| Mon 1 Jul 2002, 0:00 | | Union Mines Limited - Announcement Of Restructurin |
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UNION MINES LIMITED - ANNOUNCEMENT OF RESTRUCTURING, PLACEMENT OF SHARES FOR
CASH, EMPOWERMENT ARRANGEMENTS AND ACQUISITION BY UNION OF THE ZAAIPLAATS
TIN OPERATION AND OTHER ASSETS
UNION MINES LIMITED
(Registration number 1949/032935/06)
Share Code UNN ISIN: ZAE000022265
("Union" or "the company")
ANNOUNCEMENT OF RESTRUCTURING, PLACEMENT OF SHARES FOR CASH, EMPOWERMENT
ARRANGEMENTS AND ACQUISITION BY UNION OF THE ZAAIPLAATS TIN OPERATION AND
OTHER ASSETS
1. INTRODUCTION
The board of directors of Union (as reconstituted in April 2001) has taken
various steps and entered into different agreements to revive the affairs of
the company.
The agreements specifically include a settlement agreement to restructure
the company, an empowerment arrangement and the acquisition of additional
assets ("acquisitions").
To the extent that any director of Union holds any interest in any of the
arrangements and / or assets, this will declared. A fair and reasonable
opinion on the transaction will form part of the follow-up circular to
members. All steps taken and all arrangements are subject to confirmation by
members at a general meeting.
2. BACKGROUND AND HISTORY
To understand the steps taken, the history of Union has to be taken into
account.
The shares of Union were re-listed in the "Mining and Minerals" sector of
the JSE Securities Exchange ("JSE") on 11 October 1999. The listing was
based on the detailed circular of 22 September 1999.
As stated in the circular, Union has 1 408 800 000 authorised ordinary
shares of 0.5 cents each of which 395 000 000 were issued and listed at the
end of February 2001.
The main assets to be acquired by Union before listing included Transvaal
Mining and Finance Co Ltd (owner of the Buffalo fluorspar mine at
Naboomspruit, Northern Province), Riverbend Diamonds (Pty) Ltd (holder of a
number of claims on the Longland diamond diggings at Barkly West) and
B.Online (Pty) Ltd, holder of certain exploration technologies. The
company`s proposed strategy was to beneficiate tin ore at the Buffalo Plant
and the exploit the diamondiferous gravels on the diggings.
In terms of the circular the sponsoring brokers were to place Union shares
to raise R2 000 000 to provide working capital for the group, but only R106
000 was raised.
The lack of cash caused production and cash flow problems. This resulted in
a loss of various mineral and other rights and of key staff members at
Riverbend and at B.Online.
In January 2000 an agreement was signed whereby Union acquired the cobalt
beneficiation group of Spring Consultants Ltd and associates ("Spring") in a
"reverse takeover" for the issue of an additional 2 000 000 000 Union shares
(necessitating an increase in capital). This was announced in detail on SENS
and in the press.
Various disputes (specifically relating to the delivery of the shares in
Transvaal Mining) delayed the takeover, the transfer of management to Spring
and the funding of the group. All these disputes were settled in a composite
settlement agreement in Stellenbosch on 30 May 2000 ("the settlement"). In
terms thereof the takeover would proceed, the previous directors resigned
and Spring took management control on 2 June 2000. The settlement was again
announced in detail on SENS and in the financial press.
On 18 July 2000 Spring cancelled the settlement, and the directors appointed
by them applied for the suspension of the listing of Union`s shares on the
JSE.
A study of the company`s affairs by the new board confirmed that the diamond
rights at Longlands were the most substantial asset left in the group, but
development thereof had to be preceded by a restructuring of the company and
the finding of a financial supporter and a black empowerment partner of
repute.
A provisional agreement with Sterling Asset Finance (Pty) Ltd (a subsidiary
of New Africa Capital Ltd) of September 2001 provided synergies for the
creation of a substantial new mining group.
Sterling acquired 20 000 000 Union shares from an existing shareholder
amounting to 6.7 % of the issued capital of Union after restructuring.
In return the consortium would use its best endeavours to safeguard Union`s
diamond rights at Longlands with these rights to be held directly by Union.
3. RESTRUCTURING
Part of the restructuring is the preparation and lodging of the group`s
audited financial statements for the financial years 2000, 2001 and 2002.
This is being attended to by the new auditors Lombard & Rth who replaced N
Price & Co on 21 June 2002.
A detailed agreement regarding the restructuring (on guidelines previously
laid down by various board decisions of Union) was signed by the most
important parties involved (including four directors) on 11 December 2001,
and was ratified by the full board of directors at their meeting on 1 March
2002.
The restructuring includes:
1. The reduction of the issued shares to 300 000 000 following various
write-offs.
2. The transfer of all disputed mineral rights to an unlisted "mirror
company" which is a fully owned subsidiary of Union.
3. The sale of B.Online for R1 000 000 payable in shares, subject to
certain listing obligations.
By this restructuring any asset over which there is or may be a dispute,
will fall outside the main business of Union. Union remains a metal and
diamond company with practically no debt (except certain fees owing to the
JSE and the loan accounts of two of its directors who have funded the daily
operations since April 2001). The total amount will be less than R300 000.
4. LONGLANDS DIAMOND RIGHTS
Due to the management and related problems that Union experienced in the
Riverbend Diamonds subsidiary, Union did not apply for the renewal of the
mining authorization at Longlands, Barkly West in the name of Riverbend but
directly in the name of Union.
Union filed a detailed application, including a full environmental
management programme, in September 2001. Union was supported by Sterling. It
is expected that the new mining authorization will be granted by mid-July.
