| Tue 5 Oct 2004, 12:39 | | NEW STRATEGIC DIRECTION AND CHANGE OF NAME |
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SA CHROME - NEW STRATEGIC DIRECTION AND CHANGE OF NAME
SOUTH AFRICAN CHROME AND ALLOYS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1987/003452/06)
(Share code: SCE ISIN code: ZAE000022943)
(`SA Chrome` or `the Company`)
NEW STRATEGIC DIRECTION AND CHANGE OF NAME
Introduction
SA Chrome is a listed empowerment company, currently operating
exclusively within the ferrochrome industry. In its annual
results announcement dated 30 June 2004, the board noted its
intention to grow the Company. This announcement sets out the
change in the strategic direction of the Company in order to
enhance its growth prospects. The board also proposes to
change the name of SA Chrome to more accurately reflect its
new strategic direction.
SA Chrome`s two largest shareholders, Royal Bafokeng Resources
Holdings (Proprietary) Limited (`RBR`) and the Industrial
Development Corporation of South Africa Limited (`the IDC`),
have endorsed the proposed changes.
The growth opportunity
Changes in mining legislation and the recent Mining Charter
have created an opportunity for empowerment companies to
partner with existing resources companies and to access new
projects within the resources industry in South Africa. We
believe that the empowerment companies best positioned to be
successful in the current environment are those that have a
strong balance sheet, access to capital, the ability to add
value and have a broad base of shareholders and are focused.
Change of strategic direction
SA Chrome`s risk profile has changed from being focused on a
235,000 tonne per annum ferrochrome facility, to a partner
with Xstrata SA (Proprietary) Limited (`Xstrata`) in a
1,400,000 tonnes per annum ferrochrome business. The Xstrata-
SA Chrome Venture which came into being on 1 July 2004 has
created the world`s largest ferrochrome producer. While the
Company will be involved in operations, day-to-day operational
control will reside with the broader Venture management which
will allow SA Chrome management to focus on sourcing
additional growth opportunities.
RBR has a substantial interest in platinum, and will focus in
the area of precious metals and diamonds. In order to avoid
conflicts with RBR, SA Chrome will assess opportunities in
resources excluding precious metals and diamonds, but
including coal, iron ore, nickel, coke, manganese and other
ferro alloys.
The broad criteria for SA Chrome in its growth strategy will
be to invest in:
opportunities that give access to cash flows (as opposed to
dividends);
unlisted entities;
ventures that give the Company a strategic influence (20% -
25%) shareholding;
entities that have operational management with a proven track
record;
South Africa and Africa, south of the equator;
resources in which the region has a dominant position
internationally;
larger investments that management can add value to rather
than a multitude of smaller deals; and
an initial focus on operating concerns rather than start-up
projects.
RBR has agreed to partner the Company on projects that are, or
may be, too large for SA Chrome to fund, and this will extend
the range of opportunities available.
Notwithstanding the change in direction of SA Chrome, the
Company will continue to seek growth within the ferrochrome
industry, with the Project Lion expansion in the Xstrata-SA
Chrome Venture being the immediate example.
Project Lion is a brown-fields expansion project, to be
pursued jointly with Xstrata, in the Steelport, Mpumalanga
area, constructed in three phases, each with 360,000 tonnes of
annual smelting capacity. Phase One, with an estimated capital
cost of R1.67 billion to be funded by Xstrata and SA Chrome in
proportion to their participation interests, is scheduled to go into production in 2006.
Although the Xstrata-SA Chrome Venture is now the largest
ferrochrome producer in the world, we believe that
opportunities will present themselves to grow via acquisition.
Reconstitution of the board
The board will be strengthened to assist the Company in
achieving its new strategic direction by the appointment of
new independent non-executive directors. Further details will
be announced in due course.
Change of name and circular to shareholders
It is proposed to change the name of the Company to Merafe
Resources Limited. `Merafe` is an African name meaning
`communities`. The name reflects the inclusiveness of the
Company.
The ferrochrome business and assets of the Company will
continue to reside in a wholly owned subsidiary of the Company
and will continue to trade in the pooling and sharing venture
with Xstrata as the Xstrata-SA Chrome Venture.
The change of name is subject to the approval of shareholders
in a general meeting and a circular including a notice of
general meeting providing details of the special resolution(s)
to be passed will be posted to shareholders in due course.
Johannesburg
5 October 2004
Sponsor
RAND MERCHANT BANK (A division of FirstRand Bank Limited)
CORPORATE FINANCE
Transactional sponsor
Deutsche Bank
(Member of the Deutsche Bank Group)
Date: 05/10/2004 12:30:14 PM
Produced by the JSE SENS Department
