Wrap Text
PGL - Pallinghurst - Acquisition Of A Controlling Interest In Platmin Limited
Pallinghurst Resources (Guernsey) Limited
Registration Number: 47656
(Incorporated in Guernsey)
ISIN: GG00B27Y8Z93
BSX share code: PALLRES
JSE share code: PGL
("Pallinghurst" or the "Company")
ACQUISITION OF A CONTROLLING INTEREST IN PLATMIN LIMITED
Proposed Transaction highlights
- Delivering control of Platmin to the PGM Consortium and the PGM SPV, who
on completion of the Proposed Transaction will acquire a shareholding of
69.84% in Platmin
- Providing a publicly listed platform to potentially consolidate PGM SPV`s
PGM interests
- Significant milestone in achieving Pallinghurst`s stated strategic
objectives, including the exchange of PGM SPV`s unlisted indirect
investment in Boynton into Platmin shares
- Providing sufficient equity funding to Platmin (USD 175 million) to
complete its core Pilanesberg Platinum Mine construction
- As a consequence of the Proposed Transaction, Standard Bank has agreed to
roll and provide Platmin with a bridge facility of up to R450 million
until 31 December 2009
- Platmin will be fully funded, unhedged and lowly leveraged with first
production of PGM concentrate scheduled for March 2009 - targeting up to
250,000 oz of PGMs per annum (150,000 oz of platinum)
- The Pilanesberg Platinum Mine will be an open cast, lowest cost-quartile
PGM producer with cash costs of approximately USD 400/oz (3PGE + Au)
after base metal credits and with operating margins of approximately 40%
at prevailing spot PGM basket prices
- Implementing the Moepi Exchange will simplify the Platmin corporate
structure and provide Platmin with a 100% interest in Boynton and control
over its cash flows
- Platmin`s growth projects on the eastern limb of the BIC provide upside
potential when PGM prices recover
- Pallinghurst raises approximately R335 million to fund the PRGL
Entitlement through the Vendor Placement at a price of ZAR 4.30 per
share, a 4.23% discount to the 3 day VWAP per share on 9 December 2008
CEO of Pallinghurst Arne H. Frandsen said: "The Platmin transaction is an
important step forward in broadening our participation in PGMs. We are
creating a new low cost producer in the Western Bushveld, which is totally
unhedged with attractive further consolidation potential. Our firm focus
initially however will be on getting the Pilanesberg Platinum Mine into
production - on time and within budget".
1. Introduction
In its pre-listing statement dated 13 August 2008, the Company announced
that Pallinghurst (Cayman) GP L.P. (the "Investment Manager"), had
concluded, for and on behalf of the Company and certain strategic equity
partners (collectively, "PGM Consortium") an agreement with the Bakgatla-
Ba-Kgafela Tribe ("Bakgatla") to create a broad-based and black-
controlled company for their respective platinum group metals ("PGM`)
interests ("PGM SPV"). PGM SPV is currently 50.1% held by the Bakgatla
and 49.9% by the PGM Consortium and was formed specifically for the
purpose of establishing PGM SPV as a highly attractive investment vehicle
for exploiting value enhancing investment opportunities in the PGM
industry.
As its founding investment, on 24 December 2007, the Investment Manager,
for and on behalf of PGM SPV, concluded an agreement with the vendors of
Moepi Group (Proprietary) Limited ("Moepi") to acquire 100% of the shares
in Moepi. Moepi currently holds an aggregate indirect 27.61% interest
("Boynton Interest") in Boynton Investments (Proprietary) Limited
("Boynton"), a private company, whose primary assets are situated in the
Western Limb of the Bushveld Igneous Complex ("BIC"), north of the
Pilanesberg, South Africa and controlled by Platmin Limited ("Platmin"),
a Toronto Stock Exchange ("TSX") and Alternative Investment Market of the
London Stock Exchange listed explorer and emerging PGM producer.
Platmin`s four key projects include the Pilanesberg Platinum Mine,
M`phahlele, Grootboom and Loskop.
The Pilanesberg Platinum Mine is Platmin`s core project and is currently
under construction, having made a smooth transition from advanced
exploration into the development phase and is positioned and remains on
schedule to become an independent, lowest cost-quartile PGM producer,
within budget and within 10 months from full production.
