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WESCOAL HOLDINGS LIMITED - Acquisition of the remaining minority interest in Neosho Trading 86 Proprietary Limited

Release Date: 30/05/2019 13:00
Code(s): WSL     PDF:  
 
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Acquisition of the remaining minority interest in Neosho Trading 86 Proprietary Limited

Wescoal Holdings Limited
Incorporated in the Republic of South Africa
(Registration number 2005/006913/06)
Share code: WSL
ISIN: ZAE000069639
(“Wescoal” or the “Company” or the “Group”)

ACQUISITION OF THE REMAINING MINORITY INTEREST IN NEOSHO TRADING 86 PROPRIETARY LIMITED

1. Introduction

    Shareholders of Wescoal (“Shareholders”) are referred to the announcement released on SENS on 21 May 2019
    regarding the acquisition of 18.2% of Neoho Trading 86 Proprietary Limited (“Neosho”) (the “First Acquisition”).
    Wescoal is now pleased to advise Shareholders that Wescoal, through its wholly-owned subsidiary, Keaton Energy
    Holdings Limited (“Keaton”), has entered into and executed a sale of shares and claims agreement (the “Sale
    Agreement”) with Mbabazini Esther Dhladhla (the “Seller”), in terms of which Keaton will acquire the remaining
    minority interest of all of the ordinary shares and claims (the “Sale Shares”) held by the Seller against Neosho,
    constituting 7.8% of the issued share capital of Neosho (the “Acquisition”). Following the Acquisition, Wescoal will
    own 100% of the issued share capital of the Moabsvelden Project.

    The effective date of the Acquisition is anticipated to be by no later than 30 June 2019 (the “Effective Date”).

2. Overview of Moabsvelden Project

    The Moabsvelden Project is located approximately 16 kilometres southeast of Delmas in Mpumalanga Province
    and is in close proximity to VGF. With a 47.8 million tonne (“mt”) resource, it has the potential to be developed
    into a 1.5 to 2 mt per annum run-of-mine (“ROM”) operation. The Moabsvelden Project is fully permitted and
    there is capacity for the coal it produces to be processed at facilities at VGF or to be sold directly as a crush-and-
    screen ROM product. Wescoal is currently involved in negotiations with potential customers, including Eskom
    Holdings SOC Limited, in terms of which coal offtake and/or supply agreements may be entered into.

3. Details of the Acquisition

    3.1.   Rationale for the Acquisition

           Wescoal’s stated intentions are to optimise the asset base of Keaton, any subsidiaries of Keaton, any
           holding company of Keaton and/or any subsidiaries of such holding company (“Keaton Group”) which
           includes increasing production from the VGF complex and developing the Moabsvelden Project. The
           Acquisition forms part of that integrated development plan for the VGF complex and will result in Wescoal
           obtaining 100% ownership of the Moabsvelden Project. Wescoal believes that this is an opportune time for
           the Acquisition whilst Neosho is in preparation for the imminent commencement of development activities,
           with first coal from the Moabsvelden Project expected before the end of the 2019 calendar year.
           Moabsvelden Project ROM will be processed through a dedicated coal handling and processing plant at
           VGF complex as well as through existing processing capacity with the 5 Seam plant.

    3.2.   Purchase consideration

           3.2.1. Keaton will acquire the Sale Shares for a purchase consideration of R10.5 million.

           3.2.2. In addition, Keaton shall pay to the Sellers an amount in cash equal to R10.5 million, which
                  constitutes the proportionate share of the ROM tonnes of coal resources on the Moabsvelden
                  Project multiplied by R4.00 per tonne.
          
           (together the “Purchase Consideration”).

           3.2.3. Payment of the Purchase Consideration shall be made as follows:

                  3.2.3.1   R4 286 000 within thirty days from the Effective Date;
                  3.2.3.2   R4 286 000 within six (6) months after the Effective Date; and
                  3.2.3.3   the balance of the Purchase Consideration of R12 428 000 will be paid in fourteen (14)
                            monthly instalments of R857 000 each and one final instalment of R430 000, commencing
                            sixty (60) days from the Effective Date.

           3.2.4. All payments for the Purchase Consideration will be made from internal cash generated and/or
                  existing debt facilities.

    3.3    Conditions precedent

           The remaining condition precedent outstanding in regard to the Acquisition is that, to the extent
           required, the memorandum of incorporation of Neosho is amended to ensure that no provisions
           contained therein frustrate compliance by Keaton with its obligations in terms of the JSE Limited (“JSE”)
           Listings Requirements.

    3.4    Value of the net assets and profits attributable to the net assets of the Acquisition

           The value of the net liabilities that are the subject of the Acquisition is R 81 046 083 and value of the losses
           attributable to the net liabilities that are the subject of the Acquisition is R 6 496 713 as extracted from
           Wescoal’s reviewed condensed interim consolidated results for the six (6) months ended 30 September
           2018, which have been prepared in terms of International Financial Reporting Standards.

4. Categorisation of the Acquisition

    The Acquisition falls below the categorisation thresholds of the JSE Listings Requirements, however in terms of
    the “aggregation” provisions, the Acquisition has been aggregated with the First Acquisition and is therefore
    classified as a Category 2 transaction in terms of JSE Listings Requirements. Accordingly no shareholder approval
    is required.

Shareholders are reminded that Wescoal is currently in a closed period until the release of its results for the
year ended 31 March 2019 which are expected to be released on or about 25 June 2019.

30 May 2019

Investment bank, corporate advisor and sponsor
Nedbank Corporate and Investment Banking

IR Advisor
Singular IR

Date: 30/05/2019 01:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
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