| Fri 23 Nov 2007, 12:56 | | PZG - Pamodzi Gold - Detailed Terms Announcement |
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PZG
PZG
PZG - Pamodzi Gold - Detailed Terms Announcement
Pamodzi Gold Limited
(Previously Bema Gold SA (Proprietary) Limited)
(Incorporated in the Republic of South Africa)
Registration number 2002/013039/06
JSE Code: PZG & ISIN: ZAE000088563
("Pamodzi Gold" or "the Company")
DETAILED TERMS ANNOUNCEMENT IN RESPECT OF:
- THE PROPOSED ACQUISITION OF THE ORKNEY NO`S 1 TO 7 SHAFTS FROM HARMONY GOLD
MINING COMPANY LIMITED;
- THE PROPOSED ACQUISITION OF THE ENTIRE ISSUED ORDINARY SHARE CAPITAL OF AND
ALL CLAIMS ON LOAN ACOUNT AGAINST PRESIDENT STEYN GOLD MINES (FREE STATE)
(PROPRIETARY) LIMITED FROM THISTLE MINING INC. AND ITS SUBSIDIARIES;
- THE PRIVATE PLACEMENT OF PAMODZI GOLD ORDINARY SHARES;
AND WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
Further to the announcements released on SENS on 24 April 2007, 28 June 2007, 3
September 2007, 8 October 2007 and 12 November 2007, Pamodzi Gold is pleased to
announce the detailed terms of the:
- proposed acquisition of the Orkney No`s 1 to 7 shafts ("Orkney business")
from Harmony Gold Mining Company Limited ("Harmony") for R550 million plus
a secondary consideration ("Orkney acquisition consideration") ("Orkney
transaction");
- private placement of Pamodzi Gold ordinary shares ("Pamodzi Gold shares")
with institutional investors in order to raise R200 million to settle a
portion of the Orkney acquisition consideration ("Orkney private
placement")
- proposed acquisition of the entire issued ordinary share capital of and all
claims on loan account against President Steyn Gold Mines (Free State)
(Proprietary) Limited ("President Steyn") from Thistle Mining Inc. and its
subsidiaries ("Thistle") for R240 million ("President Steyn acquisition
consideration") ("President Steyn transaction").
- private placement of Pamodzi Gold shares with institutional investors in
order to raise R100 million to settle a portion of the President Steyn
acquisition consideration ("President Steyn private placement"); and
- private placement of Pamodzi Gold shares with institutional investors in
order to raise R200 million to fund capital development at the Orkney
business and the President Steyn gold mine ("capital development private
placement").
(the Orkney transaction and the President Steyn transaction will be collectively
referred to as the "proposed transactions" and the Orkney private placement,
President Steyn private placement and the capital development private placement
will be collectively referred to as the "private placements")
1. Rationale for the proposed transactions
Pamodzi Gold`s intention is to become a 1 million oz per annum gold
producer in the next 24 to 36 months using a dual strategy of organic and
acquisitive growth. The Company has been pursuing a number of possible
acquisitions which will enable it to increase its annual production to meet
this objective. The proposed transactions are the first of these
acquisitions and will enable the Company to, inter alia:
- significantly increase its reserves and resources;
- increase its annual gold production to approximately 420,000 oz per
annum;
- dilute the effects of the gold hedge currently in place at the East
Rand mining operations;
- increase the scale of its operations to achieve critical mass;
- increase its operational and financial flexibility; and
- establish a presence in Orkney and the Free State gold fields.
2. The Orkney transaction
Pamodzi Gold and Harmony entered into formal transaction agreements on 29
August 2007 ("Orkney transaction agreements") in terms of which, subject to
the fulfilment of the conditions precedent to the Orkney transaction
(summarised in paragraph 2.4 below), Pamodzi Gold will acquire 100% of the
issued ordinary 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 to acquire the Orkney business in
terms of section 45 of the Income Tax Act, 1962.
The effective date of the Orkney transaction is the first day of the
production month following the production month during which the last of
the conditions precedent to the Orkney transaction has been fulfilled or
waived, as the case may be. In this instance, a production month means the
production period of approximately 30 days identified in respect of the
Orkney business.
