| Wed 2 Mar 2011, 14:42 | | SIM - Simmers - Posting of Circular to Simmers Shareholders in respect of the |
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SIM
SIIF
SIM - Simmers - Posting of Circular to Simmers Shareholders in respect of the
implementation of the proposed transactions between Village and Simmers and
withdrawal of cautionary
Simmer & Jack Mines, Limited
(Registration number 1924/007778/06)
Share Code: SIM
ISIN: ZAE000006722
("Simmers" or the "company")
POSTING OF CIRCULAR TO SIMMERS SHAREHOLDERS IN RESPECT OF THE IMPLEMENTATION
OF THE PROPOSED TRANSACTIONS BETWEEN VILLAGE MAIN REEF GOLD MINING COMPANY
(1934) LIMITED ("Village") AND SIMMERS AND WITHDRAWAL OF CAUTIONARY
Further to the joint cautionary announcement issued on SENS on 6 December 2010
and in the press on 7 December 2010, the renewal of cautionary issued on 19
January 2011 and the joint announcement issued on SENS on 17 February 2011,
Simmers shareholders are advised that Simmers has posted a circular dated 2
March 2011 ("the circular") to its shareholders in respect of: (i) the
proposed disposal by Simmers of the majority of Simmers` assets to Village in
consideration of the issue by Village of Village shares to Simmers and the
assumption by Village of certain liabilities (the "disposal"); and (ii) the
proposed subsequent unbundling by Simmers of the Village shares issued to it
to its shareholders (the "unbundling" and collectively, the "proposed
transactions").
Terms defined in the circular shall bear the same meanings where used in this
announcement.
In terms of the proposed transactions, and subject to the fulfilment or waiver
of the conditions precedent, set out below, Simmers and Village have agreed
that:
1. Simmers will dispose to Village, and Village will acquire, the following
assets (the "disposal assets"):
1.1. a 100% shareholding in and all of Simmers` claims on loan account
against Simmer and Jack Investments (Proprietary) Limited ("S&J
Investments"), which is the holding company of Buffelsfontein Gold
Mines Limited ("Buffelsfontein Gold Mines") which, in turn, owns the
Buffelsfontein Gold Mine, Hartebeestfontein Gold Mine and the Tau
Lekoa Mine;
1.2. 60,622,653 common shares in First Uranium Corporation ("First
Uranium"); and
1.3. 392,874 First Uranium Notes (convertible into 42,199,141 common
shares in First Uranium); and
2. in consideration of the acquisition of the disposal assets, Village will:
2.1. issue to Simmers 597,512,158 Village shares at R2.20 per share,
comprising approximately 66% of the total Village shares in issue
post the proposed transactions (the "Village consideration shares");
and
2.2. assume or discharge the assumed liabilities, that is:
2.2.1 Village will assume all of Simmers` rights and obligations
under the ABSA note programme documents, if the conditions
precedent referred to in 2.4 and 2.5(a) of the paragraph
entitled "Conditions Precedent" below are fulfilled;
2.2.2 Village will assume all of Simmers` rights and obligations
under the forward gold purchase transaction documents, if the
condition precedent referred to in 2.5(b) of the paragraph
entitled "Conditions Precedent" below is fulfilled;
2.2.3 Village will undertake to pay to Simmers any amount which is or
becomes or will become due, owing and payable by Simmers to any
other person under, in terms of or arising out of the ABSA note
programme documents, if the conditions precedent referred to in
2.4 and 2.5(a) of the paragraph entitled "Conditions Precedent"
below are not fulfilled, but waived;
2.2.4 Village will undertake to pay to Simmers any amount which is or
becomes or will become due, owing and payable by Simmers to any
other person under, in terms of or arising out of the forward
gold purchase transaction documents, if the condition precedent
referred to in 2.5(b) of the paragraph entitled "Conditions
Precedent" below is not fulfilled, but waived; and
2.2.5 Village will indemnify Simmers against all loss, liability,
damage or expense which Simmers may suffer as a result of or
which may be attributable to any claims arising out of, or
connected with, the Aberdeen loan agreement.
The aggregate amount of Village`s liability in terms of 2.2.3 and 2.2.4
concerning the ABSA note programme documents and the forward gold purchase
transaction documents shall not exceed the sum of R290,316,533 and all amounts
of interest that are or become payable by Simmers under the ABSA note
programme documents and the forward gold purchase transaction documents.
