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Wescoal - Proposed Acquisition And Further Cautionary Announcement

Release Date: 31/05/2006 10:09:01      Code(s): WSL
Wescoal - Proposed Acquisition and Further Cautionary Announcement              
WESCOAL HOLDINGS LTD                                                            
(Incorporated in the Republic of South Africa)                                  
(Registration number 2005/006913/06)                                            
(JSE Share code: WSL & ISIN: ZAE000069639)                                      
("Wescoal" or "the company")                                                    
PROPOSED ACQUISITION OF ANKER COAL & MINERAL HOLDINGS SA (PROPRIETARY) LIMITED  
AND FURTHER CAUTIONARY ANNOUNCEMENT                                             
1.   INTRODUCTION                                                               
Shareholders are referred to the cautionary announcements dated 18 January 2006,
8 March 2006, 23 March 2006 and 5 May 2006.                                     
Wescoal has, subject to the conditions precedent set out below, purchased all   
the issued shares in and certain shareholders" claims on loan account against   
Anker Coal & Mineral Holdings South Africa (Proprietary) Limited ("Anker SA")   
from its two shareholders: 65% was acquired from Anker Holding BV ("Anker       
Holding") and 35% was acquired from Community Investment Holdings (Proprietary) 
Limited ("CIH"), which acquisitions are hereafter jointly referred to as "the   
proposed acquisitions". The proposed acquisitions are subject to separate       
purchase agreements and have different terms and conditions, as summarized in 4 
and 5 below.                                                                    
In terms of the Listings Requirements of the JSE Limited ("JSE") the proposed   
acquisitions, viewed together, are classified as a category 1 transaction.      
2.   RATIONALE                                                                  
Wescoal is involved in the coal washing and coal trading business. To date      
Wescoal has had to source all its coal from mines or other suppliers. Anker SA  
has been mining coal for a number of years and has been granted a number of     
mining rights and prospecting rights in terms of the new Minerals and Petroleum 
Resources Act of 2002. It has a coal export entitlement through a share in the  
South Dunes Coal Terminal Company (Pty) Ltd, which will amount to approximately 
one million metric tons per annum once the Phase V expansion of the Richards Bay
Coal Terminal ("RBCT") has been commissioned.. Anker SA also has an additional  
allocation of 150 000 tons through RBCT which is reviewed annually. The         
acquisition of Anker SA will therefore add a new dimension to Wescoal"s business
and will secure coal for mining, washing, export and inland trading.            
3.   DESCRIPTION OF ANKER SA"S BUSINESS                                         
Anker SA owns 100% of the issued shares of the following South African          
companies: Elandsfontein Colliery (Pty) Ltd, Golfview Mining (Pty) Ltd, Van     
Oudtshoornstroom Coal (Pty) Ltd, Anker Coal Sales & Export (Pty) Ltd, AKE Mining
Equipment (Pty) Ltd, and AKE Distribution (Pty) Ltd.                            
- Elandsfontein Colliery (Pty) Ltd:                                             
Elandsfontein Colliery is situated 15 km west of Witbank in Mpumalanga. It is an
opencast mining operation with a non-modular coal processing plant. It is       
currently processing stockpile material and mining open cast reserves of about 2
million tons remaining. It still has underground reserves and resources         
indicated at approximately 8 million run-of-mine ("RoM") tons of coal.          
- Golfview Mining (Pty) Ltd:                                                    
Golfview Mine is situated 6 km north of Ermelo in Mpumalanga. The colliery      
consists of an opencast mining operation and a modular coal processing plant.   
