REG-Pan African Resources PLC: Disposal of PAR Coal & Uitkomst <Origin Href="QuoteRef">PAFR.L</Origin>

Pan African ResourcesAnnouncement

05/04/2017 07:07

Pan African Resources PLC (Incorporated and registered in England and Wales under Companies Act 1985 with registered number 3937466 on 25 February 2000) AIM Code: PAF JSE Code: PAN ISIN: GB0004300496 (“Pan African” or “the Group”)                                               
 DETAILED TERMS ANNOUNCEMENT RELATING TO THE DISPOSAL BY PAN AFRICAN RESOURCES PLC (“PAN AFRICAN”) OF PAN AFRICAN RESOURCES COAL HOLDINGS PROPRIETARY LIMITED (“PAR COAL”) AND UITKOMST COLLIERY PROPRIETARY LIMITED (“UITKOMST”) TO COAL OF AFRICA LIMITED (“CoAL”)                  

1. Introduction

The Pan African board of directors is pleased to announce that Pan African has
concluded an agreement with CoAL, whereby Pan African will dispose of all its
shares and loan accounts in its wholly-owned subsidiary, PAR Coal, the holding
company of Uitkomst, to CoAL for a total consideration of R275 million (two
hundred and seventy five million rand) (the “Purchase Consideration”),
(the “Transaction”).

Uitkomst is a high-grade thermal coal producer, situated in the Utrecht
coalfields in KwaZulu-Natal and the Transaction will result in Pan African
disposing of its entire interest, comprising ordinary shares and claims on
loan account, in PAR Coal and Uitkomst.

2. Background

Uitkomst

PAR Coal holds 91% of the issued share capital of Uitkomst, with the balance
of the shares in Uitkomst held by broad-based trusts (including employees and
communities) and a black-owned and controlled strategic entrepreneur’s
trust.

For the six months ended 31 December 2016, the operation processed 236,011
tonnes of coal and sold, including bought-in coal, 327,202 tonnes of coal.
Uitkomst currently employs approximately 520 employees (including
contractors). Uitkomst had a net asset value of R209 million and made profits
after taxation of R21.3 million for the six months ended 31 December 2016, as
disclosed in the latest interim accounts of Pan African.

CoAL

CoAL is an emerging coal mining, development and exploration company operating
in South Africa. CoAL is incorporated in Australia and its shares are traded
on the Australian Securities Exchange (“ASX”), the AIM market of the
London Stock Exchange (“AIM”) and the main board of the JSE Limited
(“JSE”). CoAL’s recent focus has been to restructure its balance sheet,
operations and project pipeline to be better positioned to unlock shareholder
value and provide an attractive platform for growth in the junior coal sector.

CoAL’s principal coking and thermal coal assets and projects include:
* Makhado hard coking and thermal coal project (“Makhado Project”), which
has been granted a New Order Mining Right and has the potential to produce
approximately 5.5-million tonnes of saleable product. Currently, the majority
of hard coking coal consumed in South Africa is imported and the Makhado
Project will contribute to the import substitution of the majority of this
coal;
* Vele Colliery, a semi-soft coking and thermal coal mine, currently under
care and maintenance, with the potential to supply approximately 1.2-million
tonnes of saleable product per annum;
* the Mooiplaats Colliery near Ermelo, currently on care and maintenance, and
subject to a formal sale process; and
* a portfolio of exploration stage coking and thermal coal projects in the
Soutpansberg Coalfield.
Further information on CoAL can be found at http://www.coalofafrica.com/.

3. Rationale and application of the sale proceeds

The Transaction provides Pan African with an opportunity to crystallise the
value created from its acquisition of Uitkomst, and achieves the following
objectives:
* Gold focus: The Transaction allows Pan African’s management to focus on
the development of the Elikhulu Tailings Retreatment Plant, the Group’s
existing gold operations and its strategic objective of geographically
diversifying its operations.
* Cash flow: The immediate cash inflow of R125 million will supplement the
Group’s existing cash resources for the development of its growth
opportunities. Further, the R125 million to be settled with CoAL equity is not
subject to any trading restrictions.
* Value unlock: The Transaction results in an attractive profit of R157
million (inclusive of dividends received in an amount of R30 million) on the
original investment of R148 million, which represents a total return of 106%
over a 12-month period.
Cobus Loots, chief executive officer of Pan African commented: “Pan African
is pleased to have concluded this transaction with Coal of Africa.  The
transaction reaffirms Pan African’s focus on our gold mining business and,
again, demonstrates our ability to conclude value-accretive transactions to
the benefit of our shareholders.”

4. Purchase consideration

The Purchase Consideration of R275 million will be settled by CoAL as follows:
* R125 million in cash from CoAL’s available cash resources, payable on the
effective date of the Transaction (“Effective Date”).
* A deferred consideration of R25 million (the “Deferred Consideration”).
The Deferred Consideration may be paid by CoAL at any time prior to the second
anniversary of the Effective Date. The Deferred Consideration will bear
interest at the South African prime overdraft rate from the Effective Date. If
the Deferred Consideration and any interest accrued thereon is not paid to Pan
African by the second anniversary of the Effective Date, Pan African may elect
to have the amount due to it settled through the issue of new CoAL ordinary
shares at a price per share equal to the 30-day volume weighted average price
(“VWAP”) of a CoAL ordinary share as traded on the exchange operated by
the JSE prevailing on the last trading day immediately prior to the date that
such election is made.
* 261,287,625 newly-issued CoAL shares (equivalent to R125 million) (“Share
Component”). The issue price of the Share Component is based on an 8%
discount to the CoAL 30-day VWAP as at 3 April 2017, being R0.52.
5. Conditions precedent

The implementation of the Transaction is conditional upon the fulfilment and /
or waiver of various conditions precedent, customary for a transaction of this
nature and include, inter alia:
* regulatory approvals;
* approval by the Competition Authorities in terms of the Competition Act, No.
89 of 1998;
* CoAL obtaining all of the requisite shareholder, AIM, JSE and ASX approvals;
* the replacement of Pan African as a guarantor to all Uitkomst environmental
guarantees;
* South African exchange control approval, to the extent required; and
* the finalisation of certain coal marketing arrangements on terms
satisfactory to CoAL.
6. Categorisation

The Transaction is classified as a Category 2 transaction in terms of the JSE
Limited Listings Requirements.

By order of the Board

Johannesburg

04 April 2017

 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 and Joint Broker 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 Office: +44 (0) 207 418 8900                                                                
 Julian Gwillim Aprio Strategic Communications Public & Investor Relations SA Office: +27 (0)11 880 0037                                                                                             Jeffrey Couch/Neil Haycock/Thomas Rider BMO Capital Markets Limited Joint Broker Office: +44 (0) 207 236 1010                                         
 Bobby Morse/Chris Judd Buchanan Communications Public & Investor Relations UK Office: +44 (0) 207 466 5000                                                                                          Marius Saaiman M Squared Resources Transaction advisor Office: +27 (0)11 648 0207                                                                     

http://www.panafricanresources.com/



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