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Recapitalisation, Acquisitions And Renewal Of Cautionary Announcement
CHROMETCO LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 2002/026265/06)
Share code: CMO
ISIN Code: ZAE000070249
(“Chrometco” or “the Company”)
RECAPITALISATION, ACQUISITION OF AN ESTABLISHED UNDERGROUND
CHROME MINE (EASTERN LIMB), ACQUISITION OF A CHROME PROSPECTING
RIGHT (WESTERN LIMB), ACQUISITION OF A STAKE IN A CHROME TRADING
BUSINESS AND RENEWAL OF CAUTIONARY ANNOUNCEMENT
1. Introduction
Shareholders are referred to the cautionary announcement
released on SENS on 13 July 2016 and are hereby advised that the
Company has entered into agreements to recapitalise the Company
by way of a subscription agreement for R5 million and a loan
facility of R10 million (“the Recapitalisation”).
The Company has also entered into an agreement to acquire 51%
of Palm Chrome Holdings Proprietary Limited (“Palm Chrome”) in
exchange for 200 million Chrometco ordinary shares (“Palm Chrome
Acquisition”).
Furthermore, the Company has entered into an agreement to
acquire 51% of Black Chrome Holdings Proprietary Limited (“Black
Chrome”) and 25% of Sail Minerals Proprietary Limited (“Sail”)
in exchange for 2 205 million Chrometco ordinary shares (“Black
Chrome Acquisition”).
The Recapitalisation, the Palm Chrome Acquisition and the Black
Chrome Acquisition are collectively referred to as “the
Transaction”, concluded as one indivisible transaction.
2. Rationale for the Transaction
The Recapitalisation will ensure that the Company has more than
sufficient funding to sustain itself for the year ahead and
beyond as well as to cover the costs relating to the
implementation of the Transaction.
The Black Chrome asset has the potential to contribute
significantly to the income of Chrometco. It is planned to become
cash generative and earnings enhancing for all shareholders in
the near future. Black Chrome is a fully developed underground
chrome mine having an approximated economically minable resource
in excess of 20 000 000 (20 million) tonnes of Chrome ore with
an expected life of at least 15 years.
The Palm Chrome asset also has the potential to enhance earnings
for all shareholders once the Prospecting Right is converted
into a Mining Right and Mining Operations begin. Palm Chrome has
at least 1 400 000 (One million four hundred thousand) tonnes
of economically feasible chrome ore with an expected life of 5
to 7 years, depending on the rate of mining.
The Black Chrome and Palm Chrome assets are being acquired by
Chrometco as assets that are fully funded by Sail and therefore
will not require shareholder funding. Sail Minerals (“Sail”) is
a privately owned, well-established South African based global
company and is considered one of the leading Chrome trading
companies worldwide. Sail invests in Mine Resource Assets
(greenfield and brownfield projects) within the borders of South
Africa. Sail specialises in the Marketing, Distribution and
Logistics of Chrome and other Ferro related products. Sail has
provided and will continue to provide all funding required for
the Palm Chrome and Black Chrome mine projects.
The surrounding Communities are included in the BEE Consortiums
of the respective projects and will benefit directly,
economically and socially through job creation and agreed upon
social upliftment programmes respectively. Local businesses will
also benefit, being preferred suppliers as agreed with the
respective Communities. The Communities and their Leaders are
in favour of and have approved the Transaction.
The Board is in favour of and has approved the Transaction.
3. The Recapitalisation
3.1 Overview
Chrometco has entered into the Share Subscription Agreement with
Sail Minerals Proprietary Limited (“Sail”) or its nominee, in
terms of which Sail’s nominee K2016291369 (South Africa)
Proprietary Limited, trading as Grand Slam Enterprises (“GSE”)
will subscribe for a total of 62,5 million Chrometco ordinary
shares for a cash consideration of R5 million at a subscription
price of R0.08 per share (“the Subscription”) which represents
a discount to the 30 day VWAP of the Company on the date that
the cautionary announcement was released of 7,70%.
Chrometco has entered into a loan facility agreement (“Loan”)
with Sail whereby Sail will provide a facility of up to R10
million to Chrometco. In terms of the Loan, Sail will have the
right to appoint a director onto the board of Chrometco.
