Wrap Text
SNU - Sentula Mining Limited - Announcement relating to a Broad-Based Black
Economic Empowerment Transaction ("B-BBEE TRANSACTION") and withdrawal of
cautionary announcement
SENTULA MINING LIMITED
Incorporated in the Republic of South Africa
(Registration number 1992/001973/06)
Share code: SNU ISIN No. ZAE000107223
("Sentula" or "the Company")
ANNOUNCEMENT RELATING TO A BROAD-BASED BLACK ECONOMIC EMPOWERMENT TRANSACTION
("B-BBEE TRANSACTION") AND WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
1 Introduction
Sentula shareholders ("Shareholders") are referred to the detailed
cautionary announcement released on the Securities Exchange News Service
("SENS") of the JSE Limited ("JSE") on Friday, 28 October 2011, which
referred to the proposed Broad-based Black Economic Empowerment ("B-BBEE")
Transaction ("the Proposed B-BBEE Transaction") and the further cautionary
announcements released on SENS on Friday, 9 December 2011 and Friday, 20
January 2012.
Shareholders are advised that on Friday, 2 March 2012, the Company
concluded agreements with Anglo American Khula Mining Fund Proprietary
Limited ("AAKMF") in relation to the Proposed B-BBEE Transaction.
In terms of the Proposed B-BBEE Transaction, The Sentula Mining Employee
Trust (a trust to be established by Sentula for the benefit of employees of
the South African Mining Services Businesses as defined below) ("Employee
Trust"), The Sentula Mining Empowerment Trust (a trust to be established by
Sentula for the benefit of learner beneficiaries and communities around
certain of Sentula`s mining operations) ("Empowerment Trust") and AAKMF
will, through Cintacure (Proprietary) Limited (to be renamed Sentula
Contracting Proprietary Limited) ("Cintacure"), an existing wholly-owned
subsidiary of Sentula, acquire a 16.675% direct equity interest in certain
of Sentula`s South African mining services businesses (being Benicon
Opencast Mining (Proprietary) Limited ("Benicon"), Classic Challenge
Trading (Proprietary) Limited ("CCT"), JEF Drill and Blast (Proprietary)
Limited ("JEF") and Ritchie Crane Hire (Proprietary) Limited ("Ritchie
Crane")) (collectively "the South African Mining Services Businesses").
Sentula`s South African based exploration drilling operations are already
empowered through a separate initiative. Following the implementation of
the Proposed B-BBEE Transaction, the South African Mining Services
Businesses will have an effective Black ownership of more than 25% as
measured in terms of the Department of Trade and Industry Codes of Good
Practice ("DTI Codes").
Following consultation with the JSE, the Proposed B-BBEE Transaction is
deemed a Category 2 Transaction.
2 Strategic rationale
As a coal mining, mining services and exploration drilling business,
Sentula is fully committed to the South African government`s B-BBEE
initiatives. Sentula has already implemented a number of initiatives
relating to employment equity, skills development, preferential
procurement, enterprise development and corporate social investment.
Sentula`s mining services customers are increasingly seeking suppliers
which have more than 25% effective B-BBEE equity ownership. The Proposed B-
BBEE Transaction will ensure that the South African Mining Services
Businesses meet the B-BBEE ownership target sought by its mining customers
with respect to both the DTI Codes and the Broad-based Socio-Economic
Empowerment Charter for the South African Mining and Minerals Industry.
The Proposed B-BBEE Transaction will also advance Sentula`s empowerment
objective of increasing Black participation in Sentula by transferring the
long-term economic benefits of its success to a broad spread of Black South
Africans, more specifically, through the Employee Trust, to employees of
the South African Mining Services Businesses, as set out in paragraph 3.1
below, and, through the Empowerment Trust, to Black communities in areas
surrounding the mining operations of Sentula.
3 Mechanics of the Proposed B-BBEE Transaction
The Proposed B-BBEE Transaction will be implemented as follows:
* Sentula will sell its entire shareholding in each of Benicon, CCT, JEF
and Ritchie Crane to Cintacure in terms of a Sale of Shares and
Subscription Agreement between Sentula and Cintacure. The purchase
consideration payable by Cintacure to Sentula for these shares shall
be R600 million which will be funded by the issue to Sentula of
600,000 cumulative redeemable preference shares at R1,000 each in the
share capital of Cintacure, which shall entitle Sentula to a
preferential dividend at a rate of 6.5% per annum ("the Preference
Shares"). The sale shall be effected as an "intra-group transaction"
in terms of section 45 (3A) of the Income Tax Act No 58 of 1962,
following the enactment of the Taxation Laws Amendment Act No 24 of
2011, which came into operation on 1 January 2012, and applies to
Sentula with effect from the first business day of its 2013 financial
year, being Monday, 2 April 2012.