2.1 Description of the Orkney business
The Orkney business is situated in the North West Province of South
Africa, some 175km south west of Johannesburg. The Orkney business
comprises the Orkney shafts 1 to 7, all assets necessary to continue
to operate the Orkney business as a going concern and certain defined
liabilities in respect of the Orkney business, including its employee,
rehabilitation and environmental liabilities. The Orkney business can
be described as a mature mining operation with good geological
characteristics, strong historical mining and sampling data and upside
potential on shafts 3, 6 and 7. The Orkney business primarily mines
the Vaal, Ventersdorp Contact and Elsburg reefs.
2.2 The Orkney acquisition consideration
The Orkney acquisition consideration is R550 million ("initial Orkney
acquisition consideration") plus a secondary consideration ("secondary
consideration") calculated as follows:
- 3.00% of the net smelter revenue 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.
The secondary consideration is subject to an aggregate maximum of R450
million.
2.3 Settlement of the Orkney acquisition consideration
The initial Orkney acquisition consideration will be settled by
Pamodzi Gold through:
- a cash payment of R350 million to Harmony; and
- the issue of 9,272,903 Pamodzi Gold shares to Harmony
("consideration shares").
Pamodzi Gold intends to raise the R350 million cash portion of the
initial Orkney acquisition consideration through a combination of
senior debt and the Orkney private placement.
In terms of the Orkney private placement, Pamodzi Gold will place up
to 14.9 million new Pamodzi Gold shares with institutional investors
to raise, in aggregate, R200 million. The proceeds of the Orkney
private placement will be used exclusively to settle a portion of the
initial Orkney acquisition consideration.
The number of consideration shares to be issued to Harmony has been
calculated based on a Pamodzi Gold share price of R21.57 per share
which was the 30 day volume weighted average price ("VWAP") of the
Pamodzi Gold shares traded on the JSE Limited ("JSE") up to the close
of business on 23 April 2007 (the business day immediately preceding
the date upon which the first detailed announcement in respect of the
Orkney transaction was released on SENS). In terms of the Orkney
transaction 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 to Pamodzi Gold, it may approach Pamodzi Gold and
request it to place the consideration shares.
2.4 Conditions precedent to the Orkney transaction
The Orkney transaction is conditional upon the following conditions
precedent being fulfilled or waived, as the case may be:
- the shareholders of Pamodzi Gold passing all resolutions
necessary in order to approve and implement the Orkney
transaction and the allotment and issue of the consideration
shares to Harmony;
- the necessary regulatory approvals being obtained, including
approvals from the JSE and the South African Reserve Bank;
- Pamodzi Gold obtaining funding in order to enable it to pay the
entire cash portion (being R350 million) of the initial Orkney
acquisition consideration;
- the Minister of Minerals and Energy granting approval for the
Orkney transaction in terms of section 11 of the Mineral and
Petroleum Resources Development Act;
- AngloGold Ashanti Limited waiving its right of first refusal in
respect of the sale by Harmony of the Orkney shafts 1, 6 and 7 to
Clidet 759; and
- all other actions and/or approvals of a legal and/or
administrative nature required to implement the Orkney
transaction being undertaken and/or obtained.
3. The President Steyn transaction
Pamodzi Gold and Thistle have entered into formal transaction
agreements ("President Steyn transaction agreements") in terms of
which, subject to the fulfilment of the conditions precedent to the
President Steyn transaction (summarised in paragraph 3.3 below),
Pamodzi Gold will acquire the entire issued ordinary share capital of
and all claims on loan account against President Steyn for R240
million, subject to the adjustment mechanism described in paragraph
3.2.1 below.
The effective date of the President Steyn transaction is 1 December 2007.
3.1 Description of the President Steyn business
The President Steyn business consists of a northern division and
a southern division located on the Witwatersrand gold basin close
to the town of Welkom in the Free State. The northern division
consists of the Steyn 7, 9, and 3 shafts while the southern
division includes the Steyn 1, 1a and 2 shafts as well as the
metallurgical processing plant.