2. The Proposed Transaction
On 9 December 2008, the PGM Consortium, PGM SPV and the Bakgatla entered
into an investors and subscription agreement (the "Agreement") with
Platmin to:
- acquire, by way of private placement, a total of 258,416,038 new
common shares in Platmin ("Common Shares"), equivalent to 69.84% of
the total issued share capital of Platmin, through the two tranches
described below for a gross acquisition consideration of
approximately USD 125 million and R500 million, respectively (an
aggregate of approximately USD 175 million):
- First Tranche: By no later than 19 December 2008, PGM
Consortium will subscribe for and be issued 184,886,627 Common
Shares, by way of a private placement at a price of CAD 0.85
(or R6.80) per Common Share, for an acquisition consideration
of USD 125 million, pursuant to which it will hold 62.36% of
the total issued share capital of Platmin ("PGM Consortium
Subscription"); and
- Second Tranche: By no later than 31 March 2009, the Bakgatla,
through PGM SPV, or the PGM Consortium, as the case may be,
will subscribe for and be issued 73,529,411 Common Shares, by
way of a private placement at a price of R6.80 (CAD 0.85 based
on the exchange rate on 8 December 2008) per Common Share, for
an acquisition consideration of R500 million ("Bakgatla
Subscription"),
- exchange the Moepi Interest, by no later than 31 March 2010 and
subject to certain conditions, including the implementation of the
PGM Consortium and Bakgatla Subscription, for new common shares in
Platmin ("Moepi Exchange"), pursuant to which Platmin will hold 100%
of Boynton.
The net proceeds of the PGM Consortium and Bakgatla Subscription will be
used principally to complete the development of the Pilanesberg Platinum
Mine. PGM Consortium and PGM SPV`s investment in Platmin through the
Proposed Transaction is intended primarily to provide Platmin with the
required funding to complete the project.
The Investment Manager, for and behalf of the Company, has secured
Pallinghurst an entitlement to acquire an effective indirect 12.92%
interest in Platmin through the PGM Consortium, post the PGM Consortium
and Bakgatla Subscription, for an effective pro rata acquisition
consideration of USD 32.3 million ("PRGL Entitlement").
3. Background to the Proposed Transaction
Pursuant to the acquisition of the Moepi Interest, the Investment
Manager, for and on behalf of PGM SPV, has been actively engaging with
Platmin management in an endeavour to increase its exposure to Platmin on
terms mutually acceptable to both parties. During such negotiations,
Platmin had intended to secure the requisite funding to complete the
Pilanesberg Platinum Mine by way of a project loan facility to be
underwritten by The Standard Bank of South Africa Limited ("Standard
Bank") and Standard Chartered Bank. As a consequence of the simultaneous
deterioration of global credit market conditions and PGM commodity
prices, it became apparent to Platmin that such a facility could not be
obtained on the terms originally envisaged. In addition, on 14 May 2008,
Boynton entered into a R350 million bridge loan facility with Standard
Bank ("Bridge Loan") which was repayable on 31 December 2008 (having been
extended from 1 December 2008). As a consequence of the pending Bridge
Loan repayment and other contractual arrangements relating to the
development and construction of the Pilanesberg Platinum Mine, Platmin
faced serious financial difficulty. In the absence of the Proposed
Transaction, Platmin did not expect to meet its abovementioned
obligations.
In this context, the Investment Manager, for and on behalf of the PGM
Consortium and PGM SPV, approached Platmin with an equity offering as an
alternative to a project loan facility, at which time Platmin established
a committee of independent directors to evaluate the Proposed
Transaction. In this regard, the board of directors of Platmin has
accepted and agreed with the recommendations of the committee of
independent directors, acting in good faith, that Platmin faced serious
financial difficulty, that the Proposed Transaction has been designed to
improve the financial position of Platmin and that the terms of the
Proposed Transaction are reasonable under the circumstances. Pursuant to
the signature of the Agreement, Platmin has received credit approval from
Standard Bank to roll and provide Platmin with a bridge facility of up to
R450 million until 31 December 2009.
Under Part VI of the TSX Company Manual, absent an exemption, Platmin
shareholder approval in connection with the Proposed Transaction is
required on the grounds that the issuance of 184,886,627 Common Shares
under the PGM Consortium Subscription will result in the PGM Consortium
controlling 62.36% of the issued and outstanding common shares of
Platmin, thereby resulting in a deemed material affect on control of
Platmin. Platmin is applying to the TSX for an exemption from such
shareholder approval on the basis of the financial hardship exemption
pursuant to section 604(e) of the TSX Company Manual ("Financial Hardship
Exemption"). Completion of the Proposed Transaction is subject to the
approval of the TSX and all other necessary regulatory approvals, as well
as customary closing conditions, including delivery of a legal opinion
and the reconstitution of the board of directors of Platmin. In addition,
the Common Shares issuable pursuant to the Proposed Transaction will be
subject to the applicable four month regulatory hold periods under
Canadian securities laws.
