PETMIN LIMITED Incorporated in the Republic of South Africa Registration Number 1972/001062/06 Share Code JSE: PET ISIN: ZAE000076014 ('Petmin' or 'the Company') BROAD-BASED BLACK ECONOMIC EMPOWERMENT TRANSACTION ( B-BBEE TRANSACTION ) AND WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT 1. INTRODUCTION From inception, it has been Petmin s strategic intention to embrace the spirit of broad-based black economic empowerment ("B-BBEE") for the mining industry, as determined in the Mining Charter and the Mineral and Petroleum Resources Development Act (MPRDA). Petmin believes that to ensure long term sustainable empowerment at all its operations, it is imperative that, in addition to B-BBEE shareholding in Petmin, local communities and employees become owners so that they can participate and share in the rewards of its operations. As part of this commitment to transformation and the imperative for B-BBEE at operational level, Petmin wishes to advise shareholders that it has entered into a comprehensive B-BBEE transaction with the community and employees as shareholders in Tendele Coal Mining (Pty) Ltd ( Tendele ). On conclusion of the B-BBEE Transaction, Petmin s shareholding in Tendele, the company that owns Petmin s flagship Somkhele anthracite mine, will be reduced from 100% to 80%. The remaining 20% shareholding in Tendele will be held directly by a Special Purpose Vehicle ( BEE SPV ), which in turn will be held 80% by a trust established for the benefit of the youth in the Mpukunyoni Community - the Mpukunyoni Youth Development Trust ( Community Trust ) - and 20% held by a trust for the benefit of all employees of the Somkhele mine - the Tendele Economic Benefits Sharing Scheme ( EBS ). In addition to 20% shareholding, Tendele will contribute to the Community Trust: A founder s contribution of ZAR2.4 million; An annual guaranteed payment of ZAR1 million; An additional annual payment of ZAR166, 670 for every 50,000 tonnes of anthracite produced in excess of 900 000 tonnes, capped at ZAR1 million. Furthermore, Tendele will pay to the EBS: An annual guaranteed payment of ZAR1 000 per employee An additional annual payment of ZAR1 000 per employee during any financial year in which annual production exceeds 900 000 tonnes of anthracite.
This announcement outlines the B-BBEE Transaction as well as the framework within which it will be implemented and certain other salient features of the relationship between the parties to the B- BBEE Transaction. In order to ensure the transaction is fairly priced for all stakeholders, as announced on 3 March 2014 on SENS, an independent Competent Persons Report for the Somkhele Mine was completed by SRK, valuing Somkhele at ZAR1.6 billion and an updated CPR will be published in the Category 1 Circular that will be mailed to all shareholders in due course. 2. THE B-BBEE TRANSACTION The BEE SPV will subscribe for 20% of all of the ordinary shares in Tendele for a subscription consideration of ZAR 350 million. The BEE SPV will be capitalised through the issue of "A" redeemable preference shares to Depfin Investments Proprietary Limited ("Depfin"), a wholly owned subsidiary of Nedbank Limited, for ZAR270 million and "B" redeemable preference shares to Petmin for ZAR80 million, for a total preference share subscription of ZAR350 million. The subscription proceeds will be solely used by the BEE SPV to subscribe for new shares to be issued by Tendele, resulting in the BEE SPV directly owning 20% shareholding in Tendele. The Community Trust will acquire 80% (eighty percent) of the ordinary shares in the BEE SPV and will be entitled to nominate two directors to the board of the BEE SPV. The Community Trust will be entitled to nominate one director to the Tendele Board. The beneficiaries of the Community Trust are the youth of the Mpukunyoni community and all benefits flowing from the equity holding will be used for their development. In addition, Tendele will contribute to the Community Trust (for the sole purpose of supporting projects benefiting the beneficiaries), the following: A founder s contribution, in aggregate, not exceeding an amount of ZAR2.4 million; An annual guaranteed payment of ZAR1 million; An additional annual payment of ZAR166, 670 for every 50,000 tonnes of anthracite produced in excess of 900 000 tonnes, capped at ZAR1 million. A member of the Traditional Council of the Mpukunyoni Community, established in terms of traditional law, will be a permanent trustee and at least 50% of the trustees will be independent. No trustee fees will be paid. The EBS will acquire 20% (twenty percent) of the ordinary shares in BEE SPV and will be entitled to nominate two directors to the board of the BEE SPV. The EBS Trust will be entitled to nominate one director to the Tendele Board. Furthermore, Tendele will pay to the EBS: An annual guaranteed payment of ZAR1 000 per employee An additional annual payment of ZAR1 000 per employee during any financial year in which annual production exceeds 900 000 tonnes of anthracite. Those eligible to be beneficiaries of the EBS are employees of Tendele, employees of any company in which Tendele holds at least 35% of the total issued shares, and employees of any company which has a current service agreement with a duration of longer than 1 (one) year with Tendele or Mpukunyoni Mining (Pty) Ltd, where such service is directly related to mining and or processing of waste or run-
