Wrap Text
Proposed capital reduction and notice of general meeting
Pan African Resources PLC Pan African Resources Funding Company
(Incorporated and registered in England and Limited
Wales under the Companies Act 1985 with Incorporated in the Republic of South
registered number 3937466 on 25 February Africa with limited liability
2000) Registration number: 2012/021237/06
Share code on AIM: PAF Alpha code: PARI
Share code on JSE: PAN
ISIN: GB0004300496
ADR ticker code: PAFRY
("Pan African" or the "Company" or the
"Group")
PROPOSED CAPITAL REDUCTION AND NOTICE OF GENERAL MEETING
Notice of general meeting
Notice is hereby given that a General Meeting of Shareholders (General Meeting) will be held
at the offices of Fladgate LLP, 16 Great Queen Street, London WC2B 5DG on Monday, 10
June 2024 at 10:00 (all references to time in this notice is United Kingdom time, unless
otherwise stated).
Shareholders are advised that the notice of General Meeting and circular will be distributed to
shareholders on Friday, 24 May 2024.
The circular provides information, in respect of a capital reduction to enable the Company to
pay future dividends, address the payment of certain past distributions by the Company by
way of dividends, and in respect of certain share buy backs as well as the resultant related
party transactions. The Company now understands that these past distributions have
apparently been paid otherwise than in accordance with the Companies Act 2006. A copy of
the notice of General Meeting and circular are also available at:
https://www.panafricanresources.com/investors/shareholder-announcements/
The chairman's letter has been extracted from the circular and is set out at the end of this
announcement. The defined terms used in the chairman's letter shall have the same meaning
as set out in the circular.
Salient dates relevant to the General Meeting
Record date for receipt of the Circular Tuesday, 21 May 2024
Last day to trade on the JSE in order to vote at the General Monday, 3 June 2024
Meeting
Last day to trade on the LSE in order to vote at the General Tuesday, 4 June 2024
Meeting
Record date for purposes of voting at the General Meeting Thursday, 6 June 2024
Latest time and date for receipt of Forms of Proxy for the 10.00 (London time) a.m. on
General Meeting Thursday, 6 June 2024
General Meeting 10.00 (London time) a.m. on
Monday, 10 June 2024
Expected date of initial directions hearing of the Court Friday, 21 June 2024
Expected date of Court Hearing to confirm the Capital Tuesday, 2 July 2024
Reduction
Expected effective date for the Capital Reduction Wednesday, 3 July 2024
Notes
1. The expected dates for the confirmation of the Capital Reduction by the Court and the
Capital Reduction becoming effective are based on provisional dates that have been
obtained for the required Court hearings of the Company's application. These
provisional hearing dates are subject to change and dependent on the Court's timetable.
2. The timetable assumes that there is no adjournment of the General Meeting. If there is
an adjournment, all subsequent dates are likely to be adjusted accordingly.
Johannesburg
24 May 2024
For further information on Pan African, please visit the Company's website at:
www.panafricanresources.com
Corporate information
Corporate office Registered office
The Firs Building 2nd Floor
2nd Floor, Office 204 107 Cheapside
Cnr. Cradock and Biermann Avenues London
Rosebank, Johannesburg EC2V 6DN
South Africa United Kingdom
Office: + 27 (0)11 243 2900 Office: + 44 (0)20 7796 8644
info@paf.co.za info@paf.co.za
Chief executive officer Financial director and debt officer
Cobus Loots Deon Louw
Office: + 27 (0)11 243 2900 Office: + 27 (0)11 243 2900
Head: Investor relations Website: www.panafricanresources.com
Hethen Hira
Tel: + 27 (0)11 243 2900
E-mail: hhira@paf.co.za
Company secretary Nominated adviser and joint broker
Jane Kirton Ross Allister/Georgia Langoulant
St James's Corporate Services Limited Peel Hunt LLP
Office: + 44 (0)20 7796 8644 Office: +44 (0)20 7418 8900
JSE Sponsor and JSE debt sponsor Joint broker
Ciska Kloppers Thomas Rider/Nick Macann
Questco Corporate Advisory Proprietary Limited BMO Capital Markets Limited
Office: + 27 (0)11 011 9200 Office: +44 (0)20 7236 1010
Joint broker
Matthew Armitt/Jennifer Lee
Joh. Berenberg, Gossler & Co KG
Office: +44 (0)20 3207 7800
The chairman's letter (which is dated 24 May 2024) extracted from the circular reads as
follows:
"Dear Shareholder,
PROPOSED CAPITAL REDUCTION
and
PROPOSED RECTIFICATION OF RELEVANT DIVIDENDS
and
RELATED PARTY TRANSACTIONS
and
NOTICE OF GENERAL MEETING
1. Introduction
I am writing to provide you with details of a proposal to maintain the Company's ability to return value
to Shareholders in the future by way of dividends and to address the payment of certain past
distributions made by the Company by way of dividend and payments in respect of certain share buy
backs, that have now understood to have been paid otherwise than in accordance with the Companies
Act 2006.
