| Thu 2 Feb 2012, 15:30 | | ARQ/AMS - Anooraq Resources Corporation/Anglo Amer |
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ARQ AMS
ARQ
ARQ/AMS - Anooraq Resources Corporation/Anglo American Platinum -
Restructure, Recapitalisation and refinancing plan for Anooraq and the Bokoni
group of companies, further cautionary announcement
Anooraq Resources Corporation
(Incorporated in British Columbia, Canada)
(Registration number 10022-2033)
TSXV/JSE share code: ARQ
NYSE AMEX share code: ANO
ISIN: CA03633E1088
("Anooraq")
Anglo American Platinum Limited
(formerly Anglo Platinum Limited)
Incorporated in the Republic of South Africa
(Registration number 1946/022452/06)
Share code: AMS
ISIN: ZAE000013181
("Amplats")
RESTRUCTURE, RECAPITALISATION AND REFINANCING PLAN FOR ANOORAQ AND THE BOKONI
GROUP OF COMPANIES, FURTHER CAUTIONARY ANNOUNCEMENT
1. Introduction
The boards of directors of Amplats, a 79% held subsidiary of Anglo American
plc, and Anooraq (collectively "the Parties") are pleased to announce that
they have agreed the key terms in respect of a transaction to restructure,
recapitalise and refinance Anooraq and the Bokoni group of companies ("Bokoni
group") (the "Transaction").
2. Background
In July 2009, the Parties entered into a transaction that resulted in the
creation of the Bokoni group by consolidating Bokoni Platinum Mine (formerly
Lebowa Platinum Mine), as well as the Ga-Phasha, Boikgantsho and Kwanda
Platinum Group Metals ("PGM") projects under one consolidated group
structure. Anooraq acquired 51% of the Bokoni group, which acquisition
involved Anooraq vending in its existing 50% share in the Ga-Phasha,
Boikgantsho and Kwanda joint venture projects, and acquiring an additional
effective 1% controlling interest in them with Amplats retaining a 49%
shareholding in the Bokoni group. Anooraq acquired its 51% interest in the
Bokoni group for a net cash consideration of ZAR2.6 billion (US$325
million(1). The net cash consideration was settled by way of a cash payment
of ZAR1.5 billion (US$188 million), and through the issue to Amplats of
convertible preference shares ("B preference shares"), which entitled Amplats
to convert its B preference shares into 115.8 million Anooraq common shares,
representing 26% of Anooraq`s fully diluted issued share capital, at any time
prior to 1 July 2018 (the "Original Transaction").
The Original Transaction sought to transform the South African PGM mining
landscape by Amplats facilitating the transformation of Anooraq into a
significant and sustainable, historically disadvantaged South African
("HDSA") controlled PGM producer. It comprised a cornerstone empowerment
transaction for Amplats in complying with the 2014 HDSA ownership
requirements, as required by the Mining Charter for the conversion of its
`old-order` mining rights to `new-order` mining rights in terms of the
Mineral and Petroleum Resources Development Act.
(1) All financial numbers quoted in US dollars are converted at a rate of
ZAR8:US$1.
3. Transaction rationale
In April 2011 the Parties initiated a detailed review of the technical
assumptions informing the Original Transaction and its associated financing
structure. The review has resulted in the Parties agreeing to a new strategic
approach and operating plan for the Bokoni group, as well as a
recapitalisation and refinancing plan to facilitate its new growth plan.
The new strategic plan for the Bokoni group results in the disposal of
undeveloped PGM ounces to Amplats, recapitalisation and refinancing of
Anooraq and the Bokoni group, together with accelerated production growth at
Bokoni Platinum Mine.
Results of technical review
3.1 The emphasis for Bokoni Platinum Mine going forward will be its new
Brakfontein Merensky and Middelpunt Hill ("MPH") UG2 expansion projects
currently under development, while the mature Merensky operations at
Vertical and UM2 shafts will terminate within the next five years. This
will allow management to focus on an accelerated development plan for
Bokoni Platinum Mine`s lower cost new shaft operations, which will
replace existing production from mature, high cost operations by 2016.
