| Tue 8 Nov 2011, 9:05 | | DRD/VIL - DRDGold Limited/Village Main Reef Limite |
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DRD VIL
DRDD VIL
DRD/VIL - DRDGold Limited/Village Main Reef Limited - Regarding the proposed
disposal of DRDGold`s entire interest in Blyvooruitzicht Gold Mining Company
Limited to Village and cautionary announcements
DRDGOLD LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1895/000926/06)
JSE Share Code: DRD
ISIN: ZAE000058723
Issuer code: DUSM
Nasdaq trading symbol: DROOY
("DRDGOLD")
VILLAGE MAIN REEF LIMITED
(Incorporated in the Republic of South Africa)
(formerly known as Village Main Reef Gold Mining Company (1934) Limited)
(Registration number 1934/005703/06)
JSE Share Code: VIL
ISIN: ZAE000154761
("Village")
JOINT ANNOUNCEMENT REGARDING THE PROPOSED DISPOSAL OF DRDGOLD`S ENTIRE INTEREST
IN
BLYVOORUITZICHT GOLD MINING COMPANY LIMITED ("BLYVOOR")
TO VILLAGE AND CAUTIONARY ANNOUNCEMENTS
1. INTRODUCTION
DRDGOLD and Village ("Parties") are pleased to announce that DRDGOLD has
received and accepted, on a non-binding and in-principle basis, a non-binding
expression of interest from Village ("EOI") in terms of which Village has
expressed an interest in acquiring DRDGOLD`s entire interest in Blyvoor,
comprising all amounts owed to DRDGOLD by Blyvoor ("Blyvoor Loan") and all the
ordinary shares in Blyvoor held by DRDGOLD ("Blyvoor Shares") (collectively,
"Sale Assets") ("Proposed Transaction").
Pursuant to the EOI, the Parties have entered into an exclusivity and break-fee
agreement ("Break-Fee Agreement"), further details of which are set out in
paragraph 4 below.
2. PROPOSED TRANSACTION CONSIDERATION
In terms of the EOI, Village proposes to acquire the Sale Assets from DRDGOLD
for a total purchase consideration of R150 million ("Purchase Consideration"),
to be settled by Village through the issue of new ordinary shares in Village
("Village Shares") to DRDGOLD, in the manner and upon the occurrence of the
events contemplated in paragraph 5 below.
3. BACKGROUND AND COMMERCIAL RATIONALE
3.1 Blyvoor
Blyvoor mined its first ore in 1942 and is situated on the north-western edge of
South Africa`s Witwatersrand Basin, to the south of the town of Carletonville
and 70km south-west of Johannesburg in the North West Province. The mine has
both underground mining and surface tailings retreatment operations and a
carbon-
in-leach gold plant with the capacity to treat some 400 000 tonnes per month.
DRDGOLD currently owns 74% of the issued share capital of Blyvoor.
On 23 June 2011, DRDGOLD published an announcement stating that the board of
directors of DRDGOLD ("DRDGOLD Board") had decided to suspend the provision of
financial assistance to Blyvoor. This decision followed the promulgation of the
Companies Act, No. 71 of 2008, as amended ("Act") which requires the directors
of holding companies to, inter alia, seek the consent of the holding company`s
shareholders in order to provide financial assistance to a subsidiary. In
response to this decision and after considering Blyvoor`s financial position and
prospects at that date, Blyvoor`s board of directors resolved to place Blyvoor
under business rescue proceedings in terms of Chapter 6 of the Act. Blyvoor
remains under such business rescue proceedings as at the date of this
announcement.
The Parties are confident that the business rescue proceedings in respect of
Blyvoor will be discontinued imminently to their satisfaction.
3.2 Village
Village`s primary strategy is to create self-sustaining, socially responsible
mining entities by utilising, inter alia, the significant mining and investment
expertise residing within Village. This has been and will continue to be
achieved through the identification and acquisition of strategic assets and
managing these assets in a way which realises and unlocks their potential value.
