GOLIATH GOLD MINING LIMITED - Joint Firm Intention Announcement and Withdrawal of Cautionary

Release Date: 22/09/2015 07:05
Code(s): GGM
 
Wrap Text
Joint Firm Intention Announcement and Withdrawal of Cautionary

GOLIATH GOLD MINING LIMITED                              GOLD ONE AFRICA LIMITED
Incorporated in the Republic of South Africa             Incorporated in the Republic of South Africa
(Registration number 1933/004523/06)                     (Registration number 1984/006179/06)
Share code: GGM ISIN: ZAE000154753
(“Goliath Gold” or “the Company”)                        (“Gold One Africa”)


JOINT ANNOUNCEMENT OF A FIRM INTENTION BY GOLD ONE AFRICA TO MAKE AN OFFER
TO ACQUIRE THE ISSUED SHARE CAPITAL OF GOLIATH GOLD THAT IT DOES NOT ALREADY
OWN AND WITHDRAWAL OF CAUTIONARY


1.     INTRODUCTION
       Further to the cautionary announcement released on SENS on 29 July 2015 and the subsequent
       renewal thereof released on SENS on 9 September 2015, the board of directors of Gold One Africa
       and the independent directors of the Goliath Gold board (“Goliath Gold Independent Board”) are
       pleased to announce that Gold One Africa has made a firm intention offer ("Offer") to acquire all the
       Goliath Gold ordinary shares that Gold One Africa does not already own, being a total of 41 247 658
       ordinary shares (“Scheme Shares”) (“Proposed Transaction”), by way of a scheme of arrangement
       (“Scheme”) in terms of section 114 of the Companies Act, 2008 (Act 71 of 2008), as amended, (the
       "Companies Act"), to be proposed by the Goliath Gold Independent Board between Goliath Gold
       and the holders of Goliath Gold Shares (“Goliath Gold Shareholders”). In this regard, Gold One
       Africa and Goliath Gold have concluded a written transaction implementation agreement dated
       21 September 2015 (“Implementation Agreement”) in relation to the Proposed Transaction.
       The purpose of this joint firm intention announcement (“Firm Intention Announcement”) is to advise
       Goliath Gold Shareholders of the terms and conditions of the Offer.

2.     SALIENT TERMS OF THE OFFER
       In terms of the Offer, Goliath Gold Shareholders can, if the Scheme is implemented, elect to receive
       for each Scheme Share held by them on the Scheme consideration record date, either:
      
       -   R1.00 per Scheme Share on the date that the Scheme is implemented (“Scheme
           Implementation Date”) (“Immediate Cash Payment”); or
       -   R1.60 per Scheme Share on the business day immediately after the expiry of a period of 18
           months calculated with effect from and including the day after the Scheme Implementation Date
           (“Closing Date”) (“Deferred Cash Payment”); or
       -   any combination of the Immediate Cash Payment and the Deferred Cash Payment, in such ratio
           as may be elected (“Combination Cash Payment”),
       
       (collectively the “Transaction Consideration”).
       
       Goliath Gold Shareholders who do not make an election to receive either the Immediate Cash
       Payment, the Deferred Cash Payment or the Combination Cash Payment timeously, will be deemed
       to have elected to receive the Immediate Cash Payment for all of their Scheme Shares.
       The rationale behind Goliath Gold Shareholders being afforded the option to receive, at their election,
       either the Immediate Cash Payment, the Deferred Cash Payment, or the Combination Cash
       Payment originates from the initial intention of Gold One Africa, which is an indirectly wholly-owned
       subsidiary of Gold One International (Cayman Islands) (“Gold One International”), to make an offer
       in terms of which the equivalent of the Deferred Cash Payment amount is converted into Gold One
       International shares (“Conversion”) at a future point in time in the event of a potential listing of that
       company on the Hong Kong Stock Exchange. However, given current market conditions abroad and
       the complexities of such Conversion, this option was re-considered and the decision was taken to
       make a straightforward deferred cash offer while maintaining the original timeframe and pricing
       pertaining to the Conversion.

3.     BACKGROUND AND RATIONALE FOR THE SCHEME
       Goliath Gold, which is a South African mining exploration company listed on the JSE Limited (“JSE”),
       was created by Gold One Africa via the 2012 reverse takeover of White Water Resources Limited
       and the acquisition by the then White Water Resources Limited of the business of Gold One Africa
       comprising the Sub Nigel new order mining right and the Spaarwater, Vlakfontein and West
       Vlakfontein prospecting rights (“Megamine Assets”). At the time of the acquisition of the Megamine
       Assets, the Wit Nigel prospecting right was already held by White Water Resources Limited.
       Gold One Africa holds 72.0% of the issued share capital of Goliath Gold. The funding which has
       enabled Goliath Gold and its subsidiaries to complete extensive exploration and geological modelling
       of the East Rand Basin (“East Rand”) has been provided by the Gold One International group of
       companies (“Gold One Group”).
       
