Proposed Financing for Eikhulu Tailings Project
THIS ANNOUNCEMENT, INCLUDING THE APPENDICES (TOGETHER, THE "ANNOUNCEMENT") AND THE INFORMATION CONTAINED HEREIN, IS NOT FOR PUBLICATION, RELEASE, DISSEMINATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN WHOLE OR IN PART, IN OR INTO THE UNITED STATES, AUSTRALIA, CANADA OR JAPAN OR ANY OTHER JURISDICTION IN WHICH IT WOULD BE UNLAWFUL TO DO SO.
THIS ANNOUNCEMENT DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY, NOR SHALL THERE BE ANY SALE OF THE SECURITIES REFERRED TO HEREIN, IN OR INTO ANY JURISDICTION WHERE SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH JURISDICTION.
Pan African Resources PLC
(“PAFâ€, the “Company†or the “Groupâ€)
AIM Code: PAF
JSE Code: PAN
ISIN: GB0004300496
Proposed Financing for Elikhulu Tailings Project
Pan African Resources PLC, the Africa-focused precious metals producer, is pleased to announce a proposed comprehensive funding package for the Elikhulu Tailings Project, comprising:
- a proposed placing (the “Placingâ€) to existing and new institutional investors of 291,480,983 new ordinary shares of 1 pence each (“Placing Shares†or “New Ordinary Sharesâ€) at an issue price of 14 pence per Placing Share or ZAR2.42 per Placing Share (together the “Issue Priceâ€) to raise approximately ZAR705 million (US$51 million); and
- a ZAR1.0 billion (US$72 million) underwritten seven-year debt facility which has been agreed in principle with Rand Merchant Bank, a division of FirstRand Bank Limited (“RMB facilityâ€).
The funding package will be used to fast-track development of the Company’s Elikhulu Tailings Project in South Africa (“Elikhulu†or the “Projectâ€) following publication of the Definitive Feasibility Study for the Project, announced on 5 December 2016. Elikhulu is expected to produce approximately 56,000 ounces of gold per year for its first eight years of operations and 45,000 ounces of gold for the remaining five years. Commissioning and first gold of the Project is forecast and expected in the final quarter of the 2018 calendar year.
Capitalised terms not otherwise defined in the text of this Announcement are defined in Appendix III ("Definitions") of this Announcement.
Cobus Loots, Chief Executive Officer of PAF, commented:
“The completion of the proposed equity portion of the Elikhulu funding package and subsequent construction of the project will represent another key milestone for the Group. Elikhulu is expected to deliver low-risk and low-cost gold production within a relatively short timeframe. This initiative, together with our recently announced coal disposal, is consistent with our strategy of pursuing and executing value accretive opportunities both within and outside of South Africa.â€
Funding highlights
- Placing to raise gross proceeds of approximately ZAR705 million (US$51 million) subject to demand at the Issue Price of 14 pence per Placing Share or ZAR2.42 per Placing Share (discounts of approximately 12.5 percent and 11.0 percent to the Company’s share price of 16 pence per share and ZAR2.72 per share respectively as at market close on 11 April 2017);
- The net proceeds of the Placing will be used in conjunction with the proposed c. ZAR1.0 billion (US$72 million) RMB facility to fund the US$120 million total capital expenditure to bring Elikhulu into production; and
- The balance of the net proceeds of the Placing will be used for working capital.
Details of the Placing
- The Placing is being conducted, subject to the satisfaction of certain conditions, through an accelerated bookbuilding process (the “Bookbuildâ€). The Company has appointed Numis Securities Limited (“Numisâ€), Hannam & Partners (Advisory) LLP (“H&Pâ€) and Peel Hunt LLP (“Peel Huntâ€) as the UK placing agents and The Standard Bank of South Africa Limited (“Standard Bankâ€) and Rand Merchant Bank, a division of FirstRand Bank Limited (“RMBâ€) as the South African placing agents (together, the “Placing Agents†or “Bookrunnersâ€) in connection with the Placing, which will be undertaken in accordance with the terms and conditions set out in Appendix I to this Announcement. Pursuant to the terms of the Placing Agreement, the Placing Agents have conditionally agreed to use their reasonable endeavours to place the Placing Shares on a non-underwritten basis at the Issue Price with both existing and new institutional investors. Members of the public are not entitled to participate in the Placing.
- The Placing Agents will immediately commence the Bookbuild. The books are expected to close no later than 12.00 p.m. BST / 1.00 p.m. SAST today. The timing of the closing of the books and the announcement of allocations may be accelerated or delayed at the Placing Agents’ sole discretion. This Announcement gives details of the terms and conditions of, and the mechanics of participation in, the Placing.
- The price at which the Placing Shares are to be placed will be the Issue Price. The Bookbuild will establish the number of Placing Shares to be issued at the Issue Price, which will be agreed between the Placing Agents and the Company following completion of the Bookbuild.
- The total number of Placing Shares issued in the Placing will be determined subject to demand. The Directors of the Company, in consultation with the Placing Agents, reserve the right to adjust the final size of the Placing. The number of Placing Shares will be announced on a Regulatory Information Service and SENS following completion of the Bookbuild.
The Company will apply for admission of the Placing Shares to trading on AIM (“UK Admissionâ€) and to the JSE for the listing of the Placing Shares on the Main Board of the JSE ("South African Admission" and together with the UK Admission, “Admissionâ€). Subject to the Placing Agreement not having been terminated in accordance with its terms, it is expected that Admission of the Placing Shares will occur on or around 19 April 2017.
Placing Agreement
The Placing Agreement contains customary warranties given by the Company to the Placing Agents as to matters relating to the Company and its business and a customary indemnity given by the Company to the Placing Agents in respect of liabilities arising out of or in connection with the Placing. The Placing Agents are entitled to terminate the Placing Agreement in certain circumstances prior to admission of the Placing Shares, including circumstances where any of the warranties are found not to be true or accurate or were misleading and upon the occurrence of certain other events. The Placing Shares will be issued to Placees credited as fully paid and will, upon issue, rank pari passu in all respects with the PAF ordinary shares then in issue, including all rights to receive all dividends and other distributions declared, made or paid following Admission of such Placing Shares. The Placing Shares are not being made available to the public or being offered or sold in any jurisdiction where it would be unlawful to do so. The Placing is not being underwritten by the Placing Agents or any other person.
The Placing Agents may choose to accept or reject bids, either in whole or in part, on the basis of allocations determined at their discretion (in agreement with the Company) and may scale down any bids for this purpose on such basis as it may determine. Investors should refer to their trade confirmation.
UK and European Investors
Investors in the UK, the EU and Switzerland who qualify for participation in the Placing may participate in accordance with the terms and conditions of the Placing which are set out in Appendix I to this Announcement.
South African investors
Investors in South Africa who qualify for participation in the Placing may participate in accordance with the terms and conditions of the Placing which are set out in Appendix I to this Announcement.
US Investors
The Placing is being made outside the United States in “offshore transactions†within the meaning of, and pursuant to, Regulation S under the US Securities Act.
Exchange Rates
In this Announcement, references to "pounds sterling", "£", "pence" and "p" are to the lawful currency of the United Kingdom, references to "US dollars", "US$" and "cents" are to the lawful currency of United States of America and references to "South African Rand", "R" and "ZAR" are to the lawful currency of the Republic of South Africa. Unless otherwise stated, the basis of translation of pounds sterling into US dollars for the purposes of inclusion in this Announcement is £1.00/US$1.25 and the basis of translation of pounds sterling into South African Rand is £1.00/ZAR17.26. Translation of US dollars into South African Rand is US$1.00/ZAR13.83.
Your attention is drawn to the detailed terms and conditions of the Placing described in Appendix I to this Announcement, which forms part of this Announcement and sets out further information relating to the Bookbuild and the terms and conditions of the Placing, and to Appendix II to this Announcement which sets out certain risk factors in connection with the Placing.
Expected Timetable of Principal Events
| Launch of the Bookbuild | 12-Apr-17 | |
| Expected closing of the Bookbuild | 12pm BST | 12-Apr-17 |
| Results of the Placing announced through a Regulatory Information Service and on SENS | By 5pm BST | 12-Apr-17 |
| Admission and commencement of dealings in Placing Shares on the UK share register | 8am BST | 19-Apr-17 |
| Admission and commencement of dealings in Placing Shares on the SA share register | By 8am SAST | 19-Apr-17 |
| Placing Shares credited to CREST accounts (uncertificated holders only on the UK share register) | as soon as possible after 8am BST | 19-Apr-17 |
| Placing Shares credited to CSDP/broker accounts (uncertificated holders only on the SA share register) | as soon as possible after 8am SAST | 19-Apr-17 |
| Expected despatch of definitive share certificates (where applicable) | by | 24-Apr-17 |
(1) Each of the times and dates set out in the above timetable and mentioned in this announcement and in any other document issued in connection with the Placing is subject to change by the Company (with the agreement of the Bookrunners, in certain instances), in which event details of the new times and dates will be notified to the London Stock Exchange and the JSE Limited and, where appropriate, to Shareholders through an announcement on a Regulatory Information Service and on SENS.
(2) Any reference to a time in this announcement is to UK time, unless otherwise specified.
(3) 12.00 p.m. refers to midday.
(4) If the Placing proceeds, the Bookbuild will close once the Placing Agents (in consultation with the Company) have decided sufficient applications for Placing Shares have been received.
Background to and reasons for the Placing
The net proceeds of the Placing will be used to advance Elikhulu towards expected first gold production in the final quarter of 2018 with the mine construction anticipated to commence in the third quarter of 2017. Fast tracking earthworks and placing deposits for long lead items whilst awaiting the full RMB facility draw down will have numerous advantages to the Company in maintaining its proposed timelines. The Company received credit approval for a ZAR1.0 billion (US$72 million) underwritten loan facility with RMB. It is a 7-year term (capital to be repaid through equal quarterly repayments after a grace period of 2 years) at a competitive prevailing interest rate. The debt facility has credit approval but remains subject to finalisation of definitive legal agreements, and the fulfilment of conditions precedent including licensing approvals and other conditions typical/customary for a facility of this nature. As part of their credit approval process, RMB appointed the Mineral Corporation, as an independent technical advisor, to review the DRA DFS for fatal flaws. Their review did not identify any such flaws. The debt redemption profile is matched to that of the Elikhulu project’s cash flows and the projects funding is not expected to impact on PAR’s ability to pay dividends during the construction period.
The Company published the results of its Elikhulu Definite Feasibility Study (the “DFS†or the “Studyâ€) on 5 December 2016, which indicates excellent recoverable grades and gold production, attractive financial returns and a low execution risk, with the DFS results surpassing expectations of previous technical and financial assessments of the Project.
At a US$1,180 per ounce gold price the DFS results outlined a NPV9 of US$75.6 million, real post-tax IRR of 34.3% and low all in sustaining costs of US$527 per ounce of gold (cash costs US$440 per ounce) for a 13 year LOM gold production at an average of 52,000 ounces per annum. 56,000 ounces of gold is expected to be produced by the Project per year during the initial eight years of operations.
The Study included the finalisation of detailed plant engineering and process design work, enhanced geotechnical, hydrological and hydrogeological studies, as well as a robust mine plan, which should allow for the commencement of mine construction in the third quarter of the 2017 calendar year. First gold forecast from the Project is for the final quarter of the 2018 calendar year.
The DFS Study is published on the PAF website and can be viewed on the following link:
http://www.panafricanresources.com/wp-content/uploads/DRA-DFS-Executive-Summary-Final.pdf
Use of proceeds
The net proceeds of the Placing will be used in conjunction with the RMB facility to fund the US$120 million total capital expenditure to bring Elikhulu into production. The balance of the net proceeds of the Placing will be used for working capital.
Current Trading and Prospects
The Company announced its results for the six months ended 31 December 2016 on 22 February 2017, in which the Company reported gold production of 91,613 ounces for the first half of 2017.
