Have been going back to the AZC announcements to see what the...

Have been going back to the AZC announcements to see what the heck is going on. Makes very interesting reading. If you want to skip to the conclusion, scroll down.

Here is a brief synopsis:

10/11/2010:
AZC enter into an arrangement with a "private group based in the peoples repubic of china" whereby within 6 months it can be required to assign all its assets OTHER THAN ITS WIM 150 ASSETS to a JV for $16.25M plus 35% share in the JV.

In addition, the Chinese group "has 18 months within which to require that AZC assigns to the Joint Venture Company the WIM 150 assets" for $23.75M plus a 35% interest in the JV Company. This gives it until 10/4/2012 to exercise the option to require AZC to transfer its WIM 150 assets to the JV.

29/3/2011: PRC company advised AZC to transfer all assets other than WIM 150 assets into its JV.

29/6/2011: Orient Zirconic (OZC) named as the PRC company. JV (called Murray Zircon Limited - MZ) established with all AZC assets excluding WIM 150.

10/10/2011: Astron drop its appeal on the decision denying APG its right to sell APGs interest in WIM 150. This is interesting because "under the November 2010 arrangements if [AZC] gives notice to OZC that the [Astron] litigation has been resolved to its satisfaction, OZC has 3 months within which to elect whether it wishes the Group to assign the WIM 150 assets to the Joint Venture Company. If OZC elects to do so, consideration payable will be $23,750,000 to [AZC]and [AZC] will maintain its 35% holding in MZ."

10/4/2012: No news...seems like OZC let its option on AZC's WIM 150 assets lapse.

15/8/2012: AZC enters into conditional arrangements with a
company based in Hong Kong in the Peoples Republic of China to sell its 35% shareholding in Murray Zircon Pty Ltd to the Purchaser for a consideration of A$11,500,000....It is expected that the proceeds from this sale will assist the Company continuing with its mineral sands focus by progressing the Bankable Feasibility Study ("BFS") for the WIM150 Heavy Mineral Sands project in western Victoria." NOTE: Nowhere does it say that the purchaser is OZC.

16/8/2012: AZC deny APG consent to sell Wim 150 to OZC.

CONCLUSION (OR WHAT THE HECK IS GOING ON?)

AZC are playing games with OZC, and APG is stuck in the middle. Rationale...

OZC could've got control of 65% of AZC's Wim 150 assets for $23.5M up until April this year. If I do the maths that valued AZCs WIM 150 assets 21 months ago at $29.375M. For whatever reason, they choose not to do this.

However, OZC just agreed to buy APG's 20% share for $7.5M. If I do the maths again, that values AZC share very slightly higher...$30M.

Right now, AZC's only has $41.5M in assets:
- Wim 150 (which we just valued at $30M), plus
- $11.5M in the bank it got for selling its interest in the JV (I wonder if it was OZC...they weren't named in the agreement)

But as of June 30, 2011 AZC had loans outstanding of $70M+, and has repaid zero year to date according to its cashflow statement.

So basically AZC is screwed (which is well known...thats why its been restructuring for 2 years). Its adminstrator is trying its darnest to get the most value it can out of WIM 150.

By scuppering OZC's deal to get APGs share of WIM 150, it is exercising its only neogotiating power it has in an attempt to try to force OZC to sweeten its offer deal for its own WIM 150 assets.

The question is how much is AZC going to demand from OZC before it lets APG get its money? $35M? $40M? Either way, if OZC pay up, it should also mean a free path for APG.

My bet is that if AZC ended up with an offer for $35M for its WIM 150 share, it would let the APG deal go through.

Unlucky APG, stuck in the middle again!