Detailed Further Cautionary Announcement Regarding the Offer by Wits Gold for the Acquisition of Southgold Exploration (Pty) Limited

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Jul 05, 2013, 02:57 ET

WITWATERSRAND CONSOLIDATED GOLD RESOURCES LIMITED
(Incorporated in the Republic of South Africa)
Registration Number 2002/031365/06
JSE Code: WGR
ISIN: ZAE000079703
TSX Code: WGR
CUSIP Number: S98297104
("Wits Gold" or the "Company")

JOHANNESBURG, July 5, 2013 /CNW/ -

1. Introduction

Wits Gold shareholders are referred to the cautionary announcement released on the Securities Exchange News Service ("SENS") and on SEDAR on Friday, 21 June 2013, and are advised that the Company has submitted a final binding offer to Mr Peter van den Steen, the business rescue practitioner (the "Practitioner") for Southgold Exploration (Pty) Limited ("Southgold") an indirect wholly-owned subsidiary of Great Basin Gold Limited ("GBG"), to acquire from N6C Resources Inc.:

the entire issued share capital of Southgold ("Sale Shares"), the sole owner of the Burnstone property located in the South Rand area of the Witwatersrand Goldfields in the Mpumalanga Province, South Africa where the Burnstone mine project is located;
all shareholder loans and all GBG's inter-group loans against Southgold (the "Sale Claims"),

on certain terms and subject to certain conditions, common to a transaction of this nature, which terms and conditions will be finalised and will form part of the transaction agreements to be concluded in due course (the "Proposed Offer" or the "Proposed Transaction").

2. Background to the Southgold Business Rescue process

In September 2012, Southgold entered into business rescue proceedings (the "Business Rescue") under Chapter 6 of the South African Companies Act, 71 of 2008 (the "Companies Act"). Wits Gold submitted the Proposed Offer to the Practitioner on 4 July 2013, and the Proposed Offer has been accepted by the Practitioner. Accordingly, the Proposed Offer has been incorporated into a Business Rescue plan prepared by the Practitioner (the "Plan"), which Plan, incorporating a notice of meeting was disseminated to the creditors of Southgold.

In terms of the notice of meeting included in the Plan a meeting of the creditors of Southgold has been convened under section 151 and 145 of the Companies Act on 11 July 2013 to consider and vote on the Plan ("Business Rescue Meeting").

Certain creditors of Southgold, namely Credit Suisse AG, Standard Chartered Bank (the "Lenders",) certain Debentureholders and a trade creditor (collectively, the "Debt Holders"), have each entered into a Restructuring Support Agreement, in terms of which the Debt Holders have undertaken to vote in favour of the Plan and accordingly the Proposed Transaction, and to do all things necessary to implement the Proposed Transaction.

3. Details of the Proposed Offer

3.1 Purchase consideration

Under the terms of the Proposed Offer a nominal purchase consideration of R100.00 (one hundred South African Rand) will be payable on the completion date of the Proposed Transaction (the completion date is to be determined) and will be apportioned as follows:

ZAR50.00 (fifty South African Rand) in respect of the Sale Shares; and
ZAR50.00 (fifty South African Rand) in respect of the Sale Claims,

(together the "Purchase Consideration").

3.2 Wits Gold shareholders' loan

In addition to the Purchase Consideration and subject to fulfilment of the conditions precedent, Wits Gold will advance up to ZAR950 million (nine hundred and fifty million South African Rand) (US$100 million (one hundred million United States dollars) at an exchange rate of ZAR9.50 / US$1) to Southgold by means of a shareholder loan ("Wits Gold Loan"). The loan will bear interest at a rate of the three month Johannesburg Interbank Agreed Rate ("JIBAR") plus 4% (four per cent), on terms and conditions to be agreed.

3.3 Restructuring and write-down of debt owed by Southgold

The Proposed Offer is conditional on, amongst others, the restructure of all liabilities due by Southgold to, amongst others, the Debt Holders and the South African Revenue Services ("SARS"), which liabilities include the debtor-in-possession ("DIP") financing all transaction costs and all costs related to the Business Rescue, inclusive of all guarantee obligations (but exclusive of the Sale Claims) being reduced to an amount of US$177.35 million (one hundred and seventy seven point three five million United States dollars) ("Total Southgold Liability").

The Total Southgold Liability will be settled upon the following terms and conditions:

a.	An upfront payment of US$7.25 million (seven million two hundred and fifty thousand United States dollars) on completion of the Proposed Transaction ("Completion Date"), which date is yet to be determined);

b.	From actual free cash flow generated by Southgold, the repayments of the Wits Gold Loan and balance of the Total Southgold Liability of US$170.1 million, being the Total Southgold Liability less the upfront payment in a) above will be scheduled as follows, (subject to 3.3 e):
	i.	In a ratio of 90% (ninety per cent) to the Wits Gold Loan and 10% to the balance of the Total Southgold Liability;
	ii.	Once the Wits Gold Loan plus accrued interest has been settled then in a ratio of 70% (seventy per cent) to Wits Gold and 30% (thirty per cent) to the balance of the Total Southgold Liability;
	iii.	33.3% (thirty three point three per cent) of the amounts payable in settlement of the Total Southgold Liability set out in (b) (i) and (ii) will be according to a fixed payment schedule with the remaining repayment to be variable (the "Guaranteed Payment"). The Guaranteed Payment is subject to a real gold price of ZAR410,000 / kg being achieved during the period under review;

c.	Once the balance of the Total Southgold Liability has been settled then the Lenders shall be entitled to participate in 10% of the free cash flows. This participation right will be limited to the current planned Burnstone life of mine (i.e. up to 2033), alternatively shall not exceed an amount of US$233,003,463.46 (two hundred and thirty three million three thousand four hundred and sixty three United States dollars and forty six cents) being all the liabilities due by Southgold to the Lenders prior to the restructuring under the Business Rescue process.

