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SIM - Simmers - Posting of Circular to Simmers Shareholders in respect of the

Release Date: 02/03/2011 14:42
Code(s): SIM
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SIM - Simmers - Posting of Circular to Simmers Shareholders in respect of the implementation of the proposed transactions between Village and Simmers and withdrawal of cautionary Simmer & Jack Mines, Limited (Registration number 1924/007778/06) Share Code: SIM ISIN: ZAE000006722 ("Simmers" or the "company") POSTING OF CIRCULAR TO SIMMERS SHAREHOLDERS IN RESPECT OF THE IMPLEMENTATION OF THE PROPOSED TRANSACTIONS BETWEEN VILLAGE MAIN REEF GOLD MINING COMPANY (1934) LIMITED ("Village") AND SIMMERS AND WITHDRAWAL OF CAUTIONARY Further to the joint cautionary announcement issued on SENS on 6 December 2010 and in the press on 7 December 2010, the renewal of cautionary issued on 19 January 2011 and the joint announcement issued on SENS on 17 February 2011, Simmers shareholders are advised that Simmers has posted a circular dated 2 March 2011 ("the circular") to its shareholders in respect of: (i) the proposed disposal by Simmers of the majority of Simmers` assets to Village in consideration of the issue by Village of Village shares to Simmers and the assumption by Village of certain liabilities (the "disposal"); and (ii) the proposed subsequent unbundling by Simmers of the Village shares issued to it to its shareholders (the "unbundling" and collectively, the "proposed transactions"). Terms defined in the circular shall bear the same meanings where used in this announcement. In terms of the proposed transactions, and subject to the fulfilment or waiver of the conditions precedent, set out below, Simmers and Village have agreed that: 1. Simmers will dispose to Village, and Village will acquire, the following assets (the "disposal assets"): 1.1. a 100% shareholding in and all of Simmers` claims on loan account against Simmer and Jack Investments (Proprietary) Limited ("S&J Investments"), which is the holding company of Buffelsfontein Gold Mines Limited ("Buffelsfontein Gold Mines") which, in turn, owns the Buffelsfontein Gold Mine, Hartebeestfontein Gold Mine and the Tau Lekoa Mine; 1.2. 60,622,653 common shares in First Uranium Corporation ("First Uranium"); and 1.3. 392,874 First Uranium Notes (convertible into 42,199,141 common shares in First Uranium); and 2. in consideration of the acquisition of the disposal assets, Village will: 2.1. issue to Simmers 597,512,158 Village shares at R2.20 per share, comprising approximately 66% of the total Village shares in issue post the proposed transactions (the "Village consideration shares"); and 2.2. assume or discharge the assumed liabilities, that is: 2.2.1 Village will assume all of Simmers` rights and obligations under the ABSA note programme documents, if the conditions precedent referred to in 2.4 and 2.5(a) of the paragraph
entitled "Conditions Precedent" below are fulfilled; 2.2.2 Village will assume all of Simmers` rights and obligations under the forward gold purchase transaction documents, if the condition precedent referred to in 2.5(b) of the paragraph
entitled "Conditions Precedent" below is fulfilled; 2.2.3 Village will undertake to pay to Simmers any amount which is or becomes or will become due, owing and payable by Simmers to any other person under, in terms of or arising out of the ABSA note
programme documents, if the conditions precedent referred to in 2.4 and 2.5(a) of the paragraph entitled "Conditions Precedent" below are not fulfilled, but waived; 2.2.4 Village will undertake to pay to Simmers any amount which is or becomes or will become due, owing and payable by Simmers to any other person under, in terms of or arising out of the forward gold purchase transaction documents, if the condition precedent referred to in 2.5(b) of the paragraph entitled "Conditions
Precedent" below is not fulfilled, but waived; and 2.2.5 Village will indemnify Simmers against all loss, liability, damage or expense which Simmers may suffer as a result of or which may be attributable to any claims arising out of, or
