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Detailed further cautionary announcement regarding the offer by Wits Gold for the acquisition of Southgold Explorati
WITWATERSRAND CONSOLIDATED GOLD RESOURCES LIMITED
(Incorporated in the Republic of South Africa)
Registration Number 2002/031365/06
JSE Code: WGR
ISIN: ZAE000079703
TSX Code: WGR
CUSIP Number: S98297104
("Wits Gold” or the “Company")
DETAILED FURTHER CAUTIONARY ANNOUNCEMENT REGARDING THE OFFER BY
WITS GOLD FOR THE ACQUISITION OF SOUTHGOLD EXPLORATION (PTY) LIMITED
1. Introduction
Wits Gold shareholders are referred to the cautionary announcement released on the Securities
Exchange News Service (“SENS”) and on SEDAR on Friday, 21 June 2013, and are advised
that the Company has submitted a final binding offer to Mr Peter van den Steen, the business
rescue practitioner (the “Practitioner”) for Southgold Exploration (Pty) Limited (“Southgold”) an
indirect wholly-owned subsidiary of Great Basin Gold Limited (“GBG”), to acquire from N6C
Resources Inc.:
- the entire issued share capital of Southgold (“Sale Shares”), the sole owner of the
Burnstone property located in the South Rand area of the Witwatersrand Goldfields in
the Mpumalanga Province, South Africa where the Burnstone mine project is located;
- all shareholder loans and all GBG’s inter-group loans against Southgold (the “Sale
Claims”),
on certain terms and subject to certain conditions, common to a transaction of this nature, which
terms and conditions will be finalised and will form part of the transaction agreements to be
concluded in due course (the “Proposed Offer” or the “Proposed Transaction”).
2. Background to the Southgold Business Rescue process
In September 2012, Southgold entered into business rescue proceedings (the "Business
Rescue") under Chapter 6 of the South African Companies Act, 71 of 2008 (the “Companies
Act”). Wits Gold submitted the Proposed Offer to the Practitioner on 4 July 2013, and the
Proposed Offer has been accepted by the Practitioner. Accordingly, the Proposed Offer has
been incorporated into a Business Rescue plan prepared by the Practitioner (the “Plan”), which
Plan, incorporating a notice of meeting was disseminated to the creditors of Southgold.
In terms of the notice of meeting included in the Plan a meeting of the creditors of Southgold
has been convened under section 151 and 145 of the Companies Act on 11 July 2013 to
consider and vote on the Plan (“Business Rescue Meeting”).
Certain creditors of Southgold, namely Credit Suisse AG, Standard Chartered Bank (the
“Lenders”,) certain Debentureholders and a trade creditor (collectively, the “Debt Holders”),
have each entered into a Restructuring Support Agreement, in terms of which the Debt Holders
have undertaken to vote in favour of the Plan and accordingly the Proposed Transaction, and to
do all things necessary to implement the Proposed Transaction.
3. Details of the Proposed Offer
3.1 Purchase consideration
Under the terms of the Proposed Offer a nominal purchase consideration of R100.00 (one
hundred South African Rand) will be payable on the completion date of the Proposed
Transaction (the completion date is to be determined) and will be apportioned as follows:
- ZAR50.00 (fifty South African Rand) in respect of the Sale Shares; and
- ZAR50.00 (fifty South African Rand) in respect of the Sale Claims,
(together the “Purchase Consideration”).
3.2 Wits Gold shareholders’ loan
In addition to the Purchase Consideration and subject to fulfilment of the conditions precedent,
Wits Gold will advance up to ZAR950 million (nine hundred and fifty million South African Rand)
(US$100 million (one hundred million United States dollars) at an exchange rate of ZAR9.50 /
US$1) to Southgold by means of a shareholder loan (“Wits Gold Loan”). The loan will bear
interest at a rate of the three month Johannesburg Interbank Agreed Rate (“JIBAR”) plus 4%
(four per cent), on terms and conditions to be agreed.
