22nd Mar 2005 07:03
Lonmin PLC22 March 2005 LONMIN PLC AND SOUTHERN PLATINUM CORP ANNOUNCE A CASH BID BY LONMIN TO ACQUIRE SOUTHERN PLATINUM LONDON and TORONTO - March 22, 2005 -- Lonmin Plc ("Lonmin") and SouthernPlatinum Corp. ("Southern Platinum") announce that they have entered into anagreement pursuant to which Lonmin will offer to acquire the outstanding commonshares of Southern Platinum for a cash consideration of C$2.66 per common share.The offer values Southern Platinum at US$190 million. The Board of Directors of Southern Platinum has, upon the recommendation of aspecial committee of its directors established to consider the Lonmin offer,unanimously approved the Lonmin proposal and will recommend that shareholdersaccept the offer. The Board and officers of Southern Platinum have agreed totender their shares to the offer. Southern Platinum's financial advisor, RBCCapital Markets, has advised the Board that the consideration being offeredunder the Lonmin proposal is fair from a financial point of view to SouthernPlatinum shareholders. "The offer by Lonmin provides Southern Platinum shareholders with a premium fortheir investment, payable in cash," said Brad Mills, Chief Executive of Lonmin."It also alleviates concerns about their company's uncertain operations andfinancial position. Discussions have been held with Southern Platinum's bankerswho have agreed to consider granting deferment in the event of Messina being inbreach of financial covenants until the conclusion of the acquisition byLonmin." The benefits of the Lonmin offer for Southern Platinum shareholders include: • A 39% premium over the closing share price on November 23, 2004, the last trading day prior to Southern Platinum's announcement that it was in continuing discussions with its lenders to arrange the restructuring of the Messina project debt facility and that in parallel, Southern Platinum was in discussions with various other parties, including major platinum companies, to replace or eliminate its syndicated project debt facility; • 100% cash consideration and low transaction execution risk; and • A solution to the operating and financial risks facing Southern Platinum and its shareholders. "The Board of Directors of Southern Platinum has pursued and considered severalinvestment and financing alternatives to address Messina's current debt serviceobligations and short-term working capital deficiencies and has concluded thatthe offer from Lonmin is in the best interests of Southern Platinum and itsshareholders," said Dr. Christopher Jennings, Chairman of Southern Platinum. Southern Platinum owns 91.5% of Messina Limited, a company listed on the JSESecurities Exchange. Messina Limited operates the Messina platinum mine on theEastern Limb of South Africa's Bushveld complex, approximately 250 kilometersfrom the Lonmin Platinum operations. The Messina lease area has a strike lengthof 23 kilometers with an attributable PGM resource of about 20 million ounces(5PGE+Au). Current mining operations at Messina are underway on a strike length of fourkilometers and in 2004 Messina produced about 86,300 ounces of 5PGE+Au of whichplatinum production is estimated at 45,000 ounces. Lonmin sees potential forMessina's platinum production to rise to 75,000 ounces per year. In the opinionof Lonmin, sustained production at this level will require additionalexpenditure of about US$75 million over a period of three years on shaftdeepening, underground developments, mechanised mining and processing capacity.After the completion of the acquisition, Lonmin plans to examine the viabilityof additional production from the remainder of the Greater Messina resourcebase. Lonmin also announces that it has reached agreement with Impala PlatinumHoldings Limited ("Implats") to acquire the Messina concentrate off-takecontract for US$15 million in cash plus deliveries of fixed quantities of metalsin concentrate to Implats for approximately 16 months from February 1, 2005,conditional on the successful acquisition of Southern Platinum. Lonmin expectsto smelt and refine Messina concentrate from mid 2006 onwards. Lonmin is capitalised at US$2.8 billion and has proven expertise in platinummine management in South Africa. Benefits of the transaction for Lonmin include: • An improvement in the near-term performance of the Messina mine through the application of Lonmin's financial resources and extensive operating skills; • Removal of smelting value leakage through the purchase of the off-take contract from Implats; • Considerable synergies through smelting the higher copper/nickel Messina concentrate at Lonmin Platinum and through rationalisation of head office costs; and • Future growth through the maximisation of the Greater Messina resource base. The total cost of the acquisition of Southern Platinum will be US$263 millioncomprising the equity value of US$190 million, acquired debt of US$58 millionand the Implats contract of US$15 million. Lonmin will fund the acquisitionusing existing banking facilities. While this will result in higher debt,increasing gearing to 43%, Lonmin expects its interest cover to remain at morethan 10 times, a level with which the Board is comfortable in the currentenvironment. The transaction is expected to be both earnings and cash flowaccretive from fiscal 2007 onwards when the benefits of smelting the Messinaconcentrate will fully accrue. In both fiscal 2005 and 2006, it will bemarginally dilutive to earnings and cash flow excluding amortisation of goodwilland transaction costs. At September 30, 2004, Southern Platinum had net assets of US$148 million. Itreported an EBITDA loss of US$10 million and a net loss after tax of US$26million in the nine months to September 30, 2004. Southern Platinum reported apositive operating profit at Messina for November 2004. Industrial action duringthe current quarter has negatively impacted Messina's production build up andcash flow. The transaction will be subject to customary conditions including that a minimumof 66 2/3% of Southern Platinum shares, on a fully diluted basis, are tenderedto the take-over bid. The agreement between Southern Platinum and Lonminprovides that a break fee of C$6 million will be payable to Lonmin in certaincircumstances. The transaction is also subject to regulatory requirements inboth Canada and South Africa. The offer document is expected to be filed withthe Canadian securities regulators and mailed to shareholders within 15 businessdays. Regulatory approval and completion of the