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Wsl - Wescoal - Acquisition Of Coal Prospecting Rights And Withdrawal

Release Date: 10/04/2008 11:19:05      Code(s): WSL
WSL - Wescoal - Acquisition Of Coal Prospecting Rights And Withdrawal           
                   Of Cautionary Announcement                                   
Wescoal Holdings Limited                                                        
(Incorporated in the Republic of South Africa)                                  
(Registration number 2005/006913/06)                                            
(JSE code: WSL & ISIN: ZAE000069639)                                            
("Wescoal" or "the group")                                                      
ACQUISITION OF COAL PROSPECTING RIGHTS AND WITHDRAWAL OF CAUTIONARY             
ANNOUNCEMENT                                                                    
1.   INTRODUCTION                                                               
Shareholders are referred to the cautionary announcement dated 6 March          
2008.                                                                           
Wescoal has subject to the conditions precedent set out below, purchased:       
-    the Prospecting Rights extending over Portions 16 and 12 of the Farm       
    Vlakvarkfontein 213 IR district of Witbank from Razorbill Properties        
269 (Pty) Limited ("Razorbill") ("Vlakvarkfontein acquisition");            
-    the Prospecting Rights over Portion 10 of the Farm Bankfontein 216 IR      
    district of Witbank from Vuselela Mining (Pty) Limited ("Vuselela")         
    ("Bankfontein acquisition "); and                                           
-    the Prospecting Rights over Portions 8,9 & 10 of the Farm Mooiplaats       
    165 JS Mpumalanga province from Vuselela ("Mooiplaats acquisition")         
    (collectively "the coal rights acquisitions").                              
2.   RATIONALE FOR THE COAL RIGHTS ACQUISITIONS                                 
Wescoal is involved in the coal washing and coal trading business, with         
coal being sourced from mines and other suppliers. The coal rights              
acquisitions will enable Wescoal to source its own coal for its washing         
operation thereby substantially reducing input costs and in addition will       
provide the trading operations with significant additional tonnage.             
The coal rights acquisitions are also in line with Wescoal`s stated             
objective of expanding into the fast growing coal mining industry to derive     
benefit from the high inland and export pricing structures. By becoming a       
primary producer of coal product, Wescoal can enter new markets such as         
export, Eskom and the cement industry.                                          
3.   DESCRIPTION OF THE COAL RIGHTS ACQUISITIONS                                
From previous prospecting carried out on the properties, the following          
limited information is available:                                               
-    Portion 16 of the farm Vlakvarkfontein 213 IR - an indicated resource      
    of 1,8 million tons and an inferred resource of 238,000 tons of Eskom       
    grade coal.                                                                 
-    Portion 12 of the farm Vlakvarkfontein 213 IR - an inferred resource       
    of 1,9 million tons of high grade thermal coal;                             
-    Portion 10 of the farm Bankfontein 216 IR - an inferred resource of        
    5,1 million tons of high grade thermal coal.                                
-    Portions 8,9 & 10 of the farm Mooiplaats 165 IS - sufficient               
    information available to indicate the presence of coal but                  
    insufficient for any additional comment.                                    
4.   TERMS AND CONDITIONS OF THE COAL RIGHTS ACQUISITIONS                       
On 7 April 2008 Wescoal concluded agreements for the purchase of the coal       
rights acquisitions, subject to the fulfilment of the conditions precedent      
in 5 below, with effect from the date the conditions precedent have been        
fulfilled ("effective date").                                                   
The purchase consideration for each of the respective coal rights               
acquisitions are as follows:                                                    
-    Vlakvarkfontein acquisition - an amount of R 9 211 470 payable by the      
    issue of 8 608 850 Wescoal ordinary shares at 107 cents per share. The      
purchase price is based on 1 842 294 mineable tons at a price of R 5        
    per ton;                                                                    
-    Bankfontein acquisition - a maximum of R 15 000 000 payable by the         
    issue of Wescoal ordinary shares at 107 cents per share. The final          
price will be determined based on the quantity of mineable coal as          
    determined by a Competent Persons Report ("CPR") multiplied by R 5 per      
    mineable ton; and                                                           
-    Mooiplaas acquisition - a maximum of R 15 000 000 payable by the issue     
of Wescoal ordinary shares at 107 cents per share. The final price          
    will be determined based on the quantity of mineable coal as                
    determined by a CPR multiplied by R 5 per mineable ton.                     
5.   CONDITIONS PRECEDENT TO THE COAL RIGHTS ACQUISITIONS                       
The coal rights acquisitions are subject to the fulfilment of the following     
conditions precedent:                                                           
-    Completion of a due diligence investigation to the satisfaction of         
Wescoal;                                                                        
-    The compilation of a CPR and pre-feasibility study to the satisfaction     
    of Wescoal;                                                                 
-    Wescoal obtaining all the necessary regulatory approvals including any     
    consents required under the relevant mining legislation including           
Section 11 transfer in terms of the Minerals and Petroleum and              
    Resources Act, 2002 and Competition Commission approval; and                
-    The Securities Regulation Panel granting Waterberg Portion Property        
    Investments (Pty) Limited a waiver from any obligation to extend an         
offer to Wescoal shareholders as a consequence of these transactions.       
6.   PRO FORMA FINANCIAL EFFECTS                                                
The unaudited pro forma financial effects are provided for illustrative         
purposes only to provide information about how the coal rights acquisitions     
may have impacted on Wescoal`s results and financial position.  Due to the      
nature of the unaudited pro forma financial information, it may not give a      
fair presentation of the group`s results and financial position after the       
coal rights acquisitions.                                                       
The unaudited pro forma financial effects are based on the reviewed             
financial information for the six months ended 30 September 2007 as             
announced on SENS on 24 October 2007.                                           
The unaudited pro forma financial effects have been included in terms of        
the JSE Listings Requirements.  The directors of Wescoal are responsible        
for the preparation of the unaudited pro forma financial effects.               
                    Reviewed        Unaudited pro   % Change                    
                    results for     forma after                                 
the six months  the coal                                    
                    ended 30        rights                                      
                    September 2007  acquisitions                                
                                     30 September                               
2007                                        
Earnings per share  7.3             5.40            -26%                        
(cents) (1)                                                                     
Headline earnings   7.1             5.25            -26%                        
per share (cents)                                                               
(1)                                                                             
Fully diluted       7.2             5.38            -25%                        
earnings per share                                                              
(cents) (1)                                                                     
Fully diluted       7.1             5.24            -26%                        
headline earnings                                                               
per share (cents)                                                               
(1)                                                                             
Net asset value     51.11           65.34           28%                         
per share (cents)                                                               
(2)                                                                             
Net tangible asset  16.46           39.59           141%                        
value per share                                                                 
(cents) (2)                                                                     
Shares in issue     105 931         142 577                                     
(`000)                                                                          
Weighted average    104 972         141 618                                     
number of shares                                                                
(`000)                                                                          
Fully diluted       105 472         142 118                                     
weighted average                                                                
number of shares                                                                
(`000)                                                                          

