| Wed 28 Apr 2010, 13:34 | | SIM - Simmers - Detailed terms of the participation of Simmers in the First |
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SIM
SIIF
SIM - Simmers - Detailed terms of the participation of Simmers in the First
Uranium Corporation recapitalisation programme; notice of general meeting;
resignation of directors and renewal of cautionary
Simmer & Jack Mines, Limited
(Incorporated in the Republic of South Africa)
(Registration number 1924/007778/06)
Share code: SIM ISIN Code: ZAE000006722
("Simmers" or "the Company")
DETAILED TERMS OF THE PARTICIPATION OF SIMMERS IN THE FIRST URANIUM CORPORATION
RECAPITALISATION PROGRAMME; NOTICE OF GENERAL MEETING; RESIGNATION OF DIRECTORS
AND RENEWAL OF CAUTIONARY
1. INTRODUCTION
As announced on SENS on 12 March 2010, Simmers is participating in the $172.7
million First Uranium Corporation ("FIU") recapitalisation programme ("FIU
Recapitalisation Programme") for the Rand equivalent of C$62.7 million ("the
transaction"). Prior to entering into the FIU Recapitalisation Programme,
Simmers owned 37.24% of the issued share capital of FIU.
Simmers has funded its participation in the FIU Recapitalisation Programme from
its cash reserves and a bridge loan facility with Rand Merchant Bank, a division
of FirstRand Bank Ltd, dated 19 April 2010 ("Bridge Loan Facility"). Subject to
the Bridge Loan Facility agreements, Simmers intends to undertake a capital
raising by way of the issue of secured convertible redeemable bonds ("Secured
Convertible Redeemable Bonds") by way of a rights offer made to the Simmers`
ordinary shareholders ("Rights Offer").
2. THE TRANSACTION
2.1 Rationale
In January 2010 the Simmers board appointed an investment committee to ascertain
the value proposition at FIU. Following a due diligence, the board was satisfied
that there was significant value to be gained by participating in the FIU
Recapitalisation Programme as it would allow FIU to complete its capital
projects and provide the infrastructure upon which the anticipated increase in
production could be realised. As at close of business on 15 April 2010, Simmers`
37.24% investment in FIU represented 39% of Simmers` market capitalisation. It
is therefore essential that Simmers moved to protect its investment in FIU by
playing an active role in the FIU Recapitalisation Programme. This will ensure
that Simmers is best positioned to take advantage of the up-side that is
expected once production levels increase. FIU expects to grow the production at
its Ezulwini Mining Company (Proprietary) Limited ("Ezulwini Mine") as it
continues to ramp up its underground activities to increase the amount of ore
hoisted to fill its completed gold and uranium plants. The FIU Recapitalisation
Programme will enable Mine Waste Solutions (Proprietary) Limited ("Mine Waste
Solutions") to complete its planned capital build programme which is expected to
increase gold production and initiate uranium production.
2.2 Terms of the transaction
The FIU Recapitalisation Programme of C$172.7 includes the offering of C$150
million secured convertible redeemable notes ("FIU Notes"), consisting of C$40
million Rand denominated FIU Notes issued by Mine Waste Solutions ("Rand FIU
Notes") and C$110 million Canadian Dollar denominated FIU Notes issued by FIU
("Canadian FIU Notes"), and a conversion of the unsecured loan from Simmers to
First Uranium (Proprietary) Limited ("FIU SA"), an indirectly wholly owned
subsidiary of FIU, ("Simmers Facility") of approximately C$22.7 million. The
Rand FIU Notes are capable of being put or exchanged by the holders of the Rand
FIU Notes in return for FIU common shares. The terms of the Rand FIU Notes and
the Canadian FIU Notes are contained respectively in the Rand FIU note indenture
("Rand FIU Note Indenture") and the Canadian note indenture ("Canadian FIU Notes
Indenture") agreements respectively dated 26 April 2010. Where possible, these
agreements have been aligned to give effect to the pari passu ranking of the
instruments notwithstanding the instruments having different issuers and
exchange rate denominations. The Canadian FIU Notes were listed on the Toronto
Stock Exchange ("TSX") and Simmers subscribed for the Rand FIU Notes on Monday,
26 April 2010. The salient terms of these indenture agreements are detailed
below.
On 14 August 2009 Simmers and FIU SA finalised the one-year unsecured Simmers
Facility. In September 2009, FIU SA drew down the entire Simmers Facility. The
Simmers Facility bears interest at the three-month JIBAR for Rand denominated
facility plus 7% per annum.
The total amount owing by FIU SA to Simmers in terms of the unsecured Simmers
Facility is the Rand equivalent of C$22.7 million consisting of a capital amount
and unpaid accrued interest. As part of the FIU Recapitalisation Programme,
Simmers will effectively exchange or convert the amount owed in terms of the
Simmers Facility for an equivalent value of Rand FIU Notes. This conversion will
be effected through the assignment by FIU SA of its obligations to Simmers under
the existing loan to Mine Waste Solutions which will then settle its obligation
to repay Simmers by issuing further Rand FIU Notes to Simmers.