3.2 Conditions Precedent
The outstanding conditions precedent for the Subscription are:
- the approval of the Subscription by Chrometco shareholders in
general meeting, which approval in terms of the Listings
Requirements of the JSE Limited (“JSE”) is 75% of shareholders
present and voting;
- Chrometco notifying Sail that it is satisfied with the due
diligence investigation conducted in terms of the Palm Chrome
Acquisition;
- Chrometco notifying Sail that it is satisfied with the due
diligence investigation conducted in terms of the Black Chrome
Acquisition;
- the approval by the Company’s shareholders of the issue of
shares to GSE in terms of section 41(3) of the Companies Act,
No 71 of 2008 (“Companies Act”);
- to the extent required, the approval by the Company’s
shareholders of a waiver of the requirement for GSE to make a
mandatory offer in terms of section 123 of the Companies Act and
regulation 86(4) of the Companies Regulations 2011;
- the approval by the Company’s shareholders of the amendment
to the Company’s memorandum of incorporation (“MOI”) to increase
the authorised share capital of the Company to such number that
is sufficient to enable Chrometco to issue the required shares
to GSE;
- the filing of the abovementioned amendment to the Chrometco
MOI with the Companies and Intellectual Property Commission
(“CIPC”) so as to give effect to the amendment;
- the approval of the Palm Chrome Acquisition by Chrometco
shareholders in terms of the Listings Requirements of the JSE;
- the approval of the Black Chrome Acquisition by Chrometco
shareholders in terms of the Listings Requirements of the JSE;
- to the extent required, the approval of the Competition
Authorities of the Subscription; and
- all other regulatory approvals as may be required.
The effective date of the Subscription is the 3rd business day
after all the conditions precedent as set out in paragraph 3.2
have been fulfilled or waived.
4. The Palm Chrome Acquisition
4.1 Overview
Chrometco has entered into a share swap agreement with GSE in
respect of which Chrometco will acquire 51% of the shares in
Palm Chrome from GSE in exchange for 200 million Chrometco
ordinary shares.
4.2 The description of the Palm Chrome asset and project
Palm Chrome will hold a prospecting right for Chrome and other
minerals in the Western Limb of the Bushveld Igneous Complex and
is viewed to have the potential for an estimated 1.4 million ton
of economically mineable Chrome ore on the prospecting area.
4.3 Conditions Precedent and effective date
4.3.1 The conditions precedent for the Palm Chrome Acquisition
are:
- Chrometco concluding a due diligence on Palm Chrome to its
satisfaction;
- receipt of the written consent required in terms of section
11 of the Mineral and Petroleum Resources Development Act, No
28 of 2002 (“MPRDA”) from the Minister of Resources in order to
effect the change of control to Palm Chrome;
- receipt of the written consent required in terms of section
11 of the MPRDA from the Minister of Resources in order to effect
the transfer of the shares to Chrometco;
- the approval by the Company’s shareholders of the issue of
shares to GSE in terms of section 41(3) of the Companies Act;
- the approval by the Company’s shareholders of the waiver of
the requirement for GSE to make a mandatory offer in terms of
section 123 of the Companies Act and regulation 86(4) of the
Companies Regulations 2011;
- the approval by the Company’s shareholders of the amendment
to the Company’s MOI to increase the authorised share capital
of the Company to such number that is sufficient to enable
Chrometco to issue the required shares to GSE;
- the filing of the abovementioned amendment to the Chrometco
MOI with CIPC so as to give effect to the amendment;
- the approval of the Palm Chrome Acquisition by Chrometco
shareholders in terms of the Listings Requirements of the JSE;
- to the extent required, the approval of the Competition
Authorities of the Palm Chrome Acquisition; and
- all other regulatory approvals as may be required.
4.3.2 The effective date of the Palm Chrome Acquisition is the
third business day after the fulfilment of all the
conditions precedent as set out in paragraph 3.2 above.
