IMPALA PLATINUM HOLDINGS LIMITED - Proposed equity capital rising
03 September 2015 8:08
IMPCB 201509030009A
Proposed equity capital rising
Impala Platinum Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration No. 1957/001979/06)
JSE Convertible Bond ISIN: ZAE000175873
Convertible Bond Code: IMPCB
("Implats" or the "Company")
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN
PART, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES,
CANADA AND JAPAN, OR ANY JURISDICTION WHERE TO DO SO WOULD
CONSTITUTE A VIOLATION OF APPLICABLE LAW OR REGULATION
PROPOSED EQUITY CAPITAL RAISING
1. Introduction
The shareholders of Implats (“Implats Shareholders”) are
advised that Implats intends to raise up to ZAR4.0 billion
through the sale of new Implats ordinary shares using an
accelerated bookbuild process ("Specific Issue of Shares for
Cash") subject to market conditions and the necessary
shareholder approvals.
In order to implement the Specific Issue of Shares for Cash,
the approval of Implats Shareholders is required:
- to permit the Company to issue Implats ordinary shares
for cash on a non-pre-emptive basis;
- for certain qualifying shareholders to have the ability
to participate in the Specific Issue of Shares for Cash;
and
- for the approval of certain amendments to the Implats
Memorandum of Incorporation (“MOI”) to cater for amongst
other things the Specific Issue of Shares for Cash.
The Specific Issue of Shares for Cash has been fully
underwritten by UBS Limited (“Underwriter”) and support to
vote in favour of the relevant resolutions at the Implats
shareholders’ meeting has been received from a number of its
shareholders, who in aggregate currently own approximately
49% of the issued share capital of the Company, including,
Coronation Fund Managers Limited ("Coronation"), Royal
Bafokeng Holdings Proprietary Limited ("RBH") and Public
Investment Corporation (SOC) Limited ("PIC"). Furthermore,
Allan Gray, in its capacity as investment manager, has
irrevocably committed to recommend to its clients to vote in
favour of the resolutions for all Implats shares
beneficially held by its clients as at the date of the
general meeting to approve the resolutions. Its clients, and
not Allan Gray, are the beneficial owners of 2.6% of the
issued share capital of Implats.
2. Specific Issue of Shares for Cash
2.1. Specific Issue of Shares for Cash
Subject to market conditions and the necessary
shareholder approvals, it is the intention of Implats to
offer new Implats ordinary shares ("Subscription
Shares") to qualifying investors in order to raise up to
ZAR 4.0 billion.
Qualifying investors can submit their price and volume
orders into a book of demand and a single clearing
price, being the subscription payable in respect of each
of the Subscription Shares ("Subscription Price"), will
be established (the “accelerated bookbuild process”).
Qualifying investors in the Specific Issue of Shares for
Cash will pay the Subscription Price.
2.2. Terms and conditions of the Specific Issue of Shares for
Cash
Subject to the fulfilment of certain conditions
precedent, a maximum number of 171 895 144 Implats
ordinary shares will specifically be issued for cash to
qualifying investors at the Subscription Price to raise
ZAR4.0 billion. To the extent that the Subscription
Shares are not fully utilised in the placement of the
Subscription Shares to Qualifying Investors at the
Subscription Price via the accelerated bookbuild process
(“Bookbuild Placement”), the remainder of the
Subscription Shares will, subject to the underwriting
obligations of the Underwriter, revert back to Implats’
authorised but unissued share capital and will be used
for no other purpose.
Given the Subscription Price will be determined by the
accelerated bookbuild process, subject to the
underwriting arrangements concluded with the Underwriter,
there is no maximum discount at which the Subscription
Shares will be issued.
The Subscription Shares to be issued are of a class of
securities already in issue and will rank equally in
every respect with the existing Implats ordinary shares
in issue.
The proposed Specific Issue of Shares for Cash is subject
to paragraph 5.51 of the Listings Requirements which
provides that the Specific Issue of Shares for Cash must
be approved by a 75% majority of Implats Shareholders
present and voting at the general meeting at which the
proposed Specific Issue of Shares for Cash will be
considered and voted on.