This document also provides the details of a General Meeting that will be held at the offices of Fladgate
LLP at 16 Great Queen Street, London WC2B 5DG at 10.00 a.m. (London time) on Monday, 10 June
2024 to consider the Resolution that will be put to Shareholders for approval.
The purpose of this document is to provide you with information about the Capital Reduction, the
proposed rectification of Relevant Distributions and the related party transactions and to explain why
the Board considers the Resolution to be in the best interests of the Company and its Shareholders as
a whole and unanimously recommends that you vote in favour of the Resolution to be proposed at the
General Meeting.
Given the interests of the Board in the Directors' Deed of Release (and therefore the Resolution), and
as required by the AIM Rules, the Board are not considered to be independent in relation to the
Directors' Deed of Release or the Resolution and the Board therefore cannot provide the opinion
required by Rule 13 of the AIM Rules as to the fairness and reasonableness of the Directors' Deed of
Release and the Resolution. Accordingly, Peel Hunt (as the nominated adviser of the Company) has
confirmed that the Directors' Deed of Release and the Resolution are fair and reasonable insofar as the
Shareholders are concerned and recommends that Shareholders vote in favour of the Resolution.
For the avoidance of doubt, the Proposals do not constitute a related party transaction in accordance
with the JSE Listings Requirements.
Shareholders should note that, unless the Resolution is approved at the General Meeting and the Court
subsequently confirms the Capital Reduction:
A) the Capital Reduction will not take effect; and
B) the declaration and making of distributions otherwise than in accordance with the Act will not be
rectified.
If the Resolution is not approved, then the Company will retain a potential right to make claims
against the Recipient Shareholders for recovery of the payment of the Relevant Distributions.
There is no certainty that judgment would be successfully obtained by the Company against the
Recipient Shareholders or that any amount could be recovered if the Company sought to pursue
these potential claims.
If the Resolution is not approved, then the Company has a potential right to bring claims against
the Relevant Directors in relation to the payment of the Relevant Distributions. There is no
certainty that judgment would be successfully obtained by the Company against the Relevant
Directors or that any amount could be recovered if the Company sought to pursue these
potential claims.
Part II of this document contains definitions of words and terms that have been used throughout it.
Please refer to Part II as you review this document.
2. Background to, and reasons for, the Capital Reduction
The Group is an African-focused gold producer with a production capacity in excess of 200,000 ounces
of gold per annum. It owns and operates a portfolio of high-quality, low-cost operations and projects,
which are located in South Africa. Accordingly, all of the Group's revenue arises from trading in South
Africa, and so the day to day accounting of the Company and the Group is recorded in ZAR. In other
words, the Functional Currency of the Company and the Group is ZAR. The trading of the Group in the
years ended 30 June 2019, 2020, 2021, 2022 and 2023 were profitable in ZAR terms.
The Board considers the Group to be mid-tier gold producer. The Presentation Currency of other similar
gold-producing groups is US$ and so, in order to ensure that the Group can easily be compared to
those other similar gold-producing groups, US$ was chosen to be the Presentation Currency of the
Company and the Group. The first audited accounts of the Company and the Group where the
Presentation Currency was US$ was the audited accounts for the year ended 30 June 2019.
