re: Aflease (AFL.ZA) and Southern Cross (SXR.TO) to merge
the transaction will create a world-class company with geographically balanced properties all over the world
Aflease Gold and Uranium Resources to merge with Southern Cross Resources
Tuesday July 5, 3:23 am ET
JOHANNESBURG, South Africa and TORONTO, ON, July 5 /CNW/ - Aflease Gold and Uranium Resources Limited ("AFL") and Southern Cross Resources Inc. ("SXR") are pleased to announce that they have signed a definitive Pre-Merger Agreement providing for the merger of the two companies. The combination is being done "at-market" based on the recent trading of both companies.
The combined entity, to be named SXR Uranium One Inc. ("SXR Uranium One"), will unite AFL's South African uranium and gold assets with the Australian and Canadian uranium properties of SXR (as set out in Appendix A files.newswire.ca. The new company will be focused on the growth and development of its uranium business, as well as on realizing value from its existing gold assets. SXR Uranium One expects to commence uranium production in the first quarter of 2007, and expects to produce at least 4 million pounds per year of uranium and at least 90,000 ounces of gold as by-product, from current projects by 2011.
Commenting on the planned merger, AFL's Chief Executive Officer, Neal Froneman, said, "The combination of these two companies creates a focused uranium company with an international portfolio of attractive uranium assets, from exploration stage through to the advanced developmental stage." Said Froneman, "In addition to merging our assets, SXR Uranium One brings together the mining expertise of AFL and the exploration strength of SXR in a combination which will benefit the shareholders of both companies. This transaction also provides definition to our ongoing strategy to become a focused uranium company that's North American domiciled and listed."
Mark Wheatley, Chief Executive Officer of SXR said "This is an exciting development for the shareholders of SXR as the merged company will provide exposure to the very large Dominion and Rietkuil uranium projects which have the potential to be in operation for more than 20 years beginning in 2007, to the fully permitted Honeymoon in-situ leach ("ISL") project in South Australia, and to a premier exploration portfolio. This portfolio includes a joint venture with properties in the Athabasca Basin, the world's most prolific uranium region, where a minimum 8,600 metres of core drilling is scheduled to commence in the last quarter of 2005. SXR Uranium One will have a combined portfolio of near term production assets and quality exploration projects with the critical mass to develop them. Neal Froneman is a committed, experienced operator and the combination of personnel from both companies will make for a first class management and operational team."
SXR Uranium One will have a substantial resource base as estimated in accordance with the South African Code for Reporting of Mineral Resources ("SAMREC") for AFL and National Instrument 43-101 of the Canadian Securities Administrators ("NI 43-101") for SXR and set out in the table below.
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Project Code Resource In-Situ Grade In-Situ Grade
Category Uranium (%) Gold (g/t)
(mm lbs) U3O8 (mm oz)
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Rietkuil SAMREC Measured & 0.7 0.074 0.01 0.8
(AFL) Indicated
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SAMREC Inferred 77.1 0.080 1.39 1.0
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Dominion SAMREC Measured & 9.1 0.065 0.30 1.5
(AFL) Indicated
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SAMREC Inferred 36.3 0.046 0.70 0.6
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Bonanza SAMREC Measured & 0.7 0.009 0.67 (0.41 5.5
Reefs Indicated P&P Reserve)
(AFL)
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Honeymoon NI 43-101 Indicated 7.3 0.120 - -
(SXR)
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East NI 43-101 Indicated 2.0 0.074 - -
Kalkaroo
(SXR)
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Goulds
Dam (SXR) NI 43-101 Indicated 4.4 0.120 - -
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Billeroo
(SXR) NI 43-101 Inferred 7.9 0.030 - -
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Modder SAMREC Measured & - - 1.67 (1.02 3.0
East Indicated P&P Reserve)
(AFL)
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SAMREC Inferred - - 0.83 5.2
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Other SAMREC Measured & - - 0.48 3.2
Gold Indicated
Properties
(AFL)
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SAMREC Inferred - - 1.10 4.1
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Total AFL SAMREC M&I 10.5 3.13
SAMREC
Inferred 113.4 4.02
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SXR NI 43-101 13.7
Indicated
NI43-101
Inferred 7.9 -
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AFL and SXR will host a joint conference call at 10:00am Toronto
(4:00pm Johannesburg) on Wednesday July 6, 2005 to discuss the transaction.
