DISCLOSEABLE TRANSACTIONANDRESUMPTION OF TRADING IN THE SHARES...

DISCLOSEABLE TRANSACTION
AND
RESUMPTION OF TRADING IN THE SHARES AND THE WARRANTS
SUBSCRIPTION OF 28,000,000 ORDINARY SHARES AND 14,000,000 OPTIONS IN AUSTRALASIAN RESOURCES LTD
On 20 March 2007, the Company and ARH entered into the Conditional Subscription Agreement in respect of (i) the subscription of 28,000,000 ARH Shares at A$1.00 per ARH Share, at an aggregate consideration of A$28,000,000 (equivalent to approximately
HK$174,846,000 at an exchange rate of approximately A$1.00 to HK$6.2445), representing approximately 7.29% interest in the existing issued share capital of ARH as at 22 March 2007 and approximately 6.80% interest in the issued share capital of ARH
as enlarged by the issuance of 28,000,000 ARH Shares, and (ii) the grant of 14,000,000 ARH Options exercisable over the same number of 14,000,000 ARH Shares at nil consideration at an exercise price of A$1.50 per ARH Share for each ARH Option
within a period of three years after the date of Completion, representing approximately 3.65% interest in the existing issued share capital of ARH as at 22 March 2007 when all the 14,000,000 ARH Options are exercised in full for the 14,000,000 ARH Shares
and approximately 3.29% interest in the issued share capital of ARH as enlarged by the issuance of the 28,000,000 ARH Shares and 14,000,000 ARH Shares which fall to be issued when all the 14,000,000 ARH Options are exercised in full. Upon the Completion,
the Company has the right to nominate and appoint a director of ARH.
Completion of the Conditional Subscription Agreement is conditional upon the fulfillment of a condition precedent.
LISTING RULES IMPLICATIONS
The Conditional Subscription constitutes a discloseable transaction for the Company under the Listing Rules on the basis that the calculation of the consideration ratio for the Company is within the range of 5% and 25%. The taking of the 14,000,000 ARH
Options does not constitute a transaction for the Company under the Listing Rules, and is therefore not subject to the requirements thereunder. A circular of the Company containing, amongst other things, details of the Conditional Subscription Agreement
will be despatched to the Shareholders as soon as practicable.
The Company will comply with the relevant requirements of the Listing Rules upon the exercise, transfer or expiry of the ARH Options.
SUSPENSION AND RESUMPTION OF TRADING
At the request of the Company, trading in the Shares and the Warrants were suspended with effect from 2:30 p.m. on 20 March 2007 pending the release of this announcement. An application has been made by the Company to the Stock Exchange for resumption
of trading in the Shares and the Warrants with effect from 9:30 a.m. on 23 March 2007.
THE CONDITIONAL SUBSCRIPTION AGREEMENT
Date
20 March 2007.
Parties
(1) Australasian Resources Limited.
(2) The Company as subscriber.
To the best knowledge, information and belief of the Directors, having made all
reasonable enquiries, ARH and its ultimate owners are independent third parties not
connected with the Company, any of its subsidiaries or any of their respective
associates, or any of the connected persons of the Company, any of its subsidiaries or
any of their respective associates.
The 28,000,000 ARH Shares to be subscribed
Pursuant to Conditional Subscription Agreement, the Company or its wholly-owned
subsidiary as nominee shall subscribe and ARH shall allot and issue 28,000,000 ARH
Shares at A$1.00 per ARH Share, at an aggregate consideration of A$28,000,000
(equivalent to approximately HK$174,846,000 at an exchange rate of approximately
A$1.00 to HK$6.2445), representing approximately 7.29% interest in the existing
issued share capital of ARH as at 22 March 2007 and approximately 6.80% interest in
the issued share capital of ARH as enlarged by the issuance of the 28,000,000 ARH
Shares but before the issuance of any ARH Shares which fall to be issued upon
exercise of any ARH Options. Upon the Completion, the Company has the right to
nominate and appoint a director of ARH.