connected with, the Aberdeen loan agreement. The aggregate amount of Village`s liability in terms of 2.2.3 and 2.2.4 concerning the ABSA note programme documents and the forward gold purchase transaction documents shall not exceed the sum of R290,316,533 and all amounts of interest that are or become payable by Simmers under the ABSA note programme documents and the forward gold purchase transaction documents. Simmers intends unbundling the Village consideration shares to its shareholders. RATIONALE Simmers has subsidiaries that are engaged in gold mining and exploration activities in the Mpumalanga and North West Provinces of South Africa. Simmers also holds 60 622 653 common shares in the gold and uranium company, First Uranium. Simmers shareholders have seen substantial value destruction in the Simmers share price as a result of: - differences with respect to the strategy and operational management issues between the previous Simmers management and the major Simmers shareholder, Vulisango Holdings (Proprietary) Limited ("Vulisango"); - continued operational losses suffered at Buffelsfontein Gold Mines as a result of problems in bringing its operations into full production; - the negative impact to Simmers as a result of a perception, in the past, of over promise and under delivery in relation to Simmers` performance; - the impact that the First Uranium re-capitalisation undertaken during April 2010 had on the available cash within the Simmers group. As part of that re-capitalisation, Simmers committed R463 million of Simmers` funds to subscribe for First Uranium Notes to protect its investment in First Uranium; and - the Tau Lekoa acquisition taking longer to conclude than originally anticipated, having a negative impact on the cash available to Simmers. Under the guidance of the interim Simmers board appointed during December 2009 and also the current Simmers board appointed during February 2010, Simmers has successfully addressed many of the matters that negatively impacted on the Simmers operations and shareholders` perception in relation to the company. Notwithstanding all of the positive work done to date, the Simmers share price has not reacted positively and continues to trade at near all time low levels. The consequence of the events referred to above is that Simmers` balance sheet has been weakened and available cash has been reduced to very low levels. Attempts to raise capital in Simmers over the last twelve months to place Simmers on a stronger footing have been either too expensive or too difficult to achieve, attracting very little support from the Simmers shareholders. Simmers remains in a position where it will need to raise capital in the near future to allow it to repay the liabilities under the ABSA notes and to allow sufficient time for the turnaround of its assets to fully materialise. Simmers is optimistic that the enlarged entity will be able to raise the required equity more easily and at a smaller discount than Simmers would be able to do on a standalone basis. The proposed transactions will result in an enlarged entity that should have better access to capital. The disposal will allow existing and potential new investors the opportunity to objectively value the disposal assets without the prejudice of the negative impact of past events. Not only should the enlarged entity be better placed to raise capital, it will also: - have strong empowerment credentials with both Vulisango and Umbono Capital Partners (Proprietary) Limited ("Umbono") each owning 15% of the equity in the enlarged entity; - have a more diversified asset base, with exposure to gold (through three old producing operations), antimony (through the largest antimony mine in the world) as well as platinum (through an early stage platinum prospect in the Eastern Bushveld Platinum Complex). Simmers is of the opinion that the diversification of the risk through the exposure to both platinum and antimony assets should not attract a discount to a pure gold investment vehicle; - have a more diversified BEE shareholder base, positioning it well to take advantage of growth opportunities present in the South African mining environment; and - be expected to raise funds through an equity offering at a smaller discount than Simmers would be able to do on a standalone basis. Any capital raised by Simmers on a standalone basis will result in substantial dilution to its empowerment shareholding and BEE status. The proposed transactions will result in Simmers shareholders, as a collective but disparate group of shareholders: - effectively acquiring the Village assets at market value without paying a premium for control, by way of a reverse take-over. Simmers shareholders (if all the Village consideration shares are distributed to the Simmers shareholders) will collectively be the controlling shareholders in the merged entity and will retain exposure to the Buffelsfontein Gold Mines and Tau Lekoa Mines; - gaining full exposure to the Village assets, creating a more diversified asset base; - benefitting from the proven track record of Mr Swanepoel in managing marginal gold operations. It is intended that Mr Swanepoel will become the chief executive officer of the merged entity transitioning from a non- executive role in Simmers to an executive position in the merged entity responsible for day-to-day management and strategy; - being part of an enlarged entity with better access to capital markets, strong empowerment credentials and an improved balance sheet, enabling the merged entity to aggressively pursue growth