| Thu 12 Feb 2004, 18:00 | | ANNOUNCEMENT |
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Mvela Resources/ Northam/ - ANNOUNCEMENT
MVELAPHANDA RESOURCES LIMITED
(Incorporated in the Republic of South Africa)
Reg. No. 1980/001395/06
Share Code : MVL
ISIN Number : ZAE000037610
("Mvela Resources")
NORTHAM PLATINUM LIMITED
(Incorporated in the Republic of South Africa)
Reg. No 1977/003282/06
Share Code: NHM
ISIN Number: ZAE000030912
("Northam")
ACQUISITION BY MVELA RESOURCES OF A 50% JOINT VENTURE INTEREST IN
THE BOOYSENDAL PLATINUM PROJECT AND CONSOLIDATION OF THIS INTEREST
INTO NORTHAM
1. Introduction
1.1 Mvela Resources shareholders are advised that, pursuant to the
cautionary announcement dated 5 November 2003, Mvela Resources has
acquired the entire issued share capital of and loan accounts
against Khumama Platinum (Proprietary) Limited ("Khumama") ("the
Khumama interest") from three Black Economic Empowerment consortia
(the "Khumama Transaction"), whose interests in Khumama are held
through Marafe Ea Khumo Bathong (Proprietary) Limited, Newshelf
669 (Proprietary) Limited and Majweng Mining and Energy
(Proprietary) Limited ("the Sellers"). The acquisition agreement
is subject to the fulfilment, prior to 31 December 2004, of the
resolutive conditions described in 3.2.
Khumama is a vehicle that has the right to enter into a 50/50
joint venture agreement ("the JV right") with Anglo American
Platinum Corporation Limited ("Anglo Platinum") in respect of the
Booysendal Platinum Project ("Booysendal").
The consideration for the Khumama interest comprises a combination
of cash and new Mvela Resources ordinary shares, ranking pari
passu with existing issued Mvela Resources ordinary shares.
In addition, Mvela Resources shareholders are advised that Mvela
Resources has agreed in principle to transfer the JV right or the
Khumama interest to Northam, as more fully set out below.
1.2 Northam shareholders are advised that Northam has agreed in
principle with Mvela Resources for the acquisition of the JV right
or the Khumama interest for a combination of cash, Northam
deferred ordinary shares and new Northam ordinary shares ranking
pari passu with existing issued ordinary shares (the "Northam
Transaction"). The Northam Transaction is subject to the
conditions precedent set out in 0 below, including the fulfilment
of the resolutive conditions in the agreement between Khumama and
Mvela Resources and the approval of Northam shareholders.
1.3 The Khumama Transaction and the Northam Transaction are
collectively referred to as the Transactions.
2. Nature of the assets acquired
2.1 Booysendal is located in the southern end of the Eastern Limb
of the Bushveld complex. Booysendal embraces 138 square
kilometres on ten contiguous farms (Buttonshope, Kliprivier,
Draaikraal, Uysedoorns, Booysendal, Pietersburg, a portion of the
farm Der Brochen, a portion of the farm Hebron, Sheeprun and
Johannesburg).
2.2 Booysendal is underlain by the Merensky and UG2 horizons and
has been explored by Anglo Platinum. The UG2 horizon resource
grades 4.93 grams per tonne ("g/t") (3PGEs and Au) over an average
width of 127 centimetres. The Merensky horizon grades 4.72 g/t
over an average width of 100 centimetres.
2.3 Measured, indicated and inferred resources, after a 24%
allowance for geological losses total 76.8 million ounces ("Moz")
on the UG2 horizon (38.4 Moz attributable to the Khumama interest)
and 47.6 Moz on the Merensky horizon (23.8 Moz attributable to the
Khumama interest).