Upon issue, the FIU Notes will be guaranteed by the subsidiaries of FIU, secured
by second ranking security over all assets currently encumbered in favour of
Gold Wheaton Barbados Corporation ("Gold Wheaton") and first security over all
other current and future assets of FIU, not be redeemable until the maturity
date of the FIU Notes and be subject to typical anti-dilution protections.
Each Canadian FIU Note will have a principal amount of C$1 000, a maturity date
of 31 March 2013, a 7% semi-annually paid coupon and will be convertible into
769.2307 FIU common shares representing a conversion price of C$1.30, a 13%
discount to the 5-day volume weighted average price of FIU common shares on 12
March 2010. Each Rand FIU Note will have a principal amount of R1 000, a
maturity date of 31 March 2013, a 11% semi-annually paid coupon and will be
convertible into 107.36 FIU common shares, also representing a conversion price
of C$1.30, at an exchange rate of R7.16 : C$1.00 as at 12 March 2010. In
addition, Simmers and FIU have entered into the Anti-dilution agreement on 26
April 2010 in terms of which Simmers has the right during the tenor of the Rand
FIU Notes Indenture and the Rand FIU Notes (subject to TSX approval), to
participate in any issuance of equity or equity linked instruments which may
result in the Simmers` percentage holding in FIU being diluted.
Gold Wheaton will receive 14 000 000 FIU common shares ("Penalty Payment") in
part settlement of the US$42 million completion penalty due pursuant to its Mine
Waste Solutions gold stream transaction and has received a commitment to
complete construction of the third gold plant module and to satisfy the
technical completion tests prior to 1 September 2011. In the event that the
construction is not complete and tests are not met by such date, a US$1.5
million payment shall be payable by FIU to Gold Wheaton on the first day of each
of September, October, November and December 2011 unless such construction has
been completed and tests have been met prior to such date. In the event that
these commitments to construction and technical completion are not met prior to
1 December 2011, a remaining penalty of US$30 million will be payable.
If Simmers were not to convert any Rand FIU Notes, Simmers shareholding
percentage in FIU common shares would reduce to 34.36% due to the Penalty
Payment. If Simmers were to convert all of the Rand FIU Notes held by it into
FIU common shares, Simmers would acquire an additional 48 230 769 FIU common
shares bringing its holdings to approximately 48.2% of FIU common shares of the
issued and outstanding FIU common shares (assuming the other Canadian FIU Notes
were not converted but giving effect to the Penalty Payment. Assuming all the
FIU Notes were to be converted, Simmers would hold approximately 35.2% of the
FIU common shares).
Participation by the parties in the FIU Recapitalisation Programme is set out
below:
Instrument Party Participation amount
Rand FIU Notes Simmers C$62.7 million (see Note 1)
Canadian FIU Notes Gold Wheaton C$20.0 million
Other C$90.0 million
investors
FIU common shares Gold Wheaton C$18.2 million(see Note 2)
Notes:
1. Simmers intends to purchase the Rand equivalent of C$40 million of Rand FIU
Notes and intends to convert a pre-existing unsecured loan to FIU SA of
approximately C$22.7 million for the Rand equivalent value of Rand FIU Notes.
2. Calculated at a FIU share price of C$1.30.
2.3 The business of FIU
FIU is focused on the goal of becoming a significant low-cost producer of
uranium and gold through the expansion of the underground development to feed
the new uranium and gold plants at the Ezulwini Mine and through the expansion
of the plant capacity of the Mine Waste Solutions tailings recovery facility,
both operations situated in South Africa.
2.4 Pro forma financial effects of the transaction
The tables below sets out the reviewed pro forma financial effects of the
transaction. The reviewed pro forma statement of comprehensive income and
statement of financial position, which are the responsibility of the directors,
have been prepared for illustrative purposes only and, because of their nature,
may not give a true reflection of Simmers` financial position, changes in equity
and results of operations or cash flows. The reviewed pro forma statement of
comprehensive income and statement of financial position was extracted from the
published reviewed consolidated interim results of Simmers for the 6 months
ended 30 September 2009.
The reviewed pro forma financial information is intended to provide information
about how the transaction may have affected the statement of comprehensive
income and statement of financial position of Simmers for the 6 months period
ended 30 September 2009, had the transaction been effected on 1 April 2009 for
the statement of comprehensive income effects and on 30 September 2009 for the
statement of financial position effects.