Participants are asked to call one of the three numbers below:
Global calls: country code + 800-8989-6323
North America toll free: 1 (866) 898-9626
Toronto area calls: (416) 340-2216
A presentation will be available for download in advance of the call at
www.aflease.com and www.southerncrossres.com
Terms of Transaction
Under the terms of the Pre-Merger Agreement, the holders of AFL ordinary
shares will receive 0.90 of a common share of SXR for each AFL ordinary share.
On completion of the merger, on both a basic and fully diluted basis, AFL and
SXR shareholders will own approximately 83% and 17% of SXR Uranium One,
respectively. At closing, SXR Uranium One will have 374 million issued and
outstanding shares, based on the number of AFL and SXR shares outstanding on
June 30, 2005.
Resource Capital Fund L.P. and Resource Capital Fund II L.P., which hold
an aggregate 6,815,476 SXR common shares and warrants to acquire an additional
5,452,381 SXR common shares, have agreed, subject to fiduciary obligations, to
vote their shares in favour of the merger. The common shares and warrants held
by these funds represent approximately 16% of the outstanding SXR common
shares on a fully diluted basis.
It is a condition of the merger that SXR Uranium One be primarily listed
on The Toronto Stock Exchange and has a secondary listing on the JSE
Securities Exchange (South Africa). Neal Froneman and Jean Nortier, current
AFL Chief Executive Officer and Chief Financial Officer, respectively, will
hold the same positions at SXR Uranium One. SXR Uranium One will have a seven
member Board of Directors, comprised initially of Neal Froneman, Mark
Wheatley, the current CEO of SXR, as non-executive director, and three
independent non-executive directors to be mutually agreed upon, one of whom
will serve as Chairman of the Board. AFL will have the right to nominate two
additional Directors in due course.
The Boards of Directors of each of AFL and SXR have approved the merger.
The Pre-Merger Agreement will be available under the filings of SXR on
www.sedar.com. Pursuant to the Pre-Merger Agreement, each company has agreed
not to solicit third party interest in alternative transactions. Each company
has also agreed to pay a termination fee to the other of Cdn $1 million if it
terminates the Pre-Merger Agreement to accept a superior proposal or if its
shareholders fail to approve the merger. The merger is subject to confirmatory
due diligence, the negotiation of a definitive merger agreement and regulatory
and shareholder approvals. SXR has substantially completed its technical due
diligence investigations, utilizing both its own technical staff and
independent consultants. AFL is completing confirmatory technical due
diligence. Both companies are completing confirmatory financial and legal due
diligence.
The merger will be effected by way of a court-sanctioned scheme of
arrangement under the provisions of applicable South African law and in
accordance with the provisions of the Pre-Merger Agreement and a merger
agreement to be settled by the parties by the end of July. The parties
anticipate that, subject to the receipt of all required regulatory and
shareholder approvals, the merger will be completed by the end of October.
Each of AFL and SXR in the interim, and SXR Uranium One on closing, will
continue with their respective businesses and project generation activities.
In this regard, AFL and SXR will undertake interim private placements of up to
US$20 million and C$6 million, respectively.
BMO Nesbitt Burns is acting as exclusive financial adviser and agent to
AFL in connection with the merger and private placement. Nedbank Capital is
AFL's South African investment bank and sponsor. SXR is being advised by RBC
Capital Markets on the merger.
About Aflease Gold and Uranium Resources Limited
AFL owns the Dominion and Rietkuil uranium properties, and the Bonanza
South gold mine, located near Klerksdorp, South Africa, as well as the Modder
East gold project located east of Johannesburg.
