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SIBANYE GOLD LIMITED - Financial effects and withdrawal of cautionary

Release Date: 31/03/2014 09:31
Code(s): SGL     PDF:  
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Financial effects and withdrawal of cautionary

SIBANYE GOLD LIMITED
(Reg. No. 2002/031431/06)
(Incorporated in the Republic of South Africa)
JSE Code: SGL
ISIN Code: ZAE000173951
Issuer Code: SGL
NYSE Code: SBGL
(“Sibanye Gold” or the “Company”)


    FINANCIAL EFFECTS PERTAINING TO THE ACQUISITION OF WITS GOLD
     INCLUDING THE ACQUISITION OF SOUTHGOLD AND WITHDRAWAL OF
                     CAUTIONARY ANNOUNCEMENT

1. Introduction
Shareholders are referred to the Firm Intention announcement by Sibanye Gold to make
a cash offer to acquire the entire issued ordinary share capital of Witwatersrand
Consolidated Gold Resources Limited (“Wits Gold”) for a consideration of R11.55 per
Wits Gold share (“Proposed Transaction”), or a total consideration of approximately
R407 million (“Total Consideration”), incorporating the Company’s cautionary
announcement, which was jointly released by the Company and Wits Gold on SENS on
11 December 2013 and further cautionary announcements released on 28 January 2014
and 11 March 2014.

2. Southgold
Sibanye Gold wishes to advise that it has successfully concluded its detailed due
diligence investigation in relation to Southgold Exploration Proprietary Limited
(“Southgold”) and that it has taken the final decision to proceed with the acquisition of
Southgold subject to the implementation of the Proposed Transaction and the fulfilment
of certain outstanding conditions precedent listed below (the “Southgold Acquisition”).

Shareholders are referred to the Wits Gold announcement on 5 July 2013, where it was
announced that it had submitted a final binding offer (“the Offer”) to Mr Peter van den
Steen, the business rescue practitioner of Southgold, to acquire Southgold, the sole
owner of the Burnstone gold mine and assets (“Burnstone”) located in South Africa’s
Mpumalanga Province. The Offer was included in the business rescue plan that was
approved by creditors on 11 July 2013.

Summary of the key terms of the Offer:
 -    Wits Gold will acquire all of the issued share capital of Southgold together with all
    shareholder and inter-group loans against Southgold for a purchase price of R100;
 -    Reduction of Southgold total debt to US$177.3 million (“the Southgold Debt”) on the
    following terms:
    o       Upfront payment of US$7.25 million on transaction completion;
     o      Back-ranked to new funding to be injected by Wits Gold and to be repaid
            from the Burnstone mine’s free cash flow;
     o      Moratorium on interest and capital repayments for 36 months from
            transaction completion;
     o      Southgold Debt attracts interest at LIBOR +4%;
     o      Option to settle outstanding balances at any time without penalty; and
     o      Southgold Debt ring-fenced to Southgold.
 -     Wits Gold to provide up to R 950 million of new funding by means of a loan (“Wits
     Gold Loan”), over time, as working capital to support the production plan;
     o Wits Gold Loan attracts interest at JIBAR +4%;
     o Wits Gold Loan to be repaid first:
         #     90% free cash to Wits Gold Loan; 10% to Southgold Debt
     o On settlement of the Wits Gold Loan and interest, Southgold Debt will be repaid
         from free cash flow:
         #     70% to Wits Gold : 30% to Southgold Debt.

The Offer is still 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 signature
of all definitive transaction agreements, obtaining all necessary regulatory approvals,
including, amongst others, the approval of the of the Department of Mineral Resources
and Wits Gold confirming that the acquisition of Southgold does not give rise to any
adverse tax consequences for Wits Gold and/or Southgold.

Neal Froneman, CEO of Sibanye Gold, commented that “The Burnstone mine has
largely been developed, with a significant amount already invested in the mine
infrastructure. Sibanye Gold is acquiring the assets on extremely favourable terms and
we are confident that this transaction, which is consistent with our strategy to extend the
operating life of the Company in order to support the dividend yield strategy, will
contribute positively to Sibanye Gold’s free cash flow and enhance its longer term
value.”

3. Closing of the Proposed Transaction
Shareholders are advised that all conditions precedent to the Proposed Transaction
have been fulfilled or waived and accordingly the Proposed Transaction will be
implemented in accordance with its terms and become effective on 14 April 2014.

4.   Unaudited pro forma financial effects of the Proposed Transaction and the
     Southgold Acquisition
Set out below is the unaudited pro forma financial effects of the Proposed Transaction
and the Southgold Acquisition on Sibanye Gold.

