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WSL - Wescoal Holdings Limited - Announcement of offer by Wescoal to acquire

Release Date: 28/11/2011 12:31:03      Code(s): WSL
WSL - Wescoal Holdings Limited - Announcement of offer by Wescoal to acquire    
51% of the share capital of Ezimbokodweni Mining Proprietary Limited , the      
owner of the Pegasus Project and cautionary announcement                        
WESCOAL HOLDINGS LIMITED                                                        
(Incorporated in the Republic of South Africa)                                  
(Registration number 2005/006913/06)                                            
JSE Share code: WSL & ISIN: ZAE000069639                                        
("Wescoal" or "the Company")                                                    
PROJECT, AND CAUTIONARY ANNOUNCEMENT                                            
1.   INTRODUCTION                                                               
Shareholders are advised that on 25 November 2011, Wescoal made an offer to     
acquire from HSTI 17 Proprietary Limited ("HSTI"), 51% of the issued            
ordinary share capital of EZIM and 51% of EZIM`s liabilities ("the              
transaction"), on terms and conditions set out below. The offer has been        
accepted by HSTI.                                                               
The transaction is a related party transaction, as Mr R Ramaite and Mr W        
Khumalo, who hold the position of Chairman and non-executive directors of       
Wescoal respectively, have a financial interest in HSTI.                        
EZIM owns:                                                                      
*    the prospecting right in relation to Mineral Area 2 (a portion of          
Mineral Area 1) of the farm Geluk 276, Registration Division JS,            
    Mpumalanga Province, measuring 919.0666 hectares; and                       
*    the surface rights in relation to portion 2 of the farm Geluk 276,         
    Registration Division JS, Mpumalanga Province, measuring 250 hectares,      
registered under Deed of transfer number T80810/89)                         
("Pegasus project").                                                            
The Pegasus project was previously owned by BHP Billiton Energy Coal South      
Africa ("BECSA"). The project is an undeveloped export quality thermal coal     
deposit with a measured resource of approximately 15 million tons and is        
situated 10 km from Witbank contiguous to the Exxaro Inyanda colliery.          
Pegasus is a shallow coal deposit with an average strip ratio of 1,46,          
comprising the number 2 upper, number 2 lower and number 1 coal seams of the    
Witbank coalfields.                                                             
3.   RATIONALE FOR THE TRANSACTION                                              
The acquisition is in line with Wescoal`s stated goals of securing high         
quality coal resources that can be mined by the opencast method to increase     
production and sustainability.                                                  
It is anticipated that the Pegasus project will come on stream during 2014      
and will continue for 8 to 10 years thereafter. The main product of the         
project will be a low-phosphorus coal to be sold into the metallurgical         
industry thereby commanding a price premium. The coal not meeting the           
required specifications will be sold into the export market. The ultra low      
stripping ratio will result in low cost opencast mining and will ensure the     
project is at the low end of the cost curve.                                    
There was intense competition from local and international coal mining          
companies to secure the Pegasus project, as the reserve is known industry       
wide, as the last great coal resource available in the Witbank and              
Middelburg coalfields. An independent high-level valuation of the Pegasus       
project commissioned by Wescoal and conducted by Mineral Corporation            
Consultancy Proprietary Limited, based on the Monte Carlo simulation            
indicates a current value range of between R593 million and R946 million.       
The valuation further indicates that, with additional capital investment to     
bring the project into full production, the valuation as an operating           
concern could be significantly increased.                                       
Jointly Wescoal and HTSI are engaging local and international companies who     
have expressed interest in acquiring the balance of 49% of the Pegasus          
project and who will bring the necessary financial support to develop the       
4.   DETAILS OF THE OFFER                                                       
4.1 Offer                                                                       
4.1.1     Wescoal offers to purchase 51% of the issued share capital of EZIM    
         from HSTI for an amount of R102,2 million by the issue of 140 000      
         000 Wescoal ordinary shares at an issue price of 73 cents per          
         share to HSTI;                                                         
4.1.2     Wescoal will loan EZIM R4 million on signing the main agreement       
         between Wescoal and HSTI.  The loan will bear interest at the          
         prime interest rate; and                                               
4.1.3     Wescoal will settle the R54 million payment to Bisischi Mining PLC    
referred to in 4.1.5 below.                                            
EZIM will have the following liabilities and obligations:                       
4.1.4     Liabilities arising from its BECSA sale agreement of R294 million     
         of which R 44 million is payable on section 11 approval;               
4.1.5     R54 million owing to Bisischi Mining PLC payable on obtaining the     
         section 11 approval.                                                   
4.2 Conditions precedent                                                        
The transaction will be subject to the fulfillment of inter alia the            
following conditions precedent:                                                 
*    Ministerial consent in terms of section 11 of the MPRD Act;                
*    Directors and shareholders` approval from Wescoal and HSTI;                
*    The successful conclusion of a formal written agreement;                   
*    A due diligence investigation by Wescoal;                                  
*    Other regulatory approvals including Competition Commission, JSE and       
*    Obtaining a waiver from the TRP requiring HSTI shareholders to make an     
offer to Wescoal shareholders; and                                          
*    Fair and reasonable opinion from an independent expert as this is a        
    related party transaction.                                                  
5.   DETAILED ANNOUNCEMENT AND CAUTIONARY                                       
A detailed announcement will be made once a formal agreement has been signed    
which will include the financial effects. Shareholders are advised to           
exercise caution in dealing in the company`s securities on the JSE until        
such time as the detailed announcement is made.                                 
6.   FURTHER CAUTIONARY ANNOUNCEMENT                                            
Shareholders are advised that Wescoal is still in negotiations, unrelated to    
the transaction detailed in this announcement, which if successfully            
concluded, may have a material effect on the price of the company`s             
securities.  Accordingly, shareholders are advised to continue exercising       
caution when dealing in the company`s securities until a full announcement      
is made.                                                                        
Exchange Sponsors                                                               
28 November 2011                                                                
Date: 28/11/2011 12:31:03 Supplied by www.sharenet.co.za                     
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