5. ACQUISITION OF ZAAIPLAATS TIN
On 11 December 2001 Union entered into an agreement with Investpro Holdings
(Pty) Ltd whereby it will acquire 100 % of the operations of Quickstep 169
(Pty) Ltd t/a Zaaiplaats Tin.
The mine, which is situated in the Limpopo (Northern) Province, already is
in limited operation and buyers have been found for the full first year`s
metal production. This will provide a turnover at full production of not
less than R2 000 000 per month. Union effectively took over the management
of Zaaiplaats on 1 April 2002. Such production will depend on a final
agreement being reached with Fraser Alexander Tailings (Pty) Ltd on an
upgrade of the project. This contract is ready for signature. In addition
Union has entered into a short-term joint venture arrangement with a
consortium of businessmen whereby they would provide funds for an extension
of the present operation.
The acquisition agreement is subject to the suspensive conditions stated in
paragraph 12 below.
6. GROENDOORN 255 KR (PTY) LTD
This company holds the surface and mineral rights to the farms adjacent to
Zaaiplaats viz Roodepoort, Groenfontein and Groendoorn.
The total Zaaiplaats area is heavily mineralized. Below the overlying
granite occurrence various lenticular lenses have been identified. These
were never mined due to the granite overburden. A granite quarry is
presently planned for Zaaiplaats by overseas investors. This would expose
the lenses. Additional virgin ore will become available for the present
processing plant (which will probably have to be expanded). In terms of the
detailed geological reports available, the area contains in the order of 3
000 000 tons of in situ ore with an average grade of 1.6 % of cassiterite
(tin ore), copper, lead and cobalt. The price per ton of tin bullion is
presently on $3850.00 on the London Metal Exchange price.
Union is presently negotiating with a major institution to enter into a
joint venture to explore the area for tin and platinum metals.
An agreement has been signed whereby Union acquires full exploration rights
on these properties for twelve (12) months together with an option to buy
100 % of Groendoorn.
The acquisition agreement is fully binding but shall lapse if the conditions
stated in paragraph 12 below have not been fulfilled by 31 December 2002.
7. MINERAL AND PETROL RESOURCES DEVELOPMENT BILL / EMPOWERMENT
The board of Union has taken cognizance of the proposed new act, which has
as specific purpose, the freeing up of mineral rights for individuals and
smaller mining groups and the upliftment of the surrounding communities.
Various empowerment groups have already taken advantage of the clearly
stated government policy in this regard, have acquired rights in various
parts of the RSA and have entered into strategic partnerships with the main
players in the mining industry.
As advised by Sterling, Union therefore (on 1 March 2002) entered into an
agreement with an empowerment consortium with as main members Diyambu
Investments and Trans African Development Corporation. By this agreement
the consortium would acquire 30 % of the issued share capital (225 000 000
shares) in exchange for certain restraints and a claim to major mineral
assets to be acquired by them. The consortium appointed two members to the
board.
8. ISSUE OF SHARES FOR CASH
Union has issued 6 175 000 shares at 3 cents per share to fund head office
costs and the operation at Zaaiplaats. This is subject to ratification by
members in general meeting and the Listing Requirements of the JSE.
9. RATIONALE FOR ACQUISITIONS AND PROSPECTS
With the acquisition of Zaaiplaats and Groendoorn and the renewal of the
Longlands rights Union retains its original focus on tin and diamonds. It
intends becoming a major tin producer.
10. CONSIDERATION
The consideration for Zaaiplaats is 200 000 000 Union shares issued at 10
cents per share.
The consideration for Groendoorn is 70 000 000 Union shares issued at 20
cents per share. A further 32 500 000 shares may be issued to the
empowerment consortium for arranging a joint exploration programme on the
Groendoorn properties with a major institution or mining group.
The 225 000 000 Union shares issued to the consortium are to be issued at 5
cents per share.
11. CHANGE OF CONTROL
The acquisitions may result in a change of control of Union and accordingly
an offer to minority shareholders of Union will be required in terms of the
rules of the Securities Regulation Panel ("SRP"). In order to avoid an offer
to minorities the acquisition is, inter alia, subject to minority
shareholders waiving their rights to an offer in terms of rule 8.7 of the
SRP code.
Because the acquisitions will result in a reverse-takeover, the circular to
shareholders detailing the acquisitions will contain revised listing
particulars as thought the Company were a new listing. The Listing Division
of the JSE will have to confirm that the listing of Union may continue
following the acquisitions.
12. SUSPENSIVE CONDITIONS
The acquisitions and issue of shares for cash are, inter alia subject tot he
fulfilling of the following suspensive conditions.
Approval by the JSE;
Approval by the SRP;
Approval by the Competition Board (to the extent applicable);
Approval by the shareholders of Union at a general meeting.
The acquisitions are not conditional on one another.
13. FINANCIAL EFFECTS
The financial effects of the transactions will be disclosed in a further
announcement once all financial information has been obtained.
14. MANAGEMENT AND DIRECTORS
The board of directors of Union has been reconstituted, subject to the
approval of the shareholders.
The board consists of Messrs JD Abrahams, BJ Hendricks, IA Mamoojee, HP
Pieters, JE van der Burgh, DA Paul and TH Schoeman.
15. LISTING
The JSE has given the Company dispensation to issue a circular within 28
days from the date of this announcement, failing which the listing of Union
will be terminated.
16. CIRCULAR
A detailed circular including revised listings particulars will be sent to
shareholders within 28 days from the date of this announcement.
17. SPONSOR
Union is in discussions with sponsors to appoint a sponsor for the company.
An announcement will be made in due course to this effect.
Pretoria
1 July 2002
Exchange Sponsors
Date: 01/07/2002 10:05:09 AM Produced by the SENS Department
