| Mon 29 Mar 2004, 8:36 | | ACQUISITION OF CONTROL OF SAMQUARZ (PTY) limited |
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PETRA MINING LIMITED - ACQUISITION OF CONTROL OF SAMQUARZ (PTY) limited AND
STRATEGIC PARTNERSHIP WITH THE NEW AFRICA MINING FUND TO ESTABLISH PETMIN AS AN
HDSA CONTROLLED MINING AND EXPLORATION COMPANY
PETRA MINING LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1972/001062/06)
Share code: PET ISIN: ZAE 000010237
("Petmin" or "the company")
ACQUISITION OF CONTROL OF SAMQUARZ (PTY) limited AND STRATEGIC PARTNERSHIP
WITH THE NEW AFRICA MINING FUND TO ESTABLISH PETMIN AS AN HDSA CONTROLLED MINING
AND EXPLORATION COMPANY
1. INTRODUCTION
River Corporate Finance (Pty) Limited is authorised to announce that,
following the cautionary announcement contained in the circular to
shareholders dated 12 December 2003, which was renewed on 18 February 2004,
Petmin has, as one indivisible transaction, entered into the following
agreements (collectively, "the Transaction"):
* the acquisition of the total issued share capital of and all claims on
shareholder loan account against SamQuarz (Pty) Limited ("SamQuarz"), which
owns and operates the largest high quality silica mine and processing plant in
South Africa ("the SamQuarz Acquisition"); and
* a strategic partnership with the New Africa Mining Fund ("NAMF") as BEE
facilitator to establish Petmin as a company controlled by Historically
Disadvantaged South Africans ("HDSA") as defined in the Mining Charter on a
fully diluted basis.
Details of the Transaction are given below:
2. STRATEGIC PARTNERSHIP WITH NAMF AND THE ESTABLISHMENT OF PETMIN AS A
COMPANY CONTROLLED BY HDSA ON A FULLY DILUTED BASIS
2.1 Background and rationale
Following the restructuring of Petmin as detailed in the circular to
shareholders dated 12 December 2003 which was completed on 31 January 2004,
Petmin has refocused its business and has publicly stated its intention to
pursue projects in the junior mining sector in which, inter alia:
* emerging previously disadvantaged entrepreneurs, including women,
participate in a substantial and meaningful way and on a broadly
representative basis;
* the full set of criteria contained in the Mining Charter and Scorecard are
pursued and achieved progressively; and
* access to local as well as international equity capital is optimally
leveraged to enhance project economics.
To this end Petmin has entered into three unrelated strategic relationships
facilitated and funded by the NAMF with Matlapeng (Pty) Limited ("Matlapeng"),
Zondwa Resources (Pty) Limited ("Zondwa") and Little Swift Investments (Pty)
Limited ("Swift"), three mining investment companies led by emerging
entrepreneurs from previously disadvantaged communities and controlled and
managed by HDSA as defined in the Mining Charter with a broad and
representative stakeholder base including Matlapeng"s controlling
shareholders, Kopano ke Matla Investments (Pty) Limited, the investment arm of
COSATU, and Black Management Forum Investments (Pty) Limited, the investment
arm of the Black Management Forum.
NAMF is a R560 million private equity fund that was constituted and subscribed
to by the following companies:
* The Industrial Development Corporation of South Africa Limited
* The International Finance Corporation (a Division of the World Bank)
* ABSA Corporate and Merchant Bank
* Harmony Gold Mine Limited
* Kumba Resources Limited
* BHP Billiton Plc
* Development Bank of South Africa Limited
* Gold Fields Limited
* Sanlam Limited
NAMF is endorsed by the South African Government and supported by the
South African mining industry, and was set up, inter alia, to invest in the
exploration and development of the abundant mineral deposits in the SADC
region and to facilitate and fund BEE in the mining industry. Petmin is
delighted with its new strategic relationship with NAMF, which it considers as
a valuable partner in unlocking the value of South Africa"s mineral wealth for
its shareholders and growing Petmin into an HDSA controlled mining company.