opportunities; and - holding shares in Village post the unbundling and in Simmers, which will remain listed with no known material liabilities and some R45 million in cash (assuming the sale by Simmers of all its shares in and claims on loan account against Transvaal Gold Mining Estates Limited and Sabie Mines (Proprietary) Limited to Stonewall Mining (Proprietary) Limited ("Stonewall") is completed). The increased liquidity in Village shares post the proposed transactions combined with the other benefits of the proposed transactions is expected to facilitate the value unlock for Simmers shareholders. The Simmers board supports the proposed transactions as it is of the view that, from a Simmers perspective, the proposed transactions (if implemented) will provide Simmers with a clean break from its history over the last few years, whilst allowing for the existing Simmers shareholders as a collective but disparate group of shareholders to remain in control of the current Simmers operations. In addition, Village, post the disposal, should have better access to capital markets to fund future growth and the assets will be managed by an experienced management team. After the disposal and subsequent unbundling an existing Simmers shareholder will directly hold: - shares in Village, which will hold rights to a high grade platinum asset via Lesego Platinum Mining Limited, gold and antimony assets via Consolidated Murchison Mine (subject to the Cons Murch transaction being completed), gold assets through S&J Investments, which holds 100% of Buffelsfontein and Tau Lekoa Mines and uranium exposure through First Uranium; and - shares in Simmers, which will have some R45 million in available cash on completion of the sale by Simmers to Stonewall referred to above, with no known material liabilities. Simmers will remain compliant with all the Listings Requirements as a cash company and will appoint an appropriate sized board. Simmers believes that the proposed transactions are the first step in creating a new player in the junior mining sector, and the new merged entity should be well placed to develop into one of South Africa`s preferred empowered diversified mining companies. CONDITIONS PRECEDENT The proposed transactions are subject to the fulfilment (or, where applicable, waiver) of the following conditions precedent, namely: 1. by no later than 31 March 2011, or by such later date as Simmers and Village may determine, that Simmers in general meeting has passed resolutions: 1.1. approving the disposal by Simmers of the disposal assets to Village in terms of the agreement entered into between Simmers and Village in respect of the disposal, including any amendment thereto (the "disposal agreement") as required by section 228 of the Companies Act and in accordance with the Listings Requirements; 1.2. approving the distribution by Simmers of the Village distribution shares to the Simmers shareholders pro rata to their respective holdings of Simmers shares (as an unbundling transaction contemplated in section 46 of the Income Tax Act) in terms of sections 90 and 228 of the Companies Act and in accordance with the Listings Requirements; 1.3. approving the disposal by Simmers to Village of the reacquisition shares in terms of the disposal agreement, as required by section 228 of the Companies Act and in accordance with the Listings Requirements; 2. by no later than 1 May 2011 or by such later date as Simmers and Village may agree in writing on or before 1 May 2011: 2.1. that all necessary regulatory approvals required for entering into and implementing the disposal agreement have been duly given which regulatory approvals include, amongst others, the consent of the Minister of Mineral Resources in terms of section 11 of the Mineral and Petroleum Resources Development Act (Act 28 of 2002), and or any mining or prospecting rights issued in terms of that Act; 2.2. that Village in general meeting has passed resolutions: (a) authorising the directors of Village to allot and issue: (i) the Village consideration shares, as a specific approval in terms of section 221(2) of the Companies Act, and in accordance with the Listings Requirements; (ii) over and above the Village consideration shares (a) the
maximum number of Village shares permitted by the Listings Requirements (upon such terms and subject to such conditions as the directors of Village may determine) as a general approval in terms of section 221(2) of the
Companies Act and in accordance with the Listings Requirements; and (b) included in the maximum number referred to in paragraph 2.2(a)(ii)(a), such number of Village shares as the board of directors of Village may
