| Mon 26 Nov 2001, 0:00 | | Iscor Limited - Abridged Revised Listing Particula |
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Abridged revised listing particulars
For assistance please call the Iscor ShareCare line on 0800 006960
These abridged revised listing particulars are not an invitation to
subscribe for shares in Iscor, but are issued in compliance with the
Listings Requirements of the JSE Securities Exchange South Africa ("JSE")
for the purpose of providing information to the public with regard to Iscor.
The information has been extracted from the detailed revised listing
particulars which, together with the circular issued to shareholders of
Iscor, dated 29 October 2001, were posted to shareholders on that date.
1. BACKGROUND
In an announcement dated 26 September 2001, Iscor announced that agreement
had been reached with Industrial Development Corporation of South Africa
Limited ("IDC") in terms of which, inter alia:
* Iscor would transfer its mining companies and businesses to Kumba
Resources Limited ("Kumba"), a wholly-owned subsidiary of Iscor or to
subsidiaries of Kumba, save for ownership of 6,25 million tonnes per annum
("Mtpa") of iron ore produced by Sishen Iron Ore Company (Proprietary)
Limited ("Sishen undivided share") which would be retained by Iscor;
* Kumba shares would be distributed to Iscor shareholders pro rata to their
existing holdings in terms of section 60 of the South African Income Tax
Act, 1993 (Act 113 of 1993), as amended;
* IDC would inject additional equity into Saldanha Steel (Proprietary)
Limited ("Saldanha Steel") equivalent to 50% of its net debt;
* IDC's shareholding in Saldanha Steel would be acquired by Iscor;
* IDC would contribute half of the anticipated operating funding
requirements of Saldanha Steel for the financial year ending 30 June 2002;
and
* post the Kumba unbundling, Iscor would undertake a rights issue of R1,67
billion, to be fully underwritten by IDC.
In terms of the restructuring, Iscor sold its mining companies and
businesses, which held Iscor's iron ore, coal, base metals, heavy minerals
and related assets, to its wholly-owned subsidiary, Kumba or subsidiaries of
Kumba, in consideration for, inter alia, the issue to it by Kumba of 272 821
616 Kumba shares, the assumption of certain of its liabilities and the
crediting of a loan account in the name of Iscor in the books of Kumba. The
transfer of mining assets from Iscor to Kumba excluded the Sishen undivided
share the ownership of which remains with Iscor. For its domestic iron ore
off-take of 6,25 Mtpa, Iscor will re-imburse Sishen Iron Ore Company
(Proprietary) Limited ("Sishen Iron Ore") with an amount equal to the total
cost of production required by it plus a management fee equal to 3% of such
total cost. Iscor will also continue to receive 2 Mtpa of iron ore from
Thabazimbi mine at a cost equal to the cost of production plus a management
fee equal to 3% of such cost. This puts Iscor into a unique position whereby
all its iron ore requirements will be at cost of production thereof plus a
management fee equal to 3% of such cost. The effect of this will be to leave
Iscor as a vertically integrated steel producer and is expected to enhance
Iscor's viability as a stand-alone entity positioned advantageously to meet
any future volatility in the global steel markets.
2. NATURE OF BUSINESS
2.1 The steel works
Iscor's steel businesses are situated at five locations in South Africa with
the following wholly-owned plants operated as divisions of Iscor:
* a flat products integrated mill at Vanderbijlpark;
* a long products integrated mill at Newcastle;
* a long products mini-mill at Vereeniging;
* a long products rolling mill and forge press at Pretoria; and
* a direct reduction kiln at Boksburg.
Iscor Flat Steel Products - Vanderbijlpark Works
The Vanderbijlpark Works is a fully integrated flat products plant with a
liquid steel capacity of 4,1 Mtpa, although current output is 3,5 Mtpa due
to the stagnant domestic market and low international steel prices. A
comprehensive range of basic and value-added flat products is produced for
both the domestic and export markets. Vanderbijlpark's high level of
exports, 34%, is a function of the capacity that was installed when domestic
steel consumption was higher than at present and was expected to continue
growing as strongly as it had done up until the mid-1970's. The plant
supplies 80% of domestic demand for flat products.
