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Petra Mining Limited - Announcement Regarding:

Release Date: 25/05/2005 16:52
Code(s): PET
Wrap Text

Petra Mining Limited - Announcement Regarding: The Acquisition Of Springlake Holdings (Proprietary) Limited, And The Establishment Of An Anchor Black Economic Empowerment Consortium In Petmin PETRA MINING LIMITED (Incorporated in the Republic of South Africa) (Registration number 1972/001062/06) Share code: PET ISIN: ZAE000010237 ("Petmin" or "the company" or "the group") ANNOUNCEMENT REGARDING: THE ACQUISITION OF SPRINGLAKE HOLDINGS (PROPRIETARY) LIMITED, AND THE ESTABLISHMENT OF AN ANCHOR BLACK ECONOMIC EMPOWERMENT CONSORTIUM IN PETMIN 1. Introduction Shareholders are referred to the cautionary announcements dated 4 March 2005 and 26 April 2005 wherein it was announced that Petmin had entered into negotiations, which, if successfully concluded may have a material effect on Petmin"s share price. River Group is authorised to announce that Petmin has signed definitive agreements to acquire 100% of the shares in Springlake Holdings (Proprietary) Limited ("Springlake") for R108 236 000 from NAMF Nominees (Proprietary) Limited ("NAMF"), Clidet Number 537 (Proprietary) Limited, Umsombomvu (Proprietary) Limited and M R Snelling & Associates CC (collectively referred to "as the vendors"). Included in the purchase price consideration, Petmin will acquire 100% of the shareholder"s claims on loan account from NAMF for R48,0 million. The whole transaction is referred to as "the Springlake acquisition". 2. The Springlake acquisition 2.1 Introduction Springlake is a privately owned mining company with interests in various coal and anthracite mining interests in the Republic of South Africa. These interests include: - The Springlake Colliery situated within the Klipriver Coalfield at Dundee, which has a 29-year operating history and produces up to 1,1 million run-of- mine tonnes of anthracite per annum. Management"s current planning indicates a life of mine in excess of 12 years. - The Somkhele Project, which is a high quality anthracite deposit, located in KwaZulu-Natal near Richards Bay. This project is in its final bankable feasibility stage and a technical report, previously completed to Canadian National Instrument 43-101 guidelines in 2003, is being converted to comply with the requirements of SAMREC. Once developed, this project is expected to be one of the lowest cost producers of quality anthracite in South Africa. - The Baobab Tenements, also known as the Mopani/Soutpansberg Coalfields, is a green fields coking and steam coal deposit located near Musina. Springlake holds a 50% interest in the exploration tenements via a joint venture with Black Economic Empowerment ("BEE") company Motjoli Resources (Pty) Limited, chaired by Nchakha Moloi. Petmin is pleased to announce that the services of the experienced Springlake management team have been retained for a minimum period of five years from the effective date of the Springlake acquisition. The management team has a collective 19 years of experience with Springlake, and have extensive experience in the development and management of mining operations and the marketing of commodities. Springlake Colliery is served by an independent, SABS run, coal laboratory accredited to ISO 17025. The company has built a recognised brand around the name and logo of Springlake Colliery, with a reputation for consistency of quality and reliability of delivery, both of which are critical to the efficient running of smelter operations. The brand is also recognised in European household heating markets. The company also provides clients with technical support and advice for the appropriate use of their anthracite, specific to that client"s needs. 2.2 Terms of the Springlake acquisition and purchase consideration The purchase price payable will be settled by issuing 129 890 000 shares in the share capital of Petmin at 60 cents per share and R2 750 000 in cash on the closing date. In addition, the vendors have warranted that Tweewater Fuel (Proprietary) Limited, a wholly-owned subsidiary of Springlake and which trades under the name of Springlake Colliery, will have a net profit after tax for the 28 months ending June 2007 amounting to R53,6 million. Should this warranted net profit after tax be achieved, within a 15 % variance, 45 920 000 additional shares in the share capital of Petmin will be issued by Petmin at 60 cents per share to NAMF, Umsombomvu (Proprietary) Limited and M R Snelling and Associates CC, after the audited results to 30 June 2007 have been finalised. 2.3 Rationale for the Springlake acquisition Following its conversion from a cash company listed on the JSE Securities Exchange South Africa ("JSE") to a junior mining company in February 2004, Petmin stated its intention to acquire cash generative mining assets in the junior mining sector and to grow its shareholder base to over 50% held by Historically Disadvantaged South Africans ("HDSA"). Petmin has been investigating junior mining assets in the industrial, base mineral and bulk mineral categories that meet its investment criteria of being cash generative, profitable and with qualified, disciplined management. The directors of Petmin believe Springlake complies with all these criteria. Springlake brings to Petmin a strong cash generative resource from the Springlake Colliery, an advanced stage of bankable feasibility resource in Somkhele, with anticipated strong cash flows when it comes on stream, and a potentially large new coking coal resource in the Boabab Tenements. In addition, as with Petmin"s first acquisition of SamQuarz (Proprietary) Limited ("SamQuarz") in 2004, these acquisitions, with the assistance of the NAMF have allowed NAMF to fulfill part of its charter as a junior mining fund to fund BEE mining investments. Petmin"s acquisition of SamQuarz, allowed the company to achieve a 32% HDSA shareholder base, excluding shares held on behalf of HDSA investment companies by NAMF. The Springlake acquisition, together with Petmin"s further BEE initiative as discussed in paragraph 3, will take its HDSA shareholder base to over 50%, thus achieving one of the criteria to be fully empowered in terms of the Broad Based Socio-Economic Empowerment Charter for the South African Mining Industry ("the mining charter"). The Springlake acquisition also allows NAMF, who is a material shareholder in Petmin, to consolidate and reposition its shareholding in Petmin in the form of listed equity in Petmin, rather than the previously private equity investment it had in Springlake. 