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Announcement relating to the empowerment of Sentula's Bankfontein coal project
SENTULA MINING LIMITED
Incorporated in the Republic of South Africa
(Registration number: 1992/001973/06)
Share code: SNU ISIN: ZAE000107223
(“Sentula” or “the Company”)
ANNOUNCEMENT RELATING TO THE EMPOWERMENT OF SENTULA’S BANKFONTEIN COAL
PROJECT
1. Introduction
Shareholders of Sentula (“Shareholders”) are advised that, following the implementation of Sentula’s
Broad-Based Black Economic Empowerment (“B-BBEE”) Transaction on 9 May 2012 (“the B-BBEE
Transaction”), and as part of the Company’s B-BBEE strategy to empower Sentula’s South African
coal assets as disclosed in the announcement dated 2 March 2012 which set out the full terms of the
B-BBEE Transaction, Sentula has now reached agreement with its existing empowerment
consortium, Shanike Investments No 171 Proprietary Limited (“BEE Co”), to introduce BEE Co as a
26% shareholder in Sentula’s Bankfontein coal project (“the Bankfontein Project”), held by Sentula’s
wholly-owned subsidiary Benicon Mining Proprietary Limited (“Benicon Mining”). This will result in the
Bankfontein Project having a 26% Historically Disadvantaged South African (“HDSA”) ownership, as
required in terms of the Mining Charter ("the Proposed Coal Transaction").
BEE Co was initially established as part of the B-BBEE Transaction to acquire a 16.675% direct
equity interest in Sentula Contracting Services Proprietary Limited (“Sentula Contracting Services”),
which holds Sentula’s South African mining services businesses. BEE Co’s current shareholders are
Anglo American Khula Mining Fund Proprietary Limited (“AAKMF”) (33%), The Sentula Mining
Employee Trust (“the Employee Trust”) (33%) and The Sentula Mining Empowerment Trust (“the
Empowerment Trust”) (33%). Sentula, together with AAKMF, is at an advanced stage of introducing a
strategic BEE partner (“Strategic BEE Partner”) as a 40% shareholder in BEE Co. Following the
introduction of the Strategic BEE Partner as a 40% shareholder in BEE Co, each of AAKMF, the
Employee Trust and the Empowerment Trust will dilute their existing shareholding to a 20% holding in
BEE Co, respectively.
2. Overview of the Bankfontein Project
The Bankfontein Project is a near development project that forms part of the farm Bankfontein in the
magisterial district of Ermelo in Mpumalanga Province and its prospecting right is held by Benicon
Mining. The Bankfontein Project covers an area of 513 ha and is expected to mine approximately
4.7 Mt of opencast run of mine coal over a period of approximately 7 years, with operations
scheduled to commence during the course of 2013. Benicon Mining has submitted all the necessary
documentation required for an application for a new order mining right to the Department of Mineral
Resources (“DMR”), which was accepted on 20 November 2008 and Benicon Mining awaits the
granting of the mining right which is expected following the conclusion of the Proposed Coal
Transaction. In terms of the National Environmental Management Act, the Bankfontein Project has
received permission to establish the surface infrastructure required for mining.
3. Overview of AAKMF
AAKMF is a 50:50% joint venture between Anglo American and Khula Enterprise Finance Limited that
seeks to provide funding, combined with professional and experienced support, to create new
commercially viable junior exploration and mining opportunities in South Africa. Managed by Zimele –
Anglo American’s enterprise development arm – AAKMF aims to create and sustain jobs, to promote
skills transfer, to contribute to the true transformation of the mining sector and to bring about
meaningful B-BBEE enterprises, in line with national imperatives.
4. Mechanics of the Proposed Coal Transaction
The Proposed Coal Transaction will be implemented as follows:
4.1 Subscription
AAKMF will capitalise BEE Co by subscribing for one share for an amount of R1.5 million
(“Equity Contribution”) which proceeds will be used by BEE Co to subscribe for 260 ordinary
shares in the issued ordinary share capital of Benicon Mining with a par value of R1.00 each,
constituting 26% of the entire issued share capital of Benicon Mining (“the Subscription Shares”),
subject to the right of Benicon Mining to acquire the Subscription Shares or a portion thereof
(“the Repurchase Right”).
The Subscription Shares will be subject to a lock-in period expiring at the end of February 2017
in line with the B-BEE Transaction (“the Transaction Term”).
