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ROYAL BAFOKENG PLATINUM LIMITED - Proposed acquisition by RBPlat of the remaining 33% interest in the Bafokeng Rasimone Platinum Mine Joint Venture

Release Date: 05/07/2018 08:00
Code(s): RBP RBPCB     PDF:  
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Proposed acquisition by RBPlat of the remaining 33% interest in the Bafokeng Rasimone Platinum Mine Joint Venture

(Incorporated in the Republic of South Africa)
(Registration number: 2008/015696/06)
JSE share code: RBP
ISIN: ZAE000149936
Company code: RBPD
Bond code: RBPCB
ISIN: ZAE000243853
(“RBPlat” or “the Company”)


1. Introduction

   The board of directors of RBPlat (“the Board”) is pleased to advise security holders that RBPlat,
   through its wholly-owned subsidiary, Royal Bafokeng Resources Proprietary Limited (“RBR”), and
   Rustenburg Platinum Mines Limited (“RPM”), a wholly-owned subsidiary of Anglo American
   Platinum Limited, have agreed the terms of a transaction in terms of which RBR will acquire the
   balance of the 33% interest in the Bafokeng Rasimone Platinum Mine Joint Venture (“BRPM JV”),
   from RPM (“the Transaction”).

   The consideration in respect of the net assets subject to the Transaction (“Purchase
   Consideration”) shall be an aggregate amount of R1.863 billion.

2. Rationale for the Transaction

   RBPlat, through RBR, currently controls the BRPM JV through its 67% participation interest in, and
   management control of, the BRPM JV.

   Given its Merensky bias and relatively shallow depth, the BRPM JV’s Bafokeng Rasimone Platinum
   Mine is competitively positioned in the lowest quartile of the industry cost-curve. Furthermore,
   Styldrift I and Styldrift II offer RBPlat the ability to significantly increase its life of mine at
   competitive operating costs and a favourable cost-curve position. The Transaction therefore
   provides RBPlat with the ability to increase its attributable resource and reserve base in an asset
   that it knows and understands (given that it already controls the asset), with relatively low
   implementation risk and in a value accretive manner given that the Purchase Consideration
   represents a 15% discount to the “see-through” value of the BRPM JV, when calculated applying
   RBPlat’s 30-day volume weighted average share price (“30-day VWAP”) as at 4 July 2018.

3. Settlement of the Purchase Consideration

   The Purchase Consideration in respect of the Transaction shall be settled as follows:

