Acquisition of Site with Power and Environmental Permits

 

4 May 2010
AIM: JLP
JSE: JBL
Registration number: 4459850
ISIN: GB0031852162

Jubilee Platinum Plc
(“Jubilee” or “the Company”)

 

Jubilee Acquires Site with Power and Environmental Permits for Commercial ConRoast Facility and withdrawal of cautionary

(This announcement is related to the cautionary announcements of 2 March and 19 April 2010). 

   

Highlights

 Jubilee acquires active brownfield smelting site for first ConRoast Furnace build programme 

  • Purchase price is $10 million for 70% interest and $4 million shares or cash on call option for the other 30%
  • Site has self 10MW gas (Sasol supply)-powered generator facility and separate 6 MW municipal (Eskom) supply
  • Environmental and precious metal permits in place
  • Significant usable infrastructure in place reducing capital expenditure
  • Short-term opportunity from current site smelting operation

 Jubilee is pleased to announce that it has entered into a Sale Agreement (“Agreement”) with Thos Begbie Limited (TBL) and various Trusts (“Trusts”) to purchase respectively  TBL’s 70% shareholding and a call option on the Trust’s 30% shareholding in Thos Begbie Holdings (Pty) Ltd (TBH), which owns the assets of a ferro-alloy smelting facility in Middelburg, South Africa (“the acquisition”).  This acquisition is a key step towards the Company’s committed objective to fast track the commercialization of its ConRoast process.

 Colin Bird, Jubilee’s CEO, said “This acquisition is a keystone of the Company’s mission  for its ConRoast process and underlines the Company’s aggressive commitment to develop and commercialize the process. This acquisition will lead to short-term cash flow and will significantly reposition Jubilee in the Platinum arena. We are convinced that the industry now acknowledges the necessary role ConRoast will have in smelting primary and secondary high-chrome platinum concentrates.”

 The Company regards the acquisition of this smelting facility of strategic importance. It   provides the Company with a ready site with significant usable infrastructure, power and skilled labour to realise installation of its first 5MW ConRoast DC arc furnace, thereby reducing capital expenditure. The site is fully permitted environmentally and for precious metals. Permit applications have been submitted to increase the plant’s  smelting capacity.

 The Company is evaluating tenders for the engineering, construction, procurement and management for installation of a 5MW ConRoast facility complete with downstream refining.

 The Middelburg site currently has two 2.5MVA arc furnaces. TBH management are in the process of completing the construction of a 5MVA arc furnace with plans for a third 2.5MVA furnace for its ferro-alloy smelting operation. The total capital cost is anticipated at ZAR14 million, of which ZAR5 million has been incurred to date. The Company expects to benefit from short-term opportunity from the current smelting operations on site.

 

Terms of the Agreement

The salient terms of the agreement include:

 

 Conditions Precedent

 The acquisition is subject to the following conditions precedent:

·    that by 31 May 2010, the approval is obtained, insofar as it may be necessary in law and/or required by any stock exchange on which the shares of Jubilee are listed, to enable the terms and conditions of the agreement to be carried into effect

·    that by 15 May  2010, the approval is obtained for the acquisition by the board of directors of Jubilee;  

·    that by 15 May 2010, the approval is obtained, to the extent necessary, of the acquisition by all regulatory authorities including but not limited to the competition authorities of South Africa, the Securities Regulations Panel and the South African Reserve Bank;

·      that by 31 May 2010, approval is obtained in so far as it may be necessary or required by any environmental and or other regulatory authority for all consents, permits and licences not already covered by those in warranties for the company as restructured to carry out its business of smelting and refining of precious and associated base metal bearing oxide/sulphide concentrates;

·    that by 15 May 2010, a written agreement is concluded between TBH (the “company”) and its subsidiary, Thos Begbie and Co (Proprietary) Limited, in terms of which the company will be placed in control of the supply of Municipal Electricity and self generated electricity between the parties to the above agreement and which agreement will further regulate how the electricity is to be divided between the company and Thos Begbie and Co (Proprietary) Limited; and

·    that by 15 May 2010, a shareholders agreement is concluded and becomes unconditional in accordance with its terms save in respect of any condition wherein reference is made to the Agreement becoming unconditional.

Thos Begbie and Co (Pty) Ltd is specifically excluded from the acquisition.

 

Consideration

 The purchase price payable for TBL’s 70% shareholding is US$10 million (ZAR74.5 million) payable in two tranches of US$8 million (ZAR59.6 million in April 2010 and  US$2 million (ZAR14.9 million) payable on 1 June 2010.

 On the Agreement becoming effective, Jubilee will make a further payment of up to ZAR9 million towards the cost of the two additional AC arc furnaces on the site. 

 

Option

 The Trusts have granted Jubilee a call option in terms of which Jubilee shall, if the call option is exercised, acquire their 30% shareholding in TBH. The call option shall be subject to the following terms and provisions:

 ·    The call option may be exercised by Jubilee at any time prior to 31 December 2010 by Jubilee giving written notice to the Trusts of the exercise of the call option. The option is in respect of all of the option shares and not part thereof.

 ·    The consideration payable by Jubilee to the Trusts for the option shares shall be the Rand equivalent of US$4,000,000 as at the date of exercise of the option.

