| Wed 7 Dec 2005, 17:00 | | Yomhlaba Resources Limited - Detailed acquisi |
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Yomhlaba Resources Limited - Detailed acquisition and
cautionary announcement
Yomhlaba Resources Limited
(formerly Zenith Concessions Limited)
(Registration number 1994/009012/06)
Share code: YBA ISIN: ZAE000060281
("Yomhlaba" or "the Company" or "the Group")
ANNOUNCEMENT REGARDING:
THE ACQUISITION OF ILANGA COAL MINES (PROPRIETARY) LIMITED,
A RESTRUCTURING OF THE BALANCE SHEET,
AND INCORPORATING A CAUTIONARY ANNOUNCEMENT
1. Introduction
Shareholders are referred to the cautionary announcement
dated 29 September 2005 wherein it was announced that
Yomhlaba had entered into a non-binding heads of agreement
for the acquisition of various coal assets.
Sasfin Capital is authorised to announce that Yomhlaba has
signed definitive agreements to acquire 100% of the shares
in and claims on loan account against Ilanga Coal Mines
(Proprietary) Limited ("Ilanga") for R95.2 million from Risk
Reduction International Limited ("RRI") (referred to as "the
Ilanga acquisition").
In addition to, and as an integral part of the Ilanga
acquisition, the Group also entered into the following
agreements:
* Yomhlaba, Yomhlaba Coal (Proprietary) Limited ("Yomhlaba
Coal"), a 100% owned subsidiary of Yomhlaba, and New
Africa Mining Fund Nominees (Proprietary) Limited
("NAMF") have entered into an agreement whereby Yomhlaba
will acquire NAMF"s loan account and preference share
that it owns in Yomhlaba Coal (referred to as the "NAMF
transaction"); and
* Yomhlaba, Yomhlaba Coal and Rotocompactors (Proprietary)
Limited ("Roto") have entered into an agreement whereby
Yomhlaba will acquire Roto"s loan account in Yomhlaba
Coal (referred to as the "Roto transaction").
2. The Ilanga acquisition
2.1. Introduction
Ilanga is a South African private mining company owned
100% by RRI with interests in coal mining in the Witbank
and Ermelo coal fields. Ilanga"s operations consist of
opencast collieries at Ilanga West on a portion of the
farm Kleinfontein, at Ilanga East on a portion of the
farm Leeuwfontein, further coal deposits on Leeuwfontein,
as well as the Ilanga plant, currently running at an
approximate production rate of 45 000 tons per month.
Ilanga holds the mining rights to one of the properties
and have applied for prospecting rights to the remainder.
2.2. Purchase consideration and profit warranty
The purchase price payable will be settled by issuing 340
million post-consolidation shares (see 2.3 below) in the
share capital of Yomhlaba at 28 cents per share,
amounting to R95.2 million, on the closing date. RRI
will therefore own 85% of Yomhlaba after the Ilanga
acquisition.
RRI has warranted that Ilanga will have a net profit
after tax for the year ending 28 February 2006 of not
less than R40 million. Should this warranted net profit
after tax not be achieved, RRI will pay in cash to
Yomhlaba an amount calculated as the shortfall in net
profit after tax. Yomhlaba has undertaken to distribute
such amount received as a special dividend to its
shareholders.
2.3. Share consolidation
RRI and Yomhlaba have agreed that it will be proposed to
the shareholders of Yomhlaba to consolidate the shares of
Yomhlaba in a ratio of one new share for every ten shares
currently in issue.
2.4. Rationale for the Ilanga acquisition
Yomhlaba was listed in November 2004 on the Alternative
Exchange of the JSE Limited ("the JSE") as a mining
holding company. Its main operating subsidiary, Yomhlaba
Coal, provided viable solutions for the recovery of
commodities from discard dumps utilising its proprietary
double pulse action jigging technology. The prime market
for the establishment of this technology is the local
coal mining industry, where it offers a unique
opportunity for the beneficiation of discard coal to
power station quality saleable coal.
On 4 March 2005 it was announced to shareholders that
Ingwe Collieries Ltd ("Ingwe"), a subsidiary of the
Energy Coal Division of BHP Billiton, summarily
terminated its contracts with Yomhlaba Coal alleging
"illegal and/or unethical practices" ("the Ingwe
dispute"). Yomhlaba management strongly denies the
allegations and Ingwe has failed to provide further
information on, or proof of its allegations, leaving the
matter unresolved. Shareholders are also referred to the
SENS announcements dated 3 March, 4 March and 31 March
2005, as well as to the financial results announcement
accompanying this transaction announcement for further
detail on the matter.
Since March 2005, the Directors have evaluated numerous
opportunities and initiatives to resurrect Yomhlaba and
to restore the shareholder value destroyed by the Ingwe
dispute. The Ilanga acquisition offers Yomhlaba the
opportunity to acquire a profitable, cash generative coal
asset, thereby expanding its operations while continuing
to deal with the Ingwe dispute.
