| Wed 25 May 2005, 16:59 | | The Acquisition Of Springlake Holdings |
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Petra Mining Limited - Announcement Regarding:
The Acquisition Of Springlake Holdings (Proprietary) Limited,
And The Establishment Of An Anchor Black Economic Empowerment Consortium In
Petmin
PETRA MINING LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1972/001062/06)
Share code: PET ISIN: ZAE000010237
(`Petmin` or `the company` or `the group`)
ANNOUNCEMENT REGARDING:
THE ACQUISITION OF SPRINGLAKE HOLDINGS (PROPRIETARY) LIMITED,
AND THE ESTABLISHMENT OF AN ANCHOR BLACK ECONOMIC EMPOWERMENT CONSORTIUM IN
PETMIN
1. Introduction
Shareholders are referred to the cautionary announcements dated 4 March 2005
and 26 April 2005 wherein it was announced that Petmin had entered into
negotiations, which, if successfully concluded may have a material effect on
Petmin`s share price.
River Group is authorised to announce that Petmin has signed definitive
agreements to acquire 100% of the shares in Springlake Holdings (Proprietary)
Limited (`Springlake`) for R108 236 000 from NAMF Nominees (Proprietary)
Limited (`NAMF`), Clidet Number 537 (Proprietary) Limited, Umsombomvu
(Proprietary) Limited and M R Snelling & Associates CC (collectively referred
to `as the vendors`). Included in the purchase price consideration, Petmin
will acquire 100% of the shareholder`s claims on loan account from NAMF for
R48,0 million. The whole transaction is referred to as `the Springlake
acquisition`.
2. The Springlake acquisition
2.1 Introduction
Springlake is a privately owned mining company with interests in various coal
and anthracite mining interests in the Republic of South Africa. These
interests include:
- The Springlake Colliery situated within the Klipriver Coalfield at Dundee,
which has a 29-year operating history and produces up to 1,1 million run-of-
mine tonnes of anthracite per annum. Management`s current planning indicates a
life of mine in excess of 12 years.
- The Somkhele Project, which is a high quality anthracite deposit, located
in KwaZulu-Natal near Richards Bay. This project is in its final bankable
feasibility stage and a technical report, previously completed to Canadian
National Instrument 43-101 guidelines in 2003, is being converted to comply
with the requirements of SAMREC. Once developed, this project is expected to
be one of the lowest cost producers of quality anthracite in South Africa.
- The Baobab Tenements, also known as the Mopani/Soutpansberg Coalfields, is
a green fields coking and steam coal deposit located near Musina. Springlake
holds a 50% interest in the exploration tenements via a joint venture with
Black Economic Empowerment (`BEE`) company Motjoli Resources (Pty) Limited,
chaired by Nchakha Moloi.
Petmin is pleased to announce that the services of the experienced Springlake
management team have been retained for a minimum period of five years from the
effective date of the Springlake acquisition. The management team has a
collective 19 years of experience with Springlake, and have extensive
experience in the development and management of mining operations and the
marketing of commodities.
Springlake Colliery is served by an independent, SABS run, coal laboratory
accredited to ISO 17025. The company has built a recognised brand around the
name and logo of Springlake Colliery, with a reputation for consistency of
quality and reliability of delivery, both of which are critical to the
efficient running of smelter operations. The brand is also recognised in
European household heating markets. The company also provides clients with
technical support and advice for the appropriate use of their anthracite,
specific to that client`s needs.
2.2 Terms of the Springlake acquisition and purchase consideration
The purchase price payable will be settled by issuing 129 890 000 shares in
the share capital of Petmin at 60 cents per share and R2 750 000 in cash on
the closing date.
In addition, the vendors have warranted that Tweewater Fuel (Proprietary)
Limited, a wholly-owned subsidiary of Springlake and which trades under the
name of Springlake Colliery, will have a net profit after tax for the 28
months ending June 2007 amounting to R53,6 million. Should this warranted net
profit after tax be achieved, within a 15 % variance, 45 920 000 additional
shares in the share capital of Petmin will be issued by Petmin at 60 cents per
share to NAMF, Umsombomvu (Proprietary) Limited and M R Snelling and
Associates CC, after the audited results to 30 June 2007 have been finalised.
2.3 Rationale for the Springlake acquisition
Following its conversion from a cash company listed on the JSE Securities
Exchange South Africa (`JSE`) to a junior mining company in February 2004,
Petmin stated its intention to acquire cash generative mining assets in the
junior mining sector and to grow its shareholder base to over 50% held by
Historically Disadvantaged South Africans (`HDSA`).
Petmin has been investigating junior mining assets in the industrial, base
mineral and bulk mineral categories that meet its investment criteria of being
cash generative, profitable and with qualified, disciplined management. The
directors of Petmin believe Springlake complies with all these criteria.
Springlake brings to Petmin a strong cash generative resource from the
Springlake Colliery, an advanced stage of bankable feasibility resource in
Somkhele, with anticipated strong cash flows when it comes on stream, and a
potentially large new coking coal resource in the Boabab Tenements.
In addition, as with Petmin`s first acquisition of SamQuarz (Proprietary)
Limited (`SamQuarz`) in 2004, these acquisitions, with the assistance of the
NAMF have allowed NAMF to fulfill part of its charter as a junior mining fund
to fund BEE mining investments.
