13th Oct 2005 07:00
Anglo American PLC13 October 2005 ANGLO AMERICAN PLC(Incorporated in the United Kingdom)(Registration number 3564138)(Share code: AGL ISIN: GB0004901517)("Anglo American") KUMBA RESOURCES LIMITED(Incorporated in the Republic of South Africa)(Registration number 2000/011076/06)(Share code: KMB ISIN: ZAE000034310)("Kumba Resources") EYESIZWE MINING (PROPRIETARY) LIMITED(Incorporated in the Republic of South Africa)(Registration number 1999/008022/07)("Eyesizwe Mining") Joint announcement relating to a proposed empowerment transaction in respect ofKumba Resources ("The Transaction") and cautionary annouNcement TRANSACTION HIGHLIGHTS: The proposed empowerment transaction will result in: * a fully funded, sustainable black economic empowerment ("BEE") transaction andthe potential to unlock value for all Kumba Resources shareholders throughthe partial separation of the iron ore assets from the non iron ore assets intoKumba Iron Ore (a newly named company) and Newco (being the reconstituted KumbaResources pursuant to the Transaction), respectively; * the establishment of Newco as South Africa's flagship empowerment company withan enterprise value of approximately R16 billion: # South Africa's largest black-owned, controlled and managed company; # Newco will continue to be listed on the JSE Limited ("JSE"); # control of Newco by broad-based BEE groups representative of South Africa's demographics via BEE Holdco, the black controlled holding company holding 55% of Newco; # a 17.8% effective and fully funded interest held by women's groups in BEE Holdco; # Newco employees holding 3% of Newco through an employee share option programme ("ESOP"), whose major beneficiaries will be black employees; # the minimum BEE ownership requirements of the Mining Charter being significantly exceeded; # Newco as a diversified mining company with an attractive investment case which is well positioned strategically and financially to take advantage of growth opportunities in the mining sector in South Africa, on the rest of the African continent and globally; * the provision of facilitation to the BEE groups by Anglo American, TheIndustrial Development Corporation of South Africa Limited ("IDC") and KumbaResources minorities; * a targeted spread on the JSE of 25% for Newco; * the retention by Anglo American of a residual stake in Newco as ademonstration of its long-term commitment to Newco; * the creation of Kumba Iron Ore as a pure play iron ore company listed on theJSE with an enterprise value of approximately R14 billion which, through theunbundling to all existing Kumba Resources shareholders of the iron ore assets,will hold the majority of Kumba Resources' South African iron ore assetsthrough Sishen Iron Ore Company (Proprietary) Limited ("SIOC"), with Newcoretaining a 20% stake in SIOC; * Northern Cape broad-based community groupings ("Northern Cape communitygroup") acquiring a 3% interest in SIOC on a fully funded basis; and * SIOC employees holding 3% of SIOC through an ESOP, whose major beneficiarieswill be black employees. TRANSACTION SUMMARY: The Transaction * 80% of Kumba Resources' interest in SIOC will be transferred to a newly namedcompany, Kumba Iron Ore, and unbundled to all existing Kumba Resourcesshareholders. Pursuant to the Transaction there will be two separate listedentities, namely: # Newco, which will have significant coal, heavy minerals and zinc assets, together with a 20% holding in SIOC; and # Kumba Iron Ore which will own 74% of Kumba Resources' South African iron ore operations, held through SIOC, after the Northern Cape community group and ESOP transactions. * Kumba Resources' existing shareholders will hold shares in both listedcompanies in proportion to their existing shareholdings in Kumba Resourcesprior to the various steps required to implement the Transaction. * Newco will acquire the entire issued share capital of Eyesizwe Coal(Proprietary) Limited ("Eyesizwe Coal") from Eyesizwe Mining and the othershareholders in Eyesizwe Coal. All the Eyesizwe Coal shareholders will,through a Special Purpose Vehicle ("SPV"), utilise the majority of the cashreceived to subscribe for shares in BEE Holdco. * Consortia led by Eyabantu Capital (Proprietary) Limited ("Eyabantu"),TisoGroup (Proprietary) Limited ("Tiso") and South African Women in MiningAssociation ("BEE Women's Groups"), through SPVs, and the IDC will subscribe forshares in BEE Holdco through the injection of either cash or Newco shares. * BEE Holdco will, through a series of inter-conditional transaction steps,acquire and exercise control over 55% of Newco's issued ordinary sharecapital. * Shares in Newco, being approximately 3% of its issued ordinary sharecapital, will be made available to employees of Newco through a Newco ESOP,the majority of the beneficiaries of which will be black employees.Accordingly, BEE Holdco together with the Newco ESOP will hold 58% of Newco. * The Northern Cape community group will acquire a vendor funded interest ofapproximately 3% in the issued ordinary share capital of SIOC. * Shares in SIOC, being approximately 3% of its issued