3.2 The Parties have agreed that the Bokoni Platinum Mine 2009 development
plan to maintain steady state production at 160,000 tonnes per month
("tpm") through to 2020 is not the optimal extraction strategy for the
large resource base at Bokoni. Accordingly, the Parties have agreed on a
new mineral extraction strategy to accelerate the MPH Delta 80 UG2
expansion plan, which is expected to increase existing UG2 production at
Bokoni Platinum Mine. The expansion project is expected to bring forward
100,000 PGM ounces per annum of new production at Bokoni Platinum Mine
to 2016, which had previously been scheduled until after 2020.
The total Bokoni Platinum Mine revised development plan will expand its
production to a steady state operation of 245,000tpm by 2016.
3.3 The Parties have determined to effect a strategic re-alignment of the
Bokoni group`s exploration and development mineral assets. Accordingly,
the Parties have agreed to split the Ga-Phasha development project into
an Eastern and Western section. The Eastern section, comprising the
Paschaskraal and De Kamp mineral properties, will be consolidated into
Amplats` adjacent Twickenham operation, while the Western section,
comprising the Klipfontein and Avoca mineral properties, will be
consolidated into the adjacent Bokoni Platinum Mine operations. The
Parties have identified the potential to access the Western section of
Ga-Phasha through existing shaft infrastructure established at Bokoni`s
Brakfontein property.
In addition, the Parties have determined that the Bokoni group`s
Northern Limb Boikgantsho project has a strong strategic fit with
Amplats` flagship Mogalakwena North expansion plans and that this
project should be consolidated into Amplats` adjacent low cost and open
cast Mogalakwena operations.
In summary, Amplats will, through a series of related transactions,
acquire the whole of the Boikgantsho project and the Eastern section of
the Ga-Phasha project. On implementation of these transactions, the
effective net consideration of ZAR1.7 billion received by Anooraq will
be applied to reduce its approximately ZAR3.0 billion debt owing to
Amplats.
3.4 The acceleration of the MPH Delta 80 UG2 project will require the
establishment of a new UG2 concentrator plant at the Bokoni Platinum
Mine to treat the additional UG2 ore generated at the operations. The
new UG2 concentrator plant is expected to expand Bokoni Platinum Mine`s
current UG2 processing capacity from 65,000tpm to 165,000tpm, while
total processing capacity is expected to increase to 265,000tpm by 2016.
Revised production, cost and capital expenditure estimates
- Bokoni Platinum Mine will seek to increase production from its
current base to a minimum of 300,000 PGM ounces per annum by 2016.
This growth profile includes the additional production ounces to be
generated from the MPH Delta 80 UG2 expansion project and
completion of the Brakfontein Merensky expansion project.
- Together with a shift from higher cost shaft operations to the new
lower cost shaft operations at Bokoni Platinum Mine, the increased
production volumes at the operations are expected to result in unit
cost reductions.
- The capital cost estimate for the new development plan at Bokoni
Platinum Mine is ZAR2.6 billion (US$325 million). This estimate
includes capital required for the completion of the Brakfontein
Merensky expansion project and construction of the MPH Delta 80 UG2
expansion project, together with a new UG2 concentrator plant.
Results of financial review:
Anooraq assumed ZAR1.7 billion (US$213 million) of acquisition debt to
finance the Original Transaction. In addition, Anooraq assumed a ZAR750
million (US$94 million) cashflow shortfall facility to fund its operating and
capital cashflow requirements at Bokoni Platinum Mine between 2009 and 2012.
With effect from 28 April 2011, Amplats assumed all of Anooraq`s outstanding
debt facilities. At 31 December 2011, Anooraq`s attributable debt, including
capitalised interest, had increased to approximately ZAR3 billion (US$375
million). This has resulted in a highly leveraged balance sheet position for
Anooraq, which management considers excessive and undesirable in light of
current global economic conditions and risks related to being highly
leveraged (as described in Anooraq`s annual information form for the year
ended 31 December, 2010 available on SEDAR at www.sedar.com).
The Parties have agreed to refinance, deleverage and recapitalise the Anooraq
and Bokoni group balance sheets, with current debt terms to be revised, in
order to ensure that both Anooraq and the Bokoni group are fully funded on a
sustainable basis to finance Bokoni Platinum Mine`s growth plans through to
2020. The Parties have agreed to implement this financial restructure plan on
the basis described in the Transaction Overview below.
