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RNS Number : 7930A Thungela Resources Limited 14 March 2025
THUNGELA RESOURCES LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 2021/303811/06)
JSE Share code: TGA
LSE Share code: TGA
ISIN: ZAE000296554
('Thungela' or the 'Company' and, together with its affiliates, the 'Group')
ACQUISITION OF THE REMAINING SHAREHOLDING INTERESTS IN THE ENSHAM BUSINESS
1. Introduction
Shareholders are referred to the announcements released by the Company on 3
February 2023 and 29 August 2023 relating to the acquisition by the Group of
an 85% joint venture interest in the Ensham coal mine and related assets
("Ensham Business"), effected through its wholly owned subsidiary, Thungela
Resources Australia Pty Ltd ("Thungela Australia") ("Original Transaction").
Thungela Australia acquired the Group's interest in the Ensham Business via an
investment holding company, Sungela Holdings Pty Ltd ("Sungela Holdings"),
together with co-investors Audley Energy Limited ("Audley") and Mayfair
Corporations Group Pty Ltd ("Mayfair") (Audley and Mayfair, the
"Co-Investors"), with the initial shareholdings being 75% held by Thungela
Australia and 12.5% held by each of the Co-Investors. A portion of the
Co-Investors' investment was funded through loans from Thungela International
Pty Ltd ("Thungela International") in an aggregate capital sum of
AUD66,828,836, carrying interest at an interest rate of the Australian 3-month
bank bill swap rate +10%, capped at 15% ("Mezzanine Loans").
As part of the acquisition, a long-term incentive plan ("LTIP") was put in
place pursuant to which the Co-Investors' shareholdings in Sungela Holdings
could increase by a further 5% (fully diluted) on certain business milestones
being achieved. To date, 2.5% of the 5% have vested, with the remaining
milestone yet to be fulfilled relating to the award of a mining license and
related environmental approvals for Zone 1 (as defined in paragraph 2 below)
occurring on or before 31 December 2025.
Shareholders are also referred to the announcement by the Company on 28
February 2025 relating to Thungela Australia's acquisition of Bowen Investment
(Australia) Pty Ltd 15% interest in the Ensham Business.
2. The Transaction
Thungela Australia has today entered into sale and purchase agreements with
each of the Co-Investors to acquire their respective interests in Sungela
Holdings, including the unvested LTIP interests ("Transaction"). Each sale and
purchase agreement is separate, but is subject to a right in favor of Thungela
Australia to cross-cancel both agreements should either sale fail to occur or
be cancelled for reasons other than Thungela's breach.
In each sale and purchase agreement, the purchase consideration payable in
terms of the Transaction comprises:
a) an upfront amount equal to the balance of the Mezzanine Loans of
AUD81,940,313.39 at 28 February 2025, (settled by Thungela Australia directly
to Thungela International) plus a cash amount of USD862,500. The cash amount
is payable in USD to Audley and in AUD to Mayfair, as determined by the ruling
USD/AUD exchange rate 5 business days prior to closing; and
b) an additional (deferred) conditional consideration ("Additional
Consideration") of up to USD7,766,875 ("Additional Consideration Cap").
The consideration payable will be reduced to take account of any dividends
paid to the Co-investors' from Sungela Holdings prior to closing, with the
first 10% of the dividend applied to reduce the Additional Consideration Cap
and the remainder in reduction of the upfront consideration.
The Additional Consideration will be payable if, and then as from the date on
which, the Ensham Business receives a mining license and related environmental
approvals required for the Ensham Life of Mine Extension Project to extend the
life of the existing underground operations of the Ensham Business to 2037
("Zone 1"). If the Additional Consideration becomes payable, it will be paid
over a 6-year period (or until the Additional Consideration Cap has been
reached). No further payments will be made after the 6-year period, whether or
not the total payments have reached the Additional Consideration Cap.
