10 February 2012
Prosperity Minerals Holdings Limited
(“Prosperity” or “the Company”)
Proposed investment in Malaysian iron ore mines
Iron ore off-take consent
Prosperity Minerals Holdings Limited (“PMHL.L”) is an iron ore user portion the People’s Republic of China (“PRC”) and a actual estate owners and developer in the same market. It is moreover an financier in two PRC concrete manufacturers.
We are gratified to publicize that on 10 February 2012, Pro-Rise Limited (“Pro-Rise (Xetra: 915677 – headlines ) “), a unconditionally owned auxiliary of the Company, entered in to a limited sale and buy consent to acquire a 5% fascination in All Wealthy Capital Limited (“All Wealthy”) an iron ore resource growth company.
On 13 January 2012, Prosperity sealed an choice consent (“Option Agreement”) with Prosperity International Holdings (H.K.) Limited (“PIHL”) and paid US$6m as a refundable deposition (the “Option Deposit”). Under the Option Agreement, the Company has an choice to experience in the merger of serve interests in All Wealthy to one side PIHL.
Highlights
Pro-Rise has entered in to a limited sale and buy consent with Elite Force (Asia) Limited (“Elite Force”) to acquire a 5% fascination in All Wealthy for a complete money care of US$25 million (approximately 15.7 million) (the “Acquisition”); Elite Force, that owns an 80% fascination in All Wealthy, is 100% owned by Mr David Wong, the Chairman and CEO of the Company. After the finishing of the contract the Company will grip an efficient 3.5% fascination in a Malaysian iron ore operation.
All Wealthy owns a 70% fascination in disdainful mining rights in two Malaysian iron ore mines. It moreover owns a estimate plant in Malaysia adjoining to the mines, that are now beneath hearing prolongation with a future aim prolongation ability of 3 million tonnes per annum.
Prosperity will pay US$7 million (approximately 4.4 million) of the care by way of a refundable deposition (“Deposit”) by 15 February 2012 with the change of US$18 million (approximately 11.3 million) due on completion.
If All Wealthy is not listed, right away or indirectly, on the Hong Kong Stock Exchange (or other batch swap concluded by the parties) inside of 2 years of finishing of the Acquisition, Prosperity has an choice to need Elite Force to buy back its All Wealthy shares at the initial investment cost in addition to fascination on such amount at 8% per annum.
Upon finishing of the Acquisition, Prosperity will secure the right, but not the obligation, to buy 9.5 million tonnes of iron ore over a 10 year period, at a bonus to the prevalent marketplace cost (“Off-take Agreement”).
Completion of the Acquisition is approaching to take place by the finish of Mar 2012, theme to all regulatory approvals and consents being obtained, inclusive the approval of the Acquisition by the eccentric shareholders of PIHL, the Company’s most shareholder. If Completion does not happen by 30 Mar 2012, Elite Force will return the Deposit.
Under the Option Agreement sealed with PIHL on 13 January 2012, Prosperity has an choice to experience in the merger of serve interests in All Wealthy to one side PIHL.
The draft investment in All Wealthy and the Off-take Agreement is in line with the Company’s plan to go on to enlarge its investment in iron ore resources and to spread its access to arguable sources of iron ore at aggressive prices for sale to finish users in China.
Information on All Wealthy
Elite Force, that owns an 80% fascination in All Wealthy, is 100% owned by Mr David Wong, the Chairman and CEO of the Company.
All Wealthy, whose house comprises Mr David Wong as solitary Director, is an investment keeping firm and by its subsidiaries, is intent in the exploration, mining and estimate of iron ore in Malaysia. All Wealthy in a roundabout way owns a 70% fascination in disdainful mining rights in two iron ore mines situated in Sri Jaya, Pahang Province, Malaysia. The merger of a 5% fascination in All Wealthy will give Prosperity an efficient 3.5% fascination in the iron ore mines. All Wealthy moreover owns a estimate plant with 10 estimate lines in Sri Jaya that is adjoining to the mines. The plant is beneath hearing operation and has a future aim prolongation ability of 3 million tonnes per annum.
Reasons is to Proposed Transaction
The draft investment in All Wealthy and the Off-take Agreement is in line with the Company’s plan to go on to enlarge its investment in iron ore resources and to spread its access to arguable sources of iron ore at aggressive prices for sale to finish users in China.
The Company intends to account the Acquisition from its own money resources.
Acquisition Agreement
On 10 February 2012, Pro-Rise entered in to a limited sale and buy consent with Elite Force (“Acquisition Agreement”) to acquire a 5% equity fascination in All Wealthy for a complete money care of US$25 million (approximately 15.7 million) (the “Consideration”).