2.3. Related parties
RBH, Coronation and PIC are material shareholders of
Implats and therefore related parties in terms of the JSE
Listings Requirements.
The participation of each of RBH, Coronation and PIC in
the Bookbuild Placement is subject to the approval by
Implats Shareholders by way of separate inter-conditional
resolutions, each requiring a 75% majority approval from
those present and voting at the shareholders’ meeting,
excluding the votes of the relevant related parties and
their associates.
2.4. Underwriting
Implats has entered into an underwriting agreement with
the Underwriter who has agreed to procure investors for,
or, failing which, to subscribe and pay for all the
Subscription Shares. The obligations of the Underwriter
are subject to customary conditions and termination
events of a transaction of this nature (“Underwriting
Agreement”).
2.5. Shareholder support
Implats Shareholders who in aggregate currently own
approximately 49% of the issued share capital of the
Company, including, Coronation, RBH and PIC, have agreed
in respect of the shares they currently own and any
Implats ordinary shares that they may acquire prior to
the general meeting, to support the proposed resolutions
(excluding the relevant resolution they are not entitled
to vote on, if applicable) that are contained in the
notice of general meeting included in the Circular.
Furthermore, Allan Gray, in its capacity as investment
manager, has irrevocably committed to recommend to its
clients to vote in favour of the resolutions for all
Implats shares beneficially held by its clients as at the
date of the general meeting to approve the resolutions.
Its clients, and not Allan Gray, are the beneficial
owners of 2.6% of the issued share capital of Implats.
2.6. Conditions Precedent to and approvals for the Specific
Issue of Shares for Cash
The Specific Issue of Shares for Cash is subject to the
fulfilment of the following conditions precedent:
- Implats Shareholders passing a special resolution to
approve the amendments to the MOI, which amendments
include amendments to cater for the Specific Issue of
Shares for Cash;
- Implats Shareholders passing an ordinary resolution by
a 75% majority of those present and voting at the
meeting giving authority in terms of paragraph 5.51(g)
of the Listings Requirements to allot and issue the
Subscription Shares;
- Implats Shareholders passing the relevant ordinary
resolutions providing specific authorities for RBH,
Coronation and PIC, as Related Parties, to be able to
participate in the Specific Issue of Shares for Cash;
and
- the Underwriting Agreement becoming unconditional in
accordance with its terms.
3. Strategy and use of proceeds
Background
Alongside all major commodities Platinum Group Metals
(“PGM”) prices have been adversely impacted by a number of
factors, including the abrupt slowdown of Chinese economic
growth. The recent sharp decline in PGM prices has
compounded the impact of the prolonged strike in 2014,
which significantly impacted productivity and had a
material, negative effect on the overall financial
position of the Company and its subsidiaries (the
“Group”). Implats is therefore taking decisive action.
Implats had budgeted to reduce operating costs by R930
million, with a capital expenditure target of R5.5 billion
in its 2016 financial year budget cycle. In response to
the rapid reduction in PGM prices since June 2015 the
intention is now to reduce the 2016 operating cost budget
by a further R640 million (giving a total operating cost
reduction in 2016 of R1.57 billion) and the capital
expenditure budget by R1.3 billion.
There will also be accelerated implementation of certain
aspects of the strategy announced in early 2015. Due to
the low PGM prices and a lack of profitability Implats
intends to close 8 shaft and 12 shaft’s mechanised
operations by December 2015. As a result of the revised
capital schedule and envisaged closures Implats is
expecting to reduce production by approximately 180,000
ounces over the next five years. This includes 145,000
ounces from 8 shaft and 12 shaft’s mechanised operations
that would not be profitable in the current price
environment.
It is important to take swift and robust action to manage
the business in line with the price environment, but
Implats continues to believe that the market fundamentals
for PGMs remain attractive over the longer term. There is
limited incremental PGM supply anticipated beyond
increased recycling of above ground stocks whilst demand
is well positioned to benefit from the recovery of the
global economy. Increased uptake is expected from higher
catalytic converter usage with a combination of higher
vehicle demand and more stringent emission standards as
well as the evolution of the Chinese economy increasing
demand for jewellery and other industrial uses of
platinum. In line with current market consensus forecasts,
Implats therefore expects PGM prices to improve over time.
