Afrimat Limited (JSE:AFT) News - Opening of Accelerated Bookbuild and an update on the trading environment

AFRIMAT LIMITED
Incorporated in the Republic of South Africa
(Registration number: 2006/022534/06)
Share code: AFT
ISIN: ZAE000086302
(“Afrimat” or “the Company” or the “Group”)



THIS ANNOUNCEMENT AND THE INFORMATION CONTAINED HEREIN IS RESTRICTED AND IS NOT FOR
PUBLICATION, DISTRIBUTION OR RELEASE, DIRECTLY OR INDIRECTLY, IN WHOLE OR IN PART IN OR INTO OR
FROM THE UNITED STATES, AUSTRALIA, CANADA OR JAPAN OR ANY OTHER JURISDICTION IN WHICH IT IS
UNLAWFUL TO DO SO. THIS ANNOUNCEMENT DOES NOT CONSTITUTE OR FORM AN OFFER OF SECURITIES IN
THE UNITED STATES OR ANY OTHER JURISDICTION IN WHICH IT WOULD BE UNLAWFUL TO DO SO.
THIS ANNOUNCEMENT IS FOR INFORMATION PURPOSES ONLY AND IS NOT AN OFFER OF SECURITIES IN ANY
JURISDICTION.


OPENING OF ACCELERATED BOOKBUILD AND AN UPDATE ON THE TRADING ENVIRONMENT

INTRODUCTION


Afrimat hereby announces the launch of an equity raising (“the Equity Raise”) equating to approximately 5% of the Company’s
current market capitalisation, through the issue of new ordinary shares (“the Bookbuild Shares”), subject to pricing acceptable
to Afrimat.


The Equity Raise will be offered to qualifying investors (as set out in greater detail in the disclaimers below) and will be
implemented through an accelerated bookbuild process (“the Bookbuild”) which opens with immediate effect and may close
at any time thereafter. The Company reserves the right to increase the size of the Bookbuild, subject to demand and pricing.


The Bookbuild Shares will be issued by the Company under and in accordance with its existing general authority to issue
shares for cash, granted by shareholders at the annual general meeting of the Company held on 4 August 2021.


RATIONALE AND USE OF PROCEEDS


The primary intention for Equity Raise is to support Afrimat’s growth strategy of which the two long-life projects, being the
Gravenhage manganese mining right (“Gravenhage”) and the Glenover project are currently underway.


On 20 May 2021, Afrimat announced that it had agreed to acquire 100% of the Gravenhage manganese mining right and
associated assets. The parties are engaging in respect of the final actions to achieve completion of the acquisition. Total project
peak funding is estimated at approximately R1.5 billion, with the project expected to contribute to the financial results of the
Group in the 2024 financial year.


Gravenhage is a long-life, near-development manganese resource situated approximately 50 km’s north of Hotazel and
approximately 120 km’s from Afrimat’s existing Demaneng mine in the northern region of the globally significant Kalahari
Manganese Field. A definitive feasibility study was finalised, confirming Gravenhage’s technical and economic feasibility based
on an initial open-cut operation, with the potential for subsequent underground mining. The resource, and its significant
potential, have been well-defined by continued exploration drilling.


On 9 December 2021, Afrimat announced that it had purchased certain assets and rights to mine select deposits at the
Glenover mine, as well as the option to acquire the shares in Glenover from the current shareholders, for a total purchase
consideration of R550 million. The Glenover acquisition includes phosphate stockpiles, rare earths and a vermiculite mining
right, which positions Afrimat to enter new commodities. The implementation of this acquisition has been staged, and good
progress has been made on the follow-up phases of this project.


There are no outstanding conditions precedent in respect of the Inventory Deposits and Vermiculite Mining Right, and payments
of R215 million and R35 million for the inventory deposits and the vermiculite mining right respectively were paid in cash to the
sellers. Furthermore, the option to acquire the shares in Glenover is subject to the fulfilment of the following outstanding
suspensive conditions namely: i) Afrimat’s Board approval and ii) Afrimat’s sole discretion to exercise the option to purchase
100% of the issued ordinary shares in Glenover from the Glenover shareholders together with all claims that the shareholders
may have against Glenover, by 10 November 2022. Afrimat is in the process of undertaking and finalising the feasibility studies,
with total peak funding for all phases and projects estimated at R1.5 billion.


In addition to the above, the Company continues to explore appropriate further opportunities as these arise that will fulfil
Afrimat’s current strategic objectives and support diversification. The equity raise will both partly fund the described growth
projects in combination with existing cash flows, and allow for additional balance sheet flexibility.


UPDATE ON TRADING ENVIRONMENT


On 19 May 2022, Afrimat published its financial results for the financial year ended 28 February 2022. The Company delivered
strong results on the back of favourable iron ore prices, the turnaround of Nkomati Anthracite, the establishment of the Jenkins
mining assets and the return to pre-Covid-19 volumes in the Construction Materials and Industrial Minerals segments.
Shareholders are referred to Afrimat’s final results announcement released on SENS on 19 May 2022 for a detailed report on
the Company’s trading environment.


