Wrap Text
Terms announcement
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")
TERMS ANNOUNCEMENT REGARDING:
- THE CONVERSION OF DEBT INTO EQUITY;
- THE ISSUE OF SHARES TO PRESENT AND PAST DIRECTORS;
- THE GRANT OF AN OPTION TO THE CHIEF EXECUTIVE OFFICER TO
ACQUIRE SHARES;
- THE ISSUE OF SHARES TO THE CORPORATE ADVISOR; AND
- THE WITHDRAWAL OF THE CAUTIONARY ANNOUNCEMENT.
1. INTRODUCTION
MRI has embarked on a strategy to reduce its indebtedness and
settle outstanding obligations by way of proposing financing
arrangements which include the granting of options to lenders to
convert debt into equity as well as offer certain parties MRI
shares in lieu of services rendered.
The Board is pursuing this strategy so as to improve the balance
sheet position of the Company and preserve the Company’s cash
resources for use in the coal briquetting operations
(“Briquetting Project”).
Shareholders are referred to the detailed cautionary announcement
published on 21 February 2014 (“Detailed Cautionary”) as well as
the renewal of cautionary announcement published on 4 April 2014
(“Renewal Cautionary”) collectively (“Cautionary Announcements”)
which announcements advised shareholders that MRI would grant its
lenders the option to convert their debt within the MRI group
into equity.
This announcement will provide MRI shareholders with further
details on the conversion options granted as mentioned in the
Detailed Cautionary as well as terms of additional proposed
financing arrangements.
2. THE CONVERSION OPTIONS
2.1 INTRODUCTION AND TERMS OF THE CONVERSION OPTIONS
In a SENS announcement published on 19 July 2013, shareholders
were advised that Octavovox (Pty) Ltd secured a facility for the
amount of R11 000 000 from AfrAsia Special Opportunities Fund
(Pty) Ltd (“ASOF”) (the “ASOF Loan”) in order to complete the
Briquetting Project. In terms of the loan agreement entered into
between MRI and ASOF (“ASOF Loan Agreement”), MRI granted an
option to ASOF whereby ASOF has the right, at ASOF’s election, to
convert the outstandings of the ASOF Loan including interest
(“ASOF Outstandings”), into MRI shares at R0.05 per share (the
“Conversion Price”) in settlement of the ASOF Outstandings (“ASOF
Conversion Option”).
The Company also entered into a loan agreement with ACP (“ACP
Loan Agreement”) for a facility of R3 179 047 (“ACP Loan”). In
terms of the ACP Loan Agreement, MRI granted ACP an option
whereby ACP has the right, at ACP’s election and subject to
ASOF’s written consent, to convert the outstandings of the ACP
Loan including interest (“ACP Outstandings”), into MRI shares at
the Conversion Price in settlement of the ACP Outstandings (“ACP
Conversion Option”).
The ASOF Conversion Option and ACP Conversion Option are
collectively referred to herein as the “Conversion Options”.
The exercising of the Conversion Options, to the extent exercised
in full, would facilitate the repayment of the ASOF Loan and the
ACP Loan, thereby reducing MRI’s indebtedness in aggregate by R15
901 671.
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 251 697 989 MRI shares, amounting to approximately
29.64% of the issued share capital of MRI post the ASOF
Conversion Option and assuming the ACP Conversion Option is
exercised and the Specific Issues (as defined and referred to in
paragraph 3 below) are effected.
The maximum number of new MRI shares to be issued in terms of the
ACP Conversion Option, in the event that the option is exercised,
is 66 335 446 MRI shares, amounting to approximately 7.81% of the
issued share capital of MRI post the ACP Conversion Option and
assuming the ASOF Conversion Option is exercised and the Specific
Issues (as defined and referred to in paragraph 3 below) are
effected.
The Conversion Price is at a discount of approximately 53% to the
30-day volume weighted average price (“VWAP”) of MRI shares
traded on the exchange operated by JSE Limited (“JSE”) up to and
including 20 February 2014, being the day prior to the
publication of the Detailed Cautionary.
2.2 RATIONALE FOR THE CONVERSION OPTIONS
The Conversion Options allow MRI to raise equity capital, the
proceeds of which will be applied to settling in its entirety the
indebtedness in respect of the ASOF Loan and ACP Loan thereby
reducing financing costs and significantly improving its balance
sheet position.
