| Mon 11 Jul 2011, 7:30 | | FMC - Forbes Coal - Abridged Pre-Listing Statement |
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FMC
FMC - Forbes Coal - Abridged Pre-Listing Statement
Forbes & Manhattan Coal Corp.
(Formerly Nyah Resources Corp.)
(Incorporated in accordance with the laws of the Province of Ontario and
registered as an external company in the Republic of South Africa)
(Registration number: 002116278)
(External company registration number: 2011/011661/10)
Share code on the Toronto Stock Exchange: FMC
Share code on the JSE Limited: FMC
ISIN: CA3451171050
("Forbes Coal" or "the company")
ABRIDGED PRE-LISTING STATEMENT
Abridged pre-listing statement relating to the listing of Forbes Coal on the
JSE Limited ("JSE") with effect from the commencement of business on
Thursday, 28 July 2011
This abridged pre-listing statement is not an invitation to the general
public to subscribe for shares in Forbes Coal but is issued in compliance
with the JSE Limited ("JSE") Listings Requirements for the purposes of
providing information to the public with regard to Forbes Coal.
The information in this abridged pre-listing statement has been extracted
from a full pre-listing statement ("the detailed pre-listing statement")
issued by Forbes Coal on Tuesday, 5 July 2011, copies of which are available
as set out in paragraph 10 below.
1. Introduction
Forbes Coal currently has a primary listing of its ordinary shares on the
Toronto Stock Exchange ("TSX"), classified under "Mining".
The JSE has granted the company a secondary listing of 34 865 717 shares,
representing the entire issued ordinary share capital of Forbes Coal, in the
"Coal" sector under the abbreviated name "Forbes", share code "FMC" and
ISIN: CA3451171050, with effect from the commencement of trading on the JSE
on Thursday, 28 July 2011.
2. Background and history
Forbes Coal is a producer of high quality bituminous and anthracite coal,
with two producing coal projects, namely, the Magdalena mine and the
Aviemore mine, located north of the town of Dundee in the KwaZulu-Natal
province, South Africa.
In April 2010, Forbes & Manhattan Coal Inc. ("Forbes Coal Inc."), a 100%
owned subsidiary of Forbes Coal, entered into an agreement to acquire 100%
of the shares in Slater Coal (Proprietary) Limited ("Slater Coal"), the
owner of the Magdalena and Aviemore mines, from the Slater family ("the
Slater Coal vendors"), for a total purchase consideration of R600 million
payable over a two year period as follows:
- Forbes Coal Inc. acquired 53.5% in Slater Coal in 2010 for initial
payments totalling R320 million, as follows:
- a R5 million cash deposit paid in November 2009 (prior to the
conclusion of the relevant sale and purchase agreements);
- a cash instalment of R22.5 million paid on 29 June 2010;
- a cash instalment of R213.75 million paid on 23 July 2010; and
- issuance of shares in Forbes Coal Inc. to the Slater Coal vendors,
representing a value of R78.75 million in July 2010.
- The balance of R280 million was payable in two equal instalments of R140
million each, subject to the adjustment mechanism set out below:
- the first of the two instalments was paid in February 2011; and
- the second and final instalment is payable in March 2012.
The February 2011 payment was based on a targeted production rate of 781 200
tonnes of coal in 2011. A variance of greater than 10% from such production
target was applied to either increase or decrease the amount payable by such
corresponding percentage, subject to a maximum increase or decrease in
payment of 15%. The March 2012 payment is similarly based on a targeted
production rate of 782 400 tonnes of coal in 2012.
- In February 2011, Forbes Coal Inc. increased its interest in Slater Coal
to 76.75% with a payment of R119 million, representing 85% of the proposed
instalment of R140 million (i.e. the maximum 15% decrease in payment was
applied), based on actual contracted production levels achieved.
- Forbes Coal Inc. will acquire the remaining 23.25% in Slater Coal, to
increase its shareholding to 100%, pursuant to the payment of the final
instalment in March 2012.
