Disposal by Avmin of its shareholding in Iscor Limited to Stimela Mining Limited
31 October 2001
Anglovaal Mining Limited (Avmin) and Stimela Mining Limited (Stimela) announced today that they have concluded an agreement in terms of which Avmin will sell its entire Iscor shareholding to Stimela – a company owned by an offshore investor – and enter into a joint venture with Stimela to pursue opportunities in iron ore.
Stimela will pay Avmin an amount of R24.00 per share for its entire shareholding of 31 093 300 Iscor shares. This represents a total consideration of R746 239 200 for Avmin. The consideration will be paid in two equal cash installments, the first due on 5 November 2001 and the remainder on 6 May 2002. Stimela has also granted Avmin a call option on up to 25 per cent of Stimela’s shares in Kumba Resources Limited (Kumba), post the unbundling of Iscor.
Commenting on the transaction, Rick Menell, Avmin’s Deputy Chairman and CEO said: “This agreement allows Avmin to retain both financial and strategic upside in Kumba, whilst it will at the same time provide Avmin with funding for its working capital and investment needs.”
Avmin, through Assmang Limited, has significant iron ore interests in the Northern Cape and believes that material value may potentially be unlocked over time in respect of these reserves. As such, Avmin and Stimela have agreed to share a common objective of unlocking the potential value in the Northern Cape iron ore fields. This transaction provides Avmin with the option, assuming the unbundling of Iscor, to participate in Kumba and also to share in any upside in the Kumba share price. Avmin has the right to appoint a director to the board of directors of Stimela and, if Avmin exercises the full option, it will have the right to nominate 50 per cent of the directors of Stimela.
Menell continued: “Negotiations with an empowerment partner are at an advanced stage, which could result in the empowerment partner acquiring 10 per cent of the joint venture”.
On 1 February 2001, Avmin announced that it had acquired an interest of 35 293 300 ordinary shares in Iscor, with the intention of unlocking value in Iscor.
Menell added: “The board of Avmin believed at the time that Iscor’s share price did not reflect its full potential value and this made possible an inexpensive investment to participate in strategic opportunities”. As a condition of the initial purchase of the Iscor shares, an option was granted on a portion of these shares and, on 19 September 2001, 4 200 000 of these options were exercised. This resulted in a holding for Avmin of 31 093 300 Iscor shares, which amounted to approximately 11.5 per cent of Iscor’s issued share capital.
The board of Avmin decided during August 2001 to explore a range of alternatives in relation to Avmin’s shareholding in Iscor, which would best satisfy two key priorities:
address Avmin’s funding requirements; and
maintain a strategic interest in Kumba.
Having thoroughly reviewed all alternatives, including a firm outright purchase offer for the Iscor shareholding, Avmin’s board determined that the most attractive route from both a financial and strategic perspective was to sell its Iscor shares and to form a joint venture with Stimela. “We look forward to continuing with our intended strategy in terms of the original Iscor investment,” concluded Menell.
The call option that has been granted to Avmin by Stimela, assuming and following the unbundling of Iscor, is to acquire between 10 per cent and 25 per cent of all the Kumba shares beneficially held by Stimela at the time of exercising the option. In terms of the option, the cost of the Kumba shares to Avmin will be R20.25 per Kumba share, plus related transaction costs and interest. The option can be exercised any time after the listing of Kumba until 5 November 2002.
Deutsche Securities (SA) (Pty) Limited has provided a formal opinion to the Avmin board of directors that this transaction is fair and reasonable to the shareholders of Avmin from a financial point of view.
The implementation of the sale is subject to, inter alia, Avmin to obtain the release of the Iscor shares from certain cessions and pledges to its financiers.
General Manager, Investor Relations