| Mon 3 Oct 2011, 7:06 | | LON - Lonmin Plc - Lonmin`s BEE Partner Shanduka Moves a Step Closer to Becoming |
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LON
LOLMI
LON - Lonmin Plc - Lonmin`s BEE Partner Shanduka Moves a Step Closer to Becoming
a PGMs Operator
Lonmin Plc (Incorporated in England and Wales)
(Registered in the Republic of South Africa under registration number
1969/000015/10)
JSE code: LON
Issuer Code: LOLMI & ISIN: GB0031192486 ("Lonmin")
3 October 2011
Lonmin Plc
Lonmin`s BEE Partner Shanduka Moves a Step Closer to Becoming a PGMs Operator
Lonmin Plc (Lonmin) is pleased to announce that Lonmin, Western Platinum Limited
(WPL), Messina Limited (Messina) and Messina Platinum Mines Limited (MPML) have
entered into a conditional share subscription agreement (SSA) with Shanduka
Group (Proprietary) Limited (Shanduka) offering Shanduka the opportunity of
carrying out a Feasibility Review to assess the viability of it operating and
developing Lonmin`s Limpopo Division. Assuming a successful outcome of the
Feasibility Review, Shanduka will raise the necessary funds and will be entitled
to subscribe for 50% plus one share in the issued share capital of MPML which is
currently a wholly owned subsidiary of Messina (wholly owned by WPL), thereby
acquiring control and operational management of Lonmin`s Limpopo Division (the
Transaction).
Rationale for the Transaction
The purpose of the Transaction is to enable Lonmin to work with its Black
Economic Empowerment (BEE) partner to develop Limpopo on a manageable scale.
Lonmin believes that this Transaction will contribute to it meeting the Mining
Charter Phase 2 equity target of 26% by 2015, as well as furthering Shanduka`s
strategy of operating mining assets in chosen commodities. The provision of
capital by Shanduka will enable Lonmin to retain its balance sheet capacity and
management focus on growth from its Marikana operations. The Transaction further
strengthens Lonmin`s partnership with Shanduka and if completed will transform
MPML into a BEE controlled and operated Platinum Group Metals (PGMs) mining
company.
Transaction Details
Subject to the fulfilment of the conditions precedent, Shanduka will subscribe
for 50% plus one share in the issued share capital of MPML in return for a
contribution of R1.1 billion to MPML. Prior to the subscription, WPL will
procure that the Limpopo Division corporate structure is rationalised such that
WPL directly holds 100% of the issued share capital in MPML, that its 50% share
in the Dwaalkop Joint Venture is sold to MPML in return for shares in MPML and
that the historical Lonmin Group shareholder loans to MPML, which have been
fully provided for by WPL, are capitalised. Shanduka is an associate of Cyril
Ramaphosa, a director of Lonmin, and Shanduka also controls Incwala Resources
(Pty) Limited and its subsidiary Incwala Platinum (Pty) Limited, which is a
material shareholder in Lonmin`s principal operating subsidiaries. Shanduka is
therefore a related party of Lonmin and as such the Transaction may require
Lonmin shareholder approval.
On completion of the Transaction, Shanduka will hold a controlling interest of
50% plus one share, and WPL the balance of shares, in the enlarged issued share
capital of MPML. As a result, Shanduka will be in a position to develop, operate
and manage a viable mine. Lonmin and its subsidiaries will continue to hold an
82% interest in WPL. In addition, post completion, WPL will be entitled to
receive an amount of R400 million from MPML by way of preference shares to be
issued by MPML to WPL or such other mechanism as may be agreed.
If at some point in the future the Limpopo Division operations are expanded
beyond a production level of 250,000 ounces of PGMs per annum (the initial
90,000 tonnes per month producing c.100,000 to 120,000 ounces of PGMs per annum)
WPL will have an option to sole equity fund the expansion with a commensurate
increase in WPL`s shareholding in MPML.
Lonmin`s Limpopo Division
Lonmin`s Limpopo Division currently comprises:
* The Baobab Mine including the Baobab Shaft and infrastructure and a
90,000 tonnes per month concentrator held by MPML - limited
development activities have recently been restarted at Baobab;
* A 50% share in the Dwaalkop Joint Venture held by WPL. The other 50%
of the Dwaalkop Joint Venture is held by Mvelaphanda Resources
Limited;
* The Doornvlei Project held by MPML; and
* A prospecting area known as "Zebediela`s Location", held by MPML, in
respect of the area down dip and along strike from the Baobab Shaft.
