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| 1. |
INTRODUCTION |
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Shareholders of Metorex are advised that Metorex, Minerales Y Productos Derivados S.A. (“Minersa”) and Vergenoeg entered into a sale of shares agreement on 23 September 2009 whereby Metorex will dispose of its entire shareholding in Vergenoeg comprising 137 500 ordinary shares constituting 55% of the issued ordinary share capital of Vergenoeg (“the Sale Shares”), to Minersa, currently a 30% shareholder in Vergenoeg, for a cash consideration of US$60 million (“Purchase Consideration”) (“the Transaction”). |
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| 2. |
VERGENOEG |
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Vergenoeg has one of the world’s largest known fluorspar resources with a long life operating mine based on current production rates. Situated 150 kilometres north of Johannesburg, Vergenoeg boasts a state-of-the-art concentrator enabling it to meet market qualities and demand. Spanish-based Minersa, has been an active partner and has provided advice on metallurgical processes and international marketing to this operation for many years. |
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| 3. |
RATIONALE FOR THE TRANSACTION |
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In line with the Metorex management’s (“Management”) stated intention to restructure and reduce debt at its Ruashi project in the Democratic Republic of the Congo, Management has continued to pursue the strategy of disposing of certain of the Group’s assets.
Minersa is currently a 30% shareholder in Vergenoeg and has the necessary expertise to continue operating Vergenoeg successfully, thereby retaining the integrity of the recently concluded Black Economic Empowerment (“BEE”) transaction involving Medu Capital (“Medu”), a consortium of BEE controlled entities, as announced on 29 July 2009.
Through the disposal of its remaining interest in Vergenoeg, Metorex continues to further define itself as a base metals producer through the increased focus of its resources towards that objective and Management is of the view that a deliberate and resolute approach towards the development of the Ruashi project will generate value for shareholders.
The Purchase Consideration will assist with the execution of Management’s ongoing strategy, as set out above, and will furthermore reduce debt levels on the Ruashi project. |
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| 4. |
CONDITIONS PRECEDENT |
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The Transaction remains subject to the following conditions precedent as contained in the sale of shares agreement between Metorex, Minersa and Vergenoeg: |
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| 1. |
Medu, to the extent required, must agree in writing to either: |
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| (a) |
release Metorex from its obligations in terms of a put option granted to Medu in the Vergenoeg shareholders’ agreement entered into between Minersa, Medu, Vergenoeg and Metorex (“Shareholders’ Agreement”) (“Put Option”); or |
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| (b) |
Metorex ceding its rights and delegating its obligations in terms of the Put Option, to Minersa; |
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| 2. |
Minersa, Medu and Vergenoeg must, to the extent required, release Metorex from all its obligations in terms of the Shareholders' Agreement; |
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| 3. |
Minersa must be satisfied with the results of the necessary due diligence investigations; |
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| 4. |
approval must be obtained from the exchange control division of the South African Reserve Bank, to the extent required, in respect of the terms and conditions of the Transaction; |
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all the necessary approvals for the Transaction must be obtained from the JSE Limited ("JSE") in terms of the Listings Requirements of the JSE ("Listings Requirements"); |
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| 6. |
to the extent required, the shareholders of Metorex must approve the Transaction, as contemplated in the Listings Requirements; |
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| 7. |
the Transaction and all the related agreements must be unconditionally approved by the competition authorities in all the relevant jurisdictions in accordance with the relevant rules and regulations, or conditionally approved on terms and conditions acceptable to Metorex and Minersa; |
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| 8. |
the Transaction must be approved to the extent required, in terms of the Mineral and Petroleum Resources Development Act No 28 of 2002, either unconditionally, or subject to such conditions as may be approved by Metorex and Minersa; and |
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| 9. |
the Standard Bank of South Africa Limited as well as other parties to the lending agreement must release the Sale Shares from the existing pledge and cession, on such terms and conditions as may be acceptable to Metorex. |
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| 5. |
EFFECTIVE DATE |
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The effective date of the Transaction is 25 September 2009 ("Effective Date") and the closing date means the third business day after all the conditions precedent have been fulfilled ("Closing Date"). |
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| 6. |
PURCHASE CONSIDERATION |
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The Purchase Consideration is an amount equal to US$60 million less all dividends declared and distributions made in respect of the Sale Shares during the period commencing on the Effective Date and ending on the Closing Date.
Once conditions precedent 1 to 6, as disclosed in 4 above, have been fulfilled, Minersa is required to pay Metorex US$25 million ("First Payment") provided that Metorex procures an undertaking from its bankers ("the Undertaking") to refund the First Payment to Minersa in the event that the remaining conditions precedent are not fulfilled. Within 3 business days after the Closing Date, Minersa shall pay Metorex US$35 million and in the event that the Undertaking was not procured, an amount equal to the First Payment together with all interest accrued thereon less all dividends declared and distributions made in respect of the Sale Shares during the period commencing on the Effective Date and ending on the Closing Date. Interest is payable on the Purchase Consideration from the Effective date until the date upon which the Purchase Consideration is paid by Minersa to Metorex.
The Transaction is subject to warranties that are normal for a transaction of this nature which include, inter alia the indemnification of Metorex by Minersa against any claims, damages or costs resulting from Medu not releasing Metorex from its obligations in terms of the Put Option. Accordingly, Metorex has the right to waive condition precedent 1 as described in paragraph 4 above. |
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| 7. |
PRO FORMA FINANCIAL EFFECTS |
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The pro forma financial effects of the Transaction on Metorex are being prepared by the directors of Metorex.
A further announcement and a circular, detailing the pro forma financial effects of the Transaction, will be released in due course. |
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| 8. |
RELATED PARTY AND CATEGORISATION |
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Minersa and its associates currently hold in excess of 10% of Metorex's issued share capital making it a material shareholder in Metorex. In addition Mr Alberto Barrenechea, a director of Metorex, is also a shareholder and director of Minersa.
In terms of the Listings Requirements the Transaction is a related party transaction and therefore requires the approval by Metorex shareholders.
The Transaction is furthermore categorised as a Category 2 transaction in terms of the Listings Requirements. |
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| 9. |
FAIRNESS OPINION |
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In accordance with the Listings Requirements, a fairness opinion is required as to the fairness of the Transaction to Metorex shareholders.
In this regard, the Board of Directors of Metorex has appointed Venmyn Rand (Pty) Limited ("Venmyn") as independent expert advisor to provide an independent fairness opinion.
Details of Venmyn`s opinion will be included in a circular to be posted to shareholders detailing the Transaction. |
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| 10. |
CIRCULAR AND GENERAL MEETING |
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A circular setting out the full details of the Transaction and including the notice of the general meeting of shareholders is in the process of being finalised.
The salient dates and times applicable to the Transaction and the circular detailing the Transaction will be announced in due course. |
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| 11. |
FURTHER CAUTIONARY |
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Metorex shareholders' attention is drawn to the fact that the pro forma financial effects relating to the Transaction have not been included in this announcement as required in terms of the Listings Requirements.
Accordingly, shareholders should continue to exercise caution when dealing in their Metorex securities until a further announcement is made. |
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Rosebank
23 September 2009 |
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Corporate advisor and sponsor:
Barnard Jacobs Mellet Corporate Finance (Pty) Limited |
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Legal advisor:
DLA Cliffe Dekker Hofmeyer Inc |
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Independent expert advisor:
Venmyn Rand (Pty) Limited |
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