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JSE LIMITED - China-South Africa Consortium acquires a controlling interest in Phalabora Mining Company Limited

Release Date: 11/12/2012 14:36
Code(s): JSER     PDF:  
Wrap Text
China-South Africa Consortium acquires a controlling interest in Phalabora Mining Company Limited

Press Release

CHINA-SOUTH AFRICA CONSORTIUM ACQUIRES A CONTROLLING INTEREST IN PALABORA
MINING COMPANY LIMITED

December 11, 2012


Highlights:

  A Chinese consortium comprising Hebei Iron & Steel Group Co. Ltd (Hebei),
   General Nice Development Limited (General Nice), and Tewoo Group Co., Limited
   (Tewoo) and the Industrial Development Corporation of South Africa Limited (IDC),
   have entered into Shares Purchase Agreement (SPA) to acquire 74.5% direct and
   indirect stakes in Palabora Mining Company (PMC) from Rio Tinto and Anglo
   American

  The effective consideration is ZAR110 per PMC share (Purchase Price) and reflects
   a 17.0% premium to the previous trading day closing price and a 27.6% premium to
   the 30-day volume weighted average price

  The Consortium intends to extend the offer to minority shareholders when the SPA
   becomes unconditional

  This significant investment is a clear demonstration of the investment potential of the
   South African mining sector and the continued expansion efforts of the Chinese steel
   industry

  The Consortium is committed to the ongoing development of the PMC business, and
   the transaction will support the IDCs beneficiation projects in iron and steel

A consortium comprising Hebei, the IDC, General Nice and Tewoo (the Consortium), has concluded
a definitive agreement to acquire 74.5% direct and indirect stakes in Palabora Mining Company
(PMC) from Rio Tinto Group ("Rio Tinto") and Anglo American Plc ("Anglo American") (the
Transaction?). China-Africa Development Fund, an investment fund under the China Development
Bank which focuses on investing in Africa, is a potential investor and will constitute as a 5% member
in the Consortium should it obtain internal approvals by 31 January, 2013.

This follows Rio Tinto's and Anglo American's decision to divest their direct and indirect shareholdings
in PMC of 57.7% and 16.8%, respectively, as announced by the Board of PMC on 5 September 2011,
and in terms of which PMC has traded under a cautionary announcement.

The Consortium comprises the following parties (respective Consortium interest in brackets):

       Hebei (35%), a leading international steel producer wholly-owned by the Chinese
        Government;
       General Nice (25%), a privately-owned Chinese trading company;
       IDC (20%), a development finance institution wholly-owned by the South African Government;
       Tewoo (20%), a major diversified group wholly-owned by the Chinese Government;
         
The Transaction values 100% of PMC at approximately R5,310 million. In addition, the Purchase
Price is subject to customary adjustments upon closing.
PMC is a company listed on the JSE and therefore the Consortium intends to extend an offer of
ZAR110 per PMC share, subject to customary adjustments upon closing, to minority shareholders
once the Transaction with Rio Tinto and Anglo American has become unconditional in all respects.

The Transaction is subject to various conditions precedents including:

        Certain regulatory approvals required by the Peoples Republic of China including State-
         owned Assets Supervision and Administration Commission, National Development and
         Reform Commission, Ministry of Commerce, Anti-Monopoly Bureau and State Administration
         of Foreign Exchange;
        The approval of the Competition Authority in South Africa and such other jurisdictions as may
         be required; and
        The approval of the South African Reserve Bank.

It is expected that these approvals will be obtained in the next four to six months. Shareholders in
PMC should refer to the simultaneously released announcement by PMC for further details.

The Consortium, along with Rio Tinto and Anglo American, has informed the Department of Minerals
Resources (DMR) as to the acquisition of the controlling interest in PMC. The Consortium is
committed to PMC completing its BBBEE transaction with Palabora Copper Employee Trust, the
Leolo Community Trust and the Negota consortium and looks forward to working with these groups
and the DMR to develop and grow the business. The Consortium will also work towards employment
continuity for all PMC staff as well as continuing to focus on safety as a priority at the PMC operations.