The 14,000,000 ARH Options to be subscribed
Pursuant to Conditional Subscription Agreement, ARH shall grant 14,000,000 ARH
Options to the Company at nil consideration exercisable over the same number of
14,000,000 ARH Shares, representing approximately 3.65% interest in the existing
issued share capital of ARH as at 22 March 2007 when all the 14,000,000 ARH
Options are exercised in full for the 14,000,000 ARH Shares and approximately 3.29%
interest in the issued share capital of ARH as enlarged by the issuance of the
28,000,000 ARH Shares and 14,000,000 ARH Shares which fall to be issued when all
the ARH Options are exercised in full.
Entitlement
Each ARH Option entitles the Company to subscribe for one fully paid ARH Share.
Issue Price
No amount is payable on each ARH Option.
Exercise Price
The exercise price of each ARH Option is A$1.50 per ARH Share.
ARH Option Period
The 14,000,000 ARH Options are exercisable (in whole or in part by multiples of 500
ARH Options) at any time at the discretion of the Company within three years after
the date of the issue of the ARH Options, i.e. the date of Completion, failing which,
the outstanding ARH Options over the ARH Shares will lapse.
Transferability of the ARH Option
The ARH Option may be transferred by an instrument of transfer acceptable to ARH
to a related body corporate of the Company but otherwise may not be sold, assigned,
transferred or otherwise dealt with in any way.
Consideration
The aggregate consideration payable by the Company for the Conditional Subscription
of 28,000,000 ARH Shares shall be A$28,000,000 (equivalent to approximately
HK$174,846,000 at an exchange rate of approximately A$1.00 to HK$6.2445), i.e.
A$1.00 per ARH Share.
The Company shall pay the consideration in cash to a deposit account held by ARH
within 5 Business Days after the date of the Conditional Subscription Agreement.
Pending the Completion, ARH shall hold the consideration as stakeholder. If the
Conditional Acquisition Agreement is terminated for any reason and the Completion
does not occur, the consideration together with interest accrued shall be refunded to
the Company.
The consideration is arrived at after arm’s length negotiation between the Company
and ARH and with reference to the price of ARH Shares (i.e. A$0.115 per ARH Share)
on the last trading day (i.e. 14 December 2006) traded on the Australian Stock
Exchange and the theoretical price of ARH Shares at A$1.15 per ARH Share as a result
of of every ten ARH Shares for one ARH Share consolidation taken effect on 19
December 2006.
The consideration of the 28,000,000 ARH Shares at A$1.00 per ARH Share represents:
(i) a discount of approximately 4.40% to the average closing price of the ARH Share
(i.e. A$1.046 per ARH Share after share consolidation adjustment) quoted on the
Australian Stock Exchange on the last 5 full trading days up to and including 14
December 2006; and
(ii) a discount of approximately 13.04% to the closing price of the ARH Share (i.e.
A$1.15 per ARH Share after share consolidation adjustment) quoted on the
Australian Stock Exchange on 14 December 2006.
The exercise price for each of the 14,000,000 ARH Options at A$1.50 per ARH Share
represents:
(i) a premium of approximately 43.40% over the average closing price of the ARH
Share (i.e. A$1.046 per ARH Share after share consolidation adjustment) quoted
on the Australian Stock Exchange on the last 5 full trading days up to and
including 14 December 2006; and
(ii) a premium of approximately 30.43% over the closing price of the ARH Share (i.e.
A$1.15 per ARH Share after share consolidation adjustment) quoted on the
Australian Stock Exchange on 14 December 2006.
Condition precedent
Completion of the Conditional Subscription Agreement is conditional upon the
satisfaction of the Australian Stock Exchange notifying ARH in writing that the ARH
Shares will be re-instated to official quotation on the Australian Stock Exchange
subject only to the Completion occurring.
Completion
Subject to the satisfaction of the condition precedent as aforesaid, the Completion
shall take place on the 5th Business Day before the ARH Shares are reinstated to
official quotation on the Australian Stock Exchange. On the Completion, ARH shall
allot and issue the 28,000,000 ARH Shares and grant the 14,000,000 ARH Options to
the Company.
