| Tue 1 Aug 2006, 17:05 | | Sallies - Salient details of the acquisition and a |
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SAL
SAL
Sallies - Salient details of the acquisition and an issue of shares for
cash and renewal of cautionary
SALLIES LIMITED
(Incorporated in the Republic of South Africa)
Registration number 1903/001879/06
JSE Share Code: SAL
ISIN: ZAE000022588
("Sallies" or "the Company")
SALIENT DETAILS OF THE ACQUISITION OF BUFFALO FLUORSPAR AND AN ISSUE OF
SHARES FOR CASH AND RENEWAL OF CAUTIONARY
1. SALIENT DETAILS OF THE ACQUISITION OF BUFFALO FLUORSPAR
1.1 Introduction
Further to the announcements dated 9 May 2006, 5 June 2006, 23 June
2006 and 3 July 2006, shareholders are now advised that the Company on
31 July 2006 signed an entirely new agreement relating to the
acquisition of certain assets from Transvaal Mining and Finance
Company Limited ("TMFCL") (which trades as Buffalo Fluorspar) ("the
agreement"), salient details of which are contained in this
announcement.
As previously stated Buffalo Fluorspar is a fluorspar deposit located
in the Limpopo Province the salient underlying assets of which
essentially comprise mineral rights, surface rights, tailings dams and
a fluorspar beneficiation plant.
1.2 Rationale for the transaction
On 3 July 2006 the Board of Sallies announced that because of concerns
about the risk/reward profile of the acquisition, it had decided to
discuss the possible revision of its terms with the vendor. These
concerns were primarily related to divergent assay results from the
three companies that had undertaken the analysis of samples from the
tailings, derived from the drilling campaign which was part of the due
diligence exercise. Having now had the opportunity to conduct and
review further tests, the Board is confident that the quality and
quantity of the fluorspar in the Buffalo dumps are in line with its
requirements, and that the project is a sufficiently robust one that
would deliver a meaningful real internal rate of return even at the
most conservative of the sample analyses. The Board has consequently
decided to proceed with the transaction albeit on different terms.
1.3 Assets acquired
In terms of the agreement Sallies has acquired the following assets:
* the fluorspar properties (as described in paragraph 1.4
below);
* all of the slimes and/or tailings on the fluorspar properties;
and
* all plant, equipment and other production facilities on the
fluorspar properties associated with the recycling and
beneficiation of the aforementioned slimes and/or tailings.
1.4 Properties currently owned by TMFCL
The properties currently owned by TMFCL are:
* Portions 10 and 11 (both Portions of Portion 8), the remaining
Portion of Portion 8 (a Portion of Portion 3) as well as the
remainder, respectively of the Farm Buffelsfontein 347 KR
District Potgietersrus, being in aggregate an area of some 717,5
hectares; and
* Portion 7 (a Portion of Portion 2) of the Farm Buffelsfontein 647
KR District Potgietersrus, which is some 1,7 hectares in extent
(collectively defined as "the properties").
Sallies and TMFCL shall, as soon as reasonably possible, procure that
the properties owned by TMFCL shall be subdivided into two portions
namely the fluorspar properties (which have been purchased by Sallies)
and the stone properties (which remain the property of TMFCL). The
parties shall share the costs of such subdivision and registration in
equal proportions.
1.5 Purchase price
The aggregate purchase price for the assets outlined above is R65
million, of which R60 million was paid in cash on 31 July 2006. The
remaining R5 million is to be paid in cash by 31 December 2006.
The purchase price has been partly funded by the general issue of 42
858 000 Sallies ordinary shares for cash as described in more detail
in paragraph 2.
1.6 Conversion of mining rights
TMFCL has granted Sallies the right to apply, in the name of TMFCL and
as the agent for and on behalf of TMFCL, for the conversion of the old
order rights (held by TMFCL in connection with the fluorspar
properties) into respectively mining rights and/or prospecting rights
in terms of the Mineral and Petroleum Resources Development Act, 2002
(Act 28 of 2002)("MPRD Act") ("new order rights") as well as the
transfer to Sallies or its nominee of such new order rights in terms
of Section II of the MPRD Act.
