shougang circular notice

SHOUGANG CONCORD INTERNATIONAL ENTERPRISES COMPANY LIMITED
(Incorporated in Hong Kong with limited liability)
(Stock Code: 697)
DISCLOSEABLE TRANSACTION
IN RESPECT OF
SUBSCRIPTION OF SHARES IN
AUSTRALASIAN RESOURCES LIMITED
i
CONTENTS
Page
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Letter from the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Appendix – General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1
DEFINITIONS
In this circular, the following expressions shall have the following meanings, unless the context
otherwise requires:
“Agreement” the agreement dated 20 March 2007, entered into by and between
Timefull and ARH in respect of the Subscription
“ARH” Australasian Resources Limited, a company incorporated in
Western Australia, the securities of which are listed on ASX
“ARH Shares” ordinary shares of AUD$1.00 each in the share capital of ARH
“associates” has the meaning ascribed to it under the Listing Rules
“ASX” Australian Securities Exchange
“AUD$” Australian dollar, the lawful currency of Australia
“Board” the board of directors of the Company
“Business Day” a day on which banks are open for business generally in Perth,
Western Australia
“Company” Shougang Concord International Enterprises Company Limited, a
company incorporated in Hong Kong, the securities of which are
listed on the Stock Exchange
“Completion” completion of the Subscription
“Director(s)” the director(s) of the Company
“Group” the Company and its subsidiaries
“HK$” Hong Kong dollar, the lawful currency of Hong Kong
“Hong Kong” the Hong Kong Special Administrative Region of the PRC
“International Minerals” International Minerals Pty Ltd, a company incorporated in
Queensland and is a wholly-owned subsidiary of ARH
“Latest Practicable Date” 28 March 2007, being the latest practicable date prior to the
printing of this circular for ascertaining certain information
contained therein
“Listing Rules” the Rules Governing the Listing of Securities on the Stock
Exchange
2
DEFINITIONS
“PRC” the People’s Republic of China
“Project” the sole and exclusive right to mine and process 1 billion tonnes
of magnetite iron ore from part of the Susan Palmer Deposit located
on tenements in the Pilbara region of Western Australia
“SFO” the Securities and Futures Ordinance (Cap 571, the laws of Hong
Kong)
“Shareholder(s)” holder(s) of Shares
“Shares” ordinary shares of HK$0.20 each in the share capital of the
Company
“Stock Exchange” The Stock Exchange of Hong Kong Limited
“Subscriber” Timefull Investments Limited, a wholly-owned subsidiary of the
Company
“Subscription” the subscription of the Subscription Shares and the Subscription
Options by Timefull
“Subscription Options” options to subscribe for 14,000,000 ARH Shares granted by ARH
to the Subscriber pursuant to the terms of the Agreement
“Subscription Shares” 28,000,000 ordinary shares in the issued share capital of ARH to
be subscribed by the Subscriber pursuant to the terms of the
Agreement
“Timefull” Timefull Investments Limited, a company incorporated in Samoa
and is a wholly-owned subsidiary of the Company
“%” per cent.
For illustration purposes, amounts in AUD$ in this announcement have been translated into HK$
at AUD$1 = HK$6.22.
3
LETTER FROM THE BOARD
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SHOUGANG CONCORD INTERNATIONAL ENTERPRISES COMPANY LIMITED
(Incorporated in Hong Kong with limited liability)
(Stock Code: 697)
Directors: Registered Office:
Wang Qinghai (Chairman) 7th Floor
Cao Zhong (Managing Director) Bank of East Asia Harbour View Centre
Chen Zhouping (Deputy Managing Director) 56 Gloucester Road
Zhang Wenhui (Deputy Managing Director) Wanchai
Luo Zhenyu (Deputy Managing Director) Hong Kong
Ip Tak Chuen, Edmond (Non-executive Director)
Leung Shun Sang, Tony (Non-executive Director)
Kan Lai Kuen, Alice (Independent Non-executive Director)
Wong Kun Kim (Independent Non-executive Director)
Leung Kai Cheung (Independent Non-executive Director)
3 April 2007
To the Shareholders
Dear Sir or Madam,
DISCLOSEABLE TRANSACTION
IN RESPECT OF
SUBSCRIPTION OF SHARES IN
AUSTRALASIAN RESOURCES LIMITED
INTRODUCTION
The Board announced on 21 March 2007 that Timefull, a wholly-owned subsidiary of the Company,
and ARH have entered into the Agreement on 20 March 2007. Pursuant to the Agreement, Timefull has
agreed to subscribe the Subscription Shares for an aggregate consideration of AUD$28,000,000 (equivalent
to approximately HK$174,160,000) and ARH has agreed to grant to Timefull the Subscription Options.