Implats is therefore focused on an action plan that
enhances its ability to operate profitably in the current
lower price environment whilst trying to ensure that short
term actions do not materially prejudice the long term
value of the Group.
3.1 Strategy:
Implats’ key strategic focus areas remain consistent
with the outcome of the strategic review announced
in early 2015, but the relevant action plans have
been re-assessed in light of the current price
environment. The key strategic pillars include:
- Maintaining prudentinvestment through the
cycle;
- Maintaining strategic optionality and
positioning the Group for the future;
- Improving efficiencies/profitability through
operational excellence and safe production;
- Conserving cash, especially while metal prices
remain depressed; and
- Maintaining Implats’ social licence to operate.
3.1.1 Prudent investment through the cycle
Implats believes that long-term sustainable
stakeholder value can be achieved in the PGM
industry through prudent capital investment through
the cycle given limited mineral reserves, long
project time lines and high capital intensity.
Following the prolonged 2014 strike and in light of
the acute decline in PGM prices, the parameters and
balance of short and long term demands have been re-
evaluated. The principal focus is now being placed
on cash preservation and profitability in a lower
price environment. On that basis, the latest 2016
capital budget is being reduced by R1.3 billion to
R4.2 billion.
It nevertheless remains a priority for Implats to
complete key capital projects that are expected to
be value enhancing in the context of the current
price outlook and are also important to the long
term value of the Group. The intention is therefore
to complete the development of 16 and 20 shafts,
which require a rescheduled capital and development
expenditure budget of R3.9 billion across both
shafts over the next three years. In light of the
price environment, however, development at 17 shaft
will be curtailed with capital expenditure reduced
by R235 million in 2016. Outside of these main
projects, capital expenditure at the Impala Platinum
Limited (“Impala”) mining operation located to the
north of Rustenburg on the western limb of the
Bushveld Complex (the “Impala Lease Area”), will be
reduced by approximately R175 million. Capital
expenditure for the Impala Lease Area is planned to
be R2.8 billion, which includes R1.1 billion for
off-reef development expenditure. Elsewhere across
the Group, capital expenditure will be cut by
approximately R45 million at Marula, US$50 million
at Zimplats and US$13 million at Mimosa.
3.1.2 Maintaining strategic optionality
Impala Lease Area
Consistent with the outcome of the strategic review
announced earlier in 2015 it is critical that the
Impala Lease Area be transformed. The intention is
to create a more concentrated mining operation with
access to new, modern shaft complexes making better
use of the invested fixed cost base, with higher
mining efficiencies and lower unit cost.
The old shafts (E/F, 4, 6, 7, 7A, 8 and 9 shafts)
have therefore been consolidated to optimise costs
and realise synergies. These shafts are among the
lowest-cost operations at the Impala Lease Area due
to their relatively shallow mining depth and low
capital requirements and will be mined as quickly as
possible. In the current price environment, both 8
shaft as well as the mechanised operations at 12
shaft are most at risk and the intention is to close
them by December 2015.
There will be some capital rescheduling at 16 and 20
shafts but completion will be prioritised in order
to replace the declining output from other shafts
with cost effective production and to make efficient
use of Impala’s infrastructure. The mid-life shafts
(1, 10, 11, 12 and 14 shafts) are becoming more
reliant on UG2 reef and require increased mineable
face length to improve mining flexibility and
efficiencies to optimise half-level and shaft
capacities. The 16 and 20 shaft complexes provide
access to significant new concentrated ore from the
Merensky Reef to offset the increase in UG2 and this
is expected to allow Impala to attain a mix of 50%
ore from the Merensky Reef to UG2 ore, which is
important for efficient smelter operation.
Given the revised capital schedule and envisaged
shaft closures, expected production will be reduced
by approximately 180,000 platinum ounces over the
next five years. On this basis production from the
Impala Lease Area is expected to be between 815 000
and 830,000 platinum ounces by 2020, rather than the
previous guidance of 850,000 platinum ounces by
2019.
