| Tue 5 Jul 2005, 9:13 | | Aflease - Aflease to merge with Southern Cross Res |
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Aflease - Aflease to merge with Southern Cross Resources
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 GOLD AND URANIUM RESOURCES TO MERGE WITH SOUTHERN CROSS RESOURCES
July 5, 2005, JOHANNESBURG, SOUTH AFRICA and TORONTO, CANADA -- Aflease Gold and
Uranium Resources Limited (`AFL`) and Southern Cross Resources Inc. (`SXR`) are
pleased to announce that they have signed a definitive Pre-Merger Agreement
providing for the merger of the two companies. The combination is being done
`at-market` based on the recent trading of both companies.
The combined entity, to be named SXR Uranium One Inc. (`SXR Uranium One`), will
unite AFL`s South African uranium and gold assets with the Australian and
Canadian uranium properties of SXR (as set out in Appendix A). 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.
Commenting on the planned merger, AFL`s Chief Executive Officer, Neal Froneman,
said, `The combination of these two companies creates a focused uranium company
with an international portfolio of attractive uranium assets, from exploration
stage through to the advanced developmental stage.` Said Froneman, `In addition
to merging our assets, SXR Uranium One brings together the mining expertise of
AFL and the exploration strength of SXR in a combination which will benefit the
shareholders of both companies. This transaction also provides definition to
our ongoing strategy to become a focused uranium company that`s North American
domiciled and listed.`
Mark Wheatley, Chief Executive Officer of SXR said `This is an exciting
development for the shareholders of SXR as the merged company will provide
exposure to the very large Dominion and Rietkuil uranium projects which have the
potential to be in operation for more than 20 years beginning in 2007, to the
fully permitted Honeymoon in-situ leach (`ISL`) project in South Australia, and
to a premier exploration portfolio. This portfolio includes a joint venture with
properties in the Athabasca Basin, the world`s most prolific uranium region,
where a minimum 8,600 metres of core drilling is scheduled to commence in the
last quarter of 2005. SXR Uranium One will have a combined portfolio of near
term production assets and quality exploration projects with the critical mass
to develop them. Neal Froneman is a committed, experienced operator and the
combination of personnel from both companies will make for a first class
management and operational team.`
SXR Uranium One will have a substantial resource base as estimated in accordance
with the South African Code for Reporting of Mineral Resources (`SAMREC`) for
AFL and National Instrument 43-101 of the Canadian Securities Administrators
(`NI 43-101`) for SXR and set out in the table below.
Project Code Resource In-Situ Grade In-Situ Grade
Category Uranium (%) Gold (g/t)
(mm U3O8 (mm oz)
lbs)
Rietkuil SAMREC Measured 0.7 0.074 0.01 0.8
(AFL) &
Indicated
SAMREC Inferred 77.1 0.080 1.39 1.0
Dominion SAMREC Measured 9.1 0.065 0.30 1.5
(AFL) &
Indicated
SAMREC Inferred 36.3 0.046 0.70 0.6
Bonanza SAMREC Measured 0.7 0.009 0.67 5.5
Reefs & (0.41
(AFL) Indicated P&P
Reserve)
Honeymoon NI 43- Indicated 7.3 0.120 -- --
(SXR) 101
East NI 43- Indicated 2.0 0.074 -- --
Kalkaroo 101
(SXR)
Goulds Dam NI 43- Indicated 4.4 0.120 -- --
(SXR) 101
Billeroo NI 43- Inferred 7.9 0.030 -- --
(SXR) 101
Modder SAMREC Measured -- -- 1.67 3.0
East (AFL) & (1.02
Indicated P&P
Reserve)
SAMREC Inferred -- -- 0.83 5.2
Other Gold SAMREC Measured -- -- 0.48 3.2
Properties &
(AFL) Indicated
SAMREC Inferred -- -- 1.10 4.1
Total AFL SAMREC 10.5 3.13
M&I 113.4 4.02
SAMREC
Inferred
SXR NI 43-101 13.7 --
Indicated 7.9 --
NI43-101
Inferred
AFL and SXR will host a joint conference call at 10:00am Toronto (4:00pm
Johannesburg) on Wednesday July 6, 2005 to discuss the transaction. Participants
are asked to call one of the three numbers below:
Global calls: country code + 800-8989-6323
North America toll free: 1 (866) 898-9626
Toronto area calls: (416) 340-2216
A presentation will be available for download in advance of the call at
www.aflease.com and www.southerncrossres.com
Terms of Transaction
Under the terms of the Pre-Merger Agreement, the holders of AFL ordinary shares
will receive 0.90 of a common share of SXR for each AFL ordinary share. On
completion of the merger, on both a basic and fully diluted basis, AFL and SXR
shareholders will own approximately 83% and 17% of SXR Uranium One,
respectively. At closing, SXR Uranium One will have 374 million issued and
outstanding shares, based on the number of AFL and SXR shares outstanding on
June 30, 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 shares in favour of the merger. The common shares and warrants held
by these funds represent approximately 16% of the outstanding SXR common shares
on a fully diluted basis.
It is a condition of the merger that SXR Uranium One be primarily listed on The
Toronto Stock Exchange and has a secondary listing on the JSE Securities
Exchange (South Africa). Neal Froneman and Jean Nortier, current AFL 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 CEO
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. AFL
will have the right to nominate two additional Directors in due course.
