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PALABORA MINING COMPANY LIMITED - Update on the Rio Tinto and Anglo American divestment, the BBBEE transaction and renewal of cautionary announcement

Release Date: 01/07/2013 16:00
Code(s): PAM     PDF:  
Wrap Text
Update on the Rio Tinto and Anglo American divestment, the BBBEE transaction and renewal of cautionary announcement

PALABORA MINING COMPANY LIMITED
(Incorporated in the Republic of South Africa)
Registration number – 1956/002134/06
JSE Code: PAM ISIN: ZAE000005245
("Palabora" or "the Company")

ANNOUNCEMENT PERTAINING TO:
  • RIO TINTO GROUP ("RIO TINTO") AND ANGLO SOUTH AFRICA CAPITAL
     PROPRIETARY LIMITED'S ("ANGLO AMERICAN") BINDING AGREEMENT
     ("RIO/ANGLO SALE AGREEMENT") TO SELL THEIR RESPECTIVE
     EFFECTIVE SHAREHOLDINGS IN PALABORA ("RIO TINTO AND ANGLO
     AMERICAN DIVESTMENT");
  • UPDATE IN RESPECT OF PALABORA'S BROAD-BASED BLACK ECONOMIC
     EMPOWERMENT ("BBBEE") TRANSACTION ("BBBEE TRANSACTION");
  • CONCLUSION OF A MAGNETITE OFF-TAKE FRAMEWORK AGREEMENT
     BETWEEN PALABORA, PALABORA COPPER PROPRIETARY LIMITED
     ("PALABORA COPPER") AND THE INDUSTRIAL DEVELOPMENT
     CORPORATION OF SOUTH AFRICA SOC LIMITED ("IDC"); AND
  • RENEWAL OF CAUTIONARY ANNOUNCEMENT.


1.   RIO TINTO AND ANGLO AMERICAN DIVESTMENT

Shareholders of Palabora ("Shareholders") are referred to the announcements published
on the Stock Exchange News Service of the JSE Limited ("SENS") on 11 December
2012 and 28 December 2012, and the renewal of cautionary announcements published
on 12 February 2013, 27 March 2013 and 13 May 2013, regarding the conclusion of the
Rio/Anglo Sale Agreement between Rio Tinto, Anglo American and a consortium of
purchasers comprising South African and Chinese entities led by the IDC and Hebei Iron
& Steel Group Co. Ltd. ("Consortium").

As noted in the above-mentioned announcements, the completion of the Rio Tinto and
Anglo American Divestment is subject to the fulfilment of certain suspensive conditions
by 30 June 2013 (which date the parties to the Rio/Anglo Sale Agreement agreed could
be extended by mutual agreement – refer to further information provided below).

Palabora has been advised by Rio Tinto that significant progress has been made in
fulfilling or waiving the suspensive conditions to the Rio/Anglo Sale Agreement. In
particular, the following key suspensive conditions have been fulfilled:
     • the requisite approvals of the South African exchange control authorities have
          been obtained;
     • insofar as required, all Chinese regulatory approvals have been obtained;
     • the Palabora board-approved 2012 annual plan and 2013 H1 plan was provided
          to the Consortium; and
     • the Magnetite Off-Take Framework Agreement, described in more detail in
          paragraph 3 below, was entered into between Palabora, Palabora Copper and
          the IDC on 12 June 2013.

The implementation of the Rio/Anglo Sale Agreement remains subject only to the
following suspensive conditions:
   •   the approval of the Rio Tinto and Anglo American Divestment by the South
       African Competition Authorities;
   •   the completion agreement governing the BBBEE Transaction having become
       unconditional; and
   •   no material adverse change having occurred between the signature date of the
       Rio/Anglo Sale Agreement and the date that the two outstanding suspensive
       conditions referred to above are fulfilled or waived.

As regards the outstanding suspensive condition relating to approval of the Rio Tinto
and Anglo American Divestment by the South African Competition Authorities, in
accordance with the statutory process, the merger has been referred by the Competition
Commission to the Competition Tribunal with a recommendation that it be approved.
The status of the outstanding suspensive condition relating to the BBBEE Transaction is
described in detail in paragraph 2 below. To allow an adequate period of time for the
satisfaction of these two suspensive conditions, the parties to the Rio/Anglo Sale
Agreement have agreed to extend the date specified for the fulfilment of the remaining
suspensive conditions from 30 June 2013 to 31 August 2013.

As regards the outstanding suspensive condition relating to no material adverse change
having occurred, this will only be determined with reference to the date on which the two
outstanding suspensive conditions referred to above are fulfilled or waived. Based on
the operational and financial performance of Palabora to date, Palabora is of the view
that the production and threshold financial performance criteria are presently being met
and anticipates that such criteria will likely continue to be satisfied in due course.

