Mr. Stefan Hayden reports
CALEDONIA MINING PROPOSES INITIAL DIVIDEND, STATED CAPITAL REDUCTION, AND A SHARE CONSOLIDATION
Caledonia Mining Corp. proposes to pay an initial dividend of 0.5 cent per ordinary share.
Caledonia proposes to pay an initial dividend of 0.5 cent per share
on a preconsolidation basis (equivalent to five cents on a postconsolidated
common share basis);
- Driven by the company's sustainable business model and significant
free cash generation;
- Caledonia believes the combination of a dividend combined with
Caledonia's continued growth is the appropriate way to optimize its
capital structure and enhance shareholder value;
- Caledonia's strategy will be to continue to invest, principally in its
projects in Zimbabwe and Zambia;
- The proposed dividend will only be declared after Caledonia shareholders
have approved the stated capital reduction;
- After the dividend declaration, it is further proposed to consolidate
the company's common shares on the basis of one new Caledonia share for 10
existing Caledonia shares;
- A special meeting of Caledonia's shareholders will be held in late
January, 2013, at which shareholders will vote on resolutions to effect
the reduction in stated capital and share consolidation.
Stefan Hayden, Caledonia's president and chief executive officer, said: "I am delighted to announce Caledonia's maiden dividend. Over the past three years Caledonia has become a profitable and cash-generative company with exciting growth and investment opportunities. In light of our cash position and strong cash generation, the Caledonia board feels it appropriate to propose a dividend of one-half cent per existing common share and is confident that the proposed dividend will not reduce our ability to continue to invest in our exciting portfolio of assets, expanding gold production at Blanket, and continuing exploration on our Nama project."
Caledonia continues to generate significant free cash flow and believes that its business model is sustainable. Caledonia's first priority will be to continue to invest in its current and new projects. Caledonia's cash flow provides the financial capacity to distribute cash to its shareholders without adversely affecting liquidity or the ability to continue to invest for future growth. The board will annually review the company's ability to pay a dividend with regard to its cash resources, prospective cash generation and investment opportunities at that time. The next review will take place in May, 2013, after the finalization of the annual financial statements for the calendar year 2012.
Caledonia believes that the combination of a dividend with Caledonia's continued growth is the appropriate way to enhance shareholder value at this time.
As noted below, Caledonia's ability to declare and pay the dividend is conditional upon shareholders approving a reduction in its stated capital, which is detailed below. Accordingly, the dividend will not be payable until the stated capital reduction is implemented. The record date for determining shareholders entitled to receive the dividend will then be determined and announced thereafter.
Reduction in stated capital
The reduction is necessitated by the provisions of the Canada Business Corporations Act, the act under which the company exists, which states that a company cannot pay dividends if its stated capital plus liabilities exceeds the realizable value of the company's assets. The company's stated capital, which as shown in the company's Sept. 30, 2012, unaudited balance sheet is $196,657,000, is a reflection of historical capital raising via share issues. The proposed capital reduction will not affect the company's operations or the value of the company or its issued shares. Caledonia's board considers that, notwithstanding the development of the company's properties and its increased earnings, it cannot at this stage be conclusively determined that the company's assets have a current realizable value in excess of the current stated capital plus liabilities. Management, in conjunction with its financial advisers, will, prior to the mailing of the notice calling the special meeting, finalize the calculations necessary to determine the extent of the reduction in the stated capital that will be required, and circulate the requisite documentation to shareholders.
Caledonia has 507,899,280 shares outstanding, the closing price of which on the Toronto Stock Exchange on Nov. 15, 2012, was 11 cents per share. Caledonia's management believes the large number of issued shares and the low current share trading price discourages new investors. Accordingly and only after payment of the dividend, Caledonia proposes to consolidate its shares in issue on the basis of one new Caledonia share for every 10 existing Caledonia shares. Caledonia expects that the reduced number of shares in issue, in conjunction with its growth profile and new dividend policy, will increase the attraction of Caledonia to investors.
We seek Safe Harbor.