   3.1. RBPlat shall, subject to and following receipt by RBPlat of shareholder approval for the
        Transaction, implement a capital raising in terms of which it shall issue 9,791,823 new RBPlat
        shares to investors in terms of its existing general authority to issue shares for cash as
        obtained at its Annual General Meeting held in April 2018 (“the Capital Raising”) and RBR
        shall contribute the entire proceeds of the Capital Raising to RPM as part-settlement of the
        Purchase Consideration (“the Cash Consideration”);
   3.2. the balance of the consideration (“the Deferred Consideration”), after deducting the Cash
        Consideration and adjusting for a nominal claim settlement, shall be left outstanding on loan
        account on the following terms:
         3.2.1. any security provided in respect of the Deferred Consideration will be subordinated
                in favour of the security provided in respect of the Enlarged Debt (as defined in
                paragraph 7.1.3);
         3.2.2. the Deferred Consideration shall escalate at a rate equal to the interest rate charged
                by lenders to RBR, on the Enlarged Debt (as defined in paragraph 7.1.3) plus a
                premium of 2%, which shall constitute an adjustment to the Purchase Consideration;
         3.2.3. the Deferred Consideration shall be settled in three annual payments, each equal to
                one-third of the Deferred Consideration balance (inclusive of any escalation thereof
                as contemplated in 3.2.2 above) owing as at that date, with the first payment due
                on the first business day following 18 months from the Effective Date (as defined in
                paragraph 5.1), and the second and third payment due on the first and second
                anniversary thereof, respectively;
         3.2.4. whilst RBR intends to prioritise cash-settlement of the Deferred Consideration, RBR
                may, at its election, choose to settle all or a portion of the Deferred Consideration
                through the issue by RBPlat of RBPlat shares (“Consideration Shares”) to RPM on
                the following terms:
       the Consideration Shares shall be issued by RBPlat to RPM at the 30-day
                         VWAP as at the date of such election;
       in order to limit the dilution to current shareholders and provide
                         shareholders with an ability to participate in the equity capital raising at a
                         discount to the prevailing share price, to the extent that RBR elects to settle
                         any part of the Deferred Consideration through the issue by RBPlat of the
                         Consideration Shares, RBPlat shall undertake to implement a claw back offer
                         (“the Claw Back Offer”) in terms of which RBPlat shall offer the
                         Consideration Shares to RBPlat shareholders registered as such on the
                         record date for the Claw Back Offer at a discount of no more than 5% to the
                         30-day VWAP and shall utilise the proceeds of such Claw Back to settle the
                         relevant tranche of the Deferred Consideration;
      RBPlat shall not be permitted to issue, on an aggregated basis, equal to or in
                        excess of 30% of its shares in issue immediately prior to conclusion of the
                        Capital Raising, in settlement of the Deferred Consideration, unless RBPlat
                        secures the shareholder approval necessary at the time in terms of section
                        41(3) of the Companies Act, and, if applicable, a waiver of the mandatory
                        offer in terms of section 123 of the Companies Act (with the balance of any
                        Deferred Consideration being cash-settled); and
        3.2.5. the Deferred Consideration shall become immediately repayable in the event of a
               change in control of RBPlat and other customary cancellation events.

4. Purchase price adjustment

   The Purchase Consideration shall be increased by the aggregate amount of all cash calls
   contributed by RPM to the BRPM JV during the period commencing on the date of signature of
   the Agreements and terminating on the Effective Date (as defined in paragraph 5.1 below) (“the
   Interim Period”), less the aggregate amount of any distribution that RPM receives from the BRPM
   JV during the Interim Period.

5. Phased implementation and effective date

   The Transaction shall be implemented in two phases –

   5.1. Phase I: the risks and rewards of ownership shall pass to RBR in respect of RPM’s participation
        interest in the BRPM JV (including full title in respect of all assets owned by RPM which it has
        contributed the use of to the BRPM JV, but excluding the RPM Mining Rights as defined in
        paragraph 5.2), with effect from the first business day of the month following the date of
        fulfilments and/or, where possible, waiver of all conditions precedent save for the receipt of
        the Section 11 Approval (as contemplated in paragraph 7.2) (“the Effective Date”); and

   5.2. Phase II: the risks and rewards of ownership in respect of RPM’s mining rights attributable to
        the BRPM JV (“the RPM Mining Rights”) shall pass to RBR, with effect from the date on which
        the cession of the deeds relating to the RPM Mining Rights, is executed, provided that Section
        11 Approval (as contemplated in paragraph 7.2) has been received by this date (“Mining
        Right Transfer Date”).

6. Support of Royal Bafokeng Holdings Proprietary Limited

   Royal Bafokeng Holdings Proprietary Limited, which holds approximately 51% of the RBPlat shares
   in issue, has confirmed its support for the Transaction.

