| Thu 22 Nov 2001, 0:00 | | Mazal Mining And Exploration Limited - Raising Of |
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RAISING OF FUNDING AND CONVERSION OF LOANS
1. INTRODUCTION
Further to the further cautionary announcement dated 19 October 2001, BoE
Merchant Bank, a division of BoE Bank Limited, is authorised to announce
that a written agreement has been concluded between Mazal and The 57 Trust,
whereby The 57 Trust will be issued with Mazal shares for a cash injection
of R9.45 million ("the issue of shares for cash").
2. THE ISSUE OF SHARES FOR CASH
2.1 Salient Terms of the Agreement
In terms of the agreement, The 57 Trust, a discretionary trust registered in
the Jersey Islands, will receive 35 million shares, of which 18 million
shall be issued in accordance with the general authority passed at the
company's last annual general meeting. The balance of 17 million shares
shall be allotted and issued by means of a specific issue of shares for
cash. The shares shall be allotted and issued to The 57 Trust, on a pro
rata basis in line with payments received, at an issue price of 27 cents per
share.
The issue price represents a discount of 8% to the weighted average traded
price over a 30 business day period, prior to the verbal agreement being
reached on 2 November 2001.
The purchase consideration of R9.45 million shall be payable as follows:
- R3.15 million shall be paid on the effective date of which it is
acknowledged that the full amount has already been received by the Company;
- R3.15 million shall be paid on or before 15 January 2002; and
- the balance of R3.15 million shall be paid to the Company on or before
1 March 2002.
The 57 Trust has also secured an option for a six month period from the
first business day following fulfilment of the last resolutive condition
referred to in paragraph 5 to acquire 36 million shares at 50 cents each
from three major shareholders.
The 57 Trust has the right to appoint two members to the Mazal Board of
Directors, both of whom must be capable of adding value to the Company.
2.2 Rationale
The specific issue of shares for cash will enable Mazal to raise sufficient
funds to complete the following:
- the bulk sampling;
- Paardeberg East upgrade in plant and machinery, thereby effectively
doubling throughput;
- commission a leading process engineering firm to effect the necessary
upgrade and optimisation to the plant on site;
- commence a valuation of the reserves of Mazal's MK2, MK3 and MK4
Kimberlite pipes; and
- the payment of existing creditors.
2.3 Financial effects
The financial effects of the issue of shares for cash, set out in the table
below, are based on:
- the loss and headline loss per share calculated for the financial year
ended 30 June 2001, assuming the issue of shares for cash had been in
effect for the entire period resulting in the weighted average number of
shares in issue for the year ended 30 June 2001 being 215 000 000 shares;
- the purchase consideration of R9.45 million would earn interest at 8% per
annum over the entire period, which interest would not have attracted income
tax due to the Company being in a loss making position; and
- the net asset value and net tangible asset value per share have been
calculated assuming the issue had been effected on 30 June 2001 and as a
result the issued number of shares as at this date was 215 000 000.
Per Mazal ordinary share Before After Change
the the (%)
issue issue
(cents) (cents)
Loss and headline loss per (3,05) (2,20) 27,8
share
Net asset value and net 5,97 9,39 57,4
tangible asset value per
share
3. THE CONVERSION OF LOANS
The cancellation of the agreement concluded with Ore Vest Plc shall have no
effect on the conversion of shareholders' loans into equity referred to in
the terms announcement of 31 July 2001.
In terms of the conversion of loans agreement signed on 28 August 2001,
shareholders' loans to the value of R9 037 501,18 which consists of capital
and interest up to 31 October 2001, will be converted to ordinary shares of
a nominal value of 1 cent each at a share price of 35 cents per share.
The conversion of certain shareholders' loans to equity will assist the
company to strengthen its balance sheet by reducing its debt exposure.
3.1 Financial effects
The financial effects of the conversion of the loans, set out in the table
below, are based on:
- the loss and headline loss per share calculated for the financial year
ended 30 June 2001, assuming the specific issue of shares, pursuant with the
conversion of loans, had been in effect for the entire period resulting in
the weighted average number of shares in issue for the year ended 30 June
2001 being 205 821 432 shares;
- the assumption that the converted loans would save interest at 8% per
annum over the financial year, which interest would not have attracted
income tax due to the Company being in a loss making position; and
- the net asset value and net tangible asset value per share have been
calculated assuming the specific issue had been effected on 30 June 2001 and
as a result the issued number of shares as at this date was 205 821 432.
Per Mazal ordinary share Before After Change
the the (%)
issue issue
(cents) (cents)
Loss and headline loss per (3,05) (2,32) 24,1
share
Net asset value and net 5,97 9,61 61,0
tangible asset value per
share
4. THE COMBINED FINANCIAL EFFECTS
The combined financial effects of The 57 Trust specific issue of shares for
cash and the conversion of the loans, set out in the table below, are based
on:
- the loss and headline loss per share calculated for the financial year 30
June 2001, assuming both issues of shares, had been in effect for the entire
period resulting in the weighted average number of shares for the year ended
30 June 2001 being 240 821 432 shares;
- the issue of shares for cash and the converted loans would earn interest
and save 8% per annum over the financial year, which interest would not have
attracted income tax due to the Company being in a loss making position; and
- the net asset value and net tangible asset value per share have been
calculated assuming both issues of shares had been effected on 30 June 2001
and as a result the issued number of shares as at this date was 240 821 432.
Per Mazal ordinary share Before After Change
the the (%)
issue issue
(cents) (cents)
Loss and headline loss per (3,05) (1,67) 45,4
share
Net asset value and net 5,97 12,14 103,4
tangible asset value per
share
5. SUSPENSIVE AND RESOLUTIVE CONDITIONS
The agreement with The 57 Trust is subject to the condition precedent that a
marketing agreement is signed by the relevant parties. This marketing
agreement affords Benni Deutch, an authorised diamond dealer and duly
appointed nominee of The 57 Trust, the right to market the Company's parcels
of diamonds for a commission. This suspensive condition has subsequently
been fulfilled.
The specific issue of shares for cash as detailed in The 57 Trust agreement
and the conversion of loans are subject, inter alia, to the following
resolutive conditions:
- approval of both specific issues for cash by the JSE Securities Exchange
SA and the Securities Regulation Panel on Takeovers and Mergers;
- approval by the shareholders of Mazal in general meeting; and
- approval by the South African Reserve Bank.
6. DOCUMENTATION
A circular, containing details about The 57 Trust agreement, the conversion
of loans and a notice convening a general meeting of the company for the
approval thereof is in the process of being prepared and will be sent to
shareholders within 28 days.
Johannesburg
21 November 2001
Sponsor Legal Adviser to The 57 Trust
BoE Securities
Member of the JSE Securities
Exchange SA