Matlapeng, Zondwa and Swift are, except for the cross-directorships and
declared indirect equity interests that Mr Jabulani Mabena and Ms Lebo Mogotsi
- two of Petmin"s directors - hold in Swift, at arm"s length to each other and
to Petmin, and have entered into separate agreements in principle with NAMF to
capitalise the three companies with a view to participating in the SamQuarz
Acquisition and as significant new shareholders in Petmin.
2.2 Transaction action structure and financial effects
Petmin intends to raise additional capital through specific issues for
cash, predominantly facilitated by NAMF, to fund the equity portion of the
SamQuarz Acquisition. Matlapeng, Zondwa and Swift will subscribe for,
respectively,
24 000 000, 4 000 000 and 12 000 000 new Petmin shares at a price of 45 cents
per share upon closing of the SamQuarz Acquisition ("the HDSA subscriptions").
It is anticipated that the HDSA subscriptions, together with other
existing interests held by HDSA, will result in an initial aggregate HDSA
controlled interest of approximately 33% in Petmin. Petmin will further grant
options to Matlapeng, Zondwa and Swift to subscribe for a further 8 000 000,
16 000 000 and 16 000 000 new Petmin shares, respectively ("the HDSA
options"), on or before 30 June 2005 ("the exercise date"). The exercise price
will be the higher of a price equal to 45 cents per new Petmin share or a 10%
discount to the volume weighted average price at which the shares of Petmin
shall have traded on the JSE Securities Exchange South Africa ("JSE") for the
ten trading days immediately preceding the exercise date. Upon exercise of the
HDSA options, more than 50% of the issued share capital of Petmin will be
owned by HDSA, rendering Petmin itself an HDSA controlled company in terms of
the Mining Charter.
The initial HDSA subscriptions will result in R18 million of addition
capital on the Petmin balance sheet, which will be used to fund the equity
component of the SamQuarz Acquisition and a feasibility study for the
expansion of the SamQuarz plant to increase the production capacity at the
SamQuarz Delmas silica mine.
3. ACQUISITION OF SAMQUARZ
3.1 Acquisition and purchase consideration
Petmin has entered into an agreement with Quarzwerke Holding BV
("Quarzwerke"), a wholly-owned subsidiary of Quarzwerke GmbH, to acquire 100%
of the issued share capital in and claims on shareholder loan accounts against
SamQuarz with effect from 1 January 2004.
The transaction consideration payable to Quarzwerke upon closing and
after fulfilment of the conditions precedent referred to below is the amount
of
7 500 000 plus R2 000 000.
R40 000 000 of the transaction consideration will be funded by partially
replacing the loan account of Quarzwerke with a bank term loan on the balance
sheet of SamQuarz. The balance of R25 000 000 will be funded with R12 000 000
of Petmin"s own cash and R13 000 000 of new capital derived from the HDSA
subscriptions facilitated by NAMF.
3.2 Background and rationale
SamQuarz owns and operates the largest high quality silica mine in South
Africa. Processing is done with a German designed and constructed state of
the art processing plant, commissioned in 2001 at a total cost of
approximately
R105 million. The operation produces a stable and significant free cash flow
of over R11 million per annum. Quarzwerke has taken a strategic decision to
sell its interest in SamQuarz in order to focus on its core markets in Europe,
and Petmin together with NAMF and the HDSA stakeholders have taken the
decision to acquire SamQuarz as a stable cash-producing asset which would
serve as a valuable funding source for Petmin"s core business of pursuing
exploration and development opportunities and turning them to account.
Quarzwerke has also agreed in principle to enter into a consulting and skills
transfer agreement with Petmin for a specified transformation period at a fee
to be negotiated.
3.3 Transaction structure and financial effects of the Transaction
The Transaction consideration will be settled by partially replacing the
loan account of Quarzwerke with a R40 000 000 bank term loan on the balance
sheet of SamQuarz. The balance of R25 000 000 will be funded with R12 000 000
of Petmin"s own cash and new capital of R13 000 000 derived from the HDSA
subscriptions of R18 000 000 facilitated by NAMF. The balance of the HDSA
subscriptions will be used to expand the operations of SamQuarz.