determine for the purpose of a capital raising exercise, as a general issue for cash in accordance with the Listings Requirements; (b) waiving any requirement on the part of Simmers in terms of the SRP Code to extend a mandatory offer to the Village shareholders to acquire all their Village shares as a consequence of the implementation of any matter provided for in the disposal agreement;
(c) approving the disposal agreement and its implementation in accordance with the provisions of the Listings Requirements; (d) increasing Village`s authorised share capital to R625,000,000 divided into 5,000,000,000 Village shares;
(e) approving the repurchase of the reacquisition shares in accordance with the provisions of the disposal agreement regarding the unwinding, in terms of section 85(2) of the Companies Act;
(f) approving the disposal by Village to Simmers of the reacquisition assets in accordance with the provisions of the disposal agreement regarding the unwinding, as required by section 228 of the Companies Act, and in accordance with the
Listings Requirements; 2.3. that the Registrar of Companies registers all of the various resolutions required to be passed as special resolutions in terms of the Companies Act; 2.4. that the JSE has approved the listing of the ABSA notes in the name of Village; 2.5. that all consents required from First Rand Bank Limited, Rand Refinery Limited, Absa Bank Limited, Deutsche Bank AG, the holders of the ABSA notes, Lexshell 820 Investments (Proprietary) Limited and the trustees of the Simmers Security SPV Owner Trust for: (a) the assignment by Simmers of all its rights and obligations under the ABSA note programme documents to Village;
(b) the assignment by Simmers of all its rights and obligations under: (i) the forward gold purchase agreement referred to in the definition of "forward gold purchase transaction
documents" set out in the circular; and (ii) the other forward gold purchase transaction documents to which Simmers is a party, to Village, with effect from the closing date;
(c) the release of the disposal assets from all security granted by Simmers in favour of Lexshell 820 Investments (Proprietary) Limited with effect from the closing date; (d) the disposal of the disposal assets by Simmers to Village, with effect from the closing date; (e) the granting by Village of security in favour of Lexshell 820 Investments (Proprietary) Limited over the disposal assets; and (f) the disposal by Simmers or any of its subsidiaries of all or any of its assets after the closing date, have been obtained, and all agreements or other documents required by First Rand Bank Limited, Rand Refinery Limited, Absa Bank Limited, Deutsche Bank AG and/or the holders of the aforesaid notes and/or Lexshell 820 Investments (Proprietary) Limited and/or the trustees of the Simmers Security SPV Owner Trust to give effect to or arising from or in relation to the matters referred to in this 2.5, have been entered into and have become unconditional, save for any condition that the disposal agreement has become unconditional; 2.6. that Village obtains the consent of the Minister of Mineral Resources pursuant to the Mineral and Petroleum Resources Development Act (Act 28 of 2002), as amended, for the transfer of the Eerste Regt Prospecting Right to Sweet Sensation 79 (Proprietary) Limited and the notarial deed of cession executing such transfer is registered in the Mining and Petroleum Titles Registration Office; and the retrospective consent of the Minister of Mineral Resources for the changes in control (direct and indirect) of Khumo Mining and Investments (Proprietary) Limited which occurred pursuant to or in connection with the reverse takeover of Village by Umbono; and 2.7. that the SRP has waived any requirement on the part of Simmers in terms of the SRP Code to extend a mandatory offer to the shareholders of Village to acquire all of their Village shares as a consequence of any matter provided for in the disposal agreement and that (a) no appeal to such waiver shall have been timeously noted, or (b) if an appeal is noted, it is unsuccessful. UNAUDITED PRO FORMA FINANCIAL EFFECTS OF SIMMERS The unaudited pro forma consolidated statement of comprehensive income ("income statement") and pro forma consolidated statement of financial position ("balance sheet") are the responsibility of the directors of Simmers and they have been prepared for illustrative purposes only, in order to provide information about the financial position and results of Simmers, assuming the disposal and the unbundling had been implemented on 1 April 2010, in respect of the income statement and 30 September 2010, in respect of the balance sheet. Due to its nature, the pro forma financial information may not give a fair reflection of Simmers` financial position and results of operations subsequent to the disposal and the unbundling. The detailed unaudited pro forma financial information is set out in the circular and the financial effects are summarised below. The independent reporting accountants` limited assurance report on the unaudited pro forma financial information is set out in the circular. Unaudited pro forma financial effects The table below sets out the pro forma financial effects of the proposed transactions on Simmers, which are presented for illustrative purposes only and because of their nature may not give a fair reflection of Simmers` financial position after the proposed transactions. The directors of Simmers are responsible for the preparation of the financial effects. Before After % change