At 17 shaft the focus is now on cash preservation
and planned capital expenditure has been reduced by
R1.5 billion to R520 million over the next two
years. The future development schedule will be kept
under review, but at this reduced level of spending
Implats will retain the flexibility to bring 17
shaft production on stream from 2021. This
represents an eighteen month delay from the previous
plan announced in February 2015 and requires capital
expenditure of approximately R8 billion from 2018 to
2020.
Marula Platinum Proprietary Limited (“Marula”)
Marula is a relatively new, shallow, long-life ore
body with good infrastructure. Implats took a
strategic decision in 2015 to explore the sale of
Marula to realise value in the near term. However,
the sale process was terminated in May 2015 as it
became clear that shareholder value would be better
served through strategic interventions in order to
improve performance. It is expected that Marula will
be cash neutral in the current PGM price
environment.
Zimbabwe
Mining flexibility at Zimplats Platinum Mines
(Private) Limited (“Zimplats”) has been restored and
Zimplats aims to produce 260,000 platinum ounces per
annum in 2016. This is being achieved by re-
deploying production crews from Zimplats’ Bimha mine
to other portals and enhancing production from
opencast operations whilst the Bimha mine is
redeveloped, which is on track for completion by
2018.
Constructive discussions with the Government of
Zimbabwe continue with regard to the implementation
of its indigenization policy and a two year deferral
of the 15% export levy on unbeneficiated platinum
has been announced.
Afplats Proprietary Limited (“Afplats”)
Afplats remains a quality resource with significant
potential to develop a low-cost mechanised mine in
the well-serviced western Bushveld Complex.
Moreover, significant synergies can be realised
through the use of Impala’s above-ground
infrastructure. However, the project requires
significant capital investment, and Implats has
resolved to defer the project for four years while
other projects are prioritised.
Toll refining business
The Group has capacity available in Impala Refining
Services Limited (“IRS’’) that enables it to benefit
from new opportunities and diversify its production
exposure. Implats intends to continue to be a
leading player in this area.
3.1.3 Operational excellence
As part of the strategic review process announced in
early 2015 there was a bottom-up reassessment of
operations that resulted in proposed interventions
at each operation with specifically targeted
measures to improve mining efficiencies and reduce
operating costs. These measures included new
initiatives around safety; introduction of new
technology and a set of targeted short-cycle
management controls to measure, report on and
ultimately manage all critical mining parameters at
individual team level. This followed a systematic
survey to identify productivity on a team-by-team
basis with underperforming teams identified and a
specific action plan and monitoring process
implemented alongside measures to increase ore
reserve flexibility and improve the quality of
mining. As a result of these initiatives costs for
the 2016 financial year were reduced by
approximately R930 million in the 2016 budget.
In light of the price environment a number of
further initiatives are being implemented to reduce
operating costs across the Group in the 2016
financial year including a reduction of head office
and central costs; rescheduling development
expenditure; re-assessment and rescheduling of major
contracts; revised support strategies; reduction of
remuneration expenditure and revised management of
ammonium sulphate stocks. It is therefore intended
to reduce 2016 budgeted operatingcosts by
approximately R640 million including R400 million at
Impala; R20 million at Marula and US$18 million at
Zimplats.
3.1.4 Cash conservation and balance sheet flexibility
As outlined above the capital expenditure budget has
been revised to focus on cash preservation alongside
a wide range of operating cost initiatives.
Financial flexibility has also been improved with
advanced discussions to extend the period of certain
of the available credit facilities and to increase
the overall amount available from R3.0 billion to
R3.5 billion.
3.1.5 Social licence to operate
Direct employee, community and broader stakeholder
engagement is critical for Implats and expenditure
has not been curtailed in this area. The focus
remains on housing and the social and labour plan
with a budgeted spend of approximately R200 million
in 2016. Other initiatives includeskills
development; local procurement and social
investment.
3.2 Use of proceeds
Implats has been quick to respond to the rapid
deterioration of the PGM price environment. It has
built on the outcome of the strategic review process
to put in place a revised action plan in order to
strengthen its ability to operate on a sustainably
profitable basis in a “lower for longer” PGM price
scenario.