Sibanye Gold announced on 21 August 2013, that it had entered into an agreement with
Gold One International Limited to acquire its 74% interest in Newshelf 1114 Proprietary
Limited group (“Newshelf”) which owns the Cooke underground and surface operations
(“Cooke Operations”). The consideration for the Cooke Operations will be approximately
150 million new Sibanye Gold ordinary shares, or such number of shares that represents
17% of Sibanye Gold’s issued share capital, on a fully diluted basis (“Consideration
Shares”), on the closing date of the transaction (“Cooke Transaction”). The key condition
precedent that is yet to be fulfilled is the approval of the Minister of Mineral Resources of
South Africa in terms of Section 11 of the Minerals and Petroleum Resources
Development Act.

The unaudited pro forma effects are prepared for illustrative purposes only and may not
fairly present Sibanye Gold’s results, financial position or changes in equity after the
Cooke Transaction, the Proposed Transaction and the Southgold Acquisition. It has been
assumed for the purposes of the pro forma financial effects that the Cooke Transaction,
the Proposed Transaction and the Southgold Acquisition took place with effect from 1
January 2013 for income statement purposes and on 30 June 2013 for the statement of
financial position.

The unaudited pro forma financial effects have been prepared by management of
Sibanye Gold and are the responsibility of the Board of Directors of Sibanye Gold.

Sibanye Gold has evaluated the Proposed Transactions and the Southgold Acquisition
separate from each other and the unaudited pro forma financial effects below reflects the
nature and impact of the two transactions separately.
Amounts in R'million unless otherwise stated
                         Before the                                                   After the
                                                         After the
                           Cooke                                                       Cooke                       After the
                                                          Cooke       Adjustments                 Adjustments
                        Transaction,   Adjustments                                  Transaction                     Cooke
                                                       Transaction,      due to                      due to
                            the        due to Cooke                                   and the                    Transaction,
                                                        but before     Proposed                    Southgold
                         Proposed       Transaction                                  Proposed                   the Proposed    Percentage
                                                      the Proposed    Transaction                 Acquisition
                        Transaction                                                 Transaction                  Transaction     change
                                                       Transaction
                          and the                                                    but before                    and the
                                           (d)           and the
                         Southgold                                        (h)            the                      Southgold
                                                        Southgold
                         Acquisition                                                 Southgold                    Acquisition
                                                        Acquisition
                            (a)                                                     Acquisition

                                           46.6                         (38.1)                      1 783.8
Profit for the year        290.0                         336.6                         298.5                      2 082.3         618%
                                           (e)                            (i)                        (k)(l)


Headline profit for                        11.5                         (38.1)                         -
                           880.8                         892.7                         854.2                       854.2           -3%
the year                                   (e)                            (i)                         (k)

                                       157 037 992
No of shares in issue   733 603 546                   890 641 538         n/a       890 641 538       n/a       890 641 538        21%
                                           (d)

Weighted average                       157 037 992
number of shares in     566 412 788                   723 450 780         n/a       723 450 780       n/a       723 450 780        28%
issue                                      (d)


                                         3 573.7                        (19.6)                      1 783.8
Net asset value           8 188.2                       11 761.9                     11 742.3                     13 526.0         65%
                                           (e)                            (i)                         (l)

                                         3 573.7                        (19.6)                      1 783.8
Net tangible assets       8 188.2                       11 761.9                     11 742.3                     13 526.0         65%
                                           (e)                            (i)                         (l)


Basic earnings per                         (5)                            (5)
                            51                             47                           41           247            288           462%
share                                       (f)                           (f)


Headline earnings                          (32)                           (5)
                            156                           123                          118             -            118           -24%
per share                                   (f)                           (f)
Net asset value per           204                   (2)
                      1 116             1 321                 1 318      200       1 519     36%
share                         (g)                   (g)


Net tangible asset            204                   (2)
                      1 116             1 321                 1 318      200       1 519     36%
per share                     (g)                   (g)



Notes:

(a) The “Before the Cooke Transaction, the Proposed Transaction and the Southgold
    Acquisition” financial information is based on Sibanye Gold’s reviewed consolidated
    interim financial statements of Sibanye Gold for the six months ended 30 June
    2013. Sibanye Gold has published provisional financial statements for the year
    ended 31 December 2013, but to ensure comparability with available public
    information for Wits Gold and the Cooke Operations Sibanye Gold’s reviewed
    consolidated interim results for the six months ended 30 June 2013 is used.
(b) The financial information for Newshelf, in respect of the Cooke Transaction, and
    Wits Gold, in respect of the Proposed Transaction, is based on their respective
    reviewed interim financial statements for the six months ended 30 June 2013.
(c) Transaction fees incurred and forecast for all the transactions have been included in
    the financial effects.
(d) The adjustment relates to the acquisition of the 74% interest in Newshelf, in
    exchange for the Consideration Shares. The number of Consideration Shares to be
    issued is based on 17% of Sibanye Gold’s issued share capital on a fully diluted
    basis as of 30 June 2013.
(e) The estimated consideration for the Cooke Transaction of R3 338 million, is based
    on the issue of 157 037 992 shares at an issue price of R21.70 per share, being
    Sibanye Gold’s closing share price on 27 March 2014. The adjustment includes the
    consolidation journals, eliminating the equity of Newshelf and recognising negative
    goodwill of approximately R59 million on consolidation. Sibanye Gold has not re-
    valued any of the assets or liabilities of Newshelf and used the values per the
    Newshelf reviewed interim financial statements for the six months ended 30 June
    2013 in determining the negative goodwill. Sibanye Gold would be required to do a
    purchase price allocation in accordance with IFRS 3 Business Combinations (IFRS
    3) once the transaction is completed. The final goodwill or negative goodwill amount
    will be determined by using the actual consideration and the fair values of the assets
    and liabilities acquired when the Cooke Transaction is concluded.
(f) The adjustment relates to basic and diluted earnings per share and headline and
    diluted headline attributable to Sibanye Gold shareholders resulting from the impact
    of pro forma adjustments and the increase resulting from the impact of the increase
    in the weighted average number of ordinary shares (from the issue of the
    157 037 992 Consideration Shares, as described above). 100% weighting was
    assumed for the share issue.
(g) The adjustment relates to net asset value and net tangible asset value per share
    resulting from the impact of pro forma adjustments and reflecting the increase in the
    number of ordinary shares.
(h) The adjustment relates to the Proposed Transaction, the acquisition of the 100%
    interest in Wits Gold for the cash Total Consideration.
(i) The adjustment includes the consolidation journals, eliminating the equity of Wits
    Gold. Wits Gold does not constitute a business and the Proposed Transaction is
    considered to be outside the scope of IFRS 3 and is accounted for as an asset
    acquisition in which the cost of the acquisition is allocated between the individual
    identifiable assets and liabilities based on their relative fair values.
(j) The adjustment relates to the Southgold Acquisition.
(k) As Southgold was under business rescue for the six months ended 30 June 2013,
    Sibanye Gold’s management concluded that the inclusion of Southgold’s results for
    the period would be misleading as it does not represent the true nature of the
    business being acquired. The financial information, more specific the statement of
    financial position, is based on Southgold’s reviewed interim financial statements for
    the six months ended 30 June 2013 while the company was under business rescue.
(l) The adjustment includes the consolidation journals, eliminating the equity of
    Southgold. The Southgold Acquisition would meet the definition of a business
    combination under IFRS 3 and would require a purchase price allocation in
    accordance with IFRS 3 once the transaction is completed. Sibanye Gold has
    calculated the fair value of the Southgold Debt as at 30 June 2013. The fair value of
    the Southgold Debt is influenced by various factors as the debt will be repaid from
    free cash flows. In calculating the free cash flow, a gold price of R430 000/kg was
    applied to the life of mine plan as accepted under the business rescue plan and
    discounted applying US Dollar discount rate that reflects market assessments at 30
    June 2013. The US Dollar fair value of the loan was then converted to Rand
    applying the period exchange rate of R10.15/USD. Southgold’s carrying value of
    property, plant and equipment is R856 million at 30 June 2013 after the company
    has recognised an impairment loss of R3.9 billion in 2012. Applying the same
    assumptions to the life of mine, the fair value of the property plant and equipment is
    considered to be approximately R3 002 million. Sibanye Gold has not re-valued any
    of the other assets and liabilities of Southgold and used the values per the
    Southgold reviewed interim financial statements for the six months ended 30 June
    2013 to calculate the negative goodwill of R1 784 million. As Southgold is acquired
    for the nominal amount of R100.00, any fair value adjustment to property, plant and
    equipment above R1 218 million will result in negative goodwill.

5.     Withdrawal of cautionary
Following the publication of the terms and financial effects of the transaction caution is
no longer required to be exercised by shareholders when dealing in their securities in the
Company.

Johannesburg
31 March 2014

               Corporate adviser                             JSE Sponsor
     Qinisele Resources Proprietary Limited                   JP Morgan Equities South Africa (Pty) Ltd

          South African Legal Adviser                  Canadian Legal Counsel
         Edward Nathan Sonnenbergs                Norton Rose Fulbright Canada LLP

               US Legal Counsel
                Linklaters LLP

Date: 31/03/2014 09:31:00 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
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