4. Transaction Overview
The key features of the Transaction include, inter alia:
4.1 Amplats will, through a series of related transactions, acquire the
whole of the Boikgantsho project and the Eastern section of the Ga-
Phasha project. On implementation of these transactions, the
effective net consideration of ZAR1.7 billion received by Anooraq
will be applied to reduce its approximately ZAR3.0 billion debt
owing to Amplats.
4.2 The Parties will enter into an interest standstill agreement with
respect to existing debt owing to Amplats effective 1 July 2011
through to 30 April 2012. This translates into an interest saving
of approximately ZAR300 million (US$37.5 million) for Anooraq over
the standstill period.
4.3 The net effect of the asset disposal and application of the
proceeds thereof against existing debt, together with the interest
standstill agreement described above is that Anooraq`s existing
attributable debt owing to Amplats will reduce by 66% from
approximately ZAR3 billion (US$375 million) to approximately ZAR1
billion (US$125 million).
4.4 The historical debt balance owing by Anooraq to Amplats following
the asset disposal and interest standstill agreement (approximately
ZAR1 billion (US$125 million)) will be consolidated under one new
debt facility (the "Consolidated Debt Facility").
4.5 Amplats will provide further debt funding to Anooraq under the
Consolidated Debt Facility of an amount of up to ZAR1.3 billion
(US$163 million), with a maximum total facility limit of ZAR2.3
billion (US$288 million). Anooraq will utilise this extended
facility to fund its attributable share of the Brakfontein and MPH
Delta 80 UG2 expansion projects, including the construction of a
new UG2 concentrator plant at Bokoni Platinum Mine.
4.6 The Consolidated Debt Facility will be available to Anooraq for 9 years
terminating on 31 December 2020 and will attract a variable interest
rate. The variable interest rate will be determined by adding a fixed
margin to 3-month JIBAR. The Consolidated Debt Facility will attract a
reduced interest rate during the initial term (comprising the capital
intensive phase of the growth operations at Bokoni Platinum Mine through
to 2016) and escalating at an increased rate depending on the amount
owing by Anooraq under the Consolidated Debt Facility over the funding
period. The table below sets out the implied variable interest rate
profile payable by Anooraq over the funding period term.
Debt balance 2012 2013 2014 2015 2016 2017 2018 2019 2020
(%) (%) (%) (%) (%) (%) (%) (%) (%)
First tranche 0.0 0.0 0.0 2.5 5.0 7.5 10.0 15.0 15.0
(ZAR1
billion)
Second 5.0 5.0 10.0 10.0 12.5 15.0 15.0 20.0 20.0
tranche
(ZAR1
billion)
Third tranche 15.0 15.0 15.0 15.0 20.0 20.0 20.0 25.0 25.0
(ZAR300
million)
Estimated 0.5 1.4 4.3 6.9 9.4 10.8 11.6 15.0 15.0
weighted
average
interest rate
(%)
The weighted average interest rate is calculated based on the projected
opening balance of the Consolidated Debt Facility in each forecast year.
The weighted average interest rate under the Consolidated Debt Facility
will escalate from 1% to approximately 12% up to 2018, thereby
substantially reducing Anooraq`s current cost of debt (approximately
16%).
4.7 There will be no fixed repayment term for the Consolidated Debt Facility
during the peak funding years while the Brakfontein and MPH Delta 80 UG2
expansion projects are still in their ramp-up phase through to 2016.
Anooraq will be required to fully repay the Consolidated Debt Facility
to Amplats by 31 December 2020. There will be no penalty for early
repayment. Anooraq will be required to reduce the Consolidated Debt
Facility owing to Amplats to an outstanding balance (including
capitalised interest) of ZAR1 billion (US$125 million) as at 31
December 2018, and ZAR500 million (US$62.5 million) as at 31 December
2019.
4.8 Anooraq will be obliged to utilise 90% of its attributable share of free
cash flows generated from Bokoni Platinum Mine operations to service the
Consolidated Debt Facility and 10% of such free cash flow will be
available to Anooraq.
4.9 Anooraq will not be required to effect any mandatory refinancing of the
Consolidated Debt Facility during the debt term through to 2020.
4.10 Bokoni Platinum Mine will extend its existing concentrate purchase
agreement with Amplats on the same terms and conditions for a period of
eight years, terminating on 31 December 2020.