4. Rationale for the Proposed Transaction
It is the Investment Manager`s stated strategic objective of logically
developing the PGM properties north of the Pilanesberg through a series
of logically sequenced transactions in order to create a highly
attractive PGM investment vehicle. Currently the PGM Consortium, PGM SPV
and the Bakgatla have a direct interest in the three neighbouring PGM
projects situated in the Western limb of the BIC, namely the Pilanesberg
Platinum Mine, Sedibelo and Magazynskraal (collectively, the
"Properties"). The Properties have been delineated by traditional farm
boundaries which do not allow for the most optimal mining plan. Potential
exists to unlock significant value and extract synergies by optimising
the Properties, sharing plant infrastructure and mining the ore bodies as
a combined property. In this context, Platmin, which plays a pivotal role
in the abovementioned strategic objective, has been adversely impacted by
the global credit crunch and equity market meltdown, and accordingly
presented a unique opportunity to implement the Proposed Transaction and
allow PGM SPV to deliver its stated strategic initiative.
The Investment Manager believes the Proposed Transaction:
- provides a publicly listed platform to potentially consolidate PGM
SPV`s PGM interests;
- presents a significant milestone in achieving the Investment
Manager`s stated strategic objectives, including the exchange of PGM
SPV`s unlisted indirect investment in Boynton into Platmin shares;
- provides the PGM Consortium and the PGM SPV with control of Platmin;
- provides Platmin with sufficient equity funding to complete the
Pilanesberg Platinum Mine construction;
- ensures Platmin will be fully funded, unhedged and lowly leveraged
with first production of PGM concentrate scheduled for March 2009 -
targeting up to 250,000 oz of PGMs per annum (150,000 oz of
platinum);
- provides access to an open cast, lowest cost-quartile PGM producer
with cash costs of approximately USD 400/oz (3PGE + Au) after base
metal credits and with operating margins of approximately 40% at
prevailing spot PGM basket prices;
- facilitates the Moepi Exchange thereby simplifying the Platmin
corporate structure and providing Platmin with a 100% interest in
Boynton and control over its cash flows; and
- provides upside potential through Platmin`s growth projects on the
eastern limb of the BIC.
Keith Liddell, incoming Chairman of Platmin commented: "We look forward
to working with PGM Consortium, the Bakgatla and our other stakeholders
to complete the development of the Pilanesberg Platinum Mine and take
Platmin to its next stage of corporate development".
Brian Gilbertson, Chairman of Pallinghurst said: "The demand for PGMs
will be huge in years to come, and so we are pleased to increase our
ownership of this robust venture, which is about to commence production,
and which holds the promise of future growth via regional consolidation".
5. Mechanics of the Proposed Transaction
5.1 PGM Consortium Subscription
The PGM Consortium will subscribe for 184,886,627 Common Shares at a
price of CAD 0.85 (R6.80) per Common Share, for a total
consideration of approximately USD 125 million, based on the
exchange rate on 8 December 2008. Subject to the requisite
regulatory approvals, the closing date for the PGM Consortium
Subscription is expected to be no later than 19 December 2008. Upon
closing of the PGM Consortium Subscription, the PGM Consortium will
hold approximately 62.36% of the then issued and outstanding common
shares of Platmin.
Brian Gilbertson and Arne H. Frandsen, Chairman and CEO of
Pallinghurst respectively, will join the board of directors of
Platmin on completion of the PGM Consortium Subscription.
5.2 Bakgatla Subscription
Pursuant to the Agreement, Platmin will issue 73,529,411 Common
Shares to the Bakgatla, through PGM SPV, or to the PGM Consortium,
as the case may be, on or before 31 March 2009 at a price per Common
Share of R6.80 (CAD 0.85 based on the exchange rate on 8 December
2008) for a total consideration of R500 million.