ordinary share capital,will be made available to employees of SIOC through a SIOC ESOP, themajority of the beneficiaries of which will be black employees. The other transactions * As separate and independent transactions: # Kumba Resources has made a proposal, recommended by the independent directorsof the Ticor Limited ("Ticor") board, subject to no superior offer beingreceived and Ticor minority shareholder and Australian court approval, toacquire, for cash, the outstanding shares (48.8%) in Ticor which it does notalready own through a scheme of arrangement in terms of the AustralianCorporations Act; and # Anglo American will, subject to certain conditions, including theimplementation of the Transaction, grant options to Newco to acquire 100% ofNamakwa Sands (heavy minerals assets) and 26% of Black Mountain and Gamsberg(zinc assets) at a fixed price, in addition to an offtake agreement in respectof zinc concentrate. KEY INVESTMENT HIGHLIGHTS: As a result of the above transactions and assuming that Newco exercises theoptions set out above, Newco would: * have an enterprise value of approximately R16 billion; * become the second largest titanium slag producer and the third largesttitanium feedstock and zircon supplier globally; * be the fourth largest coal producer in South Africa producing 45 milliontonnes of coal per annum; * strengthen its leading position in the Southern African zinc market; * have a significant interest in iron ore through its 20% stake in SIOC; * have a significant greenfield and brownfield project pipeline to exploit itssignificant reserve and resource base; and * have significant financial capacity to expand its business with a net debtlevel of R0.8 billion initially, and increasing to R3.25 billion afterexercising the options, implying debt levels of 20% of enterprise value. Following the unbundling Kumba Iron Ore will: * have an enterprise value of approximately R14 billion; * offer significant growth opportunities particularly in South Africa withproduction targeted to increase from 32 to 42 million tonnes per annum by2008; and * be a subsidiary of the Anglo American group. THE TRANSACTION 1. Introduction The boards of Anglo American and Kumba Resources ("the Companies") are pleasedto announce that a binding transaction framework agreement has been enteredinto by the Companies and the ultimate shareholders of BEE Holdco, comprisingEyesizwe Mining (the vehicle housing the Historically Disadvantaged SouthAfricans' ("HDSA") shareholdings of Eyesizwe) and other minority shareholdersin Eyesizwe Coal (being primarily Anglo American, BHP Billiton Plc ("BHPBilliton") and the Eyesizwe Coal Employees Share Trust), the Eyabantu and Tisoconsortia, the BEE Women's Groups and the IDC, regarding a series oftransactions which, if implemented, will result in the transfer of a controllingstake in Newco to a black-owned and controlled vehicle through a fullyfunded and sustainable BEE transaction. 2. Strategic rationale Since its establishment in 2001, Kumba Resources has viewed BEE as a strategicimperative to enable the company to become truly South African. Accordingly,Kumba Resources' strategy was to: * establish a premier, independent South African mining house; * build a credible empowerment base for the company; and * position the company to play a constructive role in the transformation anddevelopment of the South African mining industry. Kumba Resources' Pre-Listing Statement dated 29 October 2001 noted thefollowing: "Kumba Resources views BEE as a fundamental prerequisite for thelong-term development and stability of the South African economy. Therefore, a distinguishing feature of its strategy is to commit thecompany to meaningful and sustainable BEE empowerment initiatives in allfacets of its business. Progressive empowerment policies, the setting ofaggressive employment equity targets and BEE are integral components of thecompany's value system and a code of conduct." Similarly, Anglo American and the IDC, as the major shareholders in KumbaResources and as significant participants in the South African economy, arefully supportive of the letter and spirit of the Mineral and PetroleumResources Development Act and the Mining Charter and have, accordingly, playeda key role in the introduction of meaningful and sustainable BEE in KumbaResources. To achieve this strategic objective, the Companies and the IDCjointly developed the Transaction to establish Newco as the premier empowermentdiversified mining company in South Africa, with a strong investment case,capable of sustainable growth and representative of South Africa'sdemographics. Whilst the Mining Charter prescribes BEE ownership targets of 15% by 2009 and26% by 2014, the Transaction will significantly exceed the requirements of theMining Charter, through: * the establishment of Newco as a premier 58% black-owned, controlled andmanaged diversified mining company in South Africa, listed on the JSE; and * the empowerment of Kumba Resources' separately listed iron ore assets through26% black ownership of SIOC on day-one. The Companies believe that the separate listing