| Wed 5 Sep 2001, 0:00 | | Anglogold Proposes Offer For Normandy |
|
Anglogold Limited
(Registration Number 1944/017354/06)
("AngloGold")
The Board of AngloGold is pleased to announce its intention to make an offer
("the offer") to acquire the entire issued share capital of Normandy Mining
Limited ("Normandy"), Australia's largest and leading gold company ("the
transaction").
The offer, which is detailed below, is to be settled in AngloGold shares in
the ratio of 2.15 AngloGold shares per 100 Normandy shares.
The offer values Normandy at A$3.2 billion (A$1.42 per share), based on the
closing price of AngloGold in New York on 4 September 2001. This represents
a premium of 29% to Normandy's closing share price on the Australian Stock
Exchange on 4 September 2001. Based on the 30 trading day weighted average
share prices to 4 September 2001 of Normandy and AngloGold in Australia and
New York respectively, the offer represents a 33% premium.
Creating the first truly global gold company
The combination of AngloGold and Normandy will create the world's first
truly global gold company. Following the transaction, the enlarged
AngloGold will be the largest gold producer in both Australia and Africa and
will be a significant gold producer in North and South America. This
profile is not matched by any other gold company. This represents an
important step in the consolidation of the gold industry.
The enlarged AngloGold will have a more diverse production portfolio, with
quality mining operations in five continents, and with a good balance
between deep level and shallow underground and open pit operations.
Normandy's strong operating cash flows, combined with those of AngloGold,
position the combined company to complete major new capital programmes that
bring to account new low cost gold ounces, to grow profits and reduce debt
while maintaining existing high levels of dividend payments. The
transaction is expected to be accretive to AngloGold's earnings per share
for the foreseeable future. The transaction is also accretive on an
operating cash flow per share basis. The enlarged AngloGold will have the
highest earnings before net interest, taxation, depreciation and
amortisation ("EBITDA") in the gold industry.
The transaction will almost double the free float of AngloGold shares which
should significantly enhance trading liquidity. This together with risk
diversification and the other benefits of the transaction will assist with a
possible re-rating of AngloGold shares.
Normandy is Australia's leading gold company and the world's seventh largest
gold producer. For the year ended 30 June 2001 Normandy produced 2.3
million ounces at a cash cost of US$162/oz and a total cost of US$224/oz and
had attributable reserves and resources of approximately 26.4 and 59.3
million ounces respectively. Normandy owns some of the most attractive gold
properties in Australia, including: a 50% interest in the Super Pit, near
Kalgoorlie in Western Australia; a 50% interest in the Pajingo mine in
Queensland; an 87.5% interest in the Tanami operations in the Northern
Territory; a 100% interest in the Yandal operations in Western Australia;
and a 44.44% interest in the Boddington gold operations in Western Australia
(in joint venture with AngloGold). Additionally Normandy owns a number of
attractive assets outside Australia including the Midas (Ken Snyder) mine in
Nevada in the United States and has a 49.9% interest in TVX Normandy
Americas which has interests in five mines in North and South America.
Normandy also has an extensive exploration portfolio and a very successful
exploration team.
AngloGold's existing portfolio includes low cost, high producing operations
such as Great Noligwa, TauTona and Kopanang in South Africa, Geita in
Tanzania, Morila in Mali and Sunrise Dam in Western Australia, low cost
producers in Brazil and Argentina and a major expansion project in the
Cripple Creek & Victor joint venture in Colorado. The combination of these
two asset bases creates a gold company of unrivalled potential.
The transaction will deliver significant benefits to shareholders of the
combined company:
* The combined annual gold production of 9.1 million ounces will reinforce
AngloGold's position as the world's leading gold producer. The acquisition
will further increase and diversify AngloGold's reserve and resource base
whilst enhancing its position as the world's largest gold company measured
by reserves and resources. Total reserves will be 106 million ounces and
total resources will be 434 million ounces. Compared to its North American
peers, which trade at substantial multiples, AngloGold's large production
and reserve base presents an opportunity for the re-rating of AngloGold's
shares.
* The transaction will substantially enhance AngloGold's asset base and
position it to exploit new assets and optimise existing operations.
Normandy's asset base, which includes joint venture operations and projects
with AngloGold in Australia and Brazil, will provide the combined company
with a significant operating and exploration presence in some of the world's
best gold producing regions, in many cases expanding AngloGold's existing
regional influence. Cost savings will be realised through the
rationalisation of complementary exploration activities in Australia, West
Africa and South America in particular.
* Normandy's and AngloGold's complementary regional operating presence in
Australia as well as in North and South America will present the company
with unique synergies and consolidation opportunities. Additionally,
Normandy's exploration network will provide the combined company with a
significant exploration presence in some of the world's most prospective
gold regions, in many cases expanding AngloGold's existing exploration
activities.