The President Steyn gold mine offers Pamodzi Gold a footprint in
the Free State with:
- approximately 1.8 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 which has the potential to
significantly increase reserves and profitable gold
production.
3.2 Settlement of the President Steyn acquisition consideration
The President Steyn acquisition consideration will be settled by
Pamodzi Gold as follows:
- a payment of R100 million to Thistle; and
- an undertaking by Pamodzi Gold to pay R140 million to Thistle
which Thistle is obliged to lend and advance (by way of cession
of rights) to Clidet No 776 ("Proprietary") Limited ("Clidet
776") in terms of a loan agreement between, inter alia, Pamodzi
Gold and Thistle.
The President Steyn acquisition consideration is subject to the
adjustment mechanism described in 3.2.1 below.
In terms of the President Steyn private placement, Pamodzi Gold will
place up to 7.45 million new Pamodzi Gold shares with institutional
investors to raise R100 million. The proceeds of the President Steyn
private placement will be used exclusively to settle a portion of the
President Steyn acquisition consideration.
Clidet 776 will apply the amount lent and advanced to it by Thistle
(as set out above) to subscribe for Pamodzi Gold shares in order to
maintain the Company`s level of Black Economic Empowerment ("BEE")
shareholding.
3.2.1 Adjustment mechanism to the President Steyn acquisition
consideration
The President Steyn acquisition consideration will be adjusted by
the difference between the net working capital of President Steyn
as 30 June 2007 and the effective date of the President Steyn
transaction. In addition, the President Steyn acquisition
consideration will be adjusted downwards by one half of the
aggregate working capital loans advanced to President Steyn by
Casten Holdings Limited ("Casten Holdings") and/or MC Resources
Limited ("MC Resources") (who are major creditors and
shareholders of Thistle, each owning 35.0% of the outstanding
shares of Thistle) and all the interest and fees related thereto
from 26 September 2007 to the effective date of the President
Steyn transaction. At this stage an adjustment to the President
Steyn acquisition consideration of between R40 million and R50
million is expected.
3.3 Conditions precedent to the President Steyn transaction
The President Steyn transaction is conditional upon the following
conditions precedent being fulfilled or waived, as the case may be:
- the board of directors of President Steyn approving the transfer
of shares and cession of claims in terms of the President Steyn
transaction agreements;
- the shareholders of Pamodzi Gold passing all resolutions
necessary in order to approve and implement the President Steyn
transaction;
- the necessary regulatory approvals being obtained, including
approvals from the JSE and the South African Reserve Bank;
- the shareholders of Thistle passing all such resolutions as may
be required under the rules of AIM, a market of the London Stock
Exchange plc, or any applicable rules and regulations of the
Toronto Stock Exchange and Canadian securities laws to approve
and implement the President Steyn transaction;
- the President Steyn business producing no less than 340kg`s of
gold for the month of November 2007; and
- all other actions and/or approvals of a legal and/or
administrative nature required to implement the President Steyn
transaction being undertaken and/or obtained.
3.4 Irrevocable undertakings in respect of the President Steyn transaction
A meeting of Thistle shareholders convened to consider the President
Steyn transaction will be held in early December 2007 ("Thistle
shareholders meeting"). The President Steyn transaction will require
approval by a two thirds majority of votes cast by Thistle
shareholders at the Thistle shareholders meeting. Casten Holdings and
MC Resources, each holding approximately 35.0% of the outstanding
shares of Thistle entitled to vote at the Thistle shareholders
meeting, have irrevocably undertaken to vote in favour of the
President Steyn transaction.
Pamodzi Resources and Middelvlei Gold Investments (Proprietary)
Limited, each holding approximately 4.7% and 33.2% respectively of the
Pamodzi Gold shares entitled to vote at the general meeting of Pamodzi
Gold shareholders (details of which are provided in paragraph 7
below), have undertaken to vote in favour of the President Steyn
transaction.