Furthermore, as previously communicated, the Consortium will extend an offer to all
remaining Shareholders to acquire their shares in Palabora ("Mandatory Offer") upon the
Rio Tinto and Anglo American Divestment being completed and the Consortium
acquiring a beneficial interest in the relevant shares in Palabora.

Pursuant to such Mandatory Offer, and subject to and in accordance with the
requirements of the Companies Act, 2008, and the Fundamental Transactions and
Takeover Regulations contained in Chapter 5 of the Companies Regulations, 2011,
minority Shareholders are to be offered a consideration of ZAR 110 per share in
Palabora, plus an escalation of 5% per annum over the period from 1 July 2012 up until
the closing date of the Rio Tinto and Anglo American Divestment ("Closing Date"). Such
escalation is conditional on Palabora maintaining a threshold financial performance up
until the Closing Date, which escalation will be established through an independent
audit. Based on the financial performance of Palabora to date, Palabora is of the view
that the threshold financial performance criterion is presently being met and anticipates
that such criteria will likely continue to be satisfied in due course. The Closing Date will
occur within a period of up to 20 business days after the fulfilment of the remaining
suspensive conditions contained in the Rio/Anglo Sale Agreement. Should Palabora
pay any dividend prior to the Closing Date, the per share consideration payable to the
remaining Shareholders under the Mandatory Offer will be reduced by an amount equal
to the per share amount of such dividend/s.

2.   BBBEE TRANSACTION

Shareholders are referred to the announcement regarding the BBBEE Transaction (the
terms of which were approved by Shareholders in general meeting) published on SENS
on 15 June 2010, and the update thereto in the announcement dated 7 December 2012,
wherein Palabora noted the fulfilment of certain suspensive conditions to the BBBEE
Transaction (preceded by prior updates in the Interim Report published on 7 August
2012 and the preceding announcements dated 15 October 2010, 7 February 2011,
20 June 2011, 19 December 2011 and 23 March 2012).

Palabora has secured the conversion and execution of seven mining rights (out of eight
old order mining rights), as was noted in the update announcement of 7 December 2012.
Palabora, together with its proposed BBBEE partners, have however agreed that the
implementation of the BBBEE Transaction should not be delayed pending conversion of
the remaining old order mining right.

The consent to the transfer of the seven converted mining rights having been obtained
from the Department of Mineral Resources ("DMR") on 6 June 2013 in terms of
section 11 of the Mineral and Petroleum Resources Development Act, 2002, the
suspensive condition outstanding for the BBBEE Transaction to become unconditional is
the receipt by Palabora Copper of written confirmation of the registration of the cession
of these rights in Palabora Copper's name in the Mineral and Petroleum Titles
Registration Office. Upon the fulfilment of this suspensive condition, the BBBEE
Transaction will be able to be implemented in accordance with its terms. The
implementation of the BBBEE Transaction will be announced to Shareholders.

The remaining old order mining right will be transferred to Palabora Copper once it has
been converted and the requisite consent to its transfer to Palabora Copper has been
obtained from the DMR. Palabora continues to engage with the DMR in order to achieve
the conversion of this right and its transfer to Palabora Copper. Shareholders will be
kept apprised of developments in this regard.

3.   MAGNETITE OFF-TAKE FRAMEWORK AGREEMENT

Shareholders were advised in the update announcement dated 28 December 2012 that
the completion of the Rio/Anglo Sale Agreement is conditional on, inter alia, the entry
into of a Magnetite Off-Take Framework Agreement between Palabora, Palabora
Copper and the IDC for the sale by Palabora to the IDC, on a long-term basis, of an
agreed quantity of beneficiated magnetite should the IDC's steel manufacturing project
become operational.

Shareholders are advised that such Magnetite Off-Take Framework Agreement was
entered into between Palabora, Palabora Copper and the IDC in fulfilment of the
aforementioned suspensive condition to the Rio/Anglo Sale Agreement on 12 June
2013, and that Palabora will cede and delegate all of its contractual rights and
obligations in terms of the Magnetite Off-Take Framework Agreement to Palabora
Copper on Palabora's written notification to the IDC and Palabora Copper of the
implementation of the BBBEE Transaction.

In broad terms, the Magnetite Off-Take Framework Agreement regulates the sale of up
to 80 million tonnes of beneficiated magnetite (with an annual maximum off-take of
3.2 million tonnes) from Palabora Copper to the IDC (or relevant project company) over
a period of up to 27 years, commencing by no later than 31 December 2022. The full
implementation of the Magnetite Off-Take Framework Agreement is subject to various
conditions, including the establishment by the IDC of an iron and steel production facility
and the Rio/Anglo Sale Agreement becoming unconditional and being fully implemented
in accordance with its terms.

4.   RENEWAL OF CAUTIONARY ANNOUNCEMENT

Shareholders are advised to continue exercising caution when dealing in Palabora's
securities until a further announcement is made in connection with the Rio/Anglo Sale
Agreement.


Phalaborwa
1 July 2013

Sponsor
One Capital

Date: 01/07/2013 04:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
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