The principal operations at the Impala Lease Area
are being fundamentally repositioned with plans to
close 8 shaft and the mechanised operations at 12
shaft by December 2015. There is also a
comprehensive programme to enhance productivity on a
team-by-team basis and a series of initiatives are
being taken across the business to cut back
operating and capital costs further. The overall
objective is to reduce R640 million of working costs
from the 2016 budget and R1.3 billion of capital
expenditure and Implats will continue to evaluate
its actions and priorities in the context of the
pricing environment.
The Group’s priorities have therefore been
materially re-balanced to focus on shorter term
profitability and cash preservation. Following
these actions the Group is expected to be EBITDA
positive in the current PGM price environment and
free cash flow positive across the Impala Lease Area
and IRS, before replacement and development capital.
It is nevertheless critical at this stage to
safeguard the completion of key capital projects,
the suspension or abandonment of which would have a
materially adverse impact on the long term value of
the Group. The completion of 16 and 20 shafts at the
Impala Lease Area is central to this. Implats
expects both shafts to be value accretive and
replace the decline in output from other shafts with
cost effective production. This replacement
production also has broader benefits for the Group
by helping efficient utilisation of infrastructure
and increasing the proportion of high grade ore from
the Merensky Reef that is important for smelter
efficiency and otherwise lost as older shafts are
mined out. Over the next three years the current
intention is to deploy R3.9 billion across both
shafts in development and capital expenditure.
The proposed equity raising should allow Implats to
implement this plan and so enhance its ability to
operate effectively and profitably both for the
short and long term.
Implats remains committed to returning excess cash
flow to its shareholders going forward as market
conditions improve.
4. Pro forma financial effects
As the Specific Issue of Shares for Cash will have no impact
on the Implats financial statements other than the receipt
of cash and the resultant impact on earnings per share there
are no pro forma financial effects disclosed.
5. Notice of General Meeting and posting of circular
A general meeting of Implats Shareholders will be held at
the Company’s registered office, 2 Fricker Road, Illovo,
Johannesburg on Tuesday, 6 October 2015 at 11h00 (South
African time) (“General Meeting”) in order to consider and,
if deemed fit, pass with or without modification the
resolutions set out in the notice of General Meeting.
A circular, incorporating the notice of General Meeting,
will be posted to Implats Shareholders on or about 4
September 2015.
6. Salient dates and times
The Salient dates and times regarding the Specific Issue of
Shares for Cash is set out below:
2015
Record date for Implats shareholders to be Friday, 28
recorded in the register to receive the circular August
and notice of General Meeting
Circular and notice of General Meeting posted to Friday, 4
Implats shareholders September
Last date to trade in the Implats ordinary shares
Thursday, 17
in order to be recorded in the register on the
September
voting record date on
Voting record date to vote at the Implats General Friday, 25
Meeting being 17:00 on September
Last day for receipt of proxies for the Implats Monday, 5
General Meeting by 11:00 on October
Implats General Meeting to consider, amongst other
Tuesday, 6
things, the Specific Issue of Shares for Cash at
October
11:00
Tuesday,
Results of the General Meeting released on SENS on
6 October
Notes:
The abovementioned times and dates are South African times and
dates and are subject to change. Any material change will be
released on SENS and in the press in South Africa. Should the
General Meeting be adjourned or postponed, it is requested
that forms of proxy be received by no later than 24 hours
(excluding Saturdays, Sundays and statutory or proclaimed
public holidays in South Africa) prior to the time of the
adjourned or postponed General Meeting.
3 September 2015
Johannesburg
Underwriter and sole bookrunner Transaction sponsor
UBS Limited UBS South Africa Proprietary
Limited
Co-independent financial adviser Co-independent financial
adviser
Centerview Partners UK LLP aloeCap Proprietary Limited
Legal Advisers to Implats as to Legal Advisers to Underwriter
SA law and US law and sole bookrunner as to US
law
Fasken Martineau (incorporated Davis & Polk & Wardwell London
in South Africa as Bell Dewar LLP
Inc.)
