| Tue 5 Jul 2005, 8:49 | | Aflease - Aflease and Southern Cross enter into a |
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Aflease - Aflease and Southern Cross enter into a pre-merger arrangement
Aflease Gold and Uranium Resources Limited
(Formerly The Afrikander Lease Limited)
(Incorporated in the Republic of South Africa)
AFL (JSE) AFLUY (NASDAQ)
(Registration number 1921/006955/06)
ISIN: ZAE000061461 & Share Code: AFL
(`Aflease`)
Aflease and Southern Cross Resources Inc. (`SXR`) enter into a pre-merger
arrangement with a view to conclude a business combination transaction, which
will have the effect of:
- Aflease ordinary shareholders exchanging 100% of their Aflease ordinary
shares for shares in SXR, which is listed on the Toronto Stock Exchange
(`TSX`);
- Aflease terminating its listing on the JSE;
- SXR changing its name to SXR Uranium One Inc. (`SXR Uranium One`); and
- SXR Uranium One obtaining a secondary listing on the JSE.
Further cautionary announcement
Introduction
Further to the cautionary announcement released on SENS on 16 May 2005, Aflease
ordinary shareholders are advised that the Aflease and SXR boards have approved
and signed a definitive Pre-Merger Agreement, which agreement will be available
under the filings of SXR on www.sedar.com, providing for the merger of the two
companies to be implemented in South Africa through a scheme of arrangement in
terms of section 311 of the Companies Act 1973 (Act 61 of 1973), as amended
(`Companies Act`) (the `merger`). The holders of Aflease ordinary shares will
receive on the completion of the merger, SXR common shares in the ratio of 0.90
of one common share of SXR for each one ordinary share of Aflease (`merger
ratio`). The merger is being done `at market` based on the recent trading of
both companies.
The merged company will be renamed SXR Uranium One and will unite Aflease`s
South African uranium and gold assets with the Australian and Canadian uranium
properties of SXR. On completion of the merger on both a basic and fully
diluted basis, the Aflease ordinary shareholders and SXR shareholders will,
based on the merger ratio, own approximately 83% and 17% of SXR Uranium One,
respectively, which company will have a primary listing on the TSX and a
secondary listing on the JSE. At closing, SXR Uranium One will have 374 million
issued shares, based on the number of Aflease and SXR shares in issue on 30 June
2005.
Resource Capital Fund L.P. and Resource Capital Fund II L.P., which hold an
aggregate 6,815,476 SXR common shares and warrants to acquire an additional
5,452,381 SXR common shares, have agreed, subject to fiduciary obligations, to
vote their SXR common shares in favour of the merger. The common shares and
warrants held by these funds represent approximately 16.0% of the fully diluted
SXR common shares in issue.
Background to SXR
SXR owns the fully permitted, in-situ leach, Honeymoon Project and the Goulds
Dam and Karkaroo exploration projects in South Australia. Honeymoon, including
the contiguous East Kalkaroo, hosts combined indicated resources of 9.3 million
pounds of uranium and the project is expected to be developed as uranium prices
improve. The Goulds Dam project includes an indicated resource of 4.4 million
pounds and an inferred resource of 7.9 million pounds. Drilling is underway at
Goulds Dam to test a number of new targets.
In 2004, SXR entered into an option agreement with Pitchstone Exploration Ltd.
to earn a 50% joint venture interest in uranium exploration properties located
in the prolific Athabasca Basin of Saskatchewan. This region hosts some of the
largest and highest-grade uranium deposits in the world, including Cigar Lake
and McArthur River. Geophysical test work has been completed and drilling is
scheduled to commence later this year.
Project generation efforts have also recently yielded a number of new projects
in South Australia, where the targets are geologically similar to those found in
the Athabasca Basin.
Rationale for the merger
Aflease has two gold mining projects currently under various stages of
development, being its Bonanza South and Modder East projects. In addition to
these gold mining projects Aflease has a vast uranium resource, which Aflease
intends to develop. The development of this uranium resource will require
additional capital. It is anticipated that the merger will enhance SXR Uranium
One`s access to the international capital markets.
As at 16 May 2005, approximately 75% of the Aflease ordinary shares were held by
shareholders who are not resident in the Republic of South Africa. The merger
will allow Aflease ordinary shareholders to retain their interest in Aflease
through their SXR Uranium One common shares.
Nature and business of SXR Uranium One and its directorate
The combined entity, to be named SXR Uranium One Inc. (`SXR Uranium One`), will
unite Aflease`s South African uranium and gold assets with the Australian and
Canadian uranium properties of SXR. The new company will be focused on the
growth and development of its uranium business, as well as on realizing value
from its existing gold assets. SXR Uranium One expects to commence uranium
production in the first quarter of 2007, and expects to produce at least 4
million pounds per year of uranium and at least 90,000 ounces of gold as by-
product, from current projects by 2011.