On 20 September 2010, Forbes Coal Inc. completed a business combination with
TSX-listed cash shell, Nyah Resources Corp. ("Nyah"), in terms of which a
wholly-owned subsidiary of Nyah amalgamated with Forbes Coal Inc., and Nyah
changed its name to Forbes & Manhattan Coal Corp.. The business combination
was by way of a three-cornered amalgamation in terms of the relevant
Canadian law governing mergers and acquisitions, being a transaction in
terms of which one company amalgamates with a subsidiary of another company.
Forbes Coal commenced trading on the TSX on 27 September 2010.
3. Overview of the Forbes Coal group
3.1 The Magdalena mine
The Magdalena mine produces bituminous coal. It achieved a production rate
of saleable coal of 556 094 tonnes for the 2011 financial year, 485 000
tonnes for the 2010 financial year and 449 000 tonnes for the 2009 financial
year. Operations at the Magdalena mine are both opencast and underground.
Production at the Magdalena mine is expected to increase to 850 000 tonnes
of saleable coal for the 2012 financial year, as a result of the
introduction of a new continuous miner at the underground operations and
increased efficiencies at the processing plant.
The Magdalena mine has a life of mine of approximately 25 years on its
underground mine, with the opencast mining ending in 2013. Measured and
indicated resources for the Magdalena mine are 51.7 million tonnes and
proven and probable reserves are 25.4 million tonnes.
The bituminous coal produced at the Magdalena mine is sold in part into the
domestic market to independent industrial companies and in part to global
offshore energy traders, in relation to which Forbes Coal has entered into
offtake agreements with, inter alia, Vitol S.A. and Glencore International
AG.
3.2 The Aviemore mine
The Aviemore mine produces high quality anthracite coal and Forbes Coal is
one of only four major anthracite producers in South Africa. All operations
at the Aviemore mine are underground.
The Aviemore mine commenced operations in June 2010, having been closed
since 2009 due to the downturn in economic conditions. In the 2011 financial
year, saleable production of 91 954 tonnes was achieved. Production at the
Aviemore mine is expected to increase to 170 000 tonnes of saleable coal for
the 2012 financial year and 290 000 tonnes for the 2013 financial year.
Measured and indicated resources for the Aviemore mine are 35.7 million
tonnes, inferred resources are 15.1 million tonnes, and proven and probable
reserves are 9.6 million tonnes.
The majority of the Aviemore mine`s coal is sold into the domestic market,
with the company targeting sales to Brazilian, Asian and European steel
manufacturers as well.
3.3 Processing plants
The coal processing operation consists of two coal processing plants, one at
the company`s head office site known as Coalfields plant located in Dundee
town, and the newer Magdalena plant situated at the site of the Magdalena
mine. There is also an anthracite calcine plant at Coalfields.
3.4 Transport and port allocation
The Slater Coal operations have a rail siding located onsite at Coalfields,
which provides a rail connection to the Transnet Freight Rail ("TFR") rail
system, whereby coal is transported to industrial customers in domestic
markets as well as to the Richards Bay Coal Terminal ("RBCT") for export to
major global energy companies.
Forbes Coal has an existing export allocation of 197 000 tonnes per annum at
RBCT, through Slater Coal`s 70% owned subsidiary, Zinoju Coal (Proprietary)
Limited ("Zinoju"), further details of which are set out in paragraph 3.5
below.
On 14 December 2010, Forbes Coal concluded an agreement with Grindrod
Terminals Richards Bay, a division of Grindrod South Africa (Proprietary)
Limited ("Grindrod") for additional export capacity through Grindrod`s
Navitrade Terminal in Richards Bay for 600 000 tonnes in 2011, 720 000
tonnes in 2012, and 960 000 tonnes in 2013.
3.5 Black Economic Empowerment ("BEE")
Slater Coal owns 70% of Zinoju, which owns all the mining and prospecting
rights pertaining to the two mining areas within the Forbes Coal group. The
remaining 30% in Zinoju was historically owned by BEE partners, African
Spirit Trading 307 (Proprietary) Limited ("African Spirit"), which held 18%
of Zinoju, and Nulane Investments 185 (Proprietary) Limited ("Nulane") which
held 12% of Zinoju.
