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Mvela Resources - Mvela Resources Signs a Memorandum of Understanding with
shareholders of Burk Mining (Pty) Ltd.
MVELAPHANDA RESOURCES LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1980/001395/06)
Share code: MVL ISIN: ZAE000050266
(`Mvela Resources`)
Mvela Resources Signs a Memorandum of Understanding with shareholders of Burk
Mining (Pty) Ltd.
Mvelaphanda Resources Limited (Mvela Resources) is pleased to announce that it
has signed a Memorandum of Understanding (MoU) with the shareholders of Burk
Mining (Pty) Ltd (Burk), in terms of which, it has agreed to acquire 100% of
Burk from a consortium of private investors. The transaction is subject to
certain conditions precedent, including inter-alia, confirmation of the
manganese and iron ore resource and completion of a financial and legal due
diligence.
The transaction will be fully funded with cash by Mvela Resources, with the
total consideration dependent on quantum of manganese and iron-ore resources
confirmed. The formal sale agreement is expected to be concluded in October
2005.
- The minimum consideration of R30 million requires a confirmed 1 million tons
manganese and 1 million tons iron-ore resource.
- This figure will rise on a pro-rata basis up to R50 million, on confirmation
of a manganese resource of between 1 million tons and 3 million tons.
- A confirmed manganese resource in excess of 3 million tons will result in an
additional R4 million payment to the current shareholders in Burk Mining.
The Burk Mine is a small manganese (Mn) mine in the Northern Cape located on the
farm Mashwening 557 (portion 1 or Rust in Vrede), south of Kumba`s Sishen Mine
and adjacent to Assmang`s King and Mokaning properties.
Current production is in the order of 6,300 tons of manganese ore a month from
open cast sources, with a manganese content of 38%-40%. Most of the production
is currently sold locally. The mine however has a railway allocation of 6,000
tons per month on the Spoornet Port Elizabeth line, which provides significant
scope for expansion. Utilisation of this allocation would not only bring
exposure to higher-export prices, but also economy-of-scale cost benefits.
The property is situated on the eastern belt of the Postmasburg Manganese Field,
close to the juncture of the eastern and western belts. Current geological
information indicates a dispersed manganese ore-body up to 30m thick,
outcropping over certain areas on the property, which limits the amount of
stripping required to access the ore-body.
In addition, fans of unconsolidated detrital iron-ore are found on or near
surface on the western portion of the farm. The ore is Iron rich (+/- 64% to 66%
Fe), with a low Phosphorus (< 0.05% P) content. These characteristics make it
ideal for blending purposes.
The current resource is conservatively estimated at 2 million tons of manganese
and 1 million tons of iron-ore. A detailed programme to confirm the estimated
resource is currently underway, with the results expected in the last quarter of
2005.
`The acquisition of Burk is an important strategic step for Mvela Resources`
said Pine Pienaar CEO. `The South African manganese sector is one in which we
see considerable scope for growth and Burk offers a high-quality entry into that
sector, which, according to our calculations, more than exceeds our hurdle rate.
The added potential in the iron-ore resource and the scope for export growth is
meaningful.`
`Mvela Resources has for some time indicated its strategic intent to become an
operating company and not just an investment holding company. This transaction
is first step to attaining that goal`.
ENDS
Johannesburg
2 September 2005
Sponsor
PricewaterhouseCoopers Corporate Finance (Pty) Ltd
Date: 02/09/2005 09:50:15 AM
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