PGM SPV will be the subscriber for the Bakgatla Subscription if, on
or before 20 March 2009:
- Platmin has inwardly listed ("Inward Listing") its shares for
trading on the securities exchange of the JSE Limited ("JSE");
- PGM SPV receives the approval of the Exchange Control Division
of the South African Reserve Bank ("SARB") for the Bakgatla
Subscription and the Inward Listing, and
- certain other conditions are satisfied.
If the above conditions have not been satisfied prior to 20 March
2009 then PGM Consortium will subscribe for the Bakgatla
Subscription in place of PGM SPV on 31 March 2009 through the
advance of either USD 50 million or R500 million to Plamin.
If PGM SPV is the subscriber of the Bakgatla Subscription, then the
PGM Consortium will transfer 73,235,880 Common Shares into PGM SPV
in order to maintain the 50.1% and 49.9% Bakgatla and PGM Consortium
ownership ratio of PGM SPV.
Upon completion of the PGM Consortium and Bakgatla Subscription, PGM
Consortium and/or PGM SPV will collectively hold approximately
258,416,038 Common Shares, representing 69.84%, of the then issued
and outstanding common shares of Platmin.
5.3 Moepi Exchange
The subsidiaries and affiliates of Moepi, being Moepi Platinum
(Proprietary) Limited, Moepi Uranium (Proprietary) Limited and
Sengani Family Mining and Exploration (Proprietary) Limited
(collectively, "Moepi Group") collectively hold 27.61% of the issued
and outstanding shares of Boynton. PGM SPV, through its wholly-owned
subsidiary Moepi, currently holds an effective 25.13% indirect
interest in Boynton through the Moepi Group.
Pursuant to the Agreement, the Moepi Group will, by 31 March 2010,
and subject to certain conditions, including the implementation of
the PGM Consortium and Bakgatla Subscription, exchange the Boynton
Interest for new common shares in Platmin. The maximum number of
common shares in Platmin to be issued to the Moepi Group is capped
at 27.61% of Platmin`s then issued and outstanding common shares,
which would be approximately 141,100,000 common shares. The formula
to determine the number of common shares to be received by the Moepi
Group on implementation of the Moepi Exchange is set out in the
Agreement (determined, inter alia, by reference to the net present
value of the Pilanesberg Platinum Mine) and will be calculated by an
independent investment bank at the time thereof.
The Moepi Exchange is conditional upon, inter alia, the approval of
the TSX given Platmin`s application for the use of the Financial
Hardship Exemption and the contingency of requiring the approval of
the SARB and the South African Department of Minerals and Energy,
which approvals are expected to take up to one year to obtain.
6. Vendor Placement
In accordance with the terms of the investment management agreement
concluded between the Company and the Investment Manager, the Investment
Manager has presented and recommended to the Company the exercise of the
PRGL Entitlement, which participation has been approved by the Company`s
board of directors. In this context, the Company is pleased to announce
that it has recently successfully concluded a road show to existing and
prospective investors ("Road Show") to raise the requisite funding to
facilitate the exercise of the PRGL Entitlement in accordance with the
vendor placement provisions of the Listings Requirements of the JSE
("Vendor Placement").
6.1 New Pallinghurst Shares
In terms of the Vendor Placement Pallinghurst will allot and issue
77,916,484 new Pallinghurst shares ("Vendor Placement Shares") at an
issue price of R4.30 per Vendor Placement Share ("Issue Price")
raising a total of R335 million ("Pallinghurst Vendor
Consideration").
The Issue Price represents a discount of 4.23% and 4.66% to the 3
business day volume weighted average closing price ("VWAP") of the
Company of R4.44 and R4.51 respectively, being the closing prices on
the date of signature of the Agreement and the business day
immediately prior to the approval by the board directors of
Pallinghurst of the Vendor Placement.
Arne H. Frandsen, CEO of Pallinghurst said: "The successful
implementation of the vendor placement, at a minimal discount to the
Company`s prevailing market price under adverse market conditions,
demonstrates the robustness of both Pallinghurst and the Platmin
transaction and is a vote of confidence in the Company`s strategic
vision and investment objectives".
The Pallinghurst Vendor Consideration will be utilised by the
Company to exercise the PRGL Entitlement and to cover the Company`s
direct costs associated with the Proposed Transaction.
The Vendor Placement Shares will be listed in the "Investment
Instruments - Equity" sector of the JSE under the abbreviated name
"PGL" on or about Friday, 19 December 2008.
