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Trans Hex Group Limited
(Incorporated in the Republic of South Africa)
(Registration number 1963/007579/06)
(Code: TSX)
(ISIN: ZAE000018552)
("Trans Hex")
'logo'
Mvelaphanda Diamonds (Proprietary) Limited
(Incorporated in the Republic of South Africa)
(Registration number 1998/025635/07)
("Mvela Diamonds")
PROPOSED ISSUE BY TRANS HEX OF 16 MILLION UNSECURED PARTICIPATING
COMPULSORILY CONVERTIBLE DEBENTURES TO MVELA DIAMONDS
1. INTRODUCTION
Standard Corporate and Merchant Bank and RMB Resources are authorised to
announce that, subject to the fulfilment of certain conditions precedent,
Trans Hex will issue 16 million unsecured participating compulsorily
convertible debentures ("the debentures") to Mvela Diamonds ("the debenture
issue"). On conversion of the debentures into Trans Hex ordinary shares,
Mvela Diamonds will control 19,4% of Trans Hex. Mvela Diamonds currently
controls 3,8% of Trans Hex.
Pursuant to an unrelated transaction, Mvela Diamonds holds an option to
acquire 5 million Trans Hex ordinary shares from Remgro Limited ("the
option"). Assuming Mvela Diamonds exercises the option and upon conversion
of the debentures, Mvela Diamonds will control 24,5% of Trans Hex.
2. OVERVIEW OF MVELA DIAMONDS
Mvela Diamonds is focused on diamond mining and exploration, primarily in
southern Africa. Its strategy is to ensure the meaningful participation of
historically disadvantaged persons in southern Africa's diamond resources
and it seeks to add significant value to the assets over which it has
influence. Mvela Diamonds' shareholders reflect a broad base of historically
disadvantaged South Africans and include:
* Mvelaphanda Holdings (Proprietary) Limited;
* Woman's Development Bank Investment Company (Proprietary) Limited;
* Makana Investment Company (Proprietary) Limited;
* Mabutho Investment Company (Proprietary) Limited;
* The Steve Biko Foundation;
* Sedibeng Mining (Proprietary) Limited; and
* a trust incorporating a large number of historically disadvantaged
persons.
Mvela Diamonds entered the diamond arena in 1999 when it acquired a 34,9%
shareholding in Gem Diamond Corporation Limited ("Gem"). Gem subsequently
merged with Trans Hex resulting in Mvela Diamonds obtaining control over
3,8% of Trans Hex. In 2000, Mvela Diamonds secured an option over Benguela
Concessions Limited ("Benguela"), a marine and alluvial diamond mining and
exploration company, which owned 7% of Diamond Fields International Limited
("DFI"). Benguela merged with Trans Hex in March 2000.
* * * * *
3. ADVANTAGES ACCRUING TO TRANS HEX FROM THE DEBENTURE ISSUE
Trans Hex's growth strategy is focused on building its diamond-resource base
through the acquisition of new projects, principally in southern Africa.
The acquisition by Mvela Diamonds of a significant interest in Trans Hex
will* accord with the principal objectives of the proposed Minerals
Development Bill and* provide Trans Hex with a competitive advantage in
acquiring projects in southern Africa.
Mvela Diamonds was instrumental in the merger of Benguela, Gem and Trans
Hex. These transactions resulted in Trans Hex significantly increasing its
mineral resources and reserves. In addition, Mvela Diamonds has secured
various additional diamond prospecting rights together with Trans Hex. Mvela
Diamonds is committed to the development of further alluvial and marine
diamond projects in South Africa and Namibia via Trans Hex.
The debenture issue will therefore play a crucial role in the fulfilment of
Trans Hex's growth strategy.
4. SALIENT FEATURES OF THE DEBENTURE ISSUE
The salient features of the debenture issue are detailed below.
Terms and conditions of the debentures
The primary terms and conditions attaching to the debentures are, inter
alia, as follows:
* the issue price will be R9,50 per debenture;
* the total consideration payable by Mvela Diamonds for the debentures is
R152 million in cash;
* the debentures will confer on Mvela Diamonds the right to receive
interest, in arrears, calculated at the rate of 13,5% per annum of the issue
price of each debenture, provided that where the pre-tax amount of any
dividend per ordinary share declared by Trans Hex exceeds the debenture
interest amount per debenture for that period, the interest per debenture
shall be increased to equal the pre-tax amount of the dividend payable in
respect of each ordinary share. The formula to be used in determining the
pre-tax amount of any dividend shall be as follows: Di = D(1+TSTC)/(1-Tc)
where: Di = Pre-tax amount of dividend; = dividend paid
D = Dividend paid;
TSTC = Secondary tax on companies rate;
Tc = Corporate tax rate; and
* each debenture will be compulsorily converted into one Trans Hex ordinary
share on the sixth anniversary date of its issue, provided that Mvela
Diamonds shall be entitled to require that all or any of the debentures be
converted into ordinary shares, in the same ratio, at such earlier date as
it determines. Trans Hex will not be entitled to anticipate the conversion
date of the debentures.
