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Scl - Sacoil - Acquisition Of A 55% Participating Interest In The Exploration

Release Date: 11/05/2010 07:05:43      Code(s): SCL
SCL - SacOil - Acquisition of a 55% participating interest in the exploration   
permit for the gas potential chaal permit area, tunisia and cautionary          
announcement                                                                    
SacOil Holdings limited                                                         
(Formerly SA Mineral Resources Corporation Limited)                             
Registration No 1993/000460/06                                                  
ISIN Number ZAE000127460                                                        
JSE Code SCL                                                                    
Incorporated in the Republic of South Africa                                    
("SacOil" or "the company")                                                     
ACQUISITION OF A 55% PARTICIPATING INTEREST IN THE EXPLORATION PERMIT FOR THE   
GAS POTENTIAL CHAAL PERMIT AREA, TUNISIA AND CAUTIONARY ANNOUNCEMENT            
Introduction                                                                    
SacOil shareholders are advised that a farm-out agreement was reached on 10 May 
2010 ("the Agreement") in terms of which SacOil will, subject to the conditions 
precedent set out below, acquire a 55% participating interest in the Chaal      
Permit Area ("the Acquisition"). The Chaal Permit Area is potentially one of    
Tunisia`s most significant future gas resources.                                
The Chaal Permit Area                                                           
Chaal is a potential world class gas condensate discovery located onshore       
central Tunisia some 25 kms to the west of Tunisia`s second largest city, Sfax. 
Candax Energy Inc. ("Candax") together with its partners and the Tunisian       
Government are actively pursuing the deep gas resources at Chaal and in the     
Triassic reservoirs lying beneath the producing fields in the south of the      
country.                                                                        
The Chaal field covers approximately 1 200 square kilometres. Gas condensate    
was discovered there in the early 1960s. In 2006 a further well was drilled     
("the Chaal 1 Well") and encountered significant gas shows. The Chaal permit is 
within close proximity of established excess capacity gas pipeline              
infrastructure and gas markets (both local and international) where excess      
demand exists.                                                                  
Prior to the implementation of the transactions contemplated in the Agreement,  
the participants in the Chaal Permit Area ("the Participants") and their        
respective interests ("Participating Interests") are:                           
Falcan Chaal Petroleum Limited ("Falcan"), a company registered in Barbados     
and wholly owned by Candax, a company listed on the Toronto Stock Exchange      
(60%);                                                                          
Societe de Maintenance d`Installations Petrolieres ("SMIP"), a Tunisian         
company (20%); and                                                              
MCX North Africa Co., Limited ("Mitsubishi"), a company wholly owned by         
Mitsubishi Corporation, a public company registered in Japan (20%).             
Following the implementation of the transactions contemplated in the Agreement  
(with Falcan and SMIP having assigned part of their respective interests to     
SacOil), the Participants and their Participating Interests would be:           
SacOil                                    55.00%                                
Falcan                                    18.75%                                
SMIP                                       6.25%                                
Mitsubishi                                20.00%                                
Candax Energy Inc.                                                              
In April 2010, Candax completed its investment agreement with Geofinance NV, an 
international upstream oil and gas company ("Geofinance"). Under the terms of   
the investment agreement, Geofinance with its Acquisition of common stock and   
assuming the exercise of all its warrants (inter alia) would control Candax and 
therefore Falcan.                                                               
Rationale                                                                       
The directors of SacOil believe that the Chaal Permit Area has the potential to 
be a world-class resource of gas/condensate. Tunisia has historically been a    
stable country. Tunisia also imports gas from Algeria in order to adequately    
provide for its growing requirements.                                           
The infrastructure within Tunisia is good and there is a major gas trunk line   
(with excess capacity) that passes some 15 kilometres to the east of the        
present exploration well.                                                       
SacOil was able to enter as a Participant on favourable terms in the light of   
the project`s need for funding. The Agreement is a farm-in position, in terms   
of which SacOil agrees to refund Falcan and SMIP, a portion of their past costs 
and to provide an advance to cover the estimated costs of the planned forward   
work programme. The "Work Programme" in this instance is re-entry or the        
drilling of a sidetrack to the Chaal 1 Well, followed by a stimulation and      
testing programme. In exchange for this, Falcan and SMIP will assign part of    
their interests to give SacOil to give it a majority stake in the project.      