The Company also announced on 20 February 2017 that it had sadly suffered a fatality on its Evander 7 shaft complex on 15 February 2017, and that Evander’s management had initiated studies which identified critical infrastructure issues requiring remedial action, to ensure safe and sustainable operation of Evander 7 and 8 shafts.
The nature of these refurbishments require a suspension of Evander’s underground mining operations for a period of up to 55 days, during which critical infrastructure issues will be addressed. Evander’s tailings and surface operations will be unaffected by the underground mining suspension.
The cost of the shaft refurbishment programmes is expected to be approximately ZAR40 million, which will be funded from the Company’s existing banking facilities.
In light of these recent developments, the Company has revised its gold production guidance for the financial year ending 30 June 2017 from 195,000 ounces to approximately 181,000 ounces.
The Company announced on 5 April 2017 that it has concluded an agreement with Coal of Africa Limited (“CoALâ€), whereby the Company will dispose of all its shares and loan accounts in its wholly-owned subsidiary, Pan African Resources Coal Holdings Proprietary Limited (“PAR Coalâ€), the holding company of Uitkomst, to CoAL for a total consideration of cash and shares to the value of ZAR275 million.
Further to the announcement on 20 February 2017, the Company provided an update on 10 April 2017, stating the refurbishment of the 7 and 8 shaft complex is progressing according to schedule and is expected to be completed on 15 April 2017 within the original ZAR40 million cost estimate.
All of the Company’s announcements can be found on the website at http://www.panafricanresources.com/.
Other Opportunities
Although the Company’s current focus is on bringing Elikhulu to production in the near-term, PAF regularly reviews opportunities to enhance its business through acquisitions, joint ventures and other combinations with companies, in line with its stated objectives.
This announcement contains inside information which is disclosed in accordance with the Market Abuse Regulation.
| Contact information | |
| Corporate Office The Firs Office Building 1st Floor, Office 101 Cnr. Cradock and Biermann Avenues Rosebank, Johannesburg South Africa Office: + 27 (0) 11 243 2900 Facsimile: + 27 (0) 11 880 1240 |
Registered Office Suite 31 Second Floor 107 Cheapside London EC2V 6DN United Kingdom Office: + 44 (0) 207 796 8644 Facsimile: + 44 (0) 207 796 8645 |
| Cobus Loots Pan African Resources PLC Chief Executive Officer Office: + 27 (0) 11 243 2900 |
Deon Louw Pan African Resources PLC Financial Director Office: + 27 (0) 11 243 2900 |
| Phil Dexter St James's Corporate Services Limited Company Secretary Office: + 44 (0) 207 796 8644 |
John Prior / Paul Gillam Numis Securities Limited Nominated Adviser, Joint Broker and Joint Bookrunner Office: +44 (0) 20 7260 1000 |
| Sholto Simpson One Capital JSE Sponsor Office: + 27 (0) 11 550 5009 |
Matthew Armitt / Ross Allister Peel Hunt LLP Joint Broker and Joint Bookrunner Office: +44 (0) 207 418 8900 |
| Jeffrey Couch/Neil Haycock/Thomas Rider BMO Capital Markets Limited Joint Broker Office: +44 (0) 207 236 1010 |
Andrew Chubb / Arabella Burwell Hannam and Partners (Advisory) LLP Financial Adviser and Joint Bookrunner Office: +44 (0) 207 907 8500 |
| Bobby Morse/Chris Judd Buchanan Communications Public & Investor Relations UK Office: + 44 (0) 207 466 5000 |
Sandra du Toit / Richard Stout The Standard Bank of South Africa Limited Transaction Sponsor and Joint Bookrunner Office: +27 11 344 5414 |
| Julian Gwillim Aprio Strategic Communications Public & Investor Relations SA Office: +27 (0)11 880 0037 |
Julian Grieve / Irshaad Paruk FirstRand Bank Limited (Rand Merchant Bank division) Joint Bookrunner Office: +27 11 282 8000 |
For more information, please visit www.panafricanresources.com
Important Information
This Announcement, including its Appendices, contains forward-looking statements, including but not limited to statements about the costs of, and the Company's ability to successfully construct, commission and execute, the Project. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future and therefore are based on current beliefs and expectations about future events. Forward-looking statements are not guarantees of future performance and the Group's actual operating results and financial condition, and the development of the industry in which it operates may differ materially from those made in or suggested by the forward-looking statements contained in this announcement. In addition, even if the Group's operating results, financial condition and liquidity, and the development of the industry in which the Group operates are consistent with the forward-looking statements contained in this announcement, those results or developments may not be indicative of results or developments in subsequent periods. Accordingly, prospective investors should not rely on these forward-looking statements. The Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. None of the Company, the Directors or the Bookrunners undertake any obligation nor do they intend to revise or update any document unless required to do so by applicable law, the Prospectus Rules, the Disclosure Requirements or the Transparency Rules.
Neither this Announcement (including its Appendices) nor the Placing constitutes or is intended to constitute an offer to the public in South Africa in terms of the South African Companies Act, 2008 (the “South African Companies Act"). In South Africa this Announcement is only being distributed to, and is only directed at, and any investment or investment activity to which this announcement relates is available only to, and will be engaged in only with, persons in South Africa who (i) fall within the categories of persons set out in section 96(1)(a) of the South African Companies Act or (ii) are persons who subscribe, as principal, for Placing Shares at a minimum placing price of R1,000,000, as envisaged in section 96(1)(b) of the South African Companies Act, in each case to whom the Placing is specifically addressed.
This Announcement (including its Appendices) and the information contained in it is restricted and is not for release, publication or distribution, directly or indirectly, in whole or in part, in, into or from the United States (including its territories and possessions, any state of the United States and the District of Columbia, collectively the "United States") or any Excluded Territory or any other jurisdiction where to do so might constitute a violation of local securities laws or regulations. The information in this Announcement may not be forwarded or distributed to any other person and may not be reproduced in any manner whatsoever. Any forwarding, distribution, reproduction, or disclosure of this information in whole or in part is unauthorised. Failure to comply with this directive may result in a violation of the US Securities Act or the applicable laws of other jurisdictions.
This Announcement is for information purposes only and does not constitute an offer or invitation to sell or issue or the solicitation of an offer to buy, acquire or subscribe for New Ordinary Shares to or by anyone in any Excluded Territory or to any person to whom it is unlawful to make such offer or invitation or undertake such solicitation. Any failure to comply with these restrictions may constitute a violation of the securities laws of such jurisdictions. Subject to certain exceptions, the securities referred to herein may not be offered or sold in any Excluded Territory or to, or for the account or benefit of any national resident or citizen of any Excluded Territory. This Announcement does not constitute an extension into the United States of the offer mentioned in this Announcement, nor does it constitute nor form part of an offer to sell securities or the solicitation of an offer to buy securities in the United States. The New Ordinary Shares have not been and will not be registered under the US Securities Act or under any securities laws or with any securities regulatory authority of any state or other jurisdiction of the United States. The New Ordinary Shares may not be offered, sold, resold, taken up, transferred, delivered or distributed, directly or indirectly, into or within the United States absent registration under the US Securities Act or an available exemption from, or in a transaction not subject to, the registration requirements of the US Securities Act and in compliance with any applicable securities laws of any state or other jurisdiction of the United States. There will be no public offer of the New Ordinary Shares in the United States. The New Ordinary Shares may not be offered or sold to, or for the account or benefit of, any ADR holder. Subject to certain exceptions, no action has been taken by the Company or by the Bookrunners that would permit an offer of the New Ordinary Shares or possession or distribution of this announcement in the Excluded Territories or any other jurisdiction where action for that purpose is required, other than the United Kingdom and the Republic of South Africa. No public offering of the shares referred to in this Announcement is being made in any Excluded Territory or elsewhere.
This Announcement has been issued by, and is the sole responsibility of, the Company. No representation or warranty, express or implied, is or will be made as to, or in relation to, and no responsibility or liability is or will be accepted by the Bookrunners or by any of their respective affiliates or agents as to or in relation to, the accuracy or completeness of this announcement or any other written or oral information made available to or publicly available to any interested party or its advisers, and any liability therefore is expressly disclaimed.
Numis, H&P and Peel Hunt, each of which is authorised and regulated in the United Kingdom by the Financial Conduct Authority (“FCAâ€), are each acting exclusively for the Company and no one else in connection with the Placing, and will not regard any other person (whether or not a recipient of this document) as a client in relation to the Placing, and will not be responsible to anyone other than the Company for providing the protections afforded to their respective clients, nor for providing advice, in relation to the Placing or any other matter referred to in this Announcement.
RMB and Standard Bank are each acting exclusively for the Company and no one else in connection with the Placing, and will not regard any other person (whether or not a recipient of this document) as a client in relation to the Placing, and will not be responsible to anyone other than the Company for providing the protections afforded to their respective clients, nor for providing advice, in relation to the Placing or any other matter referred to in this Announcement.
Apart from the responsibilities and liabilities, if any, which may be imposed on the Bookrunners by the Financial Service and Markets Act 2000, as amended, or the regulatory regime established thereunder, or by the London Stock Exchange or the AIM Rules for Companies and AIM Rules for Nominated Advisers, or under the regulatory regime of any jurisdiction where exclusion of liability under the relevant regulatory regime would be illegal, void or unenforceable, none of the Bookrunners, nor any of their respective affiliates, directors, officers, employees or advisers accepts any responsibility whatsoever for, or makes any representation or warranty, express or implied, as to, the contents of this announcement, including its accuracy or completeness, or for any other statement made or purported to be made by it, or on behalf of it, the Company, the Directors or any other person, in connection with the Company, the New Ordinary Shares and the Placing, and nothing in this document should be relied upon as a promise or representation in this respect, whether or not to the past or future. Each of the Bookrunners and their respective affiliates, directors, officers, employees and advisers accordingly disclaims to the fullest extent permitted by law all and any responsibility or liability whatsoever, whether arising in tort, contract or otherwise (save as referred to above), which it might otherwise have in respect of this Announcement or any such statement.
The distribution of this Announcement and the offering of the New Ordinary Shares in certain jurisdictions other than the United Kingdom and the Republic of South Africa may be restricted by law. Subject to certain exceptions, no action has been taken by the Company or the Bookrunners that would permit an offering of the New Ordinary Shares or possession or distribution of this Announcement or any other offering or publicity material relating to such shares in the Excluded Territories or in any other jurisdiction where action for that purpose is required. Persons into whose possession this announcement comes are required by the Company, and the Bookrunners to inform themselves about, and to observe, any such restrictions.
Statements contained in this Announcement regarding past trends or activities should not be taken as a representation that such trends or activities will continue in the future.
No statement in this Announcement (including its Appendices) is or is intended to be a profit forecast or profit estimate or to imply that the earnings of the Company for the current or future financial years will necessarily match or exceed the historical or published earnings of the Company. The price of shares and the income from them may go down as well as up and investors may not get back the full amount invested on disposal of the shares.
The New Ordinary Shares to be issued pursuant to the Placing will not be admitted to trading on any stock exchange other than on AIM, a market operated by the London Stock Exchange and the exchange operated by the JSE Limited.
Neither the content of the Company's website nor any website accessible by hyperlinks on the Company's website is incorporated in, or forms part of, this Announcement.
