| Thu 21 Apr 2011, 10:45 | | SNU - Sentula Mining Limited - Announcement in respect of the issue of shares |
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SNU
SNU
SNU - Sentula Mining Limited - Announcement in respect of the issue of shares
by Sentula to Shanduka Resources in exchange for Shanduka Resources`
shareholding in it`s coal assets
Sentula Mining Limited
Incorporated in the Republic of South Africa
(Registration number 1992/001973/06)
Share code: SNU ISIN: ZAE000107223
("Sentula" or "the Company")
Shanduka Group (Proprietary) Limited
Incorporated in the Republic of South Africa
(Registration number 2001/004663/07)
("Shanduka Group")
Shanduka Resources (Proprietary) Limited
Incorporated in the Republic of South Africa
(Registration number 2002/017835/07)
("Shanduka Resources")
ANNOUNCEMENT IN RESPECT OF THE ISSUE OF SHARES BY SENTULA TO SHANDUKA
RESOURCES IN EXCHANGE FOR SHANDUKA RESOURCES` SHAREHOLDING IN IT`S COAL
ASSETS AND WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
1. INTRODUCTION
Further to the cautionary announcement released on the Securities
Exchange News Service ("SENS") of the JSE Limited ("JSE") on 4 March
2011 and its renewal on 18 April 2011, the Board of directors of Sentula
and Shanduka Resources (collectively hereinafter referred to as "the
Parties") are pleased to advise that the Parties have entered into an
exchange of shares agreement ("Exchange Agreement"). In terms of the
Exchange Agreement and subject to the fulfilment or waiver of the
conditions precedent set out in paragraph 4.6 below, Sentula will
acquire from Shanduka Resources, a wholly-owned subsidiary of the
Shanduka Group, a leading black-owned and managed investment holding
company:
- 29.94% of the entire issued share capital of Shanduka Coal
(Proprietary) Limited ("Shanduka Coal"); and
- 100% of the entire issued share capital of Shanduka Coal
Investments (Proprietary) Limited ("Shanduka Investments") which
owns 29.93% of the issued share capital of Kangra Coal
(Proprietary) Limited ("Kangra Coal").
Shanduka Coal, Shanduka Investments and Kangra Coal are collectively
referred to as "Shanduka Resources` Coal Assets".
The number of new Sentula ordinary shares to be issued to Shanduka
Resources of 626 905 938 (the "Consideration Shares") in exchange for
its shareholding in the Shanduka Resources` Coal Assets is based on a
valuation of R2.066 billion and following their issue, on the effective
date, will constitute 51.9% of the issued share capital of Sentula (the
"Proposed Transaction").
2. RATIONALE FOR THE PROPOSED TRANSACTION
Sentula, which has been listed on the Main Board of the exchange
operated by the JSE Limited ("JSE") since 1993, derives its income from
contract mining and rehabilitation, earthworks, drilling and blasting,
exploration drilling, crane hire and mining of its coal assets. The
Company also holds a number of prospecting rights, which are currently
undergoing regulatory and development processes. During the course of
the financial year ended 31 March 2010, the Company implemented a rights
offer and also disposed of its 49.998% shareholding in the entity which
owned the Koornfontein Coal Mine. These initiatives were undertaken to
strengthen the Company`s balance sheet by reducing debt and improving
the Company`s liquidity profile. It is the Company`s strategic intent
to further develop its portfolio of coal assets and consequently, the
Proposed Transaction will further this objective, given the established
track record of profitability and cash flow generation of the Shanduka
Resources` Coal Assets.
Founded by Mr Cyril Ramaphosa, the Shanduka Group is a leading black-
owned and managed investment holding company which further encompasses
broad-based Black Economic Empowerment ("BEE"). Shanduka Group`s
shareholder base includes a 10% equity shareholding by a consortium of
black women, 3% by a consortium of black men, as well as a further 5%
shareholding by community development trusts.
Shanduka Resources` long-term strategy is to build a geographically
diverse, multi-commodity, black-owned and managed resource and mining
company. In addition to coal, Shanduka Resources is also invested in,
inter-alia, platinum group metals, gold, base minerals and mining
services.
The Parties are committed to transformation and consider broad-based BEE
as a strategic priority within the mining industry. The introduction of
Shanduka Resources, a credible black controlled company as a controlling
shareholder of Sentula, will enhance the Company`s BEE credentials and
demonstrate the Sentula Board`s commitment to BEE.
