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Market update and cautionary
MINE RESTORATION INVESTMENTS LIMITED
Incorporated in the Republic of South Africa
Registration number 1987/004821/06
Share Code: MRI
ISIN Code: ZAE000164562
("MRI" or "the Company")
GENERAL COMPANY UPDATE AND DETAILED CAUTIONARY ANNOUNCEMENT
1. UPDATE
As announced on 17 January 2014 the coal fines processing and
briquetting plant (the “Plant”) at the Vaalkrantz Colliery has been
fully commissioned and capable of commencing commercial operations.
The Plant processes fines at Keaton Energy Holdings Limited’s
(“Keaton”) Vaalkrantz Colliery (the ”Mine”) from existing coal fine
dumps and coal fines that are discarded from the wash plant at the
Mine. The MRI group has the right to process, at no initial cost,
all the discarded coal fines at the Mine. The Plant is able to
initially process these coal fines, thereby upgrading the quality of
the coal, before briquetting the coal and producing a saleable
product.
The Plant is currently testing the production of briquettes, and
identifying areas of optimisation and sampling for potential
customers. In addition, the Plant is currently processing coal
fines, from the existing fines dumps at the Mine, to produce a washed
product. Processed coal fines can be produced at less cost to the
Company than briquettes and will provide an alternate revenue source
for the Company in addition to the sale of its briquettes. The
Company has agreed commercial terms with Keaton, whom have a first
right of refusal for all product from the Plant from the Plant and
will commence sales before the end of the month.
The Company is also pleased to provide an update in respect of its
financing arrangements as follows:
- During December 2013, the Company raised an amount of R2 500 000
by way of a general issue of shares for cash;
- The Company has also entered into a further loan agreement with
Armadale Capital Plc (“ACP”), MRI’s largest shareholder,
extending its current loans by R2 000 000 for an aggregate
amount of R3 179 047.22 (“ACP Loan Facility”); and
- The Company’s existing lender, AfrAsia Special Opportunities
Fund (Pty) Ltd (“ASOF” or the “Lender”) has approved the final
draw down amount of R2 231 679.00 in respect of its R11 000
000.00 loan facility (the “Loan Facility”)
The new capital provided to the Company via these arrangements is
approximately R4 000 000. The new capital will be utilised for
working capital purposes.
2. DETAILED CAUTIONARY REGARDING THE CONVERSION OF DEBT
2.1 INTRODUCTION
Loan Facility
In a SENS announcement published on 19 July 2013, shareholders were
advised that Octavovox Proprietary Limited, which is 51% held by
MRI’s wholly-owned subsidiary, Western Utilities Corporation (Pty)
Ltd, secured the Loan Facility for the amount of R11 000 000 from the
Lender in order to complete the Plant, as detailed in paragraph 1
above.
In terms of the Loan Facility agreement, MRI granted an option to the
Lender whereby the Lender has the right to, at the Lender’s election;
convert the Loan Facility into MRI shares at a conversion price of 5
cents per share in lieu of repayment of the Loan Facility (the “ASOF
Conversion Option”).
ACP Loan Facility
As mentioned in paragraph 1 above, MRI has entered into the ACP Loan
Facility for the amount of R3 179 047.22. The ACP Loan Facility
includes a conversion option similar to the ASOF Conversion Option
whereby ACP may, at its election, convert the ACP Loan Facility into
MRI shares at a conversion price of 5 cents per share in lieu of
repayment of the ACP Loan Facility (the “ACP Conversion Option”).
The ASOF Conversion Option and ACP Conversion Option are collectively
referred to in this announcement as the “Conversion Options”.
The exercising of the Conversion Options, to the extent exercised in
full, would facilitate the repayment of the Loan Facility and the ACP
Loan Facility, thereby reducing MRI’s indebtedness by R14,179,047.22
in aggregate.
2.2 TERMS OF THE CONVERSION OPTIONS
The Loan Facility and the ACP Loan Facility include provisions
whereby the Lender and ACP have been granted a right to elect for the
repayment of the facilities (in part or in whole) by way of a
conversion into new MRI shares.
