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LONMIN PLC - Acquisition and Proposed Issue of Equity

Release Date: 30/07/2014 11:02
Code(s): LON     PDF:  
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Acquisition and Proposed Issue of Equity

Lonmin Plc (Incorporated in England and Wales)
(Registered in the Republic of South Africa under registration number 1969/000015/10)
JSE code: LON
Issuer Code: LOLMI & ISIN : GB0031192486 ("Lonmin")

REGULATORY RELEASE


30 July 2014

                              Acquisition and Proposed Issue of Equity

Lonmin Plc (“Lonmin” or “the Company”) announces that it has today entered into binding
agreements with the Bapo ba Mogale Traditional Community (“the Bapo”) in relation to a series of
transactions which will enable relevant Lonmin group companies to meet South African government
requirements regarding Black Economic Empowerment (“BEE”) targets. Under the arrangements:

(a) the Bapo will waive their current statutory right to receive royalties from Lonmin’s operating
companies Eastern Platinum Limited (“EPL”) and Western Platinum Limited (“WPL”) (together
“Lonplats”) in exchange for:

    (i)        a lump sum cash royalty payment, payable by Lonplats, that will be used by the Bapo to
               subscribe for shares in Lonmin; and
    (ii)       a deferred royalty payment of R20 million per annum payable by Lonplats in each of the
               five years following completion of the transaction, that will be used by the Bapo to pay
               the administrative costs of running, controlling and directing the affairs of the Bapo;

(b) EPL will acquire 100% of the shares in Bapo ba Mogale Mining Company (Proprietary) Limited
    (“BMC”) from the Bapo. BMC holds the Bapo's 7.5% participation interest in the unincorporated
    joint venture in respect of the Pandora mine operated by EPL (the “Pandora JV”). This interest
    in the Pandora JV is BMC’s sole asset. EPL already holds a 42.5% interest in the Pandora JV
    which holds mining rights over an area to the east and north of Lonmin’s Marikana operations.
    Part of this area is already mined by Lonmin from its existing shaft infrastructure; and

(c) the Bapo will utilise the lump sum cash royalty payment and the consideration payable for
    100% of the shares in BMC to subscribe for new ordinary shares in Lonmin to the value of R564
    million (the “Placing Shares”). Lonmin will allot and issue the Placing Shares to a special purpose
    vehicle which is a wholly-owned subsidiary of Bapo Ba Mogale Investments NPC (“Bapo NPC”), a
    non-profit company for the benefit of members of the Bapo community, by way of a non pre-
    emptive placing. The number of Placing Shares to be issued has been calculated using the 30
    day Volume Weighted Average Price (“VWAP”) of Lonmin’s shares listed on the JSE up to and
    including 29 July 2014. To preserve the BEE credentials this confers on Lonplats, the Placing
    Shares will be subject to a lock-in period of ten years from the effective date of these
    transactions, which will occur seven business days after satisfaction of all conditions precedent
    (“Completion”). Completion is currently expected in the final quarter of the 2014 calendar year.
    During the lock-in period the Placing Shares may not be sold or encumbered by the Bapo. The
    R564 million payable under (a) and (b) above includes a premium of R149 million in recognition
    of the benefit to Lonmin of the ten year lock-in period.
It is intended that the deferred royalty payment of R20 million per annum payable by Lonplats in
each of the five years following completion of the transaction will be funded from the existing cash
resources and/or debt facilities available to the Group.

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Based on the 30 day VWAP of R42.97 on 29 July 2014, the issue of Placing Shares will necessitate the
issue of 13.13 million shares, equating to 2.25% of the post-issue equity share capital of Lonmin.
It has been further agreed between the parties that:
(d) the Placing Shares will be issued on the date of Completion;
(e) Lonmin will provide an opportunity for the Bapo ba Mogale community to participate in the
    procurement and business value chain activities of Lonplats to a minimum revenue value of
    R200 million within eighteen months from Completion. This will be achieved by granting the
    Bapo NPC preferential status when tendering for the supply of goods and services to Lonplats;
    and
(f) Lonmin and the Bapo will jointly create a developmental trust for members of the Bapo
    community, to be known as the Bapo Community Local Economic Development Trust (“Bapo
    Trust”). It is intended that 0.9% of the issued share capital of EPL and 0.9% of the issued share
    capital of WPL will be transferred from Lonmin’s subsidiary LSA (U.K.) Limited into the legal and
    beneficial ownership of the Bapo Trust on a vendor funding basis. The aims of the Bapo Trust will
    be to promote, amongst other things, educational initiatives and healthcare improvement as
    well as address the developmental needs of the Bapo.
Items (a) to (e) together are referred to in this announcement as the "Bapo Transaction". Item (f) is
referred to as the “Bapo Trust Transaction”.