On 30 June 2011, African Spirit and Nulane entered into a sale and purchase
agreement which resulted in Nulane acquiring all of the shares owned by
African Spirit in Zinoju and owning 30% in Zinoju. This transaction was
finalised and implemented on 5 July 2011.
Forbes Coal remains fully compliant with the ownership requirements of the
Broad-based Socio-Economic Empowerment Charter for the South African Mining
Industry ("the Mining Charter").
In addition, Zinoju has implemented a social and labour plan for employees
of Slater Coal and Zinoju and the surrounding communities of the Magdalena
mine, including functional literacy and numeracy training for employees, a
mentorship programme and an internship and bursary plan, as well as various
sustainable long term projects which have been established for local
development.
Forbes Coal is committed to complying with the provisions of the Mining
Charter and to promoting socio-economic empowerment within its operations.
4. Prospects
4.1 Prospects for the global coal market
The demand fundamentals for thermal coal are improving with the improvement
in economic growth in the western world. Power production growth in the
United States, Western Europe and Asia has led to greater demand for thermal
coal. In addition, greater than expected imports for thermal and anthracite
coal by China and a faster than expected acceleration in India`s import
demand for thermal coal are catalysts for demand side driven growth in coal
prices.
There are certain anticipated supply side constraints such as ageing mines
and transportation bottlenecks in the major supplier nations that will place
further upward pressure on coal pricing.
Prospects for the South African coal market
As a major coal exporter, South Africa is poised to benefit from the strong
export demand from emerging economies like India and China. While South
Africa has traditionally exported circa 70% of its export coal to Europe,
this strong demand from Asia is resulting in the focus shifting to Asia.
South Africa has sufficient coal reserves to meet export demand but it faces
certain infrastructural constraints in terms of transportation backlogs and
ageing mines that pose a limitation to the quantum of exports.
4.3 Prospects for Forbes Coal
Forbes Coal will benefit from the increased demand in exports as it has
successfully created export capacity at the Richards Bay port through
Grindrod`s Navitrade Terminal in addition to its RBCT allocation. It also
benefits from direct access to the TFR line to be able to transport coal to
the Richards Bay port.
The company has already successfully negotiated offtake agreements with
significant global energy companies to take up the increase in export coal.
5. Rationale for listing
Forbes Coal has been granted a secondary listing of its shares on the JSE.
The purpose of the listing is to, inter alia:
- comply with the Exchange Control Regulations of the South African Reserve
Bank;
- provide Forbes Coal with an additional source from which permanent capital
can be obtained, if required, to fund the group`s expansion programme and
working capital requirements and to facilitate future growth;
- enhance South African investor and general public awareness of the Forbes
Coal group and its activities, thereby enlarging Forbes Coal`s investor base
and increasing trade in its shares;
- have the flexibility of JSE listed shares in order to allow Forbes Coal to
take advantage of potential South African and African acquisition
opportunities;
- facilitate direct investment by South African residents in Forbes Coal;
- facilitate investment by BEE shareholders at a listed company level.
