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Disposal by Pan African Resources of Pan African Resources Coal Holdings and Uitkomst Colliery to Coal of Africa
Pan African Resources PLC
(Incorporated and registered in England and Wales under Companies Act 1985 with
registered number 3937466 on 25 February 2000)
AIM Code: PAF
JSE Code: PAN
ISIN: GB0004300496
(“Pan African” or “the Group”)
DETAILED TERMS ANNOUNCEMENT RELATING TO THE DISPOSAL BY PAN
AFRICAN RESOURCES PLC (“PAN AFRICAN”) OF PAN AFRICAN RESOURCES
COAL HOLDINGS PROPRIETARY LIMITED (“PAR COAL”) AND UITKOMST
COLLIERY PROPRIETARY LIMITED (“UITKOMST”) TO COAL OF AFRICA LIMITED
(“CoAL”)
1. Introduction
The Pan African board of directors is pleased to announce that Pan African has concluded
an agreement with CoAL, whereby Pan African will dispose of all its shares and loan
accounts in its wholly-owned subsidiary, PAR Coal, the holding company of Uitkomst, to
CoAL for a total consideration of R275 million (two hundred and seventy five million rand)
(the “Purchase Consideration”), (the “Transaction”).
Uitkomst is a high-grade thermal coal producer, situated in the Utrecht coalfields in
KwaZulu-Natal and the Transaction will result in Pan African disposing of its entire interest,
comprising ordinary shares and claims on loan account, in PAR Coal and Uitkomst.
2. Background
Uitkomst
PAR Coal holds 91% of the issued share capital of Uitkomst, with the balance of the shares
in Uitkomst held by broad-based trusts (including employees and communities) and a
black-owned and controlled strategic entrepreneur’s trust.
For the six months ended 31 December 2016, the operation processed 236,011 tonnes of
coal and sold, including bought-in coal, 327,202 tonnes of coal. Uitkomst currently employs
approximately 520 employees (including contractors). Uitkomst had a net asset value of
R209 million and made profits after taxation of R21.3 million for the six months ended 31
December 2016, as disclosed in the latest interim accounts of Pan African.
CoAL
CoAL is an emerging coal mining, development and exploration company operating in
South Africa. CoAL is incorporated in Australia and its shares are traded on the Australian
Securities Exchange (“ASX”), the AIM market of the London Stock Exchange (“AIM”) and
the main board of the JSE Limited (“JSE”). CoAL’s recent focus has been to restructure its
balance sheet, operations and project pipeline to be better positioned to unlock shareholder
value and provide an attractive platform for growth in the junior coal sector.
CoAL's principal coking and thermal coal assets and projects include:
- Makhado hard coking and thermal coal project (“Makhado Project”), which has been
granted a New Order Mining Right and has the potential to produce approximately 5.5-
million tonnes of saleable product. Currently, the majority of hard coking coal
consumed in South Africa is imported and the Makhado Project will contribute to the
import substitution of the majority of this coal;
- Vele Colliery, a semi-soft coking and thermal coal mine, currently under care and
maintenance, with the potential to supply approximately 1.2-million tonnes of saleable
product per annum;
- the Mooiplaats Colliery near Ermelo, currently on care and maintenance, and subject
to a formal sale process; and
- a portfolio of exploration stage coking and thermal coal projects in the Soutpansberg
Coalfield.
Further information on CoAL can be found at www.coalofafrica.com.
3. Rationale and application of the sale proceeds
The Transaction provides Pan African with an opportunity to crystallise the value created
from its acquisition of Uitkomst, and achieves the following objectives:
- Gold focus: The Transaction allows Pan African’s management to focus on the
development of the Elikhulu Tailings Retreatment Plant, the Group’s existing gold
operations and its strategic objective of geographically diversifying its operations.
- Cash flow: The immediate cash inflow of R125 million will supplement the Group’s
existing cash resources for the development of its growth opportunities. Further, the
R125 million to be settled with CoAL equity is not subject to any trading restrictions.