Completion of the Bapo Transaction is subject to customary conditions precedent including but not
limited to the waiver of rights of first refusal by other participants in the Pandora JV, South African
Ministerial approval to the transfer of the ownership of the shares in BMC to EPL, South African
Competition Commission approval to the extent it is necessary, execution of a new notarial lease
and certain approvals to be granted by Lonmin shareholders. It is intended that a General Meeting of
the Company will be convened later in the year to seek the necessary shareholder approvals.

The Lonmin directors believe from discussions with the South African Department of Mineral
Resources, that the Bapo Transaction, will increase the BEE equity status of Lonplats by 2.4% from
the waiver of the Bapo’s statutory royalty rights and the purchase of their interest in the Pandora JV
and by a further 0.9% from the Bapo Trust transaction, increasing the BEE equity status of Lonplats
by 3.3%. As flagged to shareholders in the 2012 Rights Issue Prospectus and in the Interim Report for
the six months ended 31 March 2014, Lonmin also intends to implement an Employee Share
Ownership Plan (“ESOP”) and a Community Share Ownership Trust (“CSOT”) (for the benefit of the
local communities on the western portion of our Marikana operations) which trusts will collectively
hold the 4.7% balance of the additional 8% equity empowerment which EPL and WPL require to
achieve the 26% effective BEE equity ownership target by 31 December 2014. At this stage, the
Company expects that completion of all of these arrangements should be achieved in the final
quarter of the 2014 calendar year.

The Bapo is a stakeholder of great importance to Lonmin. The Board of Lonmin believes that the
Bapo Transaction will help build a new and stronger relationship with the Bapo and will, together
with the ESOP and CSOT, secure the BEE equity status of the Lonmin group of companies in South
Africa.

Kgosi Bob Mogale said: “I believe this agreement represents the most sustainable and fair way
forward, and I hope that as well as bringing financial benefits to our people it helps to build stronger
bonds between the Bapo and Lonmin.”




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Brian Beamish, Chairman of Lonmin, said: “On behalf of the Board I would like to welcome the Bapo
community as an important shareholder in our Company. We look forward to building a strong
relationship with them over the years to come.”

Ben Magara, Chief Executive Officer of Lonmin, added: “It is Lonmin’s first priority to work in the
interests of all our stakeholders. We are pleased to have reached an agreement as this is testimony
to developing a constructive relationship with the Bapo ba Mogale.”

Further updates will follow in due course.

- ENDS -

ENQUIRIES

Investors / Analysts:
Lonmin
Tanya Chikanza                                       +27 11 218 8300 / +44 20 7201 6007
Floyd Sibandze                                       +27 11 218 8300

Media:
Cardew Group
Anthony Cardew / James Clark                         +44 20 7930 0777
Sue Vey                                              +27 72 644 9777

Financial Adviser and Transaction Sponsor to Lonmin
The Standard Bank of South Africa Limited

Sponsor:
J.P. Morgan Equities South Africa Proprietary Limited

Notes to editors

Lonmin, which is listed on both the London Stock Exchange and the Johannesburg Stock Exchange, is
one of the world's largest primary producers of PGMs. These metals are essential for many industrial
applications, especially catalytic converters for internal combustion engine emissions, as well as
their widespread use in jewellery.

Lonmin's producing assets are situated in the Bushveld Complex in South Africa, where nearly 80% of
known global PGM resources are found.

The Company creates value for shareholders through mining, refining and marketing PGMs and has a
vertically integrated operational structure - from mine to market. Lonmin's mining operations
extract ore from which the Process Division produces refined PGMs for delivery to customers.
Underpinning the operations is the Shared Services function which provides high quality levels of
support and infrastructure across the operations.

For further information please visit our website: http://www.lonmin.com




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