2.3 CONDITIONS PRECEDENT TO THE CONVERSION OPTIONS
The following conditions precedent in relation to the Conversion
Options are to be fulfilled by no later than 30 June 2014 (or
such later date as the parties may agree in writing) –
- the obtaining of approval from all regulatory bodies, including
any approvals required in terms of the JSE Limited Listings
Requirements (“Listings Requirements”); and
- the approval by the requisite majority of MRI shareholders of
all the resolutions required to implement the Specific Issues.
The ACP Conversion Option is also conditional upon obtaining
approval from ASOF.
2.4 APPROVALS REQUIRED FOR THE CONVERSION OPTIONS
The approval of the Conversion Options and the issue of MRI
shares pursuant to the exercise of the Conversion Options is a
specific issue of shares for cash in terms of the Listings
Requirements and will require the support of at least 75% of the
shareholders present and entitled to vote at a general meeting of
MRI shareholders (“General Meeting”).
In addition, in accordance with section 41(3) of the Companies
Act, 71 of 2008 (“Companies Act”), the approval 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.
A notice of General Meeting will be attached to a circular to MRI
shareholders which will provide further details of the Conversion
Options and Specific Issues as referred to in paragraph 3 below)
and will be posted to shareholders in due course (“Circular”).
Although the issue is at a discount of 53% to the 30-day VWAP,
ASOF 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. To the extent
that ASOF and its associates hold any shares in MRI prior to the
General Meeting, they will be precluded from voting on the
resolution in relation to the ASOF Conversion Option.
ACP is a related party to MRI by virtue of its holding more than
10% of the current issued share capital of MRI. Accordingly, ACP
is not deemed to be a public shareholder as contemplated in the
Listings Requirements. A fairness opinion for the issue of MRI
shares pursuant to the exercise of the ACP Conversion Option to
ACP is required in terms of paragraph 5.51(f) of the Listings
Requirements and will be included in the Circular. ACP and its
associates will be precluded from voting on the resolution in
relation to the ACP Conversion Option.
3.THE SPECIFIC ISSUES
3.1 INTRODUCTION AND TERMS OF THE SPECIFIC ISSUES
As part of a greater effort to improve the indebtedness within
the MRI group and preserve cash flows for operational activities,
the Company proposes that it settle certain outstanding and
current financial obligations through the issue of new MRI
shares.
Pursuant to this, it is proposed that the following issue of
shares/grant of options be effected:
- 10 000 000 new MRI shares at R0.05 per share to be issued in
settlement of corporate advisory fees owed to AfrAsia Corporate
Finance (Pty) Ltd (“AfrAsia”) (the “AfrAsia Issue”);
- an option granted to MRI’s CEO, R Tait (“CEO”) to acquire up to
10 000 000 new MRI shares at a strike price of R0.05 per share
(“CEO Option”). The CEO Option will vest in two tranches of 5 000
000 MRI shares on 1 March 2015 and 1 March 2016 respectively; and
- 13 000 000 new MRI shares at R0.05 per share to be issued in
settlement of outstanding directors’ fees and employee fees
amounting to R650 000. This issue will be made to the existing
directors of MRI namely Q George, R Tait, A Meyer, C Roed, J
Lewis and S Caddy (“Current Directors”) as well as past directors
namely S Tredoux and J Herbst (“Past Directors”) (“Directors
Issue”) on the following basis:
Name of Director Indirect/Direct Number of Shares Rand Value of
Beneficial Shares
holding
Q George Indirect 2 508 000 R125 400
R Tait Direct 1 596 000 R79 800
A Meyer Direct 1 848 000 R92 400
C Roed Direct 2 508 000 R125 400
J Lewis Indirect 1 000 000 R50 000
S Caddy Direct 1 140 000 R57 000
S Tredoux Direct 1 200 000 R60 000
J Herbst Direct 1 200 000 R60 000
TOTAL 13 000 000 R650 000
Collectively the AfrAsia Issue, CEO Option and Directors Issue
will be referred to herein as the “Specific Issues”.
The shares to be issued further to the Specific Issues will be
ordinary shares of no par value in MRI, which shares relate to a
class of shares already in issue.
The proposed issue price of R0.05 per MRI share for the Specific
Issues, represents a discount of approximately 50% to the 30 day
VWAP of MRI shares traded on the JSE over the 30 days up to and
including 4 April 2014, being the day prior to this announcement.
3.2 RATIONALE FOR THE SPECIFIC ISSUES
As noted in paragraph 1 above, the Specific Issues represent an
opportunity to raise equity capital for the Company, the proceeds
of which will be applied to settling outstanding directors’,
employee and advisor fees without using cash resources as well as
providing the Company with a mechanism for incentivising MRI’s
CEO.