Underground operations have recently been discontinued. It has indicated        
reserves and resources, both opencast and underground, of approximately 6       
million RoM tons of coal and has a life of approximately 4 years left should the
indicated reserves be mined.                                                    
- Van Oudtshoornstroom Coal (Pty) Ltd:                                          
The LVO Resource consists of the farms Leliefontein 136 IT, Joubertsvlei 260 IT 
and Van Oudtshoornstroom 261 IT. These areas contain sufficient resources and   
reserves to ensure the future of Anker SA"s mining operations. The LVO Resource 
is located 10 km east of Ermelo. Future operations will concentrate on the      
opening up of the LVO Resource which has an indicated resource of approximately 
50 million mineable insitu tons of coal.                                        
New order prospecting rights have been granted in respect of inter alia:        
-    "Mooiklip" with an indicated bituminous and anthracitic coal resource of   
approximately 28 million insitu tons of coal;                                   
-    "Sheepmoor" with an indicated bituminous resource of approximately 8       
million insitu tons of coal;                                                    
-    "Uitkomst" with an indicated anthracitic coal resource of approximately 4  
million insitu tons of coal;                                                    
-    "Vlakfontein" with an inferred bituminous coal resource of approximately 50
million insitu tons of coal                                                     
Details of the mineral and surface rights, mining right and prospecting right   
applications and resources/reserves will be set out in the documents referred to
in 10 below.                                                                    
4.   TERMS AND CONDITIONS OF THE ACQUISITION OF SHARES FROM CIH                 
On 5 May 2006 Wescoal purchased, subject to the fulfilment of the conditions    
precedent in 5 below, 35% of the issued share capital of Anker SA, with effect  
from 1 May 2006.                                                                
The purchase consideration is the sum of R50 million, subject to downward       
adjustment based on a minimum net asset value of Anker SA on 31 March 2006,     
provided that the purchase consideration shall not be less than R28 million. The
purchase consideration shall be paid by Wescoal issuing ordinary shares in      
Wescoal to CIH at an issue price of one hundred cents per share ("the           
consideration shares"). Application will be made for the listing of the         
consideration shares on the JSE.                                                
Should Wescoal offer new shares for sale within 6 months of the completion date,
CIH will be afforded an opportunity of increasing its equity stake in Wescoal to
at least 34,9%. The proposed acquisition is subject to warranties that are      
customary in transactions of this nature.                                       
5.   CONDITIONS PRECEDENT TO THE ACQUISITION OF SHARES FROM CIH                 
The proposed acquisition of 35% of the shares of Anker SA from CIH is subject to
inter alia the following conditions:                                            
-    Wescoal obtaining all the necessary regulatory approvals;                  
-    Approval by Wescoal"s shareholders;                                        
-    Wescoal acquiring the remaining 65% of the issued shares of Anker SA from  
Anker Holding, and Anker Holding waiving its pre-emptive rights.                
6.   TERMS AND CONDITIONS OF THE ACQUISITION OF SHARES FROM ANKER HOLDING       
On 23 May 2006 Wescoal purchased, subject to the fulfilment of the conditions   
precedent in 7 below, 65% of the issued share capital of Anker SA from Anker    
Holding, as well as certain of its claims on loan account against Anker SA      
("sale claims"), with effect from 1 May 2006.                                   
The shares were purchased for one Rand, and the purchase price of the sale      
claims was the aggregate of the following amounts:                              
-    R5 per run-of-mine ton mined from certain specified reserves, which amount 
will be payable for 30 years or until the specified reserves have been depleted 
or until the aggregate payments shall have totalled the sum of R200 million,    
whichever occurs first;                                                         
-    2,5% of the free-on-board ton price of all coal, limited to 1 million tons 
per annum, exported through Anker SA"s allocation through South Dunes Coal      
Terminal, payable for 15 years or until the total sum received by Anker Holding 
pursuant hereto shall have totalled R200 million, whichever occurs first.       
Anker Holding shall retain a short term loan of R5 million, which shall be      
repaid by Anker SA within 10 days of fulfilment of the conditions precedent.    
Anker SA is bound by a Coal Prepayment Agreement with Anker Coal Company BV     
("ACC") in terms of which, ACC advanced R52 million to Anker SA ("the prepayment
amount"). ACC, which has been appointed as Wescoal"s marketing agent as set out 
in 8 below, will from the effective date until the prepayment amount plus       
interest have been settled, pay to Anker SA an amount equal to 75% of the total 
invoiced sales price of each coal shipment exported by Anker SA. The remaining  
25% shall be retained by ACC and set off against the balance of the prepayment  
amount from time to time, provided that 50% of the loan and interest shall be   
repaid by 31 May 2007, and the balance by 31 May 2008.                          
