Press releases

MDM purchases own shares

MDM announces Interim Results and merger with Sedgman

28 November 2012

MDM Engineering Group Limited
(“MDM Engineering”, “MDM” or “the Company”)
Merger with ASX-listed Sedgman Limited and Release of Interim Results

  • Recommended merger with ASX-listed Sedgman Limited (“Sedgman”) (ASX: SDM)
  • Offer Price of £1.81 per MDM share values MDM (on an undiluted basis) at US$109 million1 (£67.9 million)
  • 100% cash consideration to non-Key Shareholders
  • Offer represents 23% premium to one-month MDM VWAP
  • Cash offer provides immediate liquidity to MDM shareholders
  • Key Shareholders including certain senior employees of MDM will receive a combination of cash (70%) and shares in Sedgman (30%) equivalent to £1.81 per share
  • Sedgman has entered into voting agreements with certain key shareholders of MDM representing approximately 25% of MDM shares, and has undertakings from an additional 40% of MDM shareholders to enter into such voting agreements, pursuant to which those shareholders have irrevocably agreed to vote in favour of the Merger
  • Merger positions the MDM business with access to enhanced balance sheet strength to provide capacity to execute larger and increasingly complex projects
  • Merger subject to MDM shareholder approval and other conditions including competition approval.

Note (1): based on USD:GBP exchange rate of 0.623
Interim Results:

  • Revenue for 6 months to 30 September 2012 up 298% to US$78.9 million
  • Pre-tax profit up 145% to US$8.1 million
  • Interim dividend of US 8.0 cents per share payable in January 2013.

Recommended merger with Sedgman Limited
MDM Engineering Group Limited (AIM:MDM) is pleased to announce that it has entered into a merger implementation agreement (“MIA”) with ASX-listed Sedgman Limited (ASX: SDM) under which Sedgman’s BVI subsidiary will acquire all of the ordinary shares in MDM, subject to MDM shareholder approval by greater than 75% of the votes cast and certain other conditions  (the “Offer”, the “Transaction” or the “Merger”).

Under the terms of the Merger, MDM shareholders (other than certain key shareholders, being those shareholders, with certain exceptions, who made an early and irrevocable pledge of their shares in support of the Merger (“Key Shareholders”)) will be offered £1.81 cash for each MDM share they hold (the “Offer Price” or the “Cash Consideration”).  Certain Key Shareholders will be offered a combination of 70% cash consideration and 30% of their consideration in Sedgman shares (“Consideration Shares”) for their MDM shares (equivalent to £1.81 per share). 

The Offer Price of £1.81 per share represents:

  • a premium of 8.7% to MDM’s closing price on 27 November 2012;
  • a premium of 23.0% to the one-month VWAP prior to 27 November 2012; and
  • a premium of 21.6% to the three-month VWAP prior to 27 November 2012.

Each of the directors of the MDM Board recommends to the MDM shareholders that, in the absence of a superior proposal, they vote in favour of the Merger as they have undertaken to do in respect of their own MDM shares pursuant to their respective voting and escrow deeds. 

MDM shareholders representing approximately 25% of MDM shares on issue have executed voting and escrow deeds and voting deeds, and a further 40% of MDM shareholders have undertaken to enter into such voting agreements, pursuant to which those shareholders have irrevocably agreed to vote in favour of the Merger. 

The Transaction is subject to certain conditions precedent including MDM shareholder approval of the Merger at an extraordinary general meeting of the Company (“EGM”), clearances from South African and Tanzanian Competition authorities, no material adverse changes or prescribed occurrences (as defined in the MIA) occurring in relation to MDM’s business and an MDM minimum working capital, surplus cash and order book requirement. A summary of the key terms of the MIA is set out in Appendix I to this announcement.

The MIA also contains customary deal protection mechanisms, including no shop and no talk provisions, a matching right for Sedgman in the event of a competing proposal and break fees payable by both MDM and Sedgman in certain agreed circumstances. The MIA also contains customary restrictions on the conduct of MDM’s business prior to Completion. 