According to the Conditional Subscription Agreement, if the above condition is not
satisfied or waived by the Company on or before 30 June 2007 (or such later date as
may be agreed between the parties in writing), all rights and obligations under the
Conditional Subscription Agreement shall be terminated. The Company will not waive
the above condition.
After the Completion, the Company shall hold:
(i) 28,000,000 ARH Shares representing approximately 6.80% interest in the issued
share capital of ARH as enlarged by the issuance of the 28,000,000 ARH Shares
but before the issuance of any ARH Shares which fall to be issued upon exercise
of any ARH Options; and
(ii) 14,000,000 ARH Options, representing approximately 3.29% interest in the issued
share capital of ARH as enlarged by the issuance of the 28,000,000 ARH Shares
and 14,000,000 ARH Shares which fall to be issued when all the 14,000,000 ARH
Options are exercised in full.
After the Completion where the Company has subscribed for the 28,000,000 ARH
Shares and assuming the Company exercises in full all the 14,000,000 ARH Options
for 14,000,000 ARH Shares, the Company shall hold approximately 9.86% interest in
the issued share capital of ARH as enlarged by the issuance of the 28,000,000 ARH
Shares and 14,000,000 ARH Shares which fall to be issued when all the 14,000,000
ARH Options are exercised in full.
All the ARH Shares shall be held by the Group for strategic investment purpose and
will be classified in the accounts as Available for Sale Financial Assets as defined
under HKAS39 issued by the HKICPA.
Source of funding
The payment of the consideration for the Conditional Subscription will be financed by
short-term borrowings from a stock-broking firm in Hong Kong.
INFORMATION ON ARH
ARH is a company incorporated in Australia with limited liability whose shares are
listed on the Australian Stock Exchange since 7 June 1984.
The principal activity of ARH is mineral exploration. According to the directors’
report of ARH contained in its annual report 2006, ARH pursued major energy and iron
ore projects which have the potential to capitalise on opportunities from the
developing economies of China, India and other emerging Asian nations. With
reference to the information posted on the website of ARH, the recent development of
ARH includes (i) the Balmoral South Iron Ore Project in respect of acquiring the right
to mine 1,000,000,000 (1 billion) tonnes of magnetite ore from part of the Balmoral
South Project, situated in the Pilbara region of Western Australia; and (ii) the Sherlock
Bay Nickel Project, situated in the West Pilbara region of Western Australia, in respect
of exploiting the nickel sulphide deposit contained in that project area.
On 14 December 2006, ARH requested and the Australian Stock Exchange granted a
trading halt and on 15 December 2006, ARH Shares were suspended from quotation.
ARH requested the trading halt pending the outcome of the ARH annual general
meeting (the “Meeting”) which was held on 15 December 2006. The Meeting was
convened to consider the resolutions and explanatory materials contained in the
respective notice of the Meeting (the “Notice”). The shareholders of ARH resolved in
the Meeting, amongst other things, the acquisition of International Minerals. The
Notice explained that the acquisition of International Minerals would result in a
change in the nature and scale of activities of ARH and that ARH was exploring
several funding alternatives in this regard. To be re-quoted (i.e. resume trading on the
Australian Stock Exchange), ARH needs to demonstrate that it has the capital to fund
the change in the nature and scale of its activities. The Company’s investments by the
Conditional Subscription contribute towards the funding of ARH.
The trading of the ARH Shares on the Australian Stock Exchange has been suspended
since 14 December 2006. The price of each ARH Share on the last trading day (i.e. 14
December 2006) traded on the Australian Stock Exchange was A$0.115 per ARH
Share. After a share consolidation of ARH for every ten ARH Shares for one ARH
Share being taken place on 19 December 2006, the theoretical price of each ARH
Share was A$1.15 per ARH Share.