The Parties believe that the Proposed Transaction will create a leading
BEE controlled mining services, exploration drilling and coal mining
company, which will be well positioned to leverage its complementary
businesses and develop its portfolio of exploration, near-development
and operational coal mining assets. Furthermore, the BEE controlled
status of the Company will position it favourably for securing future
mining services contracts and proprietary coal mining opportunities.
3. INFORMATION ON SHANDUKA RESOURCES` COAL ASSETS
3.1 Shanduka Coal
Shanduka Coal, whose business comprises of coal prospecting and
mining, is 29.94% owned by Shanduka Resources and 70.06% owned by
Glencore International AG ("Glencore"). Through its subsidiaries,
Shanduka Coal owns 100% of the operating mines, Graspan Colliery,
Middelburg Townlands Colliery and Springlake Colliery. Coal is sold
to both the domestic market as well as exported through Richards
Bay Coal Terminal.
Shanduka Coal`s current mining operations have resources comprising
approximately 104 million mineable tonnes in-situ and produced 9.1
million Run of Mine tonnes for the year ended 31 December 2010.
The historical financial information for Shanduka Coal for the
years ended 31 December is set out in the table below.
Historical financial information*
2010 2009 2008
Audited Audited Audited
R`million R`million R`million
Revenue 2 139 2 371 2 795
Earnings before interest, tax, 295 692 1 394
depreciation and amortisation
Net profit after tax 29 326 799
Return on equity 2.2% 24.7% 80.7%
* 100% of Shanduka Coal
Shanduka Coal`s net profit after tax for the 2010 financial year was
adversely affected to the extent of R116 million by once-off costs and
losses resulting from placing the Lakeside, Bankfontein and Leeufontein
collieries on care and maintenance as they reached the end of their
economic lives in prevailing economic conditions.
3.2 Shanduka Investments
Shanduka Investments holds a 29.93% equity shareholding in the
issued share capital of Kangra Coal. Kangra Coal`s business is
comprised of coal prospecting and mining. The remaining 70.07%
equity shareholding in Kangra Coal is owned by Gas Natural Fenosa
SDG SA ("Gas Naturale") through its South African subsidiary, Union
Fenosa South African Coal (Proprietary) Limited ("Union Fenosa").
Kangra Coal`s assets comprise one mining operation, Savmore
Colliery, which has Richards Bay Coal Terminal direct entitlement
of 1.7 million tonnes per annum and indirect entitlement through
"Quattro" of approximately 0.3 million tonnes per annum.
Kangra Coal`s resources comprise approximately 320 million mineable
tonnes in-situ and the mine produced 4.1 million Run of Mine tonnes
for the year ended 31 December 2010.
The historical financial information for Kangra Coal for the years
ended 31 December is set out in the table below.
Historical financial information*
2010 2009 2008
Audited Audited Audited
R`million R`million R`million
Revenue 1 554 1 303 2 192
Earnings before interest, tax, 726 628 1 439
depreciation and amortisation
Net profit after tax 418 360 821
Return on equity 35.8% 37.0% 94.5%
* 100% of Kangra Coal
4. PRINCIPAL TERMS AND CONDITIONS OF THE PROPOSED TRANSACTION
4.1 Share exchange ratio
Sentula has agreed, subject to the conditions precedent as set out
in paragraph 4.6 below and subject to the share exchange adjustment
mechanism as set out in paragraph 4.3 below, to issue 626 905 938
new ordinary shares to Shanduka Resources in exchange for the
Shanduka Resources` Coal Assets, implying a value of R3.30 per
Sentula ordinary share, representing a premium of 19.8% over the 30-
day volume weighted average share price as measured on the day
prior to the release of the cautionary announcement on 4 March
2011. Consequently, Shanduka Resources will hold 51.9% of the
issued share capital of Sentula.
4.2 Effective date
The effective date of the Proposed Transaction will be the later of
the 3rd business day after the date on which the last of the
conditions precedent, as set out in paragraph 4.6 below is
fulfilled or waived, as the case may be, and if the share exchange
adjustment mechanism is applicable, the date on which agreement is
reached.
4.3 Share exchange adjustment mechanism
The Exchange Agreement provides for an increase or decrease to the
exchange ratio of up to 1.5%, post the finalisation of the due
diligence, which is expected to be completed on or around 31 May
2011. To the extent that the share exchange adjustment constitutes
a variance of more than 1.5% to the exchange ratio, the Exchange
Agreement shall automatically terminate, unless the Parties agree
otherwise.