Under the MIA, the parties have agreed that in circumstances where MDM has met certain working capital and cash requirements, there may be an increase in the consideration payable by Sedgman. Any additional consideration will be in the form of an increase to the Merger Consideration or by way of a special dividend payable to MDM Shareholders
The Notice of Meeting containing information relating to the proposed Merger and details of the EGM is expected to be despatched to MDM shareholders in early December 2012, with the EGM in relation to the Merger expected to be held on or around 18 December 2012.  Subject to the approval of the Merger by MDM shareholders and timely satisfaction of the conditions precedent (including approval of the Merger by various competition and regulatory commissions) MDM expects the Transaction to be completed in early March 2013.

It is intended that, immediately following Completion admission to trading on the AIM Market of the London Stock Exchange of MDM’s ordinary shares will be cancelled.  Further details of the timetable for such cancellation will be advised in due course. 

Chairman and CEO Comment
Commenting on the Transaction, MDM Chairman, Mr Bill Nairn said:The MDM Board view the merger with Sedgman as providing MDM shareholders with the certainty of 100% cash consideration for independent shareholders at a significant premium and immediate liquidity for their MDM shares.” 

 MDM’s Chief Executive Officer, Mr Martin Smith said:As demonstrated by the release of our interim results, MDM is delivering strong growth, underpinned by an increasing order book and excellent relationships with our key clients. The merger with Sedgman creates certainty of value for MDM shareholders at a premium that recognises the future potential of the business.  The merger also positions MDM within the larger Sedgman consolidated group with existing engineering expertise focussed on the resources sector coupled with a larger balance sheet to support the increasingly complex and larger scale projects which MDM is undertaking and targeting throughout Africa.

The Board is pleased to declare that MDM will pay a gross interim cash dividend of US 8.0 cents per share on 15 January 2013 to all shareholders registered on the share register as at the record date of 7 December 2012 (the “Interim Dividend”).  The Interim Dividend will have an ex-dividend date 5 December 2012. 

MDM Options
MDM optionholders who hold options (“MDM Options”) under the MDM Global Share Option Plan will be invited, in advance of and conditional on the Merger completing, to cancel their MDM options in consideration for a cash payment equal to the premium difference (if any) between the Cash Consideration and the exercise price of the relevant MDM Option. The cancellation of the MDM Options will be effected by way of a deed of release and cancellation.  A table setting out the MDM Options held by directors of MDM that will be cancelled conditional upon Completion is set out below:


Date Issued

Strike Price

 Outstanding options

Dominique de la Roche




Dominique de la Roche




Dominique de la Roche




George Bennett




George Bennett




George Bennett




Mark Summers




Martin Smith




Martin Smith




Martin Smith




Martin Smith




Martin Smith




About Sedgman
Sedgman Limited (ASX: SDM) was established in 1979 and is a leading provider of mineral processing and associated infrastructure solutions to the global resources industry. Sedgman listed on the ASX in June 2006. The company has over 1,000 employees and services the global coal and metalliferous markets by offering innovative Engineering and Operations capabilities.

Head Office is in Brisbane with international offices established in Beijing, Shanghai, Ulaanbaatar, Santiago and Johannesburg targeting the growth regions of China/Mongolia, South America and southern Africa.

Analyst conference call
A conference call will be held on 28 November 2012 at 11:00 a.m. GMT. Participants may join the conference call by dialling one of the following numbers approximately 10 minutes before the start of the call:

  • From UK (toll free): 0800 368 1950
  • From South Africa (toll free): 0800 983 097
  • From the rest of the world: +44 (0) 2031400668
  • Participant PIN code: 739166#

A recording of this will be available from 16:00 GMT on 28 November 2012 on the Company's website:

GMP Securities Australia is acting as MDM’s exclusive financial advisor in relation to the Transaction. Canaccord Genuity Limited is MDM’s Nominated Advisor and Broker.
Steinepreis Paganin, Memery Crystal LLP and Hempel and Boyd are acting as MDM’s legal advisors in Australia, the United Kingdom and British Virgin Islands respectively in relation to the Transaction.