It is a condition of the merger that SXR Uranium One be primarily listed on TSX
and has a secondary listing on the JSE. Neal Froneman and Jean Nortier, current
Aflease Chief Executive Officer and Chief Financial Officer, respectively, will
hold the same positions at SXR Uranium One. SXR Uranium One will have a seven
member Board of Directors, comprised initially of Neal Froneman, Mark Wheatley,
the current Chief Executive Officer of SXR, as non-executive director, and three
independent non-executive directors to be mutually agreed upon, one of whom will
serve as Chairman of the Board. Aflease will have the right to nominate two
additional Directors in due course.
Opinions and recommendations
The board of directors of Aflease (`Aflease board`) has to, in terms of the
Securities Regulation Code on Take-overs and Mergers, appoint an independent
committee. The independent committee has to appoint an independent advisor, to
advise the independent committee on the terms and conditions of the merger and
whether or not the merger is fair and reasonable to Aflease ordinary
shareholders, pursuant to which the Aflease board will advise Aflease ordinary
shareholders accordingly.
Due diligence investigations
SXR has substantially completed its technical due diligence on Aflease,
utilising both its own technical staff and independent consultants and Aflease
is in the process of completing its confirmatory technical due diligence on SXR.
Both Aflease and SXR are completing their confirmatory financial and legal due
diligence investigations on each other, which will be completed prior to
executing definitive merger agreements.
Either Aflease or SXR may terminate the pre-merger agreement on or before 25
July 2005, if either company is not satisfied with the results of its due
diligence investigation.
Break fee
Pursuant to Aflease and SXR entering into the pre-merger agreement, each company
has agreed not to solicit third party interest regarding any alternative
transaction as defined in the pre-merger agreement. Each of Aflease and SXR has
agreed to pay a termination fee of Cdn$1.0 million to the other party in the
event that the pre-merger agreement is terminated as a result of either Aflease
or SXR accepting a superior proposal or if shareholders of either Aflease or SXR
fail to approve the merger.
Interim capital raising
Each of Aflease and SXR in the interim, and SXR Uranium One on closing, will
continue with their respective businesses and project generation activities. In
this regard, Aflease and SXR will undertake interim private placements of up to
US$20 million and Cnd$6 million, respectively.
BMO Nesbit Burns is acting as exclusive financial advisor and agent to Aflease
in connection with the merger and private placement and Nedbank Capital is
acting as Aflease`s South African investment bank and sponsor. SXR is being
advised by RBC Capital Markets.
Conditions precedent to the merger
The merger is subject to conditions precedent including the following:
- satisfactory completion of confirmatory due diligence investigations by
each company on one another;
- the negotiation of a definitive merger agreement;
- the approval of the merger by a majority of Aflease ordinary shareholders
representing not less than three-fourths of the votes exercisable by
Aflease shareholders present and voting either in person or by proxy, at
the Aflease scheme meeting;
- the approval of the merger by the JSE, the Securities Regulation Panel and
the South African Reserve Bank (`SARB`);
- the SARB and the JSE granting approval for the secondary listing of SXR
Uranium One on the JSE and in the latter instance specifically for the
listing of the requisite number of SXR Uranium One shares on the JSE;
- the approval by the Competition Authorities of South Africa, if required,
of the merger;
- the High Court of South Africa (`Court`) sanctioning the merger in terms of
the Companies Act;
- the Registrar of South African Companies registering the Order of Court in
South Africa;
- the approval of the merger by a majority of votes cast at a special SXR
common shareholder meeting; and
- SXR obtaining the requisite Canadian regulatory approvals.
Timing of detailed announcement, documentation to Aflease ordinary shareholders
and completion of the merger and further cautionary announcement.
A further announcement setting out the detailed terms, financial effects,
salient dates and times of the merger will timeously be made available to
Aflease ordinary shareholders pursuant to the conclusion of a definitive merger
agreement following which a circular containing the final terms of the merger
will be posted to Aflease ordinary shareholders. Aflease and SXR anticipate
that, the merger will be completed in October 2005, subject to the receipt of
all required regulatory and shareholder approvals.
Aflease ordinary shareholders are advised to continue to exercise caution when
trading in their Aflease ordinary shares until a further announcement is made as
set out above.
Forward-looking Statement
This announcement contains certain forward-looking statements. These forward-
looking statements are subject to a variety of risks and uncertainties beyond
Aflease`s ability to control or predict, which could cause actual events or
results to differ materially from those anticipated in such forward-looking
statements. In this announcement, predictions about the merger being approved
and finalised are forward-looking statements. Accordingly, readers should not
place undue reliance on forward-looking statements.
Johannesburg
5 July 2005
South African Investment Bank, Corporate Advisor and Sponsor
Nedbank Capital
Independent Reporting Accountants
PWC Inc.
South African Legal Counsel
Deneys Reitz
Financial Advisor
BMO Nesbitt Burns
International Legal Counsel
Davis & Company
Legal Counsel to the Financial Advisor
Fasken Martineau DuMoulin
Specialised United States Legal Counsel
Latham and Watkins
Date: 05/07/2005 08:50:06 AM
Produced by the JSE SENS Department
