Yomhlaba Resources Limited
(Registration number 1994/009012/06)
Share code: YBA
ISIN: ZAE000060281
("Yomhlaba" or "the Company")
The board of directors of Yomhlaba ("the Board") is pleased to announce the proposed restructuring, an empowerment transaction which will transfer control of Yomhlaba to Royal Bafokeng Capital (Pty) Ltd ("Royal Bafokeng Capital") and the acquisition of two operating coal mines (collectively, "the Transactions") and a property, all of which are discussed in detail below.
The Board has negotiated with its current largest shareholders, and only creditors, to restructure the balance sheet of Yomhlaba, which will render the Company, prior to the acquisitions, without significant long-term debt and will enable Yomhlaba to implement the acquisition of the two productive and profitable coal mines and related assets in order to create an empowered coal platform controlled by Royal Bafokeng Capital.
The New Africa Mining Fund Nominees ("NAMF") holds a redeemable preference share with a face value of R9 million and a redemption value of R26,6 million ("the NAMF Preference Share") in Yomhlaba Coal (Pty) Ltd, a wholly-owned subsidiary of Yomhlaba ("Yomhlaba Coal"). The NAMF Preference Share does not carry a coupon and is redeemable after five years. NAMF also holds a claim on loan account against Yomhlaba Coal, amounting to approximately R16.6 million ("the NAMF Loan Account").
Yomhlaba and NAMF have entered into an agreement in terms of which Yomhlaba will acquire the NAMF Loan Account and the NAMF Preference Share ("the NAMF Debt Restructure"). The consideration payable by Yomhlaba to NAMF for the NAMF loan will be R10 million. NAMF will re-invest this cash on the same basis as the Royal Bafokeng Capital loan, as detailed below in section 6.2
Rotocompactors (Pty) Ltd ("Rotocompactors") holds a claim on loan account against Yomhlaba Coal amounting to approximately R20,9 million ("the Rotocompactors Loan Account"). Yomhlaba has entered into an agreement with Rotocompactors in terms of which Yomhlaba will acquire the Rotocompactors Loan Account for a total purchase consideration of R3,75 million ("Rotocompactors Debt Restructure"). The purchase consideration is to be settled as follows:
The effective date of the NAMF Debt Restructure and Rotocompactors Debt Restructure (collectively, "the Balance Sheet Restructure") will be the third business day after the Closing Date.
The proposed acquisitions include two operating collieries, and an adjacent property, which will form the basis of a new Black Empowered coal mining company with a solid earnings base. The collieries and the property are currently owned by Risk Reduction International, who have entered into agreements, the salient terms of which are set out below. A non-refundable deposit of R8 million is payable before 10 March 2007, with the balance payable on the Closing Date.
Ilanga owns a coal mine in the Witbank Coal Field, situated in Middelburg, Mpumalanga, some 200km east of Johannesburg. Mining operations and coal preparation have been taking place since 1996 under the management of Ilanga. It is an opencast mine with an expected life of mine of two years. A coal processing plant, weighbridge, offices and workshops are also located on the property. The coal is of a quality suitable for export through Richards Bay.
Risk Reduction International ("RRI") is currently the sole shareholder of Ilanga. Royal Bafokeng Capital, a BEE company in which the 300 000 members of the Royal Bafokeng Nation indirectly owns 50.1%, has entered into an agreement with RRI in terms of which Royal Bafokeng Capital will acquire 76.4705% of the shares in Ilanga for a purchase consideration of R20 million ("the BEE Subscription").
The effective date of the BEE Subscription is 1 October 2006.
Simultaneously with the BEE Subscription, South African Coal Mining Holdings (Pty) Ltd ("SACM"), a company with the same shareholder constituency as RRI, will acquire 10.5882% of the shares in Ilanga from RRI ("the SACM Acquisition") for a purchase consideration equal to 95% of the proceeds realised by SACM upon the sale of the Yomhlaba shares SACM will receive from the Ilanga Acquisition (which is discussed in the following paragraph).
Contemporaneously with the BEE Subscription and the SACM Acquisition, Yomhlaba has entered into an agreement with RRI, Royal Bafokeng Capital and SACM in terms of which it will acquire all the shares in and claims against Ilanga for a purchase consideration of R68 million ("the Ilanga Acquisition"), effective 1 October 2006. The purchase consideration will be discharged by the issue of 340 million ordinary shares in Yomhlaba ("Yomhlaba Shares") to RRI (44 million Yomhlaba Shares), Royal Bafokeng Capital (260 million Yomhlaba Shares) and SACM (36 million Yomhlaba Shares).
Umlabu owns a coal mine situated in the magisterial districts of Ermelo and Middelburg, Mpumalanga. Mining operations commenced in February 2003 under the management of Ilanga. It is an opencast and underground mine with an expected life of mine in excess of 19 years. The coal is of a similar quality to Ilanga, and can also supply the nearby Camden power station with much needed coal.
Yomhlaba has entered into an agreement in terms of which it will acquire all the shares in and claims against Umlabu from RRI, for a purchase consideration of R141 million ("the Umlabu Acquisition"). The effective date of the transaction is 1 October 2006.
