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PGL - Pallinghurst Resources Limited - Pallinghurst announces transformational
Tshipi/ Jupiter transaction
PALLINGHURST RESOURCES LIMITED
(Previously Pallinghurst Resources (Guernsey) Limited)
(Incorporated in Guernsey)
(Guernsey registration Number: 47656)
(South African external company registration number 2009/012636/10)
Share code on the BSX: PALLRES ISIN: GG00B27Y8Z93
Share code on the JSE: PGL
("Pallinghurst" or the "Company")
Pallinghurst announces transformational Tshipi/ Jupiter transaction
1 Introduction
The Directors are pleased to announce that, subject to the conditions
precedent set out in paragraph 8 hereafter ("Conditions Precedent"), the
Company will exchange its indirect interest in Tshipi e Ntle Manganese
Mining (Pty) Ltd ("Tshipi") for new shares in Jupiter Mines Limited
("Jupiter") (the "Proposed Transaction"). The Proposed Transaction is
expected to transform Jupiter into a significant manganese and iron ore
explorer and developer.
2 Key features of the Proposed Transaction
Under the terms of the Proposed Transaction, Jupiter will acquire a
collective 49.90% interest in Tshipi from the Company and certain co-
investors (collectively, the "Pallinghurst Co-Investors") and in return
will issue 1,160,363,867 new shares to the Pallinghurst Co-Investors at a
price of 21.10 Australian cents per share (based on the 30 day volume
weighted average price of Jupiter shares prior to this announcement).
Tshipi`s implied valuation is therefore approximately AUD490 million.
Jupiter`s proposed acquisition of 49.9% of Tshipi has an implied value of
AUD245 million.
Following the implementation of the Proposed Transaction, the Company will
be issued with 179,247,878 new Jupiter shares equating to approximately
US$35.8 million. The Company`s current interest in Jupiter is 92,899,165
shares, or 25.15% of the total 369,386,471 Jupiter shares in issue. The
Company will therefore own, in total, 272,147,043 shares, or 17.79% of the
1,529,750,338 shares then in issue, following the Proposed Transaction.
Other key features of the Proposed Transaction include:
* The Proposed Transaction has the unanimous approval of the Jupiter Board;
* Following implementation, Brian Gilbertson will join the Jupiter Board as a
non-executive Director.
3 Rationale for the Proposed Transaction
Competition for raw material supplies (particularly iron ore, coking coal
and manganese) to the global steel industry is intensifying and the major
steel producers are seeking to secure their raw material supplies through
equity ownership of mining companies. Pallinghurst has been developing a
Steel Feed Corporation ("SFC") investment platform through Tshipi and
Jupiter, for the supply of manganese and iron ore. It therefore makes
sense for these two assets to be housed in the same company.
The Proposed Transaction significantly accelerates the Company`s SFC
strategy, which will result in Jupiter owning the following assets;
* Manganese: Tshipi and Oakover, Jupiter`s 890km2 manganese project in the
East Pilbara region of Western Australia; and
* Iron ore assets in the Central Yilgarn, a region with significant potential
for further discoveries and the consolidation of existing exploration
tenements.
Additional benefits include the following:
* Potential future product and marketing synergies between the ore that could
potentially be mined at Oakover and at Tshipi;
* The transaction fast-tracks the transformation of Jupiter from an
exploration company into a production development company;
* Jupiter will be one of the very few ASX-listed companies with a large
manganese resource.
4 Background to the Company`s existing investment in Tshipi
The Company currently owns a 9.98% indirect interest in Tshipi. Tshipi is
a joint venture between the Company and the Pallinghurst Co-Investors (who
collectively own 49.9% of Tshipi) and Ntsimbintle Mining (Pty) Limited
("Ntsimbintle"), a Black Economic Empowerment consortium (who own the
remaining 50.1%).
Tshipi`s primary asset is located in the south of South Africa`s Kalahari
basin, contiguous to Samancor Manganese (Proprietary) Limited`s Mamatwan
Mine. The Tshipi manganese project is an extension of the Mamatwan ore
body, which has been mined for over 45 years.