2.5. Conditions precedent
The Ilanga acquisition is subject, inter alia, to
fulfillment of the following conditions precedent:
* the completion of a due diligence on Ilanga to the
satisfaction of Yomhlaba;
* the completion of a due diligence on Yomhlaba to the
satisfaction of RRI;
* the NAMF transaction becoming unconditional;
* the Roto transaction becoming unconditional;
* the requisite majority of Yomhlaba shareholders voting
in favor of all resolutions necessary for the share
consolidation;
* the requisite majority of Yomhlaba shareholders voting
in favor of the Ilanga acquisition;
* the approval of the JSE, the Securities Regulation
Panel and the Competition Commission; and
* the approval of any other regulatory authorities and
consents.
3. The NAMF transaction
3.1. Introduction
NAMF currently owns a redeemable preference share with a
face value of R9 million and a redemption value of R26.6
million in Yomhlaba Coal. The redeemable preference
share does not carry a coupon and is redeemable after
five years.
NAMF also owns a claim on loan account against Yomhlaba
Coal amounting to approximately R16.64 million.
3.2. Purchase consideration
Yomhlaba will acquire all of the preference shares held
by NAMF for a total purchase consideration amounting to
10% of the aggregate gross amount received by, or accrued
to, Yomhlaba or any of its subsidiaries from time to time
as a result of, or pursuant to the Ingwe dispute.
Yomhlaba will acquire NAMF"s claim on loan account
against Yomhlaba Coal for a total consideration of R10
million, payable in cash on the closing date.
3.3. Conditions precedent
The NAMF transaction is subject, inter alia, to
fulfillment of the following conditions precedent:
* the Ilanga acquisition becoming unconditional;
* the Roto transaction becoming unconditional;
* the approval NAMF"s Investment Committee;
* the approval of the JSE, the Securities Regulation
Panel and the Competition Commission; and
* the approval of any other regulatory authorities and
consents.
4. The Roto transaction
4.1. Introduction
Roto owns a claim on loan account against Yomhlaba Coal
amounting to approximately R20.92 million.
4.2. Purchase consideration
Yomhlaba will acquire Roto"s claim on loan account
against Yomhlaba Coal for a total consideration of R3.75
million. The purchase consideration will be discharged
as follows:
* by the transfer of certain fixed assets valued at R250
000 on the closing date;
* by the payment of R2 million in cash on the first
anniversary of the closing date; and
* by the payment of R1.5 million in cash on the second
anniversary of the closing date.
4.3. Conditions precedent
The Roto transaction is subject, inter alia, to
fulfillment of the following conditions precedent:
* the Ilanga acquisition becoming unconditional;
* the NAMF transaction becoming unconditional;
* the approval of the JSE, the Securities Regulation
Panel and the Competition Commission; and
* the approval of any other regulatory authorities and
consents.
5. Financial effects
The Ilanga acquisition is subject to a due diligence review
and Competent Person"s Report being issued on the Ilanga
mining assets. Yomhlaba will use these reports to determine
the fair value of the assets acquired, as well as the pro
forma effects on the net asset value, and earnings per share
of Yomhlaba ("the pro forma financial information"). The
directors of Yomhlaba 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.
6. Categorisation of the transaction and change of control
The Ilanga acquisition is categorised as a reverse take-over
transaction in terms of section 9.5 of the JSE Listings
Requirements. The Ilanga acquisition is also deemed to be
an affected transaction in terms of the Securities
Regulation Code on Takeovers and Mergers as its
implementation will result in a change of control. The NAMF
transaction and the Roto transaction are defined as related
party transactions in terms of section 10.1 of the JSE
Listings Requirements since NAMF and Roto are both material
shareholders in Yomhlaba. A full circular to shareholders,
including a fair and reasonable opinion from an Independent
Professional Expert and a pre-listing statement, will be
dispatched to shareholders in due course.
7. Cautionary announcement
As the pro forma financial effects of the Ilanga
acquisition, the NAMF transaction and the Roto transaction
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.
7 December 2005
Pretoria
Designated Advisor
Sasfin Capital
(a division of Sasfin Bank Ltd)
Restructuring Advisor
Gandalf Trust
Transaction Advisor
Radagast Capital (Pty) Ltd
Warning: The listing of the ordinary shares in the Company
is on the Alternative Exchange ("AltX"). Investors are
advised of the risks of investing in a Company listed on
AltX and that the JSE Limited ("JSE") does not guarantee the
viability or success of a Company listed on AltX. In terms
of the JSE Listings Requirements ("LR"), the Company is
obliged to appoint and retain a Designated Advisor ("DA").
The DA is required to, inter alia, attend all board meetings
held by the company, ensure that all the LR and applicable
regulations are complied with, approve the financial
director of the Company and guide the Company in a
competent, professional and impartial manner. If the
Company fails to retain a DA, it must make arrangements to
appoint a new DA within ten business days, failing which the
Company faces suspension of trading in its securities. If a
DA is not appointed within 30 days of its suspension, the
Company faces the termination of its listing without the
prospect of an appropriate offer to minority shareholders.
Date: 07/12/2005 05:01:06 PM Produced by the JSE SENS Department
