Go Back Email this Link to a friend


Exx - Exxaro - Acquisition Announcement

Release Date: 19/01/2007 16:00:02      Code(s): EXX
EXX - Exxaro - Acquisition Announcement                                         
Exxaro Resources Limited (Previously Kumba Resources Limited)                   
(Incorporated in the Republic of South Africa)                                  
(Registration number 2000/011076/06)                                            
Share code: EXX & ISIN: ZAE000084992)                                           
("Exxaro" or "the company")                                                     
Acquisition of the Namakwa Sands business and a 26% interest in Black           
Mountain Mining (Proprietary) Limited                                           
1. Introduction                                                                 
Pursuant to the empowerment transaction recently implemented by Exxaro, the     
company, acting through its wholly-owned subsidiaries, Exxaro Base Metals       
(Proprietary) Limited ("Exxaro Base Metals") and Exxaro Sands (Proprietary)     
Limited ("KZN Sands"), acquired options to acquire the assets and business      
of Namakwa Sands ("Namakwa Sands") and a 26% interest in Black Mountain         
Mining (Proprietary) Limited ("Black Mountain Mining"), which will own the      
Black Mountain zinc and lead mine as well as the Gamsberg zinc project          
(collectively, "Black Mountain") from Anglo Operations Limited ("AOL"), a       
wholly-owned subsidiary of Anglo American plc.                                  
Shareholders are advised that Exxaro, acting through Exxaro Base Metals and     
KZN Sands, has exercised the options referred to above and will,                
accordingly, subject to the fulfilment of the conditions precedent referred     
to below, acquire Namakwa Sands ("the Namakwa Sands acquisition") and a 26%     
interest in Black Mountain("the Black Mountain acquisition") (collectively,     
"the transaction").                                                             
2. Rationale for the transaction                                                
The transaction will position Exxaro strategically as one of the world`s        
largest suppliers of titanium dioxide feedstock and zircon and strengthen       
its position in the South African zinc market.                                  
Exxaro already enjoys a prominent position in the mineral sands                 
business, with operations in KwaZulu-Natal and a 50% ownership in the           
Tiwest Joint Venture, a fully integrated mineral sands and pigment producer     
in Western Australia.                                                           
Exxaro currently owns the only zinc metal refinery in South Africa and also     
holds a controlling interest in the Rosh Pinah zinc mine in Namibia.            
3. Terms of the Black Mountain acquisition                                      
3.1 Purchase consideration                                                      
Exxaro will acquire, through Exxaro Base Metals, with effect from the Black     
Mountain effective date, being the date on which the last of the conditions     
precedent referred to in paragraph 3.2 below is fulfilled, or to the extent     
possible, waived, a 26% interest in Black Mountain from AOL for a purchase      
consideration of R180 million payable in cash.                                  
The purchase consideration will be adjusted for movements in the working        
capital balances at the Black Mountain effective date, as well as for any       
exploration expenditure incurred by AOL in respect of areas of proximity to     
the Gamsberg ore body, subject to Exxaro`s proportional share of a maximum      
of R17 million. The maximum purchase price will, however, not exceed R450       
million.                                                                        
3.2 Conditions precedent                                                        
The Black Mountain acquisition is conditional upon the fulfilment of the        
following conditions precedent:                                                 
-    conversion of the old order mining rights relating to Black Mountain       
into new order mining rights in terms of the Mineral and Petroleum          
    Resources;                                                                  
-    Development Act of 2002 ("MPRDA");                                         
-    the consent of the Minister of Minerals and Energy in terms of the         
MPRDA to the cession of the converted new order mining rights to Black      
    Mountain Mining;                                                            
-    cession and transfer of the new order mining rights and other assets       
    relating to the Black Mountain business from AOL to Black Mountain          
Mining;                                                                     
-    approval by Exxaro shareholders in general meeting;                        
-    AOL receiving written confirmation acceptable to it that Exxaro has        
    sufficient funding available to satisfy its obligations in terms of         
the Black Mountain acquisition; and                                         
-    the approval of the competition authorities in South Korea.                
3.3 Shareholders` arrangements                                                  
Exxaro Base Metals, AOL and Black Mountain Mining have entered into an          
agreement to regulate the relationship between Exxaro Base Metals and AOL,      
being the shareholders in Black Mountain Mining ("the shareholders") and        
the relationship between the shareholders and Black Mountain Mining.            
