| Mon 15 Feb 2010, 7:40 | | ABO - Absolute Holdings Limited - Proposed Transformation Of Absolute Through |
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ABO
ABO
ABO - Absolute Holdings Limited - Proposed Transformation Of Absolute Through
The Acquisition Of An Effective 60% Interest In Bauba A Hlabirwa Mining
Investments (Proprietary) Limited ("Bauba")
ABSOLUTE HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1986/004649/06)
Share code: ABO ISIN No: ZAE000062998
("Absolute" or "the Company")
DETAILED CAUTIONARY ANNOUNCEMENT IN RELATION TO THE PROPOSED TRANSFORMATION OF
ABSOLUTE INTO A NEW PLATINUM EXPLORATION COMPANY THROUGH THE ACQUISITION OF AN
EFFECTIVE 60% INTEREST IN BAUBA A HLABIRWA MINING INVESTMENTS (PROPRIETARY)
LIMITED ("BAUBA")
1. INTRODUCTION
In line with Absolute`s strategic objective of procuring, acquiring and
developing junior mining and exploration projects, the Company has entered into
a company transforming binding agreement ("the Transaction Agreement") with
Hlabirwa Mining Investments (Pty) Limited ("Hlabirwa"), Highland Trading
Investments Limited ("Highland") and the shareholders of Ndarama Mineral
Resources (Pty) Limited ("the Ndarama Shareholders"), whereby Absolute will
acquire an effective 60% direct and indirect participation in Bauba ("the
Proposed Transaction").
2. OVERVIEW OF BAUBA
Bauba holds prospecting rights over eight farms which are prospective for
platinum mineralisation in the Eastern Bushveld Complex, encompassing an area of
approximately 50km in length and 6km in width (approximating 12,700 hectares)
along the Leolo mountain range in the Limpopo Province ("the Bauba Project").
The farms cover the down dip extent of several current development projects and
operating mines on the Eastern limb of the Bushveld Complex. The geological
location should reveal both Merensky Reef and UG-2 Chromitite Layer occurrences
as extensive exploration programmes are being conducted on the properties
neighbouring the Bauba Project.
A reconnaissance resource has been estimated by Stephen Gain (Pr.SciNat Msc), a
geologist with an extensive knowledge of the Eastern Bushveld, using average
modifying factors from projects and mines on adjacent properties. An estimate of
the in situ resource tonnages on the farms is 700 Mt which could include in
excess of 100 million oz Platinum Group Metals ("PGM") metal content. This in
situ reconnaissance resource estimation is considered conservative but is not
SAMREC Code compliant.
A systematic exploration programme will be designed in conjunction with an
Independent Competent Person and will comprise geological mapping, 3D seismic
surveys and diamond drilling.
Bauba has advised Absolute that they are aware of a review application pending
in respect of two prospecting rights which have already been executed. The
Sellers and Absolute have both obtained an independent view that this
application is unlikely to succeed.
3. RATIONALE
The Proposed Transaction provides Absolute with:
- a core project that is strategically positioned down dip from three
existing producing platinum mines and three development projects;
- exposure to the platinum market which is poised for significant growth and
investment over the next five to ten years;
- Johnson Matthey predicts that 2010 to 2015 will see major platinum
supply deficits due to:
- the increased auto catalyst demand from a recovering Chinese
economy;
- a decrease in platinum production globally due to cost pressures
having eroded the profitability of marginal, high cost
operations; and
- emerging production having been delayed by the 2008/9 financial
crisis.
- Surging ETF demand and limited new/fresh supply will create a sizeable
and sustained platinum price response.
- the technical and financial skills necessary to drive the Bauba Project
from greenfield exploration up to a bankable feasibility study and through
to development;
- the potential to create a formidable and sustainable force in the junior
South African platinum mining and exploration sector, and the opportunity
to be ideally positioned to participate in further sector consolidation;
- access to an experienced mining team with an extensive corporate finance
and deal-making background. The team also has access to a widespread
network within the mining and corporate environment;
- an experienced senior management team with excellent credentials, to be
spearheaded by Pine Pienaar (former Mvelaphanda Resources CEO) as CEO of
the enlarged Absolute; and
- a value adding relationship with the Bapedi Nation, who through the
retention of their participation in the Bauba Project will be able to
contribute to the project`s development and thereby increase the
involvement by Historically Disadvantaged South Africans ("HDSA`s") in the
platinum mining sector.
4. TERMS OF THE PROPOSED TRANSACTION
Absolute has agreed, with effect from the date of successful fulfilment of the
conditions precedent, to acquire from Hlabirwa, Highland and the Ndarama
Shareholders (collectively hereinafter referred to as "the Sellers") an
effective 60% direct and indirect participation in the share capital ("the Asset
Shares") of Bauba in exchange for 68,124,600 new ordinary Absolute shares ("the
Consideration Shares") at an issue price of R5.00 per Absolute share (post the
100:1 consolidation), in an asset for share transaction in terms of section 42
of the Income Tax Act. This represents an effective 81% direct participation by
the Sellers in the share capital of Absolute.
