| Mon 31 May 2010, 10:22 | | VIL - Village Main Reef Gold Mining Company Limited - Posting of circular to |
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VIL
VIL
VIL - Village Main Reef Gold Mining Company Limited - Posting of circular to
shareholders
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
POSTING OF CIRCULAR TO SHAREHOLDERS IN RESPECT OF THE ACQUSITION BY VILLAGE OF
A CONTROLLING INTEREST IN LESEGO PLATINUM LIMITED ("Lesego") AND THE PHOSIRI
PLATINUM PROJECT ("the Proposed Acquisition") AND WITHDRAWAL OF CAUTIONARY
1 INTRODUCTION
Further to the cautionary announcement issued on 11 March 2010 and the renewal
of cautionary issued on 28 April 2010, Village shareholders are advised that the
pro forma financial effects of the Proposed Acquisition have subsequently been
finalised and are provided in paragraph 2 below.
2 UNAUDITED PRO FORMA FINANCIAL EFFECTS OF THE PROPOSED ACQUISITION
The unaudited pro forma financial effects set out in the following table have
been prepared to assist Village shareholders to assess the impact of the
Proposed Acquisition on the earnings per share ("EPS"), headline earning per
share ("HEPS"), net asset value ("NAV") per share and tangible net asset value
("TNAV") per share for the six month period ended 31 December 2009. The pro
forma financial effects have been prepared for illustrative purposes only and,
because of their nature, may not fairly present Village`s financial position,
changes in equity, results of operations or cash flows post the Proposed
Acquisition.
The preparation of unaudited pro forma financial effects of the Proposed
Acquisition is the responsibility of the Directors.
Per Share (cents) Before After % Change
Proposed
Acquisition
Earnings (3.06) (276%)
(11.50)
Headline earnings (3.06) (276%)
(11.50)
NAV 633%
(4.05) 21.59
TNAV (4.05) 279%
7.24
Weighted average 6,421,506
number of Shares in
issue 259,837,521
6,978,446
Number of Shares in 260,394,461
issue
Notes:
1 The unaudited pro forma financial effects are based on the accounting
policies adopted by Village, which are in accordance with IFRS. It is
assumed that all adjustments described below are effective on:
* 1 July 2009 for purposes of preparing the unaudited pro forma
financial effects on EPS and HEPS.
* 31 December 2009 for purposes of preparing the unaudited pro forma
financial effects on NAV and TNAV.
2 The "Before" column has been extracted from the published unaudited
financial information of Village for the six months ended 31 December 2009.
* The "After Proposed Acquisition" column assumes the reverse asset
acquisition of Village and takes into consideration the adjustments
listed below.
* The four Affiliated Entities, collectively UPM, UMM, Nebavest and
KM&I, representing intermediary holding companies listed below, are
consolidated. Village acquires an effective ownership percentage of
100% in the Affiliated Entities. The financial information for the
Affiliated Entities has been extracted from non consolidated audited
balance sheets and reviewed income statements as follows:
* Umbono Minerals and Mining (Pty) Ltd ("UMM"): Financial information
for the six months ended 30 September 2009;
* Umbono Platinum Mining (Pty) Ltd ("UPM"): Financial information for
the six months ended 30 September 2009;
* Nebavest 69 (Pty) Ltd ("Nebavest"): Financial information for the six
months ended 28 February 2010; and
* Khumo Mining and Investment (Pty) Ltd) ("KM&I"): Financial information
for the six months ended 28 February 2010.
* Lesego is consolidated and its financial information has been extracted
from the audited balance sheet and the reviewed income statement for the
six months ended 31 December 2009. Village will acquire an effective
ownership percentage of 93.9% in Lesego as a result of the Proposed
Acquisition. This effective ownership percentage will decrease to 72%
following further investment by the Industrial Development Corporation of
South Africa Ltd ("IDC") of R111.0 million in terms of the IDC subscription
agreement, which is not reflected in the pro forma adjustments as it is
dependent on future events.
* The following adjustments have been made to the Lesego financial
information for significant corporate action in Lesego after 31 December
2009 but prior to the implementation of the Proposed Acquisition:
* The conversion of shareholder equity loans of R8.3 million to Lesego
shares and the rights issue of new Lesego shares to the net value of
R2.2 million. No interest benefit on net cash raised is assumed in the
adjustment of EPS and HEPS as cash raised will be used to fund
operating requirements.