5. The Black Chrome Acquisition
5.1 Overview
Chrometco has entered into a share swap agreement with GSE in
respect of which Chrometco will acquire 51% of the shares in
Black Chrome, 25% of the shares in Sail and 51% of the shares
in a company to be formed which will hold the contracting and
management agreements for the mining of the Black Chrome mining
project (“Manco”) from GSE in exchange for 2 205 million
Chrometco ordinary shares.
5.2 The description assets and project of the Black Chrome
Acquisition
Black Chrome project is a fully developed underground chrome
mine in the eastern limb of the Bushveld complex having an
approximated economically minable resource in excess of 20
million tonnes of chrome ore. The life span is expected to be
about 15 years.
Sail is a well-established and leading Chrome trading company,
which predominantly exports Chrome to China. Sail has provided
and will provide all funding required for the development of the
Palm Chrome and Black Chrome assets.
5.3 Conditions Precedent to the Black Chrome Acquisition
5.3.1 The conditions precedent to the Black Chrome Acquisition
are:
- Chrometco concluding a due diligence on Black Chrome to its
satisfaction;
- the approval by the Company’s shareholders of the issue of
shares to GSE in terms of section 41(3) of the Companies Act;
- the approval by the Company’s shareholders of the waiver of
the requirement for GSE to make a mandatory offer to shareholders
in terms of section 123 of the Companies Act and regulation
86(4) of the Companies Regulations 2011;
- the approval by the Company’s shareholders of the amendment
to the Company’s MOI to increase the authorised share capital
of the Company to such number that is sufficient to enable
Chrometco to issue the required shares to GSE;
- the filing of the abovementioned amendment to the Chrometco
MOI with the CIPC so as to give effect to the amendment;
- the approval of the Black Chrome Acquisition by Chrometco
shareholders in terms of the Listings Requirements of the JSE;
- to the extent required, the approval of the Competition
Authorities of the Black Chrome Acquisition; and
- all other regulatory approvals as may be required.
5.4 Purchase consideration
The purchase consideration for the Black Chrome Acquisition will
be settled in two traches, as follows:
5.4.1 Black Chrome Tranche 1
Chrometco will acquire 51% of the shares in Manco and 25% of the
shares in Sail in exchange for 835 million Chrometco ordinary
shares subject to the fulfilment of the conditions precedent set
out in paragraph 5.3.1 and the following additional conditions
precedent:
5.4.1.1 Manco will be appointed as the exclusive contractor in
terms of its management agreement, the effect of which will give
Manco effective benefit and control of the Black Chrome mining
project; and
5.4.1.2 Manco producing and selling 15 000 tonnes of chrome ore
originating from the Black Chrome mining operation for two
consecutive months which will generate profit of no less than
R200 per ton.
5.4.2 The effective date of the Black Chrome Tranche 1 is the
third business day after the fulfilment of the conditions
precedent set out in clause 5.4.1.
5.4.3 Black Chrome Tranche 2
5.4.3.1 Chrometco will acquire 51% of the shares in Black Chrome
in exchange for 1 370 million Chrometco ordinary shares subject
to the fulfilment of the conditions precedent set out in
paragraph 5.3.1 and the receipt of the written consent required
in terms of section 11 of the MPRDA from the Minister of Mineral
Resources in order to effect the transfer of the shares in Black
Chrome to Chrometco;
5.4.3.2 The effective date of the Tranche 2 Black Chrome
Acquisition is the third business day after the fulfilment of
the conditions precedent set out in clause 5.4.3.1.
6. Categorisation
The Subscription is a specific issue of shares for cash in terms
of the JSE Listings Requirements. The Palm Chrome Acquisition
and the Black Chrome Acquisition qualify as Category 1
acquisitions for the Company in terms of the JSE Listings
Requirements. As such, a circular, setting out full details of
the Transaction, will be distributed to Chrometco shareholders
within 60 days of the date of this announcement.
7. Renewal of cautionary announcement
Until such time as all the information required in terms of the
Listings Requirements have been disclosed, shareholders are
advised to continue to exercise caution when dealing in the
Company’s securities until a further announcement is made.
25 August 2016
Johannesburg
Designated Advisor and Transaction Advisor: PSG Capital
Proprietary Limited
Date: 25/08/2016 08:15:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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