transactions transactions (cents) (cents) Basic loss per share (44,11) (147.53) (234.46) Diluted loss per share (44,11) (147.53) (234.46) Headline loss per share (44,11) (147.53) (234.46) Diluted headline loss per share (44,11) (147.53) (234.46) Net asset value per share 208,82 1.08 (99.48) Tangible net asset value per share 208,82 1.08 (99.48) NOTICE OF GENERAL MEETING Shareholders are advised that the circular was posted today, Wednesday, 2 March 2011, which includes, inter alia, a notice convening a general meeting of Simmers shareholders to be held at Simmers` registered office, 3 Harrow Court, Isle of Houghton, 13 Boundary Road, Parktown, Johannesburg at 10:00 on Friday, 25 March 2011 to consider and, if deemed fit, pass the resolutions required to implement the proposed transactions. SALIENT DATES AND TIMES Salient dates and times in relation to the proposed transactions Circular and Village circular and revised listings Wednesday, 2 March 2011 particulars posted to Simmers shareholders on Completed forms of proxy for the general meeting to Wednesday, 23 March 2011 be received by no later than 10:00 on General meeting of Simmers shareholders held at Friday, 25 March 2011 10:00 on Results of the general meeting published on SENS on Friday, 25 March 2011 Results of the general meeting published in the Monday, 28 March 2011 press on Expected finalisation date and announcement Friday, 6 May 2011 pertinent to the unbundling published on SENS and in the press on Expected last day to trade in Simmers shares on the Friday, 13 May 2011 JSE in order to participate in the unbundling on (2) Expected date that the Simmers shares will trade Monday, 16 May 2011 "ex" the unbundling and that trade in the Village distribution shares will commence on (2) Expected unbundling record date in order to Friday, 20 May 2011 participate in the unbundling on (2) Expected date that the Village distribution shares, Monday, 23 May 2011 pursuant to the unbundling, are to be credited to the accounts of dematerialised shareholders at their CSDP or broker and posted to certificated shareholders on (2) Expected date of the company`s classification as a Monday, 23 May 2011 cash company for the purposes of the Listings Requirements on (2)(4) Notes: 1. All dates and times in this circular are local times in South Africa. The above dates and times are subject to change. Any change will be released on SENS and published in the press. 2. Based on the assumption that all of the conditions precedent to the transactions referred to above are fulfilled or waived before Sunday, 1 May 2011. 3. Share certificates in Simmers may not be dematerialised or rematerialised between Monday, 16 May 2011 and Friday, 20 May 2011, both days inclusive. 4. After implementation of the unbundling, Simmers shall, in terms of the Listings Requirements, be reclassified as a "cash company". Thereafter, should Simmers within six months after its classification to a "cash company" fail to enter into an agreement and make an announcement relating to the acquisition of viable assets that satisfy the conditions for listing stipulated in Section 4 of the Listings Requirements, the listing of the shares of Simmers on the JSE will be suspended. Thereafter, should Simmers fail within a three month period from the date of suspension of the listing to obtain approval from the JSE for a circular relating to the acquisition of viable assets that satisfy the conditions for listing set out in Section 4 of the Listings Requirements, the listing of the shares of Simmers on the JSE will be terminated. WITHDRAWAL OF CAUTIONARY As a result of the above disclosure, shareholders are advised that they no longer need to exercise caution when dealing in their Simmers shares. Johannesburg 2 March 2011 Transaction originator and financial advisor Sovereignty Capital Legal advisor Bowman Gilfillan Inc Transaction sponsor Java Capital Auditors and reporting accountants Grant Thornton Sponsor to Simmers RAND MERCHANT BANK (a division of FirstRand Bank Limited) Independent advisor to Simmers Bridge Capital Date: 02/03/2011 14:42:00 Supplied by www.sharenet.co.za Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct, indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on, information disseminated through SENS.

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