The Act requires that a public limited company must satisfy certain criteria in order to be able to declare
and pay a dividend. Not only must a public limited company have distributable profits, but the Act also
provides that a public limited company may only pay a dividend if it can satisfy the Net Assets Test. The
Company paid the dividends set out in paragraph 3 below in respect of the years ended 30 June 2019,
2020, 2021, 2022 and 2023. Those dividends amount, in aggregate, to US$93,384,863 (the "Relevant
Dividends").
A company may only acquire its own shares when the purchase price for such acquisition is paid out of
profits available for distribution (as determined in accordance with the Act) or out of the proceeds of a
fresh issue of shares for that purpose. The determination of the level of distributable profits for the
purchase of an own share acquisition engages the same principles as dividends, including a need to
satisfy the Net Assets Test. With the Buy Backs, the Company acquired its own shares in the period 1
April and 9 May 2022. Insofar as there were not profits available for distribution, the payments made
for those shares would be characterised as distributions made by the Company to the benefit of those
shareholders. The total sums paid out by the Company in respect of the Buy Backs were ZAR 50.3
million. Further details of the Buy Backs are set out in paragraph 4 of Part IV of this document.
It has come to the attention of the Company that the Technical Release clarifies that the Net Assets
Test is required to be performed on the Presentation Currency amounts (not the Functional Currency
amounts). Since 2019, when the presentation currency was changed to the US Dollar, the Rand has
depreciated by 34% over the five years ending 30 June 2023. The translation of the Company's
accounts from the Functional Currency to the Presentation Currency resulted in the Foreign Currency
Translation Reserve which, as at 30 June 2023 stood at US$171,045,970 and exceeded the Company's
retained income of US$ 47,238,936. It has also come to the attention of the Company that the Foreign
Currency Translation Reserve does not form part of the Company's undistributable reserves, despite it
being unrealised in nature, and so cannot be included as undistributable reserves when carrying out
the Net Assets Test. As explained in paragraph 1.3 of Part IV of this document, the Company should
not have made the Relevant Distributions because doing so breached the Net Assets Test, as
interpreted by the Technical Release, and so the Relevant Distributions were not in accordance with
the Act.
Under the Act, a company may, with the sanction of a special resolution passed by its shareholders and
confirmation of the Court, reduce or cancel its share capital, share premium account, and other
reserves. It may then apply the sums resulting from such reduction to its distributable reserves. These
sums may then be treated as distributable for the purposes of making future returns to Shareholders.
The Company has at 30 June 2023, a Share Premium Account standing to the credit of
US$235,063,183
The Act requires that if a company issues shares at a premium to the nominal value of those shares for
cash or otherwise, a sum equal to the aggregate amount or value of the premiums must be transferred
to the company's share premium account. A share premium account can only be used in very limited
circumstances. The Company intends to reduce the Share Premium Account in full.
The Share Premium Account is a statutory reserve in respect of which the Court has the power to
sanction the reduction or cancellation.
The Capital Reduction, if approved, will provide the Company with the flexibility to continue with its
existing progressive dividend policy and will allow the rectification of the Relevant Distributions which
have been paid otherwise than in accordance with the Act as described in paragraphs 3 and 4 of Part
IV of this document.
3. Payment of Relevant Distributions
Details of the Relevant Dividends are set out below:
Date and type of dividend Amount per Amount per Amount Exchange Total
payment (interim or final) Ordinary Ordinary per rate used aggregate
Share in ZAR Share in Ordinary to convert amount
pence Share in into US$ of dividend
US cents paid in US$
Final dividend in respect of the ZAR 0.0223745 0.11725 0.15179 US £1 = ZAR US$3,399,049
year ended 30 June 2019 – paid pence cents 19.0825
on 30 December 2019 US$1 =
ZAR 14.74
Final dividend in respect of the ZAR 0.14 0.68857 0.92105 US £1 = ZAR US$20,606,644
year ended 30 June 2020 – paid pence cents 20.3320
on 15 December 2020 US$1 =
ZAR 15.20
Final dividend in respect of the ZAR 0.18 0.84954 1.13924 £1 = ZAR US$24,984,084
year ended 30 June 2021 – paid pence cents 21.1880
on 14 December 2021 US$1 =
ZAR 15.80
Final dividend in respect of the ZAR 0.18 0.86915 1.05820 US £1 = ZAR US$23,168,220
year ended 30 June 2022 – paid pence cents 20.71
on 13 December 2022 US$1 =
ZAR 17.01
Final dividend in respect of the ZAR 0.18 0.76239 0.95491 US £1 = ZAR US$21,226,866
year ended 30 June 2023 – paid pence cents 23.61
on 12 December 2023 US$1 =
ZAR 18.85
Total aggregate value US$93,384,863
Part IV of this document sets out details of how the Relevant Dividends were paid otherwise than in
accordance with the Act as well as the proposals for rectification.