7. Conditions precedent

   7.1. Completion of Phase I of the Transaction shall be subject to the fulfilment and/or waiver (to
        the extent legally permissible) of, inter alia, the following conditions precedent:
       7.1.1. the shareholders of RBPlat approving -
        the Transaction;
        the implementation of the Revised Purchase of Concentrate Agreement and
                          the Contract Mining Agreement (as defined in paragraphs 9 and 11
                          respectively); and
        the appointment of the RPM Nominees (as defined in paragraph 10);
       7.1.2. RBPlat concluding the Capital Raising and receiving the proceeds in respect thereof;
       7.1.3. RBR receiving the necessary approval from its lenders (i) for the Transaction (to the
             extent applicable); and (ii) to increase its existing debt facilities from R2 billion (in respect
             of a 67% interest in the BRPM JV) to R3 billion (in respect of the increased 100% interest
             in the BRPM JV) (“the Enlarged Debt”); and

   7.2. Completion of Phase II of the Transaction shall be subject to the fulfilment of the condition
        precedent that the Department of Mineral Resources grants its approval, under Section 11
        of the Mineral and Petroleum Resources Development Act, of the transfer of the RPM Mining
        Rights to RBR (“Section 11 Approval”).

8. Additional financial information in respect of the BRPM JV

   For the financial year ended 31 December 2017, RBPlat recorded a net loss attributable to owners
   of the Company of R752.7 million (non-controlling interest: R95.7 million) after including an
   R863.3 million impairment of goodwill and, as at 31 December 2017, had a net asset value of
   R14.4 billion (non-controlling interest: R3.8 billion).
   The above financial information has been extracted from the audited annual financial statements
   of RBPlat for the year ended 31 December 2017 which have been prepared in accordance with
   International Financial Reporting Standards.

   Given that RBPlat consolidates the BRPM JV into its financial results and, as at 31 December 2017,
   RBPlat had no other operations save for the BRPM JV, the annual financial results of RBPlat do not
   differ materially to the annual financial results of the BRPM JV on its own, save for limited head
   office costs.

9. Revised Purchase of Concentrate Agreement

   RBR and RPM currently have a purchase of concentrate agreement (“Existing Purchase of
   Concentrate Agreement”) in place in terms of which RPM –

   9.1. is, subject to certain terms, conditions and notice periods, obliged to purchase RBR’s 50%
        attributable share in the concentrate produced by the BRPM JV; and

   9.2. has a right, subject to certain terms, conditions and notice periods, to purchase a further 17%
        of the concentrate produced by the BRPM JV.

   RPM’s 33% interest in the concentrate of the BRPM JV (“RPM Concentrate”) is not subject to the
   Existing Purchase of Concentrate Agreement (given that the BRPM JV is unincorporated and RPM
   cannot transact with itself) and rather subject to a matching of revenue principle in terms of which
   RPM is obliged to contribute an equivalent revenue amount to the BRPM JV in respect thereof.
   It is proposed, as a condition to, and conditional upon, the Transaction, that the Existing Purchase
   of Concentrate Agreement (which cross references the existing joint venture agreement) be
   replaced in its entirety by a revised purchase of concentrate agreement that substantially retains
   the parties’ rights and obligations as set out in paragraphs 9.1 and 9.2 above, whilst extending the
   rights of RPM as set out in paragraph 9.2 above to apply equally, and on substantially the same
   terms and conditions, to the RPM Concentrate (“the Revised Purchase of Concentrate

   The conclusion of the Revised Purchase of Concentrate Agreement, provides RBPlat with
   continued certainty over its off-take arrangements with RPM.

10. RPM board appointments

   For so long as the Deferred Consideration remains owing, RPM shall be entitled to nominate one
   non-executive director to the Board for every fully-diluted 10% exposure that RPM has in RBPlat.
   The exposure will be calculated as the outstanding Deferred Consideration as a percentage of the
   market capitalisation of RBPlat, plus any remaining shareholding that RPM has in RBPlat as at that
   date. The parties have determined the number of directors to be nominated by RPM for
   appointment to the Board ("RPM Nominees") as at the Effective Date to be two RPM Nominees.

11. Interim arrangements

   RPM and RBPlat shall enter into a contract mining agreement (“Contract Mining Agreement”) in
   respect of the period commencing on the Effective Date and terminating on the Mining Right
   Transfer Date, in terms of which RBR shall be appointed as contract miner to RPM in respect of its
   33% participation interest in the BRPM JV.