6. Details of directors
Details of the directors of Forbes Coal ("the board") and its subsidiaries
are set out below:
Full name, age and Designation/
nationality Business address Function
Stan Bharti (58) 65 Queen Street, 8th Forbes Coal - executive
(Canadian) Floor chairman
Toronto, Ontario
Canada
Stephan Theron 65 Queen Street, 8th Forbes Coal - president
(34) Floor and chief executive
(South African) Toronto, Ontario officer
Canada Slater Coal - executive
director
Zinoju - executive
director
David Stein (34) 65 Queen Street, 8th Forbes Coal - non-
(Canadian) Floor executive director
Toronto, Ontario
Canada
Ryan Bennett (44) 1400 16th Street, Forbes Coal - non-
(USA) Suite 200, Denver, executive director
Colorado
USA
Grant Davey (38) * 65 Queen Street, 8th Forbes Coal -
(Zimbabwean) Floor independent non-
Toronto, Ontario executive director
Canada
David Gower (52) * 65 Queen Street, 8th Forbes Coal -
(Canadian) Floor independent non-
Toronto, Ontario executive director
Canada
Johan Louw (37) The Pivot, Office Slater Coal - executive
(South African) Block E director
1st Floor, The Y Zinoju - executive
Montecasino Boulevard director
(Corner William Nicol
Drive and Witkoppen
Road)
Fourways, Sandton
South Africa
Norman Slater (59) Coalfields Slater Coal - executive
(South African) Dundee director
South Africa Zinoju - executive
director
Peter Slater (67) Coalfields Slater Coal - executive
(South African) Dundee director
South Africa Zinoju - executive
director
Debbie Ntombela Coalfields Zinoju - executive
(57) Dundee director
(South African) South Africa
*Indicates independent, in terms of Canadian guidelines
7. Major shareholders
The current major shareholders of Forbes Coal are as follows:
Name Number of shares Percentage
directly beneficially shareholding in
held Forbes Coal
Luxor Capital Partners 1 789 467 5.1%
Offshore Master Fund,
LP (note 1)
Luxor Capital 1 279 353 3.7%
Partners, LP (note 1)
Luxor Wavefront, LP 567 165 1.6%
(note 1)
GAM Equity Six, Inc. 165 455 0.5%
(note 1)
Resource Capital Fund 5 357 143 15.4%
VLP (note 2)
Aberdeen International 2 805 196 8.0%
Inc. (note 3)
The Trustees, N.O., of 2 583 882 7.4%
the Creative Trust
(note 4)
14 547 661 41.7%
1. While Luxor Capital Partners Offshore Master Fund, LP, Luxor Capital
Partners, LP, Luxor Wavefront, LP and GAM Equity Six, Inc. are considered to
be separate legal entities, they have a common portfolio manager and, if
considered to be under common control, then taken collectively, they
beneficially own 3 801 440 Forbes Coal shares representing 10.9% of the
company. The shares in the group of Luxor funds are widely held by
management and employees.
2. Resource Capital Fund VLP is a partnership with 8 partners. These
partners are James McClements, Ryan Bennett, Henderson Tuten, Brian Dolan,
Ross Bhappu, Russ Cranswick, Peter Nicholson and Manson Hills.
3. Aberdeen International Inc. is approximately 15% held by management with
the balance of its shareholders being represented by a widespread body of
fund managers and retail clients.
4. The beneficiaries of the Creative Trust are Peter Slater, Sandy Slater
(deceased), Kerry Slater, Ryan Slater and Kim Slater.
8. Share capital
Forbes Coal`s authorised and issued share capital at the date of listing
will be as follows:
C$
Authorised
Unlimited number of ordinary shares with no par
value
Issued
34 865 717 ordinary shares with no par value 96 448 050
9. Dividends and dividend policy
It is the ultimate intention of the board to implement a policy of regular
dividend payments in compliance with the provisions of the Canadian Business
Corporations Act, R.S.O. 1990 c. B.16 and the regulations thereunder, as
amended from time to time, and the by-laws of Forbes Coal. However, such
payments will be made only after consideration of the need for retention of
sufficient funds for operating requirements, loan repayments and capital
programmes applicable to current operations and future acquisition
opportunities. Major growth opportunities outside of current operations may
be funded through a combination of internal and external sources. Any
surplus to the above requirements may be declared and paid as dividends to
shareholders according to their respective rights and interest in the
company, at the discretion of the board.
10. Copies of the pre-listing statement
Copies of the detailed pre-listing statement will be available for
inspection during business hours between Monday, 11 July 2011 and Friday, 5
August 2011 at:
- Forbes Coal`s registered office in South Africa, The Pivot, Office Block
E, 1st Floor, The Y, Montecasino Boulevard, Fourways, Sandton; and
- Forbes Coal`s corporate advisor`s offices, Sasfin Capital, a division of
Sasfin Bank Limited, 29 Scott Street, Waverley.
Corporate advisor and sponsor: Sasfin Capital, a division of Sasfin Bank
Attorneys: Werksmans Attorneys
Reporting accountants and South African auditors: PricewaterhouseCoopers
Qualified persons: Minxcon
Johannesburg
11 July 2011
Date: 11/07/2011 07:30:01 Produced by the JSE SENS Department.
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