of Kumba Resources' iron oreassets will unlock value for all Kumba Resources shareholders through thecreation of a pure iron ore play via Kumba Iron Ore and South Africa's flagshipempowerment company via Newco. In addition, Newco will be positioned forgrowth through strategic acquisitions, including the immediate acquisition of100% of Namakwa Sands and part of the business of Black Mountain based on itsfinancial capability and empowerment status. Since the creation of Eyesizwe Coal, sponsored and facilitated by AngloAmerican and BHP Billiton, it has proven to be a successful black-owned andmanaged company with shareholders' value having increased significantly. TheBEE shareholders of Eyesizwe Coal believe that they can leverage their successinto the establishment of Newco and simultaneously diversify their exposurefrom a single commodity to a diversified mining company. The non-BEEshareholders of Eyesizwe Coal are fully supportive of this initiative. 3. The current and proposed Newco Group structure For a diagrammic explanation of the current Kumba Resources Group structureand the proposed Newco Group structure pursuant to the Transaction please referto the paid announcement to be published on 14 October 2005. 4. The Transaction 4.1 The Transaction The Transaction, which is subject to the fulfilment or waiver (if possible) ofthe conditions precedent detailed in paragraph 11, comprises the followingseries of indivisible and inter-conditional transaction steps which willeffectively be implemented simultaneously: Step 1 Kumba Resources will transfer 80% of the issued ordinary shares in SIOC toKumba Iron Ore, a wholly-owned subsidiary of Kumba Resources, in exchange forordinary shares in Kumba Iron Ore. Step 2 Kumba Resources will unbundle, by way of a dividend or payment under section90 of the South African Companies Act, the entire issued ordinary share capitalof Kumba Iron Ore to Kumba Resources' existing shareholders. Simultaneously theissued ordinary shares in Kumba Iron Ore will be listed on the JSE by way of anintroduction. Step 3 Kumba Resources will make an offer to repurchase from all Kumba Resourcesshareholders, pro rata to their existing shareholding, by way of a specificbuy-back, so many ordinary shares in Newco ("ex" the entitlement to the KumbaIron Ore distribution) as can be repurchased with a maximum aggregate amountof R1 620 million (after paying STC of R203 million). All Kumba Resourcesshareholders will be afforded the opportunity to tender excess shares into theoffer for pro rata acceptance to the extent that some shareholders may electnot to participate in the buy-back offer. To the extent required, Anglo South Africa Capital (Proprietary) Limited("ASAC"), an indirectly wholly-owned subsidiary of Anglo American and theholder of Anglo American's shares in Kumba Resources, has undertaken to offerto sell such additional shares in the buy-back following the pro-rata offer soas to ensure that the maximum percentage of Newco ordinary shares which can bebought back in the buy-back offer, in aggregate, is repurchased. The consideration payable per ordinary share repurchased in the buy-back ("thebuy-back price") will be determined by applying a 24.44% discount to theprojected market value of the shares in Newco following the unbundling of theKumba Iron Ore shares, calculated with reference to the 30-day volume weightedaverage price of Kumba Resources shares as at the last practicable date priorto the posting of the Transaction documentation to Kumba Resources shareholders. Step 4 Eyesizwe Mining and the other shareholders of Eyesizwe Coal (including ASAC andBHP Billiton) will sell their ordinary shares in Eyesizwe Coal to Newco forR1 582 million in cash. Such proceeds, net of inter alia an approximateR100 million retention, any tax liability and other statutory costs, will beused to subscribe for ordinary shares in Eyesizwe SPV which in turn willsubscribe for 54 484 189 ordinary shares in BEE Holdco (constituting 54.48% ofBEE Holdco after the implementation of the Transaction), at a price ofR25.62 per share and an aggregate subscription price of R1 396 million. Step 5 The Tiso SPV (with funding support provided by Nedbank Capital, a division ofNedbank Limited ("Nedbank") and The Standard Bank of South Africa Limited) andthe Eyabantu SPV (with funding support provided by Nedbank) will each subscribefor 9 757 896 BEE Holdco ordinary shares at R25.62 per share in cash and anaggregate subscription price of R250 million each, constituting a 9.76%shareholding for each of the Tiso and Eyabantu SPVs in BEE Holdco after theimplementation of the Transaction. The IDC will facilitate the BEE Women's Group SPV's subscription for shares inBEE Holdco by selling 6 889 329 of its Newco shares to the BEE Women's GroupSPV in exchange for preference shares in the BEE Women's Group to the value ofR282 million. The BEE Women's Group SPV will, in turn, sell all of the Newcoshares so acquired to BEE Holdco in exchange for the issue of 11 000 000ordinary shares in BEE Holdco (11% of BEE Holdco after the implementation ofthe Transaction) at R25.62 per share