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PGL
PGL - Pallinghurst Resources (Guernsey) Limited - Acquisition by Pallinghurst of
investment entitlements
Pallinghurst Resources (Guernsey) Limited
Registration Number: 47656
(Incorporated in Guernsey)
ISIN: GG00B27Y8Z93
BSX share code: PALLRES
JSE share code: PGL
("Pallinghurst" or "the Company")
ACQUISITION BY PALLINGHURST OF INVESTMENT ENTITLEMENTS
1 INTRODUCTION
Shareholders are referred to the Company`s abridged pre-listing statement
released on the Stock Exchange News Service ("SENS") of the JSE Limited ("JSE")
on Friday, 15 August 2008, in terms of which the Company, in addition to its
existing investments, provided an overview of its entitlement to the investment
opportunities as set out therein ("Entitlements"), which Entitlements have been
reviewed and approved by the Company`s board of directors ("Board"), subject to
the receipt of the approval of the Exchange Control Department of the South
African Reserve Bank and the inward listing of the Company on the JSE ("Inward
Listing").
The Board is hereby pleased to announce that, pursuant to the Inward Listing of
the Company on the JSE on Wednesday, 20 August 2008 and in accordance with its
stated strategic objective of pursuing investments within its four core areas of
investment, the Company has exercised the Entitlements and confirmed its
participation in the joint ventures concluded between the Company and certain
strategic equity partners with Ntsimbintle Mining (Proprietary) Limited
("Ntsimbintle") and the Bakgatla-Ba-Kgafela Tribe ("Bakgatla") and the
acquisitions set out in paragraphs 4 and 5 hereto.
2 NTSIMBINTLE PALLINGHURST JOINT VENTURE
In accordance with the Company`s stated strategic objective of forming a
platform to source and supply raw materials to the steel industry, Pallinghurst
Cayman GP L.P., as investment manager to the Company ("Investment Manager") and
accordance with the terms of an investment management agreement, has secured a
manganese investment for the Company.
In November 2007, a subsidiary of the Company, along with certain strategic
equity partners, formed a joint venture with Ntsimbintle, a Black Economic
Empowerment group with manganese exploration rights within the primary manganese
region of South Africa, commonly referred to as the Kalahari Basin. The Kalahari
Basin contains approximately 80% of the world`s known mineable manganese
reserves. One of the properties subject to the Pallinghurst Ntsimbintle joint
venture is adjacent to and appears to share similar geology to Samancor`s world-
class Mamatwan Mine. The purpose of the Pallinghurst Ntsimbintle joint venture
is to create a world-class manganese producer within the next three-year period.
Following the recommendations of an independent scoping study, a pre-feasibility
and bankable feasibility study ("BFS") has been initiated and is expected to be
completed by the second quarter of 2009.
Pursuant to the Inward Listing the Company has acquired an effective minority
indirect shareholding in the Pallinghurst Ntsimbintle joint venture.
3 BAKGATLA PALLINGHURST JOINT VENTURE
3.1 Background
The Investment Manager has identified and secured two prospective investments in
the Platinum Group Metals ("PGM") industry. Strong demand combined with
challenges in supply make the PGM industry a promising area for investment.
PGMs are used across a wide range of industries and it is estimated that 20% of
all consumer products either contain PGMs or require PGMs in their production.
The uses of PGMs are primarily industrial, particularly in the automotive
industry, which uses PGMs in catalytic converters, spark plugs and sensors. In
2007, the automotive industry consumed 4.2 million ounces of platinum,
approximately 55% of global consumption of 8 million ounces. Platinum has also
become a very popular choice for modern jewellery, and in 2007, the jewellery
industry consumed 1.6 million ounces of platinum. China is today the largest and
fastest growing market for platinum jewellery.
For the past 10 years, South Africa has consistently produced between 70-80% of
the world`s primary PGMs and according to the South African Department of
Minerals & Energy, 87.7% of the world`s platinum reserves are located in South
Africa. Recent supply failures encountered by the existing South African PGM
miners include deeper level mining, smelter failures, uncertain power supply and
shortages of skilled workers.
These combined demand and supply-side pressures led to a series of record prices
for platinum and other PGMs during 2008. Although platinum is currently trading
below its peak, long-term price expectations remain strong, and the prospects
for a new entrant to the industry continue to be attractive.
The senior partners of the Investment Manager have strategic and operational
experience in PGMs through their earlier associations with Rustenburg Platinum
Mines Limited ("RPM"), Impala Platinum Holdings Limited and Incwala Resources
(Proprietary) Limited ("Incwala"), a Black Economic Empowerment PGM investment
vehicle with an 18% interest in Lonmin plc. Mr Gilbertson and Mr Frandsen played
key roles in the formation of Incwala, respectively in the roles of Chairman and
Chief Executive Officer.
