| Fri 29 Jan 2010, 15:50 | | VIL - Village Main Reef Gold Mining Company (1934) Limited - Cautionary |
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VIL
VIL
VIL - Village Main Reef Gold Mining Company (1934) Limited - Cautionary
announcement relating to the proposed acqusition by Village of a controlling
interest in Lesego Platinum Limited ("LESEGO") and the Phosiri Platinum Project
("PHOSIRI" or "THE PROJECT")
Village Main Reef Gold Mining Company (1934) Limited
("Village")
(Incorporated in the Republic of South Africa)
(Registration Number 1934/005703/06)
JSE Code VIL ISIN : ZAE000007720
CAUTIONARY ANNOUNCEMENT RELATING TO THE PROPOSED ACQUSITION BY VILLAGE OF A
CONTROLLING INTEREST IN LESEGO PLATINUM LIMITED ("LESEGO") AND THE PHOSIRI
PLATINUM PROJECT ("Phosiri" or "the Project")
1 INTRODUCTION
Shareholders are advised that Village has concluded a binding agreement,
subject to the fulfilment of certain conditions precedent, to acquire a
controlling interest in Lesego and certain affiliated entities that
together control the Project for a total purchase consideration of
R411,481,342 ("the Proposed Transaction"). The purchase consideration will
be settled through the issue of 205,740,671 ordinary shares in Village at a
share price of 200 South African cents per share.
2 RATIONALE FOR THE ACQUISITION
If concluded, the Proposed Transaction will:
* deliver control to Village of a potentially world class platinum
asset, at an attractive valuation relative to platinum peers. The
potential acquisition will endow Village with an attributable inferred
resource of 17.5m ounces of platinum group metals (3PGMs plus gold);
* leverage the benefits of R142m of existing capital already raised by
Lesego to provide for the full funding requirements of the Project to
the bankable feasibility study stage ("BFS");
* represent the first transaction in Village`s strategy to acquire and
develop a portfolio of precious metals mining assets;
* further cement Village`s existing relationship with Umbono Capital
Partners (Pty) Ltd ("Umbono"), a broad-based Black Economic
Empowerment ("BEE") group that has an established portfolio of mining
and exploration assets in Southern Africa underpinned by a strong
capital base and the technical skills and resources. Upon conclusion
of the Proposed Transaction, Village will boast BEE ownership of over
60% and enjoy access to a broader set of mining business
opportunities; and
* augment the Village team with key Lesego personnel including Roy
Pitchford, the chairman of Lesego and a veteran in the platinum mining
industry, Phiway Mbuyazi and Dorian Wrigley.
3 LESEGO AND THE PHOSIRI PLATINUM PROJECT
Situated approximately 300km north east of Johannesburg between the Anooraq
Bokoni mine (ex Anglo Platinum Atok mine) and the Lonmin Limpopo mine, the
Phosiri platinum project has been developed by Lesego since 2005.
Phosiri is a potential world class platinum project with a total inferred
resource of 27.8m platinum group metal ounces (3PGMs plus gold) at a high
grade averaging of 6.43g/t 3PGMs plus gold. The Merensky and UG2 reefs
which comprise the resource are relatively wide at 1.47 meters and 1.18
meters respectively, with reasonably low dip.
The Proposed Transaction will result in Village controlling the entire
Project and owning an attributable resource of 17.5m ounces (3PGMs plus
gold), representing 63% of the total Project inferred resource. Ongoing
discussions with other minority shareholders in the Project may increase
Village`s attributable share of the Project`s inferred resource to in
excess of 21m ounces (3PGMs plus gold).
Lesego will, in February 2010, commence work on the bankable feasibility
study ("BFS") for the Project and the BFS is expected to be completed
within three years, before the end of 2012.
An independent Competent Persons Report ("CPR") on Phosiri compliant with
the South African Code for Reporting of Exploration Results, Mineral
Resources and Mineral Reserves ("SAMREC") is currently being updated by
Venmyn Rand (Pty) Limited ("Venmyn"). The original SAMREC-compliant CPR
prepared by Andy Clay on behalf of Venmyn dated 26 March 2008 is available
for review on www.lesego.com together with additional information regarding
the Project and Lesego.
The Project holds valid new order prospecting rights for all minerals on
six farms in the Limpopo Province. Lesego owns 100% of the rights on the
four northern farms that host 60% of the Project`s inferred resource, and
an effective 45% of the southern farm Eerste Regt which hosts 38% of the
Project`s inferred resource. The Proposed Transaction includes the
acquisition of a further 50% effective interest in Eerste Regt.
4 FUNDING FROM THE IDC FOR BANKABLE FEASIBILITY
The Industrial Development Corporation of South Africa ("IDC") has acquired
a 28% shareholding in Lesego for consideration of R142 million ("the IDC
Transaction"), and it is anticipated that this funding be adequate to cover
the entire budget for the Lesego BFS.
Since the Lesego BFS is "fully funded", Village is not expected to be
required to raise capital for this portion of the BFS through to its
anticipated completion in 2012.
5 STRUCTURE OF THE TRANSACTION
The Proposed Transaction would involve the acquisition by Village of the
indirect interests of the two major shareholders of Lesego, being Umbono
and Minex Projects (Pty) Ltd ("Minex") in Lesego, In addition, Village
would acquire the interests of a third group, Nebavest 69 (Pty) Ltd, that
own an effective 50% interest in the Eerste Regt prospecting right.
Binding agreements have been concluded between Village, Umbono, Minex and
Nebavest subject to the fulfilment of various conditions precedent
including the board and shareholder approvals of Village, required
regulatory and JSE approvals and the waiver or failure to exercise pre-
emptive rights by several parties including the IDC.
The valuation of Lesego implicit in the Proposed Transaction is based on
the valuation attributed to Lesego in terms of the IDC Transaction, and is
significantly below the "per ounce" valuations at which listed platinum
mining and exploration companies are valued presently.
Village are in ongoing discussions with certain other minority shareholders
in the Project, and these discussions may lead to the further acquisition
of up to 4m attributable inferred resource ounces in the Project. Such
potential transactions would also be settled through the issue of Village
shares.
6 FURTHER ANNOUNCEMENT AND CAUTIONARY STATEMENT
A further announcement will be made in due course.
As the Proposed Transaction may have a material effect on the price of
Village`s share, Village shareholders are advised to exercise caution when
dealing in Village`s shares until such further announcement is made.
Bernard Swanepoel, Director of Village commented, "This transaction meets
many of our strategic criteria, and lays a sound foundation for Village as
a player in precious metals. The acquisition of Lesego and the Phosiri
Project brings us ownership of a high grade platinum ore body and a fully
funded BFS programme. We are pleased to broaden Village`s BEE ownership and
develop our relationship with Umbono, a successful investor in Southern
African mining projects. This is our first deal and serves as a platform
to acquire further precious metal mining opportunities, particularly those
with imminent or existing cashflow generation"
Johannesburg
29 January 2010
Sponsor
Investec Bank Limited
Contacts:
Director, Village Main Reef Gold Company,
Bernard Swanepoel, bernard@2tp.co.za; 0833039922
Vestor, Media and Investor Relations
Louise Brugman, 083 504 1186
Date: 29/01/2010 15:50:10 Produced by the JSE SENS Department.
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