| Thu 9 Apr 2009, 15:00 | | HVL - Highveld - Joint announcement regarding a Black Economic Empowerment |
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HVL
HVL
HVL - Highveld - Joint announcement regarding a Black Economic Empowerment
transaction in respect of the Mapochs Mine
Highveld Steel and Vanadium Corporation Limited
(Incorporated in the Republic of South Africa)
(Registration number 1960/001900/06)
JSE share code: HVL
ISIN: ZAE000003422
("Highveld" or "the Corporation")
Umnotho weSizwe Group(Proprietary) Limited
(Incorporated in the Republic of South Africa)
(Registration number 1997/014260/07)
("Umnotho weSizwe")
JOINT ANNOUNCEMENT REGARDING A BLACK ECONOMIC EMPOWERMENT TRANSACTION IN RESPECT
OF THE MAPOCHS MINE
INTRODUCTION
Highveld and Umnotho weSizwe are pleased to announce a 26% Black Economic
Empowerment ("BEE") transaction in relation to the Mapochs Mine ("BEE
transaction"). Mapochs Mine is presently an independently managed division of
Highveld, which will be transferred into Mapochs Mine (Proprietary) Limited
("Mapochs Newco"), a subsidiary of Highveld. Mapochs Mine produces lumpy
titaniferous magnetite ore, which is supplied exclusively to Highveld`s
steelworks, and fines ore, which is supplied exclusively to Vanchem Vanadium
Products (Proprietary) Limited for the production of a variety of vanadium
products.
The US$59.8 million BEE transaction has been entered into in the spirit of, and
to comply with, the Mineral and Petroleum Resources Development Act ("MPRDA")
and the Broad-Based Socio-Economic Empowerment Charter for the South African
Mining Industry ("Mining Charter"). The BEE transaction comprises of:
- the sale of a 23% equity interest in Mapochs Newco to Lashka 81 (Proprietary)
Limited (the name of which is to be changed to Umnotho Iron and Vanadium
(Proprietary) Limited or such other name as the Registrar of Companies approves)
("Umnotho SPV"), a subsidiary of Umnotho weSizwe; and
- the sale of a 3% equity interest in Mapochs Newco to the Mapochs Mine
Community Trust ("the Community Trust"), a trust established by Highveld to give
effect to its broad-based socio-economic ownership strategy.
RATIONALE FOR THE TRANSACTION
Highveld is committed to complying with the ownership requirements and socio-
economic objectives in the Mining Charter as well as the MPRDA. To this end,
Highveld has resolved to include both a strategic BEE partner, Umnotho weSizwe,
as well as the broad-based Mapochs Mine Community Trust in the BEE transaction.
Umnotho weSizwe is a BEE investment holding company with interests in the mining
and minerals sector, with strong, proven mining experience and expertise. The
company has been active in the resource sector since its formation in 1997. Its
investments span the platinum, diamond, coal, chrome and oil and gas sectors,
amongst others.
Umnotho weSizwe has a core management and shareholder base that traces its
involvement back to the founding of the Umnotho weSizwe group ("the Group"),
more than 10 years ago. The Group is a manager and developer of its own projects
and holds a variety of mining and exploration rights in both base and precious
metals which it is in the process of exploiting.
The Community Trust was established in order to enable the communities
surrounding the Mapochs Mine to benefit from the broad-based socio-economic
empowerment ownership initiatives of Highveld. With a key focus on upliftment
and contribution towards socio-economic development, the beneficiaries of the
Community Trust will include people from the community surrounding the Mapochs
Mine, Roossenekal and other major labour-sending areas to Mapochs Mine. The
trustees of the Community Trust will initially comprise of one trustee appointed
by Highveld and two independent trustees. These trustees are obliged to procure
the appointment of at least two additional trustees representing the
beneficiaries of the Community, within one year of registration i.e. by no later
than 11 February 2010.
Umnotho weSizwe will work closely with the Community Trust to assist in the
achievement of the objectives of the Community Trust and to successfully
implement the Social and Labour Plan of Mapochs Newco.
