| Mon 20 Jun 2011, 8:30 | | PAM - Palabora Mining Company - Broad-Based Black Economic Empowerment |
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PAM
PAM
PAM - Palabora Mining Company - Broad-Based Black Economic Empowerment
Transaction - Update
PALABORA MINING COMPANY LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1956/002134/06)
JSE code: PAM ISIN:ZAE000005245
("Palabora" or "the Company")
BROAD-BASED BLACK ECONOMIC EMPOWERMENT ("BBBEE") TRANSACTION - UPDATE
Shareholders are referred to the announcement published on SENS on 15 June 2010
where it was announced that Palabora and its BBBEE partners had that day signed
agreements to effect its BBBEE transaction (BEE Transaction), and to the
subsequent update announcements relating to the BEE Transaction published on
SENS on 15 October 2010 and 7 February 2011 and in the Company`s 2010 annual
report released on 26 May 2011.
The BEE Transaction has not yet been implemented as Palabora has, inter alia,
yet to receive the required regulatory approval from the Department of Mineral
Resources (DMR) for the conversion of old order mining rights to new order
mining rights and transfer of the relevant mineral rights to Palabora Copper
(Proprietary) Limited ("Palabora Copper").
Shareholders will be aware that the BEE Transaction involves the sale of
Palabora`s business to Palabora Copper, and that this sale was structured to be
tax neutral for both Palabora and Palabora Copper by reliance on section 45 of
the Income Tax Act, 1962 (ITA), which provides tax rollover relief for an intra-
group transaction of this nature.
The Draft Taxation Laws Amendment Bill, 2011 released for comment on 2 June 2011
proposes to suspend the operation of section 45 of the ITA for 18 months (Draft
Amendment) on and from 3 July 2011 to 1 January 2013. As presently formulated,
the Draft Amendment would apply to the BEE Transaction as the transaction will
likely be implemented during the period of the suspension.
If the Draft Amendment was to become law, and the BEE Transaction was to be
implemented as presently formulated, Palabora would incur an immediate, material
tax charge. This outcome is presently not commercially tenable for the BEE
Transaction.
The Company is advised that the Draft Amendment will have far reaching, adverse
implications for industry in South Africa and is widely opposed by various
interested parties. In addition to this, Palabora (assisted by its professional
advisors) will actively make representations to Government to withdraw the Draft
Amendment or to amend it so as not to apply to the BEE Transaction. In doing
so, Palabora will be making submissions to the Parliamentary Standing Committee
on Finance on Tuesday, 21 June 2011 and will also be making written submissions
to National Treasury before 5 July 2011 - all in accordance with the public
objection process established for the draft legislation. Palabora will also
seek to have direct engagement with relevant senior personnel within Government
to address its concerns with the Draft Amendment.
If the outcome of the legislative objection process and engagement with
Government is not favourable, it is presently Palabora`s intention not to
proceed with the BEE Transaction in its current form. In parallel with the
above processes, Palabora will accordingly also consider and, where necessary,
pursue comparable, alternative transaction structures in conjunction with its
legal and financial advisors and the BEE partners.
Palabora management is presently confident that the situation will be resolved
satisfactorily. Shareholders will be advised accordingly should there be any
material change in the prevailing position.
Phalaborwa
20 June 2011
Sponsor:
One Capital
Date: 20/06/2011 08:30:00 Produced by the JSE SENS Department.
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