To view the PDF file, sign up for a MySharenet subscription.

SNU - Sentula Mining Limited - Announcement in respect of the issue of shares

Release Date: 21/04/2011 10:45
Code(s): SNU
Wrap Text

SNU - Sentula Mining Limited - Announcement in respect of the issue of shares by Sentula to Shanduka Resources in exchange for Shanduka Resources` shareholding in it`s coal assets Sentula Mining Limited Incorporated in the Republic of South Africa (Registration number 1992/001973/06) Share code: SNU ISIN: ZAE000107223 ("Sentula" or "the Company") Shanduka Group (Proprietary) Limited Incorporated in the Republic of South Africa (Registration number 2001/004663/07) ("Shanduka Group") Shanduka Resources (Proprietary) Limited Incorporated in the Republic of South Africa (Registration number 2002/017835/07) ("Shanduka Resources") ANNOUNCEMENT IN RESPECT OF THE ISSUE OF SHARES BY SENTULA TO SHANDUKA RESOURCES IN EXCHANGE FOR SHANDUKA RESOURCES` SHAREHOLDING IN IT`S COAL ASSETS AND WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT 1. INTRODUCTION Further to the cautionary announcement released on the Securities Exchange News Service ("SENS") of the JSE Limited ("JSE") on 4 March 2011 and its renewal on 18 April 2011, the Board of directors of Sentula and Shanduka Resources (collectively hereinafter referred to as "the Parties") are pleased to advise that the Parties have entered into an exchange of shares agreement ("Exchange Agreement"). In terms of the Exchange Agreement and subject to the fulfilment or waiver of the conditions precedent set out in paragraph 4.6 below, Sentula will acquire from Shanduka Resources, a wholly-owned subsidiary of the Shanduka Group, a leading black-owned and managed investment holding company:
- 29.94% of the entire issued share capital of Shanduka Coal (Proprietary) Limited ("Shanduka Coal"); and - 100% of the entire issued share capital of Shanduka Coal Investments (Proprietary) Limited ("Shanduka Investments") which owns 29.93% of the issued share capital of Kangra Coal (Proprietary) Limited ("Kangra Coal"). Shanduka Coal, Shanduka Investments and Kangra Coal are collectively referred to as "Shanduka Resources` Coal Assets". The number of new Sentula ordinary shares to be issued to Shanduka Resources of 626 905 938 (the "Consideration Shares") in exchange for its shareholding in the Shanduka Resources` Coal Assets is based on a valuation of R2.066 billion and following their issue, on the effective date, will constitute 51.9% of the issued share capital of Sentula (the "Proposed Transaction"). 2. RATIONALE FOR THE PROPOSED TRANSACTION Sentula, which has been listed on the Main Board of the exchange operated by the JSE Limited ("JSE") since 1993, derives its income from contract mining and rehabilitation, earthworks, drilling and blasting, exploration drilling, crane hire and mining of its coal assets. The Company also holds a number of prospecting rights, which are currently undergoing regulatory and development processes. During the course of the financial year ended 31 March 2010, the Company implemented a rights offer and also disposed of its 49.998% shareholding in the entity which owned the Koornfontein Coal Mine. These initiatives were undertaken to strengthen the Company`s balance sheet by reducing debt and improving the Company`s liquidity profile. It is the Company`s strategic intent to further develop its portfolio of coal assets and consequently, the Proposed Transaction will further this objective, given the established track record of profitability and cash flow generation of the Shanduka Resources` Coal Assets. Founded by Mr Cyril Ramaphosa, the Shanduka Group is a leading black- owned and managed investment holding company which further encompasses broad-based Black Economic Empowerment ("BEE"). Shanduka Group`s shareholder base includes a 10% equity shareholding by a consortium of black women, 3% by a consortium of black men, as well as a further 5% shareholding by community development trusts. Shanduka Resources` long-term strategy is to build a geographically diverse, multi-commodity, black-owned and managed resource and mining company. In addition to coal, Shanduka Resources is also invested in, inter-alia, platinum group metals, gold, base minerals and mining services. The Parties are committed to transformation and consider broad-based BEE as a strategic priority within the mining industry. The introduction of Shanduka Resources, a credible black controlled company as a controlling shareholder of Sentula, will enhance the Company`s BEE credentials and demonstrate the Sentula Board`s commitment to BEE. The Parties believe that the Proposed Transaction will create a leading BEE controlled mining services, exploration drilling and coal mining company, which will be well positioned to leverage its complementary businesses and develop its portfolio of exploration, near-development and operational coal mining assets. Furthermore, the BEE controlled status of the Company will position it favourably for securing future mining services contracts and proprietary coal mining opportunities. 3. INFORMATION ON SHANDUKA RESOURCES` COAL ASSETS 3.1 Shanduka Coal Shanduka Coal, whose business comprises of coal prospecting and mining, is 29.94% owned by Shanduka Resources and 70.06% owned by Glencore International AG ("Glencore"). Through its subsidiaries, Shanduka Coal owns 100% of the operating mines, Graspan Colliery, Middelburg Townlands Colliery and Springlake Colliery. Coal is sold to both the domestic market as well as exported through Richards Bay Coal Terminal. Shanduka Coal`s current mining operations have resources comprising approximately 104 million mineable tonnes in-situ and produced 9.1 million Run of Mine tonnes for the year ended 31 December 2010. The historical financial information for Shanduka Coal for the years ended 31 December is set out in the table below.