The Boards of Directors of each of AFL and SXR have approved the merger. The
Pre-Merger Agreement will be available under the filings of SXR on
www.sedar.com. Pursuant to the Pre-Merger Agreement, each company has agreed
not to solicit third party interest in alternative transactions. Each company
has also agreed to pay a termination fee to the other of Cdn $1 million if it
terminates the Pre-Merger Agreement to accept a superior proposal or if its
shareholders fail to approve the merger. The merger is subject to confirmatory
due diligence, the negotiation of a definitive merger agreement and regulatory
and shareholder approvals. SXR has substantially completed its technical due
diligence investigations, utilizing both its own technical staff and independent
consultants. AFL is completing confirmatory technical due diligence. Both
companies are completing confirmatory financial and legal due diligence.
The merger will be effected by way of a court-sanctioned scheme of arrangement
under the provisions of applicable South African law and in accordance with the
provisions of the Pre-Merger Agreement and a merger agreement to be settled by
the parties by the end of July. The parties anticipate that, subject to the
receipt of all required regulatory and shareholder approvals, the merger will be
completed by the end of October.
Each of AFL and SXR in the interim, and SXR Uranium One on closing, will
continue with their respective businesses and project generation activities. In
this regard, AFL and SXR will undertake interim private placements of up to
US$20 million and C$6 million, respectively.
BMO Nesbitt Burns is acting as exclusive financial adviser and agent to AFL in
connection with the merger and private placement. Nedbank Capital is AFL`s
South African investment bank and sponsor. SXR is being advised by RBC Capital
Markets on the merger.
About Aflease Gold and Uranium Resources Limited
AFL owns the Dominion and Rietkuil uranium properties, and the Bonanza South
gold mine, located near Klerksdorp, South Africa, as well as the Modder East
gold project located east of Johannesburg.
AFL`s Board of Directors today approved the development and construction of the
Dominion Uranium mine. The Dominion Uranium asset was previously owned and
operated by Anglo American. This brownfield project has significant
infrastructure in place and a substantial information database of both
geological and metallurgical information. Core from over 250 boreholes is
available and the geological structure is well understood as a result of
previous mining and seismic surveys. Current process testwork has confirmed the
use of pressure leaching resulting in high recoveries. The Directors of AFL have
approved the expenditure of US$2.16 million to complete a bankable feasibility
study. Completion of this document is expected by April 2006 and production of
uranium is expected to commence in early 2007. From 2011, annual production
from the mine is expected to be 4 million pounds per year.
AFL recently announced a uranium resource at its Dominion, Rietkuil and Bonanza
South properties, comprising total inferred resources of 113.3 million pounds of
contained U3O8, at an average grade of 0.064%, and total measured and indicated
resources of 9.8 million pounds of contained U3O8, at an average grade of
0.066%. In addition the Bonanza South property has a measured and indicated
resource of 723,000 pounds U3O8, at an average grade of 0.009% as a gold by-
product.
AFL`s gold assets consist of in excess of 400,000 ounces of proven & probable
reserves, at an average grade of 5.5 grams/tonne, at Bonanza, and in excess of 1
million ounces of proven & probable reserves, at an average grade of 5.2
grams/tonne, at Modder East. On June 29, 2005 AFL announced its first gold pour
from Bonanza.
The gold and uranium reserve and resource estimates were audited and reviewed by
SRK Consulting, an independent firm of consulting engineers and geologists
(`SRK`). The focus of SRK`s audit and review was on areas where there was
sufficient information to comply with SAMREC. AFL is in the process of obtaining
an independent technical report complying with NI 43-101 in respect of its
Dominion, Rietkuil, Bonanza and Modder East properties. The report is
substantially complete and AFL does not expect that the reserves and resources
calculated in accordance with NI 43-101 will be materially different from the
SAMREC compliant estimates.
The ordinary shares of AFL are traded in South Africa on the JSE Securities
Exchange under the symbol `AFL` and over the counter in the U.S. in the form of
a Level III American Depositary Receipts under the symbol `AFLUY`.
About Southern Cross Resources Inc.
SXR owns the fully permitted, in-situ leach, Honeymoon Project and the Goulds
Dam and Kalkaroo 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.
The common shares of SXR are traded on The Toronto Stock Exchange under the
symbol `SXR`.
Forward-looking Statement
This press release contains certain forward-looking statements. These forward-
looking statements are subject to a variety of risks and uncertainties beyond
the company`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 news release, predictions about the transaction being
approved and finalized are forward-looking statements. Accordingly, readers
should not place undue reliance on forward-looking statements.
Mineral resources which are not mineral reserves do not have demonstrated
economic viability.
For further information, please contact:
Neal Froneman, Chief Executive Officer
Aflease Gold and Uranium Resources Limited
Mobile: +27 (0) 83 628 0226
Office: +27 (0) 11 482 3605
Mark Wheatley, Chairman & Chief Executive Officer
Southern Cross Resources Inc.
Telephone: +61 417 688539
Don Falconer, VP Corporate Development
Southern Cross Resources Inc.
Telephone: (416) 350-3657
Date: 05/07/2005 08:51:14 AM
Produced by the JSE SENS Department