4.4 Amendment to Sentula Memorandum of Incorporation ("Memorandum")
Pursuant to the Exchange Agreement, Shanduka Group has agreed to a
standstill provision with respect to its shareholding in the
Company and it is proposed that the Memorandum of the Company is to
be amended to reflect this undertaking.
In terms of the standstill provision, Shanduka Group undertakes
that it shall not, at any time during a period of three years from
the effective date of the Proposed Transaction, increase its
shareholding in excess of 65% of the fully diluted issued ordinary
share capital of Sentula.
To the extent that this threshold is breached the Takeover
Regulations regarding "affected transactions" will be deemed to
apply to Shanduka Group, mutatis mutandis, as if Shanduka Group is
required to make a mandatory offer in terms of Regulation 86 of the
Takeover Regulations.
4.5 Material Adverse Change
The Parties have agreed to Material Adverse Change ("MAC") clauses,
allowing for the termination of the Exchange Agreement upon the
occurrence of a MAC event between the signature date of the
Exchange Agreement and the effective date. The Proposed Transaction
is also subject to other terms and conditions customary for a
transaction of this nature.
4.6 Conditions precedent
The Proposed Transaction is subject to the fulfilment or waiver, as
the case may be, of the following conditions precedent:
- the Shanduka Group shareholders having approved the Proposed
Transaction;
- Union Fenosa having irrevocably and unconditionally waived all
or any pre-emptive or similar rights which it may have in
respect of the shareholding in Kangra Coal;
- The bankers of each of Sentula, Shanduka Group and Shanduka
Investments having irrevocably and unconditionally approved or
consented to the implementation of the Proposed Transaction;
- the JSE having approved the Proposed Transaction, including
the listing of the Consideration Shares and the circular to be
sent to shareholders ("the Circular");
- the Takeover Panel having approved the Proposed Transaction,
including the "whitewash resolution" to be passed by
independent shareholders of Sentula and the Circular;
- the shareholders of Sentula, in general meeting passing the
resolutions necessary to effect the Proposed Transaction,
including :
- amending the Memorandum for the standstill provision
applicable Shanduka Group;
- changing the name of Sentula to "Shanduka Mining Limited"
(or such other name as may be approved by Shanduka Group)
with effect from the effective date;
- waiving any requirement on the part of Shanduka Resources
in terms of the Takeover Regulations to extend a
mandatory offer to the shareholders of Sentula to acquire
Sentula shares held by such shareholders as a consequence
of the Exchange Agreement;
- approving the implementation of the Exchange Agreement in
accordance with the provisions of the JSE Listings
Requirements;
- to the extent that the provisions of the Companies Act,
2008 (Act 71 of 2008), are applicable amending the
Memorandum to effect a conversion of existing authorised
and issued share share capital of Sentula from ordinary
par value shares to ordinary no par value shares,
increasing the authorised share capital of the Company
from one billion no par value shares of R0.01 (one cent)
each to two billion no par value shares of R0.01 (one
cent) each;
- placing the Consideration Shares under the control of the
directors of Sentula for the purpose of issuing such
shares to Shanduka Resources in terms of the Proposed
Transaction;
- the Competition Authorities having approved the Proposed
Transaction in terms of the Competition Act, 1998 (Act 89 of
1998), as amended; and
- the Minister of Mineral Resources and the Department of
Mineral Resources having consented to the implementation of
Proposed Transaction.
5. PRO FORMA FINANCIAL EFFECTS OF THE PROPOSED TRANSACTION
The table below sets out the unaudited pro forma financial effects of
the Proposed Transaction on Sentula`s earnings per share, headline
earnings per share, net asset value per share and tangible net asset
value per share.
The unaudited pro forma financial effects have been prepared to
illustrate the impact of the Proposed Transaction on the reported
financial information of Sentula for the six months ended 30 September
2010, had the Proposed Transaction occurred on 1 April 2010 for income
statement purposes and on 30 September 2010 for balance sheet purposes.
The unaudited pro forma financial effects have been prepared using
accounting policies that comply with International Financial Reporting
Standards and that are consistent with those applied in the audited
results of Sentula for the twelve months ended 31 March 2010 as well as
the six months ended 30 September 2010.
The unaudited pro forma financial effects, which are the responsibility
of the directors, are provided for illustrative purposes only and,
because of their pro forma nature may not fairly present Sentula`s
financial position, changes in equity, results of operations or cash
flow.
