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PAN AFRICAN RESOURCES PLC - Pan African black economic empowerment (BEE) ownership restructuring

Release Date: 15/12/2017 11:00
Code(s): PAN     PDF:  
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Pan African black economic empowerment (“BEE”) ownership restructuring

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 “Company”)

PAN AFRICAN BLACK ECONOMIC EMPOWERMENT (“BEE”) OWNERSHIP RESTRUCTURING

 
Introduction

Pan African is pleased to announce that it has successfully concluded restructuring
agreements, replacing the current BEE equity shareholdings in the Company (held via
interests in PAR Gold Proprietary Limited (“PAR Gold”)) with BEE shareholdings in Emerald
Panther Investments 91 Proprietary Limited (“SA Holdco”), a subsidiary of the Company (the
“Transaction”). SA Holdco will house all Pan African’s South African mining operations,
following implementation of the Transaction. Where the previous BEE ownership structure
terminates during December 2018, the new BEE structure will only terminate on 31 December
2021, which is a three-year extension of the original BEE transaction.

The rationale and benefits of the Transaction are as follows:
   - Extension of the BEE ownership structure for a three-year period with limited IFRS
       charges to the Company;
   - The Transaction provides flexibility to further restructure the BEE ownership of the
       South African operations, depending on the outcome of the proposed third South
       African Mining Charter and other relevant regulations;
   - The Transaction will avoid BEE ownership dilution, in the event that Pan African raises
       equity capital in the future;
   - The Transaction will not result in a dilution of Group earnings.


Following implementation of the Transaction, Pan African’s BEE ownership is calculated at
26%, comprising 21% in SA Holdco and 5% from its on-mine employee ownership schemes.

Refer to Pan African’s pre and post Transaction Group structures on our website that
summarise the BEE holdings. (website link: http://www.panafricanresources.com/about-
overview/company-structure/)


BEE shareholdings prior to the Transaction

PAR Gold, which owns 19.53% of Pan African’s issued share capital, is currently Pan African’s
primary BEE investor and its shareholders are summarised as follows:
    - The Mabindu Development Trust (“Mabindu”) - 49.5%
    - K2015200726 Proprietary Limited (“K2015”) - 0.6%
    - Pan African Resources Funding Company Proprietary Limited (“Fund Co”) - 49.9%
PAR Gold is currently majority owned by BEE shareholders (50.1%) with the balance held by
PAR’s wholly owned subsidiary Fund Co.


Steps to implement the Transaction

1) Establishment of a new BEE entity:

The Group has established a new BEE entity, Concrete Rose Proprietary Limited (“Concrete
Rose”). Concrete Rose has not conducted any business since incorporation and has been
established for the purpose of housing the interests to be acquired in SA Holdco, as further
detailed below. The provisions of the memorandum of incorporation of Concrete Rose do not
frustrate or relieve the Company in any way from compliance with its obligations in terms of
the JSE Limited Listings Requirements.

The following parties will subscribe for shares in Concrete Rose for a nominal value, as
follows:
     1) Mabindu - 24.75%
     2) Pan African Resources Management Trust - 10.5% (note 1)
     3) Pan African Resources Education Trust - 4.95% (note 2)
     4) Alpha Investment Group Proprietary Limited - 9.9% (note 3)

The remaining shares in Concrete Rose are held by Fund Co (49.9%).

Note 1: The Pan African Resources Management Trust is a new trust established to hold shares on behalf of black management
employees of the group and is controlled by employees of the Group and other historically disadvantaged South Africans
(“HDSA’s”).

Note 2: Pan African Resources Education Trust is a new trust established to hold shares that will provide funding for the education
of black students and is controlled by employees of the Group and other HDSA’s.

Note 3: Alpha Investment Group Proprietary Limited is the investment vehicle for a BEE entrepreneur.

2) Subscription by Concrete Rose for shares in SA Holdco

Concrete Rose will subscribe for 22.11% of SA Holdco’s shares for notional value through a
notional vendor financed (“NVF”) transaction. The BEE shareholders 50.1% share of the NVF
at 15 December 2017 is approximately R756 million.

The NVF shares will be issued by SA Holdco to Concrete Rose on similar commercial terms
to the original PAR Gold NVF terms with Mabindu, as summarised below.