and an aggregate subscription price ofR282 million. Step 6 The IDC will sell 35 370 671 Newco ordinary shares to BEE Holdco for a purchaseprice of R1 447 million. The purchase consideration will be settled by theissue of 15 000 000 ordinary shares in BEE Holdco at an issue price of R25.62per share and an aggregate issue price of R384 million and the balance of theconsideration will be settled by the issue by BEE Holdco of preference shares.Following the implementation of the Transaction, the IDC will hold 15% of BEEHoldco's issued ordinary share capital. Step 7 Newco will issue 55 718 339 ordinary shares, comprising 17.25% of Newco'sissued ordinary share capital after the implementation of the Transaction, toBEE Holdco, for a cash consideration of R1 711 million, representing asubscription price of R30.70 per Newco share. The subscription price of R30.70 per Newco share represents a 27% discount tothe projected market value of the ordinary shares in Newco following thedistribution of the Kumba Iron Ore shares. This was calculated with referenceto the 30 trading day volume weighted average price at which a Kumba Resourcesshare had traded on the day prior to the date on which the Kumba Resourcescautionary announcement was issued, being 22 September 2005, and "ex" theentitlement to the Kumba Iron Ore distribution. Step 8 The Northern Cape community group will acquire a 3% shareholding in the issuedshare capital of SIOC from Kumba Iron Ore for a consideration of R458 million,to be settled through the issue of preference shares by the Northern Capecommunity group or an appropriate vehicle to Kumba Iron Ore. In addition, the SIOC ESOP will purchase from Kumba Iron Ore a 3% shareholdingin the issued share capital of SIOC from Kumba Iron Ore on terms and conditionsand at prices that are still to be agreed. Step 9 ASAC will sell 79 717 416 million of its Newco ordinary shares to BEE Holdcofor R2 850 million. The purchase price of R35.75 per Newco share representsa 15% discount to the projected market value of the ordinary shares in Newcofollowing the distribution of the Kumba Iron Ore shares. This was calculatedwith reference to the 30 trading day volume weighted average price at whicha Kumba Resources share had traded on the day prior to the date on which theKumba Resources cautionary announcement was issued, being 22 September 2005,and "ex" the entitlement to the Kumba Iron Ore distribution. The purchase consideration will be settled by the issue by BEE Holdco ofvariable rate redeemable preference shares to ASAC, redeemable in full at theend of seven years and entitling ASAC to a dividend equal to all the ordinarydividends paid during the seven year period on the Newco shares sold by ASAC. Step 10 The Newco ESOP will subscribe for 3% of Newco's issued share capital after theimplementation of the Transaction, on terms and conditions and at prices thatare still be to agreed. 4.2 Other transactions The Ticor transaction As a separate and independent transaction, Kumba Resources has proposed toacquire the outstanding shares (48.8%) in Ticor which it does not alreadyown for cash through a scheme of arrangement in terms of the AustralianCorporations Act. In this regard, Kumba Resources shareholders are referred to the KumbaResources announcement dated 8 August 2005 and the subsequent cautionaryannouncement dated 23 September 2005. The Namakwa Sands and Black Mountain transactions In order to position Newco strategically as a leading global supplier oftitanium dioxide and zircon, strengthen its position in the South African zincmarket and to further enhance the Newco investment case, Anglo American hasagreed, on the proviso that Newco becomes fully empowered and subject tocertain conditions, to grant options to Newco to acquire certain Anglo Americanassets. Accordingly, as separate and independent transactions, but simultaneously withthe Transaction, Anglo Operations Limited, an indirectly wholly-ownedsubsidiary of Anglo American, will grant fixed price options to Newco,exercisable within a period of 90 days from the completion date of the Transaction, giving Newco the rights to acquire: i. the entire Namakwa Sands business and assets for a cash consideration ofR2 125 million; and ii. a 26% undivided share in the assets and businesses of Black Mountain andGamsberg for an aggregate cash price of R180 million, in addition to anofftake agreement in respect of zinc concentrate. 