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AFG
AFG
AFG - Afgem - Disposal, Repayment Of Capital In Anticipation Of The Voluntary
Winding Up And Delisting
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"), BOKANG MINE (PTY) LTD
("BOKANG") AND AFGEM DIAMONDS (PTY) LTD ("AFGEM DIAMONDS") TO MEEPO INVESTMENT
CONSORTIUM (PTY) LTD ("MEEPO") ("THE DISPOSAL") AND REPAYMENT OF CAPITAL OF
2.65 CENTS PER ORDINARY SHARE AND 0.001 CENT PER PREFERENCE SHARE (UNLISTED)
IN ANTICIPATION OF THE VOLUNTARY WINDING UP AND DELISTING OF THE COMPANY
(COLLECTIVELY, "THE TRANSACTION")
1. INTRODUCTION
Afgem shareholders are referred to the announcements dated 4 June 2007 and 4
October 2007 wherein Afgem shareholders were advised that agreement had been
reached in terms of which Afgem would, subject to the fulfilment of various
conditions precedent, dispose of its entire shareholdings in Simolotse, Bokang
and Afgem Diamonds (together "the companies") ("shares") and claims on loan
account against the companies ("claims") to MEEPO, a South African company
owned by New African Mining AG ("NAM") for an amount of R5.2 million and Euro
2.1 million settled via the issue of new shares in MEEPO. Afgem received
R2 million of the R5.2 million in mid 2007 upon signature of the disposal
agreement.
Given various regulatory obstacles, MEEPO has submitted a cash offer for the
companies for an amount of R17.75 million in addition to the R2 million cash
already received in 2007 i.e. R19.75 million ("disposal consideration").
MEEPO has no existing holdings of shares in Afgem or the companies which
provide any ownership, control or option to purchase or in respect of which it
has received an irrevocable commitment to accept the offer.
A letter of confirmation issued by John Broido, attorney, notary and
conveyencer, has been furnished in favour of Afgem that resources will be
available to MEEPO to sufficiently satisfy the disposal consideration.
Subject to the passing and where applicable, the registration of the necessary
resolutions and the fulfilment or waiver, where possible, of the conditions
precedent in 2.4 below and after the payment of the expenses of the
transaction and the liabilities of Afgem, the Company will repay capital in
the amount of 2.65 cents per ordinary share to Afgem ordinary shareholders and
0.001 cent per preference share to Afgem preference shareholders ("the
distribution") in anticipation of the voluntary winding up of the Company. No
final distribution or liquidation dividend is expected. Accordingly Afgem will
be delisted from the JSE Limited ("JSE").
2. THE TRANSACTION
2.1 Settlement of the disposal consideration
The disposal consideration of R19.75 million was and will be paid to Afgem as
follows:
- R2 million in cash on 23 May 2007 being the signature date of the
disposal agreement. This cash was used to settle creditors. If the disposal
agreement does not become unconditional in accordance with its terms, Afgem
will be required to repay MEEPO the R2 million within 30 business days of the
disposal agreement not becoming unconditional;
- R1 million on 30 June 2008;
- R1 million on 7 July 2008;
- R500 000 on 14 July 2008;
- R1.25 million upon Afgem obtaining Afgem ordinary shareholder and Afgem
preference shareholder approval, Afgem board approval and SRP approval for the
disposal; and
- R14 million on the effective date (see 2.9 below).
2.2 Information relating to Simolotse, Bokang 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 an installment sale agreement with
Stannic, a division of the Standard Bank of South Africa Limited ("Stannic").
Bokang is the owner of the Bellsbank mine, an underground fissure diamond mine
located in Kimberley. The mine was placed on care and maintenance since
acquisition.
2.3 Rationale
Afgem acquired Bellsbank Consolidated Diamond Mine (Proprietary ) Limited (now
Bokang), 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 mining 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 were further compounded by operational difficulties arising
principally from the flooding of the Simolotse mine which resulted in Afgem
having insufficient funds to properly commission the Simolotse mine. As a
result, Afgem began seeking suitable purchasers for the Bokang and Simolotse
mines during December 2006.