Pro-Rise will pay the refundable Deposit of US$7 million (approximately 4.4 million) by 15 February 2012, with the change of US$18 million (approximately 11.3 million) of the Consideration due on finishing of the Acquisition Agreement (“Completion”).
Elite Force agrees to procure, inside of 2 years of Completion (“Liquidity Event Date”), the inventory of All Wealthy, right away or indirectly, on the Hong Kong Stock Exchange (or other batch swap concluded by the parties) (“Liquidity Event”). If the Liquidity Event does not happen by the Liquidity Event Date, Pro-Rise has the right, inside of 30 days of the Liquidity Event Date, to need Elite Force to buy all its All Wealthy shares (the “Put Option”). The cost on credit by Elite Force per All Wealthy share is next to to the initial Consideration of US$25,000,000 widely separated by 350 All Wealthy shares (being the number of All Wealthy shares acquired by Pro-Rise) that is, US$71,428. 5 7 (approximately 44,979.00) per All Wealthy share in addition to fascination on such amount at a rate of 8% per annum (the ‘Option Price”). The complete Option Price is to complete number of All Wealthy shares acquired by Elite Force is on credit by Elite Force inside of 3 months of the exercise of the Put Option.
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The Acquisition Agreement contains specific composition supplies germane to a Liquidity Event and the number of All Wealthy shares held by Pro-Rise:
i.
the Pre-agreed Value per All Wealthy share to be held by Pro-Rise is next to to 70% of the cost per All Wealthy share in connection to the Liquidity Event;
ii.
if this is reduction than the initial investment amount of US$71,428.57 per All Wealthy share, Elite Force will give extra All Wealthy shares to Pro-Rise and/or pay such a money amount to Pro-Rise (to be concluded by the parties), so that the initial investment amount and the Pre-agreed Value are the same.
Prior to a Liquidity Event, Pro-Rise might usually sell its All Wealthy shares to other person theme to Elite Force having the right of first warding off to repurchase such shares. This limitation does not request to transfers of All Wealthy shares inside of the Prosperity organisation or to transfers of All Wealthy shares subsequent to a Liquidity Event
Completion of the Acquisition Agreement is approaching to take place by the finish of Mar 2012, theme to the compensation of all conditions, inclusive all vital approvals and consents being performed by the Company and its most shareholder, PIHL, as serve explained below. In the eventuality the conditions are not contented or waived by 30 Mar 2012 or such other date concluded by the parties, Elite Force will return the Deposit to Prosperity inside of 30 business days of such date and the Acquisition Agreement will terminate.
Off-take Agreement
At Completion, Prosperity will come in in to an off-take consent (the “Off-take Agreement”) with Grace Wise Pte. Limited (“Grace Wise”), a 70%- owned auxiliary of All Wealthy. Under the Off-take Agreement, Prosperity has the right to buy from Grace Wise up to 9.5 million tonnes of iron ore over a 10 year period, at intervals to be concluded between the parties. The bottom cost per dehydrated metric tonne of iron ore shall be distributed as: (i) 95% of the Base Fe Price; and (ii) reduction US$3 per dehydrated metric tonne. The Base Fe Price is distributed by anxiety to the median iron ore cost is to 5 trade days previous to the bill of payload date as gritty by anxiety to the published cost of iron ore (CFR basis) by Singapore Platts with Fe calm closest to the iron ore to be shipped.
The bottom cost shall be converted to an FOB ST (short tons) cost per dehydrated metric tonne (in the box of shipments done on a FOB ST basis) by composition is to shipping burden expenses as concluded between the parties from time to time by anxiety to marketplace rates.
Deliveries of iron ore are approaching to begin in Prosperity’s mercantile year 2012-13. The Off-take Agreement will provide Prosperity with access, at its discretion, to arguable supplies of iron ore at aggressive prices. The Company will have no responsibility to buy this iron ore if it is able to source iron ore at more aggressive prices elsewhere.
Option Agreement
In 2010, the Company’s most shareholder, PIHL, entered in to a chit of bargain with the vendors of All Wealthy is to disdainful right to negotiate with the vendors with the perspective to appropriation All Wealthy. On 13 January 2012, Prosperity entered in to the Option Agreement with PIHL. Under the Option Agreement, Prosperity paid PIHL the Option Deposit of US$6 million (approximately 3.78 million) is to right to negotiate and come in in to the Acquisition Agreement and, in the eventuality PIHL acquires a determining fascination in All Wealthy (the “All Wealthy Interest”), the right to acquire from PIHL all or segment of the All Wealthy Interest at the same cost per All Wealthy share as paid by PIHL to the vendors of All Wealthy (the “Option (Euronext: OPTI.NX – headlines ) “).