Once the project is cash positive, SacOil will receive a preferential recovery  
of its inputs.                                                                  
Terms of the Agreement                                                          
Assigning Participants                                                          
Subject to fulfilment of the conditions precedent set out below ("Conditions    
Precedent"), Falcan and SMIP respectively will assign to SacOil an undivided    
41.25% and 13.75% Participating Interest in the exploration permit and other    
governing agreements relative to the Chaal Permit Area.                         
Fulfilment date                                                                 
The fulfilment date will be the date on which the Conditions Precedent are      
fulfilled or waived, where waiver is allowed by the Agreement. The final        
date for fulfilment of the suspensive conditions is 15 July 2010 or such        
later date as may be agreed in writing by the Parties.                          
Consideration                                                                   
SacOil shall pay Falcan and SMIP within seven days of the fulfilment date an    
amount of USD250 000 (approximately R1.875 million at an exchange rate of       
R7.50/USD) to Falcan and SMIP in proportion to the percentage assigned by each  
of them.                                                                        
SacOil shall pay a further amount to Falcan and SMIP of USD4.75 million         
(approximately R33.25 million at an exchange rate of R7.50/USD) in the same     
proportions by no later than 30 days following the approval by the relevant     
Tunisian authorities of a development plan for the Chaal Permit Area.           
Payment of costs of the Work Programme                                          
In addition to the above consideration, SacOil shall bear a share proportional  
to its 55% Participating Interest of the costs of the Work Programme, plus the  
first USD2.0 million (approximately R15.0 million at an exchange rate of        
R7.50/USD) of the proportionate costs of Falcan and SMIP. Thereafter all        
parties shall contribute pro rata.                                              
Recovery of expenditures                                                        
Once the project enables the recovery of expenditures on exploration, SacOil    
will be entitled to preferential repayment of certain of the amounts paid out   
by it.                                                                          
Operator                                                                        
Falcan will be the operator of the Work Programme. SacOil shall have the right  
to request Falcan to resign as operator on completion of the Work Programme and 
shall during the conduct of the Work Programme be entitled to second employees  
to the programme and assume reasonable management, technical and financial      
control thereof.                                                                
Conditions precedent                                                            
The Agreement is subject to the fulfilment or waiver by not later than 15 July  
2010 of the following principal conditions precedent:                           
the consent of the relevant Tunisian authorities to the assignment of the       
Participating Interest to SacOil;                                               
the parties to the production sharing agreement and the joint operating         
agreement in respect of the Chaal Permit Area agreeing to SacOil becoming a     
party thereto;                                                                  
SacOil furnishing Falcan with a letter of credit or acceptable                  
undertaking/guarantee for USD6.4 million (approximately R48.0 million at an     
exchange rate of R7.50/USD) to be utilised in the Work Programme;               
Falcan obtaining an extension of one year from 25 May 2010 for the relevant     
exploration permit;                                                             
approval to the extent necessary of the relevant South African authorities,     
including the South African Reserve Bank and the JSE Limited ("JSE");           
SacOil completing a legal due diligence investigation to its satisfaction;      
approval of the Agreement by a resolution of the shareholders of SacOil in a    
general meeting; and                                                            
consent of Candax`s banker to the extent required.                              
Warranties                                                                      
Falcan and SMIP have given warranties normal for a transaction of this nature.  
Funding                                                                         
SacOil has obtained institutional support to enable it to fund its obligations  
under the Agreement.                                                            
Categorisation of the Acquisition                                               
The Acquisition is categorised as a category 1 transaction in terms of the JSE  
Listings Requirements and will require approval by SacOil shareholders in       
general meeting.                                                                
Financial effects of the Acquisition                                            
SacOil is in the process of preparing a table showing the pro forma financial   
effects of the Acquisition on SacOil`s net assets and net tangible assets as    
well as on earnings. Such table will be published as soon as it becomes         
available.                                                                      
Posting of circular                                                             
A circular containing the full details of the Acquisition and a notice of       
general meeting to obtain shareholder approval of the Acquisition will be       
posted to shareholders in due course.                                           
Cautionary announcement                                                         
SacOil shareholders are advised to exercise caution when dealing in their       
SacOil securities until a further announcement is made detailing the financial  
effects of the Acquisition.                                                     
Johannesburg                                                                    
11 May 2010                                                                     
Sponsor                                                                         
SASFIN CAPITAL                                                                  
(A division of Sasfin Bank Limited)                                             
Corporate finance adviser to SacOil                                             
LONSA                                                                           
Legal adviser to SacOil                                                         
DENEYS REITZ ATTORNEYS                                                          
Date: 11/05/2010 07:05:42 Supplied by www.sharenet.co.za                     
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