3.3 Restructuring and write-down of debt owed by Southgold
The Proposed Offer is conditional on, amongst others, the restructure of all liabilities due by
Southgold to, amongst others, the Debt Holders and the South African Revenue Services
(“SARS”), which liabilities include the debtor-in-possession (“DIP”) financing all transaction
costs and all costs related to the Business Rescue, inclusive of all guarantee obligations (but
exclusive of the Sale Claims) being reduced to an amount of US$177.35 million (one hundred
and seventy seven point three five million United States dollars) (“Total Southgold Liability”).
The Total Southgold Liability will be settled upon the following terms and conditions:
a. An upfront payment of US$7.25 million (seven million two hundred and fifty thousand
United States dollars) on completion of the Proposed Transaction (“Completion Date”),
which date is yet to be determined);
b. From actual free cash flow generated by Southgold, the repayments of the Wits Gold Loan
and balance of the Total Southgold Liability of US$170.1 million, being the Total Southgold
Liability less the upfront payment in a) above will be scheduled as follows, (subject to 3.3
e):
i. In a ratio of 90% (ninety per cent) to the Wits Gold Loan and 10% to the balance of the
Total Southgold Liability;
ii. Once the Wits Gold Loan plus accrued interest has been settled then in a ratio of 70%
(seventy per cent) to Wits Gold and 30% (thirty per cent) to the balance of the Total
Southgold Liability;
iii. 33.3% (thirty three point three per cent) of the amounts payable in settlement of the Total
Southgold Liability set out in (b) (i) and (ii) will be according to a fixed payment schedule
with the remaining repayment to be variable (the “Guaranteed Payment”). The
Guaranteed Payment is subject to a real gold price of ZAR410,000 / kg being achieved
during the period under review;
c. Once the balance of the Total Southgold Liability has been settled then the Lenders shall
be entitled to participate in 10% of the free cash flows. This participation right will be limited
to the current planned Burnstone life of mine (i.e. up to 2033), alternatively shall not exceed
an amount of US$233,003,463.46 (two hundred and thirty three million three thousand four
hundred and sixty three United States dollars and forty six cents) being all the liabilities due
by Southgold to the Lenders prior to the restructuring under the Business Rescue process.
d. Terms upon which the balance of the Total Southgold Liability will be settled:
i. Moratorium on interest and interest and capital repayments for 36 (thirty six) months
from the Completion Date; thereafter
ii. Interest rate at US$ London Interbank Offered Rate (“LIBOR”) plus 4% (four per cent);
iii. Southgold to have the option without penalty to settle the outstanding balance of the
Total Southgold Liability assumed, in cash at any time post completion of the Proposed
Transaction.
e. The Lenders agreeing to provide post-commencement financing to Southgold from 1 July
2013 until the Completion Date (“Interim DIP”). This Interim DIP financing shall not exceed
US$5 million (five million United States dollars) in total and shall be capable of draw down on
notice being given to the Lenders and shall be settled on the following terms and conditions:
i. Provided and repaid in US$ (US dollars);
ii. Repaid from free cash flow generated by Southgold, in a ratio of 50:50, with 50% (fifty
per cent) going to repay the Wits Gold Loan and 50% (fifty percent) going to repay the
Interim DIP financing until the Interim DIP financing has been settled:
a) This repayment will precede the payment schedule listed in b i), until the Interim DIP
financing is repaid, whereupon the payment schedule in b i) will begin.
4. Rationale for the Proposed Transaction
In line with Wits Gold’s strategy of owning and developing shallow mines in South Africa the
acquisition of the Burnstone property represents both a compelling value and strategic
proposition for shareholders for, amongst others, the following reasons:
- it provides shareholders with access to a cash generative asset and facilitates Wits
Gold’s transformation into a producer in the short term;
- it provides Wits Gold with access to cash flows generated by the Burnstone mine which
is anticipated to accelerate development of other Wits Gold projects;
- 80% of the Burnstone mine’s capital has been spent to date; and
- it creates a solid platform for the re-rating of Wits Gold’s securities as Wits Gold moves
from an explorer to a producer.
