TIDMPMHL
RNS Number : 1221U
Prosperity Minerals Holdings Ltd
21 December 2012
21 December 2012
Prosperity Minerals Holdings Limited
("Prosperity" or "the Company")
Update in relation to the proposed investment in
Malaysian iron ore
In line with its strategy of securing long term supplies of iron
ore at competitive prices, the Company first identified, in
February of this year, an attractive opportunity to acquire a stake
in a Malaysian iron ore operation, together with a long term
off-take agreement, through the acquisition of All Wealthy Capital
Limited ("AWC"), a 70% shareholder of the iron ore operation's
owner, Billion Win Capital Limited ("BWC"). Since then, Prosperity
has been working, together with its majority shareholder,
Prosperity International Holdings (H.K.) Limited ("PIHL") to bring
this deal to fruition. Updates have been announced by both
companies on 7 March, 30 April, 29 June, 28 September and 20
November.
On 20 November, Prosperity announced that the structure of the
transaction had been amended such that PIHL and Prosperity would,
between them, own 100% of the Malaysian mining operation, up from
the initial 70%, as a consequence of the other shareholders in BWC
agreeing to participate alongside AWC.
Prosperity would like to thank its shareholders for their
patience and, today, is pleased to report that all parties have now
agreed to replace the existing agreements with a new agreement (the
"New Agreement") to accommodate the change in the structure of the
transaction. This should serve to streamline the proposal and
hasten its conclusion, while at the same time materially preserving
the Company's rights and those of its shareholders under the
existing agreements. Completion of the transaction remains subject
to a number of important conditions and approvals being met
including a satisfactory Competent Person's report and a
satisfactory Independent Valuation by Jones Lang LaSalle Corporate
Appraisal and Advisory Limited.
In summary, PIHL is proposing to buy 100% of the mining rights
located at three sites at Sri Jaya, Kuantan, Malaysia for US$500
million through the acquisition of BWC. Upon completion of PIHL's
purchase, PIHL will give Prosperity the option to participate up to
7.55% of BWC for US$25 million. The 7.55% interest is valued at
US$37.75 million, giving Prosperity an instant 51% uplift in the
value of its US$25 million investment based on a provision in the
original sale and purchase agreement. If Prosperity exercises this
option, it will also be given the opportunity to enter into a very
attractive 10 year iron ore off-take agreement as part of the
proposed deal. Furthermore, Prosperity will also have the
opportunity to increase its holding in BWC by a further 1.2% for
US$6 million.
New Agreement
The key terms of the New Agreement, which replaces all previous
agreements relating to Prosperity's purchase of shares in AWC, are
set out below.
On completion of the acquisition of BWC by PIHL, Prosperity has
a period of 30 days from the completion date in which to decide
whether it wants to:
-- pay an amount of US$25 million ("BWC Investment"), of which
US$7 million has been satisfied through the payment of the AWC
Deposit under the previous sale and purchase agreement and US$18
million would be payable to PIHL, in consideration of which PIHL
would procure the transfer to Prosperity of shares in BWC of an
equivalent value of US$37.75 million, giving Prosperity a 7.55%
stake in the business, based on the US$500 million price being paid
by PIHL for BWC and the Independent Valuation; and
-- use the US$6 million AWC Option Deposit, paid under the
previous agreements, to subscribe for a US$6 million zero coupon
exchangeable bond to be issued by PIHL and which may be exchanged
into BWC shares at the same price per BWC share as paid by PIHL to
the vendors of BWC (the "Exchangeable Bond"). If converted in full,
Prosperity would hold an additional 1.2% in BWC. The Exchangeable
Bond will have a redemption premium of 16% and mature on the second
anniversary after the date of issue, extendable at the option of
Prosperity by a further year with an increase in the redemption
premium to 24%. Further terms are as set out in the announcement of
PIHL dated 16 November 2012.
If PIHL does not complete the acquisition of BWC by 30 June
2013, the US$7 million AWC Deposit and the US$6 million AWC Option
Deposit will be refunded to Prosperity by 30 September 2013.
If PIHL completes the acquisition of BWC and (i) Prosperity
decides not to complete the BWC Investment, PIHL will refund
Prosperity the US$7 million AWC Deposit; and/or (ii) Prosperity
decides not to subscribe for the Exchangeable Bond, PIHL will
refund Prosperity the US$6 million AWC Option Deposit, in either
case within 90 days of completion.
Upon completion of the BWC Investment, Prosperity would also
enter into an off-take agreement (the "Off-take Agreement") with
Grace Wise Pte. Limited ("Grace Wise"), a wholly-owned subsidiary
of BWC. Under the Off-take Agreement, Prosperity would have the
right but not the obligation to purchase from Grace Wise 9.5
million metric tonnes of iron ore over a ten year period at 95% of
the reference price for similar grade ore as published by Singapore
Platts plus an additional $3 per tonne discount, commencing from
the date of completion of the BWC Investment.