Historical financial information* 2010 2009 2008 Audited Audited Audited
R`million R`million R`million Revenue 2 139 2 371 2 795 Earnings before interest, tax, 295 692 1 394 depreciation and amortisation Net profit after tax 29 326 799 Return on equity 2.2% 24.7% 80.7% * 100% of Shanduka Coal Shanduka Coal`s net profit after tax for the 2010 financial year was adversely affected to the extent of R116 million by once-off costs and losses resulting from placing the Lakeside, Bankfontein and Leeufontein collieries on care and maintenance as they reached the end of their economic lives in prevailing economic conditions. 3.2 Shanduka Investments Shanduka Investments holds a 29.93% equity shareholding in the issued share capital of Kangra Coal. Kangra Coal`s business is comprised of coal prospecting and mining. The remaining 70.07% equity shareholding in Kangra Coal is owned by Gas Natural Fenosa SDG SA ("Gas Naturale") through its South African subsidiary, Union Fenosa South African Coal (Proprietary) Limited ("Union Fenosa"). Kangra Coal`s assets comprise one mining operation, Savmore Colliery, which has Richards Bay Coal Terminal direct entitlement of 1.7 million tonnes per annum and indirect entitlement through "Quattro" of approximately 0.3 million tonnes per annum. Kangra Coal`s resources comprise approximately 320 million mineable tonnes in-situ and the mine produced 4.1 million Run of Mine tonnes for the year ended 31 December 2010. The historical financial information for Kangra Coal for the years ended 31 December is set out in the table below. Historical financial information* 2010 2009 2008 Audited Audited Audited R`million R`million R`million Revenue 1 554 1 303 2 192 Earnings before interest, tax, 726 628 1 439 depreciation and amortisation Net profit after tax 418 360 821 Return on equity 35.8% 37.0% 94.5% * 100% of Kangra Coal 4. PRINCIPAL TERMS AND CONDITIONS OF THE PROPOSED TRANSACTION 4.1 Share exchange ratio Sentula has agreed, subject to the conditions precedent as set out in paragraph 4.6 below and subject to the share exchange adjustment mechanism as set out in paragraph 4.3 below, to issue 626 905 938 new ordinary shares to Shanduka Resources in exchange for the Shanduka Resources` Coal Assets, implying a value of R3.30 per Sentula ordinary share, representing a premium of 19.8% over the 30- day volume weighted average share price as measured on the day prior to the release of the cautionary announcement on 4 March 2011. Consequently, Shanduka Resources will hold 51.9% of the issued share capital of Sentula. 4.2 Effective date The effective date of the Proposed Transaction will be the later of the 3rd business day after the date on which the last of the conditions precedent, as set out in paragraph 4.6 below is fulfilled or waived, as the case may be, and if the share exchange adjustment mechanism is applicable, the date on which agreement is reached. 4.3 Share exchange adjustment mechanism The Exchange Agreement provides for an increase or decrease to the exchange ratio of up to 1.5%, post the finalisation of the due diligence, which is expected to be completed on or around 31 May 2011. To the extent that the share exchange adjustment constitutes a variance of more than 1.5% to the exchange ratio, the Exchange Agreement shall automatically terminate, unless the Parties agree otherwise. 4.4 Amendment to Sentula Memorandum of Incorporation ("Memorandum") Pursuant to the Exchange Agreement, Shanduka Group has agreed to a standstill provision with respect to its shareholding in the Company and it is proposed that the Memorandum of the Company is to be amended to reflect this undertaking. In terms of the standstill provision, Shanduka Group undertakes that it shall not, at any time during a period of three years from the effective date of the Proposed Transaction, increase its shareholding in excess of 65% of the fully diluted issued ordinary share capital of Sentula. To the extent that this threshold is breached the Takeover Regulations regarding "affected transactions" will be deemed to apply to Shanduka Group, mutatis mutandis, as if Shanduka Group is required to make a mandatory offer in terms of Regulation 86 of the Takeover Regulations. 