Iscor Long Steel Products
The long steel products business comprises the integrated steel works at
Newcastle and the electric-arc furnace based mini-mill at Vereeniging.
The Newcastle Works
The Newcastle Works is a fully integrated steel plant established in 1971
to produce a comprehensive range of hot rolled profiles including rod, bar,
light, medium and heavy sections, billets and blooms. It has a capacity of
1,6 Mtpa of rolled product but is currently producing at a level of 1,35
Mtpa in order to focus on higher quality value-added products and as a
result of low export selling prices.
The Vereeniging Works
The Vereeniging Works is an electric arc-furnace-based mini-mill, which
produces a wide range of speciality steel products, targeting primarily
local niche markets. It was established in 1911 as the Union Steel
Corporation Limited, the first primary steel producer in South Africa. Its
steel business was acquired by Iscor in 1991.
The Vereeniging Works is organised into three divisions, profile
products, forged products and seamless tubes. All three divisions dominate
the local market with a market share in excess of 80%. Approximately 90% of
the profile and forge products are sold in the domestic market while most of
the seamless tubes are exported.
Saldanha Steel
The plant at Saldanha was designed to produce 1,25 Mtpa of hot rolled
thin gauge coil in a continuous process. The plant has been successful in
producing the high quality thin gauge product for which it was designed and
in placing output in the very difficult international steel markets of the
past two years. Up to 260 000 tonnes per annum are supplied to an adjacent
re-rolling plant for export and the balance of production is exported
directly. Saldanha Steel has incurred substantial losses to date which are
the result of poor steel prices, the slower production build up and the
heavy interest burden. During the past financial year the board of directors
of Saldanha Steel raised an impairment provision of R3 billion against the
carrying value of its fixed assets. Iscor provided fully for its share of
the impairment in its financial results for the year to 30 June 2001.
Once Iscor implements full control of Saldanha Steel it will allow the
realisation of significant synergistic benefits for Iscor in the areas of
product rationalisation, marketing and future capital expenditure. It will
also represent the first step in the rationalisation of the South African
steel industry which is expected to release further benefits. Achievement of
the design production and cost levels are expected to make the plant
extremely competitive in the premium priced thin gauge segment of its
market.
Saldanha Steel agreement
In terms of the Saldanha Steel agreement, IDC will inject additional
equity into Saldanha Steel equivalent to 50% of Saldanha Steel's net debt at
the time of Kumba's unbundling. Iscor will purchase IDC's shareholding and
thereafter integrate Saldanha Steel into Iscor's flat steel products
division. IDC has also undertaken to contribute 50% of Saldanha Steel's
operating funding requirements for the financial year ending 30 June 2002
and, in this regard, IDC will contribute R250 million in cash to Iscor at
the time of the Kumba unbundling.
Iscor will acquire IDC's 50% shareholding in Saldanha Steel and in
consideration therefor and IDC's R250 million cash contribution, Iscor will
issue 20 million shares in Iscor and procure the issue of 10 million Kumba
shares to IDC. Furthermore, to the extent that Saldanha Steel's funding
requirements may exceed R500 million during the period up to and ending on
30 June 2002, IDC shall, if so requested by Iscor, contribute 50% of any
such excess in consideration for the issue to it of Iscor shares priced at
the then five-day weighted average traded price of Iscor shares on the JSE.
The implementation of the acquisition of Saldanha Steel is subject to the
approval thereof by the relevant competition authorities.