Within 30 days of the date of fulfilment of the conditions precedent, Wescoal   
shall procure the release of Anker Holdings from guarantees amounting to R120,5 
million given by Anker Holdings to certain financial institutions.              
Anker SA shall change its name and that of its subsidiary Anker Coal Sales and  
Export (Pty) Ltd to names that do not include the word "Anker". The proposed    
acquisition is subject to warranties and indemnities that are customary in      
transactions of this nature.                                                    
Wescoal has conducted a financial, tax and legal due diligence investigation of 
Anker SA to its satisfaction. Until all liabilities and obligations of Wescoal  
and Anker SA to Anker Holdings have been discharged in full, Wescoal will not   
sell or pledge the shares of Anker SA and/or the sale claims and Anker Holdings 
shall be entitled to appoint one non-executive member to the board of Anker SA. 
7.   CONDITIONS PRECEDENT TO THE ACQUISITION OF SHARES FROM ANKER HOLDING       
The proposed acquisition of 65% of the shares of Anker SA from Anker Holding is 
subject to inter alia the following conditions:                                 
-    Wescoal obtaining al the necessary regulatory approvals;                   
-    Approval by Wescoal"s shareholders.                                        
Upon fulfilment of all the conditions precedent, Anker SA will become a wholly  
owned subsidiary of Wescoal. The directors have confirmed that the Articles of  
Association of Anker SA will be amended, where required, to conform with        
Schedule 10 of the Listings Requirements of the JSE.                            
8.   MARKETING AGREEMENT WITH ANKER COAL COMPANY BV (ACC)                       
On 23 May 2006 Wescoal entered into a Marketing Agreement with ACC, a wholly    
owned subsidiary of the Rotterdam-headquartered Vitol Group. The Vitol Group is 
one of the largest physical private oil trading companies in the world, trading 
gas, coal and non-ferrous metals as well.                                       
9.   PRO FORMA FINANCIAL EFFECTS                                                
The pro forma financial effects of the proposed acquisitions are dependent on   
the finalisation of a Competent Persons Report ("CPR") which is currently being 
undertaken by Steffen Robertson and Kirsten (South Africa) (Pty) Limited. The   
pro forma financial effects will be set out in a subsequent announcement and in 
the circular to shareholders.                                                   
10.  DOCUMENTATION                                                              
A circular with full particulars of the proposed acquisitions, as well as       
Revised Listings Particulars of Wescoal, including a CPR and a notice of general
meeting of shareholders, will be mailed to shareholders upon completion of the  
CPR.                                                                            
11.  FURTHER CAUTIONARY ANNOUNCEMENT                                            
Further to the cautionary announcements referred to in 1 above, shareholders are
advised to continue exercising caution when dealing in the company"s securities 
until the financial effects have been announced.                                
Warning: The listing of ordinary shares in the company is on ALTx.  Investors   
are advised of the risks of investing in a company listed on ALTx. Investors are
advised that the JSE does not guarantee the viability or the success of a       
company listed on ALTx.  In terms of the Listings Requirements, the company is  
obliged to appoint and retain a Designated Adviser, which is required to, inter 
alia, attend all board meetings held by the company to ensure that all the      
Listings Requirements 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 Designated 
Adviser, it must make arrangements to appoint a new Designated Adviser within 10
business days, failing which the company faces suspension of trading of its     
securities.  If a Designated Adviser 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.                      
Johannesburg                                                                    
Wednesday 31 May 2006                                                           
Designated adviser:      Exchange Sponsors                                      
Auditors:                Middel & Partners                                      
Attorneys:               Kim Warren, Rambau & Associates                        
Date: 31/05/2006 10:09:20 AM Supplied by www.sharenet.co.za                     
Produced by the JSE SENS Department                                             
                                                                                
                                                                                
                                                                                



                                        
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