5. Change of control in Newco and waiver of mandatory offer Pursuant to Steps 3, 5, 6, 7 and 9, BEE Holdco will acquire in excess of35% of the issued ordinary shares of Newco. The Securities RegulationPanel ("SRP") has indicated that it will give a written ruling in termsof Rule 8.1 of the Securities Regulation Code on Take Overs and Mergers("the SRP Code") allowing BEE Holdco to dispense with the requirement toextend a mandatory offer to Kumba Resources minority shareholdersprovided a simple majority of the independent Kumba Resourcesshareholders, in general meeting, waive the requirement for a mandatoryoffer by BEE Holdco ("the whitewash resolution"). If the whitewash resolution is not passed, BEE Holdco shall extend amandatory offer to the Kumba Resources minorities for a consideration ofeither : * R40.91 per Newco share, to be settled by BEE Holdco through the issue ofordinary shares and a range of preference shares in BEE Holdco (as issued toASAC, the BEE Women's Group SPV and the IDC), the combination of which isstill to be determined; or * the buy-back price per Newco share payable in cash by BEE Holdco, whichwill be determined by applying a 24.44% discount to the projected marketvalue of the shares in Newco following the unbundling of the Kumba IronOre shares, calculated with reference to the 30-day volume weighted averageprice of Kumba Resources shares as at the last practicable date prior tothe posting of the Transaction documentation to Kumba Resources shareholders. The cash consideration payable by BEE Holdco under the mandatory offer shall befunded by ASAC, or such other Anglo American subsidiary as appropriate. 6. JSE spread requirements Kumba Resources does not currently comply with the shareholder spreadrequirements contained in the JSE Listings Requirements. This will continue tobe the case after the Transaction, irrespective of whether the minorityshareholders in Kumba Resources vote in favour of the 'whitewash resolution'discussed in paragraph 5 or not. The Companies have undertaken to the JSE thatall reasonable commercial endeavors will be used for Newco to achieve atargeted spread of 25% of its shares held by shareholders defined as public interms of the Listings Requirements of the JSE within an agreed timeframe. 7. Opinions and recommendations As steps 3, 5, 6, 7 and 9 collectively constitute an affected transaction interms of the SRP Code, the board of directors of Kumba Resources will appointan independent adviser to advise the Kumba Resources minority shareholders inrespect of the Transaction. 8. Overview of the BEE participants The Companies jointly selected Eyesizwe Mining, the Eyabantu Consortium, theTiso Consortium, the BEE Women's Group and the Northern Cape community groupas their BEE investors. The selection process involved the assessment of theseBEE investors against certain criteria agreed by the Companies. Eyesizwe Mining, the primary participant in the Eyesizwe SPV, was selected asthe lead BEE participant, given its proven leadership, managerial andoperational track record in the mining sector as well as its strong broad-basedrepresentation. 8.1 Eyesizwe SPV The Eyesizwe SPV, which will be controlled by Eyesizwe Mining, will acquire54.48% of BEE Holdco. % in Eyesizwe SPV Effective % in BEE Holdco Eyesizwe Mining 66% 36.0%Coal Employees Trust 10% 5.4%AngloCoal 11% 6.0%BHP Billiton 9% 4.9%Other 4% 2.2% 100% 54.5% Eyesizwe Mining, controlled by Eyesizwe Holdings, is a 100% black-owned andmanaged company, founded by Sipho Nkosi in 1999 through the formation ofNewCoal (renamed Eyesizwe Coal) established by Anglo American and BHPBilliton. Other shareholders in Eyesizwe Mining, which collectively accountfor 62.5% of Eyesizwe Mining's issued share capital, include broad-basedgroupings such as the investment arm of Nehawu, represented through theTshedza Trust, some 250 000 beneficiaries linked primarily to the health andeducation sectors of the economy, the National Movement of Rural Women, anon-profit organisation supporting women and rural communities throughout SouthAfrica and particularly around the mines in which Eyesizwe operates, and anumber of youth organisations and trusts representing youth developmentprogrammes and youth clubs on a national basis. 8.2 Eyabantu Consortium The Eyabantu Consortium, led by Eyabantu, will acquire 9.76% of BEE Holdco. % in consortium % in BEE Holdco Eyabantu 46.6% 4.5%Northern Cape Trusts and investors 35.4% 3.5%South African Womenin Mining Association ("SAWIMA") 3.8% 0.4%South African Womenin Mining Investment Holdings("SAWIMIH") 5.1% 0.5%Xiphemu Investments 5.1% 0.5%Pinkie Ncetezo 4.0% 0.4% 100.0% 9.8% Eyabantu Capital, a 100% black-owned and managed company, is a new generationempowerment company, comprised of experienced individuals with a proven trackrecord in mining, engineering, project management and finance. The company'sfounding members and shareholders, who collectively own 46.6% of the EyabantuConsortium, include Nchakha Moloi, Rain Zihlangu, Phuthuma Nhleko, ZolisileMapipa, Nomveliso Toyi, Pontso Maruping and Nonkqubela Mazwai. 8.3 Tiso Consortium The Tiso Consortium, led by Tiso, will acquire a 9.76% interest in BEE Holdco. % in Consortium % in BEE Holdco Tiso 71.3% 7.0%Northern Cape Mining Partnership 7.5% 0.7%Jay & Jayendra Group 2.5% 0.2%Nozala Investments (Pty) Ltd 15.0% 1.4%Northern Cape - National Movementof Rural Women 3.7% 0.4% 100.0% 9.8% Tiso, which owns 71% of the consortium, is a majority black-owned andcontrolled empowerment investment holding company with key investments in thenatural resources, industrial and financial services sectors. Tiso is comprisedof experienced individuals with a proven track record in corporate and projectfinance advisory, strategic and operational management and private equity. 