Between 1 April and 9 May 2022, the Company repurchased (by making several purchases during the
period) in aggregate 11,825,491 Ordinary Shares for a total consideration of ZAR 50.3 million (which
was, at the time, equivalent to approximately £2.55 million and US$ 3.222 million.
The consequence of the Relevant Distributions being made otherwise than in accordance with the Act
is that the Company may have a claim against all shareholders (former or present) who received any
such distribution (up to the maximum value of cumulative distributions received by each shareholder
from the Relevant Distributions) as well as a claim against all Directors (former or present, individually
or in aggregate) who approved the making of the Relevant Distributions, up to the total aggregate value
of US$93,384,863 in respect of the Relevant Dividends and in respect of US$ 3.222 million (equivalent
to approximately £2.55 million) in respect of the Buy Backs.
The Company has entered into the Shareholders' Deed of Release and the Directors' Deed of Release.
The consequence of the entry into these deeds by the Company is that the Company will be unable to
make any claims against: (a) the Recipient Shareholders; and (b) the Relevant Directors, in each case
in respect of the Relevant Distributions.
In addition, the Company has entered into the Peel Hunt Deed of Release with Peel Hunt and the RMB
Morgan Stanley Deed of Release with RMB Morgan Stanley. Under the Peel Hunt Deed of Release,
which is conditional upon the Capital Reduction becoming effective and the passing of the Resolution,
the Company waived and released Peel Hunt from any and all claims which the Company has, or may
have, in respect of the UK Buy Back and Peel Hunt waived and released the Company from any and
all claims which Peel Hunt has, or may have, in respect of the UK Buy Back. Under the RMB Morgan
Stanley Deed of Release, which is conditional upon the Capital Reduction becoming effective and the
passing of the Resolution, pursuant to which the Company waived and released RMB Morgan Stanley
from any and all claims which the Company has, or may have, in respect of the SA Buy Back and RMB
Morgan Stanley waived and released the Company from any and all claims which RMB Morgan Stanley
has, or may have, in respect of the SA Buy Back For further details please see paragraph 4 of Part IV
of this document.
The entry by the Company into the Directors' Deed of Release constituted a related party
transaction (as defined in the AIM Rules). This is because each of the Relevant Directors
(comprising persons who are, or were within the last 12 months, directors of the Company) is
deemed to be a related party under the AIM Rules and they will be released from any liability to
repay any amounts of the Relevant Distributions pursuant to the Directors' Deed of Release (as
applicable). Paragraph (e) of the Resolution will seek the specific approval of the Company's
shareholders for the entry into the Directors' Deed of Release.
4. Ensuring the Company complies with the Net Assets Test in the future
The technical issues identified in paragraph 3 above and Part IV of this document in respect of the
Relevant Distributions are of a historical nature and there is no change in the Company's financial
position or its net asset value as a consequence.
The Company is considering a number of accounting approaches/strategies to ensure adequate
distributable income (and the ability of the Company to comply with the Net Assets Test) in the future
Accordingly, we do not believe any further remedial action is required. For avoidance of doubt, the
Company continues to deem its procedures, systems and controls to be sufficient to enable it to comply
with its obligations under the AIM Rules, disclosure requirements, transparency rules and corporate
governance rules, as well as its requirement to make timely and accurate disclosure to the market.
5. The Capital Reduction
As a result of the Company's stated desire to continue with its existing progressive dividend policy, and
in order to rectify the Relevant Distributions made otherwise than in accordance with the Act, the
Company must undertake the Capital Reduction to provide it with the necessary distributable reserves.
