| Mon 30 Jan 2012, 16:28 | | PAN - Pan African Resources plc - Pan African and Wits Gold to acquire 100% |
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PAN
PAN
PAN - Pan African Resources plc - Pan African and Wits Gold to acquire 100%
of Evander Gold Mines Limited, and renewal of cautionary announcement
Pan African Resources plc
(Incorporated and registered in England and Wales under Companies Act 1985
with registered number 3937466 on 25 February 2000)
Share code on AIM: PAF
Share code on JSE: PAN
ISIN: GB0004300496
("Pan African")
PAN AFRICAN AND WITS GOLD TO ACQUIRE 100% OF EVANDER GOLD MINES LIMITED, AND
RENEWAL OF CAUTIONARY ANNOUNCEMENT
HIGHLIGHTS:
- Pan African and Witwatersrand Consolidated Gold Resources Limited ("Wits
Gold") (together the "Consortium"), form a 50:50 partnership to acquire
100% of gold producer, Evander Gold Mines Limited ("Evander") from
Harmony Gold Mining Company Limited ("Harmony") for ZAR1.7 billion
(approximately GBP139 million) less any distributions made by Evander to
Harmony prior to the Closing Date (defined in section 2.1.1 below headed
`The Acquisition Agreement`)("Transaction Consideration")
- Additional attributable gold resources and reserves for Pan African
- Increase in mined gold production for Pan African
- Upside potential in the advanced Evander development projects that
contain additional gold reserve and resource ounces
- Evander is cash-flow positive
1. INTRODUCTION
Pan African is pleased to announce that it has today, Monday, 30 January
2012 ("Signature Date"), together with Wits Gold, entered into a Sale of
Shares and Claims Agreement (the "Acquisition Agreement") with Harmony,
to acquire 100% of Harmony`s interest in Evander, for a total
consideration of ZAR1.7 billion (approximately GBP139 million) less any
distributions made by Evander to Harmony prior to the Closing Date
(defined in section 2.1.1 below headed `The Acquisition Agreement`),
hereinafter the "Transaction", and the Consortium and Harmony
hereinafter collectively the "Parties".
The Evander operations are located in Mpumalanga, South Africa, and
comprise the operating Evander 8 shaft, and several potential
development projects namely Rolspruit, Poplar, Evander South, Libra
(surface tailings resource) and the Kinross metallurgical processing
plant, and a tailings facility (Project Libra). The total underground
resource represents 32.5Moz (147Mt @ 6.88g/t)2 and a reserve of 7.6Moz
(29.5Mt @ 8.02g/t). The Evander 8 shaft currently has an expected life
of mine of more than ten years. Evander is expected to produce between
85,000 and 95,000 ounces per annum. The Transaction adds significantly
to Pan African`s reserve and resource base, and provides an annual
attributable share of approximately 45,000 ounces in production per
annum to Pan African. Evander has recently experienced a vast
improvement in performance through the closure of unprofitable shafts,
plants and additional investments in its infrastructure. More
information on Evander is provided in section 3, headed `Background to
Evander`. For more information on the members of the Consortium, refer
to the notes at the end of this announcement.
This Transaction enables Pan African to fulfil on its investment
criteria of acquiring high grade, high margin, and quality assets. The
Transaction will provide Pan African with a material increase in
production profile, contributing to its current gold production at
Barberton mines and paving the way to becoming a mid-tier mining
company.
Pan African`s CEO, Jan Nelson, commented: "Evander meets our investment
criteria in all aspects and has the same ability to yield high margins
as our Barberton Mining Operations. The Evander 8 Shaft orebody has gold
grades in excess of 14g/t in the measured and indicated resource
category, an extremely experienced management team and workforce, as
well as good infrastructure. Together with Barberton, Evander will
respectively increase our resource by 304% to 22.9Moz and our reserve by
390% or 4.9Moz. In addition, we will also increase our production by at
least 45,000 ounces per annum. Many of our management team have been
involved with the asset in the past and so we know it well. The smart
solution of a partnership with Wits Gold gives us the necessary momentum
to continue to deliver profitable sustainable stakeholder growth and
returns and represents a first in the junior gold sector in South
Africa" .
2. THE TRANSACTION
2.1 Terms of the Transaction
2.1.1 The Acquisition Agreement
Under the terms of Acquisition Agreement the Consortium will, on the Closing
Date (as defined below), acquire in equal proportions:
- 100% of the entire issued share capital of Evander ("Sale Shares"); and
- the Evander loan account due to Harmony ("Sale Claims").