4. Terms of the Namakwa Sands acquisition                                       
4.1 Purchase consideration                                                      
Exxaro will acquire from AOL, through KZN Sands, Namakwa Sands, as a going      
concern, with effect from the Namakwa Sands effective date, being the date      
on which the last of the conditions precedent referred to in paragraph 4.2      
below is fulfilled, or to the extent possible, waived, for a purchase           
consideration of R2 015 million payable in cash. The purchase consideration     
will be subject to the adjustments set out below, subject to the total          
purchase price not exceeding R3 350 million.                                    
4.1.1 Capital expenditure on Project 1000                                       
In November 2005, AOL announced the approval of a R320 million expansion of     
Namakwa Sands ("Project 1000"). Any capital expenditure incurred by AOL in      
respect of Project 1000 from 1 January 2006 until the Namakwa Sands             
effective date (being the date on which the last of the conditions              
precedent referred to below is fulfilled, or to the extent possible,            
waived), will be added to the cash consideration.                               
4.1.2 Tax recoupment                                                            
AOL is likely to be required to pay a tax recoupment to the South African       
Revenue Service for tax allowances previously claimed on capital assets in      
Namakwa Sands. KZN Sands, as the new owner of the Namakwa Sands assets,         
will receive the benefit of the tax allowances on the acquired capital          
value, which will reduce future tax payments. Therefore, the cash               
consideration will be increased by the net present value of the future          
benefit received by KZN Sands once the recoupment suffered by AOL has been      
determined.                                                                     
The increased consideration (arising as a result of the tax recoupment          
incurred by AOL) will be vendor funded by AOL on terms no less favourable       
than the Exxaro long-term loan facilities.                                      
4.1.3 Working capital                                                           
The consideration will be increased or decreased to take into account any       
movements in the working capital balances of Namakwa Sands at the Namakwa       
Sands effective date.                                                           
4.2 Conditions precedent                                                        
The Namakwa Sands acquisition is conditional upon the fulfilment of the         
following conditions precedent:                                                 
-    conversion and registration of the old order prospecting and mining        
    rights relating to Namakwa Sands into new order prospecting and mining      
rights                                                                      
-    in terms of the MPRDA;                                                     
-    the consent of the Minister of Minerals and Energy in terms of the         
    MPRDA to the cession of the converted new mining rights to KZN Sands;       
-    cession of the prospecting and mining rights relating to Namakwa           
    Sands by AOL to KZN Sands;                                                  
-    approval by Exxaro shareholders in general meeting;                        
-    AOL receiving confirmation from Exxaro`s funders that Exxaro has           
sufficient funding available to satisfy its obligations in terms of         
    the Namakwa Sands acquisition; and                                          
-    the approvals of the competition authorities in Spain.                     
5. Information on Black Mountain                                                
5.1 Overview of operations                                                      
The Black Mountain base metal mine, which is located adjacent to the town       
of Aggeneys in the Northern Cape Province of South Africa, exploits lead,       
zinc, copper and silver from the mining of ore from various deposits.           
The mine produces three concentrates with the zinc concentrate delivered to     
Exxaro`s zinc refinery located in Springs, Gauteng Province, South Africa.      
Lead and copper concentrates, from which silver is also extracted, are          
exported to various smelters world-wide through the port of Saldanha Bay.       
5.2 Information on the Gamsberg zinc project                                    
The Gamsberg zinc project has an estimated production capacity of up to         
300ktpa. A small quantity of production from Gamsberg is currently being        
mined by underground methods and this is being processed at the established     
Black Mountain process plant. The presence of manganese precludes the           
possibility of the export of concentrate product. This has necessitated the     
development of a refinery at the site.                                          
The Gamsberg zinc project provides for a possible life-of-mine of               
approximately 30 years, which at 300ktpa of zinc, would be the largest          
single mine and concentrator in the world.                                      