4.11 Anooraq will retain its existing option to acquire an ownership interest
in Amplats` Polokwane smelter complex on terms agreed between the
Parties.
4.12 Amplats will provide Anooraq with a working capital facility at JIBAR
plus 4% per annum of up to ZAR90 million (US$11 million) (including
capitalised interest) to fund its general and administrative expenses.
This will ensure that Anooraq has sufficient working capital to cover
its corporate overheads through to 2015. The working capital facility is
fully repayable by 31 December 2018.
4.13 Anooraq will receive an additional management incentive fee of up to 2%
of the Bokoni group`s after tax profits if certain technical targets
above budget plan, as agreed between the Parties, are met.
4.14 Amplats will continue to hold the B preference shares issued at the time
of the Original Transaction (representing a 26% interest in Anooraq)
until 31 December 2018. Atlatsa Holdings (Proprietary) Limited (formerly
Pelawan Investments (Proprietary) Limited), being the 51% Black Economic
Empowerment majority shareholder in Anooraq, will also extend its
shareholding in Anooraq through to 31 December 2018.
4.15 Anooraq will not issue any new equity in terms of the Transaction and
its fully diluted shares in issue will remain at 445 million shares in
issue with major shareholders as follows:
Shareholder No. of common % of share
shares capital
Atlatsa Holdings (formerly 227 million (2) 51%
Pelawan)
Amplats (B preference 116 million (3) 26%
shares)
Employee & Community 14 million 3%
Trusts
Public (including common 88 million 20%
shares available pursuant
to the incentive stock
option plan)
5. New management team and operating protocol
The Parties have agreed to enhance the Bokoni Platinum Mine management
team and implement a new management operating protocol, which will
increase Amplats` active involvement in areas of the operations relating
to mining, processing and capital projects execution. The new joint
venture operating protocol will see both Amplats and Anooraq providing
management support services at the Bokoni Platinum Mine operations
pursuant to a new management services agreement.
The Bokoni Platinum Mine operations will be lead by Mr. Dawid Stander,
in his capacity as Managing Director of Bokoni Platinum Mine with effect
from 1 February 2012. For further details on Mr. Stander`s appointment,
please view Anooraq`s announcement of 1 February 2012.
(2) Includes 111.2 million B preference shares convertible into Anooraq
common stock after 31 December 2018.
(3) The B preference shares are convertible into Anooraq common stock
after 31 December 2018.
6. Conditions precedent
The implementation of the Transaction will be subject, inter alia, to
the fulfillment of the following conditions precedent:
- conclusion of the requisite definitive agreements;
- approval of the definitive agreements by the Amplats Board and
Anooraq special committee of independent directors and board of
directors;
- approval of the Transaction by the relevant regulatory authorities
including the TSX Venture Exchange, Johannesburg Stock Exchange,
NYSE Amex and the South African Department of Mineral Resources;
and
- approval by Anooraq shareholders, where required, in a general
meeting.
7. Further cautionary announcement
Further details relating to the Transaction will be communicated to
shareholders in due course.
Further to the cautionary announcements by Anooraq dated 13 May 2011, 28
June 2011, 10 August 2011, 21 September 2011, 2 November 2011 and 15
December 2011, Anooraq shareholders are advised that the financial
effects of the Transaction are still being determined and may have a
material effect on the price of Anooraq securities. Accordingly, Anooraq
shareholders are advised to continue exercising caution when dealing in
Anooraq securities until a further announcement is made.
A further announcement will be released on the Securities Exchange News
Service, filed on SEDAR and published in the South African press as soon
as the definitive agreements have been signed and the financial effects
have been finalised.
Johannesburg
2 February 2012
For and on behalf of Anooraq:
Financial Adviser, JSE Sponsor and transaction sponsor
Macquarie First South Capital (Pty) Limited
For and on behalf of Amplats:
Merchant Bank and transaction sponsor
Rand Merchant Bank (a division of FirstRand Bank Limited)
www.angloamericanplatinum.com
www.anooraqresources.com
Neither the TSX Venture Exchange nor its Regulation Services Provider (as
that term is defined in policies of the TSX Venture Exchange) accepts
responsibility for the adequacy or accuracy of this release. The NYSE Amex
has neither approved nor disapproved the contents of this press release.