Prosperity saved the Option Deposit from its own money resources. If Prosperity decides to exercise its Option to acquire segment of the All Wealthy Interest from PIHL, the Option Deposit will be converted in to segment of the consideration. Prosperity has no responsibility to acquire any portion of the All Wealthy Interest from PIHL or the vendors of All Wealthy. PIHL is compulsory to return the Option Deposit, inside of 90 days, if Prosperity notifies PIHL of its goal not to acquire serve shares in All Wealthy. PIHL contingency moreover return the Option Deposit immediately in the eventuality PIHL has not entered in to decisive agreements to acquire the All Wealthy Interest by 12 January 2013.
Financial Information on All Wealthy
Based on the un audited combined financial statements of All Wealthy is to year finished 3 1 Mar 2011 ready in conformity with International Financial Reporting Standards and its interpretations adopted by the International Accounting Standards Board, All Wealthy incurred a distinction of roughly US$1,766,000 is to time from 11 Mar 2010 (being the date of union of All Wealthy) to 31 Mar 2011. Similarly, the net item worth of All Wealthy as at 31 Mar 2011 is roughly US$3,019,000.
AIM Rules Implications
Acquisition Agreement and Option Agreement
The Option Agreement is with PIHL, a significant shareholder and thus a connected celebration of the Company beneath the AIM Rules. The Option Agreement individually does not consecrate a connected celebration contract beneath AIM Rule 13 as it does not surpass 5% of any of the category tests beneath the AIM Rules.
The transactions beneath the Acquisition Agreement and the Option Agreement are with same persons who are connected parties of the Company as Mr David Wong binds a 100% fascination in Elite Force and, with his associates, binds a combined surreptitious 64. 11 % fascination in PIHL. The transactions are moreover of a identical nature. This means that the Company is compulsory to aggregate these transactions beneath Rule 16 of the AIM Rules is to purposes of determining either the Acquisition Agreement is a connected celebration contract beneath AIM Rule 13 and a significant contract beneath AIM Rule 12. The Acquisition Agreement, individually and when many-sided with the Option Agreement, represents a connected celebration contract beneath Rule 13 of the AIM Rules, as it exceeds 5% of specific of the category tests beneath the AIM Rules.
The Acquisition Agreement, individually and when many-sided with the Option Agreement, moreover represents a significant contract is to Company beneath Rule 12 of the AIM Rules.
Independent Directors of Prosperity’s approval
Under AIM Rule 13, the Off-take Agreement (see below) and the Acquisition Agreement are thus limited on the approval of the transactions beneath these agreements by the Directors of the Company (other than Mr Wong) (the “Independent Directors”). The Independent Directors can usually grant this approval after they have consulted the Company’s nominated adviser, Daniel Stewart mp; Company plc (“Daniel Stewart”), as to either the conditions of the Acquisition Agreement and the Off-take Agreement are satisfactory and in accord with insofar as the Company’s shareholders as a entire are concerned. If the transactions are judged to be satisfactory and reasonable, then the Acquisition Agreement is approaching to complete by the finish of Mar 2012, once PIHL’s shareholders have voted at a special broad discussion of PIHL (“SGM”) (see below).
Prosperity’s Independent Directors will deliberate with the Nominated Advisor; Daniel Stewart either the contract is satisfactory and in accord with so far as all shareholders are concerned. A well-defined statement will be expelled accordingly.
Off-take Agreements
On the 11 May 2011, the Company voiced that Prosperity Materials Macao Commercial Offshore Limited (“PMMC”) entered in to an off-take consent (the “Nanjing Agreement”) with Nanjing Iron and Steel Group International Trade Co. Limited (“Nanjing”) and Grace Wise. Under the Nanjing Agreement, PMMC acts as disdainful introducing representative for Grace Wise in apply oneself of supplies of iron ore to Nanjing. On 15 November (Stuttgart: A0Z24E – headlines ) 2011, the Company voiced that PMMC entered in to an iron ore agency consent (the “Jiangsu Agreement”) with Jiangsu Prosperity Steel Limited (“Jiangsu Steel”). Under the Jiangsu Agreement, PMMC acts as Jiangsu Steel’s representative in procuring the supply of iron ore to Jiangsu Steel. Jiangsu Steel is in a roundabout way owned 47.5% by Mr David Wong and Grace Wise is in a roundabout way 58% owned by Mr David Wong and thus both companies are connected parties of the Company beneath the AIM Rules.
