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Sentula Mining shares rocket 23 percent on asset sale news
October 12, 2009
By Justin Brown and Lucky Biyase
Sentula Mining shares rocketed as much as 23 percent on Monday after it said it had agreed to sell its stake of almost 50 percent in the Koornfontein coal mine to a consortium for R686 million.
The company said sale of the stake was to a consortium consisting of Africa Commodities Group and Bravura Group.
The news caused Sentula shares on the JSE to spike to R3.51, up almost 23 percent from Friday’s close of R2.85. The share was last quoted up 16 percent at R3.32, which valued the company at R782 million.
The company said it had considered the terms and conditions and it was convinced that it represented a fair market value for Koornfontein.
“On the basis that it is capable of implementation, is the preferred recapitalization alternative,” the company in the statement.
However, in addition to normal regulatory conditions, the deal was dependent on the consortium concluding a due diligence by no later than the end of this month after which it (the consortium) might identify any material issues amend the purchase consideration, the company said.
“If the adjustment exceeds 10 percent of the purchase consideration, either party may withdraw from the sale,” Sentula said.
Sentula, a company that was contracting for earth moving and exploration as well as running its own coal assets had an obligation to pay R400 million to the funding consortium by end of next month or face penalties on its existing debt facility.
“The board is aware of the risk inherent in the due diligence, the potential adjustments to the purchase consideration and the outstanding conditions to the to the Koornfontein sale,” it said.
To minimise the risk to Sentula, the board had elected to secure the underwriting of rights offer.
However, the company had until month end to terminate the rights, by which the date the due diligence would have been concluded and other key conditions might have been fulfilled.
“This will allow Sentula to assess the implementation risk of the Koornfontein sale. Should Sentula not find itself in a position to exclusively pursue the Koornfontein sale by month end, Sentula will undertake a fully underwritten renounceable Rights Offer to raise R502 million,” it said.
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