted the
terms contained in the Indicative Proposal.
1.2 Settlement of the President Steyn purchase consideration
The consideration for the President Steyn Transaction is a cash payment of R300
million ("President Steyn Purchase Consideration"). In terms of the Indicative
Proposal, the President Steyn Purchase Consideration will be allocated as
follows:
- R100 in respect of the entire issued share capital of President Steyn; and
- the remainder to the claims on loan account.
Thistle has undertaken to invest R150 million of the R300 million cash payment
into a convertible debt instrument ( convertible in May 2009) in a special
purpose vehicle ("SPV"), wholly owned by Pamodzi Resources (Proprietary)
Limited, which SPV shall subscribe for Pamodzi Gold ordinary shares in order to
maintain the Company`s level of black ownership.
Pamodzi Gold intends to raise the remaining R150 million cash portion of the
President Steyn Purchase Consideration through a private placement of Pamodzi
Gold ordinary shares with selected institutional investors once further
regulatory approvals have been obtained.
1.3 Exclusivity
Pamodzi Gold and Thistle have agreed to negotiate and deal exclusively with each
other in good faith until 30 November 2007, subject to early termination of such
exclusivity in certain limited circumstances. In return for this grant of
exclusivity, Pamodzi Gold has agreed to pay Thistle R3.5 million, which amount
will be offset against the final President Steyn Purchase Consideration. Pamodzi
Gold has also agreed to pay a break fee to Thistle in certain limited
circumstances.
1.4 Conditions precedent to the President Steyn Transaction
The President Steyn Transaction is subject to, inter alia, the conditions
precedent summarised below:
- the entering into of final binding legal agreements;
- the shareholders of Pamodzi Gold and Thistle, to the extent required,
passing all resolutions necessary in order to approve and implement the
President Steyn Transaction; and
- the approval of, inter alia, the JSE Limited, Department of Minerals and
Energy, the South African Reserve Bank and the South African Competition
Authorities; and
- Pamodzi Gold obtaining funding in order to enable it to pay the cash
portion of the President Steyn Purchase Consideration.
2. The Orkney Transaction
2.1 Orkney Transaction update
With regard to the Orkney Transaction, both Pamodzi Gold and Harmony have signed
the formal agreements which will, subject to the conditions precedent
(summarised in 2.3 below), result in Pamodzi Gold acquiring 100% of the issued
share capital of Clidet 759 (Proprietary) Limited ("Clidet 759"). Clidet 759 is
a newly incorporated wholly-owned subsidiary of Harmony, which has been set up
by Harmony in terms of section 42(1) of the Income Tax Act, 1962, to house the
Orkney Business.
Pamodzi Gold has engaged Harmony in order to take over management control of the
Orkney Business under a contracting agreement by 1 October 2007 prior to all the
conditions precedent being met. Harmony has in principle agreed to this
arrangement and both parties envisage signing a formal agreement within the next
three weeks. Pamodzi Gold will therefore be entitled to all of the revenue
generated by, and the capital funding requirements of, the Orkney Business from
1 October 2007.
2.2 Settlement of the aggregate acquisition consideration
The aggregate acquisition consideration payable by Pamodzi Gold to Harmony for
the Orkney Business is equal to R550 million ("Initial Orkney Purchase
Consideration") plus a secondary consideration calculated at -
- 3% of the net smelter revenues in respect of the first 1 million ounces of
gold produced by the Orkney Business after the effective date of the Orkney
Transaction; and
- 1.75% of the net smelter revenue in respect of all gold produced by the
Orkney Business thereafter, subject to an aggregate maximum amount of R450m
(collectively "the Aggregate Acquisition Consideration").
The Initial Orkney Purchase Consideration will be settled by Pamodzi Gold
through:
- the payment of a cash amount of R350 million; and
- the issue of 9,272,903 Pamodzi Gold ordinary shares to Harmony
("Consideration Shares").