5.3 Production data                                                             
The following table sets out the salient production data for Black              
Mountain:                                                                       
                                                                Six months      
                                 Year ended      Year ended          ended      
                                31 December     31 December        30 June      
2004            2005           2006      
Ore mined (kt)                         1 518           1 413            759     
Ore processed (kt)                     1 500           1 350            715     
Ore grade processed (%)                                                         
Zinc                                     2,7             3,3            3,2     
Lead                                       3             3,7            3,9     
Copper                                   0,5             0,4            0,4     
Production (kt)                                                                 
Zinc in concentrate                       28              32             15     
Lead in concentrate                       38              42             21     
Copper in concentrate                      5               3              2     
5.4 Financial information                                                       
The following table sets out the salient financial information relating to      
Black Mountain:                                                                 
                                                          Six months            
                              Year ended     Year ended         ended           
31 December    31 December       30 June          
US$ million                           2004           2005          2006         
Turnover                                49             80            64         
EBITDA                                   2             12            13         
6. Information on Namakwa Sands                                                 
6.1 Overview of operations                                                      
The mining operations of Namakwa Sands are located at Brand-se-Baai,            
approximately 60km west of Koekenaap on the west coast of South Africa. Its     
major assets are:                                                               
-    a mineral sands mine at Brand-se-Baai in the Western Cape Province,        
    consisting of a mineral sands mine, primary concentrator plants and a       
    secondary concentrator plant;                                               
-    a mineral separation plant, located 7 kilometers west of Koekenaap         
    which is used to separate ilmenite, rutile and zircon products; and         
-    the smelter located near Saldanha Bay at which ilmenite is smelted to      
    produce titanium dioxide slag and pig iron.                                 
6.2 Production data                                                             
The following table sets out salient production data for Namakwa Sands for      
the year ended 31 December 2005 and for the interim period ended 30 June        
2006:                                                                           
Six months      
                                                 Year ended          ended      
                                                31 December        30 June      
kt                                                      2005           2006     
Ore mined                                             18 100          8 700     
Production                                                                      
Ilmenite                                                 316            165     
Rutile                                                    29             14     
Zircon                                                   129             64     
Smelter production                                                              
Slag                                                     164             81     
Iron                                                     105             53     
6.3 Financial information                                                       
The following table sets out the salient financial information for Namakwa      
Sands:                                                                          
                                                            Six months          
Year ended     Year ended            ended          
                           31 December    31 December          30 June          
US$ million                        2004           2005             2006         
Revenue                             146            175               89         
EBITDA                               37             48               26         
7. Related party                                                                
AOL is a wholly-owned, indirect subsidiary of Anglo American plc, which is      
a material shareholder of Exxaro. Accordingly AOL, the vendor of Namakwa        
Sands and Black Mountain, is a related party in terms of the JSE Limited        
("JSE") Listings Requirements and the transaction will be treated as a          
related party transaction.                                                      
Anglo American plc and its associates will be taken into account in             
determining the quorum at the general meeting, but their votes will not be      
taken into account in determining the results of the voting at the general      
meeting.                                                                        
8. Financial effects                                                            
The Black Mountain acquisition and Namakwa Sands acquisition will have an       
effect of less than 3% on Exxaro`s pro forma earnings per share and             
headline earnings per share for the six months ended 30 June 2006 and on        
Exxaro`s pro forma net asset value per share and net tangible asset value       
per share as at 30 June 2006, as published in the circular to shareholders      
dated 9 October 2006, relating to the empowerment transaction recently          
implemented by the company.                                                     
9. Further documentation                                                        
A circular setting out the terms of the transaction and convening a general     
meeting of Exxaro shareholders is in the process of being prepared and will     
be posted to shareholders within 30 days of the date of this announcement.      
Pretoria                                                                        
19 January 2007                                                                 
MERCHANT BANK AND JOINT SPONSOR                                                 
Rand Merchant Bank                                                              
(A division of FirstRand Bank Limited)                                          
LEAD SPONSOR                                                                    
J.P. Morgan Equities Limited                                                    
ATTORNEYS                                                                       
Deneys Reitz Attorneys                                                          
CORPORATE LAW ADVISERS                                                          
CLS                                                                             
FINANCIAL ADVISER TO ANGLO AMERICAN PLC                                         
Deutsche Securities                                                             
Member of the Deutsche Bank Group                                               
ATTORNEY TO ANGLO AMERICAN PLC                                                  
Webber Wentzel Bowens                                                           
Date: 19/01/2007 16:00:01 Supplied by www.sharenet.co.za                     
Produced by the JSE SENS Department                             .                  



                                        
Email this JSE Sens Item to a Friend.

Send e-mail to
© 2017 SHARENET (PTY) Ltd, Cape Town, South Africa
Home     Terms & conditions    Privacy Policy
    Security Notice    Contact Details
Market Statistics are calculated by Sharenet and are therefore not the official JSE Market Statistics. The calculation/derivation may include underlying JSE data.