Simmers intends unbundling the Village consideration shares to its
shareholders.
RATIONALE
Simmers has subsidiaries that are engaged in gold mining and exploration
activities in the Mpumalanga and North West Provinces of South Africa. Simmers
also holds 60 622 653 common shares in the gold and uranium company, First
Uranium.
Simmers shareholders have seen substantial value destruction in the Simmers
share price as a result of:
- differences with respect to the strategy and operational management
issues between the previous Simmers management and the major Simmers
shareholder, Vulisango Holdings (Proprietary) Limited ("Vulisango");
- continued operational losses suffered at Buffelsfontein Gold Mines as a
result of problems in bringing its operations into full production;
- the negative impact to Simmers as a result of a perception, in the past,
of over promise and under delivery in relation to Simmers` performance;
- the impact that the First Uranium re-capitalisation undertaken during
April 2010 had on the available cash within the Simmers group. As part of
that re-capitalisation, Simmers committed R463 million of Simmers` funds
to subscribe for First Uranium Notes to protect its investment in First
Uranium; and
- the Tau Lekoa acquisition taking longer to conclude than originally
anticipated, having a negative impact on the cash available to Simmers.
Under the guidance of the interim Simmers board appointed during December 2009
and also the current Simmers board appointed during February 2010, Simmers has
successfully addressed many of the matters that negatively impacted on the
Simmers operations and shareholders` perception in relation to the company.
Notwithstanding all of the positive work done to date, the Simmers share price
has not reacted positively and continues to trade at near all time low levels.
The consequence of the events referred to above is that Simmers` balance sheet
has been weakened and available cash has been reduced to very low levels.
Attempts to raise capital in Simmers over the last twelve months to place
Simmers on a stronger footing have been either too expensive or too difficult
to achieve, attracting very little support from the Simmers shareholders.
Simmers remains in a position where it will need to raise capital in the near
future to allow it to repay the liabilities under the ABSA notes and to allow
sufficient time for the turnaround of its assets to fully materialise.
Simmers is optimistic that the enlarged entity will be able to raise the
required equity more easily and at a smaller discount than Simmers would be
able to do on a standalone basis.
The proposed transactions will result in an enlarged entity that should have
better access to capital. The disposal will allow existing and potential new
investors the opportunity to objectively value the disposal assets without the
prejudice of the negative impact of past events.
Not only should the enlarged entity be better placed to raise capital, it will
also:
- have strong empowerment credentials with both Vulisango and Umbono
Capital Partners (Proprietary) Limited ("Umbono") each owning 15% of the
equity in the enlarged entity;
- have a more diversified asset base, with exposure to gold (through three
old producing operations), antimony (through the largest antimony mine in
the world) as well as platinum (through an early stage platinum prospect
in the Eastern Bushveld Platinum Complex). Simmers is of the opinion
that the diversification of the risk through the exposure to both
platinum and antimony assets should not attract a discount to a pure gold
investment vehicle;
- have a more diversified BEE shareholder base, positioning it well to take
advantage of growth opportunities present in the South African mining
environment; and
- be expected to raise funds through an equity offering at a smaller
discount than Simmers would be able to do on a standalone basis. Any
capital raised by Simmers on a standalone basis will result in
substantial dilution to its empowerment shareholding and BEE status.
The proposed transactions will result in Simmers shareholders, as a collective
but disparate group of shareholders:
- effectively acquiring the Village assets at market value without paying a
premium for control, by way of a reverse take-over. Simmers shareholders
(if all the Village consideration shares are distributed to the Simmers
shareholders) will collectively be the controlling shareholders in the
merged entity and will retain exposure to the Buffelsfontein Gold Mines
and Tau Lekoa Mines;
- gaining full exposure to the Village assets, creating a more diversified
asset base;
- benefitting from the proven track record of Mr Swanepoel in managing
marginal gold operations. It is intended that Mr Swanepoel will become
the chief executive officer of the merged entity transitioning from a non-
executive role in Simmers to an executive position in the merged entity
responsible for day-to-day management and strategy;
- being part of an enlarged entity with better access to capital markets,
strong empowerment credentials and an improved balance sheet, enabling
the merged entity to aggressively pursue growth opportunities; and
- holding shares in Village post the unbundling and in Simmers, which will
remain listed with no known material liabilities and some R45 million in
cash (assuming the sale by Simmers of all its shares in and claims on
loan account against Transvaal Gold Mining Estates Limited and Sabie
Mines (Proprietary) Limited to Stonewall Mining (Proprietary) Limited
("Stonewall") is completed). The increased liquidity in Village shares
post the proposed transactions combined with the other benefits of the
proposed transactions is expected to facilitate the value unlock for
Simmers shareholders.