The financial effects of the SamQuarz Acquisition and the subscriptions
by Matlapeng, Zondwa and Swift on Petmin are set out in the table below:
Actual Pro forma Percentage
"Before"(1) "After"(2) change
Number of shares in issue ("000) 97,000 137,000 41,2
Earnings per share (cents)(3) 0,67 4,22 529,8
Headline earnings per share (cents)(3) 0,67 0,42 (37,3)
Net asset value per share (cents)(4) 32,99 47,61 44,3
Net tangible asset value per share (cents)(4) 32,99 47,61 44,3
Fully diluted(5)
Number of shares in issue ("000) 97,000 177,000 51,5
Earnings per share (cents)(3) 0,67 3,65 444,8
Headline earnings per share (cents)(3) 0,67 0,71 6,0
Net asset value per share (cents)(4) 32,99 47,02 42,5
Net tangible asset value per share (cents)(4) 32,99 47,02 42,5
Reconciliation of earnings per share to
headline earnings per share:
Earnings per share 4,22
Effect of foreign exchange gain (3,80)
Headline earnings per share 0,42
Fully diluted
Earnings per share 3,65
Effect of foreign exchange gain (2,94)
Headline earnings per share 0,71
Notes:
1. Extracted from the unaudited interim financial statements of Petmin for the
six months ended 31 December 2003, after taking into account the specific
issue for cash as published in the interim results.
2. Unaudited pro forma financial effects of the issue of 18 million shares at
45 cents per share and the profits for six months of SamQuarz.
3. In relation to the pro forma earnings and headline earnings per share, it
has been assumed that:
(a) the proposed transactions was effective on 1 July 2003;
(b) the interest was earned for six months on the proceeds from the share
issue at an after-tax rate of 7,5%.
4. In relation to the net asset value and net tangible asset value per share,
it was assumed that the transaction was effective on 31 December 2003.
5. In relation to all fully diluted numbers it was assumed that all options
have been exercised at the minimum exercise price of 45 cents per share on 1
July 2003.
4. CONDITIONS PRECEDENT, CIRCULAR TO SHAREHOLDERS AND FURTHER CAUTIONARY
ANNOUNCEMENT
The SamQuarz Acquisition and the HDSA subscriptions are subject, inter
alia, to the following conditions precedent:
4.1 a due diligence investigation to the satisfaction of Petmin;
4.2 the approval of the investment committee of NAMF;
4.3 the approval of the shareholders of Petmin in general meeting;
4.4 the approval of bank financing in respect of a maximum of R40 000 000;
4.5 Petmin entering into an agreement to hedge the currency risk on the
Transaction consideration with the approval of the Exchange Control Division
of the Reserve Bank so that the purchase price shall never be more than R65
million including the cost of the hedge; and
4.6 regulatory approvals, including those of the Competition Commission, the
JSE and the Reserve Bank to the extent required.
Following the successful completion of the Transaction, the articles of
association of SamQuarz will be amended to the extent required to comply with
Schedule 10 of the Listings Requirements of the JSE.
A circular to shareholders containing full details of the SamQuarz
Acquisition and the HDSA subscriptions will be posted within 28 days of this
announcement.
The Transaction constitutes a reverse take-over as defined in the
Listings Requirements of the JSE. As such, the company is required to issue a
circular to shareholders as if the company is a new applicant and the
continued listing of the company"s shares is subject to the approval of the
Listings Division of the JSE, which cannot be guaranteed. Shareholders are
therefore advised to continue to exercise caution when dealing in the
company"s shares.
Pretoria
26 March 2004
Corporate advisor to Petmin
River Group
Sponsor
River Group
BEE facilitator
New Africa Mining Fund
Managed by
Decorum Capital
Partners (Pty) Ltd.
Attorneys to Petmin
Connie Myburgh
Corporate Law Advisers
Connie Myburgh (Pty) Limited
Registration number 2002/001957/07
Date: 29/03/2004 07:00:16 AM Produced by the JSE SENS Department
