| Tue 25 Jan 2011, 17:43 | | CMO - Chrometco Limited - Disposal of Rooderand Assets BEE transaction |
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CMO
CMO
CMO - Chrometco Limited - Disposal of Rooderand Assets, BEE transaction,
withdrawal of cautionary announcement
CHROMETCO LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 2002/026265/06)
(JSE Code: CMO ISIN: ZAE000070249)
("Chrometco" or "the company")
DISPOSAL OF ROODERAND ASSETS
BEE TRANSACTION
WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
1. Introduction
Shareholders are referred to the cautionary announcement dated 29 November
2010 as well as the SENS announcement dated 20 July 2010 that Chrometco was
in the process of completing the conditional disposal of the mining rights
in respect of Portion 2 and the remainder extend of the farm Rooderand 46
JQ, located on the north-west flank of the Pilanesburg intrusion,
approximately 60km north northwest from Rustenburg, in the North West
Province of South Africa ("the Rooderand property")("the Rooderand assets")
to DCM Chrome (Proprietary) Limited ("DCM Chrome") for an amount of R62
million, in terms of the disposal agreement which was concluded in September
2007 ("the disposal").
Shareholder approval for the disposal is a condition precedent to the
disposal agreement (as described in Section 2 of this announcement). The
disposal is a category 1 transaction in terms of the JSE Limited ("JSE")
Listings Requirements ("Listings Requirements") and an affected transaction
in terms of section 228 of the Companies Act, Act 61 of 1973, as amended
("the Act") and the Securities Regulation Panel ("SRP") Code on Takeovers
and Mergers ("Code"). Chrometco shareholders are accordingly required to
consider and approve the disposal before it can be implemented.
In order to comply with the relevant provisions of the Minerals and
Petroleum Resources Development Act (Act 28 of 2002 as amended) ("MPRDA")
regarding the conversion of old order rights to new order rights, Chrometco
conditionally disposed of a 14% interest in its subsidiary Rooderand Chrome
(Proprietary) Limited ("Rooderand Chrome") to a Black Economic Empowerment
company ("BEE company"), Moepi Mining SPV (Proprietary) Limited ("Moepi
Mining") on 21 October 2010 ("the BEE transaction"). Persuant to the BEE
transaction, Chrometco has been in the process of converting its old order
mining rights into new order mining rights and transferring such new order
mining rights to Rooderand Chrome, in terms of section 11 of the MPRDA.
On 12 January 2011 Chrometco announced on SENS the results of an updated
Competent Person`s Report ("CPR") compiled by the competent person, Mr
Dexter Ferreira of Independent Resource Estimations ("IRES") in relation to
the resource statement and valuation of the Rooderand assets. The CPR
incorporates an independent valuation from Mr. Derick De Wit of Venmyn Rand
(Proprietary) Limited ("Venmyn") ("the independent valuation") which
arrives at a fair value for the Rooderand assets of R480.041 million, with
an upper and lower value of R685 million and R274 million, respectively.
2. The disposal
2.1 Background
2.1.1Chrometco
Chrometco was listed on the JSE on 28 July 2005 as a chrome
exploration company that intended to explore and, if viable
subsequently develop, a chrome mine for chrome ore production. Through
a joint venture agreement with Pilanesberg Mining Company
(Proprietary) Limited ("Pilanesberg") and Korpo Trust (Proprietary)
Limited, a wholly owned subsidiary of Chrometco, the company obtained
the used old order mining rights for chrome over the Rooderand
property.
The company also intended to investigate other chrome and base metal
properties for exploration purposes. It had further ambitions to
research and investigate business development opportunities in the
field of mining, concentrating and beneficiating ferrous metals and
their ores, in particular, chrome, copper, cobalt, nickel and
manganese.
Significant changes to key management personnel, the board of
directors and the company`s advisors, have taken place since the time
of the original announcement of the disposal.
2.1.2The disposal to DCM Chrome
On 27 Sep 2007 Chrometco announced the conditional disposal of its
interests in the Rooderand assets to DCM Chrome for R62 million.
2.1.3Disposal conditions
The agreement was subject to, inter alia, the following suspensive
conditions, which the parties anticipated would be fulfilled only over
an extended period and which remain outstanding at the date of this
circular;
2.1.3.1 the conversion of Chrometco`s old order mining rights
relative to the Rooderand assets into the new order mining
rights and the transfer of these rights to Rooderand Chrome
in terms of section 11 of the MPRDA;
2.1.3.2 Ministerial approval of the transfer of the mining rights to
DCM Chrome in terms of the MPRDA; and
2.1.3.3 approval of the disposal by Chrometco shareholders in terms
of the JSE Listings Requirements and in terms section 228 of
the Act.