3. Salient terms of the Khumama Transaction
3.1 Consideration
3.1.1 The purchase consideration is valued at approximately R313
million, made up as follows:
R"m R"m
Cash: 80.0
* An advance payment of the 15.0
consideration of R15 million already
paid
* A further advance payment of the 10.0
consideration, payable within 14 days
* Reimbursement of professional fees
incurred by the Sellers up to a 5.0
maximum of
* The balance payable upon the 50.0
agreement becoming unconditional
Shares: 9 274 527 ordinary shares in 233.0
Mvela Resources*
Total consideration 313.0
* The share consideration is illustrated based on a price per
Mvela Resources ordinary share of R25.12 based on the 30 day
weighted average traded price to 10 February 2004.
3.1.2 All the ordinary shares issued by Mvela Resources to the
Sellers will be subject to certain restrictions regarding disposal
from the date they are issued until either the resolutive
conditions are fulfilled or the agreement becomes unconditional.
3.1.3 70% of the shares issued by Mvela Resources to the Sellers
will be subject to certain restrictions regarding disposal for a
period of five years from the date on which the agreement becomes
unconditional.
3.1.4 A feasibility study will be prepared by Mvela Resources on
the basis of valuation parameters agreed upon between the parties
to the agreement and approved by Anglo Platinum and which conforms
to standards acceptable to banks and reputable financial
institutions for feasibility studies in respect of mining
operations. This feasibility study shall be completed within 30
days of finalisation by Anglo Platinum of its feasibility study in
respect of Booysendal.
3.1.5 The net present value discounted at 12.5% per annum of the
net cash flow arising from 50% of the operation to mine at
Booysendal ("NPV") will be determined. Should the Sellers not
agree with the NPV, it will be referred to an independent expert
whose determination will be binding on the parties.
3.1.6 Should the agreed or determined NPV exceed R600 million,
Mvela Resources shall allot and issue to the Sellers additional
ordinary shares in Mvela Resources as consideration for such
excess value.
3.1.7 The number of such new ordinary shares in Mvela Resources
will be determined by dividing one half of the amount (if any) by
which the NPV of Khumama"s interest in Booysendal exceeds R600
million, by 90% of the thirty day, weighted, average traded price
of ordinary shares in Mvela Resources, preceding the date on which
the NPV was agreed or determined.
3.1.8 If the number of shares to be allotted to the Sellers by
Mvela Resources referred to in 3.1.6 above exceeds 9 150 000, then
Mvelaphanda Holdings Limited ("Mvela Holdings") will transfer such
excess number of shares in Mvela Resources held by them to the
Sellers on behalf of Mvela Resources.
3.2 Resolutive conditions in respect of the Khumama Transaction
3.2.1 The following resolutive conditions must be fulfilled by 31
December 2004, otherwise the Khumama Transaction will become void
and the parties will revert to their positions preceding such
acquisition:-
* Anglo Platinum and Mvela Resources (or its nominee, which may be
Khumama) enters into a joint venture agreement in respect of
Booysendal in conformity with the principles already agreed to in
writing by Anglo Platinum and Khumama;
* Anglo Platinum consents to the acquisition of the Khumama
interest by Mvela Resources;
* A shareholders" agreement on terms satisfactory to Mvela
Resources is concluded between Anglo Platinum and Khumama;
* Mineral leases are entered into between Micawber 278
(Proprietary) Limited ("Micawber"), the company which will hold
such leases on behalf of the joint venture, and the Government of
South Africa and the necessary mining authorisations are issued to
Micawber in respect of Booysendal;
* In terms of the JV right, Khumama acquires 50% of the issued
share capital of Micawber for R1.00; and
* Mvela Resources completes a due diligence investigation of
Khumama and the Khumama interest, to its satisfaction..
The resolutive conditions may be waived by Mvela Resources at any
time before 31 December 2004. At the time that the Khumama
Transaction was entered into, the Sellers and Mvela Resources
entered into pledge agreements and a voting pool agreement, which
agreements form an indivisible part of the Khumama Transaction.