* Following the transaction, the enlarged AngloGold's increased asset base
and production profile will give it the flexibility to rationalise its asset
base by closing or disposing of lower margin operations and by acquiring new
assets consistent with the company's improved portfolio.
* AngloGold's EBITDA (based upon the 12 months ended 30 June 2001) will
increase from US$617.7 million to US$891.5 million.
* The transaction will reduce AngloGold's cash cost of production per ounce
by approximately 4% to US$182 per ounce (for the six months ended 30 June
2001).
* Management expect the enlarged AngloGold to have a lower cost of capital
due to greater risk diversity. The effect of the acquisition on the spread
of AngloGold's global gold production and reserve base (based upon
AngloGold's and Normandy's production for the six months ended 30 June 2001
and reserves for the year ended 31 December 2000 for AngloGold and for the
year ended 30 June 2001 for Normandy) is shown in the following tables:
Production for the six months ended 30 June 2001
Region Before After
`000 % `000 %
ounces ounces
South Africa 2,325 67.4 2,325 49.5
Africa 406 11.8 422 9.0
Australia 250 7.2 1,286 27.4
North America 255 7.4 388 8.2
South America 213 6.2 275 5.9
Europe 0 0.0 3 0.0
Total 3,449 100.0 4,699 100.0
Reserves
Region Before After
`000 % `000 %
ounces ounces
South Africa 56,000 69.8 56,000 52.5
Africa 8,100 10.1 11,800 11.1
Australia 6,100 7.6 23,100 21.7
North America 6,100 7.6 8,700 8.2
South America 3,900 4.9 5,500 5.2
Europe 0 0.0 1,500 1.3
Total 80,200 100.0 106,600 100.0
Total production from shallow underground and surface mines will increase
from around 40% to around 56%. EBITDA from shallow underground and surface
mines will increase from 56% to around 70%.
* The transaction will reduce AngloGold's gearing, expressed as the ratio of
net debt to total capital, from approximately 30% to around 25%.
* The transaction will lift AngloGold's market capitalisation to
approximately US$5.5 billion, thereby increasing the universe of potential
large cap institutional investors, which will further enhance the potential
for re-rating.
* The resulting increase in AngloGold's issued capital by some 48 million
shares will almost double the free float of AngloGold's shares which should
significantly enhance trading liquidity in Johannesburg, New York and,
particularly, on the Australian Stock Exchange. The transaction will also
improve the enlarged AngloGold's weighting in the indices of the various
stock exchanges on which it is listed.
* AngloGold has established a reputation as a high dividend payer, with an
established practice of paying out most of its free cash flow to
shareholders. The improvement in its cash flow should ensure that this
practice continues.
The transaction represents another significant step in the consolidation of
the gold industry. This will position the combined company to take
advantage of new opportunities that will emerge in the continuing
consolidation of the sector, including strategic gold marketing benefits and
rationalisation through the disposal and exchange of assets, so as to
realise greater operating and cost efficiencies.
Shareholders of Normandy who accept the offer will, by virtue of the share
exchange, have the opportunity to participate in these potential benefits.
In addition, Normandy's shareholders will also benefit from the substantial
premium to the market share price being offered, AngloGold's high dividend
payout, immediate access to AngloGold's New York Stock Exchange listing, the
trading liquidity in its share in New York and Johannesburg and the
advantages of the new company's size.
Description of the Normandy operations
Normandy is Australia's largest gold company with an enviable operational
and exploration track record.
The company has operations and exploration assets in all of Australia's
major gold producing regions. These operations include:
* an equal partnership interest (together with Homestake/Barrick) in
Kalgoorlie Consolidated Gold Mines Proprietary Limited, which owns and
operates the Kalgoorlie Super Pit, situated directly adjacent to the town of
Kalgoorlie in Western Australia;
* an 87.45% interest in Normandy NFM Limited, a public, listed company,
which owns and operates the company's Tanami operations, located in the
Tanami Desert region of the Northern Territory, approximately 550 kilometres
northwest of Alice Springs;
* a 100% interest in the Yandal Operations which comprise the Jundee,
Bronzewing and Wiluna mines situated in the Yandal, Norseman-Wiluna belt of
Western Australia. These mines are situated between 350 and 500 kilometres
north of Kalgoorlie. Normandy also owns significant tenements in this
region;
* a 44.44% interest in the Boddington gold mine situated 120 kilometres
southeast of Perth in Western Australia (AngloGold currently holds a 33.33%
interest in Boddington with the remaining interest held by Newcrest Mining
Limited). The mine is operated by Worsley Alumina Proprietary Limited;
* an equal joint venture interest in the Pajingo Operations (together with
Newmont Mining Limited) situated approximately 200 kilometres
south/southwest of Townsville in North Queensland; and
* a 76.6% interest in Normandy Mt Leyshon Limited, a public, listed company,
which owns and operated (prior to closure) the Mt Leyshon mine situated 171
kilometres south/southwest of Townsville in North Queensland.