The Subscription Shares will be issued on condition that, for the duration of the Transaction
Term, BEE Co’s right to receive 80% of any dividends, capitalisation awards or capital
distributions made by Benicon Mining (“Distributions”) will be suspended and BEE Co shall only
be entitled to receive 20% of the Distributions.
4.2 The Repurchase Right
On expiry of the Transaction Term, Benicon Mining will be entitled to repurchase a certain
number of Subscription Shares from BEE Co at par value of R1.00 per share (“the
Repurchase”). The number of shares subject to the Repurchase Right will be calculated in terms
of a repurchase formula (“the Repurchase Formula”), the terms of which are:
- The facilitated value of the Benicon Mining ordinary shares held by BEE Co of R39.5 million
is increased over the Transaction Term by an escalation factor of 8.3% per annum ("the
Escalation Factor");
- Less: 80% of the suspended Distributions as a result of the condition referred to above (also
increased over the Transaction Term by the Escalation Factor); and
- The above escalated value will be divided by the value of one Benicon Mining ordinary share
at maturity of the Transaction Term to arrive at the number of Subscription Shares subject to
the Repurchase Right at R1.00 per share.
The value per Benicon Mining ordinary share will be determined by an independent mining
expert with a minimum of 10 years experience in the valuation of mineral assets.
Following the implementation of the Repurchase, BEE Co will retain its remaining Subscription
Shares in Benicon Mining which it will hold free of restrictions.
The Repurchase shall be subject to all regulatory approvals which may be required, including
such approvals in terms of the Companies Act, No 71 of 2008 (“Companies Act”), and, to the
extent necessary, the Listings Requirements of the JSE Limited (“the JSE”).
4.3 Valuation
For purposes of the Proposed Coal Transaction, 100% of the Bankfontein Project is valued at
R172 million. Accordingly, the gross value attributable to BEE Co’s 26% shareholding is
R44.7 million.
The facilitated value for the purposes of the Repurchase Right amounts to R39.5 million with the
result that the difference between the gross value of R44.7 million and the facilitated value of
R39.5 million reduced by the attributable AAKMF equity subscription of R1.5 million represents
the economic cost of the Proposed Coal Transaction to Shareholders.
The valuation is based on management’s assessment of the fair value of the Bankfontein
Project.
5. Unaudited pro forma financial effects
Pro forma financial effects have not been included in this detailed terms announcement as the impact
of the Proposed Coal Transaction on each of earnings per share, headline earnings per share, net
asset value per share and tangible net asset value per share is less than 3%.
6. Small related party transaction and independent fairness opinion
As a result of BEE Co being a material shareholder of Sentula Contracting Services, the Proposed
Coal Transaction is categorised as a small related party transaction in terms of the Listings
Requirements of the JSE.
Accordingly, an opinion on the fairness of the Proposed Coal Transaction to Shareholders is required
to be given by an independent professional expert acceptable to the JSE. BDO Corporate Finance
Proprietary Limited (“BDO”) has been appointed by the Board of directors of Sentula (“the Board”) to
advise whether the terms and conditions of the Proposed Coal Transaction are fair to Shareholders.
BDO’s opinion is that the Proposed Coal Transaction is fair to Shareholders. The opinion of BDO will
be open for inspection at the Company`s registered office being Ground Floor, Building 14,
Woodlands Office Park, Woodmead, Johannesburg for a period of 28 days from the date of this
announcement.
7. Conditions Precedent
The Proposed Coal Transaction is subject to the following conditions precedent including:
i. The amended Memorandum of Incorporation of Benicon Mining being lodged for registration
with the Companies and Intellectual Property Commission, together with such resolutions
and/or special resolutions required in terms of the Companies Act;
ii. Sentula’s lenders have consented in writing to the implementation of the Proposed Coal
Transaction;
iii. To the extent necessary in law, the shareholder of Benicon Mining (being Sentula) has
passed a resolution approving the provision of financial assistance to the Subscriber in terms
of sections 44 and/or 45 of the Companies Act; and
iv. Each of the agreements relating to the Proposed Coal Transaction being entered into and
becoming unconditional in accordance with their terms.
The completion date for the Proposed Coal Transaction is expected to be in the final quarter of 2012.
Johannesburg
17 September 2012
Investment bank and transaction sponsor
The Standard Bank of South Africa Limited
Sponsor
Merchantec Capital
Attorneys and legal advisors
Edward Nathan Sonnenbergs Inc.
Independent expert
BDO Corporate Finance Proprietary Limited
IR Advisors
College Hill
Date: 17/09/2012 03:55:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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