APPENDIX I
TERMS AND CONDITIONS OF THE PLACING
IMPORTANT INFORMATION FOR PLACEES ONLY
REGARDING THE PLACING
MEMBERS OF THE PUBLIC ARE NOT ELIGIBLE TO TAKE PART IN THE PLACING. THIS ANNOUNCEMENT (WHICH IS FOR INFORMATION PURPOSES ONLY) AND THE TERMS AND CONDITIONS SET OUT IN THIS APPENDIX ARE DIRECTED ONLY AT: (A) PERSONS IN MEMBER STATES OF THE EUROPEAN ECONOMIC AREA ("EEA") WHO ARE QUALIFIED INVESTORS WITHIN THE MEANING OF ARTICLE 2(1)(E) OF THE EU PROSPECTUS DIRECTIVE (WHICH MEANS DIRECTIVE 2003/71/EC, AS AMENDED FROM TIME TO TIME, AND INCLUDES ANY RELEVANT IMPLEMENTING DIRECTIVE MEASURE IN ANY MEMBER STATE) (THE "PROSPECTUS DIRECTIVE") ("QUALIFIED INVESTORS"); (B) IN THE UNITED KINGDOM, QUALIFIED INVESTORS WHO ARE PERSONS WHO (I) HAVE PROFESSIONAL EXPERIENCE IN MATTERS RELATING TO INVESTMENTS FALLING WITHIN ARTICLE 19(1) OF THE FINANCIAL SERVICES AND MARKETS ACT 2000 (FINANCIAL PROMOTION) ORDER 2005 (THE "ORDER"); (II) ARE PERSONS FALLING WITHIN ARTICLE 49(2)(A) TO (D) ("HIGH NET WORTH COMPANIES, UNINCORPORATED ASSOCIATIONS, ETC") OF THE ORDER; OR (III) ARE PERSONS TO WHOM IT MAY OTHERWISE BE LAWFULLY COMMUNICATED; AND (C) IN THE REPUBLIC OF SOUTH AFRICA, PERSONS WHO (1) FALL WITHIN THE CATEGORIES OF PERSONS SET OUT IN SECTION 96(1)(A) OF THE SOUTH AFRICAN COMPANIES ACT, 2008 OR (2) ARE PERSONS WHO SUBSCRIBE, AS PRINCIPAL, FOR PLACING SHARES AT A MINIMUM PLACING PRICE OF R1,000,000, AS ENVISAGED IN SECTION 96(1)(B) OF THE SOUTH AFRICAN COMPANIES ACT, 2008, IN EACH CASE TO WHOM THE PLACING IS SPECIFICALLY ADDRESSED (ALL SUCH PERSONS TOGETHER BEING REFERRED TO AS "RELEVANT PERSONS").
THIS APPENDIX AND THE TERMS AND CONDITIONS SET OUT HEREIN MUST NOT BE ACTED ON OR RELIED ON BY PERSONS WHO ARE NOT RELEVANT PERSONS. PERSONS DISTRIBUTING THIS ANNOUNCEMENT MUST SATISFY THEMSELVES THAT IT IS LAWFUL TO DO SO. ANY INVESTMENT OR INVESTMENT ACTIVITY TO WHICH THIS APPENDIX AND THE TERMS AND CONDITIONS SET OUT HEREIN RELATE IS AVAILABLE ONLY TO RELEVANT PERSONS AND WILL BE ENGAGED IN ONLY WITH RELEVANT PERSONS. THIS APPENDIX DOES NOT ITSELF CONSTITUTE AN OFFER FOR SALE OR SUBSCRIPTION OF ANY SECURITIES IN THE COMPANY.
NEITHER THIS ANNOUNCEMENT (INCLUDING ITS APPENDICES) NOR THE PLACING CONSTITUTES OR IS INTENDED TO CONSTITUTE AN OFFER TO THE PUBLIC IN SOUTH AFRICA IN TERMS OF THE SOUTH AFRICAN COMPANIES ACT, 2008.
THE SECURITIES MENTIONED HEREIN HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE US SECURITIES ACT OF 1933 (THE "US SECURITIES ACT") OR UNDER ANY SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION OF THE UNITED STATES AND MAY NOT BE OFFERED, SOLD, RESOLD, TRANSFERRED OR DELIVERED, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, US PERSONS (AS DEFINED IN REGULATION S UNDER THE US SECURITIES ACT) EXCEPT PURSUANT TO AN APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE US SECURITIES ACT AND IN COMPLIANCE WITH THE US SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION OF THE UNITED STATES. THERE WILL BE NO PUBLIC OFFER OF THE SECURITIES MENTIONED HEREIN IN THE UNITED STATES.
THE SECURITIES MENTIONED HEREIN HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE US SECURITIES AND EXCHANGE COMMISSION (THE "SEC"), ANY STATE SECURITIES COMMISSION OR ANY OTHER REGULATORY AUTHORITY IN THE UNITED STATES, NOR HAVE ANY OF THE FOREGOING AUTHORITIES PASSED UPON OR ENDORSED THE MERITS OF THE PLACING OR THE ACCURACY OR ADEQUACY OF THIS ANNOUNCEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENCE IN THE UNITED STATES.
EACH PLACEE SHOULD CONSULT WITH ITS OWN ADVISERS AS TO LEGAL, TAX, BUSINESS AND RELATED ASPECTS OF AN ACQUISITION OF PLACING SHARES.
Persons who are invited to and who choose to participate in the Placing by making an oral or written offer to acquire Placing Shares, including any individuals, funds or others on whose behalf a commitment to acquire Placing Shares is given (the "Placees"), will (i) be deemed to have read and understood this Announcement, including this Appendix, in its entirety; and (ii) be making such offer on the terms and conditions contained in this Appendix I and Appendix II, including being deemed to be providing (and shall only be permitted to participate in the Placing on the basis that they have provided) the representations, warranties, acknowledgements and undertakings set out herein.
In particular each such Placee represents, warrants and acknowledges that:
- it is a Relevant Person (as defined above) and undertakes that it will acquire, hold, manage or dispose of any Placing Shares that are allocated to it for the purposes of its business;
- it is and, at the time the Placing Shares are acquired, will be outside the United States and is acquiring the Placing Shares in an "offshore transaction" in accordance with Rule 903 or Rule 904 of Regulation S under the US Securities Act and is acquiring beneficial interests in the Placing Shares for its own account; if acquiring the Placing Shares for the account of one or more other persons, it has full power and authority to make the representations, warranties, agreements and acknowledgements herein on behalf of each such account; and
- if it is a financial intermediary, as that term is used in Article 3(2) of the Prospectus Directive, that any Placing Shares acquired by it in the Placing will not be acquired on a non-discretionary basis on behalf of, nor will they be acquired with a view to their offer or resale to, persons in circumstances which may give rise to an offer of securities to the public other than an offer or resale in a member state of the EEA which has implemented the Prospectus Directive to Qualified Investors, or in circumstances in which the prior consent of the relevant Bookrunner has been given to each such proposed offer or resale.
The Company and each of Numis, Hannam & Partners, Peel Hunt, RMB and Standard Bank will rely upon the truth and accuracy of the foregoing representations, warranties, acknowledgements and agreements.
This Announcement does not constitute an offer, and may not be used in connection with an offer, to sell or issue or the solicitation of an offer to buy or subscribe for Placing Shares in any jurisdiction in which such offer or solicitation is or may be unlawful.
These materials may not be published, distributed or transmitted by any means or media, directly or indirectly, in whole or in part, in or into the United States. These materials do not constitute an offer to sell, or a solicitation of an offer to buy, securities in the United States. Securities may not be offered or sold in the United States absent (i) registration under the U.S. Securities Act of 1933, as amended (the "US Securities Act") or (ii) an available exemption from registration under the US Securities Act. The securities mentioned herein have not been, and will not be, registered under the US Securities Act and will not be offered to the public in the United States. The Placing Shares are being offered and sold outside the United States to non-US persons (as defined in Regulation S under the US Securities Act) in "offshore transactions" within the meaning of Regulation S.
This Announcement and the information contained herein is not for publication or distribution, directly or indirectly, to persons in Australia, Canada, Japan or in any other jurisdiction in which such publication or distribution would be unlawful. Persons into whose possession this Announcement may come are required by the Company to inform themselves about and to observe any restrictions of transfer in this Announcement. No public offer of securities of the Company is being made in the United Kingdom or elsewhere.
Neither the announcement to which this Appendix is attached (including the appendices thereto) nor the Placing constitutes or is intended to constitute an offer to the public in the Republic of South Africa in terms of the South African Companies Act, 2008 (the “South African Companies Act"). In the Republic of South Africa the announcement is only being distributed to, and is only directed at, and any investment or investment activity to which this announcement relates is available only to, and will be engaged in only with, persons in South Africa who (i) fall within the categories of persons set out in section 96(1)(a) of the South African Companies Act or (ii) are persons who subscribe, as principal, for Placing Shares at a minimum placing price of ZAR1,000,000, as envisaged in section 96(1)(b) of the South African Companies Act, in each case to whom the Placing is specifically addressed.
The relevant clearances have not been, nor will they be, obtained from the securities commission of any province or territory of Canada; no prospectus has been lodged with or registered by the Australian Securities and Investments Commission or the Japanese Ministry of Finance; and none of the Placing Shares have been, nor will they be, registered under or offered in compliance with the securities laws of any state, province or territory of Australia, Canada or Japan. Accordingly, none of the Placing Shares may (unless an exemption under the relevant securities laws is applicable) be offered, sold, resold or delivered, directly or indirectly, in or into Australia, Canada, Japan or any other jurisdiction outside the United Kingdom and the Republic of South Africa.
Persons (including, without limitation, nominees and trustees) who have a contractual or other legal obligation to forward a copy of this Appendix or the Announcement of which it forms part should seek appropriate advice before taking any action.
Details of the Placing Agreement and the Placing Shares
The Bookrunners are acting as agents for and on behalf of the Company in connection with the Placing and have entered into a placing agreement (the "Placing Agreement") with the Company under which each of the Bookrunners has severally agreed to use its respective reasonable endeavours to procure Placees to subscribe for the Placing Shares at a price of 14 pence per Placing Share or ZAR2.42 per Placing Share (together the “Issue Priceâ€), on the terms and subject to the conditions set out herein.
The Placing Shares will, when issued, be credited as fully paid and will rank pari passu in all respects with the existing ordinary shares of one penny per share in the capital of the Company (the "Ordinary Shares"), including the right to receive all dividends and other distributions declared, made or paid on or in respect of the Ordinary Shares after the date of issue of the Placing Shares, and will on issue be free of all claims, liens, charges, encumbrances and equities.
Application for admission to trading on AIM and the JSE
Applications will be made for the Placing Shares to be admitted to trading on the AIM market operated by the London Stock Exchange plc (“AIMâ€) and to trading on the exchange operated by JSE Limited (“JSEâ€) (together, "Admission"). It is expected that settlement for the Placing Shares and Admission will take place on or around 8.00 a.m. London time on 19 April 2017 (or such other time and date as the Bookrunners may agree with the Company, but no later than 28 April 2017) 2017.
The Placing is conditional upon, amongst other things, Admission becoming effective and the Placing Agreement not being terminated in accordance with its terms.
Participation in, and principal terms of, the Placing
1. The Bookrunners are arranging the Placing as placing agents of the Company for the purpose of procuring Placees at the Issue Price for the Placing Shares following completion of the Bookbuilding Process (as defined below).
2. Commencing today, the Bookrunners will be conducting an accelerated bookbuilding process (the "") to determine demand for participation in the Placing by Placees. This Appendix I gives details of the terms and conditions of, and the mechanics of participation in, the Placing. Numis, Hannam & Partners and Peel Hunt will be conducting the Bookbuilding Process in the United Kingdom, and RMB and Standard Bank will be conducting the Bookbuilding Process in the Republic of South Africa.
3. Participation in the Placing will only be available to persons who are Relevant Persons and who may lawfully be, and are, invited to participate by a Bookrunner.
4. The Issue Price of 14 pence (or, for investors in the Republic of South Africa, ZAR2.42 per share) per Placing Share payable by all Placees whose bids are successful is fixed.
5. The number of Placing Shares will be agreed between the Bookrunners and the Company following completion of the Bookbuilding Process.
6. The books will open with immediate effect. The Bookbuilding Process is then expected to close not later than 12.00 p.m. London time on 12 April 2017, but may be closed earlier at the sole discretion of the Bookrunners. A further announcement will be announced on a Regulatory Information Service (in the United Kingdom) and the Stock Exchange News Service (in the Republic of South Africa) as soon as practicable following the close of the Bookbuilding Process, detailing the final number of Placing Shares and the gross and net proceeds of the Placing. The Company reserves the right (upon the agreement of the Bookrunners) to reduce the amount to be raised pursuant to the Placing, in its absolute discretion.