2.4 Conditions precedent
The disposal is subject to fulfilment or waiver, where possible, of the
following conditions precedent by 30 November 2008:
- MEEPO conducting a due diligence to its satisfaction on Bokang, Simolotse
and Afgem Diamonds;
- MEEPO obtaining any necessary approvals from the Department of Minerals
and Energy;
- MEEPO reaching final written agreement with NUM and other relevant
applicants in the legal case J1917/06 that the applicants will accept a
payment of R1 million or less as settlement for the amounts claimed in such
legal action (in the event that it is established that the claim set out in
case J1917/06 is not covered by the settlement agreement dated 20 February
2007);
- MEEPO, NAM and Afgem obtaining their respective shareholder and board
approvals to the disposal agreement;
- MEEPO, NAM and Afgem obtaining any necessary regulatory approvals
including but not limited to stock exchange and Competition Commission
approvals. It has subsequently been established that Competition Commission
approval is not required;
- MEEPO, NAM and Afgem procuring that Afgem is released from the suretyship
it has provided to Stannic on behalf of Afgem Diamonds; and
- Afgem obtaining the approval of Stannic to the sales of the shares in
Afgem Diamonds.
2.5 Use of proceeds
The disposal consideration will be used by Afgem to pay the expenses of the
transaction, the liabilities of Afgem and pay the distribution to Afgem
shareholders in anticipation of the voluntary winding up of the Company.
2.6 Warranties
The disposal is subject to warranties which are usual in a transaction of this
nature.
2.7 Other significant terms of the transaction
Afgem, Simolotse, Afgem Diamonds, Bokang and MEEPO have entered into a
management and contractorship agreement in terms of which MEEPO has been
appointed as the manager of the Simolotse mine during the period from the
signature date of the disposal agreement to the effective date
(see 2.9 below)("interim period"). Afgem and MEEPO have formed a joint
management committee and all costs and expenses at Simolotse mine are jointly
authorised by Afgem and MEEPO during the interim period.
MEEPO is bearing the costs of managing and operating the Simolotse mine during
the interim period. In the event that the conditions precedent in 2.4 above
are not fulfilled and/or waived, where possible, and the disposal agreement
lapses and is of no further force or 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 has pledged
its shares in Bokang and ceded all its rights, title and interest in such
shares to MEEPO.
MEEPO will pay R4 million to NUM in terms of an agreement dated 20 February
2007 as clarified in a letter dated 25 April 2007 in respect of legal case
number JS96/04 on the due date therefor. MEEPO has indemnified and held Afgem
harmless against all losses, liability, damage or expense which Afgem may
suffer arising out of any claims against Afgem in respect of such payment and/
or arising out of legal action JS96/04 and other labour disputes which Afgem
has been joined with Simolotse as a respondent/ defendant including but not
limited to the legal actions JS96/0 4 and JS1017/06.
The intention of Afgem is for Agisanang (Proprietary) Limited to be
voluntarily wound-up.
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 ordinary share
as if the transaction took place on 1 April 2007 and 31 March 2008,
respectively. Because of their nature, the unaudited pro forma financial
effects may not give a true reflection of the Afgem group`s financial position
and performance. The unaudited pro forma financial effects have been compiled
from the audited results for the year to 31 March 2008 and are presented in
a manner consistent with the form at and accounting policies adopted by Afgem
and have been adjusted as described in the notes hereto:
Notes
Before the
disposal,
payment
to creditors,
distribution,
and voluntary
winding up
of the
Company
Loss per ordinary share (cents) 2,3 (9,35)
Diluted loss per ordinary share (cents) 2,3 (7,30)
Headline loss per ordinary share (cents) 2,3 (1,14)
Net asset value per ordinary share (cents) 4 3,48
Net tangible asset value per ordinary share (cents) 4 3,48
Actual number of ordinary shares in issue (`000) 4 257 622
Weighted average number of ordinary shares in
issue (`000) 2,3 257 622
Diluted number of ordinary shares in issue (`000) 3 329 930
After the
disposal After the
but before disposal,
payment payment
of creditors, of creditors,
distribution, distribution,
and voluntary and voluntary
winding winding up
up of of the
the Company Company
Loss per ordinary share (cents) (9,35) (10,18)
Diluted loss per ordinary share (cents) (7,30) (7,95)
Headline loss per ordinary share (cents) (1,14) (1,38)
Net asset value per ordinary share (cents) 3,48 -
Net tangible asset value per ordinary share (cents) 3,48 -
Actual number of ordinary shares in issue (`000) 257 622 257 622
Weighted average number of ordinary shares in
issue (`000) 257 622 257 622
Diluted number of ordinary shares in
issue (`000) 329 930 329 930
Notes:
1. Full details of the financial effects of the transaction detailing each
corporate action will be provided in the circular to Afgem shareholders.