The transactions beneath the Off-take Agreement, the Nanjing Agreement and the Jiangsu Agreement are with the same persons and are of a identical nature. This means that the Company is compulsory to aggregate these transactions beneath Rule 16 of the AIM Rules is to purposes of determining either the Off-take Agreement is a connected celebration contract beneath AIM Rule 13. The Off-take Agreement, individually and when many-sided with the agency income of US$2 per tonne of the Nanjing Agreement and the agency income of up to US$4 per tonne (a assignment of US$2 per dehydrated metric tonne of iron ore in addition to a handling assign of US$2 per dehydrated metric tonne of iron ore if the e-mail of credit in connection to conveyance includes remuneration conditions of 90 days) of the Jiangsu Agreement, represents a connected celebration contract beneath Rule 13 of the AIM Rules as it exceeds 5% of specific of the category tests beneath the AIM Rules.
Implications beneath HK Listing Rules
The Company’s determining shareholder, PIHL, is listed on the Hong Kong Stock Exchange. Under the Hong Kong Listing Rules, the Acquisition Agreement and the Off-take Agreement consecrate connected transactions and are theme to the approval of the eccentric shareholders of PIHL at an SGM. PIHL is compulsory to consecrate an Independent Board Committee of PIHL to suggest its eccentric shareholders on how to opinion in apply oneself of the fortitude to be tabled to ponder the agreements at the SGM. PIHL is moreover compulsory to designate an eccentric financial confidant to suggest the Independent Board Committe e and eccentric shareholders of PIHL on the transactions.
Next (Xetra: 779551 – headlines ) stairs
We comprehend that the Independent Board Committee of PIHL is compulsory to examination the contract to give its opinion of the integrity and discretion to PIHL’s eccentric shareholders for their approval
PIHL expects to despatch serve data to its shareholders concerning the transaction. As and when PIHL provides such data to its shareholders, the Company will refurbish its shareholders at the same time.
Further enquiries:
Prosperity Minerals Holdings Limited +852 3187 2618
Patrick Li
Neelke Kruger-Logan
www.pmhl.co.uk
Citigate Dewe Rogerson +44 (0) 20 7638 9571
Martin Jackson
Kate Lehane
Daniel Stewart mp; Company plc +44 (0) 20 7776 6550
Nominated Advisor and Broker
Corporate Finance: Paul Shackleton, Noelle Greenaway
Corporate Broking: Martin Lampshire
Notes to Editors:
Prosperity (AIM: PMHL) is:
– an iron ore user portion the PRC;
– a specialised actual estate owners and developer in the same market; and
– an financier in two concrete plants, moreover in the PRC.
Prosperity’s iron ore business has been working given 1992 and sources iron ore, for conveyance and use in the PRC, from leading international iron ore producers in South Africa, Brazil and Australia, together with from South East Asia, Thailand and Malaysia in particular. The most of the Company’s iron ore is sold to considerable steel manufacturers in the PRC. In the mercantile years finished 31 Mar 2010 and 2011, Prosperity shipped 7.9 million tonnes and 6.3 million tonnes of iron ore respectively. In December 2010, Prosperity acquired a 35% efficient fascination in a Brazilian mining operation that owns roughly 602 block kilometres of scrutiny rights and 3.01 block kilometres of mining benefaction in the State of Ceara. During the first half year finished 30 September 2011, 159,000 tonnes of iron ore was shipped.
Prosperity has operated a actual estate investment and growth section given February 2010 that is focused on developing a portfolio of PRC skill and growth properties with great upside promising and achievable risk. The Company has entered in to a number of agreements with its allies to rise recreational, commercial and residential projects in Guangzhou City and Changzhou City in the southern PRC and Hangzhou City in the east. Prosperity moreover acquired interests in an existing commercial office building in Guangzhou that is the largest town in the southern PRC and the third largest in the Country (after Beijing and Shanghai). It has a race in surplus of 12 million people and is located in the Pearl River Delta, the foremost economic region in the southern PRC.
In April 2010, Prosperity likely of its concrete business in the PRC but defended its 33.06% fascination in Anhui Chaodong Cement Company Limited (ACC (BSE: ACCSL.BO – headlines ) ). ACC is located in Anhui Province in the eastern PRC and is listed on the Shanghai Stock Exchange (600318:CH). The written sellable outlay ability of ACC is 5.1 million tonnes of concrete and bust per annum. On 1 September 2010, Prosperity acquired a 25% equity fascination in Liaoning Changqing in Liaoning Province, in the northern PRC. Liaoning Changqing completed construction of a new 2 million tonnes per annum concrete and bust prolongation line in April 2010 and normal prolongation commenced on 2 July 2010. Following the finishing of a share distribution in Aug 2011, Prosperity’s fascination in Liaoning Changqing was diluted to 16.11%.
The PRC is the World’s second largest manage to buy (behind the US) and the greatest customer of iron ore; it is moreover the largest writer and consumer of cement.
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