2.4 Conditions precedent The Springlake acquisition is subject, inter alia, to fulfilment of the following conditions precedent: - the completion of a due diligence to the satisfaction of the Petmin board of directors; - the obtaining of the approval of the JSE, the Securities Regulation Panel and the Competition Commission; - the approval of any other regulatory authorities and consents; and - the approval by Petmin"s shareholders in general meeting 3. The establishment of an anchor Black Economic Empowerment Consortium in Petmin Petmin has reached an agreement with Dark Capital (Proprietary) Limited ("Dark Capital"), an existing HDSA shareholder in Petmin, who become a shareholder and partially funded the Junior Loan in the Samquartz transaction through Swanvest 311 (Proprietary) Limited and NAMF. In terms of the agreement, Petmin, Dark Capital and NAMF will jointly cooperate to facilitate, enhance and consolidate the BEE shareholding in Petmin through a number of transactions that will result in an increase in the HDSA shareholding of Petmin and which will see the formation of a broad based HDSA consortium of Petmin shareholders, which will actively participate in the commercial activities of Petmin ("the BEE Consortium"). On conclusion of the under mentioned transactions and the Springlake acquisition, Dark Capital will take the initiative to establish the BEE Consortium under the chairmanship of Mr Alwyn Martin. Petmin is delighted by the involvement of Mr Martin, an HDSA individual who has distinguished himself, inter alia, in his capacity as a former chairman of Vodacom Group (Proprietary) Limited, a former director of Telkom SA Limited and a former Chief Executive of Siemens Telecommunications in South Africa. His current directorships include Trans Hex Group Limited and Medi-Clinic Corporation Limited. The deputy chairperson of the BEE Consortium will be Ms Lebo Mogotsi, a current non-executive director of Petmin. The transactions and initiatives which will coincide with the Springlake acquisition are set out below: - Dark Capital will acquire 8 333 333 Petmin shares from NAMF for a total cash consideration of R5 million. - NAMF will finance two Special Purpose Vehicles, to acquire 44 720 000 Petmin shares from NAMF at 60 cents per share. The shareholders of the Special Purpose Vehicles will be the current members of the BEE Consortium and Broad Based BEE entities, which will include HDSA members of the staff of Petmin and trusts established for the benefit of local communities in the areas where Petmin and its subsidiaries operate. - Petmin has agreed with Dark Capital to cancel 24,8 million existing Petmin options, which were purchased, inter alia, from NAMF, and to issue 7 million new Petmin options to Dark capital at 65 cents per option. These options are exercisable over a three-year period. Against implementation of these transactions, the BEE Consortium will hold over 30% of the Petmin issued shares and subsequent to the finalisation of the Springlake acquisition, in excess of 50% of Petmin will be held by HDSA entities resulting in Petmin being a black owned company as defined in the mining charter. Petmin acknowledges that "Ownership" is only one important component in transforming the South Africa mining industry. Once the Springlake acquisition is completed, and the above-mentioned transaction and initiatives are implemented, Petmin and the BEE Consortium will review and enhance the current Petmin strategy, to embrace the "spirit" of the charter, and to enable Petmin not only to be compliant, but also to exceed, the provisions of the mining charter. Petmin is confident that with the assistance of the BEE Consortium and NAMF, Petmin"s BEE initiative will diligently be pursued and will assist Petmin to develop over the next five years as one of the pre-eminent HDSA junior mining companies in Southern Africa. 4. Financial effects The Springlake acquisition is subject to a due diligence review and Competent Person"s Report being issued on the Springlake mining assets. Petmin will use these reports to determine the fair value of the Springlake assets acquired, as well as the pro forma effect on the net asset value and earnings per share of Petmin ("the pro forma financial information"). The directors of Petmin have therefore resolved to publish the pro forma effects of the acquisition only when the fair value of the assets has been finally determined, and will publish the pro forma financial information at that date, which is anticipated to be before 30 June 2005. 5. Categorisation of the transaction The acquisition of Springlake is categorised as a category 1 transaction in terms of section 9, and a related party transaction in terms of section 10.4 of the JSE Listings Requirements, as NAMF is a vendor of Springlake and a material shareholder in Petmin. A full circular to shareholders, including a fair and reasonable opinion from an Independent Professional Expert, will be dispatched to shareholders in due course. 6. Continuation of the Petmin cautionary announcements dated 4 March 2005 and 26 April 2005 As the pro forma financial effects of the Springlake acquisition have not been announced, shareholders are advised to continue exercising caution when dealing in the company"s securities until the pro forma financial effects of the acquisition have been announced. 25 May 2005 Pretoria Corporate Advisor and Sponsor River Group Date: 25/05/2005 04:52:46 PM Supplied by www.sharenet.co.za Produced by the JSE SENS Department

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