7. A bid in the Bookbuilding Process will be made on the terms and conditions in this Appendix I and will not be capable of variation or revocation after the close of the Bookbuilding Process.
8. A Placee who wishes to participate in the Bookbuilding Process should communicate its bid by telephone to the usual sales contact at:
- in the United Kingdom, Numis, Hannam & Partners or Peel Hunt; or
- in the Republic of South Africa, RMB or Standard Bank,
stating the number of Placing Shares which the prospective Placee wishes to acquire at the Issue Price. In the event of an oversubscription under the Placing, the Bookrunners reserve the right to scale back any bids in accordance with paragraph 9 of this Appendix I. If successful, each Bookruner will re-contact and confirm orally to its Placees following the close of the Bookbuilding Process the size of their respective allocations and contract notes will be dispatched thereafter. The identity of Placees and the basis of the allocations are at the discretion of the Bookrunners in consultation with the Company. A Bookrunner's oral confirmation of the size of allocations will constitute an irrevocable legally binding agreement with the Placee concerned in favour of the Company and that Bookrunner, pursuant to which each such Placee will be required to accept the number of Placing Shares allocated to the Placee at the Issue Price and otherwise on the terms and subject to the conditions set out herein and in accordance with the Company's articles of association. Each Placee's allocation and commitment will be evidenced by a contract note issued to such Placee by the relevant Bookrunner. The terms of this Appendix will be deemed incorporated in that contract note. Each such Placee will have an immediate, separate, irrevocable and binding obligation, owed to the relevant Bookrunner, to pay it or (as it may direct) one of its affiliates in cleared funds an amount equal to the product of the Issue Price and the number of Placing Shares allocated to such Placee.
9. Each Bookrunner reserves the right to accept bids, either in whole or in part, on the basis of allocations determined in accordance with the Company and to scale back the number of Placing Shares to be subscribed for or acquired by any Placee in the event of an oversubscription under the Placing. Each Bookrunner also reserves the right not to accept offers to subscribe for or acquire Placing Shares or to accept such offers in part rather than in whole. The acceptance of offers shall be at the absolute discretion of the Bookrunners. The Bookrunners shall be entitled to effect the Placing by such alternative method to the Bookbuilding Process as they may determine in agreement with the Company and each other.
10. Irrespective of the time at which a Placee's allocation pursuant to the Placing is confirmed, settlement for all Placing Shares to be acquired pursuant to the Placing will be required to be made at the same time, on the basis explained below under "Registration and Settlement".
11. All obligations of the Bookrunners under the Placing will be subject to fulfilment of the conditions referred to below under “Conditions of the Placing†and to the Placing not being terminated on the basis referred to below under “Right to terminate under the Placing Agreementâ€.
12. By participating in the Placing, each Placee will agree that its rights and obligations in respect of the Placing will terminate only in the circumstances described below and will not be capable of rescission or termination by the Placee.
13. Except as required by law or regulation, no press release or other announcement will be made by any Bookrunner or the Company using the name of any Placee (or its agent), in its capacity as Placee (or agent), other than with such Placee’s prior written consent.
14. To the fullest extent permissible by law, neither of the Bookrunners, the Company nor any of their respective affiliates, agents, directors, officers or employees shall have any responsibility or liability to Placees (or to any other person whether acting on behalf of a Placee or otherwise). In particular, neither of the Bookrunners, nor the Company, nor any of their respective affiliates, agents, directors, officers or employees shall have any responsibility or liability (including to the extent permissible by law, any fiduciary duties) in respect of each Bookrunner’s conduct of the Placing and the Bookbuilding Process or of such alternative method of effecting the Placing or the Bookbuilding Process as any Bookrunner and the Company may agree.
15. The Placing is not subject to any minimum fundraising and no element of the Placing is underwritten by any of the Bookrunners or any other person.
Conditions of the Placing
The Placing is conditional upon the Placing Agreement becoming unconditional and not having been terminated in accordance with its terms.
Each of the Bookrunners' obligations under the Placing Agreement in relation to the Placing of the Placing Shares are conditional on, inter alia:
- admission of the Placing Shares occurring at or before 8.00 a.m. (London time) on 19 April 2017 (or such later time and/or date as the Company and the Bookrunners may otherwise agree, being no later than 28 April 2017);
- the performance by the Company of its obligations under the Placing Agreement so far as those obligations fall to be performed prior to Admission; and
- the Company having confirmed to the Bookrunners that, prior to the delivery of such confirmation, none of the representations, warranties and agreements of the Company contained in the Placing Agreement was untrue, inaccurate or misleading at the date of the Placing Agreement or will be untrue, inaccurate or misleading immediately prior to Admission.
If: (i) any of the conditions in relation to the Placing of the Placing Shares contained in the Placing Agreement, including those described above, are not fulfilled or (where permitted) waived by the Bookrunners by the relevant time or date specified (or such later time or date as the Company and the Bookrunners may agree, being no later than 28 April 2017); or (ii) any of such conditions become incapable of being fulfilled; or (iii) the Placing Agreement is terminated in the circumstances specified below, the Placing will lapse and the Placees' rights and obligations hereunder in relation to the Placing Shares shall cease and terminate at such time and each Placee agrees that no claim can be made by it in respect thereof.
The Bookrunners may, at their discretion and upon such terms as they consider fit, waive compliance by the Company with the whole or any part of any of the Company's obligations in relation to the conditions in the Placing Agreement save that the above condition relating to Admission taking place may not be waived. Any such extension or waiver will not affect Placees' commitments as set out in this Announcement.
None of the Bookrunners shall have any liability to any Placee (or to any other person whether acting on behalf of a Placee or otherwise) in respect of any decision it may make as to whether or not to waive or to extend the time and/or date for the satisfaction of any condition to the Placing nor for any decision they may make as to the satisfaction of any condition or in respect of the Placing generally and by participating in the Placing each Placee agrees that any such decision is within the absolute discretion of the Bookrunners.
Right to terminate under the Placing Agreement
The Bookrunners are entitled, at any time before Admission, to terminate the Placing Agreement by giving notice to the Company if, inter alia:
(a) any statement contained in the presentation prepared by the Company in connection with the Placing and provided to potential Placees (the “Presentationâ€) or this Announcement has become or has been discovered to be untrue or misleading;
(b) any of the warranties given by the Company in the Placing Agreement is untrue, inaccurate or misleading;
(c) the Company fails to comply with any of its obligations under the Placing Agreement;
(d) any Material Adverse Change (as defined in the Placing Agreement) has occurred since the date of the Placing Agreement; or
(e) any material adverse change in financial markets; (ii) any outbreak or escalation of hostilities or other crisis affecting the Republic of South Africa or the UK; (iii) any suspension or termination of trading in the Ordinary Shares or AIM or the JSE generally; (iv) any actual or perspective change in the tax regime which would materially affect the Group; or (v) a banking moratorium in the UK, the Republic of South Africa or internationally,
where any Bookrunner, acting in good faith, is of the opinion that such event is materially prejudicial to the outcome of the Placing and that it is, as a result of such matter, inappropriate to proceed with the Placing.
Upon such termination, the parties to the Placing Agreement shall be released and discharged (except for any liability arising before or in relation to such termination) from their respective obligations under or pursuant to the Placing Agreement subject to certain exceptions.
By participating in the Placing, Placees agree that the exercise by the Bookrunners of any right of termination or by the Bookrunners of any other discretion under the Placing Agreement shall be within the absolute discretion of the Bookrunners, as the case may be, and that the Bookrunners need not make any reference to Placees and that the Bookrunners shall have no liability to Placees whatsoever in connection with any such exercise or failure so to exercise.
No Admission Document or Prospectus
The Placing Shares are being offered to a limited number of specifically invited persons only, and will not be offered in such a way as to require an admission document or prospectus in the United Kingdom or in any other jurisdiction. No offering document or prospectus has been or will be submitted to be approved by the London Stock Exchange and the exchange operated by the JSE, the FCA or any other regulatory body in relation to the Placing.
Placees' commitments will be made solely on the basis of the information contained in this Announcement (including Appendix I and Appendix II) released by the Company today and the Presentation and subject to the further terms set forth in the contract note to be provided to individual prospective Placees. Each Placee, by accepting a participation in the Placing, agrees that the content of this Announcement (including this Appendix), the Presentation and all other publicly available information previously published by the Company by notification to a Regulatory Information Service or otherwise filed by the Company is exclusively the responsibility of the Company and confirms that it has neither received nor relied on any other information, representation, warranty, or statement made by or on behalf of the Company or any Bookrunner or any other person and none of the Company or any Bookrunner nor any other person will be liable for any Placee's decision to participate in the Placing based on any other information, representation, warranty or statement which the Placees may have obtained or received. No representation or warranty, express or implied, is or will be made by the Bookrunners in relation to, and no representation or liability is or will be accepted by any of the Bookrunners, or by any of their affiliates or agents, as to or in relation to, the accuracy or completeness of this Announcement, the Presentation or any other such information. Each Placee acknowledges and agrees that it has relied on its own investigation of the business, financial or other position of the Company in accepting a participation in the Placing. Nothing in this Announcement shall exclude the liability of any person for fraudulent misrepresentation by that person.
Registration and Settlement
United Kingdom
Settlement of transactions in the Placing Shares (ISIN: GB0004300496) following Admission will take place within the system administered by Euroclear UK & Ireland Limited ("CREST"). Subject to certain exceptions, Numis, Hannam & Partners, Peel Hunt and the Company reserve the right to require settlement for, and delivery of, the Placing Shares (or any part thereof) to Placees by such other means that they deem necessary if delivery or settlement is not possible or practicable within the CREST system within the timetable set out in this Announcement or would not be consistent with the regulatory requirements in the Placee's jurisdiction.
Each Placee allocated Placing Shares in the Placing will be sent a trade confirmation in accordance with the standing arrangements in place with the relevant Bookrunner stating the number of Placing Shares allocated to it at the Issue Price, the aggregate amount owed by such Placee to that Bookrunner and settlement instructions. Each Placee agrees that it will do all things necessary to ensure that delivery and payment is completed in accordance with the standing CREST or certificated settlement instructions in respect of the Placing Shares that it has in place with the relevant Bookrunner.
It is expected that settlement of the Placing Shares will be on 19 April 2017, in accordance with the instructions set out in the trade confirmation.
Interest is chargeable daily on payments not received from Placees on the due date in accordance with the arrangements set out above at the rate of two percentage points above LIBOR as determined by the relevant Bookrunner.
Each Placee is deemed to agree that, if it does not comply with these obligations, the relevant Bookrunner may sell any or all of the Placing Shares allocated to that Placee on such Placee's behalf and retain from the proceeds, for that Bookrunner's account and benefit, an amount equal to the aggregate amount owed by the Placee plus any interest due. The relevant Placee will, however, remain liable for any shortfall below the aggregate amount owed by it and may be required to bear any stamp duty or stamp duty reserve tax (together with any interest or penalties) or other similar taxes imposed in any jurisdiction which may arise upon the sale of such Placing Shares on such Placee's behalf.
If Placing Shares are to be delivered to a custodian or settlement agent, Placees should ensure that the trade confirmation is copied and delivered immediately to the relevant person within that organisation.
Insofar as Placing Shares are registered in a Placee's name or that of its nominee or in the name of any person for whom a Placee is contracting as agent or that of a nominee for such person, such Placing Shares should, subject as provided below, be so registered free from any liability to UK stamp duty or stamp duty reserve tax. Placees will not be entitled to receive any fee or commission in connection with the Placing.
In the Republic of South Africa
Settlement of transactions in the Placing Shares on the JSE following Admission will take place through the facilities of and in accordance with the rules and practices of STRATE (Pty) Limited. Placees should ensure that they contact their CSDP or broker is informed in this regard.