* A new company, Shanike Investments No 171 Proprietary Limited ("BEE
Co") has been established as the vehicle through which the Employee
Trust, Empowerment Trust and AAKMF shall hold their interest in
Cintacure.
* BEE Co will subscribe for an effective 16.675% of the issued ordinary
share capital of Cintacure in terms of a subscription agreement
between BEE Co and Cintacure at a subscription price of R5 million.
* The shareholding of BEE Co will initially consist of the Empowerment
Trust (33.3%), the Employee Trust (33.3%) and AAKMF (33.3%). Sentula,
together with AAKMF, is in the process of identifying an appropriate
strategic BEE partner ("Strategic BEE Partner") which will be issued
with an effective 40% of the issued shares of BEE Co in terms of a
subscription call option. Following the share issue by BEE Co to the
Strategic BEE Partner, the Employee Trust, the Empowerment Trust and
AAKMF shareholdings shall dilute, with the resultant shareholding
constituted as Strategic BEE Partner (40%), the Employee Trust (20%),
the Empowerment Trust (20%) and AAKMF (20%).
* Cintacure is expected to receive dividends from the South African
Mining Services Businesses and will use 80% of such dividends to
settle the dividends payable (and redeem capital) on the Preference
Shares held by Sentula. The balance of the Preference Shares dividend
accrual, if any, will roll up.
* The balance of 20% of such dividends received from the South African
Mining Services Businesses will be declared as an ordinary dividend to
Cintacure`s shareholders.
* BEE Co will be entitled to 16.675% of such ordinary dividend, which
will then be available for distribution to the shareholders of BEE Co.
* There is a lock-in period expiring at the end of February 2017 in line
with the ownership measurement date of the DTI Codes, at the end of
which period AAKMF shall be entitled to sell its shares at fair market
value, as determined by an independent investment bank, in BEE Co to
Sentula, in exchange for the issue of shares in Sentula at the 30 day
volume weighted average price and subject to the requisite regulatory
and shareholder approvals.
3.1 The Employee Trust
The allocated beneficiaries of the Employee Trust will be the current and
future permanent employees of the South African Mining Services Businesses,
who do not participate or will be ineligible to participate, in any of
Sentula`s existing long-term share incentive schemes. The South African
Mining Services Businesses, currently employ about 2 300 eligible employees
of whom approximately 80% are Black persons and 12% are Black women.
The Employee Trust has been established as a perpetual trust, and shall
only terminate if all of the trustees so resolve or if the trustees no
longer hold any assets or funds, and then only if Sentula confirms that the
Employee Trust should be terminated.
3.2 The Empowerment Trust
The Empowerment Trust shall, among other things, focus on improving
education in Black communities where Sentula operates or has a material
interest. Beneficiaries will include Black persons from the communities
wishing to advance their skills and training within the mining and
extraction industry, and charities in the communities, as selected by the
Empowerment Trust trustees. The Empowerment Trust Deed stipulates that 100%
of the economic benefit accruing to the beneficiaries will benefit Black
people and at least 50% will benefit Black women.
The Empowerment Trust has been established as a perpetual trust, and shall
only terminate if all of the trustees so resolve or if the trustees no
longer hold any assets or funds, and then only if Sentula confirms that the
Empowerment Trust should be terminated.
3.3 AAKMF
Launched in 2003, AAKMF is a joint initiative between Anglo American Plc
("Anglo American") and Khula Enterprise Finance Limited, a government-owned
entity that promotes small and medium enterprise development.
The fund, which focuses on promoting mining-related investments, is managed
by Anglo American Zimele. It is based on an effective and replicable
business model that aims to boost the South African mainstream economy and
support the South African government`s initiatives by helping emerging
black-owned mining operations with commercially viable prospects.
The fund insists on partnered BEE entrepreneurial skill, day-to-day
involvement by the partner as well as a personal equity contribution, as
the lack of these has led to the demise of numerous companies.
As well as providing financing and technical expertise, the fund offers
inter alia:
* Assistance with the selection of the BEE partner;
* Assistance with the integration of the BEE partner into the business;
* Provision of equity and loan finance for the development of mineral
projects; and
* Provision of ongoing strategic, operational, financial and business
support through representation on the board in a non-executive
capacity.