2.1.4Mining and management agreement
Chrometco subsequently entered into a mining and management agreement
with DCM Chrome in terms of which the parties agreed that:-
2.1.4.1 DCM Chrome would be appointed as a contractor and would
conduct mining activities in relation to the Rooderand
assets;
2.1.4.2 Chrometco would receive R13 million on every anniversary of
the mining and management agreement`s signature date, which
amounts would be deducted from the disposal consideration,
until such time as the disposal conditions were fulfilled.
As at the date of this announcement Chrometco has received a total of
R52 million in terms of the mining and management agreement, with a
further R10 million due upon the fulfilment of the disposal conditions
or 3 December 2011, whichever is the earlier date.
2.2 Rationale for the disposal
2.2.1 The rationale for entering into the disposal agreement in 2007 was
that the company`s core focus at that time was to identify,
assess, acquire and develop niche mineral and commodity
opportunities in exploration, mining, concentration and
beneficiation and trading throughout Africa. The company`s then
preferred targets were in the copper, cobalt, tin and gold
sectors. Rooderand on the other hand is a chrome asset which was
no longer considered part of the company`s focus.
2.2.2 As a result of the change in focus of the company away from chrome
the decision was taken to dispose of the Rooderand assets to DCM
Chrome.
2.2.3 The implementation of the disposal of the Rooderand assets has
been and remains delayed for the following reasons:
2.2.3.1 Chrometco has not yet been able to convert its old order
mining right into a new order mining right and as a result
has not been able to fulfil that disposal condition. An
application for the conversion was lodged in 2008 with the
DMR and Chrometco has subsequently entered into the BEE
transaction in Rooderand Chrome to facilitate the conversion.
2.2.3.2. Chrometco has not yet obtained shareholder approval as
required in terms of the disposal agreement. Chrometco has
been advised that the company is unable to dispose of the
Rooderand assets without first obtaining shareholder approval
and a valuation of the Rooderand assets from an independent
expert for the disposal;
2.2.3.3 even with shareholder approval, the disposal will remain
conditional until such time as the new order mining rights
have been granted.
2.2.4 In order to fulfil its regulatory obligations in terms of the JSE
and SRP rules and in terms of section 228 of the Act, Chrometco
commissioned the CPR, including the independent valuation, which
places a fair value on the Rooderand assets of approximately R480
million.
2.3 Further conduct regarding the disposal
2.3.1 Having regard to the circumstances set out above the board has
resolved:
2.3.1.1 to send a circular to shareholders setting out all relevant
facts pertaining to the disposal and convening a general
meeting of shareholders at which the disposal may be
considered ("the general meeting");
2.3.1.2 to enter into the BEE transaction, the terms of which are set
out below, subject , inter alia, to the disposal not being
approved by shareholders in general; and
2.3.1.3 to proceed with the application for the conversion of the old
order mining rights into new order mining rights.
2.4 Opinions and valuation
The disposal constitutes an affected transaction in terms of section
228 of the Act and an independent valuation by an appropriate external
valuer is therefore required by the SRP in terms of Rule 3.1 of the
Code. Venmyn has been appointed as the external valuer and has
concluded that the fair value of the Rooderand asset is approximately
R480 million.
2.5 Additional information required by the SRP
2.5.1 Disclosure of interests, holdings and dealings
At the last practicable date none of the directors of Chrometco
had any direct or indirect beneficial interest in DCM Chrome, nor
did DCM Chrome or any of its directors or shareholders or any
parties acting in concert with DCM Chrome have any material
interest in Chrometco. To the best of the board`s knowledge, DCM
Chrome has acquired an insignificant number of shares in Chrometco
within the six months prior to the last practicable date. Neither
of the parties nor any of its directors have dealt in the shares
of Chrometco in the six months prior to the last practicable date.
2.5.2 No set-off
Should the disposal be approved by shareholders and implemented
upon fulfilment of the disposal conditions, the settlement of the
outstanding portion of the disposal consideration will be paid in
full in accordance with the terms of the disposal agreement
without regard to any lien, right of set-off, counterclaim or
other analogous right to which DCM Chrome may otherwise be, or
claim to be, entitled against Chrometco.
