| Wed 18 Nov 2009, 16:34 | | CMO - Chrometco Limited - Acquisition and withdrawal of cautionary |
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CMO
CMO
CMO - Chrometco Limited - Acquisition and withdrawal of cautionary
CHROMETCO LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 2002/026265/06)
(JSE Code: CMO ISIN: ZAE000070249)
("Chrometco" or "the company")
- ACQUISITION OF MINORITY INTERESTS IN TWO ADDITIONAL EXPLORATION COMPANIES AND
AN OPTION TO ACQUIRE THE REMAINING SHARE CAPITAL
- WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
INTRODUCTION
Further to the announcements published on 29 June 2009 and on 18 September 2009,
shareholders are advised that Chrometco has concluded subscription agreements
(the "Subscription Agreements") to acquire 9.774% of the share capital in each
of two exploration companies (the "Minority Interests"); namely Lime-Chem
Minerals (Proprietary) Limited ("Lime-Chem Minerals"), a potential limestone
resource, and Summer Season Trading 84 (Proprietary) Limited ("Summer Season"),
a potential dolomite resource.
The existing shareholders of Lime-Chem Minerals and those of Summer Season have
also granted Chrometco free call options to acquire all the shares in Lime-Chem
Minerals and Summer Season subject to the fulfilment of certain conditions
precedent (the "Call Options").
The Call Options, if exercised, would result in either Lime-Chem Minerals or
Summer Season, or both, becoming wholly owned subsidiaries of Chrometco ("the
Resource Acquisitions"). The Resource Acquisitions will be settled in Chrometco
shares.
This announcement sets out the salient terms of the Subscription Agreements and
the Call Options as well as the financial effects of (i) the Lime-Chem
acquisition announced on 29 June 2009, (ii) the Subscription Agreements and
(iii) the Call Options (collectively "the transactions").
RATIONALE FOR THE TRANSACTIONS
Chrometco previously announced that it had entered into an agreement to acquire
a 90% interest in Lime-Chem (Proprietary) Limited ("Lime-Chem"). Chrometco has
also stated its intention to possibly pursue the construction of a 500 ton/day
kiln in order to convert its existing raw limestone and dolomite resources into
higher value burnt lime and burnt dolomite respectively ("the Kiln Project").
Considering the proposed scale of the Kiln Project, Chrometco has determined it
strategically important to acquire additional limestone and dolomite resources
to strengthen their position in this market with related products.
CLASSIFICATION OF THE TRANSACTIONS
Some of the existing shareholders of Lime-Chem Minerals (being the Edward
Bramley Family Trust) and Summer Season (being JG Scott and Audax Resources
(Pty) Ltd) are related parties as defined in the JSE Listings Requirements. In
terms of the JSE Listing Requirements the Subscription Agreements and the Call
Options fall below the threshold of small related party transactions. However,
in terms of sections 9.11 and 9.13 of the JSE Listing Requirements the
transaction will be classified as a Category I transaction as the Subscription
Agreements and the Call Options are to be aggregated with the Lime-Chem
acquisition.
PURCHASE CONSIDERATION FOR THE MINORITY INTERESTS
The purchase consideration for the Minority Interests in each of Lime-Chem
Minerals and Summer Season is R13, payable in cash and shall be applied to
subscribe for subscription shares (the "Subscription Shares") in each of the
companies. The Subscription Shares shall be 13 (thirteen) ordinary shares of
R1.00 (one rand) each in the authorised ordinary shares of each of the companies
which will constitute, after their allotment and issue, approximately 9.774%
(being 13 out of 133 ordinary shares) of the entire issued share capital of each
of the companies.
THE PURCHASE CONSIDERATION WHEN EXERCISING THE CALL OPTIONS
At any time during the Call Option Exercise Period, for each of the Call
Options, Chrometco has the irrevocable right but not the obligation, by written
notice, to purchase from the existing shareholders all their shares and claims
(up to its face value) in the companies for the aggregate of the value of the
claims and the share consideration.