Normandy also has interests in a diverse international portfolio of gold
assets. These include:
* a 100% interest in the Midas (Ken Snyder) mine and adjoining tenements
situated on the Carlin Trend in the state of Nevada, United States of
America;
* a 49.9% interest in TVX Normandy Americas which owns:
* a 49% interest in the New Britannia mine situated in Canada (51% owned
and operated by High River Gold);
* a 32% interest in the Musselwhite mine situated in Canada (68% owned
and operated by Placer Dome);
* a 50% interest in the Brasilia/Paracatu mine situated in Brazil (50%
owned and operated by Rio Tinto);
* a 50% economic interest in the Crixas (Serra Grande) mine situated in
Brazil (50% owned and operated by AngloGold); and
* a 50% interest in the La Coipa mine situated in Chile (50% owned and
operated by Placer Dome).
* a 67.1% interest in the Martha Hill mine located adjacent to the town
of Waihi, 110 kilometres southeast of Auckland on the North Island of New
Zealand;
* a 90% interest in the Yamfo-Sefwi mine (feasibility study stage),
situated on the Yamfo-Sefwi Belt in Ghana, a 50% interest in the adjoining
E. Ntotoroso (in exploration stage) and an 80% interest in Akim (Kenbert)
(in exploration stage) also situated in Ghana;
* a 51% interest in the Ity mine situated in C te d'Ivoire;
* 100% interest in the Ovacik mine (which recently commenced production) and
the Mastra mine (feasibility stage) situated in Turkey; and
* an 80% interest in the Perama Project situated in Greece.
Normandy also has certain non-gold interests. These include:
* a 100% interest in the Golden Grove zinc, copper and precious metals
operation, situated 225 kilometres east of the town of Geraldton in Western
Australia;
* a 62.5% interest in Australian Magnesium Corporation Limited ("AMC") which
owns significant magnesium resources and has developed and owns a
proprietary process to produce high quality magnesium metal and magnesium-
based alloys for supply to the automotive industry; and
* a 53.9% interest in the Kasese cobalt project located in western Uganda.
Proposed offer terms and conditions
AngloGold, via a wholly owned subsidiary, proposes to acquire the entire
issued share capital of Normandy for AngloGold shares at an exchange ratio
of 2.15 AngloGold shares per 100 Normandy shares.
The AngloGold shares issued to Normandy shareholders in terms of the offer
will rank pari passu in all respects to the AngloGold shares currently in
issue including the right to all future dividends.
The offer will be subject to the following conditions:
* the acceptance of the offer by holders of a minimum of 50.1% of Normandy
shares;
* the approval of the transaction by ordinary resolution of AngloGold
shareholders in general meeting. AngloGold's 53.3% shareholder, Anglo
American plc, has committed to vote in favour of that resolution;
* the approval of the transaction by the South African Reserve Bank;
* the approval of the transaction by the Australian Foreign Investment
Review Board ("FIRB");
* obtaining any other regulatory approvals necessary to ensure that
AngloGold can acquire all of the shares in Normandy pursuant to the offer
and that AngloGold shares can be issued under the offer and traded without
restriction;
* there being no pre-emptive rights applicable to the Pajingo Joint Venture
or KCGM (known as the Super Pit) which would be triggered on a change of
control of Normandy;
* there being no pre-emptive rights applicable to Normandy's 49.9%
shareholding in the corporate entity or entities which constitute the TVX
Normandy Americas Alliance which would be triggered on a change of control
of Normandy;
* there being no standard prescribed occurrences as envisaged by the
Australian Corporations Act;
* an unqualified audit report being issued in respect of Normandy's
consolidated financial statements for the year ended 30 June 2001;
* Normandy or any Normandy subsidiary not entering into any agreement with
AMC or obligation in respect of AMC for an amount greater than A$20 million
other than those agreements and obligations disclosed in the AMC
institutional offering memorandum dated 19 June 2001 or disclosed by
Normandy; and
* there being no contingent liabilities with an individual value of A$15
million and an aggregate value of A$50 million disclosed in Normandy's
financial statements for the year ended 30 June 2001 which have not been
previously disclosed by Normandy.
