31 Jul 2006
JCI shareholders are referred to the SENS announcement published on 26 June 2006, in terms of which it was announced that Letšeng Investment Holdings (South Africa) (Proprietary) Limited (“Letšeng”) had entered into a binding legal agreement for the disposal of its entire 76% equity interest in Letšeng Diamonds (Proprietary) Limited (“Letseng Diamonds”) to Gem Diamond Mining Company of Africa Limited (“Gem”) for R879.5 million payable in cash (“the proposed transaction”).
- The nature of the business of Letseng
Letšeng is an investment holding company incorporated in the Republic of South Africa, owned 50% by Matodzi Resources Limited (“Matodzi”), 40% by JCI and 10% by Letšeng Diamonds Limited, a company incorporated in Guernsey (“Letšeng Guernsey”). Letšeng has as its sole operating asset a 76% equity interest in Letšeng Diamonds with the remaining 24% of the shares being owned by the Government of the Kingdom of Lesotho (“the Lesotho Government”).
The current organisational structure of Letšeng Diamonds is set out in the diagram below:
Letšeng Diamonds is a Lesotho registered company and the holder of the mining lease and operational assets of the Letšeng Diamond Mine located in the Letšeng-la-Terae region of the mountains of Lesotho (“the Letšeng Mine”). The Letšeng Mine consists of two kimberlite pipes and a stockpile of previously mined lower grade diamondiferous ores.
The Letšeng Mine has a proven track record of producing large, high quality diamonds, with historic records showing that 15% of diamonds recovered weigh more than 10 carats and 1.5% of diamonds recovered weigh over 100 carats. A large percentage of production from the Letšeng Mine is graded as D flawless, and 90% of the diamonds produced are gem quality and are sold on private auction to the jewellery market.
Letseng, Gem and the Lesotho Government have agreed that, post implementation of the proposed transaction, Gem will dispose of 6% of the issued share capital of Letseng Diamonds to the Lesotho Government (“the Lesotho Government disposal”), thereby increasing the equity interest of the Lesotho Government in Letseng Diamonds from 24% to 30%. The Lesotho Government disposal will be implemented as follows:
- Gem will transfer 3% of the issued share capital of Letseng Diamonds to the Lesotho Government at zero purchase consideration; and
- Gem will sell a further 3% of the issued share capital of Letseng Diamonds to the Lesotho Government for a purchase consideration of R37.5 million. This amount will be loaned to the Lesotho Government by Gem on an interest free basis, and will be repaid by the Lesotho Government to Gem out of dividends received by the Lesotho Government from Letseng Diamonds.
- Background to Gem
Gem is registered in the British Virgin Islands and was incorporated in July 2005, with the objective of developing into an international diamond mining company with producing assets and a focus on diamond production from Africa. Gem has a recognised and leading management and technical team with combined experience of over 150 years in the diamond mining industry, led by Clifford Elphick, former Managing Director of E Oppenheimer & Sons.
Gem is currently involved in a number of other diamond projects in the Central African Republic and the Democratic Republic of Congo, which are in the exploration and evaluation phase, with the first diamonds from production expected in the first half of 2007.
Rationale for the transaction
The JCI board of directors believes the proposed transaction presents JCI with an opportunity to realise substantial value for JCI’s interest in Letšeng.
- Effective date of the transaction
The effective date of the proposed transaction is 1 July 2006 (“the effective date”).
- Purchase consideration
The purchase consideration payable by Gem for the Letšeng interest is R879.5 million, payable in cash, and will attract interest at a rate of 6.75% per annum with effect from the effective date to the date of payment thereof, being the first business day after the fulfilment of the last of the conditions precedent, as set out in paragraph 8 below. In addition, an amount equal to the distributable profit of Letšeng Diamonds for the three month period ended 30 June 2006 will be distributed by Letšeng Diamonds to its shareholders, being Letšeng and the Lesotho Government, provided that R30 million in cash, consumables and diamond stocks will remain in Letšeng Diamonds to fund its short-term working capital requirements. The quantum of such distribution will be determined by the auditors of Letšeng Diamonds within a period of ninety days from the effective date.
- Unaudited pro-forma financial effects
The table below sets out the unaudited pro forma financial effects on JCI based on the assumptions set out below. The unaudited pro forma financial effects have been prepared by the board of JCI for illustrative purposes only, in order to provide information about how the proposed transaction may have affected the results, changes in equity and financial position of JCI, had the transaction been implemented on 1 April 2005 for income statement purposes and 30 September 2005 for balance sheet purposes. Due to their nature the unaudited pro forma financial effects may not give a true reflection of the results, changes in equity and financial position of JCI after the proposed transaction. The directors of JCI are responsible for the unauditedpro forma financial effects.
| ||Before the||After the|| |
| ||proposed||proposed|| |
| ||(cents per||(cents per||increase|
|Loss per share (“LPS”)||-7.741||-3.883||49.92|
|Headline loss per share (“HLPS”)||-5.901||6.644||212.47|
|Net asset value per share (“NAV”)||-15.122||-11.925||21.16|
|Tangible net asset value per share (“TNAV”)||-15.122||-11.925||21.16|
|Number of ordinary shares in issue6||2 106 476 728||2 106 476 728||0.00|
|Weighted average number of ordinary shares in issue7||2 063 635 198||2 063 635 198||
Back to home