Before the After the Percentage
Proposed Proposed change
Transaction Transaction
(1) (2)
Basic earnings per share (cents) 9.89 7.40 (25.20)
Headline earnings per share 10.59 7.73 (26.94)
(cents)
Net asset value per share (cents) 495.89 408.53 (17.62)
Tangible net asset value per 421.86 372.91 (11.60)
share (cents)
Weighted average number of shares 581 005 1 207 911
in issue (000`s)
Notes
1. The "Before the Proposed Transaction" basic earnings and headline
earnings per share have been extracted without adjustment from the
reviewed, published results of Sentula for the six months ended 30
September 2010. The "Before the Proposed Transaction" net asset
value and tangible net asset value per share have been calculated
from the financial information presented in the reviewed, published
results of Sentula as at 30 September 2010.
2. The "After the Proposed Transaction" assumes:
a. Shanduka Coal has been accounted for using the equity method
on the basis that Sentula is able to exercise significant
influence over Shanduka Coal. The investment in Shanduka Coal
has been raised at fair value on the effective date;
b. Shanduka Investments has been consolidated by Sentula as
Sentula controls the management and decisions of Shanduka
Investments;
c. Kangra Coal has been accounted for using the equity method on
the basis that Shanduka Investments is able to exercise
significant influence over Kangra Coal. The investment in
Kangra Coal has been raised at fair value on the effective
date;
d. payment of estimated transaction costs of R12.5 million in
respect of the Proposed Transaction;
e. the issue of 626 905 938 ordinary shares to Shanduka
Resources;
f. the equity accounted income from Shanduka Coal and Kangra Coal
for the period 1 April 2010 to 30 September 2010 and the value
of the preference shares and the preference dividends for the
period relating to Shanduka Investments as included in the pro
forma financial effects presented above has been extracted
from the unaudited management accounts of these entities for
this period. Sentula is satisfied with the quality of these
management accounts; and
g. the pro forma earnings, net asset value and tangible net asset
value per share have been adversely impacted by the
circumstances disclosed in paragraph 3.1 above.
6. CATEGORISATION OF THE PROPOSED TRANSACTION AND FURTHER DOCUMENTATION
The Proposed Transaction is classified as a reverse take-over in terms
of the Listings Requirements of the JSE. Accordingly, a Circular
containing full details of the Proposed Transaction, Competent Persons
Reports, Revised Listing Particulars, the opinion of the independent
expert and a notice to convene a general meeting of Sentula shareholders
for the purposes of approving the Transaction, will be distributed to
shareholders in due course. Shareholders will be kept updated with
regards to the expected date of distribution of the Circular.
7. OPINIONS AND RECOMMENDATION
The Proposed Transaction is classified as an "affected transaction" in
terms of the Takeover Regulations, and accordingly the Sentula Board
will be required to obtain an independent opinion. Sentula has appointed
BDO Corporate Finance as the Independent External Adviser to provide
such opinion in due course.
The Sentula Board will provide its opinion and recommendation to
shareholders of Sentula following the independent advice of BDO
Corporate Finance on the Proposed Transaction. The opinion of the
independent expert and the recommendation of the directors will be
included in the Circular to be posted to Sentula shareholders.
8. WITHDRAWAL OF CAUTIONARY
Shareholders of Sentula are referred to the renewal of cautionary
announcement dated 18 April 2011, and are advised that caution is no
longer required to be exercised by shareholders when dealing in the
Company`s securities.
Johannesburg
21 April 2011
For further information contact:
Sentula Sentula
Robin Berry - Chief Executive Officer Deon Louw - Chief Financial
+27 11 656 1303 (office) Officer
+27 82 449 1858 (mobile) +27 11 656 1303 (office)
robin.berry@sentula.co.za +27 82 889 0224 (mobile)
deon.louw@sentula.co.za
Investment Bank and Transaction Sponsor to Sentula
Standard Bank
Sponsor to Sentula
Merchantec Capital
Legal Advisers to Sentula
Cliffe Dekker Hofmeyr
Reporting Accountants to Sentula
BDO Corporate Finance
Independent External Adviser
BDO Corporate Finance
Investor Relations for Sentula
College Hill
Investment Bank to Shanduka Resources
Rand Merchant Bank
Legal Advisers to Shanduka Resources
Edward Nathan Sonnenbergs
Werksmans Attorneys
Date: 21/04/2011 10:45:02 Produced by the JSE SENS Department.
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