| Thu 7 Oct 2010, 14:00 | | VIL - Village Main Reef Gold Mining Company (1934) Limited - Acquisition of the |
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VIL
VIL
VIL - Village Main Reef Gold Mining Company (1934) Limited - Acquisition of the
Consolidated Murchison Operations and renewal of cautionary
Village Main Reef Gold Mining Company (1934) Limited
Incorporated in the Republic of South Africa
(Registration Number 1934/005703/06)
Share code on the JSE: VIL
ISIN: ZAE000007720
("Village" or the "company")
ACQUISITION OF THE CONSOLIDATED MURCHISON OPERATIONS AND RENEWAL OF CAUTIONARY
Transaction highlights:
- Village to acquire a 74% interest in Consolidated Murchison Mine (Pty)
Limited ("Cons Murch") for ZAR30 million.
- Cons Murch is a 1.346 million ounce gold equivalent life of mine gold and
antimony deposit.
- The Cons Murch mine is currently one of the largest known antimony ore
bodies in the world and is the largest global producer of antimony outside
of China. At present gold prices, just over 40% of revenue is sourced from
gold production.
- Remaining 26% owned by the Cons Murch Broad-Based Black Economic
Empowerment Staff Trust (the "BBBEE Staff Trust").
- Immediate ZAR605,000 monthly cash inflow through the acquisition of a
management agreement with Cons Murch for ZAR10 million.
- Further value add potential through the treatment of a high grade gold
tailings dam, likely improved antimony beneficiation, and exploration of
adjacent properties.
- Independent competent person`s valuation indicates a potential value of
between ZAR200 million and ZAR400 million for Village`s 74% interest in
Cons Murch.
1. INTRODUCTION
Village has continued building on its stated strategy of acquiring cash
generative assets by entering into binding agreements with To The Point Growth
Specialists (Pty) Limited and its affiliates ("To The Point"),in terms of which
Village will:
- indirectly acquire a 74% interest in Cons Murch from To The Point for a
total consideration of ZAR30 million;
- acquire certain rights under a mine management agreement with Cons Murch
from To The Point for a total consideration of ZAR10 million; and
- inject ZAR20 million into Cons Murch,
hereinafter the "Transaction".
The Transaction is expected to transform Village into an emerging mining company
with immediate positive cash flows.
2. THE TRANSACTION
Acquisition agreement in respect of the Cons Murch Agreement
As announced by Metorex on 6 September 2010 Cons Murch concluded a conditional
agreement with Metorex ("Cons Murch Agreement") on 20 August 2010, in terms of
which it will acquire the operations, including the mine, of Consolidated
Murchison, a division of Metorex ("Cons Murch Mine") hereinafter the "Cons Murch
Transaction".
Cons Murch is a special-purpose vehicle formed for the Cons Murch Transaction,
and is held 26% by the Cons Murch BBBEE Staff Trust and 74% by Nebavest 49 (Pty)
Limited ("Nebavest"). Nebavest is a wholly owned subsidiary of To The Point.
Under the terms of the Transaction, Village will acquire the entire issued share
capital of Nebavest from To The Point ("Acquisition Agreement"), for a total
consideration of ZAR30 million.
2.2 Salient terms of the Cons Murch Agreement
The Cons Murch Agreement sets out a staged transaction, as follows:
- Stage I: Cons Murch will acquire the Cons Murch Mine from Metorex for a
consideration of ZAR1. Metorex will, however, retain the existing mining
license ("Old Order Mining Right") andthe existing new order prospecting
right ("Prospecting Right"). Cons Murch will conduct all mining and
processing activities on a contract mining basis for its own risk and
benefit until Stage II is completed.
Stage I is subject to certain conditions precedent which are anticipated to
be fulfilled by 15 December 2010.
- Stage II: Cons Murch will take transfer from Metorex for a consideration of
ZAR1, following the conversion of the Old Order Mining Right into a New
Order Mining Right ("Conversion") and the granting of consent by the South
African Minister of Mineral Resources in terms of Section 11 of the South
African Mineral and Petroleum Resources Development Act ("Section 11
Consent"), of:
(a) the New Order Mining Right; and
(b) the obligation to rehabilitate the Cons Murch Mine, in exchange for
which Metorex will transfer ZAR25 million to the Cons Murch rehabilitation
fund.
If the Conversion or the Section 11 Consent is not obtained and Cons Murch
elects not to continue as a contract miner for Metorex, Metorex may elect
to purchase all the ordinary shares of Cons Murch for a consideration of
ZAR1.
- Stage III: Cons Murch will take transfer of the Prospecting Right from
Metorex upon the granting of the Section 11 Consent for a consideration of
ZAR 1.
2.3 Other terms of the Cons Murch Agreement
Metorex will, inter alia:
- contribute an amount of ZAR51 million, less any costs incurred or to be
incurred between the signature date and the closing date of Stage I of the
Cons Murch Transaction, towards the recapitalisation of Cons Murch
("Initial Agreed Recapitalisation").
Village will, inter alia:
- provide the balance of the Initial Agreed Recapitalisation, being an amount
of ZAR20 million; and
- provide Cons Murch with adequate financial support for a minimum period of
12 months from the completion of Stage I of the Cons Murch Transaction.
2.4 Assignment agreement in respect of the Cons Murch Mine Management Agreement
Under the terms of the Transaction, the rights and obligations accruing to To
The Point under a mine management agreement entered into between Cons Murch and
To The Point in respect of the provision of mine management services by To The
Point to Cons Murch for a monthly fee of ZAR605,000 on 20 August 2010 ("Mine
Management Agreement") will be assigned to Village ("Assignment Agreement").