5. CONDITIONS PRECEDENT TO THE PROPOSED TRANSACTION
The Proposed Transaction is subject to, inter alia, the fulfilment of the
following Conditions Precedent:
- The satisfactory completion of a mutual due diligence by 31 March 2010;
- Absolute shall on or before 28 February 2010 obtain an independent
assessment and verification of Bauba`s in-situ reconnaissance resources to
the satisfaction of the Company;
- Absolute having informed the Sellers in writing on or before 31 March 2010
that it has secured the services of industry experienced staff for key
executive management positions as well as having identified the planned
exploration, mining and related service providers or personnel to progress
the Bauba Project;
- Absolute having on or before 30 April 2010 secured irrevocable undertakings
from potential investors for the purposes of raising working capital for
the Company in the minimum amount of R60,000,000 (sixty million Rand);
- Absolute having obtained any and all regulatory approvals, including but
not limited to the exchange control department of the South African Reserve
Bank, the SRP and the JSE Limited ("the JSE"), to the extent that such
regulatory approvals are necessary to give effect to the Proposed
Transaction;
- The Bauba shareholders, other than the Sellers, not having exercised any
rights of first refusal or pre-emptive rights which they may have in
respect of the Asset Shares in Bauba, on or before 1 April 2010;
- the shareholders of Absolute passing in general meeting such resolutions as
may be necessary for the Proposed Transaction to proceed by 30 June 2010;
- the board of directors of the Sellers passing such resolutions as may be
necessary for the Proposed Transaction to proceed by 31 March 2010;
- the board of the Absolute passing such resolutions as may be necessary for
the Proposed Transaction to proceed by 31 March 2010; and
- Absolute obtaining its shareholders approval and waiver of the requirement
for the Sellers to make a mandatory offer to minorities in terms of the
Securities Regulation Code ("the SRP Code") and rules of the Securities
Regulation Panel ("the SRP") in general meeting.
6. REVERSE TAKEOVER
The implementation of the Proposed Transaction will result in a reverse takeover
of Absolute for the purposes of the Listings Requirements of the JSE ("the
Listings Requirements"), which stipulate that Absolute can only retain its
listing following the reverse take-over if the JSE is satisfied that Absolute
continues to qualify being listed. The directors of Absolute are confident that
the Company will meet this requirement post the implementation of the Proposed
Transaction.
7. CHANGE OF CONTROL AND WAIVER OF MANDATORY OFFER
Approval and implementation of the Proposed Transaction will result in the
Sellers owning more than 35% of the issued shares in Absolute. At the general
meeting to approve the Proposed Transaction referred to below, Absolute
shareholders shall be asked to waive the requirement of a mandatory offer that
would otherwise apply in terms of Rule 8 of the SRP Code. An application will
then be lodged with the SRP seeking dispensation in terms of Rule 8.7 of the SRP
Code, which deals with the obligation to make a mandatory offer.
8. CHANGE OF NAME
To mark the beginning of a new era for Absolute`s entrance into the platinum
industry, Absolute will undergo a rebranding exercise which will include a
change of the Company`s name.
9. PRO FORMA FINANCIAL EFFECTS
The table below reflects the unaudited pro forma financial effects of the
Proposed Transaction. These have been prepared in terms of the Listings
Requirements, are for illustrative purposes only and due to their nature, may
not truly reflect Absolute`s financial position, results of operations, changes
in equity or cash flows. The directors of Absolute are responsible for the
preparation of the pro forma financial effects.
Before the Pro forma Change
issue after the (%)
issue
Basic loss - cents per share (51.36) (9.77) 81%
Headline loss - cents per share (36.81) (7.00) 81%
Net asset value ("NAV") - cents per share 197.43 442.42 124%
Net tangible asset value ("NTAV") - cents 197.43 442.42 124%
per share
Number of shares in issue 16,011,848 84,136,448 425%
Notes:
I. The "Before the issue" figures are based on Absolute`s published results
for the year ended 30 June 2009, as adjusted for the intended consolidation
of shares on the basis of 1 share for every 100 shares held.
II. The "Pro forma after the issue" column is based on the assumption that the
issue was effective from 1 July 2009 for basic loss per share and headline
loss per share. Given that the Purchase Price is settled via the issue of
new Absolute shares, earnings for the period will not be affected. Loss and
headline loss per share, however, will be diluted by the new number of
shares in issue.
III. The "Pro forma after the issue" column is based on the assumption that the
issue was effective on 30 June 2009 for NAV and NTAV purposes.
IV. All issues of shares subsequent to year end 30 June 2009 have been included
in the above calculations.
V. The "Number of shares in issue" is based on the assumption that the share
consolidation of 100:1 will have been approved by shareholders on 17
February 2010 (but excludes the impact of the proposed odd lot offer).
10. DOCUMENTATION
In terms of the Listings Requirements, the Proposed Transaction constitutes a
category one transaction for Absolute. A circular containing full details of
the Proposed Transaction and incorporating notice of a general meeting of
shareholders will be posted to Absolute`s shareholders within 28 days of the
conclusion of the reciprocal due diligence investigations referred to in
paragraph 5 above.
11. CAUTIONARY ANNOUNCEMENT
As a result of the above, shareholders are advised to exercise caution in
dealing in their securities until a further announcement is made in relation to
the achievement of the conditions precedent set out in paragraph 5 above.
For further information please contact Mark Rosslee on 083 308 8000 or Dennis
Tucker on 082 492 4957.
Johannesburg
15 February 2010
Corporate advisor Legal advisor Sponsor
Qinisele Resources (Pty) Limited Eversheds Arcay Moela Sponsors
(Proprietary) Limited
Date: 15/02/2010 07:40:01 Produced by the JSE SENS Department.
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