Petmin`s acquisition of SamQuarz, allowed the company to achieve a 32% HDSA
shareholder base, excluding shares held on behalf of HDSA investment companies
by NAMF. The Springlake acquisition, together with Petmin`s further BEE
initiative as discussed in paragraph 3, will take its HDSA shareholder base to
over 50%, thus achieving one of the criteria to be fully empowered in terms of
the Broad Based Socio-Economic Empowerment Charter for the South African
Mining Industry (`the mining charter`).
The Springlake acquisition also allows NAMF, who is a material shareholder in
Petmin, to consolidate and reposition its shareholding in Petmin in the form
of listed equity in Petmin, rather than the previously private equity
investment it had in Springlake.
2.4 Conditions precedent
The Springlake acquisition is subject, inter alia, to fulfilment of the
following conditions precedent:
- the completion of a due diligence to the satisfaction of the Petmin board
of directors;
- the obtaining of the approval of the JSE, the Securities Regulation Panel
and the Competition Commission;
- the approval of any other regulatory authorities and consents; and
- the approval by Petmin`s shareholders in general meeting
3. The establishment of an anchor Black Economic Empowerment Consortium in
Petmin
Petmin has reached an agreement with Dark Capital (Proprietary) Limited (`Dark
Capital`), an existing HDSA shareholder in Petmin, who become a shareholder
and partially funded the Junior Loan in the Samquartz transaction through
Swanvest 311 (Proprietary) Limited and NAMF. In terms of the agreement,
Petmin, Dark Capital and NAMF will jointly cooperate to facilitate, enhance
and consolidate the BEE shareholding in Petmin through a number of
transactions that will result in an increase in the HDSA shareholding of
Petmin and which will see the formation of a broad based HDSA consortium of
Petmin shareholders, which will actively participate in the commercial
activities of Petmin (`the BEE Consortium`).
On conclusion of the under mentioned transactions and the Springlake
acquisition, Dark Capital will take the initiative to establish the BEE
Consortium under the chairmanship of Mr Alwyn Martin. Petmin is delighted by
the involvement of Mr Martin, an HDSA individual who has distinguished
himself, inter alia, in his capacity as a former chairman of Vodacom Group
(Proprietary) Limited, a former director of Telkom SA Limited and a former
Chief Executive of Siemens Telecommunications in South Africa. His current
directorships include Trans Hex Group Limited and Medi-Clinic Corporation
Limited.
The deputy chairperson of the BEE Consortium will be Ms Lebo Mogotsi, a
current non-executive director of Petmin.
The transactions and initiatives which will coincide with the Springlake
acquisition are set out below:
- Dark Capital will acquire 8 333 333 Petmin shares from NAMF for a total
cash consideration of R5 million.
- NAMF will finance two Special Purpose Vehicles, to acquire 44 720 000
Petmin shares from NAMF at 60 cents per share. The shareholders of the
Special Purpose Vehicles will be the current members of the BEE Consortium and
Broad Based BEE entities, which will include HDSA members of the staff of
Petmin and trusts established for the benefit of local communities in the
areas where Petmin and its subsidiaries operate.
- Petmin has agreed with Dark Capital to cancel 24,8 million existing Petmin
options, which were purchased, inter alia, from NAMF, and to issue 7 million
new Petmin options to Dark capital at 65 cents per option. These options are
exercisable over a three-year period.
Against implementation of these transactions, the BEE Consortium will hold
over 30% of the Petmin issued shares and subsequent to the finalisation of
the Springlake acquisition, in excess of 50% of Petmin will be held by HDSA
entities resulting in Petmin being a black owned company as defined in the
mining charter.
Petmin acknowledges that `Ownership` is only one important component in
transforming the South Africa mining industry. Once the Springlake acquisition
is completed, and the above-mentioned transaction and initiatives are
implemented, Petmin and the BEE Consortium will review and enhance the current
Petmin strategy, to embrace the `spirit` of the charter, and to enable Petmin
not only to be compliant, but also to exceed, the provisions of the mining
charter.
Petmin is confident that with the assistance of the BEE Consortium and NAMF,
Petmin`s BEE initiative will diligently be pursued and will assist Petmin to
develop over the next five years as one of the pre-eminent HDSA junior mining
companies in Southern Africa.
4. Financial effects
The Springlake acquisition is subject to a due diligence review and Competent
Person`s Report being issued on the Springlake mining assets. Petmin will use
these reports to determine the fair value of the Springlake assets acquired,
as well as the pro forma effect on the net asset value and earnings per share
of Petmin (`the pro forma financial information`). The directors of Petmin
have therefore resolved to publish the pro forma effects of the acquisition
only when the fair value of the assets has been finally determined, and will
publish the pro forma financial information at that date, which is anticipated
to be before 30 June 2005.
5. Categorisation of the transaction
The acquisition of Springlake is categorised as a category 1 transaction in
terms of section 9, and a related party transaction in terms of section 10.4
of the JSE Listings Requirements, as NAMF is a vendor of Springlake and a
material shareholder in Petmin. A full circular to shareholders, including a
fair and reasonable opinion from an Independent Professional Expert, will be
dispatched to shareholders in due course.
6. Continuation of the Petmin cautionary announcements dated 4 March 2005 and
26 April 2005
As the pro forma financial effects of the Springlake acquisition have not been
announced, shareholders are advised to continue exercising caution when
dealing in the company`s securities until the pro forma financial effects of
the acquisition have been announced.
25 May 2005
Pretoria
Corporate Advisor and Sponsor
River Group