Two scenarios are presented below to illustrate the impact of the transaction if
i) the Rand FIU Notes are not converted, and ii) assuming notes have been
converted immediately on issuance. Shareholders are cautioned however that,
especially in the light of the Simmers Rights Offer, the board will only convert
the Rand FIU Notes if and when it makes commercial sense, taking into account,
inter alia, interest payments, security and dividend flows.
2.4.1 No conversion of Rand FIU Notes into FIU common shares
Before the After the Change
transaction transaction (%)
(see Note 1) (see Note 2)
EPS (cents) (10.57) (12.45) (18%)
Diluted EPS (cents) (10.70) (12.61) (18%)
HEPS (cents) (12.81) (14.70) (15%)
Diluted HEPS (cents) (12.97) (14.88) (15%)
NAV per share (cents) 295.66 294.13 (1%)
TNAV per share (cents) 295.66 294.13 (1%)
Number of Simmers 1,221 1,221 -
ordinary shares in issue
(`000)
Weighted Average Number 1,159 1,159 -
of ordinary shares (`000)
Notes:
1. The "Before the transaction" column is based on the reviewed financial
statements of Simmers for the 6 months ended 30 September 2009.
2. The continuing financial effects are calculated on the following assumptions:
- no adjustments other than the adjustments to reflect the impact of the
transaction have been made to the reviewed pro forma financial information;
- Simmers subscribes for the Rand equivalent of C$62.7 million of the Rand FIU
Notes;
- the Rand FIU Notes are not converted during the term of the Rand FIU Notes;
- the existing unsecured Simmers Facility of R162 million is reversed;
- Simmers enters into a Bridge Loan Facility agreement with Rand Merchant Bank
for R220 million which results in an interest expense for the period of R12.1
million;
- Simmers share of equity accounted losses from FIU has:
- decreased due to the interest income received on the Rand FIU Notes of R25
million from the associate;
- increased due to the reversal of interest income of R2.7 million received by
Simmers on the Simmers Facility; and
- increased by the Simmers portion (R18 million) of the total interest expense
of the FIU Notes on FIU (R52.5 million);
- the currency conversion rate is assumed to be R7.16: C$1, the conversion rate
at the last practicable date;
- the FIU common share price at the end of the period is assumed to reflect the
FIU Common Share price as at the last practicable date (C$1.30); and
- directly attributable transactions costs of R18.7 million has been expensed
through the statement of comprehensive income, included in finance charges.
2.4.2 Conversion of Rand FIU Notes into FIU common shares immediately after
acquisition
Before the After the Change
transaction transaction (%)
(see Note 1) (See Note 2)
EPS (cents) (10.57) (13.12) (24%)
Diluted EPS (cents) (10.70) (13.28) (24%)
HEPS (cents) (12.81) (15.36) (20%)
Diluted HEPS (cents) (12.97) (15.55) (20%)
NAV per share (cents) 295.66 294.13 (1%)
TNAV per share 295.66 294.13 (1%)
(cents)
Number of Simmers 1,221 1,221 -
ordinary shares in
issue (`000)
Weighted Average 1,159 1,159 -
Number of ordinary
shares (`000)
Notes:
1. The "Before the transaction" column is based on the reviewed financial
statements of Simmers for the 6 months ended 30 September 2009.
2. The continuing financial effects are calculated on the following assumptions:
- no adjustments other than the adjustments to reflect the impact of the
transaction have been made to the reviewed pro forma financial information;
- Simmers subscribes for the Rand equivalent of C$62.7 million of the Rand FIU
Notes;
- all holders of FIU notes immediately convert their FIU Notes on acquisition of
the FIU Notes;
- The existing unsecured Simmers Facility of R162 million is reversed;
- Simmers enters into a Bridge Loan Facility agreement with Rand Merchant Bank
for R220 million which results in an interest expense for the period of R12.1
million;
- the loss from associate is adjusted with reference to:
- Simmers share of equity losses has increased due to the reversal of interest
income of R2.7 million received by Simmers on the Simmers Facility; and
- Simmers now only shares in 35% of the loss from associate should all FIU
Notes issued be converted;
- the currency conversion rate is assumed to be R7.16: C$1, the conversion rate
at the last practicable date;
- the FIU common share price at the end of the period is assumed to reflect the
FIU Common Share price as at the last practicable date (C$1.30); and
- directly attributable transactions costs of R18.7 million has been expensed
through the statement of comprehensive income, included in finance charges.
The detailed reviewed pro forma statement of comprehensive income and statement
of financial position of Simmers, showing the pro forma financial effects of the
transaction will be contained in circular, which will be distributed, to
shareholders on or about Thursday, 29 April 2010.
2.5 Shareholder approval and ratification
Simmers has entered into certain agreements aimed at recapitalising FIU, which
require shareholder approval and ratification at the general meeting of Simmers,
details of which are set out below in 5.
