Proposed acquisition by ARM of TEAL minorities and formation of a 50:50 joint venture with Vale
17 December 2008
African Rainbow Minerals Limited (“ARM”) announces the proposed transaction to acquire the shares held by minority shareholders in TEAL Exploration & Mining Incorporated (“TEAL”) and to simultaneously introduce Companhia Vale do Rio Doce (“Vale”) as a 50% strategic joint venture (“JV”) partner. TEAL will then be delisted from the Toronto Stock Exchange (“TSX”) and JSE Limited (“JSE”). This will have the net effect of reducing ARM’s shareholding in TEAL to 50%. The cash offer price to TEAL shareholders and the price ARM will receive for the sale of its 15% stake in TEAL is C$3.00 per share.
TEAL has been listed on the TSX since November 2005 and on the JSE since April 2006 and is currently 65% owned by ARM.
ARM’s rationale for listing TEAL was to enable TEAL to raise capital to advance its exploration activities. These activities have been well progressed to date, however, due to TEAL’s share price performance, capital raisings have not been possible. This inability to raise equity capital has been further impacted by the recent market crisis which has made it difficult to raise capital for mining exploration type projects. ARM has been required to provide ongoing financial support to TEAL, disproportionate to its level of shareholding. ARM has embarked on a strategic review of its growth plans into Africa as well as its TEAL investment and remains focused on building large scale, quality copper operations in the DRC and Zambia. TEAL remains key to ARM’s long term diversification plans, being ARM’s chosen vehicle for expanding its copper interests in Africa.
ARM has publicly stated that it intends to position itself as a partner of choice for mining in Africa, as demonstrated by its partnerships with world class mining companies. A JV partnership with Vale in respect of TEAL would ensure that risk exposure, capital allocation, funding and copper mining expertise would be optimised for the development of a successful copper business in Africa.
Vale, headquartered in Brazil, is the second-largest diversified metals and mining company in the world.
Vale is the world’s largest producer of iron ore and pellets, key raw materials for the steel industry, and one of the largest producers of nickel, which is used to produce stainless steel, batteries, special alloys, chemicals and other products. Vale also produces copper, manganese, ferroalloys, bauxite, alumina, aluminum, coal, cobalt, PGMs, among other raw materials important to the global industrial sector.
Investment in the copper business is an important part of Vale’s growth strategy. Vale already operates a copper mine in Brazil, Sossego, and has copper production associated with its nickel operations in Canada. It is currently developing copper projects in Salobo, in Brazil, and Tres Valles, in Chile, and is studying several initiatives that could enable Vale to reach an annual production capacity of one million metric tons over the next five to seven years.
Pursuant to the terms of the proposed transaction, TEAL shareholders will receive C$3.00 per share (“the transaction consideration”), which represents a 123% premium to the 120 day volume weighted average trading price of the TEAL shares on the TSX for the period ended 12 December 2008 and values 100% of TEAL at approximately C$162 million. The proposed transaction is structured as a plan of arrangement under the corporate laws of the Yukon territory of Canada, and in connection with such plan of arrangement, in addition to the acquisition by ARM of the minority TEAL shares, Vale will acquire 50% of the shares of a wholly-owned subsidiary of TEAL which at such time would hold, directly or indirectly, all of TEAL’s mining and exploration assets and liabilities.
A special committee of independent directors of TEAL (the “Independent Committee”) has reviewed the proposed transaction, in consultation with its independent legal and financial advisors and has recommended that shareholders vote in favour of the transaction.
Financial impact on ARM
The following outlines the anticipated impact on ARM post the transaction completion:
- ARM will reduce its effective shareholding in TEAL from 65% to 50%
- ARM will receive a cash consideration of approximately C$24 million for the sale of the 15% stake in TEAL (at C$3.00 per share)
- ARM will proportionately consolidate its 50% interest in TEAL
- ARM’s capital investment requirement into potential TEAL project development reduces
Conditions precedent and timing
The implementation of the proposed transaction is subject to, inter alia, the approval by TEAL shareholders and by various regulatory authorities, including the South African Reserve Bank.
It is expected that the proposed transaction will be implemented by the end of the first quarter of 2009.
Patrice Motsepe, Executive Chairman of ARM said: “We are delighted to announce this proposed joint venture with Vale. We have several joint ventures with leading global mining companies and see significant benefit for the development of TEAL’s assets under such a JV arrangement. We are excited about working with Vale. They bring world class skills and expertise to the proposed JV.
ARM understands and is uniquely positioned to grow in Africa. This proposed JV will increase our presence in copper on the African continent.”
For more information please visit the TEAL website at www.tealmining.com and the Vale website at www.vale.com.
For all investor relations queries please contact:
Corporate Development and Head of Investor Relations
Office: +27 11 779 1507
Mobile: +27 83 411 2881
Executive Director: Business Development
Office: +27 11 779 1476
Mobile: +27 82 412 1004
Financial advisors to ARM: J.P. Morgan
Sponsors to ARM: Deutsche Securities (SA) (Proprietary) Limited