8.4 BEE Women's Groups The Companies are committed to increasing the level of participation of womenwithin the mining industry. Whilst 6.8% of BEE Holdco's share capital isindirectly held by women's groups participating in Eyesizwe Mining (3.6%), theEyabantu Consortium (1.4%) and the Tiso Consortium (1.8%), the Companiesresolved to allocate an additional direct interest of 11.0% in BEE Holdco towomen's groups. Accordingly, approximately 17.8% of BEE Holdco will be held bywomen's groups. These groups and their attributable economic interests in BEEHoldco's share capital will be as follows: % in BEE Holdco Direct Indirect Total National Movement of Rural Women 2.3% 3.6% 5.9%Malibongwe Women's DevelopmentOrganisation 2.2% - 2.2%SAWIMA 2.2% 0.4% 2.6%Xiphemu Investments - 0.5% 0.5%SAWIMIH 1.9% 0.5% 2.4%Nozala Investments 1.9% 1.4% 3.3%Northern Cape - National Movementof Rural Women 0.5% 0.4% 0.9% 11.0% 6.8% 17.8% The 11% stake will be held through Basadi Bakopane Investments (Proprietary)Limited, an SPV ("BEE Womens Groups SPV") which will be co-ordinated bySAWIMA as spokesperson for the SPV, via SAWIMIH. * South African Women in Mining Association ("SAWIMA") SAWIMA, launched in December 1999, is a non-profit organisation representinginterests of South African women in mining and related fields. Thebeneficiaries of SAWIMA are women spanning all the provinces in South Africawho pay membership fees and in return receive training and development inmining related ventures. * South African Women in Mining Investments Holdings ("SAWIMIH") SAWIMIH is an investment associate of SAWIMA and was registered in October2003. SAWIMIH is a majority black women owned and managed company, whose visionis to be the leading broad-based women mining investment company in Africa. Thecompany's mission is to empower women in the mining sector by participating andinvesting in ventures that will create value for its shareholders. * Malibongwe Women's Development Organisation ("Malibongwe") Malibongwe is a non-government, non-profit organisation that is committed tosocially and economically developing and empowering South African women, with aparticular emphasis on previously disadvantaged women in both rural and urbanareas. Malibongwe runs a number of community projects such as home based carefor HIV/AIDS sufferers, caring for HIV/AIDS orphans and income generation forwomen. Malibongwe has ten Commissions aimed at empowering women in fields suchas construction, security, health, capacity building, fruit gardening,manufacturing, cleaning, child minding and home based care. The organisationacts as a catalyst in building bridges between women in rural and urban areas. Malibongwe has no shareholders. Profits that accrue to the organisation areused for the sole benefit of its development projects. Recent projects havebenefited a number of women and include HIV/AIDS management and educationprograms, income generation projects, poverty alleviation and food distributionprojects. Malibongwe is chaired by Ms N V Gxowa, an esteemed leader of the Women RightsMovement and a community builder since the 1950's. * National Movement of Rural Women ("NMRW") NMRW is a non-profit organisation which focuses on empowering women on anational basis, through community-based projects, capacity building, trainingand skills development, HIV/AIDS awareness and other gender specificinitiatives. NMRW, which has a membership of 1000 women, has a strong presencein all nine provinces of South Africa and has active Chapters in Mpumalanga,Limpopo, Free State and the Northern Cape. The direct beneficiaries of theprojects are approximately 1 500 and 2 000 indirectly. NMRW also owns a 10%interest in Eyesizwe Mining. The Northern Cape Chapter of NMRW hasapproximately 100 members that work on the projects in the region. * Nozala Investments (Proprietary) Limited ("Nozala Investments") Nozala Investments is a broad-based investment company, which is 100%-owned bywomen. The company, which has a national membership of over 500 000 women, aimsto actively promote the economic advancement of women. 26% of the company isheld by national broad-based empowerment shareholders which include the NMRW,representing more than 250 000 beneficiaries, the Workers Investment Corporation an investment vehicle involved in education and training anddesigned to benefit individual worker members, representing 200 000beneficiaries and the Muthande Society for the Aged, a community basedorganisation founded by a group of health nurses and educators to developcommunity resources to assist elderly and HIV affected families andrepresenting 2 500 beneficiaries and Umanyano Lwentandazo Lwamanina, aChristian women's guild representing 100 000 women and aimed at identifyingwith projects within the church that support the poor. Other BEE womenshareholder groups are Akhona Trade & Investment, Kwazulu Natal grouprepresenting 3 000 women, Mmathari, Itumeleng, Katekani and SequoiaInvestments. * Northern Cape - National Movement of Rural Women ("NC-NMRW") NC-NMRW is a non-profit organisation which focuses on the development of ruralwomen in the Northern Cape. The organisation owns a 3.75% interest in the TisoConsortium. NC-NMRW is involved in training and skills development, povertyalleviation and job creation projects, health education and HIV awareness,and support to basic housing needs. The current projects have benefited over2 000 households. * Xiphemu Investments (Proprietary) Limited ("Xiphemu Investments") Xiphemu Investments has been incorporated as a black owned women empowermentSPV in terms of which three SAWIMA member companies will participate in theTransaction. 