Pamodzi Gold intends to raise the R350 million cash portion of the Initial
Orkney Purchase Consideration through a combination of senior debt and a private
placement of Pamodzi Gold ordinary shares with selected institutional investors
once further regulatory approvals have been obtained (primarily, Ministerial
consent in terms of section 11 of the MPRDA).
The number of Consideration Shares to be issued to Harmony has been calculated
based on the 30 day VWAP of the Pamodzi Gold ordinary share price on the JSE up
to the business day immediately preceding the date upon which the detailed
cautionary was announced, being 24 April 2007, which VWAP is equal to R21.57. In
terms of the formal agreements, Harmony shall not be entitled to dispose of the
Consideration Shares for a period of twelve months after the effective date of
the Orkney Transaction. Should Harmony wish to reduce its exposure, it may
approach Pamodzi Gold and request it to place such shares privately with
selected institutional investors.
2.3 Conditions precedent to the Orkney Transaction
The Orkney Transaction is subject to, inter alia, the conditions precedent
summarised below:
- the board of directors of the Clidet 759 approving the transfer of all of
the ordinary issued share capital of Clidet 759 to Pamodzi Gold;
- the shareholders of Pamodzi Gold passing all resolutions necessary in order
to approve and implement the Orkney Transaction;
- Harmony converting its Old Order Mining Rights to New Order Mining Rights
in terms of Item 7 of Schedule 2 of the MPRDA;
- the Minister of Minerals and Energy consenting to the transfer of all of
the issued share capital of Clidet 759 to Pamodzi Gold in terms of section 11 of
the MPRDA; and
- Pamodzi Gold obtaining funding in order to enable it to pay the cash
portion of the Initial Orkney Purchase Consideration.
3. Timing and shareholder approvals
Pamodzi Gold will publish a combined circular to shareholders providing
information on both the Orkney Transaction and the President Steyn Transaction
("the Transactions") during October 2007. The notice of general meeting,
attached to the circular, will convene a meeting of shareholders to vote on the
resolutions required to implement the Transactions. It is envisaged that the
general meeting will take place during late October or November 2007 at the
offices of Pamodzi Gold.
4. Interim Capital Raising and Third Party Private Placement
The Company has decided to delay the respective capital raisings for the
President Steyn Transaction and the Orkney Transaction until the various
regulatory approvals have been received, specifically:
- the approval by the competition tribunal of the President Steyn
Transaction; and
- the receipt of the section 11 approval from the Minister of Minerals and
Energy in respect of the Orkney Transaction.
Currently, the capital raisings in respect of the President Steyn Transaction
and the Orkney Transaction are envisaged to commence concurrently in late
November 2007.
However, in the interim, the Company is required to meet certain capital
development objectives, for both its current operations and for the Orkney
Business (which it will be taking operational responsibility for from 1 October
2007) through a private placement of Pamodzi Gold ordinary shares with selected
institutional investors.
In terms of the Interim Capital Raising, Pamodzi Gold will issue up to 4,100,000
new Pamodzi Gold ordinary shares for the purpose of funding:
- certain capital development requirements of the Orkney Business resulting
from the transfer of operational control of the Orkney Business to Pamodzi Gold
on 1 October 2007; and
- an accelerated capital development program at its current operations.
In addition, on behalf of a third party and in order to settle certain financial
obligations of such third party, Pamodzi Gold will privately place up to
3,700,000 existing Pamodzi Gold ordinary shares with selected institutional
investors. The private placement is not on behalf of management and the Company
will not receive any proceeds from such placing.
5. Further cautionary announcement
Shareholders are advised to continue to exercise caution in dealing in their
shares until a further announcement is made.
Johannesburg
3 September 2007
Merchant bank and sponsor
Rand Merchant Bank, a division of FirstRand Bank Limited
Legal Advisors
Cliffe Dekker
Bookrunner
RMB Morgan Stanley
Date: 03/09/2007 17:30:01 Produced by the JSE SENS Department.
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