The Simmers board supports the proposed transactions as it is of the view
that, from a Simmers perspective, the proposed transactions (if implemented)
will provide Simmers with a clean break from its history over the last few
years, whilst allowing for the existing Simmers shareholders as a collective
but disparate group of shareholders to remain in control of the current
Simmers operations. In addition, Village, post the disposal, should have
better access to capital markets to fund future growth and the assets will be
managed by an experienced management team.
After the disposal and subsequent unbundling an existing Simmers shareholder
will directly hold:
- shares in Village, which will hold rights to a high grade platinum asset
via Lesego Platinum Mining Limited, gold and antimony assets via
Consolidated Murchison Mine (subject to the Cons Murch transaction being
completed), gold assets through S&J Investments, which holds 100% of
Buffelsfontein and Tau Lekoa Mines and uranium exposure through First
Uranium; and
- shares in Simmers, which will have some R45 million in available cash on
completion of the sale by Simmers to Stonewall referred to above, with no
known material liabilities. Simmers will remain compliant with all the
Listings Requirements as a cash company and will appoint an appropriate
sized board.
Simmers believes that the proposed transactions are the first step in creating
a new player in the junior mining sector, and the new merged entity should be
well placed to develop into one of South Africa`s preferred empowered
diversified mining companies.
CONDITIONS PRECEDENT
The proposed transactions are subject to the fulfilment (or, where applicable,
waiver) of the following conditions precedent, namely:
1. by no later than 31 March 2011, or by such later date as Simmers and
Village may determine, that Simmers in general meeting has passed
resolutions:
1.1. approving the disposal by Simmers of the disposal assets to Village
in terms of the agreement entered into between Simmers and Village
in respect of the disposal, including any amendment thereto (the
"disposal agreement") as required by section 228 of the Companies
Act and in accordance with the Listings Requirements;
1.2. approving the distribution by Simmers of the Village distribution
shares to the Simmers shareholders pro rata to their respective
holdings of Simmers shares (as an unbundling transaction
contemplated in section 46 of the Income Tax Act) in terms of
sections 90 and 228 of the Companies Act and in accordance with the
Listings Requirements;
1.3. approving the disposal by Simmers to Village of the reacquisition
shares in terms of the disposal agreement, as required by section
228 of the Companies Act and in accordance with the Listings
Requirements;
2. by no later than 1 May 2011 or by such later date as Simmers and Village
may agree in writing on or before 1 May 2011:
2.1. that all necessary regulatory approvals required for entering into
and implementing the disposal agreement have been duly given which
regulatory approvals include, amongst others, the consent of the
Minister of Mineral Resources in terms of section 11 of the Mineral
and Petroleum Resources Development Act (Act 28 of 2002), and or any
mining or prospecting rights issued in terms of that Act;
2.2. that Village in general meeting has passed resolutions:
(a) authorising the directors of Village to allot and issue:
(i) the Village consideration shares, as a specific approval
in terms of section 221(2) of the Companies Act, and in
accordance with the Listings Requirements;
(ii) over and above the Village consideration shares (a) the
maximum number of Village shares permitted by the Listings
Requirements (upon such terms and subject to such
conditions as the directors of Village may determine) as a
general approval in terms of section 221(2) of the
Companies Act and in accordance with the Listings
Requirements; and (b) included in the maximum number
referred to in paragraph 2.2(a)(ii)(a), such number of
Village shares as the board of directors of Village may
determine for the purpose of a capital raising exercise,
as a general issue for cash in accordance with the
Listings Requirements;
(b) waiving any requirement on the part of Simmers in terms of the
SRP Code to extend a mandatory offer to the Village
shareholders to acquire all their Village shares as a
consequence of the implementation of any matter provided for in
the disposal agreement;
(c) approving the disposal agreement and its implementation in
accordance with the provisions of the Listings Requirements;
(d) increasing Village`s authorised share capital to R625,000,000
divided into 5,000,000,000 Village shares;
(e) approving the repurchase of the reacquisition shares in
accordance with the provisions of the disposal agreement