The results of the recent feasibility study concluded on the Tshipi
property, carried out by Turgis Consulting (Proprietary) Limited, were
announced on 18 June 2009. The study estimated an indicated mineral
resource of 61.82Mt at 37.07% Mn, and an inferred mineral resource of
101.41Mt at 37.11% Mn (total 163.23Mt) (SAMREC compliant) of open-pit
"Mamatwan-type" ore, to a depth of 250 metres.
The feasibility study estimated that project construction could commence in
2010, to achieve steady state production by early 2013, in line with
expected rail and port infrastructure developments. Present estimates are
that the open pit mine life would be over 60 years at expected production
rates, excluding deeper ore contained within the project area. A "fast
track" mine development schedule with earlier logistics options is under
investigation and could result in an earlier entry to market.
5 Previous part disposal of partial interest in Tshipi to POSCO
Effective 1 July 2009, the Company disposed of an indirect interest of
2.27% in Tshipi for US$6.9 million to a subsidiary of South Korean steel
major, POSCO, resulting in its remaining indirect interest in Tshipi being
reduced to 7.71%. The disposal remains subject to certain conditions.
Shareholders are referred to the Company`s announcement on 1 July 2009 for
more details.
6 Calculation of unrealised gain on conclusion of Proposed Transaction
Number of Closing US$/AUD Amount (US$)
Jupiter Jupiter rate on
shares share 25
received price in February
AUD on 25 2010*
February
2010*
Fair value of
assets disposed of
to Jupiter
Fair value of 7.71% indirect (23,079,501)
shareholding in
Tshipi vended into Jupiter
Fair value of 179,247,878 0.225 0.887 35,754,231
consideration
received
Fair value of
Jupiter shares
receivable
Gain on implementation of Proposed 12,674,730
Transaction
The actual results of the completion of the Proposed Transaction could be
materially different from the estimated figures disclosed above as the US$/ AUD
foreign exchange rate and the Jupiter share price may vary substantially from
those prevailing on 25 February 2010. Additionally, the effects of the
potential gain on the Proposed Transaction above ignores any related tax and
transaction costs, as these have not yet been determined, and may be
significant.
7 Financial effects of the Proposed Transaction on the Company
The unaudited pro forma financial effects set out in the table below have
been prepared to enable the Company`s shareholders to assess the impact of
the Proposed Transaction on the Company`s key earnings measures (earnings
per share, headline earnings per share, diluted earnings per share, net
asset value ("NAV") and tangible NAV per share) for the 6 month period
ended 30 June 2009. For the purposes of these calculations, there is no
difference between earnings, headline earnings and diluted earnings per
share, nor between NAV and tangible NAV per share.
The pro forma financial effects have been calculated based on the
assumption that the adjustments were effective from 1 January 2009 for
income statement purposes and 30 June 2009 for balance sheet purposes These
pro forma financial effects have been prepared for illustrative purposes
only and because of the nature of the calculations they may not fairly
present the impact of the Proposed Transaction on the Company`s financial
position at 30 June 2009, or on the income statement for the period from 1
January 2009 to 30 June 2009.
The Directors of the Company are responsible for the preparation of the
financial effects of the Proposed Transaction on the Company`s key earnings
measures as illustrated below. All scenarios are assumed to be at 30 June
2009. These financial effects have not been reviewed by the Company`s
auditors.
Befor Scena Scena Scenario Scenari Scenar Scena
e rio 1- rio 1- 2- o 2-% io 3- rio 3-
Propo inclu % Includin change Includ %
sed ding chang g impact includi ing chang
Trans impac e of ng impact e
actio t of inclu US$100 impact of from
n- at Propo ding million of US$100 scena
30 sed impac rights US$100 millio rio
June Trans t of offer, million n 24
20091 actio Propo but rights rights
n2 sed excludin offer, offer,
Trans g but and
actio Proposed excludi Propos
n2 Transact ng ed
ion3 Propose Transa
d ction4
Transac
tion3
(US$) (US$) % (US$) % (US$) %
Earning 0.11 0.17 45.05 0.06 (48.04% 0.09 45.05
s per % ) %
share,
headlin
e
earning
s per
share
and
diluted
earning
s per
share
NAV and 0.76 0.81 6.75% 0.60 (21.61% 0.62 4.47%
tangibl )
e NAV
per
share
Earning 28,13 40,80 45.05 28,134,3 0% 40,809 45.05
s 4,361 9,091 % 61 ,091 %
Net 187,8 200,5 6.75% 283,431, 50.87% 296,10 4.47%
asset 61,60 36,33 820 6,550
value 0 0
Number 247,2 247,2 0% 475,803, 92.45% 475,80 0%
of 32,48 32,48 860 3,860
shares 4 4
in
issue
Notes
1 The "Before" column has been extracted from the Company`s interim financial
statements for the six month period to 30 June 2009, as published on the
Securities Exchange News Service of the JSE Limited ("SENS"). These
results were reviewed by the Company`s auditors, Saffery Champness.