The Subscription constitutes a discloseable transaction for the Company under Rule 14.06 of the
Listing Rules. The purpose of this circular is to provide the Shareholders with further information in
relation to the Subscription.
4
LETTER FROM THE BOARD
THE AGREEMENT
Date of the agreement
20 March 2007
Parties to the agreement
(1) ARH, an Australian company listed on the ASX, is principally engaged in investment holding and
mining; and
(2) Timefull, a wholly-owned subsidiary of the Company, as the subscriber of the Subscription Shares
and Subscription Options.
To the best of the Directors’ knowledge, information and belief, having made all reasonable
enquiry, ARH and its substantial shareholders are independent third parties not connected with the
Company or any of its subsidiaries or any of their respective directors, chief executive or substantial
shareholders or any of their respective associates.
Subscription Shares
28,000,000 new ARH Shares are to be subscribed by the Subscriber, representing approximately
7.29% of the existing issued share capital of ARH and approximately 6.40% of the issued share capital of
ARH as enlarged by the Subscription together with another subscription agreement entered into by ARH
on 20 March 2007 with another party.
The Subscription Shares, when fully paid, will rank pari passu in all respects with the ARH Shares
in issue, including the right to any dividends or distributions.
Consideration
The consideration for the Subscription Shares is AUD$28,000,000 (equivalent to approximately
HK$174,160,000), which is determined after arm’s length negotiation between the Subscriber and ARH
by reference to the closing price of the ARH Shares. ARH conducted a reorganization of capital by
consolidating 10 ARH Shares into 1 ARH Share on 19 December 2006 and the pre-consolidation closing
price of ARH Share as at 14 December 2006, the last trading date of the ARH Shares prior to its
suspension on the ASX, is AUD$0.115. The subscription price of AUD$1.00 per Subscription Share
represents a discount of approximately of 13.04% to the theoretical post-consolidation latest closing
price of AUD$1.15 per ARH Share.
The consideration will be satisfied by the internal resources of the Group and is payable in full at
Completion.
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LETTER FROM THE BOARD
Conditions
The Subscription is subject to satisfaction of the following conditions precedent:
(i) the first to occur of:
(A) the Treasurer of the Commonwealth of Australia (“Treasurer”) ceasing under the
Foreign Acquisitions and Takeovers Act 1975 (“Act”) to be empowered to make an
order under Part II of the Act in relation to the entering into and Completion of this
Agreement; and
(B) the receipt by the Subscriber of notice in writing issued by or on behalf of the
Treasurer to the effect that the Government of the Commonwealth of Australia does
not object to the Subscriber entering into and completing the transaction contemplated
by this Agreement;
(ii) the Treasurer of the Commonwealth of Australia approving the Subscriber’s application
under Australia’s Foreign Investment Policy with regard to direct investments by foreign
governments and their respective agencies in relation to entering into and completion of this
Agreement;
(iii) the approval of ARH’s shareholders in a general meeting for the issue of the Subscription
Shares and the grant of the Subscription Options in accordance with the requirements of
ASX listing rules 7.1 and 7.3 and any other applicable regulatory requirements; and
(iv) the ARH Shares having been reinstated to official quotation on ASX or ASX notifying ARH
in writing that the ARH Shares will be reinstated to official quotation on ASX subject only
to completion of the issue and allotment of the Subscription Shares.