Representations, Warranties and Further Terms
By participating in the Placing each Placee (and any person acting on such Placee's behalf) irrevocably:
1. represents and warrants that it has read and understood the Announcement, including this Appendix I and Appendix II, in its entirety and that its acquisition of Placing Shares is subject to and based upon all the terms, conditions, representations, warranties, acknowledgements, agreements and undertakings and other information contained herein and undertakes not to redistribute or duplicate this Announcement;
2. acknowledges that no offering document or prospectus has been or will be prepared in connection with the Placing and represents and warrants that it has not received and will not receive a prospectus or other offering document in connection with the Placing or the Placing Shares;
3. acknowledges that none of the Bookrunners, the Company, any of their respective affiliates, agents, directors, officers or employees or any person acting on behalf of any of them has provided, nor will provide, it with any material regarding the Placing Shares, the Company or its Group other than (in the case of the Company) this Announcement and the Presentation; nor has it requested any of the Bookrunners, the Company, any of their respective affiliates or any person acting on behalf of any of them to provide it with any such information;
4. acknowledges that the Company’s ordinary shares are listed on AIM and the JSE and that the Company is therefore required to publish certain business and financial information in accordance with the rules and practices of the FCA, the AIM Rules for Companies and the JSE Listings Requirements, which includes a description of the Company’s business and the Company’s financial information, including balance sheets and income statements, and that it is able to obtain or access such information, or comparable information concerning other publicly traded companies, in each case without undue difficulty;
5. acknowledges that none of the Bookrunners, any person acting on behalf of any of them, or any of their respective affiliates has or shall have any liability for any publicly available or filed information or any representation relating to the Company or its Group, provided that nothing in this paragraph excludes the liability of any person for fraudulent misrepresentation made by that person;
6. acknowledges that the content of this Announcement and the Presentation is exclusively the responsibility of the Company and that none of the Bookrunners, nor their respective affiliates or any person acting on behalf of any of them has or shall have any liability for any information, representation or statement contained in, or omission from, this Announcement, the Presentation or any information previously published by or on behalf of the Company or its Group, pursuant to applicable laws, and will not be liable for any Placee’s decision to participate in the Placing based on any information, representation or statement contained in this Announcement, the Presentation or otherwise. Each Placee further represents, warrants and agrees that the only information on which it is entitled to rely and on which such Placee has relied in committing itself to acquire Placing Shares is contained in this Announcement, the Presentation and any information previously published by the Company by notification to a Regulatory Information Service (in the United Kingdom) or the Stock Exchange News Service (in the Republic of South Africa), such information being all that such Placee deems necessary or appropriate and sufficient to make an investment decision in respect of the Placing Shares and that it has neither received nor relied on any other information given, or representations, warranties or statements made, by any of the Bookrunners or the Company nor any of their respective affiliates and none of the Bookrunners or the Company will be liable for any Placee’s decision to accept an invitation to participate in the Placing based on any other information, representation, warranty or statement, provided that nothing in this paragraph excludes the liability of any person for fraudulent misrepresentation made by that person;
7. acknowledges and agrees that it may not rely, and has not relied, on any investigation that any of the Bookrunners, any of their respective affiliates or any person acting on their behalf, may have conducted with respect to the Placing Shares or the Company or its Group, and none of such persons has made any representation, express or implied, with respect to the Company, its Group, the Placing Shares or the accuracy, completeness or adequacy of any publicly available or filed information or any representation relating to the Company or its Group; each Placee further acknowledges that it has conducted its own investigation of the Company, its Group and the Placing Shares and has received all information it believes necessary or appropriate in connection with its investment in the Placing Shares;
8. acknowledges that it has made its own assessment and has satisfied itself concerning the relevant tax, legal, currency and other economic considerations relevant to its investment in the Placing Shares;
9. acknowledges that none of the Bookrunners, their respective affiliates or any person acting on behalf of any of them has or shall have any liability for any information made publicly available by or in relation to the Company or its Group or any representation, warranty or statement relating to the Company or the Group contained therein or otherwise, provided that nothing in this paragraph excludes the liability of any person for fraudulent misrepresentation made by that person;
10. represents and warrants that it is and, at the time the Placing Shares are acquired, will be located outside the United States and is not a US person (as defined in Regulation S) and is acquiring the Placing Shares in an “offshore transaction†in accordance with Rule 903 or Rule 904 of Regulation S; (ii) if it is acquiring the Placing Shares for the account of one or more other persons, it has full power and authority to make the representations, warranties, agreements and acknowledgements herein on behalf of each such account; (iii) it is not acquiring the Placing Shares as a result of any “directed selling efforts†as defined in Regulation S or as a result of any form of general solicitation or general advertising (within the meaning of Rule 502© of Regulation D under the US Securities Act); and (iv) it will not publish, distribute or transmit these or any other documents or information related to the Placing, by any means or media, directly or indirectly, in whole or in part, in or into the United States;
11. acknowledges that the Placing Shares have not been and will not be registered under the US Securities Act or the securities laws of any state of the United States and that the Company has not been and will not be registered under the Investment Company Act; and the Placing Shares may not be offered or sold within the United States or to, or for the account or benefit of, US persons (as defined in Regulation S) except in an “offshore transaction†in accordance with Regulation S or in a transaction exempt from, or not subject to, the registration requirements of the US Securities Act and the Investment Company Act;
12. acknowledges that in making any decision to acquire Placing Shares it (i) has such knowledge and experience in financial and business matters to be capable of evaluating the merits and risks of subscribing for or purchasing the Placing Shares, (ii) has relied on its own examination, due diligence and analysis of the Company, including the markets in which the Company and the Group operates and the terms of the Placing, including the merits and risks involved, (iii) has had sufficient time to consider and conduct its own investigation with respect to the Placing and purchase of Placing Shares, including the legal, regulatory, tax, business, currency and other economic and financial considerations relevant to such an investigation, (iv) will not look to any Bookrunner for all or part of any such loss it may suffer, (v) is experienced in investing in securities of this nature in this sector and is aware that it may be required to bear, and is able to bear, the economic risk of an investment in the Placing Shares, (vi) is able to sustain a complete loss of an investment in the Placing Shares and (vii) has no need for liquidity with respect to its investment in the Placing Shares;
13. undertakes, unless otherwise specifically agreed with the Bookrunners, that it is not and at the time the Placing Shares are acquired, neither it nor the beneficial owner of the Placing Shares will be, a resident of the United States, Australia, Canada or Japan or any other jurisdiction where it would be unlawful to offer or subscribe for the Placing Shares, and further acknowledges that the Placing Shares have not been and will not be registered under the securities legislation of the United States, Australia, Canada or Japan or other such jurisdictions and, subject to certain exceptions, may not be offered, sold, transferred, delivered or distributed, directly or indirectly, in or into those jurisdictions;
14. acknowledges that the Placing Shares have not been and will not be registered and that a prospectus will not be cleared in respect of any of the Placing Shares under the securities laws or legislation of the United States or any state or jurisdiction thereof, Australia, Canada or Japan and, subject to certain exceptions, may not be offered, sold, or delivered or transferred, directly or indirectly, in or into those jurisdictions;
15. acknowledges that the Placing Shares are being subscribed for investment purposes, and not with a view to offer, resell or distribute within the meaning of the United States securities laws;
16. acknowledges that no representation has been made as to the availability of any exemption under the US Securities Act for the reoffer, resale, pledge or transfer of the Placing Shares;
17. represents and warrants that the issue to it, or the person specified by it for registration as holder, of Placing Shares will not give rise to a liability under any of sections 67, 70, 93 or 96 of the Finance Act 1986 (depositary receipts and clearance services) and that the Placing Shares are not being acquired in connection with arrangements to issue depositary receipts or to issue or transfer Placing Shares into a clearance service;
18. represents and warrants that it has complied with its obligations under the Criminal Justice Act 1993, section 118 of the Financial Services and Markets Act 2000 (the “â€) and in connection with money laundering and terrorist financing under the Proceeds of Crime Act 2002 (as amended), the Terrorism Act 2000, the Terrorism Act 2006 and the Money Laundering Regulations 2007 and any related or similar rules, regulations or guidelines, issued, administered or enforced by any government agency having jurisdiction in respect thereof (the “â€) and the Money Laundering Sourcebook of the FCA and, if making payment on behalf of a third party, that satisfactory evidence has been obtained and recorded by it to verify the identity of the third party as required by the Regulations;
19. represents and warrants that it is acting as principal only in respect of the Placing or, if it is acting for any other person: (i) it is duly authorised to do so and has full power to make the acknowledgments, representations and agreements herein on behalf of each such person; and (ii) it is and will remain liable to the Company and/or the relevant Bookrunner for the performance of all its obligations as a Placee in respect of the Placing (regardless of the fact that it is acting for another person);
20. if a financial intermediary, as that term is used in Article 3(2) of the EU Prospectus Directive, represents and warrants that the Placing Shares purchased by it in the Placing will not be acquired on a non-discretionary basis on behalf of, nor will they be acquired with a view to their offer or resale to, persons in a Member State of the EEA which has implemented the Prospectus Directive other than Qualified Investors, or in circumstances in which the prior consent of the Relevant Bookrunner has been given to the offer or resale;
21. represents and warrants that it has not offered or sold and will not offer or sell any Placing Shares to persons in the United Kingdom, except to persons whose ordinary activities involve them in acquiring, holding, managing or disposing of investments (as principal or agent) for the purposes of their business or otherwise in circumstances which have not resulted and which will not result in an offer to the public in the United Kingdom within the meaning of section 85(1) of the FSMA;
22. represents and warrants that it has not offered or sold and will not offer or sell any Placing Shares to persons in the EEA prior to Admission except to persons whose ordinary activities involve them in acquiring, holding, managing or disposing of investments (as principal or agent) for the purposes of their business or otherwise in circumstances which have not resulted in and which will not result in an offer to the public in any member state of the EEA within the meaning of the Prospectus Directive;
23. represents and warrants that it has only communicated or caused to be communicated and will only communicate or cause to be communicated any invitation or inducement to engage in investment activity (within the meaning of section 21 of the FSMA) relating to the Placing Shares in circumstances in which section 21(1) of the FSMA does not require approval of the communication by an authorised person;
24. represents and warrants that it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to the Placing Shares in, from or otherwise involving, the United Kingdom;
25. represents and warrants, if in a Member State of the European Economic Area, unless otherwise specifically agreed with the relevant Bookrunner in writing, that it is a “qualified investor†within the meaning of Article 2(1)€ of the Prospectus Directive;
26. represents and warrants, if in the United Kingdom, that it is a person (i) having professional experience in matters relating to investments who falls within the definition of “investment professionals†in Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the “â€) or (ii) who falls within Article 49(2)(a) to (d) (“High Net Worth Companies, Unincorporated Associations, etc.â€) of the Order, or (iii) to whom this Announcement may otherwise lawfully be communicated;
27. acknowledges that neither the offer referred to herein nor the Placing constitutes or is intended to constitute an offer to the public in the Republic of South Africa in terms of the South African Companies Act, 2008 (the “South African Companies Actâ€) and that in the Republic of South Africa such offer is only being distributed to, and is only directed at, and any investment or investment activity to which this announcement relates is available only to, and will be engaged in only with, persons in South Africa who (i) fall within the categories of persons set out in section 96(1)(a) of the South African Companies Act or (ii) are persons who subscribe, as principal, for Placing Shares at a minimum placing price of R1,000,000, as envisaged in section 96(1)(b) of the South African Companies Act, in each case to whom the Placing is specifically addressed;
28. represents and warrants that, if in the Republic of South Africa, it is a person referred to in clause 27 above;
29. acknowledges and agrees that no action has been or will be taken by either the Company or any Bookrunner or any person acting on behalf of the Company or any Bookrunner that would, or is intended to, permit a public offer of the Placing Shares in any country or jurisdiction where any such action for that purpose is required;