1.7 Financial effects
The operations of Buffalo Fluorspar have been operated sporadically by
third parties for approximately the last 12 years and accordingly no
trading results are available for that period. It is therefore not
practicable to quantify any pro forma financial effects in respect of
the acquisition at this time.
1.8 Purchase of material
TMFCL has agreed to sell to Sallies all of the fluorspar produced by
TMFCL and stored on the fluorspar properties as at the signature date
of the agreement, including approximately 6 000 wet metric tons of
acid grade fluorspar, produced by the beneficiation plant as part of
the due diligence exercise, at US$155.50 (exclusive of value-added
tax), per dry metric ton, free-on-board, Port Durban.
2 ISSUE OF SHARES FOR CASH
Sallies has completed a general issue of shares for cash corporate
action whereby 42 858 000 Sallies ordinary shares have been placed
with Titan Financial Services (Pty) Ltd at a price of 70 cents per
ordinary share ("the issue"). The issue was made in terms of the
general authority to issue shares for cash granted to the Board by
shareholders at the general meeting held on 26 June 2006. The issue
price was determined by the directors on 24 July 2006 and represents a
discount of 1.2% to the 30-day weighted average traded price on that
date.
The capital raised, which amounts to approximately R30 million, has
been used to fund a part of the purchase consideration of Buffalo
Fluorspar. Once the agreement to acquire Buffalo Fluorspar was
terminated on 30 June 2006, the Company used R25 million of the R65
million raised from the recent rights offer to repay debt, to fund an
extensive preventative maintenance project, and to acquire replacement
mobile plant. When the new agreement to acquire Buffalo was concluded,
albeit on different terms from the prior agreement, it was thought
advisable to raise additional capital to pay for the acquisition and
not use borrowings for that purpose. The issue increases the number of
shares in issue from 450 063 797 to 492 921 797 ordinary shares of 0.1
cents each.
The pro forma financial effects of the issue on the earnings and net
asset value per Sallies share, which is the responsibility of the
directors of the Company and which, due to their nature, may not
fairly present the financial position or the trading results of the
Company, is presented below:
Pro forma Pro forma Percentage
Before After Change
Basic loss per share
(cents) (6.7) (6.1) (9.0)
Headline loss per
share (cents) (6.7) (6.1) (9.0)
Net asset value per
share (cents) 24.8 29.2 17.7
Tangible net asset
value per share
(cents) 22.2 26.9 21.2
Notes
1. The "pro forma before" financial information has been extracted
from the circular to Sallies shareholders dated 5 June 2006 and
represents the unaudited reviewed interim results of Sallies for the
six months ended 31 December 2005 as adjusted for the pro forma
financial effects of the recently completed rights offer and BEE
transactions.
2. The "Pro forma after" column reflects the adjustments relating to
the issue of the 42 858 000 ordinary shares at 70 cents per share. The
earnings and headline earnings per share calculations have been based
on the assumption that the issue was effective from 1 July 2005 and
the net asset value and tangible net asset value per share
calculations have been based on the assumption that the issue was
effective on 31 December 2005. Earnings and headline earnings per
Sallies share have not been adjusted, other than to indicate any
dilutionary effect of the additional shares being issued.
3 RENEWAL OF CAUTIONARY
Sallies shareholders are advised to continue to exercise caution when
dealing in the Company"s securities until such time as the financial
effects of the Buffalo Fluorspar acquisition are published.
Johannesburg
1 August 2006
Sponsor
Ernst & Young Sponsors (Pty) Ltd
(Registration number 2000/031843/07)
Date: 01/08/2006 05:05:18 PM Produced by the JSE SENS Department