12. Termination of the JV Agreement

   As a result of the Transaction, the existing joint venture agreement (and, hence, the BRPM JV)
   shall terminate with effect from the Effective Date.

13. Categorisation and circular

   Given the size of the Transaction and the fact that RPM has, in the preceding 12-month period,
   held 10% or more of the RBPlat shares in issue, RPM is a related party to RBPlat and the
   Transaction is therefore a related party category one transaction for RBPlat.

   Furthermore, given that the Revised Purchase of Concentrate Agreement and the Contract Mining
   Agreement constitute agreements entered into between RBPlat (through RBR) and a related
   party, the implementation of the Revised Purchase of Concentrate Agreement and Contract
   Mining Agreement will require approval by shareholders in a general meeting.

   A circular containing, inter alia, a fairness opinion from an independent expert acceptable to the
   JSE Limited in respect of the Transaction (including the Contract Mining Agreement as an interim
   measure thereto) and the Revised Purchase of Concentrate Agreement, will be distributed to
   shareholders in due course.

   5 July 2018

   Corporate advisor and transaction sponsor               Legal advisor
   Questco (Pty) Ltd                                       Bowmans

   JSE sponsor                                             JSE debt sponsor
   Merrill Lynch South Africa (Pty) Ltd                    FirstRand Bank Limited)


The release, publication or distribution of this announcement in certain jurisdictions may be restricted by
law and therefore persons in such jurisdictions into which this announcement is released, published or
distributed should inform themselves about and observe such restrictions. This announcement is for
information purposes only and does not constitute or form part of an offer to sell or the solicitation of an
offer to buy or subscribe to any securities of RBPlat. The securities referred to herein have not been and will
not be registered under the United States Securities Act of 1933 (the "Securities Act") or with any securities
regulatory authority of any state or other jurisdiction of the United States and may not be offered, sold,
resold, transferred or delivered, directly or indirectly, in the United States except pursuant to registration
under, or an exemption from the registration requirements of, the Securities Act. There will be no public
offering of securities in the United States or any other jurisdiction.

Forward looking statements

Certain statements included in this announcement, as well as oral statements that may be made by RBPlat,
or by officers, directors or employees acting on its behalf related to the subject matter hereof, constitute
or are based on forward-looking statements. Forward-looking statements are preceded by, followed by or
include the words “may”, “will”, “should”, “expect”, “envisage”, “intend”, “plan”, “project”, “estimate”,
“anticipate”, “believe”, “hope”, “can”, “is designed to” or similar phrases.

These forward-looking statements involve a number of known and unknown risks, uncertainties and other
factors, many of which are difficult to predict and generally beyond the control of RBPlat, that could cause
RBPlat’s actual results and outcomes to be materially different from historical results or from any future
results expressed or implied by such forward-looking statements. Such risks, uncertainties and other factors
include, among others, RBPlat’s ability to complete the Transaction, RBPlat’s ability to achieve anticipated
efficiencies and other cost savings in connection with the Transaction, RBPlat’s ability to increase
production, the success of exploration and development activities and other risks. RBPlat undertakes no
obligation to update publicly or release any revisions to these forward-looking statements to reflect events
or circumstances after the date of this announcement or to reflect any change in RBPlat’s expectations with
regard thereto.

Although RBPlat believes that the expectations reflected in any such forward-looking statements (or this
announcement) relating to the Transaction are reasonable, the information has not been reviewed or
reported on by the reporting accountants and auditors and no assurance can be given by RBPlat that such
expectations will prove to be correct. RBPlat does not undertake any obligation to publicly update or revise
any of the information given in this announcement that may be deemed to be forward-looking.

For further information, please contact:
Lindiwe Montshiwagae
Executive: Investor Relations
Tel: +27 (0)10 590 4510
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