d.	Terms upon which the balance of the Total Southgold Liability will be settled:
	i.	Moratorium on interest and interest and capital repayments for 36 (thirty six) months from the Completion Date; thereafter
	ii.	Interest rate at US$ London Interbank Offered Rate ("LIBOR") plus 4% (four per cent);
	iii.	Southgold to have the option without penalty to settle the outstanding balance of the Total Southgold Liability assumed, in cash at any time post completion of the Proposed Transaction.

e.	The Lenders agreeing to provide post-commencement financing to Southgold from 1 July 2013 until the Completion Date ("Interim DIP"). This Interim DIP financing shall not exceed US$5 million (five million United States dollars) in total and shall be capable of draw down on notice being given to the Lenders and shall be settled on the following terms and conditions:
	i.	Provided and repaid in US$ (US dollars);
	ii.	Repaid from free cash flow generated by Southgold, in a ratio of 50:50, with 50% (fifty per cent) going to repay the Wits Gold Loan and 50% (fifty percent) going to repay the Interim DIP financing until the Interim DIP financing has been settled:
		a)	This repayment will precede the payment schedule listed in b i), until the Interim DIP financing is repaid, whereupon the payment schedule in b i) will begin.

4. Rationale for the Proposed Transaction

In line with Wits Gold's strategy of owning and developing shallow mines in South Africa the acquisition of the Burnstone property represents both a compelling value and strategic proposition for shareholders for, amongst others, the following reasons:

it provides shareholders with access to a cash generative asset and facilitates Wits Gold's transformation into a producer in the short term;
it provides Wits Gold with access to cash flows generated by the Burnstone mine which is anticipated to accelerate development of other Wits Gold projects;
80% of the Burnstone mine's capital has been spent to date; and
it creates a solid platform for the re-rating of Wits Gold's securities as Wits Gold moves from an explorer to a producer.

Wits Gold CEO Philip Kotze comments: "I am delighted that our offer for the Burnstone mine has been accepted by the Practitioner. As part of the Proposed Transaction Wits Gold has formulated a business plan for the mine which we believe is realistic, deliverable, value accretive to Wits Gold shareholders and aims to ensure maximum benefit and participation for each stakeholder in the Proposed Transaction"

5. Conditions precedent to the Proposed Transaction

The Proposed Offer and the implementation of the Proposed Transaction are each subject to and conditional upon the fulfilment of, or waiver by Wits Gold of conditions precedent standard to a transaction of this nature, including but not limited to entering into definitive transaction agreements, obtaining all necessary shareholder and regulatory approvals, including, amongst others, the approval of the Supreme Court of British Columbia, South African competition authorities, Toronto Stock Exchange ("TSX)", JSE Limited ("JSE"), and South African Reserve Bank ("SARB"), and Wits Gold obtaining the necessary financing arrangements.

6. Full terms announcement regarding the Proposed Transaction

A full terms announcement including the pro forma financial effects on the reported financial information of Wits Gold, as well as the salient dates and times relating to the implementation of the Proposed Transaction, including the effective date, will be announced to shareholders in due course, and remains subject to, amongst others, the approval of the Plan by the creditors of Southgold at the Business Rescue Meeting.

7. Renewal of cautionary announcement:

Wits Gold shareholders are referred to the cautionary announcement released by the Company on SENS and on SEDAR on Friday, 21 June 2013, and are advised that, as the Proposed Offer forming part of the Plan has not yet been approved by the creditors of Southgold, and the definitive transaction agreements are still being negotiated, which may have a material effect on the price at which the Company's securities trade, shareholders are advised to continue to exercise caution when dealing in Wits Gold's securities until a further announcement is made.

Johannesburg
05 July 2013

FORWARD LOOKING STATEMENTS
This press release contains "forward-looking information" within the meaning of applicable securities laws including information regarding the business of Wits Gold, the timing and terms and conditions of the Proposed Offer and Proposed Transaction, as well as the contemplated benefits from the Proposed Transaction. Readers are cautioned not to place undue reliance on forward-looking information. Forward‐looking information involves known and unknown risks, uncertainties and other important factors that could cause actual results and developments to differ materially from those contemplated by this information. Such risks, uncertainties and other important factors include among others: the ability to obtain the necessary shareholder and regulatory approvals; the ability to obtain the necessary financing on satisfactory terms, or at all; the ability to satisfy all other conditions precedent to the Proposed Transaction; economic, business and political conditions in South Africa; decreases in the market price of gold; hazards associated with underground and surface gold mining; and changes in laws and government regulations. The statements in this press release are made as of the date of this release. You should not place undue importance on forward‐looking information and should not rely upon this information as of any other date. The Company undertakes no obligation to update publicly or release any revisions to these forward‐looking statements to reflect events or circumstances after the date of this document or to reflect the occurrence of unanticipated events except where required by applicable laws.

SOURCE: Wits Gold