The closing date of the Transaction will be the later of 2 July 2012 and the
fifth business day after the last of the conditions precedent is fulfilled or
waived as the case may be (the "Closing Date"). The conditions precedents are
disclosed in greater detail below, and include, amongst others, shareholder,
relevant exchange (JSE and AIM) and other regulatory approvals.
2.1.2 Sale of Business Agreement
Harmony and Evander have entered into a Sale of Business Agreement whereby on
and with effect from the Closing Date, Harmony undertakes to sell its
business of procuring for or providing for reward, its employees to Evander
for a purchase consideration of ZAR1.00 (approximately GBP0.08).
Consequently, all employees employed by Harmony, and who render services to
or perform work for Evander, will be directly employed by Evander with effect
from the Closing Date.
2.1.3 Shared Services Agreement
A shared services agreement has been entered into between Harmony and Evander
("Shared Services Agreement") whereby Harmony has agreed to continue
providing the services currently rendered by it, or any of its group
companies, to Evander, and Evander has similarly agreed to continue providing
the services currently rendered by it to Harmony ("Services") from the
Signature Date until the first anniversary of the Closing Date ("Shared
Services Period").
Evander shall have the right to extend the Shared Services Period for an
additional six months ("Extended Period").
2.2 The Transaction Consideration
The Transaction Consideration is a total amount of ZAR1.7 billion
(approximately GBP139 million), less any distributions made by Evander to
Harmony by way of dividends, capital reduction of share repurchases, prior to
the Closing Date, and is firstly attributable to the face value of the Sale
Claims and the balance to the Sale Shares.
The Transaction Consideration will be paid by the Consortium to Harmony as
follows:
- ZAR1.4 billion (approximately GBP115 million) in cash payable on the
Closing Date;
- Four equal cash instalments of ZAR25 million (approximately GBP2
million) payable on a quarterly basis, the first quarter commencing
immediately following the month in which the Closing Date occurs;
- ZAR100 million (approximately GBP8 million) payable 19 months after the
month during which the Closing Date falls, subject to the average rand
gold price* for the preceding 12 month period being greater than
ZAR410,000 per kilogram (US$1,700 per ounce) ("First Tranche"); and
- ZAR100million (approximately GBP8 million) payable 31 months after the
Closing Date, subject to the average rand gold price* for the preceding
12 month period being greater than ZAR450,000 per kilogram (US$1,865 per
ounce) ("Second Tranche").
*The average rand gold price will be calculated by multiplying the average of
the daily London gold price quoted in US$ and the average daily ZAR/US$
exchange rate quoted by Reuters for the relevant period.
The First Tranche and the Second Tranche are payable in cash or through the
issue of Pan African and Wits Gold shares, in equal rand value proportions,
or a combination of cash and shares, at the election of the Consortium
("Consideration Shares"). Should the Consortium elect to settle a tranche
through the issue of shares to Harmony then each of Pan African and Wits Gold
will be required to issue the number of shares arrived at by dividing ZAR50
million (approximately GBP4 million) by the 30-day volume weighted average
traded price of their respective securities on the JSE. The Consortium must
procure that the Consideration Shares issued to Harmony (if any) does not
result in Harmony having to make a mandatory offer to acquire all or any of
the remaining Pan African or Wits Gold ordinary shares, as the case may be.
The Consortium intends utilising a combination of debt and equity to settle
the Transaction Consideration.
3. BACKGROUND TO EVANDER
Evander, a wholly owned subsidiary of Harmony, conducts the business of
exploring, prospecting, mining, recovery, treatment and commercial production
of gold and related products. The Evander operations comprise:
- operating shafts: currently only the Evander 8 shaft area is being mined
while Evander 7 shaft is utilised for rock hoisting;
- development projects: Evander South, Rolspruit, Poplar, Twistdraai and 6
shaft. Harmony has already entered into a joint venture agreement with
Taung Gold Limited with respect to Twistdraai and 6 shaft and these two
development projects do not form part of the Transaction;
- surface sources: the potential for processing the existing tailings
dumps (Project Libra) will be considered;
- closed operations: Evander 2 shaft, 5 shaft and 9 shaft;
- metallurgical processing facilities: the Kinross plant; and
- associated infrastructure and buildings.
Ore from the mine is milled and processed at the Kinross plant using a hybrid
carbon-in-pulp/carbon-in-leach (CIP/CIL) process.