AFL's Board of Directors today approved the development and construction
of the Dominion Uranium mine. The Dominion Uranium asset was previously owned
and operated by Anglo American. This brownfield project has significant
infrastructure in place and a substantial information database of both
geological and metallurgical information. Core from over 250 boreholes is
available and the geological structure is well understood as a result of
previous mining and seismic surveys. Current process testwork has confirmed
the use of pressure leaching resulting in high recoveries. The Directors of
AFL have approved the expenditure of US$2.16 million to complete a bankable
feasibility study. Completion of this document is expected by April 2006 and
production of uranium is expected to commence in early 2007. From 2011, annual
production from the mine is expected to be 4 million pounds per year.
AFL recently announced a uranium resource at its Dominion, Rietkuil and
Bonanza South properties, comprising total inferred resources of 113.3 million
pounds of contained U3O8, at an average grade of 0.064%, and total measured
and indicated resources of 9.8 million pounds of contained U3O8, at an average
grade of 0.066%. In addition the Bonanza South property has a measured and
indicated resource of 723,000 pounds U3O8, at an average grade of 0.009% as a
gold by-product.
AFL's gold assets consist of in excess of 400,000 ounces of proven &
probable reserves, at an average grade of 5.5 grams/tonne, at Bonanza, and in
excess of 1 million ounces of proven & probable reserves, at an average grade
of 5.2 grams/tonne, at Modder East. On June 29, 2005 AFL announced its first
gold pour from Bonanza.
The gold and uranium reserve and resource estimates were audited and
reviewed by SRK Consulting, an independent firm of consulting engineers and
geologists ("SRK"). The focus of SRK's audit and review was on areas where
there was sufficient information to comply with SAMREC. AFL is in the process
of obtaining an independent technical report complying with NI 43-101 in
respect of its Dominion, Rietkuil, Bonanza and Modder East properties. The
report is substantially complete and AFL does not expect that the reserves and
resources calculated in accordance with NI 43-101 will be materially different
from the SAMREC compliant estimates.
The ordinary shares of AFL are traded in South Africa on the JSE
Securities Exchange under the symbol "AFL" and over the counter in the U.S. in
the form of a Level III American Depositary Receipts under the symbol "AFLUY".
About Southern Cross Resources Inc.
SXR owns the fully permitted, in-situ leach, Honeymoon Project and the
Goulds Dam and Karkarook exploration projects in South Australia. Honeymoon,
including the contiguous East Kalkaroo, hosts combined indicated resources of
9.3 million pounds of uranium and the project is expected to be developed as
uranium prices improve. The Goulds Dam project includes an indicated resource
of 4.4 million pounds and an inferred resource of 7.9 million pounds. Drilling
is underway at Goulds Dam to test a number of new targets.
In 2004, SXR entered into an option agreement with Pitchstone Exploration
Ltd. to earn a 50% joint venture interest in uranium exploration properties
located in the prolific Athabasca Basin of Saskatchewan. This region hosts
some of the largest and highest-grade uranium deposits in the world, including
Cigar Lake and McArthur River. Geophysical test work has been completed and
drilling is scheduled to commence later this year.
Project generation efforts have also recently yielded a number of new
projects in South Australia, where the targets are geologically similar to
those found in the Athabasca Basin.
The common shares of SXR are traded on The Toronto Stock Exchange under
the symbol "SXR".
Forward-looking Statement
This press release contains certain forward-looking statements. These
forward-looking statements are subject to a variety of risks and uncertainties
beyond the company's ability to control or predict, which could cause actual
events or results to differ materially from those anticipated in such forward-
looking statements. In this news release, predictions about the transaction
being approved and finalized are forward-looking statements. Accordingly,
readers should not place undue reliance on forward-looking statements.
Mineral resources which are not mineral reserves do not have demonstrated
economic viability.
For further information
Neal Froneman, Chief Executive Officer, Aflease Gold and Uranium Resources Limited, Mobile: +27 (0) 83 628 0226, Office: +27 (0) 11 482 3605
Mark Wheatley, Chairman & Chief Executive Officer, Southern Cross Resources Inc., Telephone: +61 417 688539
Don Falconer, VP Corporate Development, Southern Cross Resources Inc., Telephone: (416) 350-3657 |