8.5 Northern Cape community group The Northern Cape community group is a broad-based empowerment groupingrepresenting an estimated 200 000 historically disadvantaged individualsfrom the Northern Cape community, an area that is geographically relevantto Kumba's iron ore operations. The Northern Cape community group willacquire a 3% interest in SIOC from Kumba Iron Ore and participants of thegroup will comprise: * Kgalagadi Poverty Node Charitable Trust ("Kgalagadi Trust") The Kgalagadi Trust is a broad-based development trust representing 181 000beneficiaries. The trust focuses on alleviating poverty in the Kgalagadidistrict by supporting community projects that benefit a broad range ofbeneficiaries. * Maphalane Disabled People's Trust The Maphalane Disabled Children's Trust has been formed specifically to lookafter the interests of disabled people in the Northern Cape and particularlythose communities affected by the mining operations.The trust has amongst its beneficiaries a multi-purpose centre used for thetraining of parents whose children live with disabilities. The trust alsofacilitates and assists in the taking care of abandoned disabled children frominformal settlements and rural areas as well as disabled AIDS orphans, avulnerable sector of children often overlooked in the fight against thepandemic. Currently the trust has 2000 beneficiaries. * Gamagara Development Forum ("Gamagara Forum") The Gamagara Forum is a non-profit organisation that serves as the planning andlocal development co-ordination platform for the areas surrounding Sishen Mineand has as its beneficiaries and estimated 25 000 people in the communities ofDeben, Sishen, Katu, Dingleton and Olifantshoek. * Tsantsabane Social and Labour Development Forum ("Tsantsabane Forum") The Tsantsabane Forum is a non-profit community organisation in the Postmasburgregion for the benefit, welfare, maintenance, improvement and development ofwomen in the community of Tsantsabane Municipality. The Tsantsabane Forum ischaired by the Mayor of Postmasburg. The Tsantsabane Forum's beneficiaries areapproximately 10 000. 9. Funding BEE Holdco will source funding as follows: Equity R2.5 billionSenior Debt R1.6 billionMezzanine Debt R1.1 billionIDC Preference Shares R1.1 billionAnglo Finance Preference Shares R2.9 billionTotal R9.2 billion BEE Holdco will use the funding sourced as follows: Loan to Anglo Finance R2.9 billionNewco shares R6.3 billionTotal R9.2 billion To the extent that Newco exercises the options set out in paragraph 4.2 and theacquisition of the minority interests in Ticor is approved, it will make thefollowing acquisitions totaling R5.2 billion: Minority interests in Ticor R1.3 billionEyesizwe Coal R1.6 billionNamakwa Sands business and assets R2.1 billion26% of Black Mountain and Gamsberg R0.2 billionTotal R5.2 billion In addition, Newco will undertake a specific pro rata share buy-back ofR1.8 billion (including STC). Newco will source the funding for the above acquisitions (R5.2 billion) and theshare buy-back (R1.8 billion) as follows: Loan repayments and special dividend from SIOC R2.8 billionShare subscription by BEE Holdco R1.7 billionSenior debt from third party banks* R2.2 billionVendor finance in respect of the Namakwa Sands purchase* R0.3 billion *Newco will have R0.8 billion of net debt post the unbundling of Kumba Iron Ore. To the extent that Newco exercises the options as set out in paragraph4.2 and acquires the minority interests in Ticor, Newco will have net debt ofR3.25 billion. The Northern Cape community group's 3% shareholding in SIOC will be vendorfinanced by Kumba Iron Ore through preference shares (R0.5 billion). 10. Facilitation Recognising the level of empowerment, the facilitation cost to Kumba Resourcesshareholders as a percentage of Kumba Resources' market capitalisation is inline with similar BEE transactions in the sector that only met the minimum BEEownership requirements. However, the bulk of the facilitation is being borne byAnglo American through the discount on the sale transactions. In addition,Anglo American and the IDC have played an important role in facilitating themeaningful and sustainable funding of such a landmark transaction. Anglo American, as the majority shareholder in Kumba Resources, will provideits facilitation via: * effectively transferring control in Newco to BEE Holdco via, inter alia, aR2.85 billion sale of shares in Newco to BEE Holdco at a 15% discount inexchange for preference shares and Anglo American's participation in a specificpro-rata share buy-back by Newco at a 24.44% discount; * providing a fixed