WSL - Wescoal Holdings Limited - Acquisition of The Elandspruit Reserve and Release Date: 10/08/2010 09:01:59 Code(s): WSL
WSL - Wescoal Holdings Limited - Acquisition of The Elandspruit Reserve 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 THE ELANDSPRUIT RESERVE AND FURTHER CAUTIONARY ANNOUNCEMENT
Shareholders are referred to the cautionary announcement dated 30 June 2010.
Wescoal Mining (Pty) Limited, a wholly owned subsidiary of Wescoal has, subject
to the conditions precedent set out below, purchased from South African Mining
Management (Pty) Limited, the shares and loan accounts of its wholly owned
subsidiary Nungu Trading 341 (Pty) Limited ("Nungu"). Nungu owns specified
assets and prospecting rights situated on Portions 4 and 23 Elandspruit 291 JS
("Elandspruit reserve") ("the proposed acquisition").
Following on the success of its Khanyisa Mine acquisition and the bullish long
term view on the coal industry, Wescoal has outlined its objectives as follows:
Position Wescoal to become a primary coal producer with a strong trading arm
rather than the historical coal trading company with a production facility;
Ensure sustainability of the mining activities and the results produced;
Aim to mine four million tons of run of mine ("ROM") per annum;
Increase beneficiated product available to the trading division and into the
inland market; and
Increase product available for Eskom.
This acquisition will contribute to achieving each of these goals as the 11, 6
million ton resource will allow Wescoal to establish a fully fledged mining
operation with beneficiation facilities including a washing plant capable of
processing 1, 8 million tons of ROM per annum. In addition, it is envisaged
that, crushing and screening plants, together with middlings from the washing
plant, will be capable of producing 1- 2 million tons of Eskom product per
annum. The expected life of mine is six years, however the stated resources
cover approximately 65% of the property and further drilling should extend the
life of mine beyond the current six year level.
DESCRIPTION OF THE ELANDSPRUIT RESERVE
Elandspruit 291 JS, portions 4 and 23, are situated approximately five
kilometres southwest of Middelburg, Mpumalanga adjacent to the Shanduka
Townlands coal mine and bordered by the R555 Witbank/Middelburg Road. It is a
Greenfields project with an indicated resource of 11,611,559 tons of thermal
coal, the bulk of which can be mined through the opencast method.
The prospecting right was granted in October 2006 with prospecting being done to
an indicated resource level. Of this indicated resource, 4.3 million tons is
metallurgical type coal, 4.1 million tons thermal coal suitable for the inland
and/or export markets with the remainder being Eskom type product.
The mining right application for the project was submitted in 2008, accepted by
the Department of Mineral Resources in January 2009 and it is expected that the
mining right will be granted in the next few months. This will ensure that
mining operations will begin before the reserves at Khanyisa are depleted.
TERMS AND CONDITIONS OF THE PROPOSED ACQUISITION
On 5 August 2010 Wescoal concluded an agreement ("acquisition agreement") for
the purchase of Nungu, subject to the fulfilment of the conditions precedent in
6 below, with effect from 1 December 2010 ("effective date").
The purchase consideration for Nungu is R45 million, payable as follows:
R25 million on the effective date, payable in cash; and
The balance of the purchase price will be payable by the issue of 17 391 304 new
ordinary Wescoal shares at 115 cents per share.
FUNDING OF THE PROPOSED ACQUISITION
The cash portion of the purchase price will be funded from existing cash
resources of the company.
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
Wescoal completing a due diligence investigation to its satisfaction on the
Elandspruit reserve and Nungu;
Wescoal receiving a Competent Persons Report in connection with the resources of
the Elandspruit reserve;
Nungu furnishing Wescoal with written approval from the Department of Mineral
and Energy Affairs for the transfer of the shares in Nungu to Wescoal; and
Nungu concludes agreements, to the satisfaction of Wescoal, with the surface
rights owners of the property to obtain the right of access to the Elandspruit
reserve for mining purposes.
PRO FORMA FINANCIAL EFFECTS
Financial effects will be published as soon as the information has been obtained
CLASSIFICATION OF THE TRANSACTION AND ANNOUNCEMENTS
The acquisition is classified as a Category 1 transaction. Shareholders will be
informed once the circular is mailed of the date of the general meeting to
approve the transaction.
9. 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.
10 August 2010
Date: 10/08/2010 09:01:59 Supplied by www.sharenet.co.za
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