| Tue 28 Feb 2012, 9:02 | | MML - Metmar Limited - Announcement regarding related party transactions entered |
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MML
MML
MML - Metmar Limited - Announcement regarding related party transactions entered
into by Metmar
METMAR LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1998/007269/06)
Share code: MML
ISIN code: ZAE000078747
("Metmar" or "the Company")
ANNOUNCEMENT REGARDING RELATED PARTY TRANSACTIONS ENTERED INTO BY METMAR
Metmar shareholders ("Shareholders") are advised that Metmar, either in its own
capacity or through its wholly owned subsidiary, Metmar Investments and
Resources (Proprietary) Limited ("Metmar Investments"), has entered into various
related party transactions ("the Transactions"), as set out below.
Each of the Transactions described in this announcement is a small related party
transaction in terms of the JSE Limited Listings Requirements ("Listings
Requirements") and this announcement is therefore published in order to comply
with the Listings Requirements. In further compliance with the Listings
Requirements, the Company has appointed an independent expert to advise whether
the terms and conditions of each of the Transactions are fair to Shareholders.
Shareholders will be advised in due course of the outcome of this process.
THE TRANSACTIONS
This announcement provides information on four equity purchase transactions
which are as follows:
* the purchase of an additional 20% equity interest in each of Metmar
Industrial (Proprietary) Limited ("MI") and Gubha Resources (Proprietary)
Limited (Gubha") on 3 September 2010 ("MI/Gubha Transaction");
* the purchase of an additional 60% equity interest in Eastern Belt Chrome
Mines (Proprietary) Limited ("EBCM") ("EBCM 60% Transaction"), details of
which were announced on the Securities Exchange News Service ("SENS") on 24
June 2011 ("the Announcement");
* the purchase of the remaining 20% equity interest in MI on 21 December
2011, increasing Metmar Investments` participation in MI to 100% ("MI
Transaction"); and
* the purchase of the remaining 20% equity interest in EBCM signed on 30
January 2012 to increase Metmar Investments` participation in EBCM to 100%
("EBCM 20% Transaction").
* Other than the EBCM 60% Transaction, details of which were provided in the
Announcement and which is covered in this announcement for completeness of
the pro forma financial effects, the Transactions would not ordinarily have
been reported in terms of the Listings Requirements as they are less than
5% of Metmar`s market capitalisation. However, the Listings Requirements
require that any transaction with a related party which is greater than
0.25% but less than 5% of market capitalisation be announced on SENS.
MI/GUBHA TRANSACTION
1 Introduction
Metmar, Ceel Investments (Proprietary) Limited, Gubha and Jacobus van
Loggerenberg concluded a settlement and sale agreement ("MI/Gubha
Agreement") on 3 September 2010 ("MI/Gubha Signature Date"). In terms of
the MI/Gubha Agreement, Metmar acquired a 20% interest in MI and associated
loan accounts in MI and a 20% interest in Gubha and associated loan
accounts in Gubha (collectively "MI/Gubha Sale Equity"). Metmar held a 60%
interest in each of MI and Gubha at the time the MI/Gubha Agreement was
entered into and after this transaction increased its stake to 80% in each
of MI and Gubha.
2 Nature of business of MI and Gubha
MI and Gubha reprocess stockpiles and create markets for by-product
materials in the metallurgical and chemical industries and also screen and
market metallurgical coke from Zimbabwe. The metallurgical coke from
Zimbabwe is consumed as a reductant in alloy production, as an energy
source in the copper and cobalt industries and in the sintering of ores.
3 Rationale
The MI/Gubha Transaction was concluded in line with Metmar`s strategy of
having full control over its investments so that value can be optimally
unlocked.
4 Consideration
The purchase consideration for the MI/Gubha Sale Equity was a total amount
of R7.2 million which has been fully settled in cash.
5 Conditions precedent and effective date
The MI/Gubha Agreement has become unconditional in accordance with its
terms and became effective on the MI/Gubha Signature Date.