In order to extend the offer into the United States ("US") to holders of
Normandy shares who are resident in the US and in compliance with US federal
securities laws, AngloGold intends to arrange for an approved nominee to
receive the AngloGold shares to be received by such holders of Normandy
shares. The approved nominee will sell such shares, on such holders behalf,
on any approved stock exchange where AngloGold shares are listed, and pay
the proceeds received from such sale to such holders.
Pro forma historical effect on AngloGold's Net Asset Value, EBITDA, Basic
Earnings and Headline Earnings Per Share
For the purpose of compliance with JSE Securities Exchange ("JSE") Listings
Requirements, the pro forma effect of the transaction on the EBITDA, basic
earnings and headline earnings per share for AngloGold for the year ended 30
June 2001, and on the net asset value per share at 30 June 2001, are as
follows:
%
Change
(amounts in Rands per share) Before After(4)
Net asset value per share (1) 107.93 167.72 55.4
EBITDA per share (1) and (3) 43.95 46.54 5.9
Basic earnings per share (1) 10.35 1.31 (87.3)
and (2) (after abnormal items)
Headline earnings per share (1) 17.11 15.35 (10.2)
and (4)
1. At 30 June 2001 for AngloGold and Normandy. Net asset value per share is
determined assuming 107 167 837 shares in AngloGold and 2 231 293 559 shares
in Normandy. The net asset value for Normandy was translated into US
Dollars assuming an exchange rate of 0.51 US Dollars per Australian Dollar
and into Rands assuming an exchange rate of 8.05 Rands per US Dollar at 30
June 2001. EBITDA, basic earnings and headline earnings per share, is
determined assuming an average of 107 039 904 shares in AngloGold and an
average of 1 806 145 187 shares in Normandy for the year ended 30 June 2001.
EBITDA, basic earnings and headline earnings for Normandy have been
translated into US Dollars assuming an average exchange rate of 0.54 US
Dollars per Australian Dollar and into Rands assuming an average exchange
rate of 7.62 Rands per US Dollar for the year ended 30 June 2001.
2. Pro forma for the twelve months ended 30 June 2001 for AngloGold and as
reported for the year ended 30 June 2001 for Normandy. In the financial
year ending 30 June 2001 Normandy made abnormal write downs totalling
A$274.7 million. This included write downs in the carrying value of
Normandy's interests in its Yandal assets, Kasese, its non Australian
exploration assets and TVX Gold Inc. to reflect fair value.
3. Pro forma assuming that 100% of Normandy shareholders accept the offer
and in the case of basic earnings including depreciation of mining assets
and amortisation of the goodwill incurred in the transaction.
4. Pro forma assuming that 100% of Normandy shareholders accept the offer
and in the case of headline earnings including depreciation of mining
assets.
For the year ended 30 June 2001 Normandy recorded an attributable profit of
A$120.1 million, before net abnormal write downs amounting to A$274.7
million (R7.71 per AngloGold share) and an attributable loss of A$154.6
million after net abnormal write downs. As at this date Normandy's total
net assets were A$1,398 million. The attributable profit for the year ended
30 June 2001 is stated after higher borrowing costs (A$112 million as
compared to A$66.7 million for the year ended 30 June 2000). Normandy
reduced its net debt by A$353.3 million during the year ended 30 June 2001
and therefore future borrowing costs are expect to be reduced. In addition,
Normandy's depreciation and amortisation for the year ended 30 June 2001 was
A$263.3 million as compared to A$121.9 million for the year ended 30 June
2000.
Documentation, next steps and cautionary announcement
A circular to AngloGold shareholders requesting approval for the transaction
and the offer document to Normandy's shareholders are currently being
prepared. Subject to the approval of the relevant regulatory authorities
these documents will be posted to the respective shareholders in due course.
Shareholders are accordingly advised to exercise caution in dealing in
AngloGold shares.
Johannesburg
5 September 2001
Financial advisers to the transaction
Deutsche Bank AG
Legal advisers in Australia
Freehills
Legal advisers in South Africa
Tabacks
Legal advisers in the US
Shearman & Sterling
Accountants
Ernst & Young
Joint JSE Sponsors
UBS Warburg
JP Morgan
Share Code: ANG
ISIN Code: ZAE000014601
Except for historical information which may be contained herein, there may
be matters discussed in this announcement that are forward-looking
statements. Such statements are only predictions and actual events or
results may differ materially. For a discussion of important factors
including, but not limited to, development of AngloGold's business, the
economic outlook in the gold industry, expectations regarding gold prices
and production, and other factors, which could cause actual results to
differ materially from such forward-looking statements, refer to AngloGold's
annual report on Form 20-F for the year ended 31 December 2000 which was
filed with the United States Securities and Exchange Commission on 23 April
2001.