Payments of the Additional Consideration to the Co-Investors will be made
bi-annually, following the release of the Company's interim and final annual
financial statements, in amounts determined with reference to the tonnes of
coal sold by the Ensham Business, in proportion to Sungela's interest in the
Ensham Business, being 85% of the sold production during the preceding 6-month
period, multiplied by an amount per tonne determined with reference to the
average index price for coal over that period ("Additional Consideration
Rate"). The Additional Consideration Rate applicable to each of Audley and
Mayfair ranges from zero, at average coal prices below USD115 per tonne, to
USD1.275, at average coal prices at or above USD170 per tonne during the
preceding 6 months.
The acquisition of Bowen Investment (Australia) Proprietary Limited's
remaining 15% interest announced on 28 February 2025, together with the
Transaction, once fully implemented, will result in Thungela owning and
controlling 100% of the Ensham Business.
3. Rationale for the Transaction
From inception of the Original Transaction, Thungela has always emphasised the
importance of its geographic diversification strategy into Australia, which
continues to enhance the Group's production profile and earnings. We remain
pleased with the operational performance of the Ensham Business as we continue
to utilise our technical and marketing capabilities to create further value
for the Group. In line with our strategic priorities, the Ensham Business
continues to enable Thungela to sell coal into new markets such as Japan and
Malaysia, diversifying our customer base and providing exposure to the
Newcastle Benchmark coal price.
4. Conditions precedent
The Transaction is subject to the fulfilment or waiver (as applicable) of the
following conditions precedent contained in the sale and purchase agreements
by 31 August 2025:
a) Foreign Investment Review Board approval
The Treasurer of the Commonwealth of Australia having exercised its powers in
terms of the Foreign Acquisitions and Takeovers Act 1975 and has not objected
to the Transaction.
b) South African Reserve Bank approval
To the extent required, Thungela (or other applicant member of the Group)
having obtained all the necessary consents or permissions for the Transaction
from the South African Reserve Bank.
5. Financial Information
The Transaction involves the investment by Thungela Australia into Sungela
Holdings, and repayment of the Mezzanine Loans. As such, the Transaction has
no incremental net asset value ("NAV"), however will increase the attributable
NAV and attributable net profit after tax ("NPAT").
The Ensham Business had a NAV of AUD395 million (100% basis) as at 30 June
2024, being the date of the last reviewed interim financial statements. The
NPAT attributable to these net assets was AUD27 million (on a 100% basis),
based on the last reviewed interim financial statements as at 30 June 2024
for Thungela Resources prepared in terms of International Financial Reporting
Standards.
6. Other
The intention is to fund the total purchase consideration payable for the
Transaction from the Group's existing net cash resources. The Company expects
to continue to have sufficient liquidity headroom to provide the necessary
support to continue to fund the completion of existing committed projects.
7. Categorisation of the Transaction
The Transaction is categorized as a Category 2 transaction in terms of section
9 of the JSE Listings Requirements. An exchange rate of ZAR18.31:USD was
utilised in respect of the Transaction, being the spot rate of exchange at
close of business on 13 March 2025, the first business day prior to the
signature of the sale and purchase agreements by Thungela.
Johannesburg
14 March 2025
Disclaimer
The information contained within this announcement is deemed by the Company to
constitute inside information as stipulated under the Market Abuse Regulation
(EU) No. 596/2014 as amended by the Market Abuse (Amendment) (EU Exit)
Regulations 2019. Upon the publication of this announcement via the regulatory
information service, this inside information is now considered to be in the
public domain.
Investor Relations
Hugo Nunes
Email: hugo.nunes@thungela.com
Shreshini Singh
Email: shreshini.singh@thungela.com
Media
Hulisani Rasivhaga
Email: hulisani.rasivhaga@thungela.com
South African Attorneys
Webber Wentzel
UK Financial Adviser and Corporate Broker
Panmure Liberum Limited
Sponsor
Rand Merchant Bank
(A division of FirstRand Bank Limited)
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