Afrimat remains well-positioned to capitalise on strategic initiatives and future opportunities, and the following operational and
financial highlights are emphasised:
-   during the 2022 financial year, the Jenkins iron ore mine was successfully ramped up in line with strategic plans and is
    supplying iron ore to the local market at intended capacities;
-   Nkomati Anthracite Mine, where a successful turnaround strategy was implemented to turn it into a profitable state, is
    contributing positively to the Bulk Commodities segment;
-   Glenover has successfully commissioned high-grade phosphate sales, and further test work on the follow-on phases and
    projects is proving to be positive, but still ongoing;
-   the Demaneng iron ore mine continues to produce at a steady state for the export market, with the previously noted train
    availability issues from Transnet having improved. Since the full year results were released, quantities of iron ore loaded
    have been steady at an average of approximately 70 000 tonnes per month; and
-   Afrimat has a strong balance sheet, is currently ungeared and continues to generate substantial cash, enabling the Group
    to respond to opportunities and finance capital requirements efficiently.

The Company’s iron ore operations are expected to remain profitable even at the lower end of the iron ore commodity cycle,
allowing Afrimat to remain resilient to the recent decline in the iron ore price. Inflation and price increases on inputs such as
fuel, electricity and explosives are placing pressure on operating costs, which are being actively managed.


THE EQUITY RAISE


The Equity Raise will be offered to qualifying investors (as set out in greater detail in the disclaimers below) and will not be
offered to the public in any jurisdiction. The Equity Raise is not an offer to the public as contemplated under the South African
Companies Act, No.71 of 2008, as amended (the “South African Companies Act”), having regard to the provisions of section
96(1)(a) and 96(1)(b) of the South African Companies Act.


Pricing and allocations will be decided at the close of the Bookbuild. The timing of the closing of the Bookbuild and the price at
which the Bookbuild Shares will be placed (“Bookbuild Price”) are at the discretion of the Company and Investec Bank Limited
(“Investec”), acting as sole bookrunner (“Sole Bookrunner”) for the Equity Raise, pursuant to a placement agreement entered
into between the Sole Bookrunner and the Company.


The Company reserves the right to close the Bookbuild at any time.


The Bookbuild Shares, when issued, will be credited as fully paid and will rank pari passu in all respects with the existing shares
of the Company. Pricing and allocations will be announced as soon as is reasonably practicable following the closing of the
Bookbuild.


Investec, the Sole Bookrunner, can be contacted using the contact details included below.


Investec contact details:
Jarrett Geldenhuys or Ashleigh Williams
Email: iib_ecm@investec.co.za




Cape Town
27 July 2022


Sole Bookrunner and Transaction Sponsor
Investec Bank Limited


South African Legal Counsel to the Sole Bookrunner
DLA Piper




This announcement is for information purposes only and is not intended to and does not constitute, or form part of, any offer
or invitation to purchase, subscribe for or otherwise acquire or dispose of, or any solicitation to purchase or subscribe for or
otherwise acquire or dispose of, any securities in any jurisdiction. Persons needing advice should consult an independent
financial adviser.
The Equity Raise is made to qualifying investors, outside the United States in reliance on Regulation S being investors to whom
the Equity Raise may be lawfully made without having to file or register any offering or related documentation with any securities
regulatory authority in any relevant jurisdiction.


This announcement is not for publication or distribution or release, directly or indirectly, in or into the United States including
its territories and possessions, any State of the United States and the District of Columbia, Australia, Canada, Japan or any
other jurisdiction in which such release, publication or distribution would be unlawful. The distribution of this announcement
may be restricted by law in certain jurisdictions and persons into whose possession any document or other information referred
to herein comes should inform themselves about and observe any such restriction. Any failure to comply with these restrictions
may constitute a violation of the securities laws of any such jurisdiction. This announcement is for information purposes only
and shall not constitute or form part of an offer or solicitation of an offer to purchase or subscribe for securities in the United
States or any other jurisdiction it would be unlawful to do so. To the fullest extent permitted by applicable law, the Company
and the Sole Bookrunner disclaim any responsibility or liability for the violation of such requirements by any person. The Equity
Raise is not to be regarded as an offer or invitation to any person in any jurisdiction to the extent that any applicable legal
requirement in such jurisdiction has not been complied with or it is for any reason illegal or unlawful to make such an offer or
invitation in such jurisdiction.


The securities referred to herein (the “Shares”) may not be offered to the public in any jurisdiction in circumstances which would
require the preparation or registration of any offering document relating to the Bookbuild in such jurisdiction. The Shares may
not be offered or sold in the United States absent registration under the U.S. Securities Act of 1933, as amended (the “Securities
Act”), unless offered and sold in a transaction exempt from, or not subject to, the registration requirements of the Securities
Act. The Equity Raise will be offered to qualifying institutional investors outside the United States in reliance on Regulation S
under the Securities Act. The Bookbuild may not be offered to the public in the United States. The offer and sale of the Shares
has not been, and will not be, registered under the Securities Act or under the applicable securities laws of Australia, Canada
or Japan. Subject to certain exceptions, the Shares referred to herein may not be offered or sold in Australia, Canada or Japan
or to, or for the account or benefit of, any national, resident or citizen of Australia, Canada or Japan. There will not be any offer
of Shares in the United States, Canada, Australia and Japan.