regarding the unwinding, in terms of section 85(2) of the
Companies Act;
(f) approving the disposal by Village to Simmers of the
reacquisition assets in accordance with the provisions of the
disposal agreement regarding the unwinding, as required by
section 228 of the Companies Act, and in accordance with the
Listings Requirements;
2.3. that the Registrar of Companies registers all of the various
resolutions required to be passed as special resolutions in terms of
the Companies Act;
2.4. that the JSE has approved the listing of the ABSA notes in the name
of Village;
2.5. that all consents required from First Rand Bank Limited, Rand
Refinery Limited, Absa Bank Limited, Deutsche Bank AG, the holders
of the ABSA notes, Lexshell 820 Investments (Proprietary) Limited
and the trustees of the Simmers Security SPV Owner Trust for:
(a) the assignment by Simmers of all its rights and obligations
under the ABSA note programme documents to Village;
(b) the assignment by Simmers of all its rights and obligations
under:
(i) the forward gold purchase agreement referred to in the
definition of "forward gold purchase transaction
documents" set out in the circular; and
(ii) the other forward gold purchase transaction documents to
which Simmers is a party,
to Village, with effect from the closing date;
(c) the release of the disposal assets from all security granted by
Simmers in favour of Lexshell 820 Investments (Proprietary)
Limited with effect from the closing date;
(d) the disposal of the disposal assets by Simmers to Village, with
effect from the closing date;
(e) the granting by Village of security in favour of Lexshell 820
Investments (Proprietary) Limited over the disposal assets; and
(f) the disposal by Simmers or any of its subsidiaries of all or
any of its assets after the closing date,
have been obtained, and all agreements or other documents required
by First Rand Bank Limited, Rand Refinery Limited, Absa Bank
Limited, Deutsche Bank AG and/or the holders of the aforesaid notes
and/or Lexshell 820 Investments (Proprietary) Limited and/or the
trustees of the Simmers Security SPV Owner Trust to give effect to
or arising from or in relation to the matters referred to in this
2.5, have been entered into and have become unconditional, save for
any condition that the disposal agreement has become unconditional;
2.6. that Village obtains the consent of the Minister of Mineral
Resources pursuant to the Mineral and Petroleum Resources
Development Act (Act 28 of 2002), as amended, for the transfer of
the Eerste Regt Prospecting Right to Sweet Sensation 79
(Proprietary) Limited and the notarial deed of cession executing
such transfer is registered in the Mining and Petroleum Titles
Registration Office; and the retrospective consent of the Minister
of Mineral Resources for the changes in control (direct and
indirect) of Khumo Mining and Investments (Proprietary) Limited
which occurred pursuant to or in connection with the reverse
takeover of Village by Umbono; and
2.7. that the SRP has waived any requirement on the part of Simmers in
terms of the SRP Code to extend a mandatory offer to the
shareholders of Village to acquire all of their Village shares as a
consequence of any matter provided for in the disposal agreement and
that (a) no appeal to such waiver shall have been timeously noted,
or (b) if an appeal is noted, it is unsuccessful.
UNAUDITED PRO FORMA FINANCIAL EFFECTS OF SIMMERS
The unaudited pro forma consolidated statement of comprehensive income
("income statement") and pro forma consolidated statement of financial
position ("balance sheet") are the responsibility of the directors of Simmers
and they have been prepared for illustrative purposes only, in order to
provide information about the financial position and results of Simmers,
assuming the disposal and the unbundling had been implemented on 1 April 2010,
in respect of the income statement and 30 September 2010, in respect of the
balance sheet. Due to its nature, the pro forma financial information may not
give a fair reflection of Simmers` financial position and results of
operations subsequent to the disposal and the unbundling.
The detailed unaudited pro forma financial information is set out in the
circular and the financial effects are summarised below. The independent
reporting accountants` limited assurance report on the unaudited pro forma
financial information is set out in the circular.
Unaudited pro forma financial effects
The table below sets out the pro forma financial effects of the proposed
transactions on Simmers, which are presented for illustrative purposes only
and because of their nature may not give a fair reflection of Simmers`
financial position after the proposed transactions. The directors of Simmers
are responsible for the preparation of the financial effects.