       The business of Goliath Gold is, through a management agreement, controlled and managed by
       Gold One Africa which owns a mining operation and two prospecting rights adjacent to Goliath Gold’s
       East Rand exploration area.
      
       The finalisation of the transaction between Goliath Gold and the joint provisional liquidators of the
       Pamodzi East Rand Group Companies in 2013, in terms of which Goliath Gold acquired certain
       historical mining and geological data and was granted two additional prospecting rights, provided the
       Company with a significant portfolio of prospecting rights across the East Rand. Accordingly, Goliath
       Gold’s strategic focus has moved away from the deeper Megamine Assets to the exploration of low
       capital, near-cash generative projects. This change has resulted in an increase of approximately 40%
       in the Company’s East Rand resource estimate, as set out in Goliath Gold’s financial results for the
       year ended 31 December 2014 which were announced on SENS on 31 March 2015.
       The board of directors of Gold One Africa believes that an increased focus by management on the
       aforementioned opportunities within the Gold One Group, outweighs the current value in maintaining
       Goliath Gold’s listing.
       
       While Goliath Gold’s market capitalisation as at 18 September 2015, being the last trading day prior
       to signature of the Implementation Agreement, was approximately R221 million, the Company’s
       outstanding loan balance to the Gold One Group amounted to approximately R125 million as at
       31 December 2014 and R181 million as at 30 June 2015.
       In addition, with Stellar Capital Partners Limited holding 21.89% of the issued share capital of Goliath
       Gold, trading of the Company’s Shares on the JSE is very illiquid given that two Shareholders hold
       approximately 94% of Goliath Gold’s issued share capital. Accordingly, should the Scheme be
       implemented, Goliath Gold minority Shareholders will be provided with the opportunity to realise their
       investments by exiting an illiquid share.

4.     CONDITIONS PRECEDENT TO THE IMPLEMENTATION OF THE SCHEME
       4.1.   The Scheme will be subject to the fulfilment (or waiver, as the case may be), of the following
              conditions precedent on or before 31 December 2015 (“Longstop Date”), or such later date
              as Gold One Africa and Goliath Gold may agree to in writing:
              4.1.1.   the independent expert as referred to in section 114(2) of the Companies Act
                       (“Independent Expert”) appointed by Goliath Gold issuing a report dealing with the
                       matters set out in section 114(3) of the Companies Act and expressing an opinion
                       on whether the Offer is fair and reasonable;
              4.1.2.   the Goliath Gold Board having passed such resolutions as may be necessary in
                       terms of the regulations issued in terms of sections 120 and 223 of the Companies
                       Act (“Takeover Regulations”) to approve the Proposed Transaction;
              4.1.3.   the resolutions required to implement the Scheme, as contemplated in section 115(2)
                       of the Companies Act, having been approved by the requisite majority of Goliath
                       Gold Shareholders;
              4.1.4.   not more than 5%, being a total of 2 062 383 Scheme Shares, of the Goliath Gold
                       Shareholders voting at the meeting to be convened to approve the Scheme
                       (“Scheme Meeting”), exercising their rights of appraisal under section 164 of the
                       Companies Act;
              4.1.5.   should the implementation of the Proposed Transaction be subject to approval by a
                       court in terms of the provisions of section 115(2)(c) of the Companies Act, such
                       approval being obtained; and
              4.1.6.   the requisite unconditional written approvals having been obtained from, inter alia,
                       all governmental and regulatory bodies, including but not limited to:
                       4.1.6.1. approval by the JSE;
                       4.1.6.2. the issue by the Takeover Regulation Panel (“TRP”) of a compliance
                                certificate contemplated in section 121(b)(i) of the Companies Act;
                       4.1.6.3. approval by the South African Reserve Bank (“SARB”); and
                       4.1.6.4. approval by the National Development and Reform Commission, the
                                Ministry of Commerce, the State Administration of Foreign Exchange and
                                the State-owned Assets Supervision and Administration Commission of
                                the State Council of the People’s Republic of China, to the extent that any
                                such approval is required.

5.    SHAREHOLDER UNDERTAKINGS
      To date, irrevocable undertakings to vote in favour of the Scheme have been received from Stellar
      Capital Partners Limited, a Goliath Gold Shareholder holding in aggregate 32 311 931 Goliath Gold
      Shares, representing 78.34% of the voting power if all Scheme Shares are voted at the Scheme
      Meeting or any adjournment thereof.