In addition to the approval by Shareholders of the cancellation of the share premium account, the
reduction of capital requires the approval of the Court. Accordingly, following the General Meeting, an
application will be made to the Court in order to confirm and approve the reduction of capital.
In providing its approval of the Capital Reduction, the Court may require measures to be put in place
for the protection of creditors (including contingent creditors) of the Company whose debts remain
outstanding on the relevant date, except in the case of creditors who have consented to the Capital
Reduction. Shareholders should note that (although the Group has debt and creditors) the Company
itself (which will be the entity considered by the Court) has no senior debt and only minor creditors for
service providers to the Company are expected. Such creditor protection measures may include
seeking the consent of the Company's creditors to the Capital Reduction or the provision by the
Company to the Court of an undertaking to deposit a sum of money into a blocked account created for
the purpose of discharging the non-consenting creditors of the Company or an undertaking to treat as
undistributable for the time being certain sums representing the realisation of "hidden value" in the
balance sheet as at the Effective Date.
It is anticipated that the initial directions hearing in relation to the Capital Reduction will take place on
Friday, 21 June 2024, with the final Court Hearing taking place on Tuesday, 2 July 2024 and the Capital
Reduction becoming effective on the following day, following the necessary registration of the Court
Order at Companies House.
There will be no change in the number of Ordinary Shares in issue (or their nominal value) following the
implementation of the Capital Reduction and no new share certificates will be issued as a result of the
Capital Reduction. The Capital Reduction itself will not involve any distribution or repayment of capital
or share premium by the Company and will not reduce the underlying net assets of the Company. The
distributable reserves arising on the Capital Reduction will, subject to the discharge of any undertakings
required by the Court as explained above, support the Company's ability to pay dividends should
circumstances in the future make it desirable to do so and the appropriation of profits to ratify relevant
accounting entries.
Shareholders should note that if, for any reason, the Court declines to approve the Capital Reduction,
the Capital Reduction will not take place. The Board reserves the right to abandon or to discontinue (in
whole or in part) the application to the Court in the event that the Board considers that the terms on
which the Capital Reduction would be (or would be likely to be) confirmed by the Court would not be in
the best interests of the Company and/or its Shareholders as a whole. The Board has undertaken a
thorough and extensive review of the Company's liabilities (including contingent liabilities) and
considers that the Company will be able to satisfy the Court that there is no real likelihood that any
creditor of the Company would be prejudiced by the Capital Reduction.
6. General Meeting and Resolution
The Notice of General Meeting is set out in Part V of this document.
The General Meeting will take place at the offices of Fladgate LLP at 16 Great Queen Street, London
WC2B 5DG at 10.00 a.m. (London time) on Monday, 10 June 2024. At the General Meeting, the
Resolution set out in Part V of this document will be proposed to Shareholders.
The Resolution, which will be proposed as a special resolution, has five elements to it, each of which
are summarised below:
- the first element is to approve, subject to confirmation of the Court, the cancellation of the Share
Premium Account.
- the second element is, subject to the Capital Reduction becoming effective, to approve that
distributable profits of the Company be appropriated to the relevant accounting periods during
which the Relevant Distributions were declared and paid.
- the third element is to approve the release and waiver by the Company of any claims which it
has or may have against either of the Brokers in respect of the Buy Backs (and the reciprocal
release and waiver by each of the Brokers of any claims which either of them have or may have
against the Company) in respect of the Buy Backs and to ratify and authorise the entry into the
Brokers' Deeds of Release by the Company .
- the fourth element is to approve the release and waiver of all claims which the Company may
have in respect of the Relevant Distributions against previous and current shareholders and their
successors in title and to ratify and authorise the entry into the Shareholders' Deed of Release
by the Company.
- the fifth element is to approve the release and waiver of all claims which the Company may have
in respect of the Relevant Distributions against the directors (current and former and their
personal representatives and successors in title) at the time of declaration and payment of each
respective Relevant Distributions and to ratify and authorise the entry into the Directors' Deed of
Release by the Company.
The Resolution (being a special resolution) will be passed if 75% or more of the votes cast (in person
or by proxy) at the General Meeting are in favour of the Resolution.
