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Conclusion of binding funding agreement with Continental Coal and cautionary announcement
VILLAGE MAIN REEF LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1934/005703/06)
Share Code: VIL ISIN: ZAE000154761
(“Village” or “the company”)
CONCLUSION OF BINDING FUNDING AGREEMENT WITH CONTINENTAL COAL AND
CAUTIONARY ANNOUNCEMENT
1. Introduction
Shareholders are advised that Village has entered into a binding funding agreement (the “transaction”)
with Continental Coal Limited (“Continental”), a South African thermal coal production, development
and exploration company, listed on the Australian Securities Exchange (“ASX”) and the Alternative
Investment Market of the London Stock Exchange (“AIM”), pursuant to which:
- Village and Continental have entered into a private placement agreement in terms of which,
inter alia, Village will subscribe for 100 000 000 ordinary shares in Continental (“Continental
shares”) at an issue price of A$0.08 per share (the “private placement”);
- Village and Continental have entered into a buy-back agreement in terms of which Village will
acquire all of the shares held by shareholders of Continental holding parcels of Continental shares
with a market value of less than A$ 500 (“minority members”) (the “buy-back”);
- Village may, up to 30 April 2014, acquire further Continental shares on the market at a price of up
to A$0.10 per share, thereby increasing Village’s shareholding in Continental to 19.9% of the issued
share capital of Continental. Both the timing and price of the on-market purchases of Continental
shares by Village will be at the discretion of Village.
The transaction reflects Village’s continued diversification strategy whilst maintaining Village’s
requirement to invest in strong, cash generating assets. Village intends to ultimately hold a 19.9% interest
in the issued share capital of Continental.
Continental is a South African thermal coal producer with a portfolio of projects located in South Africa’s
major coal fields including three operating mines, Vlakvarkfontein, Ferreira and Penumbra Coal Mines.
As stated in the ASX announcement released by Continental dated 18 March 2013, which announcement
was also released on the Regulatory News Service of AIM on 18 March 2013, the mines are set to
produce at an annualised rate of 2.8Mtpa of thermal coal for the export and domestic markets.
Continental’s first underground mine, the Penumbra Coal Mine, commenced development in September
2011 and produced first coal in November 2012. In 2011, a Feasibility Study was also completed on a
proposed fourth mine, the De Wittekrans. Continental has further concluded strategic off-take and funding
agreements with EDF Trading for its export thermal coal production, signed a joint development
agreement with KORES, Korea Resources Corporation and secured debt funding from ABSA Capital to
fund its growth.
Village Joint Chief Executive Officer Marius Saaiman said: “We think Continental is at an inflection point
in terms of its development. The Company has a strong portfolio of projects and has demonstrated its
ability to develop and operate mines and we look forward to working with and supporting the
management team as production continues to increase and as greater value is recognised within the
Company.”
Commenting on the private placement, Continental CEO Don Turvey said: "I am pleased to welcome the
strategic investment and partnership that we have now established with Village Main Reef. The private
placement and off-market purchase of small shareholdings, will have a significant impact on our business
in the short term. The introduction of such a strategic and cornerstone investor to our share register,
demonstrates the value proposition of our operating coal mining business and our coal project
development opportunities. VMR is an established and profitable dividend paying mining company and as
this is their first investment in the coal sector positively reflecting on the quality of our portfolio.
We are pleased to have secured this strategic and long-term relationship with VMR and to have the opportunity
to work with their dynamic and successful management team.”
2. Terms of the private placement
Pursuant to the private placement, Village will subscribe for 100 000 000 Continental shares at an issue
price of A$0.08 per Continental share for an aggregate subscription price of A$8 000 000
(the “subscription price”), payable in cash.
In addition, pursuant to the private placement, a further 25 000 000 unlisted options to acquire Continental
shares will be issued to Village, at a strike price of A$0.10 per option, which options will expire on 31
March 2016.
The private placement is conditional upon Continental shareholders approving the requisite resolution
allowing Continental to allot and issue the 100 000 000 Continental shares and the 25 000 000 unlisted
options to Village in terms of the private placement.
The transaction also remains subject to Village receiving approval for the private placement from the
South African Reserve Bank.
The effective date for the issue of the 100 000 000 Continental shares and the 25 000 000 unlisted options,
referred to above, is expected to be 7 May 2013.
Upon signature of the formal agreements in respect of the private placement and the buy-back referred to
below, Village will lend and advance A$2 000 000 to a wholly owned South African subsidiary of
Continental as a secured interim loan, which will convert into Continental shares upon Continental
shareholders approving the private placement. The A$2 000 000 will form part of the total subscription
price of A$8 000 000. The balance of the subscription price will be paid in cash to Continental upon
Continental shareholders approving the private placement. In the event that Continental shareholders do
not approve the private placement, the secured interim loan will be repayable or convert into Continental
shares at an issue price equal to the volume weighted average price at which Continental shares traded for
the 30 days preceding the signature of the formal agreements in respect of the transaction.
3. Terms of the buy-back
Pursuant to the buy-back, Village will acquire all of the shares held by minority members (other than
those held by minority members who elect to retain their shares in Continental) at a minimum sale price
of A$0.0521 per Continental share. The minimum sale price is equal to the simple average of the last sale
prices of Continental’s shares, quoted on the ASX for each of the 10 trading days prior to 11 March 2013
(the “record date”).
As at the close of business on the record date, Continental had 11 054 shareholders, of which 5 614 were
minority members, which minority members held 19 352 630 Continental shares in total.
4. Categorisation of the transaction
The transaction is classified as a Category 2 transaction in terms of the JSE Listings Requirements.
Accordingly it is not subject to approval by Village’s shareholders.
5. Financial effects and cautionary
The financial effects of the transaction are still in the process of being finalised and will be published in
due course. Village shareholders are advised to exercise caution when dealing in their shares until the
financial effects of the transaction are announced.
18 March 2013
Sponsor
Java Capital
Date: 18/03/2013 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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