3.3 CONDITIONS PRECEDENT FOR THE SPECIFIC ISSUES
The following conditions precedent in relation to the Specific
Issues are to be fulfilled by no later than 30 June 2014 (or such
later date as the Parties may agree in writing) –
- the approval by all regulatory bodies, including any approvals
required in terms of the Listings Requirements; and
- the approval by the requisite majority of MRI shareholders of
all the resolutions required to implement the Specific Issues.
3.4 APPROVALS REQUIRED FOR THE SPECIFIC ISSUES
The Specific Issues are deemed specific issues of shares for cash
to related parties in terms of the Listings Requirements. The
parties are deemed to be related parties to MRI in terms of the
Listings Requirements as:
- AfrAsia is the corporate advisor to MRI; and
- the Current Directors are directors of MRI and the Past
Directors have been directors of MRI within the 12 months
preceding the date of this announcement.
The Specific Issue will require the support of at least 75% of
the MRI shareholders present and entitled to vote at the General
Meeting. As noted in paragraph 3.1 above, the Specific Issues
will be at a 50% discount to the 30-day VWAP and accordingly
requires the inclusion of a fairness opinion from an independent
expert, which opinion will be included in the Circular.
In addition, in accordance with section 41(1) of the Companies
Act, the approval of the Directors Issue will also require
support of at least 75% of the MRI shareholders present and
entitled to vote at the General Meeting as MRI will be issuing
shares to directors.
AfrAsia, the Current and Past Directors and their associates will
be precluded from voting on the resolutions in relation to the
relevant Specific Issues to the extent that they already hold
shares in MRI.
4. CLEARANCE TO DEAL DURING A CLOSED PERIOD
MRI is currently in a closed period as the Company’s financial
results for the year ended 28 February 2014 (“2014 AFS”) have not
yet been published on SENS (“Closed Period”).
In terms of section 3.69 of the Listings Requirements, the
Current Directors are not permitted to deal in the shares of the
Company during the Closed Period. However in terms of 3.70 of
Listings Requirements, the JSE has granted a dispensation on
certain conditions in order that the Company may proceed with the
inclusion of the CEO Option and Directors Issue in the Circular
during the closed period.
It should be noted that although the CEO Option and Directors
Issue were agreed to during the Closed Period, the issuing of
shares and exercising of options will only be permitted once the
following conditions have been met:
(i) the 2014 AFS are published prior to the General Meeting;
(ii) MRI shareholders approve the resolutions in respect of the
Directors Issue and CEO Option at the General Meeting; and
(iii) MRI is no longer in a closed period.
5. PRO FORMA FINANCIAL EFFECTS
For purposes of this announcement, the Conversion Options and the
Specific Issues are referred to herein as the “Transactions”.
The unaudited pro forma financial effects of the Transactions are
the responsibility of the MRI directors and have been prepared
for illustrative purposes only to provide information about how
the Transactions may affect the financial position and results of
MRI and, because of its nature, may not give a fair reflection of
MRI’s financial position, changes in equity, and results of
operations or cash flows after the Transactions.
The pro forma financial information has been prepared using the
most recent published restated results of the MRI group for the
interim period ended 30 August 2013 in terms of the Listings
Requirements and guidelines issued by the South African Institute
of Chartered Accountants. The accounting policies of MRI have
been used in calculating the pro forma financial effects. The
accounting policies used are consistent with previous accounting
policies used by MRI and the accounting policies have been
applied on the same basis.
Before the Subsequent After ACP ASOF Directors CEO Option6 AfrAsia Pro forma 31 % Change
1 2 3 4 5
Transactions Events Subsequent Conversion Conversion Issue Issue and August 2013
Events transaction
fees7
Net asset value per
share (cents) 10.14 (0.16) 9.97 (0.58) (1.36) (0.07) (0.04) (0.13) 7.80 (23%)
Net tangible asset
value per share (cents) (5.67) 0.72 (4.95) 1.17 2.70 0.08 0.07 (0.02) (0.95) (83%)
Basic loss per share
(cents) (0.91) 0.05 (0.86) 0.10 0.24 (0.01) 0.01 (0.03) (0.55) (40%)
Headline loss per
share (cents) (0.91) 0.05 (0.86) 0.10 0.24 (0.01) 0.01 (0.03) (0.55) (40%)
Weighted and actual
number of shares in
issue at the end of the
period 468 413 000 496 190 778 496 190 778 562 526 224 814 224 214 827 224 214 837 224 214 847 224 214 847 224 214 81%
Shares in issue at the
end of the period 470 507 794 498 285 572 498 285 572 564 621 018 816 319 008 829 319 008 839 319 008 849 319 008 849 319 008 81%
Notes and assumptions:
1. The amounts set out in the “Before the Transactions” column
above have been extracted from the restated consolidated interim
results of MRI for the six months ended 31 August 2013 as
announced on SENS on 4 April 2014.