This provision allows both the Lender and ACP to exercise the
Conversion Options after the facilities were advanced for the portion
of the outstandings which the Lender and ACP elect to convert.
The maximum number of new MRI shares to be issued in terms of the
ASOF Conversion Option, in the event that the option is exercised, is
220 000 000, amounting to 28.14% of the issued share capital post the
ASOF Conversion Option and assuming the ACP Conversion Option is
exercised. The maximum number of new MRI shares to be issued in terms
of the ACP Conversion Option is 63 580 940, amounting to 8.13% of the
issued share capital post the ASOF Conversion Option and the ACP
Conversion Option.
The conversion price of 5 cents per share is at a discount of
approximately 50% to the 30-day Volume Weighted Average Price
(“VWAP”) on 20 February 2014.
2.3 CONDITIONS PRECEDENT TO THE CONVERSION OPTIONS
The Conversion Options are subject to the following conditions
precedent being achieved by no later than 30 April 2014 or such later
date as agreed to between ASOF, ACP and MRI:
- JSE Limited (“JSE”) and regulatory approval;
- Approval by the requisite majority of MRI shareholders of the
special resolutions (to the extent applicable and required) in
terms of section 41 (3) of the Companies Act and section 5.51 of
the JSE Listings Requirements; and
- Approval of the listing of the Conversion Option shares, if the
Conversion Options are to be exercised.
2.4 CATEGORISATION OF THE CONVERSION OPTIONS
The issue of MRI shares pursuant to the exercise of the Conversion
Options will be deemed a specific issue of shares for cash in terms
of the JSE Listings Requirements and will require the support of at
least 75% of the MRI shareholders present and entitled to vote at a
MRI general meeting (the “General Meeting”).
In addition, in accordance with section 41(3) of the Companies Act,
the grant of the Conversion Options and the issue of MRI shares
pursuant to the exercise of the Conversion Options will also require
support of at least 75% of the MRI shareholders present and entitled
to vote at the General Meeting as more than 30% of MRI’s issued share
capital will be issued. Details hereof will be included in a notice
of the General Meeting attached to a circular to MRI shareholders, to
be issued in due course.
The number of shares to be issued in terms of the Conversion Options
will exceed 50% of the issued share capital of MRI and accordingly
MRI will need to issue revised listing particulars with the Circular.
Although the issue is at a discount to the 30-day VWAP, the Lender is
a public shareholder in terms of section 4.25 of the Listings
Requirements and therefore no fairness opinion is required in respect
of the ASOF Conversion Option. However, as ACP is a related party to
MRI by virtue of it holding more than 10% of the current issued share
capital of MRI and is accordingly not deemed to be a public
shareholder, a fairness opinion for the issue of MRI shares pursuant
to the exercise of the ACP Conversion Option to ACP will be required.
ACP will be precluded from voting on the resolution in relation to
the ACP Conversion Option.
3. PRO FORMA FINANCIAL EFFECTS
Pro forma financial effects will be published in due course.
4. DOCUMENTATION AND SALIENT DATES
A circular incorporating the terms of the Conversion Options, a
notice of general meeting, a fairness opinion and revised listing
particulars will be submitted to the JSE for approval and mailed to
shareholders in due course.
The Company will keep shareholders informed of progress made, the
expected date of posting of the above-mentioned circular and the
salient dates in terms of the Conversion Options detailed in this
announcement.
5. CAUTIONARY ANNOUNCEMENT
The pro forma financial effects in relation to the Conversion Options
will be published in due course. Until such time as these details
have been published, shareholders are advised to exercise caution
when dealing in MRI’s securities.
Johannesburg
21 February 2014
Corporate Advisor:
AfrAsia Corporate Finance Proprietary Limited
Designated Advisor:
Sasfin Capital (a division of Sasfin Bank Limited)
Date: 21/02/2014 12:15:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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