Salient terms of the Black Mountain shareholders’ arrangements

1.   

SALIENT FEATURES

1.1 

The business of Black Mountain Mining (Proprietary) Limited (“the Company”) includes, but is not limited to, the exploration, development, mining, treatment, production and sale of zinc, lead, copper and silver in concentrated form.

1.2 

The ordinary shares in the share capital of the Company (“Ordinary Shares”) shall be held as follows: Exxaro Base Metals (Proprietary) Limited (“Exxaro Base Metals”): 26%; and Anglo Operations Limited (“AOL”): 74%.

1.3   

The Shareholders Arrangements Terms and Conditions (“the Agreement”) regulates: (i) the relationship between Exxaro Base Metals and AOL as shareholders in the Company (“Shareholders”) and (ii) the relationship between the Shareholders and the Company.

1.4 

There will be a minimum of three directors on the board of directors of the Company (“the Board”). Each Shareholder may appoint one director for each complete 10% of the Ordinary Shares held by such Shareholder. The minority Shareholder is subject to restrictions regarding the appointment of directors for the purpose of avoiding conflicts of interest.

1.5 

In relation to Board decisions, each director shall have a number of votes equal to the number of Ordinary Shares held by the Shareholder which appointed such director. The chairperson of the Board does not have a casting vote.

1.6

In relation to shareholders’ decisions, each Ordinary Share carries one vote. Shareholder decisions are taken by a simple majority of votes, subject to the provisions of the Companies Act. There are a number of material items that require 85% of the shareholder votes in order to be validly passed. These material items include:

(i)

any material change to the nature or scope of the business of the Company, including any material commodity diversification thereto;

(ii)

any disposal or transfer or sale of the whole of the business of the Company (other than any disposal, transfer or sale in the ordinary course of business where some or all of the assets of the Company are transferred or contributed or swapped in an operational arrangement (where it is demonstrated that there are sound reasons for doing so));

(iii) 

the listing of any Ordinary Shares on any exchange or market.

1.7

Exxaro Base Metals is subject to lock-in provisions which apply until the Final Date. The Final Date is the earlier of: (i) the tenth anniversary of the completion date of the empowerment transaction, and (ii) the date upon which AOL is satisfied that its equity credits under the Mining Charter are secure.

1.8

If a Shareholder wishes to dispose of its Ordinary Shares, it is first obliged to follow the preemptive rights procedure in favour of the remaining Shareholders.

1.9 

If: (i) a Shareholder is wound-up, deregistered or compromises with its creditors or (ii) Exxaro Base Metals breaches its lock-in obligations and fails to remedy the breach within timeframes set out in the Agreement, there will be a forced sale of Ordinary Shares of the relevant Shareholder at market value.

1.10 

The Agreement makes provision for tag-along and come-along rights of the Shareholders.

1.10.1 

The tag-along clause provides that if (having gone through the pre-emptive rights process) a Shareholder offers to sell 50% or more of the Ordinary Shares in the Company to a third party, such Shareholder shall procure that the third party makes the same pro rata offer to acquire the Ordinary Shares of the remaining Shareholders. This clause does not apply to AOL until the Final Date, except where the third party to whom the offer of 50% or more of the Ordinary Shares is offered is an HDSA.

1.10.2 

The come-along clause provides that if a third party offers to acquire all of the Ordinary Shares of all of the Shareholders and Shareholders holding 50% or more of the Ordinary Shares accept such offer, the remaining Shareholders shall be obliged to accept the offer of the third party in respect of all of their Ordinary Shares (subject to the pre-emptive rights process being followed).

1.11 

Special provisions relate to the funding of major capital projects (“Shareholder Project Funding”).

1.11.1 

If, prior to the Final Date, Exxaro Base Metals is unable or unwilling to provide its pro rata portion of Shareholder Project Funding, then Exxaro Base Metals shall be entitled, within a period set out in the Agreement, to give AOL and the Company written notice that it wishes to sell all of its Ordinary Shares and Claims (“Sale Equity”) to another HDSA (“the HDSA Sale”).

1.11.2 

Before embarking on the process for the HDSA Sale, Exxaro Base Metals and AOL shall determine the market value of the Sale Equity and Exxaro Base Metals shall decide the terms and conditions upon which it would agree to sell the Sale Equity. Exxaro Base Metals is first obliged to offer the Sale Equity to AOL at the determined market value and on the proposed terms and conditions. If AOL declines such offer, Exxaro Base Metals and AOL shall endeavour to find an HDSA (satisfactory to AOL) to whom to offer for sale all of the Sale Equity, provided that such HDSA is able and willing to provide its pro rata portion of Shareholder Project Funding. Exxaro Base Metals may not sell the Sale Equity to any HDSA on more favourable terms and conditions or a lower price than was offered to AOL. 

1.11.3 

Should Exxaro Base Metals elect not to provide any Shareholder Project Funding to the Company, AOL shall immediately be entitled to contribute all or some of the funding required (whether the process for the HDSA sale occurs or not).

1.12 

The Agreement provides for clawback rights prior to the Final Date. If the allotment and issue of Ordinary Shares by the Company in circumstances set out in the Agreement results in the Company not meeting the equity ownership requirements of the Mining Charter at dates specified in the Agreement, Exxaro Base Metals shall be entitled, at the sole discretion of AOL, either to: (i) subscribe for that number of Ordinary Shares which would result in the Company meeting the equity ownership requirements, in which event the Company shall repurchase a corresponding number of Ordinary Shares from AOL or (ii) purchase from AOL that number of Ordinary Shares which would result in the Company meeting the equity ownership requirements. The clawback price shall be equal to the higher of: (a) the market value of the Ordinary Shares at the date of the relevant subscription or purchase or (b) the value of the total disproportionate funding contributed by AOL to the Company divided by the total number of Ordinary Shares issued to AOL in respect of such disproportionate funding.