The total consideration for Summer Season shall be:
- R20 million in the event that a scoping study (the "Scoping Study) has not
identified any dolomite resource suitable for metallurgical purposes (the
property currently has a large quantity of aggregate); or
- in the event that the Scoping Study has identified a dolomite resource
suitable for metallurgical purposes, the higher of R50 million or 50% of the
value of the dolomite resource determined by Venmyn Rand (Pty) Ltd ("Venmyn") in
accordance with the South African Mineral Asset Valuation Working Group
("SAMVAL")
The total consideration for Lime-Chem Minerals shall be:
- R20 million in the event the Scoping Study has not identified any limestone
resource suitable for metallurgical purposes or any limestone resource suitable
for the production of cement (the property currently has a large quantity of
limestone); or
- in the event that the Scoping Study has identified a limestone resource
suitable for metallurgical purposes, the higher of R20 million or 60% of the
value of the limestone resource determined by Venmyn in accordance with SAMVAL;
or
- in the event that the Scoping Study has identified a limestone resource
suitable for the production of cement, the higher of R60 million or 50% of the
value of the cement limestone resource determined by Venmyn in accordance with
SAMVAL.
The consideration to the existing shareholders shall be settled through the
allotment and issue by Chrometco of Chrometco ordinary shares valued at the 30
day volume weighted average traded price ("VWAP") on the exercise date.
Should Chrometco not exercise the Call Options when they expire, that company
shall be entitled, within 90 days of receipt of written notice, to repurchase
the Subscription Shares from Chrometco for R13.
CONDITIONS PRECEDENT
The purchase of the Minority Interests is subject to the fulfilment of certain
conditions precedent that are standard in agreements of this nature by not later
than 17:00 on 29 January 2010 and include, inter alia:
- that the directors of Summer Season and Lime-Chem Minerals have passed
resolutions that approve and ratify the transactions;
- allot and issue the subscription shares; and
- appointed with effect from the subscription date no fewer than 2 Chrometco-
nominated directors to each of the companies
FINANCIAL EFFECTS OF THE TRANSACTION
The table below sets out the unaudited pro forma financial effects of the
transactions (being the Lime-Chem acquisition announced on 29 June 2009, the
Subscription Agreements and the Call Options) based on Chrometco`s unaudited
interim consolidated financial results for the six months ended 31 August 2009.
The financial effects are presented for illustrative purposes only and because
of their nature may not give a fair reflection of the Company`s results,
financial position and changes in equity after the transactions. It has been
assumed for purposes of the pro forma financial effects that the above
transactions took place as at 31 August 2009 for balance sheet and for the
period 1 March 2009 to 31 August 2009 for income statement purposes. The
directors of Chrometco are responsible for the preparation of the financial
effects.
1 2 3
Before the After the %
Transactions Transactions Change
Pro Forma
Weighted average 184 929 557 729 202%
number of shares
(000`s)
Shares for net 184 929 557 729 202%
asset value
calculation
(000`s)
Basic loss per (0.96) (0.35) 64%
share (cents)
Basic headline (0.96) (0.35) 64%
loss per share
(cents)
Net asset value 18,33 15.39 (16%)
per share (cents)
Tangible net asset 16.93 2.68 (84%)
value per share
(cents)
Notes:
1. This column represents the "before" financial information, which has been
extracted, without adjustment, from the published unaudited interim consolidated
results of Chrometco for the six months ended 31 August 2009.
2. This column reflects the effect after the 89.989% acquisition of Lime-Chem
and the issue of shares in settlement of the R 66.6m purchase price. It also
includes the effect of the Subscription Shares; no cash is expected to be spent
on the Scoping Costs relating to the exercise of the Call Options. These values
are unaudited.
3. This column reflects the percentage change the above group of transactions
has on the performance per ordinary share of Chrometco. Actual figures have been
used to determine percentage change rather than the rounded figures reflected
above.
The Board would like to confirm and highlight the fact that the above financial
information is based on a fair value of R 55.1m in respect of Lime-Chem`s
identifiable net assets, which does not include the fair value of the Kiln
Project. The fair value of Lime-Chem (including the Kiln Project) has been
independently assessed as being between R 283.5m and R 549.7m details of which
will be included in the circular to be posted to shareholders in due course.
The assumptions used above are:
- earnings remain constant;
- all shares are issued based on Kiln profitability targets being achieved;
- Chrometco earns interest on cash deposits at a rate of 7%.
DOCUMENTATION
A circular setting out the terms of the transactions and convening a general
meeting of Chrometco shareholders will be posted to shareholders in due course.
WITHDRAWAL OF CAUTIONARY
Accordingly, as details pertaining to the Subscription Shares and the Call
Options have been announced, shareholders are no longer advised to exercise
caution when dealing in the company`s securities.
Designated Advisor
Sasfin Capital
A division of Sasfin Bank Limited
Date: 18/11/2009 16:34:18 Produced by the JSE SENS Department.
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