30. represents and warrants that it and any person acting on its behalf is entitled to acquire the Placing Shares under the laws of all relevant jurisdictions and that it has fully observed such laws and obtained all such governmental and other guarantees, permits, authorisations, approvals and consents which may be required thereunder and complied with all necessary formalities to enable it to commit to this participation in the Placing and to perform its obligations in relation thereto (including, without limitation, in the case of any person on whose behalf it is acting, it has the necessary powers and capacity and all necessary consents and authorities to agree to the terms set out or referred to in this Appendix I) and will honour such obligations and that it has not taken any action or omitted to take any action which will or may result in any Bookrunner, the Company or any of their respective directors, officers, agents, employees or advisers acting in breach of the legal or regulatory requirements of any jurisdiction in connection with the Placing;
31. undertakes that it (and any person acting on its behalf) will make payment in respect of the Placing Shares allocated to it in accordance with this Appendix I on the due time and date set out herein, failing which the relevant Placing Shares may be placed with other acquirers or sold as the relevant Bookrunner may in their sole discretion determine and without liability to such Placee, who will remain liable for any amount by which the net proceeds of such sale falls short of the product of the relevant Issue Price and the number of Placing Shares allocated to it and may be required to bear any stamp duty, stamp duty reserve tax or other similar taxes (together with any interest or penalties) which may arise upon the sale of such Placee’s Placing Shares;
32. that its allocation (if any) of Placing Shares will represent a maximum number of Placing Shares which it will be entitled, and required, to acquire, and that the Bookrunners and/or the Company may call upon it to acquire a lower number of Placing Shares (if any), but in no event in aggregate more than the aforementioned maximum;
33. acknowledges that none of the Company nor any Bookrunner, nor any of their respective affiliates, nor any person acting on behalf of them, is making any recommendations to it, advising it regarding the suitability of any transactions it may enter into in connection with the Placing and that its participation in the Placing is on the basis that it is not and will not be a client of any Bookrunner in connection with its participation in the Placing and that the Bookrunners have no duties or responsibilities to it for providing the protections afforded to their respective clients or customers or for providing advice in relation to the Placing nor in respect of any representations, warranties, undertakings or indemnities contained in the Placing Agreement nor for the exercise or performance of any of their respective rights and obligations thereunder including any rights to waive or vary any conditions or exercise any termination right. Further, it acknowledges that any payment by it will not be treated as client money as governed by the FCA Handbook rules;
34. acknowledges that any money held in an account by the Bookrunners on behalf of the Placee and/or any person acting on behalf of the Placee will not be treated as client money within the meaning of the rules and regulations under FSMA and that the money will therefore not be subject to the protections conferred by the client money rules. As a consequence, the Placee acknowledges that its money will not be segregated from the Bookrunners’ money in accordance with the client money rules and will be used by each of the Bookrunners in the course of its own business and the Placee will rank only as a general creditor of the relevant Bookrunner;
35. undertakes that the person whom it specifies for registration as holder of the Placing Shares will be (i) itself or (ii) its nominee, as the case may be. Neither the bookrunners nor the Company will be responsible for any liability to stamp duty or stamp duty reserve tax or other similar taxes resulting from a failure to observe this requirement (“â€). Each Placee and any person acting on behalf of such Placee agrees to participate in the Placing and it agrees to indemnify the Company and each Bookrunner on an after-tax basis in respect of any Indemnified Taxes on the basis that the Placing Shares will be allotted to the CREST stock account of the relevant Bookrunner who will hold them as nominee on behalf of such Placee until settlement in accordance with its standing settlement instructions;
36. acknowledges that these terms and conditions and any agreements entered into by it pursuant to these terms and conditions set out in this Appendix I, and all non-contractual or other obligations arising out of or in connection with them, shall be governed by and construed in accordance with the laws of England and Wales and it submits (on behalf of itself and on behalf of any person on whose behalf it is acting) to the exclusive jurisdiction of the English courts as regards any claim, dispute or matter arising out of any such contract (including any dispute regarding the existence, validity or termination of such contract or relating to any non-contractual or other obligation arising out of or in connection with such contract), except that enforcement proceedings in respect of the obligation to make payment for the Placing Shares (together with any interest chargeable thereon) may be taken by either the Company or any Bookrunner in any jurisdiction in which the relevant Placee is incorporated or in which any of its securities have a quotation on a recognised stock exchange;
37. agrees to indemnify on an after tax basis and hold the Company, each Bookrunner and their respective affiliates harmless from any and all costs, claims, liabilities and expenses (including legal fees and expenses) arising out of or in connection with any breach of the representations, warranties, acknowledgements, agreements and undertakings in this Appendix I and further agrees that the provisions of this Appendix I shall survive after completion of the Placing;
38. represents and warrants that it has neither received nor relied on any inside information concerning the Company prior to or in connection with accepting this invitation to participate in the Placing and is not purchasing Placing Shares on the basis of material non-public information and if it has received any confidential price sensitive information about the Company in advance of the Placing, it has neither dealt in securities of the Company, encouraged or required any other person to deal in securities of the Company or disclosed any such information to any other person prior to the information being made publicly and generally available;
39. acknowledges that its commitment to subscribe for Placing Shares on the terms set out herein and in the trade confirmation or contract note will continue notwithstanding any amendment that may in future be made to the terms of the Placing, and that Placees will have no right to be consulted or require that their consent be obtained with respect to the Company’s conduct of the Placing;
40. if it is a pension fund or investment company, its purchase of Placing Shares is in full compliance with applicable laws and regulations;
41. represents and warrants that it is not acting in concert (within the meaning given in the City Code on Takeovers and Mergers) with any other Placee or any other person in relation to the Company;
42. represents and warrants that it will provide the Bookrunners with such relevant documents as they may reasonably request to comply with requests or requirements that either they or the Company may receive from regulators in relation to the Placing, subject to its legal, regulatory and compliance requirements and restrictions;
43. represents and warrants that it has read and understood the risk factors relating to the Company, its Group and the Placing, set out in Appendix II; and
44. agrees that the Company, each Bookrunner and their respective affiliates and others will rely upon the truth and accuracy of the foregoing representations, warranties, acknowledgements and undertakings which are given to the Bookrunners on their own behalf and on behalf of the Company and are irrevocable and irrevocably authorises the Company and each Bookrunner to produce this Announcement, pursuant to, in connection with, or as may be required by any applicable law or regulation, administrative or legal proceeding or official inquiry with respect to the matters set forth herein.
The foregoing representations, warranties and confirmations are given to each Bookrunner for itself and on behalf of the Company and are irrevocable.
The agreement to allot and issue Placing Shares to Placees (and/or to persons for whom such Placee is contracting as agent) free of stamp duty and stamp duty reserve tax relates only to their allotment and issue to Placees, or such persons as they nominate as their agents, direct from the Company for the Placing Shares in question. Such agreement also assumes that the Placing Shares are not being acquired in connection with arrangements to issue depositary receipts or to issue or transfer the Placing Shares into a clearance service. If there are any such arrangements, or the settlement relates to any other dealing in the Placing Shares, stamp duty or stamp duty reserve tax or other similar taxes may be payable, for which neither the Company nor any Bookrunner will be responsible and the Placees shall indemnify the Company and each Bookrunner on an after-tax basis for any stamp duty or stamp duty reserve tax paid by them in respect of any such arrangements or dealings. If this is the case, each Placee should seek its own advice and notify the relevant Bookrunner accordingly.
The Company and the Bookrunners are not liable to bear any transfer taxes that arise on a sale of Placing Shares subsequent to their acquisition by Placees or for transfer taxes arising otherwise than under the laws of the United Kingdom. Each Placee should, therefore, take its own advice as to whether any such transfer tax liability arises and notify the relevant Bookrunner accordingly. Furthermore, each Placee agrees to indemnify on an after-tax basis and hold each of the Bookrunners and the Company and their respective affiliates harmless from any and all interest, fines or penalties in relation to stamp duty, stamp duty reserve tax and all other similar duties or taxes to the extent that such interest, fines or penalties arise from the unreasonable default or delay of that Placee or its agent.
In addition, Placees should note that they will be liable for any stamp duty and all other stamp, issue, securities, transfer, registration, documentary or other duties or taxes (including any interest, fines or penalties relating thereto) payable outside the UK by them or any other person on the acquisition by them of any Placing Shares or the agreement by them to acquire any Placing Shares.
Each Placee, and any person acting on behalf of the Placee, acknowledges that neither the Company nor any of the Bookrunners owe any fiduciary or other duties to any Placee in respect of any representations, warranties, undertakings or indemnities in the Placing Agreement.
Each Placee and any person acting on behalf of the Placee acknowledges and agrees that each Bookrunner or any of their respective affiliates may, at its absolute discretion, agree to become a Placee in respect of some or all of the Placing Shares.
When a Placee or person acting on behalf of the Placee is dealing with a Bookrunner, any money held in an account with that Bookrunner on behalf of the Placee and/or any person acting on behalf of the Placee will not be treated as client money within the meaning of the rules and regulations of the FCA made under the FSMA. The Placee acknowledges that the money will not be subject to the protections conferred by the client money rules; as a consequence, this money will not be segregated from that Bookrunner's money in accordance with the client money rules and will be used by that Bookrunner in the course of its own business and the Placee will rank only as a general creditor of that Bookrunner.
All times and dates in this Announcement may be subject to amendment. Each Bookrunner shall notify its Placees and any person acting on behalf of the Placees of any changes.
APPENDIX II
RISK FACTORS
All the information set out in this Appendix II and, in particular, those risks relating to the Placing described below should be carefully considered prior to making any investment decision. Accordingly, you are strongly recommended to consult an investment adviser authorised under the FSMA if you are in the United Kingdom or, if not, another appropriately authorised independent financial adviser, who specialises in the acquisition of shares and other securities before making a decision to invest. In addition to all the other information contained in this Announcement, potential investors should carefully consider the following risk factors which the Directors consider to be all the known material risks in respect of the business of the Company and its securities, but are not set out in any particular order of priority.
If any of the circumstances identified in the risk factors were to materialise, the Group’s business, financial condition and operating results could be materially affected. Investors should note that the trading price of the Ordinary Shares could decline due to any of these risks and investors may lose all or part of their investment.
Additional risks which are not presently known to the Board, or that the Board currently deems to be immaterial but which may be material, may also have an effect on the Group’s business, financial condition and operating results.
Risks relating to the Group’s business
The Group’s exploration licences and contracts
The Group’s current exploration operations are dependent upon the grant, renewal or continuance in force of appropriate surface and/or subsurface use contracts, licences, permits and regulatory approvals and consents which may be valid only for a defined time period, may be subject to limitations and may provide for withdrawal in certain circumstances. There can be no assurance that such surface and/or subsurface use contracts, licences, permits, regulatory approvals or consents would be granted, renewed or continue in force, or, if so, on what terms.
The Group’s surface and/or subsurface use contracts and related work programmes contain a range of obligations on the Group, and there may be adverse consequences of breach of these obligations, ranging from penalties to, in extreme cases, suspension or termination of the Group’s surface and/or subsurface use licences and/or surface and/or subsurface use contracts.
Withdrawal of licences, termination of surface and/or subsurface use contracts or failure to secure requisite licences or the cessation thereof in respect of any of the Group’s operations may have a material adverse impact on the Group’s business, operating results and financial condition.
Changes to the current political and regulatory environment in the Republic of South Africa or any other markets in which the Group operates in the future may adversely affect the Group
Regulatory changes, if any, in extraction or investment policies or shifts in political attitude may adversely affect the Group’s operations and future profitability. Operations may be affected in varying degrees by Government regulations with respect to, but not limited to, restrictions on production, price controls, export controls, currency remittance, income and other taxes, foreign investment, maintenance of claims, environmental legislation, water use, employment and contractor selection.