Village recently concluded the acquisition of the majority of the assets of
Simmer and Jack Mines Limited which resulted in Village becoming the owner of
two operating gold mines, namely Buffelsfontein and Tau Lekoa. Village also owns
and operates Consolidated Murchison, an antimony and gold operation situated in
Limpopo.
The Proposed Transaction will result in Village increasing its issued share
capital by approximately 9% whilst more than doubling its gold reserves from 2.1
Moz to some 7.4 Moz and increasing gold resource ounces by 115%. Furthermore, it
is estimated that the acquisition of Blyvoor`s 85 000 oz of gold production will
result in Village producing more than 250 000 oz of gold per annum from its
operations.
3.3 Commercial rationale
It is the opinion of the DRDGOLD Board and the board of directors of Village
("Village Board") that the Proposed Transaction represents an excellent
opportunity for Village to utilise its specialist skills to unlock further
value, in a socially responsible manner, from the Blyvoor operations going
forward, including for the benefit of DRDGOLD, Village and their respective
shareholders.
From DRDGOLD`s perspective, the Proposed Transaction provides DRDGOLD with an
opportunity to:
* eliminate any further funding exposure towards Blyvoor;
* retain significant further indirect potential upside from its historic
investment in Blyvoor, via its shareholding in Village;
* provide Blyvoor with access to the significant management and operational
skills that Village possesses and create a platform for the sustainable and
socially responsible future development of Blyvoor and its operations; and
* clearly separate its surface and underground operations, which is its stated
strategy.
4. BREAK-FEE AGREEMENT
In terms of the Break-Fee Agreement, DRDGOLD has granted Village an exclusive
right, for a period of 60 days from 7 November 2011 ("Exclusivity Period"), to
acquire the Sale Assets.
The Break-Fee Agreement contains such terms and conditions as are customary for
a transaction of this nature, including an extension of the Exclusivity Period
in the event that the Parties enter into definitive transaction agreements in
respect of the Proposed Transaction during the Exclusivity Period.
In terms of the Break-Fee Agreement, subject to certain terms and conditions, a
party that withdraws from the Proposed Transaction will be required to pay to
the other party a break-fee in an amount of R5 million in the event that such
withdrawing party has failed to adhere to the provisions of the Break-Fee
Agreement.
5. SALIENT TERMS OF THE PROPOSED TRANSACTION
The Parties envisage that the Proposed Transaction will be implemented in two
phases, as more fully described below.
5.1 Phase I
During phase one of the Proposed Transaction ("Phase I"), Village will enter
into (i) a sale and purchase agreement in respect of the Sale Assets with
DRDGOLD ("Sale and Purchase Agreement") and (ii) a contract mining agreement
with Blyvoor ("Contract Mining Agreement") in terms of which all mining
activities conducted by Blyvoor will be managed by Village for and on behalf of
Blyvoor. The Contract Mining Agreement is expected to come into effect on or
about 1 February 2012 ("Phase I Effective Date") and endure until such time as
all the requisite statutory and regulatory approvals and consents pertaining to
the Sale and Purchase Agreement, including those required in terms of the
Mineral and Petroleum Resources Development Act, 2002 ("Statutory Approvals"),
have been obtained by the Parties.
On the Phase I Effective Date, Village will:
- acquire a R115 million portion of the Blyvoor Loan from DRDGOLD for an
amount of R115 million ("Phase I Consideration");
- issue 65 714 286 Village Shares to DRDGOLD in settlement of the Phase I
Consideration, as more fully contemplated in paragraph 5.3 below; and
- issue 20 000 000 Village Shares, in favour of DRDGOLD, for settlement of
the Phase II Consideration (as more fully contemplated in paragraph 5.3
below), but to be held in Escrow ("Escrow Shares").
The Escrow Shares will be released to DRDGOLD as more fully contemplated in
paragraph 5.2 below.