- Value unlock: The Transaction results in an attractive profit of R157 million (inclusive
of dividends received in an amount of R30 million) on the original investment of
R148 million, which represents a total return of 106% over a 12-month period.
Cobus Loots, chief executive officer of Pan African commented: “Pan African is pleased to
have concluded this transaction with Coal of Africa. The transaction reaffirms Pan
African’s focus on our gold mining business and, again, demonstrates our ability to
conclude value-accretive transactions to the benefit of our shareholders.”
4. Purchase consideration
The Purchase Consideration of R275 million will be settled by CoAL as follows:
- R125 million in cash from CoAL’s available cash resources, payable on the effective
date of the Transaction (“Effective Date”).
- A deferred consideration of R25 million (the “Deferred Consideration”). The Deferred
Consideration may be paid by CoAL at any time prior to the second anniversary of the
Effective Date. The Deferred Consideration will bear interest at the South African prime
overdraft rate from the Effective Date. If the Deferred Consideration and any interest
accrued thereon is not paid to Pan African by the second anniversary of the Effective
Date, Pan African may elect to have the amount due to it settled through the issue of
new CoAL ordinary shares at a price per share equal to the 30-day volume weighted
average price (“VWAP”) of a CoAL ordinary share as traded on the exchange operated
by the JSE prevailing on the last trading day immediately prior to the date that such
election is made.
- 261,287,625 newly-issued CoAL shares (equivalent to R125 million) (“Share
Component”). The issue price of the Share Component is based on an 8% discount to
the CoAL 30-day VWAP as at 3 April 2017, being R0.52.
5. Conditions precedent
The implementation of the Transaction is conditional upon the fulfilment and / or waiver
of various conditions precedent, customary for a transaction of this nature and include,
inter alia:
- regulatory approvals;
- approval by the Competition Authorities in terms of the Competition Act, No. 89 of
1998;
- CoAL obtaining all of the requisite shareholder, AIM, JSE and ASX approvals;
- the replacement of Pan African as a guarantor to all Uitkomst environmental
guarantees;
- South African exchange control approval, to the extent required; and
- the finalisation of certain coal marketing arrangements on terms satisfactory to CoAL.
6. Categorisation
The Transaction is classified as a Category 2 transaction in terms of the JSE Limited
Listings Requirements.
By order of the Board
Johannesburg
4 April 2017
Contact information
Corporate Office Registered Office
The Firs Office Building Suite 31, Second Floor
1st Floor, Office 101 107 Cheapside
Cnr. Cradock and Biermann Avenues London
Rosebank, Johannesburg EC2V 6DN
South Africa United Kingdom
Office: + 27 (0) 11 243 2900 Office: + 44 (0) 207 796 8644
Facsimile: + 27 (0) 11 880 1240 Facsimile: + 44 (0) 207 796 8645
Cobus Loots Deon Louw
Pan African Resources PLC Pan African Resources PLC
Chief Executive Officer Financial Director
Office: + 27 (0) 11 243 2900 Office: + 27 (0) 11 243 2900
Phil Dexter John Prior / Paul Gillam
St James's Corporate Services Limited Numis Securities Limited
Company Secretary Nominated Adviser and Joint Broker
Office: + 44 (0) 207 796 8644 Office: +44 (0) 20 7260 1000
Sholto Simpson Matthew Armitt / Ross Allister
One Capital Peel Hunt LLP
JSE Sponsor Joint Broker
Office: + 27 (0) 11 550 5009 Office: +44 (0) 207 418 8900
Julian Gwillim Jeffrey Couch/Neil Haycock/Thomas Rider
Aprio Strategic Communications BMO Capital Markets Limited
Public & Investor Relations SA Joint Broker
Office: +27 (0)11 880 0037 Office: +44 (0) 207 236 1010
Bobby Morse/Chris Judd Marius Saaiman
Buchanan Communications M Squared Resources
Public & Investor Relations UK Transaction advisor
Office: +44 (0) 207 466 5000 Office: +27 (0)11 648 0207
www.panafricanresources.com
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