4. Salient Terms of the Northam Transaction
4.1.1 Consideration
The consideration, payable on fulfilment of the conditions
precedent referred to in 4.2 below, is made up as follows:-
* Cash of R90 million;
* 20.4 million new Northam ordinary shares ranking pari
passu with existing issued Northam ordinary shares.
Based on the 30 day weighted average traded price of
Northam to 10 February 2004 of R11.75, this represents
a consideration value of R239.7 million; and
* 20.4 million Northam deferred ordinary shares, which
will not rank for dividends for the four years ending
on the date of the fourth anniversary of their issue.
These deferred ordinary shares will not be listed until
the end of the four year period referred to above.
The value of these voting Northam deferred ordinary
shares is a function of various assumptions,
particularly relating to the assumed dividend flows of
Northam and the trading restrictions imposed on Mvela
Resources. For the purpose of this announcement, the
Boards of Directors of Mvela Resources and Northam
have ascribed a value of R6.40 per deferred ordinary
share, which represents a consideration of R130.6
million in total.
Based on the above, the total consideration is estimated to be
R460.3 million.
4.1.2 The consideration calculated above of R460.3 million is
equivalent to R11.99 (US$1.74 at an exchange rate of R6.90 per
US$) per UG2 oz attributable to Khumama and R7.38 (US$1.07 at an
exchange rate of R6.90 per US$) per combined oz on the Merensky
and UG2 horizons, attributable to Khumama.
4.2 Conditions precedent
4.2.1 The Northam Transaction is subject to the following
conditions precedent:-
* completion, to the satisfaction of Northam, of a due diligence
investigation of Khumama and the Khumama interest;
* the Khumama Transaction becoming unconditional;
* approval by Northam"s ordinary shareholders; and
* any other necessary regulatory approvals.
5. Rationale for the Transactions
5.1 The Khumama Transaction
Mvela Resources acquired the Khumama interest directly because the
Sellers wished to receive the major portion of their consideration
by an allotment of new ordinary shares in Mvela Resources.
However, it is the announced intention of Mvela Resources to
concentrate its platinum assets in Northam in which Mvela
Resources already holds 22.3%.
5.2 The Northam Transaction will:-
enhance Northam"s empowerment status since Mvela Resources" stake
in Northam will increase to 34%;
provide Northam with a material increase in its resource base on
terms which are highly favourable relative to those of other
recently announced acquisitions of Platinum Group Metal ("PGM")
resources; and
provide Northam with a large, new project with a potential for
commanding significantly lower unit production costs than those
ruling at Northam"s existing operation.
6. Financial Effects of the Transactions on Mvela Resources and
Northam
The unaudited pro forma financial effects of the transactions set
out below, are based on the published audited results of Mvela
Resources and the unaudited interim results of Northam, which have
been prepared in accordance with South African Statements of
Generally Accepted Accounting Practice.
The unaudited pro forma financial effects set out below do not
necessarily represent or indicate sustainable earnings or future
profits. Accordingly the unaudited pro forma financial effects,
set out below have been prepared for illustrative purposes only to
show the effect of the Transactions.
The financial effects of the Transactions on Mvela Resources and
Northam respectively have been prepared:
* for earnings and headline earnings, on the basis that the
Transactions had been implemented on 1 October 2002 and 1 July
2003 respectively; and
* for net asset values and tangible net asset values, on the basis
that the Transactions had been implemented on 30 September 2003
and 31 December 2003 respectively.
6.1 Financial Effects of the Transactions on Mvela Resources
The table below sets out the relevant financial effects.