2.5.3 Special arrangements, undertakings or agreements
Other than as agreed in terms of the mining and management
agreement there are no arrangements, undertakings or agreements
between Chrometco and DCM Chrome and persons acting in concert
with either of them in relation to the disposal consideration.
There are further no agreements, arrangements or understanding
between DCM Chrome or any person acting in concert with it and any
of the directors of Chrometco, or any persons who were directors
of Chrometco in the 12 months preceding the disposal agreement or
with Chrometco shareholders or persons who were Chrometco
shareholders in the 12 months preceding the disposal agreement,
which has any connection with or dependence upon the disposal.
2.5.4 Directors of Chrometco
There will be no changes to the board as a result of the disposal.
2.6 Financial effects of the disposal
BEFORE CHANGE AFTER % CHANGE
Loss per -2.03 -3.98 -6.02 -196%
share
(cents)
Headline -2.04 -3.98 -6.02 -196%
loss per
share
(cents)
NAV per 16.17 -3.98 12.19 -25%
share
(cents)
TNAV per 16.17 -3.98 12.19 -25%
share
(cents)
Notes:
1.The "before" financial information is based on Chrometco`s published
reviewed interim statement of financial position at 31 August 2010.
2.The pro forma financial information is based on the assumption that
shareholders do not approve the conditional disposal, due thereto that the
"before" financial information has already taken the effect of the
conditional disposal into account as the conditional disposal was recognised
in the 2008 financial year.
3. The financial effects of non-approval of the disposal will be realised
upon the termination of the mining and management agreement, which would
result in the acquisition of Korpo Trust and Rooderand Chrome at a fair
value of R 480m by Chrometco at zero cost.
4. The effect of estimated transaction costs of R 1.545m has been taken
into account
5. The "after" financial information reflects the financial effect of non-
approval of the disposal on the financial position of the company at the
year ended 31 August 2010.
6. The financial effects of the disposal presented above have not been
reviewed by the company`s auditors.
3 THE BEE TRANSACTION
3.1 Terms of the BEE transaction
In terms of the BEE transaction:
3.1.1 Chrometco has agreed to dispose of a 14% interest in Rooderand
Chrome ("the sale shares") to Moepi Mining ("the initial BEE
disposal");
3.1.2 Should the disposal of the Rooderand assets to DCM Chrome become
unconditional and be implemented the initial BEE disposal will be
treated as follows:-
3.1.2.1 Moepi Mining shall grant Chrometco a call option to
purchase the sale shares acquired by Moepi Mining in terms of
the initial BEE disposal at par value plus a break fee of
R100 000; and
3.1.2.2 Chrometco shall grant Moepi Mining a put option to sell
all the sale shares acquired by Moepi Mining in terms of the
initial BEE disposal, back to Chrometco at par value plus a
break fee of R100 000;
3.1.3 Should the disposal of the Rooderand assets to DCM Chrome fail to
become unconditional and not be implemented:-
3.1.3.1 Chrometco may at its election sell an additional 12% of its
interest in Rooderand Chrome ("the additional interest") to
Moepi Mining ("the additional BEE disposal") for a purchase
price equivalent to the fair value of a 26% interest in
Rooderand Chrome, which fair value shall be calculated by an
independent chartered accountant appointed by mutual
agreement between Chrometco and Moepi Mining, or failing such
agreement, within 10 days, by the South African Institute of
Chartered Accountants;
3.1.4 Moepi Mining has guaranteed that for so long as it is a
shareholder of Rooderand Chrome, it shall at all times qualify as
a BEE company and shall provide Chrometco with proof of its
status as a BEE company on an annual basis.
4 Documentation and general meeting
A circular to Chrometco shareholders, providing further information on the
disposal and containing, inter alia, a copy of the CPR and the independent
valuation and a notice of the general meeting of Chrometco shareholders and
a form of proxy will be posted to Chrometco shareholders in due course.
5 Withdrawal of cautionary announcement
Chrometco shareholders are advised that, as a result of the publication of
this announcement, caution is no longer required when dealing in Chrometco
securities.
Johannesburg
25 January 2011
Designated Advisor
Sasfin Capital
(a Division of Sasfin Bank Limited)
Competent Person
Independent Resources Estimations
Independent Valuer
Venmyn Rand
Legal Advisors
Cliffe Dekker Hofmeyr Inc.
Lanham Love Inc.
Reporting Accountants
RMS Betty & Dickson (Johannesburg)
Date: 25/01/2011 17:43:01 Produced by the JSE SENS Department.
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