Wrap Text
Acquisition of mining fleet and transfer of employees from existing mining contractor
Tharisa plc
(Incorporated in the Republic of Cyprus with limited liability)
(Registration number HE223412)
JSE share code: THA
LSE share code: THS
ISIN: CY0103562118
('Tharisa')
Acquisition of mining fleet and transfer of employees from existing mining contractor
Introduction
Further to the announcement on 4 April 2017 of Tharisa Minerals Proprietary Limited’s
(Tharisa Minerals) intention to transition to an owner mining model, shareholders are advised that
Tharisa Minerals has entered into a binding term sheet with MCC Contracts Proprietary Limited (MCC)
on 10 May 2017 in terms of which Tharisa Minerals will purchase, subject to the fulfilment of certain
conditions precedent, certain of MCC’s existing equipment, strategic components, site infrastructure
and spare parts (Assets and Equipment), and transfer the employees currently deployed at its Tharisa
Mine in South Africa (the Transaction).
Nature of the business carried on by MCC
MCC is currently the mining contractor at the Tharisa Mine and provides opencast contract mining
services, including drilling, blasting, load hauling and rehabilitation. MCC’s parent company,
Extract Group Limited (Extract) has announced a strategic decision to align its capital allocation with
the current mining environment and to review its business model.
Rationale for the Transaction
Tharisa Minerals, a profitable low cost producer of PGMs and chrome, owns a large scale open pit
operation in South Africa with an open pit life of 18 years and a further 40 years of underground mine
extension. With the long life of the open pit, Tharisa Minerals has been evaluating the benefits of
transitioning from contract mining to an owner mining model.
Tharisa Minerals has, in the normal course of managing its mining operations, developed engineering
and geological skills that are integral to in-house mining. With the long life of the open pit, Tharisa
believes that the transition to an owner mining model is a logical progression in its development with
both cost and operational benefits. By taking direct control of its mining operations, Tharisa Minerals
will be better placed to control the reef grades, thereby delivering improved quality ore to the
processing plants and optimising the feed and recovery within the plants. This will further cement
Tharisa Minerals’ low-cost high margin position.
MCC’s review of its business model has presented Tharisa Minerals with the opportunity to purchase
MCC’s existing on-site plant and equipment, as well as employ the employees currently in service at
the Tharisa Mine, thereby enabling Tharisa Minerals to transition to an owner mining model with
neither interruption nor delay.
Particulars of the proposed Transaction
In terms of the binding term sheet, Tharisa Minerals will purchase the Assets and Equipment from
MCC for a purchase consideration of ZAR303.3 million (US$22.3 million). The 153 ‘yellow fleet’
machines being purchased include excavators, off highway dump trucks, articulated dump trucks and
support vehicles, being substantially all of the equipment at the Tharisa Mine, as well as 17 additional
machines from another MCC site. In addition, Tharisa will accept assignment in respect of leased
equipment comprising drill rigs, excavators and off highway dump trucks and will continue to lease
these 14 machines. The settlement amount for the leased equipment as at 1 June 2017 is
approximately ZAR100.2 million (US$7.3 million).
Approximately 900 on-site employees of MCC will be transferred to Tharisa in terms of Section 197 of
the South African Labour Relations Act. Given the employees’ existing roles on site, Tharisa Minerals
envisages a smooth integration of these employees into the Tharisa Minerals workforce.
The purchase consideration for the Transaction will be settled through a cash payment of
ZAR250.0 million (US$18.3 million) within 30 days of the conditions precedent being fulfilled
or waived, the cession of the lease obligations of approximately ZAR100.2 million (US$7.3 million), the
deduction of certain liabilities relating to the transfer of the employees such as the leave pay provision
and the deduction of future costs that have been incorporated into the mining rate to date, such as
future equipment demobilisation. The balance owing will be paid in cash in six equal monthly
instalments.
The purchase consideration will be funded through a combination of a new bridge finance facility,
OEM supplier finance, traditional banking facilities and available cash resources.
Tharisa Minerals is purchasing the mining fleet from its mining contractor and, as such, the operating
costs post implementation of the Transaction are expected to be substantially the same as the current
amount being paid to MCC for the outsourced mining. Accordingly there are no ‘net profits’ that can
be attributed to the net assets that are the subject of the Transaction in terms of the requirements of
the JSE Listings Requirements.
Conditions precedent to the Transaction
The Transaction is subject to the fulfilment or waiver, as the case may be, of, inter alia, the following
conditions precedent on or before 30 September 2017:
- all and any approvals required in terms of the South African Competition Act No. 1998 from
the Competition Authorities
- irrevocable undertakings to vote in favour of the Transaction from shareholders of Extract
holding more than 50% of the voting rights to be exercised in a general meeting of Extract
shareholders
- all MCC shareholder approvals required to authorise and give effect to the Transaction
- approval of the senior debt lenders of Tharisa Minerals
- approval of the terms and conditions of the leases by Tharisa Minerals.
The effective date of the Transaction will be the date immediately following the fulfilment or waiver,
as applicable, of the conditions precedent, or such later date as may be agreed between the parties.
Categorisation
The acquisition of the MCC assets is categorised as a Category 2 Transaction in terms of Section 9.15
of the JSE Listings Requirements and accordingly will not require Tharisa shareholder approval.
Paphos, Cyprus
11 May 2017
JSE Sponsor
Investec Bank Limited
Investor Relations contact:
Tharisa plc
Sherilee Lakmidas
+27 11 996 3538
+27 79 276 2529
slakmidas@tharisa.com
Broker contacts:
Peel Hunt LLP (Joint Broker)
Matthew Armitt / Ross Allister
+44 207 7418 8900
BMO Capital Markets Limited (Joint Broker)
Jeffrey Couch/Neil Haycock/Thomas Rider
+44 020 7236 1010
Financial PR contacts:
Bobby Morse/Anna Michniewicz
+44(0) 20 7466 5000
tharisa@buchanan.uk.com
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