Interim Financial Results for the six months ended 30 September 2012

  • Revenue up 298% to US$78.9 million (2011: US$19.8 million);
  • Pre-tax profit up 145% to US$8.1 million (2011: US$3.3 million);
  • Strong cash position of US$20.1 million with negligible gearing;
  • Basic earnings per share of US15.94 cents per share (2011: US 6.51 cents);
  • Interim dividend of US8.00 cents per share (2011: US 2.50 cents); and
  • Strong pipeline for continued growth at both feasibility and project levels.

Operational outlook
The highlight of the period is the successful completion of construction and commissioning of the 300 000 ton per month Tharisa Chrome and Platinum Group Minerals (“PGM”) Concentrator plant in South Africa;

  • Nine execution projects in various stages of progress, representing project capex values in excess of US$ 1 billion of confirmed contract value work with leading industry names and a focus on Africa;
  • Eight Bankable Feasibility Studies (“BFS”) and a number of Pre-Feasibility Studies (“PFS”) currently being undertaken; and
  • MDM is proud of its excellent safety record, currently 0.17 Lost Time Injury Free Rate (“LTIFR”), well below our target of 0.25.

Financial Review
The gross profit margin for the first half is at 16.8% which is 1.4% lower than the gross profit margin of 18.2% for the full year ending 31 March 2012. MDM recorded a profit before tax of US$8.1 million for the first half of FY2013, which represents a 145% increase from the comparable period’s profit before tax of US$3.3 million. This improvement is primarily a result of the continued increased workload since 31 March 2012 as well as MDM’s flagship Tharisa 3.6 million tonne per annum  (“Mtpa”) chrome and platinum project.

The cash balance, since year end, has reduced by US$9.0 million which is primarily associated with the movement of working capital between debtors and creditors associated with the pending conclusion and receipt of final staged payments associated with the Tharisa Chrom and PGM project, exchange rate fluctuations against the South African Rand and the full year 2012 dividend payment.

The MDM Board believes that MDM has a robust business model, generates strong cash flow from operations and is well positioned with a growing project pipeline during the 2013 financial year.

Operational Review
Highlights for the half year period ending September 2012:
MDM’s flagship project for the period was the Tharisa 3.6 Mtpa chrome and PGM concentrator plant built for Tharisa Minerals in North West Province, South Africa. Due to the fast track nature of the contract, MDM used in-house resources to manage and construct the plant. The plant was successfully commissioned in September 2012 on time and within budget. This was done on an EPC fixed price contract valued in excess of US$130 million. The project achieved an excellent safety record with only, but regrettably, three lost time minor injuries for a total of 2,895,823 man-hours worked.

Outlook for balance of FY2013:
The outlook for the balance of FY2013 is expected to be profitable with a strong order book flowing through to FY2014. The following projects are in various stages of execution:

Tharisa chrome and PGM concentrator (Republic of South Africa (“RSA”), North West Province)
MDM continues on site for Tharisa Minerals with the expansion of the newly built plant by adding additional secondary crushing and screening facilities for more operational flexibility. This work is due for completion in January 2013. MDM is managing the construction component of the project with its own in-house resources.

Kalagadi Umtu (RSA, Northern Cape Province)
MDM is constructing a 2.4 Mtpa manganese beneficiation plant for Kalahari Resources, owned by Arcelor Mittal (50 %), Kalahari Resources (40 %) and the Industrial Development Corporation (RSA) (10 %). This project started in 2010 and is due for completion in the last quarter 2013. MDM is managing the project on a reimbursable EPCM contract.