 ·    The exercise price for the option shall be paid to the Trusts at Jubilee’s election, either in cash or by Jubilee procuring the issue to the Trusts of such number of Jubilee shares equal in value to the Rand equivalent of US$4,000,000 based on the 30-day volume weighted average price at which Jubilee shares trade on the JSE during the 30 trading days immediately preceding the issue of such Jubilee shares. 

 

Withdrawal of cautionary

 Shareholders are referred to the cautionary announcements published on 2 March and 19 April 2010 respectively and are advised that as a full terms announcement together with financial effects has now been published, caution is no longer requird to be exercised vy shareholders when dealing in their shares.

 

Note on the Financial Effects of the Transaction

 

Pro forma Financial effects of the acquisition

 The table below reflects the unaudited pro forma financial effects of the acquisition. These have been prepared in terms of the Listings Requirements of the JSE Limited, are for illustrative purposes only and due to their nature, may not truly reflect Jubilee’s financial position or results of operations. It has been assumed for purposes of the pro forma financial effects that the acquisition took place with effect from 1 July 2009 for income statement purposes and 31 December 2009 for balance sheet purposes. The directors of Jubilee are responsible for the preparation of the unaudited pro forma financial effects.

 

Effects per Jubilee share

Before 1

After the acquisition of a 70% interest in TBH 2

Percentage change

After the exercise of the option and settlement of the option consideration in Jubilee shares 3

Percentage change

After the exercise of the option and settlement of the option consideration in cash 4

Percentage change

(Loss)/ earnings per share (pence)

 (1.43)

(1.42)

0.7%

(1.35)

5.6%

(1.42)

0.7%

Headline (loss)/ earnings per share (pence)

 (1.10)

(1.10)

(1.05)

4.5%

(1.10)

Net asset value per share (pence)

 32.69

32.69

32.89

0.6%

32.69

Tangible net asset value per share (pence)

 6.41

4.48

(30.1%)

4.75

(25.9%)

3.74

(41.7%)

Weighted average shares in issue (‘000)

 157 278

157 278

163 816

4.2%

157 278

Shares shares in issue (‘000)

 229 551

229 551

236 088

2.8%

229 551

 

Notes:

 The financial effects are indicative only and have been based on the assumptions set out below. The acquisition has been accounted for in terms of the revised IFRS 3: Business Combinations, as the expected effective date is after 1 July 2009, being the effective date of the revised statement.

 1.   The “Before” financial information is based on Jubilee’s published unaudited interim results for the six months ended 31 December 2009.

 2.   The “After the acquisition of a 70% interest in TBH” assumes:

·          TBH’s income statement for the year ended 30 September 2009 (adjusted for a six month period) has been aggregated with the income statement of Jubilee for the six months ended 31 December 2009. The TBH income statement has been converted at £1 – ZAR12.5651, being the average rate for the six months ended 31 December 2009;

·          TBH’s balance sheet is based on the annual financial statements of TBH for the year ended 30 September 2009 converted at £1 – ZAR11.8144, being the closing rate at 31 December 2009;

·          Payment of the consideration of US$10 million in cash, converted at £1 – US$1.5256, being the closing rate at 30 April 2010;

·          Total transaction costs of £10,000 in respect of the acquisition;

·          For the purpose of determining the loss per share and headline loss per share only, interest foregone on the cash component is calculated based on the assumption that the cash would have invested at a return of 0.75 per cent. per annum (being the average investment rate for the period); and

·  The tax effects of the above.

3.   The “After the exercise of the option and settlement of the option consideration in Jubilee shares” assumes (in addition to the assumption in note 2 above):

·          Payment of the option consideration of US$4 million via the issue of 6,537,410 new Jubilee shares at the 30-day volume average weighted price to 30 April 2010 (equating to R4.52 per share, converted at US$1 – ZAR7.3910, being the closing rate at 30 April 2010);

4.   The “After the exercise of the option and settlement of the option consideration in cash” assumes (in addition to the assumption in note 2 above):

·          Payment of the option consideration of US$4 million in cash, converted at £1 – US$1.5256, being the closing rate at 30 April 2010.

 

Note to editor

 The ConRoast technology, developed and patented by Mintek (South Africa’s national mineral research organization). has been licensed (to year 2020) exclusively to Braemore Platinum Smelters SA (Pty) Ltd (a wholly owned subsidiary of Jubilee). ConRoast is a robust, clean and safe DC-arc smelting process, for treating especially difficult high chrome-bearing platinum concentrates from UG2 reef ore. ConRoast offers increased metal recovery, low SO2 emissions and improved furnace reliability for chromite-bearing platinum concentrates; all being significant improvements over the matte smelting process currently employed in the Platinum mining industry.

 

 For further information please contact:

 

Colin Bird                                         Matthew Robinson/Ed Frisby

Jubilee Platinum plc                         FinnCap

Tel +27 (0) 11 253 3280                 Tel +44 (0) 20 7600 1658

Tel +44 (0) 20 7584 2155

                                               

Andrew Sarosi                                Leonard Eiser/Sharon Owens

Jubilee Platinum plc                         Sasfin Capital

Tel +44 (0) 1752 221937                 Tel +27 (0) 11 809 7500

 

Leon Coetzer                                  Michael Kinirons/Giang Nguyen

Braemore Platinum (Pty) Ltd           Bishopsgate Communications Ltd

Tel +27 (0)83 455 7749                   Tel +44 (0) 20 7562 3350