Lonmin`s published attributable reserves and resources in respect of its Limpopo
Division as at 30 September 2010 are as follows:
Mineral Resource (Total Measured, Indicated and Inferred)
3PGE + Au
Area Mt g/t Moz
Limpopo* 144.7 4.23 19.7
Limpopo Baobab Shaft 46.1 3.91 5.8
Mineral Reserves (Total Proved and Probable)
Mt 3PGE + Au
Area g/t Moz
Limpopo* 42.4 3.2 4.4
Limpopo Baobab Shaft 9.4 3.16 1.0
* Excludes Baobab
Shaft
Due to the prevailing market conditions the Baobab Shaft was placed on care and
maintenance during 2009 and accordingly no profits were generated during the
2010 or 2011 financial years. Published historical production statistics from
the Baobab Shaft are set out below.
Units 2010 2009 2008 2007 2006
Tonnes kt 0 87 523 757 870
Mined
Tonnes kt 0 92 534 781 901
Milled
PGMs (6E) Oz 0 8,679 46,667 73,600 106,410
in
Concentrate
The value of the assets which are the subject of the Transaction, as reflected
on Lonmin`s balance sheet as at 31 August 2011, is US$143 million (unaudited).
The R1.1 billion Shanduka contribution will be used to develop and increase
production from the Baobab Shaft and to develop the projects at Dwaalkop and
Doornvlei.
Conditions Precedent
The Transaction is subject to several conditions precedent, the most material
being:
* Completion of limited legal and financial due diligence by Shanduka to
its satisfaction;
* Shanduka completing a Feasibility Review, at its own cost, based on a
90,000 tonnes per month operation and the approval of the Feasibility
Review by WPL;
* WPL`s 50% interest in Dwaalkop being sold to MPML in return for
shares in MPML;
* Shanduka raising R1.1 billion including the conclusion of definitive
funding agreements;
* Lonmin and Shanduka agreeing the capital structure of MPML, failing
which the amount of R1.1 billion will be contributed by Shanduka as
equity and WPL will subscribe for preference shares in MPML, as set
out above;
* WPL and MPML entering into a concentrate off-take agreement for the
Limpopo Division concentrate;
* Any approvals by the shareholders of Lonmin or undertakings to the
Financial Services Authority which may be required under the Listing
Rules of the United Kingdom Listing Authority in respect of related
party transactions being received;
* South African Competition Authorities approval; and
* The consent of the Department of Mineral Resources of South Africa.
The parties to the SSA will co-operate with the objective of fulfilling the
conditions precedent as soon as practicably possible and anticipate it will take
between 12 and 15 months to close the Transaction. Should all conditions not be
met by 31 January 2013, the SSA will terminate unless extended by agreement
between the parties.
Commenting on the Transaction, Ian Farmer, CEO of Lonmin, said:
"This transaction has the potential to extend our relationship with Shanduka and
provides a clear roadmap for the development and future expansion of our Limpopo
Division. It gives Shanduka the opportunity to become a BEE controlled PGMs
mining and operating company in line with the DMR`s empowerment objectives and
is a further demonstration of our strong and ongoing commitment to achieving 26%
empowerment in terms of the Mining Charter."
Commenting on the Transaction, Phuti Malabie, Chief Executive Officer of
Shanduka Group, said:
"This transaction evidences Shanduka`s progress from a BEE investment company to
an owner and operator of a substantial mining asset, in line with our country`s
transformation objectives. Our partnership with Lonmin, as well as our track
record of sustainable investment in the South African mining industry, now
enables us to conduct this Feasibility Review on the very prospective Limpopo
orebody, mine and other existing infrastructure".
Contact
For further information please contact:
Lonmin +44 (0)20 7201 6007
Tanya Chikanza (Head of Investor Relations)
Citi (Joint Broker) +44 (0)20 7986 4000
Tom Reid
Alex Carter
J.P. Morgan Cazenove (Joint Broker) +44 (0)20 7588 2828
Michael Wentworth-Stanley
Nik Kloepfer
Cardew Group (Financial PR Adviser) +44 (0)20 7930 0777
Anthony Cardew
James Clark
Financial Dynamics (Financial PR Adviser) +27 (0)11 214 2402
Sue Vey
Date: 03/10/2011 07:06:40 Produced by the JSE SENS Department.
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