coupon on the loan from BEE Holdco to enable BEE Holdco toraise competitive financing; * providing R445 million of subordinated debt to BEE Holdco; * accepting a vendor loan of R0.25 billion as part consideration for theNamakwa Sands disposal to Newco, if the option in this regard is exercised; and * to the extent required, providing the funding to BEE Holdco, at no cost, tofinance a mandatory offer to be made by BEE Holdco in terms of the Transactionif the 'whitewash resolution' in paragraph 5 is not approved by Kumba Resourcesshareholders. The IDC, as a key shareholder in Kumba Resources and key facilitator ofempowerment for Government, will: * inject R1 447 million of its Newco shares into BEE Holdco in exchange for a15% minority equity position (R384 million) and preference shares(R1 063 million); and * sell the balance (R282 million) of its Newco shares to the BEE Women's GroupsSPV in return for preference shares in the BEE Womens Groups SPV. These Newcoshares will be sold by the BEE Women's Groups SPV to BEE Holdco in exchange foran 11% shareholding in BEE Holdco. The consideration receivable by the IDC for its Newco shares was determinedwith reference to the 30 trading day volume weighted average price at which aKumba Resources share had traded on the day prior to the date on which theKumba Resources cautionary announcement was issued, being 22 September 2005,and "ex" the entitlement to the Kumba Iron Ore distribution. The Eyesizwe Coal shareholders (including ASAC and BHP Billiton) have agreed toreinvest their net proceeds flowing from the sale of Eyesizwe Coal to Newco,into the Eyesizwe SPV. 11. Conditions precedent Implementation of the Transaction will be subject, inter alia, to: * the completion of satisfactory due diligence reviews;* the obtaining of the required funding;* the signature and becoming unconditional of the requisite legal and funding agreements; * the obtaining of the requisite regulatory approvals;* the obtaining of Kumba Resources shareholder approvals for the Transaction,to the extent required, other than the whitewash resolution; and * the obtaining of all other third party and shareholder approvals, to the extent required. 12. Cautionary announcement A further announcement will be made on the Securities Exchange News Service andin the press as soon as the requisite legal agreements have been signed and thefinancial effects finalised. Accordingly, Kumba Resources shareholders areadvised to exercise caution when trading in their securities until such time asa further announcement is made. Johannesburg13 October 2005 Structuring, financial and debt adviser to Anglo American Deutsche Securities (SA) (Pty) Ltd Member of the Deutsche Bank Group Structuring, financial and debt adviser to Kumba Resources Rand Merchant Bank A division of FirstRand Bank Limited Financial advisers to Eyesizwe PricewaterhouseCoopers Corporate Finance (Pty) Ltd Attorneys to Anglo American Webber Wentzel Bowens Attorneys to Kumba Resources Deneys Reitz Attorneys Attorneys to Eyesizwe Bell Dewar Halland Moforah Nkwe Attorneys Transaction sponsor to Anglo American Deutsche Securities (SA) (Pty) Ltd Member of the Deutsche Bank Group Transaction sponsor to Kumba Resources Rand Merchant Bank A division of FirstRand Bank Limited Sponsor to both Anglo American and Kumba Resources JP Morgan Communications advisers to the Transaction Brunswick Facilitators Idcand BHP Billiton Investment bank to Eyabantu Nedbank Capital Attorneys to the Eyabantu Consortium and the BEE Women's Group Kwinana Nyapotse Inc Corporate law adviser to Kumba Resources CLS Consulting Services (Pty) Ltd ANALYST AND MEDIA PRESENTATION A presentation will be held in the presence of the Minister of Minerals andEnergy at 15h30 CAT today (Thursday, 13 October) to discuss the proposed Kumbaempowerment transaction in the Ballroom at the Park Hyatt Hotel, Oxford Road,Rosebank, Johannesburg. The presentation will be followed by a Q&A sessionwith questions being taken from the floor, via the web and over the phone. Ifyou are unable to attend in person, the presentation can be accessed via: • Summit TV - DSTV channel 55• Webcast - www.KumbaBEE.com• Phone call - Please ask for the Kumba BEE Presentation - numbers below South AfricaToll +2711 535 3600Toll-free 0800 200 648 Playback facility South Africa & Other+27 11 305 2030Code 2084# A conference call for analysts will commence at 17h45 CAT (16h45 BST, 11h45 EST)to discuss technical aspects of the transaction such as the structure andfunding. This call will be hosted by Hugh Thompson, Anglo American, RiaanKoppeschaar, Kumba Resources and the transaction's technical team. This callwill not deal with issues of broader strategy which should be referred to normalcontacts at Anglo American or Kumba. The dial - in numbers for that call are asfollows. Please ask for "Kumba BEE Technical conference call". South AfricaToll +27 11 535 3600Toll-free 0800 200 648 Playback facility +27 11 305 2030Code 2173# Access more information on the transaction website: www.KumbaBEE.com This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Anglo American