DETAILS OF THE TRANSACTION
Shareholders are referred to the announcement dated 22 April 2008, in which they
were advised that Mapochs Mine would be transferred into Mapochs Newco in an
internal restructuring, related to the disposal of certain vertically integrated
vanadium assets. Highveld has concluded agreements in this regard and, subject
to the conversion of the old order mining right which Highveld holds in relation
to Mapochs Mine, and the consent of the Minister of Minerals and Energy for the
transfer of the converted new order mining right to Mapochs Newco, Mapochs Mine
will be transferred to Mapochs Newco.
After the transfer of Mapochs Mine to Mapochs Newco, the BEE transaction will be
implemented with 23% of the equity in Mapochs Newco being sold to Umnotho SPV.
The consideration due to Highveld will be discharged by the payment of an
initial cash consideration of R15 million and the application of dividends
received by Umnotho, secured appropriately. In addition, 3% of the equity
interest in Mapochs Newco will be sold to the Community Trust, with the purchase
consideration being funded by a donation from Highveld to the Community Trust.
The parties are confident that the financing and structure of the BEE
transaction will ensure a sustainable transaction.
The agreements governing the BEE transaction include limited warranties and the
terms and conditions are customary to a transaction of this nature. Umnotho SPV
will appoint one director to the board of Mapochs Newco, while Highveld will
retain the right to appoint the majority of directors. The parties have agreed
on share disposal restrictions and certain empowerment status undertakings,
which are appropriate to secure the interests of both parties in Mapochs Mine,
the BEE transaction and the conversion of Highveld`s old order mining right.
APPLICATION OF PROCEEDS
Possible uses of the proceeds will be considered by the board of Highveld in due
course.
CONDITIONS PRECEDENT
The BEE transaction is subject, inter alia, to the conversion of the old order
mining right relating to Mapochs Mine and the consent of the Minister of
Minerals and Energy for the transfer of the converted new order right to Mapochs
Newco.
The effective date of the BEE transaction will be the later of 1 July 2010 and
the last business day of the calendar month in which the conditions above are
fulfilled. If the effective date of the BEE transaction is later than 1 July
2010, the purchase consideration will be appropriately adjusted for all profits
distributed to Highveld from 1 July 2010.
The transaction is a Category 2 transaction. Accordingly, no shareholder
approval is required.
PRO FORMA FINANCIAL EFFECTS
The table below sets out the unaudited pro forma financial effects of the
disposal on the Corporation`s earnings per share ("EPS"), headline earnings per
share ("HEPS"), net asset value per share ("NAV") and tangible net asset value
per share ("TNAV") based on the audited results for the financial year ended 31
December 2008. The pro forma financial effects have been prepared for
illustrative purposes only, and, because of their nature, may not give a true
reflection of Highveld`s financial position, changes in equity, results in
operations or cash flows. The directors of Highveld are responsible for the pro
forma financial effects.
Before the After the Percentage
implementation implementation change
of the BEE of the BEE %
transaction transaction
(cents) (cents)
EPS 2,561 3,228 26.04%
HEPS 2,560 2,858 7.85%
NAV per share 2,866 3,533 23.26%
TNAV per share 5,382 5,917 9.95%
Notes:
The pro forma financial effects were calculated based on 99 150 098 weighted
average ordinary shares in issue as at 31 December 2008 and the impact as shown
above assumes and effective date of 1 January 2008.
The pro forma financial effects assumes that the cash proceeds from the disposal
were invested at 10 percent per annum.
The pro forma financial effects of the balance on the outstanding purchase price
attracts interest at prime interest rates.
The pro forma financial effects of the increased revenue as a result of sales to
third party were calculated based on 2008 market prices for ore and vanadium.
9 April 2009
eMalahleni
Investment bank, transaction advisor and transaction sponsor to Highveld
The Standard Bank of South Africa Limited
Attorneys to Highveld
Webber Wentzel
Sponsor to Highveld
JP Morgan
Attorneys to Umnotho
DM5 Inc
Date: 09/04/2009 15:00:04 Produced by the JSE SENS Department.
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