4. The capital development private placement
Pamodzi Gold will be required to fund capital development at the Orkney
business and on the President Steyn gold mine in terms of their respective
"life of mine" plans and in order to undertake additional capital
development in areas, identified by Pamodzi Gold management, where it is
economical to do so.
Pamodzi Gold management, following a due diligence process, have estimated
that approximately R200 million in capital development funding will be
required for the Orkney business and the President Steyn gold mine. The
capital development program will include upgrading the metallurgical plant,
upgrading mine infrastructure, increasing exploration and underground
development.
In terms of the capital development private placement, Pamodzi Gold will
place up to 14.9 million Pamodzi Gold shares in the market to raise R200
million to be used to fund these capital development projects.
5. Black economic empowerment
Pamodzi Gold`s strategy is to consolidate the South African junior gold
mining sector. At the time of listing the Company envisaged making a
number of acquisitions and having to issue shares as part consideration to
fund such acquisitions.
The Company believes in the strategic advantage of being black owned,
especially in current market conditions. In order to cater for the
possible dilution of the BEE shareholders` shareholding in the event of a
dilution issue, Pamodzi Gold granted Pamodzi Resources (its strategic BEE
shareholder) an option to acquire such number of Pamodzi Gold shares, at a
discount of 15% to the VWAP of the Pamodzi Gold share traded on the JSE up
to the date on which the terms of the dilution issue are released on SENS,
as would enable it to maintain its 50.1% shareholding in Pamodzi Gold and
thereby keep Pamodzi Gold black owned ("option agreement").
Pamodzi Resources intends to follow its rights in terms of the option
agreement, subject to it being able to raise the requisite funding, and
subscribe for Pamodzi Gold shares to maintain the Company`s level of BEE
shareholding.
6. Financial effects of the proposed transactions and the private placements
The table below summarises the unaudited pro forma financial effects of the
proposed transactions and the private placements on Pamodzi Gold based on
the unaudited published financial results of Pamodzi Gold for the six
months ended 30 June 2007.
The unaudited pro forma financial effects are the responsibility of the
Pamodzi Gold directors and have been prepared for illustrative purposes
only to provide information about how the proposed transactions and the
private placements may have affected the financial position of the Pamodzi
Gold. Due to their nature, the unaudited pro forma financial effects may
not be a fair reflection of Company`s financial position after the
implementation of the proposed transactions and the private placements.
Unaudited Unaudited Unaudited The Change
published pro forma pro forma capital
interim financial financial deve-
financial effects effects lopment
results after the after the private Unaudited
as at 30 Orkney President place- pro forma
June 2007 trans- Steyn ment financial
action and tran effects
the Orkney saction after the
private and the proposed
placement President trans-
Steyn actions and
private the private
placement placements
(cents) (cents) (cents) (cents) (cents) (%)
Earnings (26.5) (141.2) (167.6) 11.5 (156.1) (488.7)
per
ordinary
share
Diluted (26.5) (141.2) (167.6) 11.5 (156.1) (488.7)
earnings
per
ordinary
share
Headline (26.5) (141.2) (167.6) 11.5 (156.1) (488.7)
earnings
per
ordinary
share
Diluted (26.5) (141.2) (167.6) 11.5 (156.1) (488.7)
headline
earnings
per
ordinary
share
Net 473.7 819.1 920.0 62.2 982.2 107.3
asset
value
per
ordinary
share
Net 472.6 818.4 919.5 62.3 981.8 107.7
tangible
asset
value
per
ordinary
share
Number 41,020 67,467 85,111 14,156 99,267
of
ordinary
shares
in issue
Notes:
1. The unaudited pro forma financial effects are based on the unaudited
published interim financial results of Pamodzi Gold for the six months
ended 30 June 2007. The financial impact on the earnings of Pamodzi
Gold is illustrated as if the proposed transactions and the private
placements had been completed at the beginning of the 2007 financial
year, while the impact on the net assets of Pamodzi Gold are shown as
if the proposed transactions and the private placements had been
implemented as at 30 June 2007.
2. The financial information shown in respect of the Orkney business has
been extracted from the unaudited management accounts of Orkney for
the six months ended 30 June 2007.