The results and annual financial statements for the financial year to 31
December 2009 will be released during March 2010.
2 The "Scenario 1- including impact of Proposed Transaction" column includes
the pro forma financial effects of the Proposed Transaction on the
Company`s key earnings measures from the 30 June 2009 reviewed interim
financial statements.
3 The "Scenario 2- Including impact of US$100 million rights offer, but
excluding Proposed Transaction" column shows the pro forma financial
effects of the Company`s capital raising of US$100 million by way of a
renounceable rights offer on the Company`s key earnings measures. The
Company carried out a renounceable rights offer to raise around US$100
million to pursue the strategic objectives for each investment platform.
The rights offer was announced on SENS on Tuesday, 11 August 2009 and the
rights offer circular was posted to Pallinghurst shareholders on Monday, 7
September 2009. The rights offer circular included a pro forma financial
effects table, which applied the impact of the rights offer to the audited
31 December 2008 annual results. The Company released its 30 June 2009
reviewed interim financial statements on 22 September 2009 and therefore
shareholders are likely find the illustration of the impact of the Proposed
Transaction on the Company`s key earnings measures at 30 June 2009 more
relevant. The same assumptions as used in the pro forma effects
calculation in the circular have been used; that ZAR800 million equates to
US$100 million (using an FX rate of ZAR8: US$1), and that transaction costs
of US$4,429,780 were incurred.
Scenario 2 excludes the impact of the Proposed Transaction.
4 The "Scenario 3- After Proposed Transaction" column includes the pro forma
financial effects of both the Company`s US$100 million capital raising, and
the impact of the Proposed Transaction on the company`s key earnings
measures from the 30 June 2009 reviewed interim financial statements. The
% change column therefore illustrates to shareholders the specific impact
of the Proposed Transaction, which is a 4.47% increase in NAV per share.
8 Conditions Precedent
The Proposed Transaction is subject to certain Conditions Precedent,
including:
* The satisfactory completion by Jupiter of an Independent Expert Report,
technical asset evaluation and legal due diligence investigation, all of
which have commenced;
* The formalisation of comprehensive agreements including (but not limited
to) share sale agreement and shareholder agreements between the relevant
parties;
* Approval by Jupiter shareholders at an Extraordinary General Meeting, which
is expected to occur in May 2010;
* Formal approval by Ntsimbintle and waiver of any necessary pre-emptive
rights; and
* Approval, to the extent required of the applicable regulatory and statutory
bodies, including but not limited to the Australian Foreign Investment
Review Board (FIRB).
9 Categorisation of transaction
In terms of the Listings Requirements of the JSE Limited the Proposed
Transaction has been categorised as a Category 2 transaction.
Pallinghurst Chairman Brian Gilbertson commented:
"Pallinghurst recognises Jupiter`s significant potential. This transaction
provides commodity and geographical diversification, and fast tracks Jupiter`s
transition from explorer to a developer and producer".
Pallinghurst Chief Executive Arne H. Frandsen, commented:
"As well as being a transformational transaction for Jupiter, Tshipi will also
benefit from operating within a listed platform as it progresses nearer to
production. This is a key step in our Steel Feed Corporation strategy, and will
realise significant value for shareholders."
Guernsey
1 March 2010
Investment bank and sponsor
Investec Bank Limited
Date: 01/03/2010 09:02:10 Supplied by www.sharenet.co.za
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