4. TRANSACTION RATIONALE
The Transaction represents an attractive value proposition to the Consortium
and will provide Pan African with an immediate increase in attributable gold
resources and reserves. Undertaking this Transaction as a Consortium created
the opportunity for Pan African to bid for a better quality asset, at lower
risk and financial exposure to the company. This will result in the
combination of both Pan African`s and Wits Gold`s specialist mining and
exploration skill sets to extract maximum value from the acquisition.
The Evander operations are well known and understood by both the Pan African
and the Wits Gold management teams, and given its location, could provide
potential synergies with Pan African`s Barberton Mine operations. Evander has
experienced a vast improvement in performance recently as stated in Harmony`s
most recent report published for the quarter ended 30 September 2011.
5. CONDITIONS PRECEDENT
The implementation of the Transaction is subject to the fulfilment of a
number of conditions precedent common to a transaction of this nature
including, amongst others:
- written consent being obtained from the South African Minister of the
Department of Mineral Resources ("DMR") in terms of section 11 of the
South African Mineral and Petroleum Resources Development Act 28 of 2002
("MPRDA") for the transfer of the controlling interest in Evander to the
Consortium, by 31 October 2012. Either of the Parties will be entitled
to extend the date for fulfilment of this condition on written notice
given provided that each such extension agreed will not be for longer
than 90 days in the aggregate;
- each of the Consortium members obtaining the relevant shareholder
approval for the Transaction by 31 May 2012;
- the Consortium entering into financing arrangements with a suitable
financial institution/s by 31 May 2012; and
- all relevant regulatory approvals being obtained, including from the
Financial Surveillance Department of the South African Reserve Bank
(SARB), each of the exchanges on which the Consortium members are
listed, and the South African Competition Authorities, by 31 May 2012.
Each of the Parties must use its reasonable endeavours to procure the
fulfilment of the conditions precedent as soon as possible after the
Signature Date.
6. PRO FORMA FINANCIAL EFFECTS AND SALIENT DATES
The pro forma financial effects of the Transaction on the reported financial
information of Pan African, as well as the salient dates relating to the
implementation of the Transaction will be announced to shareholders in due
course.
7. CATEGORISATION AND RELATED PARTY TRANSACTION
The Transaction constitutes a category I transaction for Pan African under
the provisions of section 9 of the Listings Requirements of the JSE.
8. CIRCULAR
A circular containing full details of the Transaction and incorporating a
notice of general meeting of shareholders will be posted to Pan African
shareholders, in due course.
9. RENEWAL OF CAUTIONARY ANNOUNCEMENT
Pan African shareholders are referred to the cautionary announcements
released by Pan African on the Securities Exchange News Service of the JSE on
Thursday, 29 December 2011 and Thursday, 17 November 2011, and are advised
that the pro forma financial effects of the Transaction are still being
determined, and they may have a material effect on the price of Pan African
shares. Accordingly, shareholders are advised to continue to exercise caution
when dealing in Pan African`s securities until a further announcement is
made.
Note:
All amounts converted at ZAR12.1187:GBP1, and ZAR7.7559:US$1.
Johannesburg
30 January 2012
JSE Sponsor to Pan African
Macquarie First South Capital (Pty) Limited
For further information contact:
Jan Nelson
CEO: Pan African
+27 11 243 2900
Pierre Joubert
Senior Vice President: Macquarie First South Capital (Pty) Limited
+27 11 583 2000
Reginald Demana
Principle: Nedbank Capital
+27 11 294 6575
For and on behalf of Pan African
Joint Transaction adviser and JSE Transaction Sponsor
Macquarie First South Capital (Pty) Limited
Joint Transaction adviser and JSE Transaction Sponsor
Nedbank Capital
South African legal counsel to the Transaction
Eversheds
South African legal due diligence provider to the Transaction
MalanScholes Attorneys
United Kingdom legal counsel
Fasken Martineau
Tax adviser, Auditor and Reporting Accountant
KPMG Services (Pty) Limited
Investor Relations
Vestor Investor Relations
UK Nominated Adviser and Broker
RBC Capital Markets
Company Secretary
St James` Corporate Services Limited
NOTES:
THE CONSORTIUM
Pan African is a precious metals producer dual primary listed on the Main
Board of JSE Limited ("JSE"), and the Alternative Investment Market of the
London Stock Exchange, and operates in South Africa and Mozambique.
Wits Gold is a gold and uranium exploration company with assets located in
the Witwatersrand Basin in South Africa. Wits Gold has a primary listing on
the Main Board of the JSE, and a secondary listing on the Toronto Stock
Exchange and has an American Depository Receipt (ADR) programme through the
Bank of New York.
Date: 30/01/2012 16:28:01 Produced by the JSE SENS Department.
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