3. The financial information shown in respect of President Steyn has been
extracted from reviewed condensed interim financial statements of
President Steyn Gold Mines (Free State) (Proprietary) Limited for the
six months ended 30 June 2007.
4. The pro forma financial effects take into account the dilutionary
impact of the private placement of 2,445,665 Pamodzi Gold shares at
R15.00 per share with institutional investors in September 2007 to
raise cash for capital development projects at the Orkney business.
Pamodzi Gold management took operational control of the Orkney
business on 25 September 2007 and was required to fund capital
development until the Orkney private placement could be undertaken.
No earnings effects have been included relating to cash raised from
this private placement.
5. In terms of the Orkney transaction agreements, 9,272,903 Pamodzi Gold
shares are issued to Harmony.
6. For the purpose of the pro forma financial effects, it has been
assumed that the R350 million cash component of the initial Orkney
acquisition consideration is raised as follows:
a. Pamodzi Resources subscribes for 12,024,543 Pamodzi Gold shares
at a price per share of R13.26 pursuant to the Orkney private
placement and in terms of the option agreement;
b. 2,703,638 Pamodzi Gold shares are placed with institutional
investors at R15.00 per share pursuant to the Orkney private
placement; and
c. senior debt funding to the value of R150 million.
7. In terms of the President Steyn transaction agreements and the option
agreement, Clidet 776 will subscribe for, in aggregate, 10,558,069
Pamodzi Gold shares at R13.26 per share.
8. For the purpose of the pro forma financial effects, it has been
assumed that the R100 million cash component of the President Steyn
acquisition consideration is raised in terms of the President Steyn
private placement as follows:
a. Pamodzi Resources subscribes for 3,613,792 Pamodzi Gold shares at
a price per share of R13.26 in terms of the option agreement; and
b. 3,472,075 Pamodzi Gold shares are placed with institutional
investors at R15.00 per share.
9. For the purpose of the pro forma financial effects set out in the
table above, it has been assumed that R200 million is raised in terms
of the capital development private placement as follows:
a. Pamodzi Resources subscribes for 7,092,168 Pamodzi Gold shares at
a price per share of R13.26 in terms of the option agreement; and
b. 7,063,856 Pamodzi Gold shares are placed with institutional
investors at R15.00 per share.
7. Posting of the circular and notice of general meeting
Pamodzi Gold will post a circular to shareholders regarding the
proposed transactions and the private placements and containing a
notice of general meeting on or about Tuesday, 4 December 2007.
A general meeting of Pamodzi Gold shareholders, convened in terms of
the notice of general meeting, will be held at 10:00 on or about
Wednesday, 19 December 2007 at the registered office of the Company,
2nd Floor, Building C, East Gate Office Park, South Boulevard, Bruma
for the purpose of considering and, if deemed fit, passing the
resolutions required to implement the proposed transactions and
private placements.
8. Salient dates and times
The salient dates and times of the proposed transactions are set out
in the table below.
2007
Post circular on or about Tuesday 4 December
Last day for the receipt of proxy Friday 14 December
forms for the general meeting by 10:00
on
General meeting to be held at the Wednesday 19 December
registered office of the Company, 2nd
Floor, Building C, East Gate Office
Park, South Boulevard, Bruma at 10:00
on or about
Results of the general meeting Wednesday 19 December
released on SENS on or about
Results of the general meeting Thursday 20 December
published in the press on or about
Note:
1. These dates and times are subject to change. Any material change
will be released on SENS. Any reference to time is a reference to
South African time.
9. Withdrawal of cautionary announcement
The Pamodzi Gold cautionary announcement is hereby withdrawn.
Accordingly, Pamodzi Gold shareholders are no longer required to
exercise caution when dealing in their Pamodzi Gold shares.
Bedfordview
23 November 2007
Merchant bank and sponsor
RAND MERCHANT BANK (A division of FirstRand Bank Limited)
Legal Advisors
Cliffe Dekker Inc.
Date: 23/11/2007 12:56:19 Produced by the JSE SENS Department.
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