Funding Requirement
The initiation and construction of the Project will require significant capital expenditures. As at 31 December 2016, the Company’s cash and cash equivalents totalled ZAR68 million (US$5 million) and the Group had access to immediately available undrawn facilities totalling ZAR341 million (US$25 million). The Group estimates that its final capital funding requirement will be approximately US$120 million. The Placing is expected to raise approximately US$51 million of the funding requirement with the balance being funded by the RMB facility. Although the Credit Committee of RMB has granted approval and has entered into a Mandate Letter with the Group in respect of the RMB facility, the Mandate Letter does not constitute a binding commitment to underwrite, provide or secure any financing, which remains subject to ongoing due diligence, the completion of definitive facility documentation and other approvals. There can be no assurance that the approvals and conditions included in the Mandate Letter will be met, that the Group will have secured committed financing at the time that it intends to draw upon the financing or that RMB will be willing to lend at that time.
Exchange Control Regulations
South Africa, where the Group operates, employs, or may employ in the future, exchange control regulations which may adversely affect the Group’s ability to transfer funds in and from such territories, and therefore the Group’s ability to carry on its operations in such territories.
Gold Price and Market
The profitability of the Group’s operations and the cash flows generated by these operations are significantly affected by changes in the market price for gold. The market price for gold can fluctuate widely. These fluctuations are caused by numerous factors beyond the Group’s control, including: speculative positions taken by investors or traders in gold; changes in the demand for gold use in jewellery, for industrial uses and for investment; changes in the supply of gold from production, disinvestment, scrap and hedging; financial market expectations regarding the rate of inflation; the strength of the US dollar (the currency in which the gold price is denominated) relative to other currencies; changes in interest rates; actual or expected gold sales by central banks; gold sales by gold producers in forward transactions; global or regional political or economic events; and costs of gold production in major gold-producing nations, such as China, the United States, South Africa, Australia, Peru and Russia.
The price of gold is often subject to sharp, short-term changes resulting from speculative activities and general world economic events. While the overall supply of, and demand for, gold can affect its market price, because of the considerable size of above ground stocks of the metal, in comparison to other commodities, these factors typically do not affect the price to the extent that the supply of, and demand for, other commodities tends to affect their market prices.
If the gold price falls below the cost of anticipated production for an extended period, the Group may be forced to curtail or suspend some or all of its capital projects and/or operations. In addition, the Group would have to assess the economic impact of low gold prices on its operating results or financial condition.
Information on Reserves and Resources
The Group’s reported mineral resources and mineral reserves are reported in accordance with the SAMREC standard and as stated as mineral inventory in the Company’s Regulatory Information Service announcement. There are numerous uncertainties inherent in estimating mineral resources, including factors beyond the control of the Group. The estimation of mineral resources and mineral reserves is a statistical process and the accuracy of any such estimation is a function of the quality of available data and of engineering and geological interpretation and judgement. Results of drilling, metallurgical testing, production, evaluation of mine plans and exploration activities subsequent to the date of any estimate may justify revision (up or down) of such estimates. There is no assurance that mineral resources can be economically mined. Mineral resources that have not been converted to mineral reserves do not have demonstrated economic viability. A mineral resource is a statement of in situ mineralisation. Mineral reserves are a statement of resources that are considered as commercially mineable according to ruling economic parameters at the time.
Only a certain proportion of estimated mineral resources will be translated into reserves and recovered as the Group proceeds to production on its development and exploration sites. There is no guarantee that they will be recovered at the volume, grade and rates estimated. The failure of the Group to achieve its production estimates is likely to have a material and adverse effect on any or all of its future cash flows, profitability, results of operations and financial condition. These production estimates are dependent on, among other things, the accuracy of mineral resource and reserve estimates, the accuracy of assumptions regarding mineral grades and recovery rates, ground conditions (including hydrology), physical characteristics of ores, such as hardness, the presence or absence of particular metallurgical characteristics and the accuracy of estimated rates and costs of mining, ore haulage and processing.
Changes in the Group’s capital costs and operating costs are likely to have a significant impact on its profitability. Its main planned production expenses will be mining contracting costs, transport costs, treatment costs and overheads. Changes in costs of the Group’s mining and processing operations can occur as a result of unforeseen events and could result in changes in profitability or resource estimates, including rendering certain mineral resources uneconomic to mine. Many of these changes may be beyond the Group’s control.
The volume and grade of the ore the Group recovers may not conform to current expectations. Lower market prices, increased production costs, reduced recovery rates and other factors may render the Group’s mineral resources and mineral reserves uneconomic to exploit and may result in revision of its mineral reserve estimates from time to time. Mineral reserve data is not necessarily indicative of future results of operations. If the Group’s actual mineral reserves are less than current estimates, the Group’s results of operations and financial condition may be materially impaired.
Estimates in financial statements
Preparation of consolidated financial statements requires the Group to use estimates and assumptions. Accounting for estimates requires the Group to use its judgement to determine the amount to be recorded in its financial statements in connection with these estimates. The Group’s accounting policies regarding exploration and evaluation require management to make certain estimates and assumptions as to future events and circumstances, in particular, the assessment of whether economic quantities of ore reserves or mineral resources have been found. In addition, the carrying amounts of certain assets and liabilities are often determined based on estimates and assumptions of future events. If the estimates and assumptions are inaccurate, the Group could be required to write down the value of certain assets. On an ongoing basis, the Group re-evaluates its estimates and assumptions. However, the actual amounts could differ from those based on estimates and assumptions.
Holding company structure and restrictions on dividends
The Company’s operating results and its financial condition are dependent on the trading performance of members of the Group. The Company’s ability to pay dividends in the future will depend on the level of distributions, if any, received from the Company’s subsidiaries. The Group’s members may, from time to time, be subject to restrictions on their ability to make distributions to the Company, as a result of factors such as restrictive covenants contained within loan agreements, foreign exchange limitations and regulatory or fiscal restrictions. There can be no assurance that such restrictions will not have a material adverse effect on the Group’s business, operating results and financial condition.
Uninsured risks
It is not always possible to obtain insurance against all risks facing the Group and the Group may decide not to insure against certain risks because of high premiums or other reasons. Moreover, insurance against risks such as environmental pollution or other hazards as a result of exploration and production is not generally available to the Group or to other companies in the mining industry on acceptable terms. Although the Group maintains insurance to protect against certain risks in such amounts as it considers reasonable, its insurance will not cover all potential risks associated with its operations and insurance coverage may not continue to be available or may not be adequate to cover any resulting liability. Should such liabilities arise, they could reduce or eliminate any further profitability and result in increasing costs and a decline in the value of the Ordinary Shares.
Working Capital
The Company may need to raise additional funds in the future in order to develop exploration and development programmes. Whether as a result of fluctuating market conditions, lack of market interest in the Company’s industry sector or otherwise, this additional financing may not be available to the Company on acceptable terms. Additional equity financing may be dilutive to Shareholders and could contain rights and preferences superior to those of the New Ordinary Shares, while debt financing may involve restrictions on the Company’s financing and operating activities or may not be available at reasonable cost. If the Company is unable to raise additional funds as needed, the scope of its operations may be reduced and or its interest in concessions may be diluted or may expire and, as a result, the Company may be unable to fulfil its medium to long-term exploration and development programme.
Currency risks
Currency fluctuations may affect the Group’s revenue from its operations. The Placing and other financing activities will be received in pounds sterling, while a significant portion of its operating expenses will be incurred in other currencies, particular those of the countries in which it operates, namely the Republic of South Africa. Accordingly, foreign currency fluctuations may adversely affect the Group’s financial position and operation results.
As the Group makes limited use of commodity or derivative instruments to protect against a fall in gold prices, the Group is exposed to the impact of any significant drop in the gold price. In general, hedging in this manner reduces the risk of exposure to a fall in the gold price. As the Group does not make extensive use of transactions to hedge against the future price at which its gold production is sold and does not expect to in the near future, the Group can realise the positive impact of any increase in the gold price. However, this also means that the Group is not protected against decreases in the gold price and, if the gold price decreases significantly, the Group’s revenues will be materially adversely affected.
Risks relating to key personnel
The Group’s prospects depend in part on the ability of its executive officers, senior management and key consultants to operate effectively, both independently and as a group. To manage its growth, the Group must attract and retain additional highly qualified management and technical personnel and continue to implement and improve operational, financial and management information systems. Investors must be willing to rely to a significant extent on management’s discretion and judgement, as well as the expertise and competence of outside contractors.
Litigation
While the Group currently has no material outstanding litigation or dispute not already disclosed, there can be no guarantee that the current or future actions of the Group will not result in litigation since there have been a number of cases where the rights and privileges of mining companies have been the subject of litigation. The mining industry, as with all industries, may be subject to legal claims, both with and without merit, from time to time. The Directors cannot preclude that such litigation may be brought against the Group in the future. Defence and settlement costs can be substantial, even with respect to claims that have no merit. Due to the inherent uncertainty of the litigation process, there can be no assurance that the resolution of any particular legal proceeding will not have a material adverse effect on the Group’s financial position, results or operations. The Group’s business may be materially adversely affected if the Group and/or its employees or agents are found not to have met the appropriate standard of care or not exercised their discretion or authority in a prudent or appropriate manner in accordance with accepted standards.
Competition
Whilst the Group will not experience competition for its future sales, as gold is a worldwide commodity, it may encounter competition in identifying and acquiring exploration and development rights for attractive gold properties in Africa.
For the Group to expand its operations, it is likely to face competition from both domestic gold mining companies in such countries and any international gold mining companies which already have significant operations in these countries, together with potential new entrants into such markets, any of which might have greater financial, technological and other resources than the Group.
There is a high degree of competition for the discovery and acquisition of properties considered to have a commercial potential. The Group competes with other mining companies for the acquisition of mineral claims, leases and other mineral interests as well as for the recruitment and retention of qualified employees and other personnel.
Risks relating to the gold mining industry
PAF is the holding company for a group of companies engaged in gold mining and exploration activities. Gold mining companies face many risks related to their operations (including their exploration and development activities) that may affect their cash flows and overall profitability.
Production of gold
Gold mining is susceptible to numerous events that may have an adverse impact on the Group’s business, as well as the Group’s ability to produce gold and to meet its future production targets. The material risks faced by the Group are:
- environmental hazards, including discharge of metals, pollutants or hazardous chemicals;
- industrial accidents;
- labour disputes;
- activities of illegal or artisanal miners;
- mechanical breakdowns;
- electrical power interruptions;
- encountering unexpected geological formations;
- grade dilution
- unanticipated ground and water conditions;
- unanticipated increases in gold lock-up and inventory levels at the Group’s metallurgical operations;
- unexpectedly lower metallurgical recoveries
- geotechnical issues affecting pit stability or strip ratio; legal and regulatory restrictions and changes to such restrictions;
- safety-related stoppages;
- seismic activity; and
- other natural phenomena, such as floods or inclement weather conditions.
Uncertainty and cost of mineral exploration and acquisitions
As part of its mine development, PAF must undertake exploration activities in order that it can fully understand the geology across its mining and prospecting rights areas and successfully develop the mining operations to fully exploit its resources. Exploration activities are speculative and are often unproductive. These activities also often require substantial expenditure to establish gold resources or reserves through drilling and metallurgical and other testing techniques, determine appropriate recovery processes to extract gold from the ore and construct, renovate or expand mining and processing facilities.
Once gold mineralisation is discovered it can take several years to determine whether gold reserves exist. During this time the economic viability of production may change.
The Group may consider from time to time the acquisition of gold reserves, development properties and operating mines, either as stand-alone assets or as to be integrated into existing Group companies or operations. Its decisions to acquire these properties will be based on a variety of factors including historical operating results, estimates of and assumptions about future reserves, cash and operating costs, the gold price and projected economic returns and evaluations of existing or potential liabilities associated with each property and its operations. Other than historical operating results, all of these parameters may differ significantly from the Group’s estimates and assumptions.
Mining companies are subject to extensive health, safety and environmental laws and regulations
Gold mining operations are subject to a variety of industry-specific health and safety laws and regulations depending upon the jurisdiction in which they are located. These laws and regulations are formulated to improve and to protect the safety and health of employees. Should compliance with any new standards require a material increase in expenditure or material interruptions to production, the Group’s results in respect of operations and financial condition may be adversely affected.