3.2 Formation of a strategic partnership with the Bakgatla
The Investment Manager, for and on behalf of the Company and certain strategic
equity partners (collectively, "PGM Consortium") concluded an agreement with the
Bakgatla, in terms of which the parties will form a broad-based and black-
controlled PGM investment vehicle ("PGM SPV"), to be held initially as to 50.1%
by the Bakgatla and 49.9% by the PGM Consortium. In terms of the shareholders`
agreement that regulates the parties` relationship as shareholders of PGM SPV,
the parties will endeavour to exploit PGM opportunities in accordance with the
Company`s investment policy and investment objectives in order to realise
superior returns for its investors.
The PGM Consortium and the Bakgatla plan to exploit each of the transactions
described below, and the PGM SPV may consider further acquisitions and/or
development opportunities where the investment proposition and return propsects
are favourable.
4 ACQUISITION OF 100% OF THE ISSUED SHARE CAPITAL OF MOEPI GROUP
(PROPRIETARY) LIMITED
On 24 December 2007, the Investment Manager concluded an agreement with the
vendors of Moepi Group (Proprietary) Limited ("Moepi Group"), in terms of which
PGM SPV would acquire 100% of the shares in Moepi Group, a company holding an
approximate effective indirect 25% interest in Boynton Investments (Proprietary)
Limited ("Boynton"), subject to the fulfilment of certain conditions precedent.
Boynton is a private company whose primary assets are situated in the Western
Limb of the Bushveld Igneous Complex ("BIC"), north of the Pilanesberg, South
Africa and is controlled by Platmin Limited ("Platmin"), a USD 500 million
company incorporated in Canada and listed on the Toronto Stock Exchange and
Alternative Investment Market of the London Stock Exchange. Platmin focuses on
the exploration and development of PGM deposits in South Africa exclusively
through its approximate 73% effective interest in Boynton.
Concurrently with the Moepi sale and purchase agreement, the Company provided a
guarantee over loan funding of USD 25 million in order for the Moepi Group to
acquire a further 7.80% interest in Boynton, thereby increasing Moepi Group`s
total effective interest in Boynton to approximately 25%. The guarantee over
loan funding was the first step towards PGM SPV acquiring 100% of Moepi Group,
which transaction was declared unconditional on 4 June 2008.
Pursuant to the Inward Listing the Company has acquired a 9.26% interest in PGM
SPV as the platform for a broader PGM strategy.
5 ACQUISITION OF 40% INTEREST IN THE ISSUED SHARE CAPITAL OF RICHTRAU NO. 123
(PROPRIETARY) LIMITED
In addition, the Investment Manager, for and on behalf of the PGM Consortium,
secured a further prospective PGM investment pursuant to which the PGM
Consortium concluded an agreement on 31 May 2008 with the Bakgatla, subject to
requisite regulatory approvals, to acquire a 40% interest in Richtrau No. 123
(Proprietary) Limited, a PGM exploration company whose sole asset is a new order
prospecting right in respect of Magazynskraal 3, Registration Division J.Q.,
North West Province ("Magazynskraal"), a farm situated in the Western Limb of
the BIC, north of the Pilansberg. In terms of the Magazynskraal sale and
purchase agreement, the PGM Consortium will procure 100% of the BFS funding
required for the completion of the BFS in respect of Magazynskraal and pay the
Bakgatla an undisclosed consideration once the Magazynskraal transaction has
been declared unconditional in accordance with its terms. Currently, the
necessary regulatory approvals (including those from the Competition Authorities
and the Department of Minerals and Energy) are being obtained. The approval
process is anticipated to take up to 4 months.
Pursuant to the implementation of the Magazynskraal transaction, each of the
Bakgatla and the PGM Consortium will hold a 40% interest in Magazynskraal, with
RPM holding the remaining 20% interest. The PGM Consortium and Bakgatla`s
interests will be regulated in accordance with the PGM SPV`s shareholders`
agreement for the benefit of the PGM SPV. In terms of the Magazynskraal sale and
purchase agreement, the PGM Consortium will be appointed as a contractor to
complete the BFS in respect of Magazynskraal.
Pursuant to the Inward Listing the Company has acquired a 7.4% interest in the
Magazynskraal transaction.
20 August 2008
Sandton
Investment bank and sponsor Legal advisers in South Africa
(Investec Corporate Finance (ENS logo)
Logo)
Investment adviser
(Pallinghurst Resources LLP
logo)
Date: 20/08/2008 09:00:04 Produced by the JSE SENS Department.
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