Mintek Atomiser (RSA, Gauteng Province)
A nickel atomiser integrated with a three megawatt direct current arc-furnace plant to produce 325 tonne per month (“tpm”) atomized nickel powder for the Mintek testing facility. The project facility has been commissioned in August 2012 and is in the process of production optimising.

Camrose dense media separation (“DMS”) (Democratic Republic of the Congo (“DRC”))
MDM has completed and successfully commissioned one of two 1 Mtpa copper DMS plants for ENRC’s Camrose project and are in the final construction phase of the second DMS plant on the same site. The project is due for completion in the first quarter of 2013.

Banro’s Namoya Project (DRC)
MDM has nearly finished the engineering and procurement for the 2 Mtpa gold heap leach gravity & carbon-in-leach (“CIL”) recovery plant for Banro Corporation. The construction management team has mobilised to site in the South Kivu Province, DRC and is busy managing the earthworks terracing and civil foundations. The project completion is scheduled for the third quarter of 2013.

Foskor D-Bank Flotation (RSA, Northern Province)
Engineering and procurement are mostly completed and MDM has started with the construction on site of a replacement 5.1 Mtpa phosphate floatation plant for Foskor, owned by the South African Industrial Development Corporation. The project is due for completion in the fourth quarter of 2013.

African Barrick Gold, Bulyanhulu (Tanzania)
MDM secured the contract for the BFS in 2011 and after successful completion was awarded the full execution project on an EPC fix price contracting basis. The project is essentially a 2.4 Mtpa gold tailings retreatment plant scheduled for completion in the first quarter of 2014. This project follows on the Tharisa Minerals project in our project pipeline as the next major project.

Gold Fields, Tarkwa Expansion Project 6 (Ghana)
MDM secured the Front End Engineering and Design for the project early in FY2012 and has prepared a final Control Budget Estimate for the project, submitted in November 2012. The project scope is to provide a 12 Mtpa CIL gold facility to partially replace current heap leach plants. MDM expects that this project or some aspects thereof will move into full engineering and construction phase early in 2013.

Early works on various execution projects (RSA and Africa)
Several clients have commissioned MDM to undertake upfront engineering and early site preparation on some of their projects. Most of these projects are small in nature at this stage but might develop into larger projects in future.

Bankable and Pre-Feasibility Studies:
To further supplement the workload, MDM is currently undertaking a combination of eight Definitive Feasibility Studies or BFS and a number of PFS.
One of the more significant PFS’s secured recently, is the Synergy Study for Gold One after completing the scoping study previously. This project, combining joint gold tailing resources from Gold One and Gold Fields in the Johannesburg region, estimated at 42 Mtpa, is destined to reclaim gold/ uranium and deposit the retreated tailings onto new environmentally friendly mega dams. This project represents a mega future project which is expected to be built in a few years time.

Business model and strategies:
MDM is particularly well known in the market for its gold and uranium expertise. The completed tailings retreatment process plants for Mine Waste Solutions (2009-2011) and the current Barrick Bulyanhulu project, ensure a keen interest for our experience from gold producers. However, MDM’s range of commodity projects also includes manganese, chrome, PGM’s, copper and cobalt. This versatility spreads the risk of commodity market price fluctuations having an effect on the demand for the Company’s services.

MDM has secured sufficient technical skills in the market to be able to execute the projects successfully. The risks involved with these projects have been individually assessed and appropriate contracting strategies selected. As a further risk mitigating measure, MDM has adopted a culture of hands-on management, working closely together with our clients. Safety is MDM’s management and employees’ first priority and the Company has recruited sufficient safety resources to focus on all the operations.

MDM’s projects are contracted on both EPCM and EPC models. This ensures a healthy mixture of risk profiles. The EPC projects have generally been engineered to a point whereby sufficient information was available to address typical risks of price, quantities and schedule.

Currently only three projects are contracted on an EPC methodology, whereas the other projects are mainly on an EPCM or a hybrid incentivised version.