Mining companies are also subject to extensive environmental laws and regulations in the various jurisdictions in which they operate. These regulations establish limits and conditions on companies’ ability to conduct their operations. The cost of the Group’s compliance with environmental laws and regulations has been, and is expected to continue to be, significant. Environmental laws and regulations are continually changing and are generally becoming more restrictive. If environmental compliance obligations alter as a result of changes in laws and regulations, or in certain assumptions on the basis of which the Group estimates liabilities, or if unanticipated conditions arise at the Group’s operations, expenses and provisions would increase. If material, these expenses and provisions could adversely affect the Group’s results and financial condition.
Mining companies are required to close their operations and rehabilitate the lands that they mine in accordance with environmental laws and regulations. Estimates of the total ultimate closure and rehabilitation costs for gold mining operations are significant. Environmental liabilities are accrued when they become known, probable and can be reasonably estimated. Regulators are continuously reviewing these regulations and any amendments could result in additional financial guarantees being required, negatively impacting on Group working capital. Costs associated with rehabilitating land disturbed by the mining processes and addressing the environmental, health and community issues are estimated and financial provision made based upon information available currently.
Estimates may however, be insufficient and further environmental issues may be identified at any stage. Any underestimated or unidentified rehabilitation costs would reduce earnings and could materially and adversely affect the Group’s asset values, earnings and cash flows.
Security risks and loss control issues
Whilst mine security and loss control procedures have been implemented, the risk remains of illegal mining, theft, threats to mine workers’ lives and safety as well as industrial espionage, information loss and the loss of the operational efficiency of the mine.
Risks relating to emerging markets generally
Investors in companies whose assets are located in emerging economies such as the Republic of South Africa should be aware that these economies are subject to greater risk than more developed economies, including in some cases significant legal, regulatory, economic and political risks. Investors should also note that emerging economies are subject to rapid change and that the information set out in this document may become outdated. Accordingly, investors should exercise particular care in evaluating the risks involved and must decide for themselves whether, in light of these risks, investing in the New Ordinary Shares is appropriate. Generally, investment in a company whose assets are located in an emerging economy is only suitable for sophisticated investors who fully appreciate the significance of the risks involved and investors are urged to consult with their own legal and financial advisers before making an investment in the New Ordinary Shares.
The legal system in many emerging markets countries is less certain than more developed legal systems
Many emerging markets countries have a less developed legal system than more established economies, particularly with respect to mining operations, which may result in risks such as: (i) potential difficulties in obtaining effective legal redress in their courts, whether in respect of a breach of law or regulation, or in an ownership dispute; (ii) a higher degree of discretion on the part of Governmental authorities; (iii) the lack of judicial or administrative guidance when interpreting applicable rules and regulations; (iv) inconsistencies or conflicts between and within various laws, regulations, decrees, orders and resolutions; or (v) relative inexperience of the judiciary and courts in such matters. In addition, the commitment of local business people, government officials and agencies and the judicial system to abide by legal requirements and negotiated agreements may be uncertain, creating particular concerns with respect to licences and agreements for business. These may be susceptible to revision or cancellation and legal redress may be uncertain or delayed. Any difficulties faced by the Group arising from these uncertainties could have an adverse effect on the Group’s business and financial condition and prospects.
Any downgrading of prevailing debt rating by an international rating agency could have a negative impact on the Group
Any adverse revision to the prevailing credit rating for domestic and international debt by any of the international rating agencies may adversely impact the Group’s ability to raise future project financing and the interest rates and other commercial terms at which such additional financing may be available. This could have an adverse effect on the Group’s financial performance and its ability to obtain financing to fund its growth on favourable terms or at all.
National or regional instability could disrupt the Group’s business and affect the price of the Ordinary Shares
Exploration and Mining Risks
The business of exploration for minerals is highly speculative in nature, involves a high degree of risk and is frequently unsuccessful. Few properties that are explored are ultimately developed into producing mines. There can be no assurance that any mineralisation discovered by the Group will result in proven and probable reserves nor that any mineral deposits determined by the Group will contain economically recoverable volumes of resources. Should the mineral deposits contain economically recoverable resources then delays in the construction and commissioning of mining projects or other technical difficulties may result in the Group’s current or future projected target dates for production being delayed or further capital expenditure being required or the resource becoming uneconomic.
The operations of the Group may be disrupted by a variety of risks and hazards which are beyond the control of the Company, including geological, geotechnical and seismic factors, environmental hazards, industrial accidents, occupational and health hazards, technical failures, labour disputes, unusual or unexpected rock formations, explosions, flooding and extended interruptions due to inclement or hazardous weather conditions and other acts of God such as natural disasters and outbreaks of highly contagious diseases. These risks and hazards could also result in damage to, or destruction of, production facilities, personal injury, environmental damage, business interruption, monetary losses and possible legal liability. No assurance can be given that the Group will be able to obtain insurance coverage at reasonable rates (or at all), or that any coverage it obtains will be adequate and available to cover any such claims.
The occurrence of any of these hazards can delay activities of the Group and may result in liability. The Group may become subject to liability for pollution or other hazards against which it has not insured or cannot insure, including those in respect of past mining activities for which it was not responsible.
Substantial expenditures are required to establish ore reserves through drilling, and, in the cases of new properties, to construct mining and processing facilities. As a result of these uncertainties, no assurance can be given that the exploration programmes undertaken by the Group will result in any new commercial mining operations being brought into operation. In addition, delays in the construction and commissioning of any of the Group’s mining projects or drilling projects or other technical difficulties may result in projected target dates for related production being delayed and/or further capital expenditure being required. In common with all mining and drilling operations, there is uncertainty, and therefore risk, associated with operating parameters and costs resulting from the scaling up of extraction methods tested in laboratory conditions. The Group’s ability to raise further funds will depend on the success of existing and acquired operations. The Group may not be successful in procuring the requisite funds and, if such funding is unavailable, the Group may be required to reduce the scope of its operations or anticipated expansion. In the event that financing is successful it may mean that new Ordinary Shares need to be issued on a non pre-emptive basis, thus diluting the interests of investors at that time.
Operational Targets and Delays
The Group’s operational targets will be subject to the completion of planned operational goals on time and according to budget, and are dependent on the effective support of the Group’s personnel, systems, procedures and controls. Any failure of these may result in delays in the achievement of operational targets with a consequent material adverse impact on the business, operations and financial performance of the Group. The Group will not generate any material income until mining has successfully commenced. In the meantime the Group will continue to expend its cash reserves.
Bribery and corruption
The Group operates in a range of regions where its representatives may be exposed to potentially corrupt practices. There is no guarantee that the Group’s policies will successfully protect the Group from such practices and their legal and financial consequences.
Risks relating to the Placing
Future sales of Ordinary Shares could adversely affect the share sale price
Sales of additional Ordinary Shares into the public market following the Placing could adversely affect the market price of the Ordinary Shares if there is insufficient demand for the Ordinary Shares at the prevailing market price.
Share price may fluctuate
Publicly traded securities from time to time experience price and volume fluctuations that may be unrelated to the operating performance of the companies that have issued them. In addition, the market price of the Ordinary Shares may prove to be volatile. The market price of the Ordinary Shares may fluctuate in response to a number of factors, many of which are beyond the Group’s control, including: variations in operating results in the Group’s reporting periods; changes in financial estimates by securities analysts; changes in market valuation of similar companies; announcements by the Group of significant contracts, acquisitions, strategic alliances, joint ventures or capital commitments; changes to mineral resource and reserve statements; additions or departures of key personnel; any shortfall in revenues or net income or any increase in losses from levels expected by securities analysts; future issues or sales of Ordinary Shares; and stock market price and volume fluctuations. Any of these events could result in a material decline in the price of the Ordinary Shares.
Other risk factors
The Ordinary Shares are traded on AIM, rather than the main market of the London Stock Exchange. An investment in shares traded on AIM may carry a higher risk than an investment in shares listed on the Official List of the UK Listing Authority and traded on the main market of the London Stock Exchange.
Investors should be aware that the value of the Ordinary Shares may be volatile and may go down as well as up and investors may therefore not recover their original investment, especially as the market in the Ordinary Shares on AIM may have limited liquidity.
The market price of the Ordinary Shares may not reflect the underlying value of the Company’s net assets. The price at which investors may dispose of their shares in the Company may be influenced by a number of factors, some of which may pertain to the Company, and others of which are extraneous. Investors may realise less than the original amount invested.
The risks above do not necessarily comprise all those faced by the Company and are not intended to be presented in any assumed order of priority.
APPENDIX III
DEFINITIONS
The following definitions apply throughout this Announcement, unless the context requires otherwise:
| "Admission" | the admission to trading on AIM and JSE of the New Ordinary Shares |
| "AIM" | the market of that name operated by the London Stock Exchange |
| “AIM Rules for Companies†| the AIM Rules for Companies published by the London Stock Exchange (as amended from time to time) together with any guidance notes as published by the London stock Exchange from time to time |
| "Board" or "Directors" | the directors of the Company from time to time |
| "Bookbuild" | the accelerated bookbuilding process to be conducted by the Placing Agents to arrange participation by Placees in the Placing which will establish the number of Placing Shares at the Issue Price |
| "Company" or "PAF" | Pan African Resources PLC |
| "CREST" | the relevant system for the paperless settlement of trades and the holding of uncertificated securities operated by Euroclear UK & Ireland in accordance with the CREST Regulations |
| "CREST Regulations" | the Uncertificated Securities Regulations 2001, as amended |
| "Euroclear UK & Ireland" | Euroclear UK & Ireland Limited, the operator of CREST |
| “Excluded Territory†| The United States, Australia, Canada or Japan or any other jurisdiction where it would be unlawful to offer or subscribe for the Placing Shares |
| "FCA" | the Financial Conduct Authority of the United Kingdom |
| "FSMA" | the Financial Services and Markets Act 2000 (as amended) |
| “BST†| British Summer time, the daylight saving time zone for Britain |
| "Group" | the Company, together with its subsidiary undertakings |
| "ISIN" | International Securities Identification Number |
| "London Stock Exchange" | London Stock Exchange PLC |
| "Money Laundering Regulations" | the Money Laundering Regulations 2007 (as amended) |
| "Ordinary Shares" | the ordinary shares of £0.01 each in the capital of the Company |
| "Placees" | the persons by whom or on whose behalf a commitment to acquire Placing Shares will be or has been given |
| "Placing" | the placing of the Placing Shares with existing and new institutional investors by way of the Bookbuild |
| "Placing Agreement" | the conditional agreement dated 12 April 2017 between the Company and the Placing Agents relating to the Placing |
| "Issue Price" | 14 pence per Placing Share or ZAR2.42 per Placing Share |
| "Placing Share" or “New Ordinary Shares†| each Ordinary Share to be issued under the Placing |
| "Prospectus Rules" | the rules made by the FCA under Part VI of FSMA in relation to offers of transferable securities to the public and admission of transferable securities to trading on a regulated market |
| "rand", "ZAR" or "R" | the lawful currency of the Republic of South Africa |
| "Registrars" | Capita Asset Services, Corporate Actions, The Registry, 34 Beckenham Road, Kent, BR3 4TU, UK |
| "Regulatory Information Service" | one of the regulatory information services approved by the London Stock Exchange for the distribution to the public of AIM announcements |
| “RSA†| The Republic of South Africa |
| “SAST†| South African Standard Time, the official time in the RSA |
| “SENS†| Stock Exchange News Service, the regulatory information service provided by the JSE |
| "Shareholder" | a holder of Ordinary Shares |
| "sterling", "pounds sterling", "£", "pence" or "p" | the lawful currency of the United Kingdom |
| “UK†| The United Kingdom of Great Britain and Northern Ireland |
| “United States†or “US†| the United States of America, its territories and possesses, any state of the United States and the District of Columbia |
| "US$" or "US dollar" | the lawful currency of the United States of America |
| "US Securities Act" | the United States Securities Act of 1933 (as amended) |
-ends-
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