transaction is expected within90 days after the filing of the offer. Lonmin is being advised by BMO Nesbitt Burns Inc., as lead advisor, and JPMorganCazenove Limited. Southern Platinum is being advised by RBC Capital Markets. Information on Lonmin Plc - See Appendix 1 or visit - http://www.lonmin.comInformation on Southern Platinum Corp - visit - http://www.southplats.com Conference CallsLonmin and Southern Platinum management will host joint teleconferences today,March 22, 2005. Newswire Services08:00hrs (London) 10:00hrs (South Africa)Interested Parties should call:UK callers: 020 8609 0205International callers: +44 20 8609 0205 Pin number: 282 782# Members of the Press12:00hrs (London) 14:00hrs (South Africa) 07:00hrs (Toronto)Interested Parties should call:UK callers: 020 8609 0205International callers: +44 20 8609 0205 Pin number: 282 782# Investors and analysts14:00hrs (London) 16:00hrs (South Africa) 09:00hrs (Toronto)Interested Parties should call:UK callers: 020 8609 0205Canadian callers: 1866 270 8076International callers: +44 20 8609 0205 Pin number: 282 782# A presentation summarising this transaction will be available on Lonmin'swebsite, one hour before the Investor teleconference call at www.lonmin.com. Forward Looking Statement: This announcement includes forward-looking statements. All statements other thanstatements of historical fact included in this announcement, including withoutlimitation those regarding Lonmin's plans, objectives and expected performance,are forward-looking statements. Lonmin has based these forward-lookingstatements on its current expectations and projections about future events,including numerous assumptions regarding its present and future businessstrategies, operations, and the environment in which it will operate in thefuture. Forward-looking statements generally can be identified by the use offorward-looking terminology such as "ambition", "may", "will", "expect","intend", "estimate", "anticipate", "believe", "plan", "seek" or "continue" ornegative forms or variations of similar terminology.Such forward-looking statements involve known and unknown risks, uncertainties,assumptions and other factors related to Lonmin, including, among other factors:(1) the risk that the businesses of Lonmin and Southern Platinum will not beintegrated successfully; (2) material adverse changes in economic conditionsgenerally or in relevant markets or industries in particular; (3) fluctuationsin demand and pricing in the mineral resource industry and fluctuations inexchange rates; (4) future regulatory and legislative actions and conditionsaffecting Lonmin's and Southern Platinum's operating areas; (5) obtaining andretaining skilled workers and key executives; and (6) acts of war and terrorism.Forward-looking statements involve risks, uncertainties and assumptions. Actualresults may differ materially from those expressed in forward-lookingstatements. Given these risks, uncertainties, and assumptions, you are cautionednot to put undue reliance on any forward-looking statements. In addition, theinclusion of such forward-looking statements should under no circumstances beregarded as a representation by Lonmin that Lonmin will achieve any results setout in such statements or that the underlying assumptions used will in fact bethe case. Other than as required by applicable law or the applicable rules ofany exchange on which Lonmin's securities may be listed, Lonmin has no intentionor obligation to update any forward-looking statements included in thisannouncement after the release of this announcement. For Further Information:Lonmin PlcJohn Robinson, Chief Financial Officer - +44 20 7201 6032Albert Jamieson, Vice President, Business Development - +27 11 516 1323Jack Jones, Vice President, Business Development - +44 20 7201 6007 Southern Platinum Corp.Patrick Evans, President and CEO - (416) 359-9282 Media Enquiries: Lonmin Plc, United KingdomNadja VetterAnthony CardewCardew Group - +44 20 7930 0777 South AfricaNicholas WilliamsJohannes van NiekerkCollege Hill - +27 11 447 3030 CanadaJohn LuteLute & Company - +416 929 5883 ext 222 APPENDIX 1 INFORMATION ON LONMIN PLC Lonmin is the third largest and the lowest cost primary platinum producer in theworld from its operations on South Africa's Bushveld Igneous Complex, LonminPlatinum. It has an 82% interest in these assets which produce over 900,000ounces of Platinum per annum. The remaining 18% is owned by Incwala Resources, ablack economic empowerment group. Lonmin Platinum operates three mines, a smelter, base metals refinery andprecious metals refinery. Lonmin markets 100% of the metals produced througha wholly owned subsidiary, almost entirely on long term contracts. The mines, smelter and base metals refinery are located in the Marikana districtto the east of the town of Rustenburg in the North West Province of SouthAfrica. Two Platinum -bearing reefs of UG2 and Merensky are mined simultaneouslyin the lease area over a strike of some 27 kilometers at an average depth of 360meters. Underground mining predominates, although open cast mining is beingcarried out at all three mines. The precious metal refinery is situated inBrakpan in the Gauteng Province. Lonmin and Black Economic Empowerment (BEE) In 2003 the South African Government's Department of Minerals and Energy ("DME")unveiled its Charter for Broad-Based Socio Economic Development in the MiningIndustry. Lonmin and Lonmin Platinum are fully committed to this and the SouthAfrican Government's objectives for BEE in general. In December 2004, Lonmin Platinum submitted its application for the conversionof its mining licenses to DME; this includes plans to achieve various targetsfor employment equity, women in mining, procurement, human resource development,social investment, etc. In September 2004, Lonmin was instrumental in creating Incwala Resources, acompany which is owned, managed and controlled by Historically DisadvantagedSouth Africans ("HDSA"). Incwala has some 50,000 HDSA beneficiaries. Incwalaowns 18% of Lonmin Platinum, empowering it with BEE ownership credits in termsof the Charter. Lonmin's vision is to create value by the discovery, acquisition, developmentand marketing of mineral and metals, but at the same time respecting thecommunities and nations that host its operations and conducts its business in asustainable, socially and environmentally responsible way.End This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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