Notes:                                                                          
(1)  The unaudited pro forma financial effects on the results were prepared     
    on the basis that the acquisition of the coal rights acquisitions was       
completed on 1 April 2007.                                                  
(2)  The unaudited pro forma financial effects on the financial position        
    were prepared on the basis that the coal rights acquisitions were           
    completed on 30 September 2007.                                             
(3)  It is assumed that no income and profits after taxation has been           
    earned on the coal rights acquisitions.                                     
(4)  The "after the acquisition" column has been adjusted to include the        
    issue of 36 646 234 new ordinary shares at 107 cents per share.             
Although in the short term the coal rights acquisitions will decrease the       
earnings per share of Wescoal due to the dilutionary impact of the              
additional shares issued, it is expected that in the medium term                
substantial profits will be generated from these acquisitions.                  
7.   RELATED PARTY TRANSACTION                                                  
Messrs Robinson Ramaite and Mpumelelo Sikhosana, directors of Wescoal, have     
an equity interest in Razorbill and Vuselela through their BEE company          
Waterberg Portion Property Investments (Pty) Limited and is therefore           
regarded as a related party to Wescoal in terms of the Listing Requirements     
of the JSE Limited ("Listing Requirements"). Accordingly the coal rights        
acquisitions are a related party transaction in terms of the Listing            
Requirements.                                                                   
The requirements to be met for a related party transaction in terms of the      
Listing Requirements will only be known once the final acquisition price        
has been determined. It could however include a fairness opinion from the       
Designated Advisor.                                                             
8.   WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT                                      
Caution is no longer required to be exercised by shareholders when dealing      
in their securities.                                                            
9.   FURTHER ANNOUNCEMENT                                                       
Shareholders will be notified of the progress of the acquisitions including     
the related party transaction implications.                                     
Johannesburg                                                                    
10 April 2008                                                                   
Designated adviser       Exchange Sponsors                                      
Attorneys                Kim Warren, Rambau & Associates                        
Date: 10/04/2008 11:19:04 Supplied by www.sharenet.co.za                     
Produced by the JSE SENS Department                             .                  
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information disseminated through SENS.                                          



                                        
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