6.    GUARANTEES AND CONFIRMATIONS TO THE TAKEOVER REGULATION PANEL
      FirstRand Bank Limited, acting through its Rand Merchant Bank Division, and ENSafrica, situated at
      1 North Wharf Square, Loop Street, Foreshore, Cape Town, being Gold One Africa’s legal advisors,
      have respectively delivered an irrevocable, unconditional bank guarantee in the amount of
      R51 699 089.60 (“Cash Guarantee”) and an irrevocable, unconditional confirmation that
      R14 297 163.20 is being held in escrow (“Cash Confirmation”), to the TRP in compliance with
      regulations 111(4) and 111(5) of the Takeover Regulations. The Cash Guarantee and the Cash
      Confirmation comprise the maximum possible Transaction Consideration payable in terms of the
      Scheme.

7.    SHARE OPTIONS
      The two executive directors of Goliath Gold hold 3 200 000 Goliath Gold share options (with a strike
      price of R1.94 each) under the Goliath Gold Share Incentive Scheme (“Share Options”). These
      executive directors, together with the company secretary of Goliath Gold (who holds 1 200 000 Share
      Options) and management, employees and past employees of the Group (who hold 4 935 000 Share
      Options) have elected to receive a settlement offer of R0.20 per Share Option for the cancellation of
      all their Share Options upon finalisation of the Scheme. The total settlement value of the Share
      Options in the amount of R1 867 000.00 is being held in escrow with ENSafrica Cape Town, being
      the legal advisors to Gold One Africa.

8.    TERMINATION OF THE GOLIATH GOLD LISTING
      Following implementation of the Scheme, application will be made to the JSE to terminate the listing
      of the Goliath Gold Shares on the JSE.

9.    SHAREHOLDING IN GOLIATH GOLD AND ACTING AS PRINCIPAL
      Gold One Africa, which, as previously stated, holds 72.0% of the Goliath Gold Shares, confirms that
      it is the ultimate proposed purchaser of all the Goliath Gold Shares and that it is not acting as agent
      or broker for, any other party.

10.   RECOMMENDATION AND INDEPENDENT EXPERT OPINION
      The Goliath Gold Independent Board has appointed BDO Corporate Finance Proprietary Limited as
      the Independent Expert, as required in terms of section 114(2) of the Companies Act and the
      Takeover Regulations, to issue a report dealing with the matters set out in section 114(3) of the
      Companies Act and to express an opinion on whether the Offer is fair and reasonable.
      The contents of the Independent Expert's advice and opinion and the final views of the Goliath Gold
      Independent Board will be detailed in the circular to Goliath Gold Shareholders relating to the
      Scheme (“Scheme Circular”).

11.   DOCUMENTATION
      Details of the Scheme and Proposed Transaction will be included in the Scheme Circular, which will
      contain, inter alia, details of the Scheme, a notice of the Scheme Meeting, a form of proxy, and a
      form of election, surrender and transfer. The Scheme Circular is expected to be distributed to Goliath
      Gold Shareholders on or about 15 October 2015.
      The salient dates pertaining to the Scheme will be released on SENS and published in the press
      prior to the distribution of the Scheme Circular.

12.   GOLIATH GOLD RESPONSIBILITY STATEMENT
      The Goliath Gold Independent Board accepts responsibility for the information contained in this Firm
      Intention Announcement to the extent that it relates to Goliath Gold. To the best of its knowledge and
      belief, the information contained in this Firm Intention Announcement is true and nothing has been
      omitted that is likely to affect the import of the information.

13.   GOLD ONE AFRICA RESPONSIBILITY STATEMENT
      The board of directors of Gold One Africa accepts responsibility for the information contained in this
      Firm Intention Announcement to the extent that it relates to Gold One Africa. To the best of their
      knowledge and belief, the information contained in this Firm Intention Announcement is true and
      nothing has been omitted that is likely to affect the import of the information.

14.   WITHDRAWAL OF CAUTIONARY
      Following the release of this announcement, Shareholders are advised that caution is no longer
      required when dealing in the Company’s securities.

Johannesburg
22 September 2015

Corporate Adviser and Transaction Sponsor to Goliath Gold
Merchantec Capital

Independent Expert
BDO Corporate Finance Proprietary Limited

Legal Adviser to Goliath Gold
ENSafrica
150 West Street, Sandton
Johannesburg, 2196

Date: 22/09/2015 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
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