It is the Consortiums view that this Transaction reflects:

        The attractiveness of the South African mining sector and a clear sign of confidence in the
         investment potential of South Africa and the African continent;
        The clear support by China for the development of a strong relationship between South Africa
         and China via a joint investment by multiple Chinese enterprises;
        The continued commitment to growth of the Chinese steel industry and the continued
         development of the relationship between Hebei and the IDC; and
        The commitment of both PMC and the IDC to supporting beneficiation in South Africa and
         assisting in the development of new iron and steel projects.

Mr Wang Yifang, Chairman of Hebei said: Hebei is pleased to enter into this partnership alongside
the IDC, and is of the view that South Africa offers significant long-term investment opportunities for
Hebei and the IDC.

Mr Geoffrey Qhena, Chief Executive Officer of the IDC said: The IDC is pleased to establish this
partnership in support of IDCs steel industry initiative. PMC is a well-established player in the South
African mining industry and the IDC is committed to working together with all partners to take
advantage of the new opportunities that are expected to flow from this transaction.

------
Advisors

The Investment Banking divisions of Barclays Bank PLC and Absa Group Limited (an affiliate of
Barclays Bank PLC) in Hong Kong and South Africa are acting as exclusive financial advisors to the
Chinese consortium members, and JT&N (Jincheng Tongda & Neal) is acting as the Chinese
consortium members lead counsel with Werksmans Attorneys acting as South African counsel.

Deutsche Bank Johannesburg is acting as the exclusive financial advisor to IDC and Edward Nathan
Sonnenbergs is acting as IDCs legal advisor.

------
About Palabora Mining Company

PMCs principal asset is a copper and magnetite mine in Palabora, South Africa, with a c.240Mt
magnetite stockpile. PMC also owns a vermiculite mine. Studies are currently underway to extend the
life of the copper operation from 2016 to 2030, with plans to expand the export magnetite business
and to develop domestic magnetite supplies for further processing for iron production.

------

About Hebei, General Nice and Tewoo

Hebei is Chinas largest steel producer and the second largest in the world, ranked #269 among
Fortune Global 500 in 2012. Hebei has an annual production capacity of 50 million tonnes and
produced 44.4 million tonnes of steel and generated approximately US$40 billion of revenue in 2011.
It controls 13 large operations across a number of sub-sectors of steel production, iron ore mining,
trading and logistics in China.

General Nice, founded in 1992, is headquartered in Hong Kong. Its mainland business operation
headquarter is in Tianjin, China. General Nice is principally engaged in resources development and
production, logistics and trading. Strategic associates of the group are Abterra Limited which is listed
in Singapore and Loudong General Nice Resources (China) Holdings Limited which is listed in Hong
Kong.

Tewoo, a large Chinese state-owned enterprise ranked #416 among Fortune Global 500 in 2012, is
one of the major commodity logistics companies in China. Its operations encompass commodities
trading, natural resources development, logistics, real estate, financial services and vocational
education. In 2011, Tewoos total import and export volume was in excess of US$4 billion.


About the IDC

The IDC is a South African national development finance institution that was established in 1940 to
promote economic growth and industrial development. The IDC is wholly owned by the South African
Government under the supervision of the Economic Development Department. The IDC's primary
objectives are to contribute to the creation of balanced, sustainable economic growth in South Africa
and on the rest of the African continent.

------

For Chinese related media enquiries, please contact:

Hebei Iron & Steel Group Co. Ltd
Madam Yang Gui Qing
Minister, Capital Operations Department
Tel?+86 311 6677 8658
Email: yangguiqing@hebgtjt.com

For further information, please contact:

The Industrial Development Corporation of South Africa Limited
Mandla Mpangase
Public Relations Manager
Tel: +27 (0) 11 269 3282
Email: mandlam@idc.co.za

End
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