Sentula is of the view that the following points are, inter alia,
compelling strategic and commercial reasons for having AAKMF as Sentula`s
strategic partner:
* Strategic benefits offered by Anglo American`s depth of experience and
relationship networks in the South African mining industry;
* Long term relationship between Anglo American and Sentula;
AAKMF`s experience in identifying and supporting new entrants with
appropriate standing, reputation and influence, into the mining
industry; and
* AAKMF`s ability to fund and participate on commercial terms in future
coal mining transactions.
AAKMF will pay R5 million in cash for the acquisition of its interest in
BEE Co.
4 Transaction cost
Sentula has estimated the net cost of implementing the Proposed B-BBEE
Transaction, calculated in accordance with the statement on share based
payments in terms of International Financial Reporting Standards ("IFRS2"),
to be R12.5 million, which together with transaction implementation costs
of approximately R7.0 million equates to 1.59% of Sentula`s market
capitalisation of R1 232 million on the JSE as at the close of business on
Thursday, 1 March 2012. The IFRS2 cost will be charged to Sentula`s income
statement as a once-off charge in the financial reporting period in which
the Proposed B-BBEE Transaction becomes effective and does not represent a
cash cost.
The introduction of the Strategic BEE partner in due course will result in
a further once-off IFRS2 charge which will be determined at the time that
this transaction is implemented.
5 Conditions precedent
The Proposed B-BBEE Transaction is subject, inter alia, to the fulfillment
of the conditions precedent set out below and will become effective on the
later of the 3rd business day following the fulfilment of the last of the
conditions precedent and Monday, 2 April 2012 ("the Effective Date"):
* The substitution of Cintacure`s existing Memorandum of Incorporation
("MOI") with a new agreed MOI approved by the JSE;
* The substitution of BEE Co`s existing MOI with a new agreed MOI;
* The Master of the High Court of South Africa having issued letters of
authority to the initial trustees of the Employee Trust and the
Empowerment Trust to act as such; and
* Each of the agreements relating to the Proposed B-BBEE Transaction
("the Transaction Agreements") being entered into and becoming
unconditional in accordance with their terms.
6 Unaudited pro forma financial effects
The unaudited pro forma financial effects set out below have been prepared
to illustrate the impact of the Proposed B-BBEE Transaction on the earnings
per share ("EPS"), headline earnings per share ("HEPS"), net asset value
per share ("NAV") and tangible net asset value per share ("TNAV").
The unaudited pro forma financial effects are presented for illustrative
purposes only and because of their nature may not fairly present Sentula`s
financial position, changes in equity, results of operations or cash flows
after the Proposed B-BBEE Transaction.
The board of directors is responsible for the preparation of the unaudited
pro forma financial effects.
It has been assumed for purposes of the unaudited pro forma financial
effects for the six months ended 30 September 2011 that the Proposed B-BBEE
Transaction took place with effect from 1 April 2011 for statement of
comprehensive income purposes and on 30 September 2011 for statement of
financial position purposes.
Before the After the Proposed Percentage
Proposed B-BBEE B-BBEE change
Transaction Transaction (%)
EPS (cents) (42.08)
(38.72) (8.68 )
HEPS (cents) 7.23
10.59 (31.73 )
NAV (cents) 460.13 458.92
(0.26 )
TNAV (cents) 384.14 382.93
(0.31 )
Shares in issue (000`s) 581,005 581,005
Weighted average number 581,005 581,005
of shares in issue
(000`s)
Diluted weighted 581,005 581,005
average number of
shares in issue (000`s)
Notes:
1 The "Before" column has been extracted without adjustment from the
condensed consolidated reviewed interim financial results for the six
months ended 30 September 2011.
2 The "After the Proposed B-BBEE Transaction" EPS and HEPS assumes:
a the adjustment of the IFRS2 charge in respect of AAKMF of R12.531
million; and
b. payment of once-off implementation expenses of R7 million. This
will not have a continuing effect on Sentula`s financial results.
3 The "After the Proposed B-BBEE Transaction" NAV and NTAV assumes:
a the payment of the once-off implementation expenses of R7
million.
7 Withdrawal of cautionary announcement
Shareholders are advised that as the full terms of the Proposed B-BBEE
Transaction have now been released, Shareholders no longer need to exercise
caution when dealing in their Sentula shares.
Johannesburg
2 March 2012
Investment bank and transaction sponsor
The Standard Bank of South Africa Limited
Sponsor
Merchantec Capital
Attorneys and legal advisors
Cliffe Dekker Hofmeyer Incorporated
IR Advisors
College Hill
Date: 02/03/2012 17:00:02 Supplied by www.sharenet.co.za
Produced by the JSE SENS Department.
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