* The issue of Lesego shares to the IDC in terms of the IDC subscription
agreement. In terms of the IDC subscription agreement and following
the receipt from the IDC of R31.0 million as a first investment
tranche, the IDC acquires an effective ownership interest of 6.1% in
Lesego. Further investment tranches to be received from the IDC, which
will increase the IDC`s effective ownership to maximum 28.0%, are
subject to future events and are not reflected in the pro forma
adjustments. Transaction costs of R3.1 million are non-recurring and
are expensed. No interest benefit on net cash raised is assumed in the
adjustment of EPS and HEPS as cash raised will be used to fund
operating requirements.
* Sweet Sensation 79 (Pty) Ltd ("Sweet Sensation") is consolidated and its
financial information has been extracted from the audited balance sheet and
the reviewed income statement for the six months ended 28 February 2010.
Village will acquire an effective ownership percentage of 97.3% in Sweet
Sensation as a result of the Proposed Acquisition. This effective ownership
percentage will decrease to 87.4% following further investment in Lesego by
the IDC in terms of the IDC subscription agreement, which is not reflected
in the pro forma adjustments as it is dependent on future events.
* Non controlling interest in net assets and earnings is calculated on the
6.1% effective ownership interest of the IDC in Lesego. Lesego`s 45.0%
effective ownership of Sweet Sensation also results in an effective
ownership interest by the IDC in Sweet Sensation of 2.7%. The IDC`s
effective ownership will increase to 28.0% in Lesego and 12.6% in Sweet
Sensation following further investment in terms of the IDC subscription
agreement, however, this is subject to future events and is not reflected
in the pro forma adjustments.
3 The "After Proposed Acquisition" column reflects the impact of the reverse
asset acquisition of Village in terms of the Proposed Acquisition. The
Proposed Acquisition does not represent the acquisition of a business, but
the acquisition of assets. An appropriate reverse asset acquisition
accounting policy will be adopted by Village, which will result in
consolidated financial statements that are similar to those produced under
reverse acquisition accounting as referred to in IFRS3 Revised: Business
Combinations. The following is assumed under the reverse asset
acquisition:
* Assets, liabilities and shareholders` equity of Lesego are carried
forward into Village at their historic values.
* The issue of 248,140,721 Shares in exchange for shares in UMM, UPM and
Nebavest.
* The issue of 2,766,225 Shares to extinguish debt of R5.0 million.
While the debt is reflected at R5.0 million in the financial
statements on which the pro forma financial information is based, the
actual debt at the effective date is expected to be R5.5 million.
* The deemed acquisition value of Village is R14.0 million. The actual
deemed acquisition value of Village will be based on the market value
of the 6,978,446 Shares which would have had to be issued to give the
Village shareholders the same percentage equity interest in the
combined entity that results from the reverse asset acquisition at the
acquisition date.
* The Village acquisition value of R14.0 million less the negative net value
of Village assets and liabilities amounts to R14.2 million and is expensed
in terms of IFRS 2 Share Based Payments. This is a non-recurring expense.
It is assumed that the historic book value of Village assets and
liabilities reflect their fair value. A formal valuation of Village assets
and liabilities has not yet been performed and needs to be determined at
the acquisition date. This will impact the eventual fair value and nature
of identified assets, intangible assets and the value of the resulting
difference to be expensed, if any, as applicable. These assets will be
subject to normal impairment testing.
* Transaction costs amount to R11.9 million and are non-recurring. R6.9
million
of the transaction costs are paid in cash while transaction costs of R5.0
million are settled through the issue of 2,509,069 Shares. The interest
impact on cash outflows is assumed at 8% before tax.
4 Diluted earnings per share are anti dilutive.
5 Capitalised exploration costs are treated as intangible assets for the
calculation of TNAV.
3 WITHDRAWAL OF CAUTIONARY
As a result of the disclosure in 2 above, shareholders are advised that
they no longer need to exercise caution when dealing in their Village
shares.
4 POSTING OF CIRCULAR AND NOTICE OF GENERAL MEETING
Shareholders are also advised that the circular in respect of the Proposed
Acquisition was posted today, Monday, 31 May 2010, which includes, inter
alia, a notice convening a general meeting of Village shareholders to be
held at 100 Grayston Drive, Sandown, Sandton, 2196 at 10:00 on Tuesday, 15
June 2010 to consider and if deemed fit to pass the resolutions necessary
to effect the Proposed Acquisition.
Johannesburg
31 May 2010
Investment Bank and Sponsor
Investec Bank Limited
Legal advisor to Village
Werksmans Incorporating Jan S. De Villiers
Date: 31/05/2010 10:22:01 Produced by the JSE SENS Department.
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