Wits Gold CEO Philip Kotze comments: “I am delighted that our offer for the Burnstone mine
has been accepted by the Practitioner. As part of the Proposed Transaction Wits Gold has
formulated a business plan for the mine which we believe is realistic, deliverable, value
accretive to Wits Gold shareholders and aims to ensure maximum benefit and participation for
each stakeholder in the Proposed Transaction”
5. Conditions precedent to the Proposed Transaction
The Proposed Offer and the implementation of the Proposed Transaction are each subject to
and conditional upon the fulfilment of, or waiver by Wits Gold of conditions precedent standard
to a transaction of this nature, including but not limited to entering into definitive transaction
agreements, obtaining all necessary shareholder and regulatory approvals, including, amongst
others, the approval of the Supreme Court of British Columbia, South African competition
authorities, Toronto Stock Exchange (“TSX)”, JSE Limited (“JSE”), and South African Reserve
Bank (“SARB”), and Wits Gold obtaining the necessary financing arrangements.
6. Full terms announcement regarding the Proposed Transaction
A full terms announcement including the pro forma financial effects on the reported financial
information of Wits Gold, as well as the salient dates and times relating to the implementation of
the Proposed Transaction, including the effective date, will be announced to shareholders in
due course, and remains subject to, amongst others, the approval of the Plan by the creditors of
Southgold at the Business Rescue Meeting.
7. Renewal of cautionary announcement:
Wits Gold shareholders are referred to the cautionary announcement released by the Company
on SENS and on SEDAR on Friday, 21 June 2013, and are advised that, as the Proposed Offer
forming part of the Plan has not yet been approved by the creditors of Southgold, and the
definitive transaction agreements are still being negotiated, which may have a material effect
on the price at which the Company’s securities trade, shareholders are advised to continue to
exercise caution when dealing in Wits Gold’s securities until a further announcement is made.
Johannesburg
05 July 2013
Corporate adviser Legal advisers Sponsor
Qinisele Resources (Pty) Faskens (South Africa) PricewaterhouseCoopers
Limited Stikeman Elliott (Canada) Corporate Finance
(Proprietary) Limited
Transaction sponsor
Macquarie First South Capital
(Pty) Limited
For further information please contact:
Philip Kotze Hethen Hira
Chief Executive Officer Vice President: Corporate Affairs
Tel: +27 11 832 1749 Tel: +27 11 832 1749
www.witsgold.com
FORWARD LOOKING STATEMENTS
This press release contains "forward-looking information" within the meaning of applicable
securities laws including information regarding the business of Wits Gold, the timing and terms
and conditions of the Proposed Offer and Proposed Transaction, as well as the contemplated
benefits from the Proposed Transaction. Readers are cautioned not to place undue reliance on
forward-looking information. Forward?looking information involves known and unknown risks,
uncertainties and other important factors that could cause actual results and developments to
differ materially from those contemplated by this information. Such risks, uncertainties and other
important factors include among others: the ability to obtain the necessary shareholder and
regulatory approvals; the ability to obtain the necessary financing on satisfactory terms, or at all;
the ability to satisfy all other conditions precedent to the Proposed Transaction; economic,
business and political conditions in South Africa; decreases in the market price of gold; hazards
associated with underground and surface gold mining; and changes in laws and government
regulations. The statements in this press release are made as of the date of this release. You
should not place undue importance on forward?looking information and should not rely upon this
information as of any other date. The Company undertakes no obligation to update publicly or
release any revisions to these forward?looking statements to reflect events or circumstances
after the date of this document or to reflect the occurrence of unanticipated events except where
required by applicable laws.
Date: 05/07/2013 08:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
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