7. Related Party Transactions
Given the interests of each of the Directors in the Resolution it is not appropriate for the Board to provide
a recommendation in this instance.
In lieu of any independent directors' recommendation in relation to the Resolution, in order to provide a
statement as to what is fair and reasonable, and specifically due to all Directors being statutory directors
at the time the Relevant Distributions were proposed and paid, Peel Hunt, in its capacity as Nominated
Adviser to the Company for the purposes of the AIM Rules, considers that the Resolution (and
specifically the entry by the Company into the Shareholders' Deed of Release and the Directors' Deed
of Release) are fair and reasonable insofar as the shareholders of the Company are concerned.
8. Taxation position of UK shareholders
The following comments are intended as a general guide only and relate only to certain UK tax
consequences of the Reduction of Capital. The comments are based on current legislation and HM
Revenue & Customs published practice, both of which are subject to change, possibly with retrospective
effect. These comments deal only with Shareholders who are resident for taxation purposes in the UK,
who are the absolute beneficial owners of the Ordinary Shares and who hold them as an investment
and not in a trading account ("UK Shareholders"). They do not deal with the position of certain classes
of Shareholders, such as dealers in securities, insurance companies, collective investment schemes or
persons regarded as having obtained their Ordinary Shares by reason of employment.
Any Shareholder who has any doubt about their own taxation position, or who is subject to
taxation in any jurisdiction other than the UK should consult their own professional taxation
advisor immediately.
The Share Premium Reduction
The Share Premium Reduction should not have any consequences for UK Shareholders for the
purposes of UK taxation of chargeable gains ("CGT"), UK income tax or UK corporation tax.
UK stamp duty and stamp duty reserve tax
No stamp duty or stamp duty reserve tax will be payable on the Reduction of Capital.
9. Action to be taken in respect of the General Meeting
Shareholders can appoint a proxy electronically using the link www.signalshares.com – Details of how
to appoint a proxy in this way are set out on pages 20 to 23 of this document. Details of how to complete,
or request an additional, hard copy Form of Proxy are set out on pages 20 to 23 of this document. To
be valid, a Form of Proxy must be returned as soon as possible and so as to be received by the
Registrars by not later than 10.00 a.m. (London time) on Thursday, 6 June 2024.
The completion and return of the Form of Proxy will not prevent you from attending and voting at the
General Meeting in person.
In accordance with current best practice and to ensure voting accurately reflects the views of
Shareholders, it will be proposed at the General Meeting that voting on the Resolution will be conducted
by poll vote rather than by a show of hands and the relevant procedures will be explained at the General
Meeting.
If the Resolution is not passed, the Company may continue to have claims against the Relevant
Directors and Recipient Shareholders.
10. Questions
If you wish to ask a question relating to the business of the General Meeting in advance, please submit
your questions to info@paf.co.za. or jane.kirton@corpserv.co.uk, please include in your email: the
shareholder's full name, number of shares held and telephone contact details.
11. Recommendation
The Board consider the Resolution to be in the best interests of the Company and its Shareholders as
a whole and the Board unanimously recommend that you vote in favour of the Resolution to be proposed
at the General Meeting.
Given the interests of the Board in the Directors' Deed of Release (and therefore the Resolution),
and as required by the AIM Rules, the Board are not considered to be independent in relation to
the Directors' Deed of Release or the Resolution and the Board therefore cannot provide the
opinion required by Rule 13 of the AIM Rules as to the fairness and reasonableness of the
Directors' Deed of Release and the Resolution. Accordingly, Peel Hunt (as the nominated
adviser of the Company) has confirmed that the Directors' Deed of Release and the Resolution
is fair and reasonable insofar as the Shareholders are concerned and recommends that
Shareholders vote in favour of the Resolution.
In addition, the Directors have each undertaken to abstain, and to take all reasonable steps to ensure
that their respective associates abstain, from voting on the Resolution. The aggregate shareholdings of
the Directors are 14,488,695 Ordinary Shares representing approximately 0.76% of the Ordinary
Shares in issue at the date of this document.
Yours faithfully
Keith Spencer
Non-executive Chairman"
Date: 24-05-2024 09:00:00
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