| Thu 29 Mar 2012, 10:00 | | PGL - Pallinghurst Resources Limited - IDC Pallinghurst and Bakgatla form a |
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PGL
PGL
PGL - Pallinghurst Resources Limited - IDC, Pallinghurst and Bakgatla form a
strategic partnership
PALLINGHURST RESOURCES LIMITED
(Previously Pallinghurst Resources (Guernsey) Limited)
(Incorporated in Guernsey)
(Guernsey registration Number: 47656)
(South African external company registration number 2009/012636/10)
Share code on the BSX: PALLRES ISIN: GG00B27Y8Z93
Share code on the JSE: PGL
("Pallinghurst" or the "Company")
MEDIA RELEASE
THURSDAY 29 MARCH 2012
IDC, PALLINGHURST AND BAKGATLA FORM A STRATEGIC PARTNERSHIP
TO CREATE A MAJOR NEW PGM PRODUCER THROUGH CONSOLIDATION AND A R3.24 BILLION
IDC INVESTMENT
* Consolidation of PGM interests controlled and owned by Pallinghurst and
the Bakgatla to create a major new force in the PGM industry
* Creation of a large, shallow and low-cost mining complex, with long
life (in excess of 30 years)
* Unhedged and debt-free producer, with a healthy balance sheet (cash of
US$500 million)
* R3.24 billion (US$420 million) investment from IDC for a 16.2% interest
in the consolidated entity
* Partners to form a joint venture to explore and fund opportunities for
PGM beneficiation and processing
The Industrial Development Corporation of South Africa today announced a
major investment in the platinum mining and beneficiation industry that will
see the creation of a significant platinum group metals (PGM) company in the
North West Province of South Africa. The investment will be into a newly
consolidated company, NewCo, which has the potential to create some 9,000
direct and permanent jobs. This consolidation provides the foundation for a
large, shallow and low-cost mining complex, with long life (in excess of 30
years) and a promising strong growth profile. NewCo`s resource base is
approximately 70 million 4PGM ounces and, uniquely, the majority of these
ounces are shallower than 600 metres, making this one of the safest and most
energy efficient new generation PGM operations in the world.
The Industrial Development Corporation (IDC), the Pallinghurst Investor
Consortium (Pallinghurst), the Bakgatla Ba Kgafela Tribe (Bakgatla) and
Platmin Limited (Platmin) have concluded a R3.24 billion transaction that
would bring about the consolidation of a number of important PGM properties
around the Pilanesberg Platinum Mine. In addition, the IDC and the parties
will form a joint venture to develop and fund PGM beneficiation
opportunities in the region.
Announcing the partnership, IDC CEO, Geoffrey Qhena said: "This strategic
partnership between the IDC and Pallinghurst will certainly transform the
local platinum mining and beneficiation landscape. IDC`s equity funding is
the catalyst that is required to implement the consolidation plan that has
been developed by Pallinghurst over the last five years. This will assist
the consolidated PGM entity to become one of the major PGM players within
five years. The investment is attractive to the IDC as the PGM consolidated
entity will benefit from shallow resources which will allow for safe and
cost efficient mining."
In addition, Qhena said: "This investment is the first step in developing
downstream beneficiation of PGM`s and demonstrates the IDC`s commitment to
the development of South Africa`s mineral beneficiation industry."
The IDC`s total exposure to the mining industry is R45 billion.
The Chairman of Pallinghurst and Platmin, Brian Gilbertson commented: "This
is the fourth time that I have had the privilege of partnering with the IDC.
As with the others, this PGM partnership is intended to create an industry-
transforming entity, generating capital investment and jobs for South
Africa. We are proud to welcome the IDC as a cornerstone shareholder at this
pivotal time. The IDC`s involvement will ensure the consolidated company is
well positioned to become the next major producer in the strategically
important platinum industry."
His Royal Highness Kgosi Pilane of Bakgatla Ba Kgafela Traditional Community
in South Africa, a 27% shareholder in the post consolidated company said:
"The transaction has crystalized the vision always held by the Bakgatla Ba
Kgafela to develop a regional PGM mining leader which will create wealth and
jobs, which will also be used as a catalyst for the other developments to
benefit the entire community. It is significant for our 350 000 strong
Bakgatla Ba Kgafela Tribe, by not only creating additional permanent jobs in
the region, but also providing the financial engine for further upliftment
of our community."
CEO of Pallinghurst, Arne Frandsen said: "This consolidation has been almost
five years in the making and represents an exciting development for all
stakeholders. The IDC`s equity investment will allow NewCo to remain debt-
free with a strong balance sheet, thereby providing financial security to
execute our unique growth opportunities. Our beneficiation partnership with
the IDC has the potential to transform the PGM smelting industry and to
provide third party juniors access to cost-efficient concentrate
processing."
BACKGROUND
THE CONSOLIDATION OF THE PLATINUM GROUP METAL PROPERTIES
The consolidation of the PGM interests controlled and owned by Pallinghurst
and the Bakgatla (Consolidation) will create a major new force in the PGM
industry (NewCo). The Consolidation will facilitate the optimised
development of three historically stand alone, shallow (mainly open-cast)
contiguous PGM properties (Properties) into a single regionally optimised
mega-mine. The Properties, situated north of the Pilanesberg on the western
limb of the Bushveld Complex (Western Limb) in South Africa, are:
* Pilanesberg Platinum Mine (PPM), the producing operations of Platmin;
* the Sedibelo Platinum Project, owned by Itereleng Bakgatla Minerals
Resources (Pty) Limited (IBMR); and
* the Magazynskraal Platinum Project, owned by Richtrau No 123 (Pty)
Limited (Richtrau).