6 Unaudited pro forma financial effects ("Financial Effects") of the MI/Gubha
Transaction
Based on the published results at the time that the MI/Gubha Transaction
was entered into, being the audited results for the year ended 28 February
2010, the Financial Effects of the MI/Gubha Transaction on Metmar`s
earnings per share ("EPS"), headline earnings per share ("HEPS"), net asset
value per share ("NAVPS") and net tangible asset value per share ("NTAVPS")
were not significant. The value of the net assets acquired at the time the
MI/Gubha Transaction was entered into was R1.5 million. The net income
after taxation attributable to MI and Gubha for the year ended 28 February
2011 (as disclosed on page 49 of the 2011 annual report) was R8.6 million
and R2.4 million, respectively.
MI TRANSACTION
1 Introduction
Metmar, through Metmar Investments, entered into a purchase of shares
agreement ("MI Agreement") with Johannes van Zyl ("Van Zyl") on 21 December
2011 ("MI Signature Date") in terms of which Metmar acquired a further 20%
interest in MI. Subsequent to the MI/Gubha Transaction detailed above,
Metmar held an effective 80% interest in MI at the time the MI Agreement
was entered into.
2 Rationale
Based on the demand for Zimbabwean coke, the Metmar board is of the opinion
that significant value can be unlocked with the Company having full control
of the MI business. Following a 3 year process, Metmar secured a Zimbabwe
Investment Authority (ZIA) number which entitles MI to trade uninhibited in
Zimbabwe. Metmar is also taking advantage of the group`s trade finance
facilities which enables it to augment trading in coke products as the
demand increases.
3 Consideration
The purchase consideration payable by Metmar Investments is R17.7 million
which amount will be increased by a further R1.0 million should Van Zyl
procure a particular agency agreement ("Agency Obligation") on or before 30
June 2012, which was achieved during February 2012.
The purchase consideration will be funded from cash generated from
operations or from credit facilities raised and is payable as follows:
3.1 an amount of R3.7 million was paid two days after the MI Signature
Date ("MI Effective Date");
3.2 an amount of R5.0 million no later than 30 April 2012;
3.3 an amount of R5.0 million no later than 15 January 2013; and
3.4 the balance, being an amount of R4.0 million (plus the additional R1.0
million as the Agency Obligation has been fulfilled) no later than 28
February 2013.
4 Conditions precedent and effective date
The MI Agreement has become unconditional in accordance with its terms and
became effective on the MI Effective Date.
5 Financial Effects of the MI Transaction
The table below sets out the Financial Effects of the MI Transaction based
on Metmar`s published unaudited interim financial results for the six
months ended 31 August 2011 ("Interim Results"). The Financial Effects have
been prepared for illustrative purposes only, to assist Shareholders in
assessing the impact of the MI Transaction on Metmar`s EPS, HEPS, NAVPS and
NTAVPS.
These Financial Effects have been disclosed in terms of the Listings
Requirements and, because of their nature, do not necessarily fairly
present Metmar`s financial position, changes in equity, results of
operations and cash flows after the MI Transaction. The Financial Effects
are the responsibility of the directors of Metmar.
The Financial Effects of acquiring a further interest in a subsidiary on
EPS and HEPS are primarily transaction costs and the interest costs of the
transaction if settled in cash. This has a negative effect on EPS and HEPS.
MI is currently generating profits and positive cash flows.
80% subsidiary to 100%
subsidiary
Before the After the MI Change (%)
MI Transaction (2)
Transaction
(1)
EPS (cents) 8.33 8.12 (4) (2.52)
HEPS (cents) 8.62 8.40 (4) (2.55)
NAVPS (cents) 256.88 249.31 (5) (2.95)
NTAVPS (cents) 230.83 223.26 (5) (3.28)
Weighted -
average number 232 440 480 232 440 480
of shares in
issue
Shares in issue -
at 31 August 232 440 480 232 440 480
2011
Notes:
1 Based on the Interim Results.
2 Based on the assumption that the MI Transaction took place on 1 March 2011
for statement of comprehensive income purposes and 31 August 2011 for
statement of financial position purposes.