6.2 Irrevocable undertakings
In relation to the Vendor Placement the Company has received
irrevocable undertakings, from existing and prospective investors,
to subscribe for the Vendor Placement Shares at the issue price.
7. Conditions precedent
The Proposed Transaction and Vendor Placement are unconditional and no
regulatory or other approvals are required other than:
- obtaining the approval from the TSX for Platmin to issue the Common
Shares pursuant to the Financial Hardship Exemption; and
- Obtaining the approval from the JSE for the listing of the Vendor
Placement Shares.
8. Financial effects of the Proposed Acquisition
The table and the accompanying notes below set out the unaudited pro
forma financial effects of the Proposed Transaction. The unaudited pro
forma financial effects are based on the published, unaudited, condensed
consolidated interim financial statements of Pallinghurst for the six-
month period ended 30 June 2008 which has been adjusted for the effects
of the Proposed Transaction.
The unaudited pro forma financial effects of the Proposed Transaction are
the responsibility of the directors of Pallinghurst and are presented for
illustrative purposes only to provide information about how the Proposed
Transaction might have impacted on the financial position and results per
share for the six-month period ended 30 June 2008. As a result, the pro
forma financial effects may not provide a fair reflection of the
financial position and results of Pallinghurst subsequent to the Proposed
Transaction.
USD Before After Change
Per Pallinghurst Share (cents) (cents)( (%)
(1,3) 2, 4)
Earnings 0.28 0.19 -31.6%
Headline earnings 0.28 0.19 -31.6%
Net asset value 1.30 1.02 -21.3%
Tangible net asset value 1.30 1.02 -21.3%
Number of shares in issue (`000) 247,232 46.0%
169,316
Weighted average number of 247,232 46.0%
shares (`000) 169,316
Notes:
1. The earnings and headline earnings per share, as set out in the
"Before" column, are based on the latest condensed consolidated
interim financial statements for the six-month period ended 30 June
2008.
2. The earnings and headline earnings per share, as set out in the
"After" column, are based on the latest condensed and consolidated
interim financial statements for the six-month period ended 30 June
2008 and have only been adjusted as a result of the increased
weighted average number of shares in issue subsequent to the
implementation of the Proposed Transaction.
3. The net asset value and tangible asset value per share, as set out
in the "Before" column, are based on the latest condensed and
consolidated interim financial statements for the six-month period
ended 30 June 2008.
4. The net asset value and tangible net asset value per share, as set
out in the "After" column, are based on the latest condensed and
consolidated interim financial statements for the six-month period
ended 30 June 2008 which have been adjusted for the effects of the
Proposed Transaction and assumes the following:
4.1 the number of Vendor Placement Shares issued were based on a
Pallinghurst share price of R4.30 to which an exchange rate of
ZAR 10.058 : USD 1 has been applied, resulting in an issue
price of USD 0.43 per Pallinghurst Vendor Placement Share;
4.2 the Vendor Placement Shares (based on a Pallinghurst share
price of USD 0.43) were issued on 30 January 2008; and
4.3 The Pallinghurst Vendor Consideration will be utilised by the
Company to exercise the PRGL Entitlement and to cover the
Company`s direct costs associated with the Proposed
Transaction.
9. Documentation
A copy of the presentation material presented on the Road Show,
incorporating an unaudited directors` valuation of the Company`s existing
investment portfolio and unaudited cash reconciliation to 30 November
2008, can be found on Pallinghurst Resources LLP`s website
(www.pallinghurst.com) (Pallinghurst Resources LLP is the investment
adviser to the Investment Manager).
10. Conference call with Pallinghurst
Arne H. Frandsen, CEO of Pallinghurst will host a conference call at
12h00 South African time on 11 December 2008 to discuss the Proposed
Transaction. The purpose of the conference call does not constitute an
offer to sell or issue, nor does will it constitute any solicitation of
any offer to purchase or subscribe for shares in the Company.
Participants must call +27 11 535 3600, and ask to join the Pallinghurst
call.
11 December 2008
Guernsey
Investment bank and sponsor Legal advisers in South
to the Company Africa
(Investec Bank logo) (ENS logo)
Joint financial advisors to Legal advisers in Toronto
PGM SPV
(Investec Bank logo) (Tory`s logo)
(RFA logo)
Investment Adviser Legal advisers in Guernsey
(Pallinghurst logo) (Ozannes logo)
Pallinghurst Resources LLP
Date: 11/12/2008 08:53:12 Supplied by www.sharenet.co.za
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