These Properties are the last shallow PGM resources on the Western Limb,
situated immediately south of Anglo Platinum Limited`s Union Mine.
The Consolidation provides the foundation for a large, shallow and low-cost
mining complex, with long life (in excess of 30 years) and a strong growth
profile. NewCo`s resource base is approximately 70 million 4PGM ounces.
Uniquely, the majority of the ounces are shallower than 600 metres. By
comparison, many new projects announced by the industry majors are rapidly
approaching 2,000 metres. This provides NewCo with a clear advantage in
respect of employee safety, as well as being mineable without the need for
expensive and electricity intensive ventilation and refrigeration. Uniquely,
NewCo will be unhedged and debt-free, with a healthy balance sheet - cash in
excess of US$500 million. NewCo is expected to become a global top-4 PGM
producer within the next four to five years and will continue to grow
thereafter.
The combined exploitation of these Properties will provide significant
financial and operational benefits to shareholders, including:
* a material reduction in up-front capital expenditure, with economies of
scale providing unit operating cost reductions;
* common utilisation of the PPM`s state-of-the-art concentrator-complex
and other infrastructure for the Properties;
* significant financial and operating synergies and efficiencies; and
* 12km of shallow-dipping strike length, most of which is mineable
through open-cast and inclines, allowing safe and cost-efficient
mining.
In addition, NewCo will control three strategically important shallow PGM
assets on the eastern limb of the Bushveld Complex (Eastern Limb), providing
further growth opportunities for the company.
The Consolidation remains subject to conditions precedent considered
customary for a transaction of this nature, including approval from the
South African Reserve Bank.
THE IDC INVESTMENT
NewCo and the IDC have entered into a binding equity subscription agreement
to introduce the IDC as a new cornerstone shareholder of NewCo, the
consolidated PGM entity. Upon completion of the Consolidation, the IDC will
invest R3.24 billion (Subscription Funds) in return for newly issued
ordinary shares, representing 16.2% of NewCo.
In addition, NewCo will issue warrants to the IDC that will entitle the IDC
to new ordinary shares in the company (Warrants). If exercised, in return
for the payment of R800 million, the Warrants will convert into NewCo
ordinary shares equivalent to 4% of the ordinary shares in issue immediately
prior to the Warrants being issued, implying an agreed valuation for NewCo
post-consolidation of R23.24 billion (including the cash injection of the
Subscription Funds). The Warrants will expire on 31 December 2013.
The Parties have agreed that the Subscription Funds shall only be utilised
by NewCo for the exploration, development, exploitation and/or mining of
PGM`s in South Africa.
THE BENEFICIATION JOINT VENTURE
NewCo and the IDC will also form a joint venture to explore, and ultimately
fund, opportunities in PGM beneficiation and processing. These opportunities
are expected to provide local community benefits, as well as energy-
efficient and environmentally-advanced industrial solutions for the benefit
of the entire PGM industry in South Africa.
The Parties expect the transactions to be completed during the June quarter
of this year. Further details will be included in an information memorandum
that will be sent to the shareholders of Platmin in the near future.
ABOUT THE IDC
The IDC is a South African based national development finance institution
established by the South African government in order to promote sustainable
economic growth and industrial capacity development, and as such invests
capital in leading projects of national interest, in order to secure
significant value to South Africa and important community development
benefits.
ABOUT PALLINGHURST
Pallinghurst is an investment consortium formed specifically to pursue
attractive investment opportunities within the global natural resources
industry. As one of the largest investors into South Africa, Pallinghurst
has in the past four years invested more than US$1 billion of long term
equity funding. Pallinghurst utilises its financial ability, expertise and
execution skill to participate in and develop investments with the objective
of providing investors with an attractive rate of return. The consortium
includes "blue-chip" global investors in the natural resources industry, as
well as leading high-profile sovereign investors.
ABOUT THE BAKGATLA
The Bakgatla Ba Kgafela Tribe is a traditional community established
according to indigenous custom with full contractual capacity. The Bakgatla
comprises approximately 350,000 people resident in the Pilanesberg area of
South Africa. The Bakgatla is the largest tribe in the area with
approximately 32 villages falling within the Bakgatla tribal area. As a
result the Bakgatla owns a significant portion of the land in the vicinity
of the Pilanesberg National Park and accordingly benefits from its numerous
PGM interests.
ABOUT NEWCO
NewCo will be a major new PGM producer in South Africa, formed through the
consolidation of Platmin`s Pilanesberg Platmin Mine, Sedibelo and
Magazynskraal. In addition, NewCo will control three exciting growth
projects on the Eastern Limb, being, Mphahlele, Grootboom and Loskop.
For further Information:
The IDC:
Abel Malinga: +27 11 269 3608
Mbuyazwe Magagula: +27 11 269 3422
Kevin Hodges: +27 11 269 3630
Pallinghurst:
Arne H. Frandsen: +27 79 528 2407
Investment Bank and Sponsor:
Investec Bank Limited
Date: 29/03/2012 10:00:01 Produced by the JSE SENS Department.
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