3 The financial information relating to MI in calculating the Financial
Effects was extracted from MI`s management accounts for the six months
ended 31 August 2011 ("the Management Accounts"). Management of the Company
is satisfied with the accuracy of the Management Accounts.
4 EPS and HEPS have been adjusted to include the following:
a) transaction costs of R184 000, with no taxation adjustment; and
b) the interest income no longer earned following the cash settlement of
the purchase consideration of R18.7 million ("the Consideration") from 1
March 2011 to 31 August 2011 at 5.5% per annum, together with the taxation
effect thereon at 28%.
5. The NAVPS and NTAVPS have been adjusted to include the following:
a) the increase in financial liabilities by the outstanding portion of the
Consideration discounted at 9% per annum being R13.9 million; and
b) the "negative" non-distributable reserve arising from the difference
between the Consideration and the carrying value of the investment of R15.5
million.
EBCM TRANSACTION
1 Introduction
Metmar, through Metmar Investments, entered into a sale of shares and
claims agreement ("EBCM Agreement") with CoroCapital (Proprietary) Limited
("CoroCapital") on 30 January 2012 ("EBCM Signature Date"). In terms of the
EBCM Agreement, Metmar Investments purchased a 20% interest in EBCM and all
claims on loan account which CoroCapital had against EBCM reflected in the
books of account of EBCM (collectively "EBCM Sale Equity") on the EBCM
Signature Date ("EBCM 20% Transaction").
2 Nature of business of EBCM
Metmar currently holds an effective 80% interest in EBCM, a holding company
which owns 51% in Steelpoort Chrome Mines (Proprietary) Limited ("SCM") and
49.9% in Bolepu Holdings (Proprietary) Limited ("Bolepu"). Bolepu owns 40%
of Sefateng Chrome (Proprietary) Limited ("Sefateng"). Through its
investment in EBCM, Metmar has acquired the off-take of chrome ore from
Sefateng`s current mining permit licences in respect of mining operations
at Swartkoppies and Waterkop mine and the entire off-take of all mineable
SCM chrome ore from the future mining operations at the Goudmyn mine. These
mines are located in the Steelpoort area.
3 Rationale
During 2011, Metmar, through Metmar Investments, entered into the EBCM 60%
Transaction, taking its effective holding in EBCM to 80%. The EBCM 60%
Transaction and the subsequent EBCM 20% Transaction (collectively "EBCM
Transactions") were effected in terms of Metmar`s strategy to own key
resources, chrome being one of these. This is a further step in the process
of acquiring a controlling interest in Sefateng which holds 40 million
metric tons of LG6 Chrome deposit.
Metmar invests in assets where it can secure off-take and positive cash
flow can be generated within one year of investing and where Metmar has
control. Metmar Trading (Proprietary) Limited is currently negotiating to
secure the full off-take from EBCM`s associated companies` production.
4 Consideration
The purchase price of CoroCapital`s stake in EBCM is R20.5 million and it
is based on the same valuation that the EBCM 60% Transaction was completed.
The R20.5m will be funded from cash generated from operations or from
credit facilities raised and is payable as follows:
4.1 R5.0 million no later than 31 July 2012;
4.2 R5.0 million no later than 31 October 2012;
4.3 R5.0 million no later than 31 January 2013; and
4.4 the balance of R5.5 million, plus interest calculated on all outstanding
amounts due from time to time at the prime rate, shall be paid by no later
than 30 April 2013.
5 Conditions precedent and effective date
The EBCM Agreement has become unconditional in accordance with its terms
and became effective on the EBCM Signature Date.
6 Financial Effects
The Financial Effects as set out below have been prepared for illustrative
purposes only, to assist Shareholders in assessing the impact of the EBCM
Transactions on Metmar`s EPS, HEPS, NAVPS and NTAVPS.
These Financial Effects have been disclosed in terms of the Listings
Requirements and, because of their nature, do not necessarily fairly
present Metmar`s financial position, changes in equity, results of
operations and cash flows after the EBCM Transactions. The Financial
Effects are the responsibility of the directors of Metmar.
