AFRIMAT LIMITED - ACQUSITION OF 60% OF DIRO AND WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT

ACQUSITION OF 60% OF DIRO AND WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT

Afrimat Limited
Incorporated in the Republic of South Africa
(Registration number: 2006/022534/06)
Share code: AFT ISIN: ZAE000086302
(“Afrimat” or “the Company”)

ACQUSITION OF 60% OF DIRO MANGANESE AND DIRO IRON ORE (“DIRO”) BY AFRIMAT AND WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT

1. The Acquisition

The board of directors of Afrimat is pleased to announce that it has concluded an agreement to purchase
60% of Diro Manganese (Pty) Ltd and Diro Iron Ore (Pty) Ltd (“Diro” or “the Business”) (“the Acquisition”
or “the Transaction”) from Diro Resources (Pty) Ltd, as well as a cession and delegation agreement with
Investec Limited (“Investec”) to purchase all of its security.

The Business’s operations have been halted as a consequence of it being under financial distress and
was accordingly put into formal Business Rescue (“BR”) on the 7th of June 2016.

Afrimat approached the shareholders of the Business (“the Business Shareholders”), the Business
Rescue Practitioner (“BRP”) and Investec, a major creditor who hold securities over all the moving and
unmoving assets of the Business, with the intention to rescue the business and in the process obtaining a
controlling share in the Business.

2. Description of the Business

The Business is an iron-ore producer based in the Northern Cape. The Business accumulated debt of
approximately R483 million which was compromised according to the Business Rescue Plan approved by
the requisite majority of creditors on 23 September 2016 and published on SENS on 27 September 2016.
The details of the compromise are disclosed under note 7 below. The Business still has a proven iron ore
reserve of 5.6Mt which could be mined and upgraded through its existing beneficiation plants. In addition
to the 5.6Mt reserve there are also approximately 1.3Mt of sellable fine ore stockpiles. The Business
currently sells its products via Sishen to the Saldanha iron ore export channel.
3. Rationale of the Acquisition

Given Afrimat’s track record in turning struggling business around and as part of its diversification and
growth strategy, Afrimat has decided to enter the Iron Ore sector.

The Acquisition will complement and augment Afrimat’s product offering and further expand its footprint
across South Africa.

Given the nature of Diro’s reserves and the access to infrastructure, together with Afrimat’s existing
competencies, the transaction allows the ability to leverage the combined strengths which will result in
developing new revenue opportunities for Afrimat in the iron ore space.

4.    Classification of the Acquisition

The Acquisition is classified as a Category 2 transaction in terms of the Listings Requirements of the JSE
Limited (“LR”). The Acquisition is not a related party transaction in terms of the LR.

5. Vendors

The vendor of Diro is Diro Resources (Pty) Ltd (“Vendors”).

6. Effective date

The Effective Date of the Acquisition is first Business Day following the date on which the Conditions
Precedent are fulfilled or waived and the agreement becomes unconditional and enforceable in all
respects.

In the Interim period, from Signature Date to Effective Date, Afrimat will be assisting the BRP under a
Contractors Agreement.

A finalisation announcement will be made when the Acquisition becomes unconditional.

7. Purchase consideration

The aggregate purchase consideration payable for the acquisition of Diro is R 276 million. The total
consideration will be payable as follows:


-    R 118 million plus an additional deferred amount of R 33 million to be paid after 36 months following
     the Signature Date, to acquire 100% of Investec’s claims and security of R 167 million;
-    R 50 million as post commencement financing (“PCF”) required to re-commission the operations and
     resume operations
-    R 75 million for the compromise of the creditors, of which R25 million is payable immediately under
     the instruction of the BRP.
-    and R50 million is payable on the latest of the following:
                o   The 24th Month after the Approval of the Business Rescue Plan
                o   The date after which all conditions precedent have been fulfilled
      -     The subscription for shares, representing 60% of the Business, including 100% of all claims
            against the Business will be acquired for R1 and subject the following conditions precedent:

All funding provided by Afrimat to Diro will be treated as loan funding and will attract interest at an interest
rate that is above the prime lending rate. Furthermore, Afrimat will receive a market related management
fee based on the gross turnover of the business in accordance with a formal management agreement.

8.  Conditions Precedent

The Acquisition is subject to the following conditions precedent:

           -   The approval in writing of the applicable competition authorities, in terms of the Competition
               Act, 1998 to the extent required;
           -   Section 11 approval in writing from the Department of Mineral Resources (“DMR”); and
           -   Obtaining all other regulatory approvals or clearances as may be required.

Other than as disclosed in this announcement, there are no other significant terms to the Acquisition.

9.  Net assets and profits of Diro

Based on the unaudited financials as at 29 February 2016, the net asset value of Diro is approximately R
149 228 554 and the loss after taxation associated with Diro is R 95 794 995 for the year ended 28
February 2016.

10. Memorandum of Incorporation

Afrimat undertakes that the Memorandum of Incorporation of Diro will conform to Schedule 10.21 of the
Listings Requirements of the JSE, as required.

11. Withdrawal of cautionary announcement

Following the release of this announcement, the cautionary announcement published by Afrimat on 27
September 2016 is hereby withdrawn and caution is no longer required to be exercised by Afrimat
shareholders when dealing in Afrimat shares.

11 October 2016
Cape Town
Sponsor: Bridge Capital Advisors Proprietary Limited

Date: 11/10/2016 12:25:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
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