The audited financial information of ARH for the two years ended 30 June 2006 and
2005 are as follows:
Year ended
30 June 2006
Year ended
30 June 2005
Audited
A$
Audited
A$
Net assets value 18,266,665 3,074,479
Net loss before taxation and
minority interest (11,598,978) (4,431,521)
Net loss after taxation and
minority interest (11,598,978) (4,431,521)
The Company confirmed that no dividends had been paid or declared and no
recommendation had been made as to dividends for the past two years for ARH.
INFORMATION ON THE COMPANY
The Company is incorporated as an exempted company with limited liability in
Bermuda under the Companies Act 1981 of Bermuda (as amended). Its securities are
listed on the Stock Exchange.
The Group is principally engaged in (i) trading in base metals and commodities trading
portfolio primarily focused on natural resources and related sectors; and (ii) trading
in fabric products and other merchandises, investment in the resources and related
industries, and listed securities as trading portfolio.
REASONS FOR AND BENEFITS OF THE CONDITIONAL SUBSCRIPTION
The Company sought (as disclosed in the Previous Circular) and will continue to seek
to become a significant natural resources trading and investment company through the
identification, evaluation and acquisition of strategic interests in quality natural
resource assets (either indirectly through investment in, and support of, resource
corporations or by direct investment in mineral projects) as a means to build an
extensive portfolio of long term cash generating investments so as to enhance the
Company’s value in the context of natural resource industry consolidation and
rationalization where it believes value can be maximized for all concerned
stakeholders. The Company has still been (as disclosed in the Previous Circular) on
the lookout for good investment opportunities to maximize return for the
Shareholders. It has always been the intention of the Company to seek to lock in the
supply of iron ore materials and to trade in such materials for higher profit.
The Conditional Subscription is consistent with the Company’s strategy of exploring
geographic regions and commodity markets which it believes present attractive
opportunities and where rationalization and consolidation is likely to occur. The
Conditional Subscription is anticipated to produce higher return on asset with increase
in profit and value of the Company to the benefit of the Shareholders as a whole.
In view of current market conditions, the Directors consider that the Conditional
Subscription represents a good opportunity for the Company to further increase its
investment in the Australian resources sector upon which to build a significant
investment and commodities trading company primarily focused on the natural
resources and related sectors.
The Company, International Minerals and ARH have entered into a commission
agreement on 20 March 2007 which set out the intention of the parties for the
Company to procure the relevant buyer(s) the signing of certain offtake agreements for
the sale of iron ore products (including iron ore concentrate, iron ore pellets and hot
briquetted iron) produced by International Minerals in return for a commission of
US$1.00 per dry tonne of iron ore products to the Company.
The Company has been advised by ARH of its right to mine 1 billion tonnes of
magnetite irone ore from Susan Palmer deposit within the larger Balmoral deposits in
Pilbara region of Western Australia. ARH has announced a 346 million tonnes ore
reserve estimate in accordance with JORC guidelines. The actual output remains
uncertain at the moment, but the current proposed development plan of ARH involves
the production and export as final products of 5 million tonnes of iron ore concentrate,
5 million tonnes of iron ore pellets and approximately 1.5 million tonnes of hot
briquetted iron. The implementation of the detailed arrangements under the
commission agreement depends therefore on the development plan of ARH, which may
or may not materialise. In the event such development plan of ARH materialises, the
Company may receive commission only on the basis that it successfully procures the
relevant buyer(s) the signing of the relevant offtake agreement(s).
The commission agreement is consistent with the Company’s strategy of exploring
geographic regions and commodity markets, and the procurement of signing the
offtake agreements, if successfully implemented, will enable the Company to generate
income and cash flow from the Company’s investment and trading activities in the
resource sector in the near future.
Having regard to the nature of and the benefits resulting from the Conditional
Subscription and the commission agreement, the Directors believe that the Conditional
Subscription is fair and reasonable and in the interests of the Shareholders taken as a
whole.