Before the After the Percentage
As reported1 Transactions Transactions3& change
2 4
Earnings per
ordinary share 91.98 4.72 6.37 35.07
(cents)
Headline
earnings per 78.35 (8.41) (14.35) (70.65)
ordinary share
(cents)
Net asset
value per 1 338.71 1 288.18 1 402.09 8.84
ordinary share
(cents)
Net tangible
asset value 1 155.99 1 111.98 1 246.11 12.06
per ordinary
share (cents)
Number of
ordinary 68 970 613 71 520 613 80 795 140
shares in
issue
Weighted
average number 67 784 050 70 334 050 79 608 577
of ordinary
shares in
issue
Notes
1. Extracted from the unadjusted audited Mvela Resources annual
report for the year ended 30 September 2003.
2. Adjusted to reflect the financial effects of the following
financial transactions which occurred between 30 September 2003
and the date of this announcement:
(a) the scheme of arrangement in terms of section 311 of the
Companies Act, proposed by Mvela Resources as set out in the
circular to linked unit holders dated 26 September 2003 and the
share consolidation implemented immediately thereafter;
(b) the issue by Mvela Resources of 2 550 000 ordinary shares to
Mvela Holdings as set out in the announcement published on 27
November 2003.
3. In relation to the pro forma figures after the Transactions,
the following main adjustments have been made based on the
assumption that all resolutive conditions and conditions precedent
are met:
(a) additional equity accounted profit as a result of the
increased stake in Northam from 22.3% to 34.0%;
(b) amortisation of negative goodwill arising on the acquisition
of increased stake in Northam over a period of 20 years;
(c) taxation impact of additional equity accounted profit as well
as capital gains tax arising on the transfer of the Khumama
interest to Northam;
(d) an increase in the Northam investment at the cost to Mvela
Resources; and
(e) a R225 million increase in share capital and share premium
representing shares issued to the Sellers.
6.2 Financial Effects of the Transactions on Northam
The table below sets out the relevant financial effects.
Note Before the After the Percentage
Northam Northam change
Transaction Transaction
Basic
and
headline 1, 2 44.9 37.1 -17.4%
earnings
per
share
(cents)
Fully 44.0 36.4 -17.3%
diluted 1, 3
earnings
per
share
(cents)
Net
asset 4 664 701 5.6%
value
per
share
(cents)
Notes
1. The adjustment to the basic earnings per share, headline
earnings per share and fully diluted earnings per share represents
the after tax interest forfeited on the cash component of the
consideration paid by Northam, at a pre-tax rate of 9.4% per
annum, on the assumption that the disbursements had taken place on
1 July 2003.
2. The basic earnings per share and headline earnings per share
are based on the weighted average number of shares in issue during
the period and assume that the ordinary and deferred ordinary
consideration shares were issued on 1 July 2003.
3. The fully diluted earnings per share is based on the weighted
average number of share in issue during the period plus the
weighted average number of Northam Share Option Scheme options
outstanding during the period and assumes that the ordinary and
deferred ordinary consideration shares were issued on 1 July 2003.
4. The net asset value per share is based on the actual number of
shares in issue at 31 December 2003, and assumes that the ordinary
and deferred consideration shares were issued at that date.
7. Documentation
As Northam is a related party in respect of Mvela Resources in
terms of the Listings Requirements of the JSE Securities Exchange
South Africa, a circular will be sent to Northam shareholders
which will, inter alia, convene a meeting of Northam shareholders
requesting their approval of the Northam Transaction. An
independent subcommittee of the Board of Directors of Northam will
appoint an independent financial advisor to provide it with
independent advice in respect of the terms of the Northam
Transaction.
Johannesburg
12 February 2004
Mvelaphanda Resources Limited Northam Platinum Limited
MERCHANT BANK
Rand Merchant Bank (a division
of FirstRand Bank Limited)
Corporate Finance
SPONSOR SPONSOR
PricewaterhouseCoopers Corporate Barnard Jacobs Mellet
Finance (Proprietary) Limited Corporate Finance
(Proprietary) Limited
LEGAL ADVISOR TO THE TRANSACTION
Bowman Gilfillan
Date: 12/02/2004 05:06:12 PM Produced by the JSE SENS Department