Debt sponsor
The Standard Bank of South
Africa Limited
Forward looking statements
This announcement includes certain “forward-looking
statements” and “forward-looking information”. All statements
other than statements of historical fact included in this
announcement including, without limitation, statements
regarding future plans and objectives of Implats are forward-
looking statements (or forward-looking information) that
involve various risks, assumptions and uncertainties. There
can be no assurance that such statements will prove to be
accurate and actual values, results, actions and future events
could differ materially from those anticipated in such
statements. Accordingly, readers should not place undue
reliance on forward-looking statements.
Any forward-looking statements in this announcement speak only
at the time of issue. Implats does not undertake to update any
forward-looking statements that are included herein, or revise
any changes in events, conditions or circumstances on which
any such statements are based, except in accordance with
applicable securities laws and securities exchange listing
requirements.
Notice to investors in South Africa
This announcement does not constitute an “offer to the public”
(as such term is defined in the Companies Act). Any offer of
the Subscription Shares within South Africa pursuant to the
accelerated bookbuild placement will only be made to persons
or entities described in section 96 of the Companies Act which
lists the types of offers that are deemed not to constitute
offers to the public.
Notice to investors in the U.S.
The Subscription Shares have not been and will not be
registered under the U.S. Securities Act of 1933, as amended,
or under any U.S. state securities laws, and may not be
offered or sold within the U.S. absent registration or an
applicable exemption from the registration requirements of the
U.S. Securities Act and applicable U.S. state securities laws.
This announcement does not constitute an offer to sell or a
solicitation of an offer to buy any of the Subscription Shares
within the U.S. Accordingly, if and when the Subscription
Shares are offered and sold, they will be offered and sold,
subject to certain exceptions, only outside the U.S in
compliance with Regulation S promulgated under the U.S.
Securities Act.
Member States of the European Economic Area
In relation to each member state of the European Economic Area
which has implemented the Prospectus Directive (each, a
“Relevant Member State”), with effect from and including the
date on which the Prospectus Directive was implemented in that
Relevant Member State, no Subscription Shares have been
offered or will be offered to the public in that Relevant
Member State prior to the publication of a prospectus in
relation to the Subscription Shares which has been approved by
the competent authority in that Relevant Member State or,
where appropriate, approved in another Relevant Member State
and notified to the competent authority in the Relevant Member
State, all in accordance with the Prospectus Directive, except
that, with effect from and including the relevant
implementation date, offers of Subscription Shares may be made
to the public in that Relevant Member State at any time:
(i) to legal entities which are qualified investors (as
defined in the Prospectus Directive);
(ii) to fewer than 150 natural or legal persons (other than
qualified investors, as defined in the Prospectus
Directive), subject to obtaining the prior written
consent of the Underwriter; and
(iii) in any other circumstances falling within article
3(2) of the Prospectus Directive, provided that no such offer
of Subscription Shares shall result in a requirement for the
publication by the Company or any bank of a prospectus
pursuant to Article 3 of the Prospectus Directive.
For this purpose, the expression “an offer of any Subscription
Shares to the public” in relation to any Subscription Shares
in any Relevant Member State means the communication in any
form and by any means of sufficient information on the terms
of the Specific Issue and any Subscription Shares to be
offered so as to enable an investor to decide to acquire any
Subscription Shares as the same may be varied in that Relevant
Member State by any measure implementing the Prospectus
Directive in that Relevant Member State.
Notice to investors in the UK
This announcement has not been approved by an authorised
person for the purposes of section 21 of the Financial
Services and Markets Act 2000 (as amended) (“FSMA”).
Accordingly, this announcement is only for distribution to and
directed at: (i) in the United Kingdom, persons having
professional experience in matters relating to investments
falling within Article 19(5) of the Financial Services and
Markets Act 2000 (Financial Promotion) Order 2005 (as amended)
(the "Order")and (ii) in the United Kingdom high net worth
entities falling within Article 49(2)(a) to (d) of the Order;
(iii) persons who are outside the United Kingdom; and (iv) any
other person to whom it can otherwise be lawfully distributed
(all such persons together being referred to as "Relevant
Persons"). Any investment or investment activity to which this
announcement relates is available only to and will be engaged
in only with Relevant Persons. Persons who are not Relevant
Persons should not take any action based upon this
announcement and should not rely on it.
Date: 03/09/2015 08:08:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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