Pricing of the debentures
* The issue price of the debentures represents an 11% premium to the 60 day
weighted average quoted Trans Hex share price on the JSE Securities Exchange
South Africa ("JSE") for the 60 days immediately prior to the publication on
15 December 2000 of the first cautionary announcement in respect of the
debenture issue.
Use of the debenture proceeds
The debenture proceeds will be used to fund Trans Hex's capital expenditure
obligations in respect of the marine joint venture in Namibia with DFI, as
well as its capital expenditure in respect of land operations.
5 PRO FORMA FINANCIAL EFFECTS OF THE DEBENTURE ISSUE
The pro forma financial effects per Trans Hex share for the year ended 31
March 2001 are as follows:
Before the After the
debenture issue debenture issue
% decrease
Net asset value per
share (cents) 705,0 701,2 (0,54%)
Net tangible asset
value per share (cents) 618,4 614,7 (0,60%)
Earnings per share (cents) 155,5 151,8 (2,38%)
Fully diluted earnings
per share (cents) 151,7 138,7 (8,57%)
Headline earnings
per share (cents) 154,1 150,3 (2,47%)
Notes:
1. The "Before the debenture issue" figures are as disclosed in or are
derived from the audited Annual Financial Statements of Trans Hex for the
year ended 31 March 2001.
2. The "After the debenture issue" figures have been calculated based on the
following assumptions:
* the debentures are not converted in the first year after being issued,
except for the fully diluted earnings per share figure which has been
calculated on the assumption that the debentures were converted on 1 April
2000; and
* the proceeds of the debentures earn interest at the average rate for a 3-
month NCD of 10,58% for the full financial year ended 31 March 2001 and a
tax rate of 30%.
6. RELATED PARTY TRANSACTION
In terms of the JSE Listings Requirements, Mvela Diamonds is a related party
to Trans Hex. Consequently, it will not be entitled to vote its current
indirect shareholding in Trans Hex at the shareholders meeting which will be
convened to approve the debenture issue.
7. STOCK EXCHANGE LISTINGS
Application will be made for the listing on the JSE and Namibian Stock
Exchange of the Trans Hex ordinary shares arising from the conversion of the
debentures. The application will be made at the time of the conversion. The
debentures will not be listed.
8. FINANCING OF THE DEBENTURE ISSUE
Mvela Diamonds is currently in negotiations regarding the provision of the
funding necessary for Mvela Diamonds to subscribe for the debentures. It is
anticipated that these negotiations will be completed in the near future.
BOARD OF DIRECTORS
Mvela Diamonds will be entitled, upon the issue of the debentures, to
appoint 3 directors to the board of directors of Trans Hex.
9. CONDITIONS PRECEDENT
The debenture issue is subject to the fulfilment of the following conditions
precedent:
Mvela Diamonds obtaining the funding necessary to subscribe for the
debentures;
* the approval by the requisite majority of Trans Hex shareholders in
general meeting of the special and ordinary resolutions required to approve
and implement the debenture issue;
* the registration by the Registrar of Companies of the special resolutions
referred to above; and
* such regulatory approvals as may be required to implement the debenture
issue.
10. FAIR AND REASONABLE OPINION
Investec Bank Limited has been appointed by the board of directors of Trans
Hex to express an opinion on the fairness and reasonableness of the
debenture issue. The contents of such opinion will be contained in the
documentation to be posted to shareholders.
11. DOCUMENTATION AND MEETING
Documentation, which is subject to the approval of the JSE, containing full
details of the debenture issue including the full debenture terms and a
notice of general meeting will be posted to shareholders in due course.
Parow
29 August 2001
Joint merchant banks to Mvela Diamonds
SCMB
RMB
Independent financial adviser to Trans Hex shareholders
Investec
Attorneys to Mvela Diamonds
Werksmans
Attorneys to Trans Hex
Deneys Reitz
Sponsor to Trans Hex in South Africa
RMB
Sponsoring broker to Trans Hex in Namibia
Jolyon Irwin'
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