2. Subsequent to 31 August 2013, MRI issued 27 777 778 new
ordinary shares of no par value for a cash amount of R2 500 000,
at 9 cents per share, being a 10% discount to the 30-day VWAP as
at the agreement date on 27 November 2013. The shares were issued
to Lavender Sky Investments 40 Proprietary Limited ("Lavender
Sky"), not a related party to MRI. This subsequent event was
determined to be material. MRI undertook to pay an arrangement
fee of R 500,000 and was paid in cash to Lavender Sky on the same
day as the share issue. The arrangement fee was taken directly to
stated capital.
3. It is assumed that in terms of the ACP Conversion Option, ACP
will fully convert its loan balance of R3 317 000 as at 14 July
2014 at a price of R0.05 per share into 66 335 446 new MRI
shares. ACP has indicated that it will either exercise in full or
not at all. There is no impact on the pro forma income statement
in respect of finance charges, as the loan was not in existence
on or before 31 August 2013. In the event that ASOF does not
convert the loan balance, the pro forma financial effect will be
nil.
4. It is assumed that in terms of the ASOF Conversion Option,
ASOF will fully convert the loan balance as at 14 July 2014 of
R12 584 899 into 251 697 989 new MRI shares at a price of R0.05
per share. ASOF has indicated that it will either exercise in
full or not at all. The exercising of the Conversion Options will
facilitate the repayment of the ASOF Loan reducing MRI’s
indebtedness and resulting in an interest saving of R134 000 for
the 6 month period ended 31 August 2013. The loan balance as at
31 August 2013 was R6 795 000, with the remaining amount
increasing cash and cash equivalents. In the event that ASOF does
not convert the loan balance, the pro forma financial effect will
be nil.
5. Directors fees and employee fees of R650 000 were due and
payable as at 28 February 2014. In line with the Company’s
strategy to reduce its indebtedness and preserve the Company’s
cash resources, the Company proposes that 13 000 000 new MRI
shares at R0.05 per share be issued in settlement of this amount.
For purposes of the pro forma financial effects, it has been
assumed that 13 000 000 new MRI shares have been issued.
6. The Company proposes that the CEO be granted an option to
acquire up to 10 000 000 new MRI shares at R0.05 per share over a
period of 2 years from 1 March 2015 to 1 March 2017. For purposes
of the pro forma financial effects, it has been assumed that the
option has been exercised in full and 10 000 000 new MRI shares
have been issued
7. The effect of the Transactions is presented net of transaction
fees of approximately R792 000. As agreed, MRI has selected to
settle R500 000 of the total transactions costs through the issue
of 10 000 000 new MRI shares at an issue price of R0.05 per share
to AfrAsia. All transaction costs relate to the issue of MRI
shares and as such are deducted from stated capital.
8. It has been assumed that the Transactions were implemented on
31 August 2013 for purposes of compiling the statement of
financial position and on 1 March 2013 for purposes of compiling
the statement of comprehensive income.
9. Tax consequences in relation to the Transactions have been
taken into account.
10. All adjustments, other than transaction fees, will have a
continuing effect.
6. DOCUMENTATION AND SALIENT DATES
The Circular incorporating the terms of the Transactions, a
notice of General Meeting and a fairness opinion will be posted
to shareholders in due course.
The Company will keep shareholders informed of progress made, the
expected date of posting of the Circular and the salient dates in
terms of the Transactions detailed in this announcement.
7. WITHDRAWAL OF CAUTIONARY ANNOUNCEMENTS
Since the full terms and pro forma financial effects in relation
to the Transactions have been published, the Cautionary
Announcements are accordingly withdrawn.
8. UPDATE ON THE ROLE OF THE CEO
Shareholders are referred to the SENS announcement dated
18 November 2013 advising that R Tait be appointed as CEO of MRI
until such time as a suitable candidate is found. Pursuant to
that appointment and the excellent contribution that R Tait has
made to the Company in his capacity as CEO, the Company is
pleased to announce that Richard Tait will in fact remain on as
CEO on a permanent basis.
Johannesburg
8 April 2014
Corporate Advisor:
AfrAsia Corporate Finance Proprietary Limited
Designated Advisor:
Sasfin Capital (a division of Sasfin Bank Limited)
Date: 08/04/2014 04:13:00 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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