The purchase consideration will be funded through R105 million medium-term loan ("the Term Loan") and the balance will be provided in the form of shareholders' loans ("the Shareholders' Loans") as follow:
The Shareholders' Loans will be converted into Yomhlaba Shares after 91 days at the greater of:
Yomhlaba has also entered into an agreement with the Lutzkie Besigheidstrust in terms of which a property adjacent to Umlabu will be acquired for R770 000 ("the Property Acquisition"), subject to the suspensive conditions set out in paragraph 6 below. The rationale for the Property Acquisition is to build a railway siding near Umlabu in order to transport coal produced to the Richards Bay Coal Terminal in future.
The restructuring of the balance sheet of Yomhlaba will result in the Company, prior to the acquisitions, having no long-term debt and enables the Company to pursue transactions which will create value for shareholders and restore the financial viability of the Company.
The implementation of the Transactions will result in Royal Bafokeng Capital holding a controlling interest of 65% in Yomhlaba. Royal Bafokeng Nation participation ensures that the majority shareholder of Yomhlaba is not only black-owned, but also regarded as a broad-based economic empowerment entity.
As a result of the Ilanga Acquisition and the Umlabu Acquisitions (collective, "the Acquisitions"), Yomhlaba will own two productive and profitable coal mines and related assets that will enable it to return to being a productive business. The Acquisitions create a platform on which the Yomhlaba Group can promote growth and development of a viable BEE coal mining operation.
The NAMF Debt Restructure, the Rotocompactors Debt Restructure, BEE Subscription, the SACM Acquisition, the Ilanga Acquisition, the Umlabu Acquisition and the Property Acquisition are subject to, inter alia, the following outstanding suspensive conditions:
The BEE Subscription will result in the change of the control of Yomhlaba. As a result, in terms of the Securities Regulation Code on Takeovers and Mergers, a mandatory offer must be extended to all shareholders. Shareholders of Yomhlaba will be requested to vote on waiving this requirement at the General Meeting.
Subsequent to the change in the controlling shareholder to Royal Bafokeng Capital, the Board will be reconstituted, subject to Shareholders' approval.
Current non-executive directors JH Jonck and DB Steyn have agreed to resign from the Board. Shareholders will be required to approve the appointments of TV Mokgatlha as chairman, KJ Gribnitz as acting Chief Executive Officer, and the appointments of Lucas Ndala (representing the Royal Bafokeng Nation) and Neil Gardyne (representing NAMF) as non-executive directors. It is the intention of the Board to grow the number of directors serving on the Board and shareholders will be advised of future appointments to the Board.
The Board further proposes that the name of the company is changed from "Yomhlaba Resources Limited" to "South African Coal Mining Holdings Limited" in order to reflect the Company's intended new focus on coal mining subsequent to the Transactions.
The Board is currently following a process set out by the JSE Limited ("the JSE") and will, following the conclusion of this process, formally request the JSE to lift the suspension on trading in Yomhlaba's securities listed on the JSE.
Shareholders are also referred to the separate announcement released on SENS today containing Yomhlaba's audited annual financial statements for the year ended 30 June 2006 and the reviewed interim financial results for the six months ended 31 December 2006.
Due to the changed nature of the Yomhlaba's business activities, the Board intends to also apply to the JSE to transfer the listing of the company from AltX to the Main Board of the JSE in the Mining - "Other Mineral Extractors and Mines" section of the JSE list.
Shareholders should note that the final listing of Yomhlaba is at the discretion of the JSE and is contingent upon the JSE's assessment of the suitability for listing of the Company subsequent to the implementation of the Transactions.
The Transactions are collectively categorised, inter alia, as a Category 1 transaction, a related party transaction and a reverse take-over, in terms of the Listings Requirements of the JSE. A circular, incorporating a fair and reasonable opinion, prepared by an independent professional expert acceptable to the JSE, and a notice of general meeting of shareholders for the purpose of considering and, if deemed appropriate, passing of the requisite resolutions to approve and implement the Tansactions, and revised listing particulars will be posted to Shareholders.
Further announcements incorporating, inter alia, the JSE's decision with regards to the lifting of the suspension in the trading of Yomhlaba shares, the salient dates for implementation of the Transactions and the pro forma financial effects of the Transactions will be made in due course. Accordingly, shareholders are advised to continue exercising caution when dealing in Yomhlaba Shares until further announcements are made.
7 March 2007
Pretoria
Designated Advisor
Sasfin Capital (a division of Sasfin Bank)
Transaction sponsor
Metier Advisory (Pty) Ltd
Restructuring Advisor
Gandalf Trust
Transaction Advisor
Radagast Capital (Pty) Ltd
Independent expert
Moores Rowland Corporate Finance (Pty) Ltd
Reporting accountants and auditors
Compendium Pretoria Inc.
Chartered Accountants (S.A.)
Registered Accountants and Auditors
Attorneys to RRI
MacRobert Incorporated