Comparison of the revised BEE scheme versus the original BEE scheme

 Description                                 Revised BEE scheme                         Original BEE Scheme

 Strategic BEE                               Concrete Rose                              PAR Gold
 shareholder:
 Term expiry:                                31 December 2021                           31 December 2018
 Repayment mechanism:                        90% of dividends utilised to               95% of dividends utilised to
                                             fund NVF repayments                        fund NVF repayments
 Trickle dividends:                          10% of attributable dividends              5% of attributable dividends.
                                                                                        Mabindu received R5.6
                                                                                        million in trickle dividends
                                                                                        over the term of the BEE
                                                                                        scheme relating to two
                                                                                        dividend distributions.
 NVF finance rate:                           SA prime rate plus a margin                SA prime rate plus a margin
                                             of five percent                            of five percent
 BEE ownership on mining                     Total of 26%                               Total of approximately 26%
 operations (direct and
 indirect)
 Conversion right:                          On expiry of the scheme,                    On expiry of the scheme,
                                            BEE shareholders                            of BEE shareholders of PAR
                                            Concrete Rose will be                       Gold were entitled to sell
                                            entitled to exchange their                  their shares to Fund Co for
                                            shares in Concrete Rose for                 cash.
                                            Pan African shares based on
                                            the market value of their
                                            holding, less the outstanding
                                            NVF balance. The
                                            conversion rights remains
                                            subject to regulatory, PAR
                                            shareholder and other
                                            approvals if required.


SA Holdco’s investments and shareholdings

As previously stated, SA Holdco will house all the Pan African South African mining
operations. The Transaction will result in:
   - Barberton Mines Proprietary Limited (“Barberton Mines”), which is 95% held by Pan
       African, being transferred to SA Holdco through an intra-group asset-for-share
       transaction; and
   - Elikhulu Tailings Retreatment Proprietary Limited (“Elikhulu”), which is a wholly owned
       subsidiary of Pan African, being transferred to SA Holdco through an intra-group asset-
       for-share transaction.

Following the restructure, SA Holdco will house the following investments:
    - Evander Gold Mining Proprietary Limited – 95%
    - Barberton Mines – 95%
    - Elikhulu – 100%
    - Evander Gold Mines Proprietary Limited – 100%

Currently SA Holdco is a wholly owned subsidiary of Pan African. Following the
implementation of the Transaction, the shareholders of SA Holdco will be:
   - Pan African - 77.89%
   - Concrete Rose - 22.11%

The details pertaining to and the net assets and profits attributable to SA Holdco, Evander,
Barberton Mines and Elikhulu are contained in the 2017 integrated annual report and the
audited consolidated annual financial statements of Pan African for the financial year ended
30 June 2017 available at www.panafricanresources.com. In the year ended 30 June 2017,
the entities that are the subject of the transaction produced profit after tax of approximately
£18.6 million and as at 30 June 2017 these entities had gross assets of approximately £263.8
million.

3) PAR Gold shareholding post the Transaction

PAR Gold will repurchase Mabindu's 49.5% shareholding for a nominal consideration, due to
the NVF currently exceeding the market value of the equity interest. Thereafter PAR Gold will
issue new shares to K2015 to the extent of 50.1% for a nominal consideration. In future these
new shares will enjoy full voting rights but no economic rights. Following the issue to K2015,
Fund Co and K2015 will hold 49.9% and 50.1% of the issued share capital of PAR Gold,
respectively.

The 50.1% interest held in PAR Gold by K2015 does not qualify for BEE ownership within the
group. The 19.53% of Pan African’s issued equity held by PAR Gold is treated as treasury
shares and will still be eliminated on consolidation for purposes of calculating earnings per
share as was previously the case.

Conditions precedent

The conditions precedent to the Transaction are customary to transactions of this nature,
including any regulatory approvals. The Transaction is likely to be implemented during January
2018.

Categorisation

The value pursuant to the Transaction represents a 21% interest in the mining operations of
the Group. Accordingly, the Transaction is considered to be a category 2 transaction, as
contemplated in the JSE Listings Requirements.

By order of the Board

Johannesburg
15 December 2017

Contact information
Corporate Office                                Registered Office
The Firs Office Building                        Suite 31
1st Floor, Office 101                           Second Floor
Cnr. Cradock and Biermann Avenues               107 Cheapside
Rosebank, Johannesburg                          London
South Africa                                    EC2V 6DN
Office: + 27 (0) 11 243 2900                    United Kingdom
Facsimile: + 27 (0) 11 880 1240                 Office: + 44 (0) 207 796 8644
                                                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, Joint Broker
Office: + 44 (0) 207 796 8644                   Office: +44 (0) 20 7260 1000

Sholto Simpson                                  Ross Allister / Chris Burrows
One Capital                                     Peel Hunt LLP
JSE Sponsor                                     Joint Broker
Office: + 27 (0) 11 550 5009                    Office: +44 (0) 207 418 8900

Jeffrey Couch/Neil Haycock/Thomas Rider         Bobby Morse/Chris Judd
BMO Capital Markets Limited                     Buchanan Communications
Joint Broker                                    Public & Investor Relations UK
Office: +44 (0) 207 236 1010                    Office: + 44 (0) 207 466 5000

Julian Gwillim                                  Gareth Driver/Huneiza Goolam
Aprio Strategic Communications                  Webber Wentzel
Public & Investor Relations SA                  Legal Advisers
Office: +27 (0)11 880 0037                      Office: +27 (0) 11 530 5000


www.panafricanresources.com

Date: 15/12/2017 11:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
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