The Financial Effects of acquiring a further interest in an associate
company, such that the interest becomes that in a subsidiary, include the
consolidation of the subsidiary`s earnings and any fair value adjustments,
which have a positive impact on EPS and HEPS. The Financial Effects of
acquiring a further interest in a subsidiary on EPS and HEPS are primarily
transaction costs and the interest costs of the transaction, if settled in
cash, and therefore have a negative effect on EPS and HEPS.
From associate to 80%
subsidiary subsidiary
to 100%
subsidiary
Before After Chang After the Change
the EBCM the EBCM e (%) EBCM (%)
Transacti 60% 20%
ons (1) Transact Transactio
ion (3) n (3)
EPS (cents) 8.33 12.66 51.98 12.41 (7) (1.97)
(5)
HEPS (cents) 8.62 12.94 50.12 12.70 (7) (1.85)
(5)
NAVPS (cents) 256.88 267.78 4.24 259.48 (8) (3.10)
(6)
NTAVPS 230.83 204.38 (11.4 196.08 (8) (4.06)
(cents) (6) 6)
Weighted - -
average
number of 232 440 232 440 232 440
shares in 480 480 480
issue
Shares in - -
issue at 31 232 440 232 440 232 440
August 2011 480 480 480
Notes:
1 Based on the Interim Results.
2 The effects of the EBCM 60% Transaction were disclosed in the Announcement
based on Metmar`s audited results for the year ended 28 February 2011 and
have been revised to reflect the impact on the Interim Results as this
transaction became effective after 31 August 2011.
3 Based on the assumption that the EBCM Transactions took place on 1 March
2011 for statement of comprehensive income purposes and 31 August 2011 for
statement of financial position purposes.
4 The financial information relating to EBCM in calculating the Financial
Effects was extracted from EBCM`s management accounts for the six months
ended 31 August 2011 ("the Management Accounts"). Management of the Company
is satisfied with the accuracy of the Management Accounts.
5 EPS and HEPS have been adjusted for the EBCM 60% Transaction to include the
following:
a) transaction costs of R265 000, with no taxation adjustment;
b) the fair value adjustment of the initial 20% of EBCM purchased by Metmar
for R7.2 million, being R13.6 million and deferred capital gain taxation
thereon at 14%, amounting to R1.9 million. This accounting treatment of the
fair value adjustment is required in terms of IFRS 9 Financial Instruments,
which specifies how an entity should classify and measure financial assets;
c) the interest income no longer earned following the cash settlement of
the purchase consideration of R61.4 million ("EBCM 60% Consideration") from
1 March 2011 to 31 August 2011 at 5.5% per annum together with the taxation
effect thereon at 28%; and
d) the pro forma consolidated loss of EBCM for the six months ended 31
August 2011 amounting to R201 000.
6 The NAVPS and NTAVPS have been adjusted for the EBCM 60% Transaction to
include the following:
a) the increase in financial liabilities by the EBCM 60% Consideration
discounted at 9% per annum being R60 million; and
b) in terms of IFRS (3) Business Combinations, each identifiable asset
acquired and liability assumed of EBCM must be measured at its acquisition
date at fair value. During the period that the Company considered whether
to effect the EBCM 60% Transaction, a third party had offered an amount
similar to the EBCM 60% Consideration paid by Metmar.
7. EPS and HEPS have been adjusted for the EBCM 20% Transaction to include the
following:
a) transaction costs of R165 000, with no taxation adjustment; and
b) the interest income no longer earned following the cash settlement of
the purchase consideration of R20.5 million ("the EBCM 20% Consideration")
from 1 March 2011 to 31 August 2011 at 9% per annum, together with the
taxation effect thereon at 28%.
8. The NAVPS and NTAVPS have been adjusted to include the following:
a) the increase in financial liabilities by the EBCM 20% Consideration
discounted at 9% per annum, being R19.3 million; and
b) a decrease in non-controlling interests of R19.3 million.
Johannesburg
28 February 2012
Sponsor
One Capital
Date: 28/02/2012 09:02:01 Produced by the JSE SENS Department.
The SENS service is an information dissemination service administered by the
JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or
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.