Longer term prospects:
MDM’s forward work load has been identified, both within our current client base as well as with newly targeted clients. The current strategy is to ensure repeat business with clients having multiple projects in the pipeline.

MDM is currently engaging with feasibility studies in its main field of expertise, which hold the promise of longer term projects to follow onto its existing workload.
The Company’s income statement, balance sheet, and cash flow statement are included in this announcement at Appendix II.


MDM Engineering Group Limited
Martin Smith (CEO)                                            Tel:  +27 11 993-4300 
George Bennett (Executive Director)           

Canaccord Genuity Limited                             Tel: +44 (0) 207 523 8000   
Andrew Chubb / Sebastian Jones

Tavistock Communications                              Tel: +44 (0) 207 920 3150  
Emily Fenton / Jos Simson

About MDM:
MDM Engineering Group Limited is a minerals process and project management company focused on the mining industry. The Company provides a wide range of services from preliminary and final feasibility studies, through to plant design, construction and commissioning. To date, the Company's clients have largely been junior and mid-tier mining corporations with operations in Africa.

The MDM Engineering core technical team has a 24 year track record of completing a wide range of studies and execution projects across a variety of minerals, including precious metals, base metals, ferrous and non-ferrous metals, uranium and diamonds.

The Company has adopted an approach to project execution based on an open-book Engineering, Procurement, and Construction Management "EPCM" or "cost-plus" basis and on a Engineering, Procurement and Construct (EPC) basis. With a core focus on Africa, MDM Engineering is setting the benchmark standard for best practice in the mining services industry through its commitment to providing the highest quality services and actively engaging with clients to ensure maximum transparency.

This announcement contains 'forward-looking statements' concerning MDM and Sedgman that are subject to risks and uncertainties. Generally, the words 'will', 'may', 'should', 'continue', 'believes', 'targets', 'plans', 'expects', 'aims', 'intends', 'anticipates' or similar expressions or negatives thereof identify forward-looking statements. Forward looking statements include statements relating to the following: (i) future capital expenditures, expenses, revenues, earnings, synergies, economic performance, indebtedness, financial condition, dividend policy, losses and future prospects; (ii) business and management strategies and the expansion and growth of MDM and Sedgman’s operations and potential synergies resulting from the Transaction.

These forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements. Many of these risks and uncertainties relate to factors that are beyond MDM and Sedgman’s ability to control or estimate precisely, such as future market conditions, changes in regulatory environment and the behaviour of other market participants. Neither MDM nor Sedgman can give any assurance that such forward-looking statements will prove to have been correct. The reader is cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this announcement. Neither MDM nor Sedgman undertakes any obligation to update or revise publicly any of the forward-looking statements set out herein, whether as a result of new information, future events or otherwise, except to the extent legally required.

Nothing contained herein shall be deemed to be a forecast, projection or estimate of the future financial performance of MDM, Sedgman or any other person following the implementation of the Transaction or otherwise. 

Canaccord Genuity Limited, which is authorised and regulated in the United Kingdom by the Financial Services Authority, is acting as nominated adviser, joint broker and independent financial adviser to the Company and no-one else in connection with the arrangements referred to herein and will not be responsible to anyone other than MDM Engineering Group Limited for providing the protections afforded to the clients of Canaccord Genuity Limited or for affording advice in relation to the contents of this announcement or any matters referred to herein. Canaccord Genuity Limited has not authorised the contents of, or any part of, this announcement, is not making any representation or warranty, express or implied, as to the contents of this announcement and nor shall it have any liability whatsoever (in negligence or otherwise) for any loss whatsoever arising from any use of this announcement, its contents or otherwise arising in connection with this announcement (including any omission of any information from this announcement). Nothing in this paragraph shall serve to exclude or limit any responsibilities which Canaccord Genuity Limited may have under FSMA or the regulatory regime established thereunder.

Financials and Notes



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