THE BOOKBUILD SHARES ACQUIRED BY PERSONS OUTSIDE THE UNITED STATES MAY NOT BE OFFERED, SOLD,
RESOLD, DELIVERED OR OTHERWISE DISTRIBUTED IN OR INTO THE UNITED STATES OR TO ANY U.S. PERSON
(AS DEFINED BY REGULATION S UNDER THE SECURITIES ACT) UNTIL A MINIMUM OF 40 DAYS AFTER THE
SETTLEMENT OF THE BOOKBUILD AND BY ACQUIRING BOOKBUILD SHARES IN THE BOOKBUILD FROM OUTSIDE
THE UNITED STATES, YOU WILL BE DEEMED TO AGREE TO THE FOREGOING RESTRICTIONS.


This announcement does not constitute or form a part of any offer or solicitation or advertisement to purchase and/or subscribe
for Shares in South Africa, including an offer to the public for the sale of, or subscription for, or the solicitation of an offer to buy
and/or subscribe for, shares as defined in the South African Companies Ac, and will not be distributed to any person in South
Africa in any manner that could be construed as an offer to the public in terms of the South African Companies Act. This
announcement does not, nor is it intended to constitute a “registered prospectus” as contemplated in the South African
Companies Act.

In South Africa, the Bookbuild will not be an offer to the public as defined in the South African Companies Act and only (i)
persons falling within the exemptions set out in section 96(1)(a) of the South African Companies Act or (ii) persons who propose
to subscribe, as principal, for shares at a total contemplated acquisition cost equal to or greater than R1 000 000, as envisaged
in section 96(1)(b), of the South African Companies Act, and in each case to whom any offer to participate in the Bookbuild is
specifically addressed (all such persons in (i) and (ii) being referred to as “Relevant Persons”), will be entitled to apply for
Shares in the Bookbuild. Any investment activity to which this announcement relates will only be available to, and will only be
engaged with, Relevant Persons. Any person who is not a Relevant Person should not act on this announcement or any of its
contents. This announcement does not, nor does it intend to, constitute any offering document relating to the Bookbuild.
Information made available in this announcement should not be considered as “advice” as defined in the South African Financial
Advisory and Intermediary Services Act, 2002, and nothing in the document should be construed as constituting the canvassing
for, or marketing or advertising of, financial services in South Africa.


This announcement is for information purposes only and in member states of the European Economic Area (other than the
United Kingdom), is directed only at, and the Equity Raise will only be made to, persons who are qualified investors (as defined
in article 2(1)(e) of EU directive 2003/71/EC (the "Prospectus Directive") and the relevant implementing rules and regulations
adopted by each Member State). In the United Kingdom, this announcement is directed only at and the Equity Raise will only
be made to, the following persons: (i) investment professionals falling within article 19(5) of the Financial Services and Markets
Act 2000 (Financial Promotion) Order 2005 (the "Order") or (ii) who fall within Article 49(2)(A) to(D) of the Order, and (iii) to
whom it may otherwise lawfully be communicated, and any investment activity to which it relates will only be engaged in with
such persons and it should not be relied on by anyone other than such persons.


This announcement has been issued by and is the sole responsibility of Afrimat. No representation or warranty, express or
implied, is or will be made as to, or in relation to, and no responsibility or liability is or will be accepted by Investec or by any of
their respective directors, officers, employees, advisers affiliates or agents as to, or in relation to, the accuracy, completeness
or verification of the information set forth in this announcement or any other written or oral information made available to or
publicly available to any interested party or its advisers, and any liability therefore is expressly disclaimed and nothing contained
in this announcement is, or shall be relied upon as, a promise or representation in this respect, whether as to the past or the
future. Neither Investec nor any of its respective directors, officers, employees, advisers affiliates or agents accepts any
responsibility for its accuracy, completeness or verification and, accordingly, disclaim, to the fullest extent permitted by
applicable law, any and all liability which they might otherwise be found to have in respect of this announcement or any such
statement.


This announcement does not purport to identify or suggest the risks (direct or indirect) which may be associated with an
investment in the securities. No representation or warranty is made by Afrimat or Investec in connection with the Equity Raise,
and any investment decision to buy securities in terms of the Equity Raise must be made solely on the basis of publicly available
information which has not been independently verified by Investec.


Investec is acting for Afrimat, and no one else, in connection with the Equity Raise and will not be responsible to anyone other
than Afrimat for providing the protections offered to clients of Investec, nor for providing advice in relation to the Equity Raise.

Date: 27-07-2022 05:15:00
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