[miningmx.com] — VILLAGE Main Reef’s shares surged on Monday following an announcement that the company had received a R1bn unsolicited offer for Tau Lekoa.
The announcement came as part of Village’s quarterly report for March, and lifted the group’s share price by more than 7% by noon.
“Village is in the process of appointing an independent financial advisor to evaluate the offer,’ read a company statement. “Based on the financial performance of Tau since its acquisition, the view of the Village Board is that the amount offered.is well short of the company’s own valuation.’
Village acquired Tau Lekoa as part of its purchase of all Simmer & Jack’s (acquired) key assets in a R1.3bn deal concluded last year. Simmers bought Tau Lekoa for R600m in 2009 from AngloGold Ashanti. It was the only asset where Village met or exceeded production guidance during the past quarter.
In another proposal, Village received a non-binding offer of R85m for its Weltevreden shares, subject to a due diligence process.
Village’s overall production of 39,768oz during the quarter was slightly better than guidance given early April, but still lower than initial guidance of 40,530oz. The quarter’s production was also 11% lower than the December-period and the biggest contributor to the company’s 22% revenue decline of R150m to R543.2m.
The biggest culprit was Buffels, also acquired from Simmers, where both volume and grade issues affected production.
“Even with the seasonal downturn Buffels didn’t perform to our expectations,” said CEO Bernard Swanepoel. “We hope to see some improvement in the next quarter.”
Pre-tax profit was down 55% to R64.8m from R145m.
In other developments, former CFO Marius Saaiman was appointed joint-CEO, a position he will share with Bernard Swanepoel. Sandeep Gandhi took over from Saaiman as CFO on May 4.
‘R1BN NOT TOO BAD’
Taking questions from investors and analysts during a dial-in conference call, Swanepoel was told three times the R1bn seemed to be a fair offer for Tau Lekoa, especially when considered that the asset only has a life-of-mine of four to five years.
“We think its a nice offer,” said Louis Venter of Anglorand Securities. “It’s nice to have R1bn in your back pocket.”
Swanepoel responded Village expected Tau to generate R600m’s worth of operating profit in the current financial year alone, with the possibility of more upside.
“It’s not only about the money on the table,” Swanepoel said. “We don’t know much about the Tannous group.” He said the due dilligence process would determine whether Tannous can pay for such a deal, and whether it has the skills base to operate a mine.
“We’re not yet in a position to say vote ‘yes’ or ‘no’,” he said.
Quizzed about his future role at Village, Swanepoel said he and Saaiman would work alongside one another for a while before the new appointee took over full responsibility.
“He [Saaiman] does all the work; I do nothing,” Swanepoel quipped. “It works extremely well for me.
“In six months time you’ll probably find me underground at Blyvoor.”
Swanepoel already told Miningmx in November Saaiman was due to take over the reins within the next twelve months.
“I want to do more of what I like and less of what I don’t like,” he said. “A typical CEO’s job involves 80% wasted effort on issues taking place off the mines – all the meetings, all the travel. You have to do that well but I don’t want to do it anymore.”
Saaiman said on Monday Village expected to receive permission from the Competition Commission for the takeover of Blyvoor from DRDGold by end-June.