5.2 Phase II
The second phase will commence upon the Parties having obtained all the relevant
Statutory Approvals ("Phase II"). During Phase II, Village will:
- acquire the balance of the Blyvoor Loan not already acquired by Village
during Phase I, for an amount of R35 million ("Phase II Consideration");
- release the Escrow Shares to DRDGOLD, in settlement of the Phase II
Consideration; and
- acquire the Blyvoor Shares from DRDGOLD, for a purchase consideration of
R1.
5.3 Issue price of the Village Shares
The Phase I Consideration and the Phase II Consideration will be settled by
Village through the issue of Village shares at an issue price of R1.75 per
Village Share, constituting 65 714 286 (Phase I Consideration) and 20 000 000
(Phase II Consideration) Village Shares, respectively.
6. CONDITIONS PRECEDENT
The EOI envisages the Proposed Transaction being subject to the fulfilment or,
where applicable, waiver by Village in whole or in part of, inter alia, the
following conditions precedent:
* the conclusion of a due diligence investigation by Village into the Sale
Assets and Blyvoor to the satisfaction of Village;
* the execution of the Sale and Purchase Agreement and Contract Mining
Agreement, which agreements shall include terms considered normal for a
transaction of this nature;
* the conclusion of the Savuka ground acquisition by Blyvoor from AngloGold
Ashanti Limited;
* the receipt of the Statutory Approvals;
* the receipt of all required third party waivers and/or consents for the
acquisition of the Sale Assets along with the assignment of all contracts
required for the normal operation of Blyvoor;
* approval of the Sale and Purchase Agreement and the Contract Mining Agreement
by the DRDGOLD Board and Village Board;
* the termination of the business rescue proceedings in respect of Blyvoor, in
terms of Chapter 6 of the Act, to the satisfaction of Village;
* confirmation, to the satisfaction of Village, that there are no events or
circumstances (including, without limitation, any legal or regulatory
proceedings, changes in law or its interpretation, changes in foreign exchange
rates or commodity prices) that have or could reasonably be expected to have a
material adverse effect on the Sale Assets, the value of the Sale Assets, the
extent of any environmental liability relating to Blyvoor, a Party`s ability
to comply with the relevant legal agreements or the enforceability of such
legal agreements; and
* such other conditions precedent as may be customary for a transaction of this
nature.
Readers of this announcement are reminded that the EOI and the in-principle,
non-
binding acceptance thereof by DRDGOLD remain non-binding and that the EOI does
not constitute a firm intention by Village to make an offer to acquire the Sale
Assets.
7. CAUTIONARY ANNOUNCEMENT AND FURTHER CAUTIONARY ANNOUNCEMENT
7.1 Village cautionary announcement
Shareholders of Village ("Village Shareholders") are advised that the outcome of
the negotiations referred to in this announcement may have a material effect on
the price of Village`s securities.
Accordingly, Village Shareholders are advised to exercise caution when dealing
in Village`s securities until a further announcement is made.
7.2 DRDGOLD further cautionary announcement
Shareholders of DRDGOLD ("DRDGOLD Shareholders") are referred to the cautionary
announcement published on 3 November 2011 and are advised that the outcome of
the negotiations referred to in this announcement may have a material effect on
the price of DRDGOLD`s securities.
Accordingly, DRDGOLD Shareholders are advised to continue exercising caution
when dealing in DRDGOLD`s securities until a further announcement is made.
Johannesburg
8 November 2011
Corporate Advisor and Transaction Sponsor to DRDGOLD
One Capital
Attorneys to DRDGOLD
Cliffe Dekker Hofmeyr Inc.
Corporate Advisor to Village
To The Point Growth Specialists (Proprietary) Limited
Attorneys to Village
Cliffe Dekker Hofmeyr Inc.
Sponsor to Village
Java Capital
Date: 08/11/2011 08:45:00 Produced by the JSE SENS Department.
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