2.2 Other significant investments
Ownership of the Sishen undivided share
Iscor has retained registered ownership of a portion of the mineral
rights at the Sishen mine, entitling it to delivery of 6,25 Mtpa of a
specific grade mix of iron ore. Iscor will re-imburse Kumba for the cost of
producing the ore by an amount equal to the cost of production plus a
management fee equal to 3% of such cost. Iscor has the right to participate
in any future iron ore production expansion programme by Sishen Iron Ore in
South Africa to the extent that it requires additional iron ore for its
South African steel production. In this regard Iscor will contribute pro
rata with Sishen Iron Ore to the cost of development and Kumba will be
entitled to a management fee of 3% of the production costs of such
expansion. During the past financial year Sishen Iron Ore supplied 4,5
million tonnes of iron ore to the Vanderbijlpark and the Newcastle Steel
Works and 1,3 million tonnes to Saldanha Steel. After the latter's full ramp-
up the combined off-take is expected to increase to an estimated 6,25 Mtpa.
The estimated saving to Iscor and Saldanha Steel on the cost of iron ore
on a cost of production plus a management fee equal to 3% of such cost basis
compared to arm's length contract prices for the past financial year would
have been equal to approximately R313 million.
Suprachem (Proprietary) Limited ("Suprachem")
Suprachem distils and refines crude tar which is a by-product of Iscor's
coke production, and manufactures and markets coal, tar and related by-
products. In addition to the main products, hydrochloric acid is
regenerated, ferrite magnetic powders are manufactured and coke is produced
for ferrochrome producers from coke oven batteries no longer used by Iscor.
Macsteel International Holdings BV ("MIBV")
MIBV is a joint venture between Iscor and Macsteel Holdings (Proprietary)
Limited, a major steel service centre business operating locally and
internationally. MIBV is one of the largest international steel traders with
a strong position in Iscor's export markets. It was established in 1996 to
handle Iscor's exports as the exclusive export channel in order to enhance
customer service and trades in excess of 3 million tonnes of steel annually
through an international network. Its shipping operation handles in excess
of 5,5 million tonnes of bulk cargo products.
3. DIRECTORS
The names, ages, addresses and designations of the directors of Iscor are
set out below:
Name and age Address Designation Date appointed
W A M Clewlow (65) PO Box 782248 Chairman 1 October 1989
Sandton, 2146
L L van Niekerk (51) PO Box 450 Chief Executive 3 February 1993
Pretoria, 0001
M Macdonald (59) PO Box 450 Executive director - 8 March 1997
Pretoria, 0001 Finance
J van den Berg (64) PO Box 360 Non-executive director 1 October 1989
Magaliessig, 2067
PO Box 2600 Non-executive director 1 February 2001
D Mokhele (45) Pretoria, 0001
4. SHARE CAPITAL
The share capital of Iscor is as follows:
R'000
Authorised
1 200 000 000 ordinary shares of R10,00 each 12 000 000
2 357 584 "C" redeemable preference shares of R10,00 each 24
12 000 024
Issued
272 821 716 ordinary shares of R10,00 each 2 728
Share premium 1 638
4 366
5. DETAILED REVISED LISTING PARTICULARS
English copies of the detailed revised listing particulars are available
during normal business hours at the offices of:
* Iscor: Iscor Head Office, Roger Dyason Road, Pretoria West;
* JP Morgan, 1 Fricker Road, corner Hurlingham Road, Illovo; and
* Mercantile Registrars Limited, 10th Floor, 11 Diagonal Street,
Johannesburg.
Pretoria
26 November 2001
Financial adviser and sponsor
JP Morgan
Independent technical adviser
SRK Consulting
Corporate law advisers and consultants
Edward Nathan & Friedland (Pty) Ltd
(Registration number 1999/026464/07)
Independent reporting accountants and auditors
KPMG
Registered Chartered Accountants (SA)
(Registration number 1999/021543/21)
Investor relations
College Hill
Information agent
Georgeson Shareholder
Independent financial adviser
Schroder Salomon Smith Barbey
A member of citygroup
