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Kumba - Participation of Kumba Resources Limited in the Hope Downs Project
KUMBA RESOURCES LIMITED
Incorporated in the Republic of South Africa
(Registration Number: 2000/011076/06)
Share Code: KMB
ISIN Number: ZAE000034310
PARTICIPATION OF KUMBA RESOURCES LIMITED (`KUMBA`) IN THE HOPE DOWNS PROJECT
(`PROJECT`)
Shareholders are referred to previous announcements relating to the Project
dated 21 December 2004 and 11 January 2005 respectively, in which it was
announced that Kumba had been unsuccessful in the arbitration proceedings
between Downs Holding BV (`Downs`) (a wholly owned subsidiary of Kumba), and
Hope Downs Iron Ore Pty Ltd (`HDIO`) (a subsidiary of Kumba`s Australian partner
in the Project, Hancock Prospecting Pty Limited (`Hancock`)). The arbitration
related to a dispute as to whether HDIO had acted unreasonably in withholding
its approval of Anglo American plc (`Anglo`) as the new ultimate controlling
company of Downs.
On 11 January 2005, Kumba announced that it had lodged an appeal against the
arbitration decision in the Supreme Court of Western Australia. Following
negotiations relating to the Project value as at the date on which Anglo
obtained control, Kumba and Hancock have entered into an agreement on 4 April
2005 in terms of which, inter alia:
- Kumba abandons its appeal against the arbitration ruling;
- Anglo is approved as the ultimate controlling company of Downs;
- Hancock acquires an irrevocable option to purchase Downs` interest in the
Project at any time prior to or on 1 July 2005 (the `Option`). If Hancock
does not exercise the Option, Downs will retain its interest in the
Project;
- Until the exercise of the Option, both parties will continue as
participants in the Project and progress it in accordance with their
contractual arrangements;
- Hancock and Kumba provide releases and indemnities to each other in
respect of all claims arising out of or in connection with the Project
prior to 4 April 2005, irrespective of whether the Option is exercised;
In consideration for acquiring the Option Hancock has paid a non-refundable
amount of A$5.1 million to Kumba (`Option payment`). The exercise price in
respect of the Option is as follows:
- an amount of A$137,9 million payable on 1 July 2005 (the `first
instalment`); and
- an amount of A$103,8 million payable on 1 July 2006 (the `second
instalment`).
Hancock may, at its election, replace the first and second instalments with a
single payment of A$231,4 million (the `full payment`) on 1 July 2005. To the
extent that Hancock makes payment of the first instalment, the second instalment
and/or the full payment in advance of the due date for such payment Hancock will
receive a discount of 1% on the relevant amount for each completed calendar
month, or part thereof on a pro rata basis, by which the relevant payment is
made prior to the due date for such payment. The second instalment will be
secured by certain assets and a limited guarantee provided by Hancock.
The pro forma financial effects on Kumba if the Option is exercised (`the
Transaction`) have been prepared for illustrative purposes and are set out in
the table below:
Cents Per Share Pre - Post - Change (%)
Transaction Transaction
Attributable earnings per share for 226 522 130,8
the 12 month period ended 31 December
2004
Headline earnings per share for the 258 282 9,4
12 month period ended
31 December 2004
Tangible Net asset value (`NAV`) at 1 774 2 014 13,6
31 December 2004
Notes:
1. Kumba`s audited financial results to December 2004 reflected an 18 month
period. The pro forma effects have been calculated using the unaudited
financial results for the 12 month period to 31 December 2004 in line with
Kumba`s changed financial year-end.
2. For the purpose of calculating the post Transaction attributable and
headline earnings per share, it is assumed that:
2.1. The Transaction was effective on 1 January 2004;
2.2 The total consideration is A$236.5 million, being the sum of the
Option payment and the full payment.
2.3 The consideration has been converted to Rands at the prevailing
exchange rate of R4.93/A$ and has reduced interest charges at a rate
of 9,5% per annum; and
2.4 The expenditure incurred on the Project during the 12 month period
ending 31 December 2004 has been reversed. A$ expenditure was
converted to Rands at the average exchange rate of R4.75/A$ for the
calendar year 2004.
The post Transaction attributable earnings per share include the net surplus
that would have been realised on receipt of the total consideration. This is
excluded in the post Transaction headline earnings per share.
For the purpose of calculating the post Transaction NAV it is assumed that the
Transaction was affective on 31 December 2004 and the total consideration
converted to Rands at the prevailing exchange rate of R4.40/A$.
The total consideration will be used for general corporate purposes.
Shareholders will be advised as and when further developments occur.
Pretoria
5 April 2005
Sponsor
JP Morgan
Contact person
Trevor Arran
General Manager
Corporate Affairs & Investors Relations
+27 (12) 307 3292 (Office)
+27 83 609 1444 (Mobile)
Trevor.arran@kumbaresources.com
Date: 05/04/2005 04:17:03 PM
Produced by the JSE SENS Department
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