LISTING RULES IMPLICATIONS
The Conditional Subscription constitutes a discloseable transaction for the Company
under the Listing Rules on the basis that the calculation of the consideration ratio for
the Company is within the range of 5% and 25%. The taking of the 14,000,000 ARH
Options does not constitute a transaction for the Company under the Listing Rules, and
is therefore not subject to the requirements thereunder. A circular of the Company
containing, amongst other things, details of the Conditional Subscription Agreement
will be despatched to the Shareholders as soon as practicable.
The Company will comply with the relevant requirements of the Listing Rules upon
the exercise, transfer or expiry of the ARH Options.
SUSPENSION AND RESUMPTION OF TRADING
At the request of the Company, trading in the Shares and the Warrants were suspended
with effect from 2:30 p.m. on 20 March 2007 pending the release of this
announcement. An application has been made by the Company to the Stock Exchange
for resumption of trading in the Shares and the Warrants with effect from 9:30 a.m. on
23 March 2007.
DEFINITIONS
“A$” Australian dollars, the lawful currency of Australia
“ARH” Australasian Resources Limited (A.C.N. 008 942 809), a
company incorporated under the laws of Australia with
limited liability, the shares of which are listed on the
Australian Stock Exchange and having 383,838,092 ordinary
fully paid shares in issued as at the date of this announcement
“ARH Options” the options granted by ARH to the Company under the
Conditional Subscription Agreement
“ARH Shares” the ordinary shares in the issued share capital of ARH
“associates” having the meaning ascribed to it in the Listing Rules
“Australian Stock
Exchange”
The Australian Stock Exchange Limited
“Company” APAC Resources Limited, a company incorporated in
Bermuda with limited liability, with its securities listed on the
Stock Exchange
“Completion” the completion of the Conditional Subscription Agreement
pursuant to the terms and conditions stipulated thereunder
“Conditional
Subscription”
the conditional subscription of 28,000,000 ARH Shares and
14,000,000 ARH Options by the Company pursuant to the
terms and conditions of the Conditional Subscription
Agreement
“Conditional
Subscription
Agreement”
the conditional share and option subscription agreement dated
20 March 2007 entered into between the Company and ARH
relating to the subscription of 28,000,000 ARH Shares and
14,000,000 ARH Options
“Directors” the directors of the Company
“Group” the Company and its subsidiaries
“HK$” Hong Kong dollars, the lawful currency of Hong Kong
“Hong Kong” the Hong Kong Special Administrative Region of the People’s
Republic of China;
“HKAS” Hong Kong Accounting Standards issued by the HKICPA
“HKICPA” Hong Kong Institute of Certified Public Accountants
“International
Minerals”
International Minerals Pty Limited (A.C.N 058 341 638), a
company incorporated under the laws of Australia with
limited liability and a wholly-owned subsidiary of ARH
“Listing Rules” Rules Governing the Listing of Securities on The Stock
Exchange of Hong Kong Limited
“Previous Circular” the circular dated 19 March 2007 of the Company in respect
of, amongst other things, a major transaction and a very
substantial acquisition and connected transaction for the
Company relating to the acquisition of shares in Mount
Gibson Iron Limited
“SFO” Securities and Futures Ordinance (Chapter 571 of the Laws of
Hong Kong)
“Shareholders” shareholders of the Company
“Share(s)” ordinary share(s) of HK$0.10 each in the issued share capital
of the Company
“Stock Exchange” The Stock Exchange of Hong Kong Limited
“US$” United States dollars, the lawful currency of the United States
of Amercia
“Warrants” 251,795,622 warrants of the Company listed on the Stock
Exchange
By Order of the Board
APAC RESOURCES LIMITED
Yue Jialin
Chairman
Hong Kong, 22 March 2007
As at the date of this announcement, the board of Directors comprises Mr. Yue Jialin
(Chairman), Mr. Lau Yau Cheung (Chief Executive Officer), Mr. Michael Joseph
Bogue being the executive Directors and Mr. Wong Wing Kuen, Albert, Mr. Tsui Robert
Che Kwong and Mr. Yang Weiming being the independent non-executive Directors.
* For identification purpose only