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Wsl - Wescoal - Acquisition Of Khanyisa Mine And Further Cautionary Announcement

Release Date: 24/06/2009 15:19:01      Code(s): WSL
WSL - Wescoal - Acquisition of Khanyisa Mine and Further 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 company")                                                    
ACQUISITION OF KHANYISA MINE AND FURTHER CAUTIONARY ANNOUNCEMENT                
1.   INTRODUCTION                                                               
Shareholders are referred to the cautionary announcements dated 12 May 2009 and 
6 April 2009.                                                                   
Wescoal Mining (Pty) Limited, a wholly owned subsidiary of Wescoal has, subject 
to the conditions precedent set out below, purchased from Nucoal Mining (Pty)   
Limited ("Nucoal Mining") the business of Nucoal of conducting a mining         
operation at Portions 96, 97 and 99 Heuwelfontein 215 IR under the name and     
style of Khanyisa Mine ("Khanyisa Mine") and certain specified assets and       
liabilities ("the business") ("the proposed acquisition").                      
2.   RATIONALE                                                                  
As an ongoing strategy, Wescoal continues to seek additional coal resources to  
build an asset base and sustainability. Since the depletion of the Schoongezicht
operation, Wescoal has been sourcing its run of mine ("ROM") from Khanyisa Mine 
and the washing yields have been proven to be good and constant. The acquisition
of the business has the advantages of:                                          
-    Substantially reduced ROM input costs;                                     
-    No capital expenditure requirements as the mine is operational;            
-    Significantly increased sustainability of constant quality ROM;            
-    Added capability of doubling the current 40,000 tons per month processing  
    capacity when required; and                                                 
-    Ability to enter new markets that require the sustainability afforded by   
    this acquisition.                                                           
3.   DESCRIPTION OF THE BUSINESS                                                
Khanyisa Mine is an operating opencast mine situated near Kendal in Mpumalanga  
with remaining measured in situ coal reserves totalling 4, 5 million tons and   
further indicated resources of 0, 5 million tons. The mine has 2 operational    
opencast pits currently extracting 100,000 tons per month with the necessary    
infrastructure such as offices and access roads but does not process coal on    
site. Mining activity is currently sub-contracted and will remain as such for   
the foreseeable future.                                                         
4.   TERMS AND CONDITIONS OF THE PROPOSED ACQUISITION                           
On 23 June 2009 Wescoal concluded an agreement ("acquisition agreement") for the
purchase of the business, subject to the fulfilment of the conditions precedent 
in 6 below, with effect from 1 August 2009.                                     
The purchase consideration for the business is R36.5 million, subject to a      
maximum purchase price of R42.5 million payable as follows:                     
-    R25 million within 7 days of the effective date, payable in cash; and      
-    The balance up to a maximum of R11.5 million and a minimum of R8.8 million,
    payable in cash on the first anniversary of the effective date.             
If Wescoal decides to mine the coal in situ on portion 99 of the Farm           
Heuwelfontein 215 IR ("portion 99"), then Wescoal is obliged to pay Nucoal the  
maximum of R8 per tonne of coal actually mined from portion 99 limited to a     
maximum of R6 million.                                                          
5.   FUNDING OF THE PROPOSED ACQUISITION                                        
The purchase price will be funded through the existing cash resources of the    
company.                                                                        
6.   CONDITIONS PRECEDENT TO THE PROPOSED ACQUISITION                           
The proposed acquisition is subject to the fulfilment of inter alia the         
following conditions precedent:                                                 
-    Approval by Wescoal`s board of directors ;                                 
-    Wescoal obtaining all the necessary regulatory approvals, including        
    Competition Commission approval;                                            
-    Wescoal completing a due diligence to its satisfaction on the business;    
-    Wescoal receiving a Competent Persons Report in connection with mineable   
    reserves;                                                                   
-    Nucoal furnishing Wescoal with written confirmation from the Department of 
Mineral and Energy Affairs that both the contract concluded between Nucoal  
    and BSM Mining (Pty) Limited and the cession and assignment of such         
    contract to Wescoal comply with the provisions of the Mineral and Petroleum 
    Resources Development Act 28 of 2002;                                       
-    Nucoal concluding certain agreements with certain parties as described in  
    the acquisition agreement;                                                  
-    Nucoal ceding and assigning all contracts with certain parties to Wescoal  
    as described in the acquisition agreement;                                  
-    Nucoal obtaining written confirmations regarding payments of contracts from
    certain parties as described in the acquisition agreement;                  
-    Nucoal terminating certain agreements with certain parties as described in 
    the acquisition agreement;                                                  
-    Nucoal obtaining written confirmation from a certain supplier that it has  
    no claim whatsoever against the business or Wescoal;                        
-    Nucoal furnishing Wescoal with a special resolution passed by their        
    shareholders in terms of Section 228 of the Companies Act,1973, authorising 
the sale of the business to Wescoal; and                                    
-    Notices in terms of Section 34 (1) of the Insolvency Act, 24 of 1926 as    
    amended being published.                                                    
7.   PRO FORMA FINANCIAL EFFECTS                                                
Financial effects will be published as soon as possible.                        
8.   FURTHER CAUTIONARY ANNOUNCEMENT                                            
Shareholders are advised to continue exercising caution in dealing in the       
company`s securities on the JSE until such time as the financial effects of the 
transaction are published.                                                      
9.   FURTHER ANNOUNCEMENT                                                       
Shareholders will be notified once the proposed acquisition has become          
unconditional.                                                                  
Designated Adviser:                                                             
Exchange Sponsors                                                               
Johannesburg                                                                    
24 June 2009                                                                    
Date: 24/06/2009 15:19:01 Supplied by www.sharenet.co.za                     
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