Before After % change
transactions transactions
(cents) (cents)
Basic loss per share (44,11) (147.53) (234.46)
Diluted loss per share (44,11) (147.53) (234.46)
Headline loss per share (44,11) (147.53) (234.46)
Diluted headline loss per share (44,11) (147.53) (234.46)
Net asset value per share 208,82 1.08 (99.48)
Tangible net asset value per share 208,82 1.08 (99.48)
NOTICE OF GENERAL MEETING
Shareholders are advised that the circular was posted today, Wednesday, 2
March 2011, which includes, inter alia, a notice convening a general meeting
of Simmers shareholders to be held at Simmers` registered office, 3 Harrow
Court, Isle of Houghton, 13 Boundary Road, Parktown, Johannesburg at 10:00 on
Friday, 25 March 2011 to consider and, if deemed fit, pass the resolutions
required to implement the proposed transactions.
SALIENT DATES AND TIMES
Salient dates and times in relation to the proposed transactions
Circular and Village circular and revised listings Wednesday, 2 March 2011
particulars posted to Simmers shareholders on
Completed forms of proxy for the general meeting to Wednesday, 23 March 2011
be received by no later than 10:00 on
General meeting of Simmers shareholders held at Friday, 25 March 2011
10:00 on
Results of the general meeting published on SENS on Friday, 25 March 2011
Results of the general meeting published in the Monday, 28 March 2011
press on
Expected finalisation date and announcement Friday, 6 May 2011
pertinent to the unbundling published on SENS and in
the press on
Expected last day to trade in Simmers shares on the Friday, 13 May 2011
JSE in order to participate in the unbundling on (2)
Expected date that the Simmers shares will trade Monday, 16 May 2011
"ex" the unbundling and that trade in the Village
distribution shares will commence on (2)
Expected unbundling record date in order to Friday, 20 May 2011
participate in the unbundling on (2)
Expected date that the Village distribution shares, Monday, 23 May 2011
pursuant to the unbundling, are to be credited to
the accounts of dematerialised shareholders at their
CSDP or broker and posted to certificated
shareholders on (2)
Expected date of the company`s classification as a Monday, 23 May 2011
cash company for the purposes of the Listings
Requirements on (2)(4)
Notes:
1. All dates and times in this circular are local times in South
Africa. The above dates and times are subject to change. Any change
will be released on SENS and published in the press.
2. Based on the assumption that all of the conditions precedent to the
transactions referred to above are fulfilled or waived before
Sunday, 1 May 2011.
3. Share certificates in Simmers may not be dematerialised or
rematerialised between Monday, 16 May 2011 and Friday, 20 May 2011,
both days inclusive.
4. After implementation of the unbundling, Simmers shall, in terms of
the Listings Requirements, be reclassified as a "cash company".
Thereafter, should Simmers within six months after its
classification to a "cash company" fail to enter into an agreement
and make an announcement relating to the acquisition of viable
assets that satisfy the conditions for listing stipulated in Section
4 of the Listings Requirements, the listing of the shares of Simmers
on the JSE will be suspended. Thereafter, should Simmers fail
within a three month period from the date of suspension of the
listing to obtain approval from the JSE for a circular relating to
the acquisition of viable assets that satisfy the conditions for
listing set out in Section 4 of the Listings Requirements, the
listing of the shares of Simmers on the JSE will be terminated.
WITHDRAWAL OF CAUTIONARY
As a result of the above disclosure, shareholders are advised that they no
longer need to exercise caution when dealing in their Simmers shares.
Johannesburg
2 March 2011
Transaction originator and financial advisor
Sovereignty Capital
Legal advisor
Bowman Gilfillan Inc
Transaction sponsor
Java Capital
Auditors and reporting accountants
Grant Thornton
Sponsor to Simmers
RAND MERCHANT BANK (a division of FirstRand Bank Limited)
Independent advisor to Simmers
Bridge Capital
Date: 02/03/2011 14:42:00 Produced by the JSE SENS Department.
The SENS service is an information dissemination service administered by the
JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or
implicitly, represent, warrant or in any way guarantee the truth, accuracy or
completeness of the information published on SENS. The JSE, their officers,
employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature,
howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