Cautionary and forward-looking information
This document contains "forward-looking statements" that were based on
Anooraq`s expectations, estimates and projections as of the dates as of which
those statements were made, including statements relating to the Bokoni Group
restructure and refinancing and anticipated financial or operational
performance. Generally, these forward-looking statements can be identified by
the use of forward-looking terminology such as "may", "will", "outlook",
"anticipate", "project", "target", "believe", "estimate", "expect", "intend",
"should" and similar expressions.
Anooraq believes that such forward-looking statements are based on material
factors and reasonable assumptions, including the following assumptions: the
Bokoni Mine will increase or continue to achieve production levels similar to
previous years; the Ga-Phasha, Boikgantsho, Kwanda and Platreef Projects
exploration results will continue to be positive; contracted parties provide
goods and/or services on the agreed timeframes; equipment necessary for
construction and development is available as scheduled and does not incur
unforeseen breakdowns; no material labour slowdowns or strikes are incurred;
plant and equipment functions as specified; geological or financial
parameters do not necessitate future mine plan changes; and no geological or
technical problems occur.
Forward-looking statements are subject to known and unknown risks,
uncertainties and other factors that may cause the Company`s actual results,
level of activity, performance or achievements to be materially different
from those expressed or implied by such forward-looking statements. These
include but are not limited to:
- uncertainties related to the completion of the Bokoni Group restructure and
refinancing;
- uncertainties and costs related to the Company`s exploration and
development activities, such as those associated with determining whether
mineral resources or reserves exist on a property;
- uncertainties related to feasibility studies that provide estimates of
expected or anticipated costs, expenditures and economic returns from a
mining project;
- uncertainties related to expected production rates, timing of production
and the cash and total costs of production and milling;
- uncertainties related to the ability to obtain necessary licenses, permits,
electricity, surface rights and title for development projects;
- operating and technical difficulties in connection with mining development
activities;
- uncertainties related to the accuracy of our mineral reserve and mineral
resource estimates and our estimates of future production and future cash and
total costs of production, and the geotechnical or hydrogeological nature of
ore deposits, and diminishing quantities or grades of mineral reserves;
- uncertainties related to unexpected judicial or regulatory proceedings;
- changes in, and the effects of, the laws, regulations and government
policies affecting our mining operations, particularly laws, regulations and
policies relating to:
- mine expansions, environmental protection and associated compliance costs
arising from exploration, mine development, mine operations and mine
closures;
- expected effective future tax rates in jurisdictions in which our
operations are located;
- the protection of the health and safety of mine workers; and
- mineral rights ownership in countries where our mineral deposits are
located, including the effect of the Mineral and Petroleum Resources
Development Act (South Africa);
- changes in general economic conditions, the financial markets and in the
demand and market price for gold, copper and other minerals and commodities,
such as diesel fuel, coal, petroleum coke, steel, concrete, electricity and
other forms of energy, mining equipment, and fluctuations in exchange rates,
particularly with respect to the value of the U.S. dollar, Canadian dollar
and South African rand;
- unusual or unexpected formation, cave-ins, flooding, pressures, and
precious metals losses (and the risk of inadequate insurance or inability to
obtain insurance to cover these risks);
- changes in accounting policies and methods we use to report our financial
condition, including uncertainties associated with critical accounting
assumptions and estimates; environmental issues and liabilities associated
with mining including processing and stock piling ore;
- geopolitical uncertainty and political and economic instability in
countries which we operate; and
- labour strikes, work stoppages, or other interruptions to, or difficulties
in, the employment of labour in markets in which we operate mines, or
environmental hazards, industrial accidents or other events or occurrences,
including third party interference that interrupt the production of minerals
in our mines.
For further information on Anooraq, investors should review the Company`s
annual Form 40-F filing with the United States Securities and Exchange
Commission www.sec.gov and annual information form for the year ended
December 31, 2010 and other disclosure documents that are available on SEDAR
at www.sedar.com.
Date: 02/02/2012 15:03:39 Produced by the JSE SENS Department.
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implicitly, represent, warrant or in any way guarantee the truth, accuracy or
completeness of the information published on SENS. The JSE, their officers,
employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature,
howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