2.5 Transaction consideration
The total consideration for the Acquisition Agreement and Assignment Agreement
of ZAR40 million will be settled, at the election of Village, partly or wholly,
in cash or through the issue to To The Point of up to 18,181,818 million Village
shares at a value of ZAR2.20 each ("Acquisition Shares"). The issue price
represents a premium of 8.91089% to the closing Village share price of ZAR2.02
on Wednesday, 6 October 2010, and a 2.53830% discount to the 30-day volume
weighted average traded price of ZAR2.26 for Village shares on Wednesday, 6
October 2010. Post the issue of the Acquisition Shares, To The Point and its
affiliates will own 7.6% of the current issued share capital of Village.
3. BACKGROUND TO THE CONS MURCH BUSINESS
Located near Gravelotte in the Limpopo Province of South Africa, the Cons Murch
Mine is an underground mining operation situated in the antimony line of the
Archaean Murchinson Greenstone Belt. As one of the largest known antimony ore
bodies in the world the Cons Murch Mine is currently one of the largest global
producer of antimony. Since Cons Murch`s partner in the antimony beneficiation,
filed for Chapter 11 protection under the United States Bankruptcy Code, the
mine has lost its ability to enrich its antimony product from a 56% to a 85%
metal content. Consequently, Cons Murch receives discounted pricing for its
antimony product which is mainly shipped to Indian and Chinese customers. This
enrichment facility which is currently under care-and-maintenance, could be re-
commissioned.
The Cons Murch Mine is a 1.346 million ounce gold equivalent gold and antimony
deposit which can be broken down into a South African Mineral Resource Committee
compliant resource of 750,272 ounces of gold at an average grade of 2.45 grams
per tonne (including 8,970 ounces in the measured category), and 200,729 tonnes
of antimony at an average grade of 2.10%.
4. RATIONALE FOR THE TRANSACTION
The Transaction is in line with the company`s stated strategy of acquiring a
cash generative asset. The acquisition of Cons Murch will enable Village to
evolve its strategy to that of the acquisition and transformation of mining
assets into self-sustaining mining entities.
The Transaction holds significant upside potential for Village shareholders. The
Cons Murch Mine recently returned to profitability which Village anticipates to
be sustainable.
5. CONDITIONS PRECEDENT, IRREVOCABLE UNDERTAKINGS AND EFFECTIVE DATE
5.1 Conditions precedent
The Transaction is subject to the fulfilment of a number of conditions precedent
including, inter alia:
- the approval by Village shareholders of the Transaction, including the
issue of the Acquisition Shares; and
- the fulfillment of the Stage I suspensive conditions.
5.2 Irrevocable undertakings
Village has obtained irrevocable undertakings to vote in favour of the
Transaction from shareholders representing 72.7% of the issued share capital of
Village.
5.3 Effective date
The effective date of the Transaction is expected to be no later than 30
November 2010 or such later agreed date.
6. PRO FORMA FINANCIAL EFFECTS AND SALIENT DATES
The pro forma financial effects of the Proposed Transaction on the reported
financial information of Village and historical reported information of Cons
Murch carve out accounts, as well as the salient dates relating to the
implementation of the Transaction will be announced to shareholders in due
course.
7. CATEGORISATION AND RELATED PARTY TRANSACTION
The transaction constitutes a category II transaction for Village under the
Listings Requirements of the JSE.
Under the provisions of section 10 of the Listings Requirements of the JSE, the
entering into of the Transaction will be deemed to be a related party
transaction because Bernard Swanepoel, the controlling shareholder of To The
Point, is also the Chief Executive Officer of Village. Accordingly, the approval
of the shareholders of Village will be required in order to implement the
Transaction.
As required under the provisions of the Listings Requirements of the JSE, the
board of directors have appointed KPMG Services (Pty) Limited to provide an
independent opinion on the fairness of the Transaction to the board of directors
of Village. The outcome of the opinion will be announced to Village shareholders
in due course and the full opinion will be made available for inspection.
10. CIRCULAR
A circular containing full details of the Transaction and incorporating a notice
of general meeting of Village shareholders will be posted to Village
shareholders in due course.
11. RENEWAL OF CAUTIONARY
Village shareholders are advised that the financial effects of the Proposed
Transaction are still being determined, and may have a material effect on the
price of Village securities. Accordingly, Village shareholders are advised to
continue exercising caution when dealing in Village securities until a full
announcement is made.
Bryanston
7 October 2010
JSE Sponsor
Macquarie First South Advisers (Pty) Limited
Legal adviser
Werksmans Attorneys
Independent Expert
KPMG Services (Pty) Limited
Competent Person
Minxcon (Pty) Limited
Investor Relations
Vestor
COMPETENT PERSON
The information in this release that relates to Cons Murch`s exploration
results, mineral resources or ore reserves is based on information compiled by
Quintin C Antunes, B.Sc. (Hons), Pr. Sci. Nat., MGSSA (Resources), Daan v
Heerden, B.Sc. (Min.Eng.), M.Comm. (Bus. Admin.),ECSA, MSAIMM, AMMSA (Reserves)
to qualify as a Competent Person for the purposes of the South African Code for
Reporting of Exploration Results, Mineral Resources and Mineral Reserves
("SAMREC Code")and Johan Odendaal.Sc. (Geol.), B.Sc. Hons. (Min.Econ.), M.Sc.
(Min. Eng.),Pr. Sci. Nat., FSAIMM, MGSSA, MAusIMM to qualify as a Competent
Valuator for the purposes of the South African Code for the Reporting of Mineral
Asset Valuation ("SAMVAL Code").
M Johan Odendaal consents to the inclusion in this release of the matters in the
form and context in which they appear.
Date: 07/10/2010 14:00:03 Produced by the JSE SENS Department.
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