2. The "before" loss per ordinary share, diluted loss per ordinary share and
headline loss per ordinary share figures are based on the weighted average
number of ordinary shares in issue at 31 March 2008.
3. The adjustments to the loss per ordinary share, diluted loss per ordinary
share and headline loss per ordinary share are based on the weighted average
number of ordinary shares in issue at 31 March 2008 and are stated assuming
that the transaction was effective 1 April 2007.
4. For net asset value and net tangible asset value calculations, it is
assumed
that the transaction was effective 31 March 2008 and based on the actual
number of ordinary shares in issue at 31 March 2008.
2.9 Effective date
The transaction will become effective on the 2nd business day following
fulfilment of the conditions precedent set out in paragraph 2.4 above.
2.10 Categorisation of the transaction
The transaction is a Category1 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 Afgem shareholders in due
course including a notice of general meeting to vote on the transaction.
3. VOLUNTARY WINDING UP OF AFGEM AND DELISTING
3.1 Voluntary winding up of Afgem
The remaining cash, after payment of the expenses of the transaction and
liabilities of Afgem, will be distributed to shareholders in anticipation of
the voluntary winding up of Afgem.
3.2 Delisting of Afgem
Subject to the passing and registration of the special resolution for the
voluntary winding-up of Afgem, the Company will apply for the delisting from
the JSE.
4. Expected timetable
2008
Circular and notice of general meeting posted to
Afgem shareholders on Thursday, 30 October
Last day for receipt of forms of proxy from
Afgem shareholders for the general meeting
by not later than 10:00 on Wednesday, 19 November
General meeting to be held at 10:00 on Friday, 21 November
Announcement on the Securities Exchange
News Service ("SENS") in respect of the results of
General meeting released on Friday, 21 November
Announcement in the press in respect of the General
meeting published on Monday, 24 November
*Finalisation date Thursday, 4 December
*Last day to trade over the counter in Afgem
shares to be recorded in the shareholders` register
of Afgem as an Afgem shareholder on the record date on Thursday, 11 December
*Record date to determine who qualifies for the
distribution to Afgem shareholders on Friday, 19 December
*Dematerialised shareholders` accounts held at
their Central Securities Depository Participant
or broker credited and/or updated on Monday, 22 December
*Electronic transfer of funds or cheques posted
by ordinary mail to certified shareholders on or about Monday, 22 December
*Termination of the listing of Afgem ordinary shares
on the JSE from commencement of trading on Tuesday, 23 December
*These dates and times are subject to change especially those that are
dependant on the requisite approval of Afgem shareholders being obtained in
respect of the disposal and the voluntary winding-up, the registration of the
special resolutions and the fulfilment or waiver, where possible, of the
conditions precedent in 2.4 above. Any change will be published in the press
and released on SENS.
5. Circular to shareholders
Afgem is in the process of preparing a circular to shareholders requesting the
approval of inter alia, the transaction, the distribution, the voluntary
winding-up and delisting of the Company.
Melrose Arch
17 October 2008
Sponsor
MACQUARIE FIRST SOUTH ADVISERS (PTY) LTD
Auditors and Reporting Accountants for Afgem
Zeelie De Kock
Chartered Accountants (SA)
Independent Expert
PKF CORPORATE FINANCE
Attorneys
ROUTLEDGE MODISE
In association with
EVERSHEDS
Date: 17/10/2008 14:01:02 Produced by the JSE SENS Department.
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