| Wed 6 Nov 2002, 13:42 | | Aflease - Acquisition By "Afl" Of 92,14% Of The Is |
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Aflease - Acquisition By "Afl" Of 92,14% Of The Issued Share Capital Of "Nkmc"
And Withdrawal Of Cautionary
THE AFRIKANDER LEASE LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1921/006955/06)
Share code: AFL (JSE) AFKDY (NASDAQ)
ISIN Code: ZAE000000253
("AFL" or "the company")
ACQUISITION BY AFRIKANDER LEASE LIMITED ("AFL") OF 92,14% OF THE ISSUED SHARE
CAPITAL OF NEW KLEINFONTEIN MINING COMPANY LIMITED ("NKMC") AND WITHDRAWAL OF
CAUTIONARY
1. INTRODUCTION
Further to the latest cautionary announcement published on 1 October 2002,
Gensec Bank Limited is authorised to announce that AFL has entered into an
agreement ("the acquisition agreement") with the Neal Froneman Consortium
("NFC"), to purchase all of NFC`s claims against and shares in NKMC. NFC is a
consortium led by underground mining specialist, Neal Froneman.
2. INFORMATION ON NKMC
NKMC is the beneficial owner of the four East Rand mining properties better
known as Modder East, UC Prospecting, Turnbridge and New Kleinfontein
respectively.
Cumulatively the properties represent an estimated blue sky potential of
7,000,000 ounces of gold, an estimated SAMREC resource of 2,900,000 ounces of
gold and an estimated SAMREC reserve of 280,000 ounces of gold. The shallow ore
body is generally 300 m deep and consists largely of the black reef at
approximately 8 g/t which contains underground and opencast potential, the
substantial Kimberley reefs at 3.5 g/t and the well known main reefs at 4 g/t.
Whilst Modder East can be considered an exploration project, ongoing mining
activities at UC Prospecting and New Kleinfontein qualify these areas as mining
prospects. Turnbridge prospect has well understood geology and mining
operations need to be re-established.
3. RATIONALE FOR THE ACQUISITION
The directors of AFL continue to strive to add value for shareholders by
increasing AFL resources, reserves, monthly gold output and earnings per share
at a time when the bullish gold price has placed a premium on low risk ore
bodies and in particular open cast ore bodies.
It is therefore overwhelmingly apparent that the acquisition of a shallow, low
risk (300 m depth), high grade (8 g/t) underground ore body with open cast
potential and an estimated blue sky potential of 7 million oz acquired for
approximately US$1.40 per blue sky ounce and US$3.30 per resource oz represents
a most exciting gold related acquisition at this time.
The evaluation of these four properties was undertaken by an independent
respected competent person and verified by a second independent competent
person, whose reports estimated the Net Present Value ("NPV") of the properties
to be R251 million discounted at 20% or R360 million discounted at 0%. The
purchase agreement between Aflease and the NFC allows for the purchase of 92,14%
of NKMC for a consideration of R93.4 million which represents a discount of 61%
or 72% on R251 million and R360 million respectively.
Further beneficial advantages relating to the acquisition of these properties
are summarised below :
3.1 The ore body is generally shallow, is partially developed, has minimal
underground mining risks normally related to Wits ore bodies.
3.2 As a further consequence of the shallow depth and the higher grade, a higher
margin can be anticipated with the consequential low cash cost. (Operating cash
profit margins in excess of 100% is expected.)
3.3 The open cast potential together with AFL`s proven track record of being
South Africa`s lowest cost open cast miner result in an exciting possible upside
relating to the open casting of the East Rand area generally.
3.4 Subsequent to the conclusion of negotiations relating to the acquisition of
the properties the ongoing drilling program focused primarily on the high grade
shallow black reef and has yielded additional intersections and so further
increased the previously estimated resources and reserves and NPV of the
properties. The drilling program is anticipated to continue yielding positive
intersections.
3.5 On the completion of the estimated twelve months exploration program and the
commencement of mining on the Modder East and possibly UC Prospecting
properties, a monthly production of approximately 350kg of gold per month is
anticipated which could double AFL`s existing monthly production.
3.6 The acquisition is expected to be earnings enhancing.
3.7 AFL has been approached by certain parties interested in purchasing certain
of the mining areas that AFL does not anticipate focusing on. The sale of some
of these mining areas would lead to the partial recoupment of the purchase
price.
4. TERMS OF THE PROPOSED ACQUISITION
4.1 The consideration
The total consideration for the shares and claims against NKMC (92,14%) amounts
to R93,472,984 and will be settled in cash and shares, in two tranches,
discharged as follows:
- Tranche 1
Aflease will acquire 65,621,823 NKMC shares equating to 34,9% of the issued
shares in NKMC at R0,53954113 per NKMC share, for a total purchase consideration
of R35,405,672, with effect from 31 October 2002. The consideration in terms of
Tranche 1 comprises R11,801,891 in cash and 5,222,076 new ordinary Aflease
shares.
- Tranche 2
Aflease will acquire 107,623,513 NKMC shares equating to 57,24% of the issued
shares in NKMC at R0,53954113 per NKMC share, for a total purchase consideration
of R58,067,312, with effect from the first business day after which the
suspensive condition set out on paragraph 6 has been met. The consideration in
terms of Tranche 2 comprises R19,355,771 in cash and 8,564,500 new ordinary
Aflease shares.
4.2. Financial effects
The following table sets out the pro forma financial effects of the transaction
based on the assumption that the transaction had been effective for the quarter
ended 30 September 2002:
Before the After the (Cents) (%)
transaction transaction
Headline earnings 4.8 2.5 (2.3) (47.9%)
per share (cents)
Net Asset Value 135.3 128.1 (7.2) (5.3%)
(cents)
Notes:
The financial effects of the transaction are based on:
- The acquisition being effective on 1 July 2002;
- A loss for the quarter, after tax, by NKMC of R2.9 million, after taking
into account restructuring charges of R2.6 million.
- A purchase consideration of R93,472,984; and
- The issue of 13,786,576 AFL shares at R4.52 per share and the payment of
R31,157,662 in cash, in settlement of the purchase consideration.
The quarterly results of the acquired companies include restructuring and
turnaround costs adversely affecting this calculation. The acquired company is
anticipated to deliver marginal profits in the short term with a negligible
effect on the earnings per share.
5. MANDATORY OFFER
In terms of the Securities Regulation Panel Code and Rules, should AFL
shareholders approve the transaction, AFL would be required to make a mandatory
offer to the minority shareholders of NKMC. Consequently, should the
transaction be approved by AFL shareholders, an offer will be made to NKMC
minority shareholders.
6. RESOLUTIVE AND CONDITIONS PRECEDENT
The proposed transaction is conditional upon the ratification, in the case of
Tranche 1, and approval, in the case of Tranche 2, of the transaction by AFL
shareholders through ordinary resolution at general meeting.
7. CIRCULAR TO SHAREHOLDERS
A circular giving full details of the acquisition and notice of the general
meeting, which is subject to approval by the JSE Securities Exchange South
Africa and the SRP, will be sent to shareholders as soon as practicably possible
but within 28 days of this announcement.
8. WITHDRAWAL OF CAUTIONARY
Shareholders are advised that it is no longer necessary for them to exercise
caution in dealing in their shares in the company.
Investment Bank and Legal Adviser
Sponsor
Gensec Bank Limited Werksmans
Date: 06/11/2002 07:17:43 AM Produced by the JSE SENS Department
