| Tue 20 Jul 2010, 13:28 | | LAB - Labat Africa Limited - Acquisition of primrose gold metallurgical |
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LAB
LAB
LAB - Labat Africa Limited - Acquisition of primrose gold metallurgical
operation and erpm gold metallurgical operation and further cautionary
announcement
LABAT AFRICA LIMITED
Incorporated in the Republic of South Africa
(Registration number 1986/001616/06)
JSE code: LAB
ISIN: ZAE000018354
("Labat" or the "company")
ACQUISITION OF PRIMROSE GOLD METALLURGICAL OPERATION AND ERPM GOLD METALLURGICAL
OPERATION AND FURTHER CAUTIONARY ANNOUNCEMENT
1 Introduction
The board of directors is pleased to announce that Labat has entered into an
agreement to acquire the gold processing and smelting operations known as
Primrose Gold Metallurgical as well as ERPM Gold Metallurgical from Primrose
Gold Mines (Pty) Limited ("seller"), a wholly owned subsidiary of Aurora
Empowerment Systems (Pty) Limited, for a purchase consideration of R38 000 000
through the issue of 38 000 000 Labat ordinary shares at R1.00 per share ("the
acquisition"). The acquisition will give Labat control over two of only four ore
crushing and gold smelting plants on the East Rand. The businesses and related
assets are acquired as going concerns and no liabilities are assumed. The mining
operations of the seller are specifically excluded.
2 Nature of the acquired businesses
2.1 Primrose Gold Metallurgical
Primrose Gold Metallurgical comprises a full end-to-end ore processing and
smelting operation, which currently treats approximately 4 500 tons of gold
bearing material per month. The operation is fairly modern and consists of
crushing and ball milling, followed by cyanide leaching and carbon in pulp.
Approximately 15 kg of gold is recovered monthly at a recovery grade of 3.3
grams per ton.
The re-commissioning of the second ball mill is planned. This will be instituted
when feedstock is available from obtaining ore from other operations in the
area. The anticipated gold production is envisaged to reach over 30 kg per month
in the near term and increase to 45 kg to 50 kg per month over the next 18
months.
To facilitate the envisaged increased capacity, the crushing circuit is
currently being upgraded to increase the throughput capacity of the plant to
approximately 12 000 tons of gold bearing material per month.
2.2 ERPM Gold Metallurgical
ERPM Gold Metallurgical was commissioned in 1960 to treat gold bearing material
from the underground and surface reserves of the old ERPM. The operation has a
design capacity of 240 000 tons per month, but the plant has become redundant.
The area is currently being cleaned up and all mining structures are being
reclaimed and processed through the Primrose Gold Metallurgical plant in order
to recover gold from ceased smelting operations and adjoining land.
It is expected that reclamation will take approximately two years and recover
approximately 10 kg of gold per month which is included in the Primrose Gold
Metallurgical Plant gold production outlook alluded to above.
3 Rationale for the acquisition
The company wishes to acquire income-producing businesses which supplement the
company`s current plant processing activities thus ensuring an ongoing business
into the future for those shareholders who wish to remain invested in Labat.
The acquired assets are considered gems and will be used to generate gold from
underground production and surface clean up. The ERPM Gold Metallurgical plant
will be dismantled and gold will be recovered from the plant. The equipment from
the ERPM Gold Metallurgical plant will be used to increase the size of Primrose
Gold Metallurgical, thereby increasing its capacity. The additional equipment
will be used in the recovery of other precious metals. The acquisition is
expected to unlock shareholder value as there are significant unmined gold
resources available. The acquisition will provide Labat with a sound foundation
in the gold industry.
The ore processing and gold smelting operations are currently achieving monthly
operating profit of approximately R2 million. This is expected to improve in
line with the increased ore milling capacity in the next few months.
4 Effective date
The effective date of the acquisition as per the agreement is 15 July 2010.
5 Conditions precedent
The acquisition is subject to the following conditions precedent:-within two
weeks from the date of signature, Labat conducts a due diligence investigation
into the business and affairs of the seller and provides a written notice of
satisfaction to the seller;
-within one business day from the date of the written notice of satisfaction
contemplated above, the acquisition is approved of by the board of directors of
Labat; and
-within 60 days from the signature date of the agreement, the purchaser receives
such other regulatory approvals and/or approval of Labat shareholders as may be
required in order to give effect to the acquisition.
6 Financial effects
The financial effects of the acquisition will be announced in due course.
7 Further cautionary announcement
Shareholders are advised to continue to exercise caution when dealing in the
company`s securities until a further announcement, containing the financial
effects of the acquisition, is made.
Sandton
20 July 2010
Corporate adviser and sponsor to Labat
Vunani Corporate Finance
Legal adviser to Labat
Eversheds
Corporate adviser to Aurora Empowerment Systems (Pty) Limited
Arcay Moela Sponsors (Pty) Ltd
Date: 20/07/2010 13:28:01 Produced by the JSE SENS Department.
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