4.5 Material Adverse Change The Parties have agreed to Material Adverse Change ("MAC") clauses, allowing for the termination of the Exchange Agreement upon the occurrence of a MAC event between the signature date of the Exchange Agreement and the effective date. The Proposed Transaction is also subject to other terms and conditions customary for a transaction of this nature. 4.6 Conditions precedent The Proposed Transaction is subject to the fulfilment or waiver, as the case may be, of the following conditions precedent: - the Shanduka Group shareholders having approved the Proposed Transaction; - Union Fenosa having irrevocably and unconditionally waived all or any pre-emptive or similar rights which it may have in respect of the shareholding in Kangra Coal; - The bankers of each of Sentula, Shanduka Group and Shanduka Investments having irrevocably and unconditionally approved or
consented to the implementation of the Proposed Transaction; - the JSE having approved the Proposed Transaction, including the listing of the Consideration Shares and the circular to be sent to shareholders ("the Circular");
- the Takeover Panel having approved the Proposed Transaction, including the "whitewash resolution" to be passed by independent shareholders of Sentula and the Circular; - the shareholders of Sentula, in general meeting passing the resolutions necessary to effect the Proposed Transaction, including : - amending the Memorandum for the standstill provision applicable Shanduka Group;
- changing the name of Sentula to "Shanduka Mining Limited" (or such other name as may be approved by Shanduka Group) with effect from the effective date; - waiving any requirement on the part of Shanduka Resources
in terms of the Takeover Regulations to extend a mandatory offer to the shareholders of Sentula to acquire Sentula shares held by such shareholders as a consequence of the Exchange Agreement;
- approving the implementation of the Exchange Agreement in accordance with the provisions of the JSE Listings Requirements; - to the extent that the provisions of the Companies Act,
2008 (Act 71 of 2008), are applicable amending the Memorandum to effect a conversion of existing authorised and issued share share capital of Sentula from ordinary par value shares to ordinary no par value shares,
increasing the authorised share capital of the Company from one billion no par value shares of R0.01 (one cent) each to two billion no par value shares of R0.01 (one cent) each;
- placing the Consideration Shares under the control of the directors of Sentula for the purpose of issuing such shares to Shanduka Resources in terms of the Proposed Transaction;
- the Competition Authorities having approved the Proposed Transaction in terms of the Competition Act, 1998 (Act 89 of 1998), as amended; and - the Minister of Mineral Resources and the Department of Mineral Resources having consented to the implementation of Proposed Transaction. 5. PRO FORMA FINANCIAL EFFECTS OF THE PROPOSED TRANSACTION The table below sets out the unaudited pro forma financial effects of the Proposed Transaction on Sentula`s earnings per share, headline earnings per share, net asset value per share and tangible net asset value per share. The unaudited pro forma financial effects have been prepared to illustrate the impact of the Proposed Transaction on the reported financial information of Sentula for the six months ended 30 September 2010, had the Proposed Transaction occurred on 1 April 2010 for income statement purposes and on 30 September 2010 for balance sheet purposes. The unaudited pro forma financial effects have been prepared using accounting policies that comply with International Financial Reporting Standards and that are consistent with those applied in the audited results of Sentula for the twelve months ended 31 March 2010 as well as the six months ended 30 September 2010. The unaudited pro forma financial effects, which are the responsibility of the directors, are provided for illustrative purposes only and, because of their pro forma nature may not fairly present Sentula`s financial position, changes in equity, results of operations or cash flow. Before the After the Percentage Proposed Proposed change