of-mine material. A maximum of 3 trustees per Union will be appointed by the unions that have a recognition agreement with Tendele. Once the BEE SPV has redeemed all its preference shares, BEE SPV will be required to distribute its 20% equity in Tendele as a dividend in specie to the Community Trust and the EBS. The EBS has a further option to acquire an additional 4% of Tendele Equity at fair value at the time all preference shares of the BEE SPV are redeemed. The Community Trust and EBS will not be entitled to dispose of their equity in Tendele, other than to Tendele. 3. FINANCING TERMS OF THE TRANSACTION The transaction will be financed by a series of redeemable preference shares to be issued by the BEE SPV as follows: Depfin will subscribe for "A" redeemable Preference Shares at an aggregate subscription price of ZAR270 000 000 (two hundred and seventy million rand); Petmin will subscribe for 80 (eighty) "B" redeemable Preference Shares at an aggregate subscription price of ZAR80 000 000 (eighty million rand); Petmin may be obliged to subscribe for "C" Preference Shares if, and to the extent that the BEE SPV defaults in respect of its payment obligations under the "A" Preference Shares, effectively guaranteeing the obligations of the BEE SPV to ensure its sustainability. The A" redeemable Preference Shares will be redeemed from dividends to be received from Tendele, and the B redeemable Preference Shares will rank behind the A redeemable Preference Shares. 4. CONDITIONS PRECEDENT The transaction is subject to the approval by the various regulatory and statutory authorities and fulfilment of all of the conditions precedent which inter alia require that the shareholders of Petmin have provided any and all approvals required for the implementation of the B-BBEE Transaction, including any approvals required in terms of the Companies Act and the Listings Requirements of the JSE Limited. Each of the parties to the B-BBEE Transaction will, to the extent it is within their control, use their reasonable commercial endeavours to procure fulfilment of the aforementioned conditions precedent as soon as reasonably possible and it is anticipated that the transaction will become effective during July 2015. 5. FINANCIAL EFFECTS Tendele will, on closing, receive ZAR350 million in cash and will utilise this cash to reduce its debt (including some ZAR280 million of Petmin s loan account) and hence will in future benefit from a reduced interest cost. The table below sets out the pro forma financial effects of the above transaction, based on Petmin s unaudited interim results for the period ended 31 December 2014. The financial effects are presented for illustrative purposes only and because of their nature may not provide a fair reflection of the Group`s results, financial position and changes in equity after the transaction. It has been assumed for the purposes of the pro forma financial effects that the above transaction took place as at 31 December 2014 for the statement of financial position and for the period 1 July 2014 to
31 December 2014 for the statement of comprehensive income. The directors of Petmin are responsible for the preparation of the financial effects: Before the transaction (1) Unaudited 31 December 2014 Adjustme nts (2) Pro Forma After the transaction (3) Percentage Change (4) Weighted average number of shares (000 s shares) Shares for net asset value calculation (000 s shares) 561,031-561,031 0% 561,031-561,031 0% Basic earnings per share (cents) 8,40-0,82 7,58-9,80% Basic headline earnings per share (cents) 8,40-0,82 7,58-9,80% Net asset value per share (cents) 214-0,00 214-0,00% Tangible net asset value per share (cents) 214-0,00 214-0,00% Column notes: 1. This column represents the "before" financial information, which has been extracted without adjustment, from the published interim group results of Petmin for the 6 months ended 31 December 2014. 2. This column reflects the effects of the transaction contemplated above. This only reflects the effects in the first year of the transaction and therefore includes the effect of the ZAR2.4 million founder s contribution to the Community Trust. 3. This column reflects the "after" financial information, including the effects of the transaction contemplated above. 4. This column reflects the percentage change that the above transaction has on the performance per ordinary share of Petmin. The assumptions used above are: Historical earnings remain constant; The cash received has been utilised to settle debt; The profits and cash flow of Tendele will finance the financing structure. 5. CATEGORISATION This transaction is a Category 1 transaction (but not a related party transaction as defined by the JSE Listings Requirements) and more specifically as a disposal with provision of financial assistance by Petmin and will require shareholder approval at a General Meeting. The circular to shareholders is being prepared and will be dispatched to shareholders in due course.
6. BEFORE AND AFTER STRUCTURE The current structure of Tendele before the conclusion of the BEE Transaction: Petmin 100% Tendele The new structure of Tendele after the conclusion of the BEE Transaction: Mpukunyoni Youth Development Trust Tendele Economic Benefits Sharing Scheme Petmin 80% 20% 80% BEE SPV 20% Tendele 7. WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT Shareholders are referrred to the cautinary announcement dated 18 May 2015 and are advised that as the contents referred to therein have ceased to have any relevance or effect on the Company, caution is no longer required to be excercised by shareholders when dealing in their securities.
8. CONFERENCE CALL DETAILS Live call and Q&A with Petmin management Analysts, investors and media are invited to join a live call and Q&A with Petmin management at 10h00 SA Standard Time on Wednesday 10 June 2015. Dial in details below. Country/city Access Number South Africa - Cape Town 021 819 0900 South Africa - Durban 031 812 7600 South Africa - Johannesburg Neotel 011 535 3600 South Africa - Johannesburg Telkom 010 201 6800 Australia - Toll-Free 1 800 350 100 Other Countries - International +27 11 535 3600 Other Countries - International +27 10 201 6800 UK - Toll-Free 0808 162 4061 USA and Canada - Toll Free 1 855 481 5362 Playback access (code 36271) Other Countries - International +27 11 305 2030 South Africa 011 305 2030 UK - Toll Free 0 808 234 6771
Petmin Bradley Doig +27 11 706 1644 Media Jonathon Rees +27 76 185 1827 Sponsor and Corporate Advisor River Group Transaction Funding Nedbank Limited Legal Advisers to Petmin DLA Cliffe Dekker Hofmeyr Reporting Accountants KPMG Inc Competent Person SRK Consulting (South Africa) (Pty) Ltd Advisers to the Transaction Siyakhula Sonke Empowerment Corp (Pty) Limited Simukai Consulting (Pty) Ltd Johannesburg 10 June 2015 Sponsor and Corporate Advisor River Group