Upon completion of the BWC Investment, Prosperity will also
enter into a shareholders' agreement with PIHL (the "Shareholders'
Agreement") containing, inter alia, the following terms:
-- In the event that PIHL subsequently sells all or part of its
interest in BWC, Prosperity shall have a tag-along right to sell
the same proportion of its interest to the same purchaser upon the
same terms;
-- In the event that PIHL sells all of its interest in BWC, PIHL
shall have a drag-along right requiring Prosperity to also sell its
interest to the same purchaser upon the same terms;
-- In the event that BWC disposes of substantially all its
business or assets, unless otherwise agreed, the shareholders shall
procure BWC to distribute the proceeds of such disposals to its
shareholders;
-- The shareholders shall procure BWC not to issue shares or
securities convertible into shares at lower than 80% of the
prevailing fair market value of BWC without the approval of all
shareholders;
-- If any shareholder sells its interests in BWC, the other
shareholder shall have a pre-emption right to purchase such
interests. If the other shareholder does not wish to purchase those
interests, those interests may be sold to third parties;
-- In the event that Prosperity decides to dispose of any of its
shares in BWC, and PIHL decides against acquiring those shares at a
price and upon terms mutually acceptable to Prosperity and PIHL,
then upon the request of Prosperity, PIHL shall use its reasonable
endeavours to assist Prosperity in finding matching buyers for
those shares. However, Prosperity is not obliged to sell to buyers
introduced by PIHL, nor does PIHL warrant that it will be able to
find buyers for those shares upon terms and at a price acceptable
to Prosperity;
-- All material contracts or arrangements entered into by the
BWC Group shall be on an arm's length basis;
-- Save as otherwise agreed, all profits of BWC (other than
those required to be retained for the prudent working capital
requirements of the BWC Group) shall be distributed to its
shareholders. Shareholders shall only be paid as and when cash flow
permits.
Completion of the New Agreement remains subject to various
conditions including receipt of a satisfactory Competent Person's
report and a satisfactory Independent Valuation by Jones Lang
LaSalle Corporate Appraisal and Advisory Limited as well as
approval by the Company's Independent Directors.
Implications under the AIM Rules
BWC is 70% owned by AWC, which in turn is 79% owned by Elite
Force (Asia) Limited ("Elite Force"). Elite Force is 100% owned by
Mr David Wong, Chairman and CEO of the Company. As such, completion
of the New Agreement is a related party transaction for Prosperity
under the AIM Rules and is subject to the approval of the Company's
Independent Directors. The Company's Independent Directors can only
grant this approval having consulted the Company's Nominated
Adviser, Daniel Stewart & Company plc as to whether the terms
of the transaction are fair and reasonable insofar as all of its
shareholders are concerned.
Completion of the New Agreement is also a substantial
transaction for Prosperity under the AIM Rules.
Further information about the factors that the Company's
Independent Directors will consider in determining whether or not
to approve the New Agreement, the Off-take Agreement and the
Shareholders' Agreement is set out in the announcement dated 7
March 2012.
Prosperity Minerals Holdings Limited
Patrick Li
Neelke Kruger-Logan +852 3187 2618
Citigate Dewe Rogerson
Martin Jackson
Priscilla Garcia +44 (0) 20 7638 9571
Daniel Stewart & Company plc
Corporate Finance: Paul Shackleton, Antony
Legge, Emma Earl
Corporate Broking: Martin Lampshire +44 (0) 20 7776 6550
Notes to Editors:
Prosperity (AIM: PMHL) is:
- an iron ore trading business serving the PRC;
- a specialised real estate owner and developer in the same
market; and
- an investor in two cement plants, also in the PRC.
Prosperity's iron ore trading business has been operating since
1992 and sources iron ore, for shipment and use in the PRC, from
major international iron ore producers in South Africa, Brazil,
Australia and South East Asia, Thailand and Malaysia in particular.
The majority of the Company's iron ore is sold to large steel
manufacturers in the PRC. In the fiscal years ended 31 March 2011
and 2012, Prosperity shipped 6.3 million tonnes and 4.8 million
tonnes of iron ore respectively. In December 2010, Prosperity
acquired a 35% effective interest in United Goalink Limited (UGL),
a Brazilian mining operation which owns approximately 600 square
kilometres of exploration rights and 3 square kilometres of mining
concession in the State of Ceara. In the year ended 31 March 2012,
UGL shipped 218,808 tonnes of iron ore.
Prosperity has operated a real estate investment and development
division since February 2010 which is focused on creating a
portfolio of PRC property and development assets with good upside
potential and manageable risk. The Company has entered into a
number of agreements with its partners to develop recreational,
commercial and residential projects in Guangzhou City and Changzhou
City in the southern PRC and Hangzhou City in the east. Prosperity
also acquired interests in an existing commercial building in
Guangzhou, which is a regional capital and is located in the Pearl
River Delta, the foremost economic zone in the southern PRC.
Prosperity has two investment associates in the cement
manufacturing industry in the PRC. The Company holds a 33.06%
interest in Anhui Chaodong Cement Company Limited (ACC), located in
Anhui Province in the eastern PRC. The designed sellable production
capacity of ACC is 5.1 million tonnes of cement and clinker per
annum. In addition, Prosperity owns 16.11% of TCC Liaoning Cement
Company Limited which has a designed saleable production capacity
of 2 million tonnes of cement and clinker per annum.
The PRC is the World's second largest economy (behind the US)
and the biggest buyer of iron ore; it is also the largest producer
and consumer of cement.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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