Transaction Transaction (1) (2) Basic earnings per share (cents) 9.89 7.40 (25.20) Headline earnings per share 10.59 7.73 (26.94) (cents) Net asset value per share (cents) 495.89 408.53 (17.62) Tangible net asset value per 421.86 372.91 (11.60) share (cents) Weighted average number of shares 581 005 1 207 911 in issue (000`s) Notes 1. The "Before the Proposed Transaction" basic earnings and headline earnings per share have been extracted without adjustment from the reviewed, published results of Sentula for the six months ended 30 September 2010. The "Before the Proposed Transaction" net asset value and tangible net asset value per share have been calculated from the financial information presented in the reviewed, published results of Sentula as at 30 September 2010. 2. The "After the Proposed Transaction" assumes: a. Shanduka Coal has been accounted for using the equity method on the basis that Sentula is able to exercise significant influence over Shanduka Coal. The investment in Shanduka Coal has been raised at fair value on the effective date; b. Shanduka Investments has been consolidated by Sentula as Sentula controls the management and decisions of Shanduka Investments; c. Kangra Coal has been accounted for using the equity method on the basis that Shanduka Investments is able to exercise
significant influence over Kangra Coal. The investment in Kangra Coal has been raised at fair value on the effective date; d. payment of estimated transaction costs of R12.5 million in respect of the Proposed Transaction; e. the issue of 626 905 938 ordinary shares to Shanduka Resources; f. the equity accounted income from Shanduka Coal and Kangra Coal for the period 1 April 2010 to 30 September 2010 and the value of the preference shares and the preference dividends for the period relating to Shanduka Investments as included in the pro forma financial effects presented above has been extracted
from the unaudited management accounts of these entities for this period. Sentula is satisfied with the quality of these management accounts; and g. the pro forma earnings, net asset value and tangible net asset value per share have been adversely impacted by the circumstances disclosed in paragraph 3.1 above. 6. CATEGORISATION OF THE PROPOSED TRANSACTION AND FURTHER DOCUMENTATION The Proposed Transaction is classified as a reverse take-over in terms of the Listings Requirements of the JSE. Accordingly, a Circular containing full details of the Proposed Transaction, Competent Persons Reports, Revised Listing Particulars, the opinion of the independent expert and a notice to convene a general meeting of Sentula shareholders for the purposes of approving the Transaction, will be distributed to shareholders in due course. Shareholders will be kept updated with regards to the expected date of distribution of the Circular. 7. OPINIONS AND RECOMMENDATION The Proposed Transaction is classified as an "affected transaction" in terms of the Takeover Regulations, and accordingly the Sentula Board will be required to obtain an independent opinion. Sentula has appointed BDO Corporate Finance as the Independent External Adviser to provide such opinion in due course. The Sentula Board will provide its opinion and recommendation to shareholders of Sentula following the independent advice of BDO Corporate Finance on the Proposed Transaction. The opinion of the independent expert and the recommendation of the directors will be included in the Circular to be posted to Sentula shareholders. 8. WITHDRAWAL OF CAUTIONARY Shareholders of Sentula are referred to the renewal of cautionary announcement dated 18 April 2011, and are advised that caution is no longer required to be exercised by shareholders when dealing in the Company`s securities. Johannesburg 21 April 2011 For further information contact: Sentula Sentula Robin Berry - Chief Executive Officer Deon Louw - Chief Financial +27 11 656 1303 (office) Officer +27 82 449 1858 (mobile) +27 11 656 1303 (office) robin.berry@sentula.co.za +27 82 889 0224 (mobile) deon.louw@sentula.co.za
Investment Bank and Transaction Sponsor to Sentula Standard Bank Sponsor to Sentula Merchantec Capital Legal Advisers to Sentula Cliffe Dekker Hofmeyr Reporting Accountants to Sentula BDO Corporate Finance Independent External Adviser BDO Corporate Finance Investor Relations for Sentula College Hill Investment Bank to Shanduka Resources Rand Merchant Bank Legal Advisers to Shanduka Resources Edward Nathan Sonnenbergs Werksmans Attorneys Date: 21/04/2011 10:45:02 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.

Share This Story