2.6 Opinion of directors and recommendation
The board has considered the terms and conditions of the transaction and is of
the opinion that the transaction is in the best interests of Simmers and its
shareholders and recommends that ordinary shareholders vote in favour of the
resolutions to be proposed at the general meeting. In so far as their holdings
of shares, the directors intend voting in favour of the all resolutions to be
proposed at the general meeting.
3. SIMMERS BRIDGE FINANCING
Simmers has used the Rand equivalent of C$10 million from Simmers` cash reserves
to subscribe for Rand FIU Notes. In addition, Rand Merchant Bank has provided
Simmers with a Bridge Loan Facility of R220 million (approximately C$30 million)
which Simmers used to subscribe for Rand FIU Notes. Subject to the terms of the
Bridge Loan Facility, Simmers has undertaken to proceed with a Rights Offer to
all ordinary shareholders. The Bridge Loan Facility becomes repayable
immediately should an event of default occur.
The Bridge Loan Facility bears interest at 1 month JIBAR plus 4% and is
guaranteed by Simmers` material subsidiaries. Simmers and its material
subsidiaries have provided security in favour of security special purpose
vehicle ("Security SPV"). The Security SPV has guaranteed Simmers` obligations
under the Bridge Loan Facility to Rand Merchant Bank.
The security provided to the Security SPV consists of shares in and claims
against FIU and its subsidiaries, shares in Buffelsfontein Gold Mine
(Proprietary) Limited and cession of bank accounts. General and special notarial
bonds over all moveable assets not already encumbered and mortgage bonds over
mining rights once possible, will be registered in favour the Security SPV.
4. RIGHTS OFFER
In order to repay the Bridge Loan Facility and to fund, directly or indirectly,
its mining projects, Simmers, subject to the Bridge Loan Facility agreement,
intends to offer R360 million Secured Convertible Redeemable Bonds to ordinary
shareholders in terms of the Rights Offer. The Secured Convertible Redeemable
Bonds will be issued at a par value of R1 000 each, will (prior to their
conversion) pay a coupon of 6 month JIBAR + 4% semi-annually in arrears, and
will have a maturity of 3 years. Shareholders will be entitled to apply for
excess applications in terms of the Rights Offer. The Secured Convertible
Redeemable Bonds will benefit from the security given to the Security SPV as
described above. The Secured Convertible Redeemable Bonds will be convertible
into ordinary shares, at the election of the holder, at any time after 3 months
from the issue date. The conversion price will be the 5 day VWAP up to and
including the day immediately prior to the day of the submission of the Rights
Offer circular to the JSE for formal approval.
Rand Merchant Bank will underwrite an amount of R246.8 million of the Rights
Offer subject to conclusion of an underwriting agreement. The detailed terms of
the Rights Offer will be announced in due course and a circular sent to
shareholders giving full details of the Rights Offer and agreements relating
thereto.
5. NOTICE OF GENERAL MEETING
Notice is hereby given that a general meeting of Simmers ordinary shareholders
will be held at 5 Press Avenue, Selby, Johannesburg on Monday, 24 May 2010 at
09:00 for the purpose of considering and, if deemed fit, to pass with or
without modification, the ordinary and special resolutions necessary to effect
the transaction and to proceed with the Rights Offer. A notice of general
meeting, detailing the resolutions to be proposed at such meeting, will be
distributed to ordinary shareholders on or about Thursday, 29 April 2010.
6. RESIGNATION OF DIRECTORS
In compliance with paragraph 3.59 of the JSE Listings Requirements, shareholders
are advised that Messrs Kevin Wakeford and Peter Surgey have resigned as
directors of Simmers in order to represent the interests of the Company on the
FIU board. Additionally, Mr Clinton Halsey, co-founder and director of To The
Point Growth Specialists, has also been appointed to the FIU board as a third
Simmers` nominee.
7. RENEWAL OF CAUTIONARY ANNOUNCEMENT
Shareholders are advised that once the terms relating to the Simmers Right Offer
haVE been finalised, a terms announcement will be released on SENS and published
in the press. The announcement relating to the terms of the Simmers Rights Offer
is expected to be made on or about 14 May 2010. Shareholders are accordingly
advised to continue exercise caution when dealing in the Company`s shares until
a further announcement is made.
8. FURTHER DOCUMENTATION
Simmers` shareholders are advised that in accordance with the provisions of the
JSE Listings Requirements, a circular to shareholders, together with a notice of
a general meeting of Simmers shareholders, will be issued on or about Thursday,
29 April 2010 containing full details of the transaction.
Johannesburg
28 April 2010
Merchant bank and sponsor
RAND MERCHANT BANK (A division of FirstRand Bank Limited)
Independent sponsor
Deloitte & Touche Sponsor Services (Proprietary) Limited
Independent reporting accountants
Grant Thornton
Date: 28/04/2010 13:34:01 Produced by the JSE SENS Department.
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