If the conditions precedent above are not satisfied or waived, as the case may be, on or before 30
June 2007 or such later date as the parties may agree in writing, then all rights and obligations of the
parties under the Agreement shall terminate save for antecedent breaches.
Trading in ARH Shares has been suspended since 15 December 2006 pursuant to ASX Listing
Rule 11.1 which requires that a company undergoing a major change in the nature or scale of its
activities must, in certain circumstances, be suspended until the company has satisfied certain re-listing
requirements of ASX including completion of a capital raising exercise and the issue of a prospectus. The
suspension of the trading in ARH Shares was caused by the change in the scale of its activities as a result
of the acquisition of International Minerals. ARH is seeking re-listing on ASX and anticipates re-listing
will take place within the next few weeks once it completes a prospectus.
Completion
Completion will take place on the 2nd Business Day after the satisfaction or waiver of the conditions
of the Agreement.
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LETTER FROM THE BOARD
Subscription Options
Pursuant to the Agreement, ARH will also grant to the Subscriber without consideration the option
to subscribe for 14,000,000 ARH Shares at the exercise price of AUD$1.50 per ARH Share.
The Subscription Options have an option period of three years from the date of its issue. Subscription
Options not exercised during the option period will automatically expire. The Subscription Options may
be transferred to a related body corporate but otherwise may not be sold, assigned, transferred or otherwise
dealt with in any way.
All ARH Shares issued pursuant to the exercise of the Subscription Options will rank pari passu in
all respects with the existing ARH Shares in issue. The Company will comply with the relevant
requirements of the Listing Rules upon the exercise, transfer or expiry of the Subscription Options.
ARH
ARH is a company incorporated in Australia, the shares of which are listed on ASX. ARH is
principally engaged in the business of mineral exploration and through the interest of its wholly-owned
subsidiary, International Minerals, owns the rights to mine 1 billion tonnes of magnetite iron ore from
part of the Susan Palmer Deposit located on tenements in the Pilbara region of Western Australia.
The audited net asset value of ARH as at 30 June 2005 and 30 June 2006 were approximately
HK$116,216,000 and approximately HK$115,802,000, respectively. The losses before and after tax of
ARH for the two financial years ended 30 June 2005 and 30 June 2006 were approximately HK$27,564,000
and approximately HK$72,146,000, respectively. The financial reports of ARH have been prepared in
accordance with Australian Accounting Standards which are equivalent to International Financial Reporting
Standards, other authoritative pronouncements of the Australian Accounting Standard Board, Urgent
Issues Group Interpretations and the Corporations Act 2001 of Australia.
ARH intends to use most of the proceeds towards the payment of any assessed stamp duty for the
purchase of International Minerals and the undertaking of a bankable feasibility study for the Project.
Financial effects of the Subscription
Upon Completion, the Company’s interest in ARH will be approximately 6.40% and the investment
in ARH will be accounted for as a financial asset at fair value through profit or loss under the Hong Kong
Accounting Standard 39 issued by the Hong Kong Institute of Certified Public Accountants.
The Subscription is not expected to have any material effect on the assets and liabilities of the
Company.
Reason for the transaction
The Group is principally engaged in the manufacture, sale and trading of steel products, shipping
operations and electricity generation.
7
LETTER FROM THE BOARD
In order to enhance the Group’s position in the manufacture and sale of steel products in the PRC,
the Board believes that the investment in ARH, the principal business of which is mineral exploration, is
in the interest of the Shareholders as it would potentially secure a long-term and stable source of supply
of raw materials for the Group’s steel manufacturing operation. The Group will explore further opportunity
to cooperate with ARH in future.
The Directors (including the independent non-executive Directors) consider that the Agreement
has been made on normal commercial terms and that such terms are fair and reasonable so far as the
Company and the Shareholders are concerned and that the Subscription is in the interest of the Company
and the Shareholders as a whole.
GENERAL
The Subscription constitutes a discloseable transaction for the Company under Rule 14.06 of the
Listing Rules.
Your attention is drawn to the general information set out in the appendix to this circular.
Yours faithfully,
For and on behalf of the Board
Cao Zhong
Managing Director