Dingyi has requested a review of Hong Kong Stock Exchange Decision (as
Elemental remains committed to supporting Dingyi in the review process
and the parties have agreed conditional timetable extensions to
facilitate this process
The Majority Directors continue to recommend the Dingyi Offer. Until
there is greater clarity on the response of the SEHK review, they
suggest Shareholders wait for that decision before taking further steps
in respect of the Dingyi Offer
Up to $10 million should be available for drawdown in the coming weeks
under the existing convertible loan facility provided by Dingyi to
Elemental, subject to satisfaction of conditions.
PERTH, Australia, Dec. 23, 2013 /CNW/ - Elemental Minerals Ltd (ASX,
TSX: ELM) ("Elemental" or the "Company") provides the following update on the off-market takeover offer for
all of the fully-paid ordinary shares of Elemental ("Dingyi Offer") by Dingyi Group Investment Limited ("Dingyi"), a company incorporated in Bermuda and listed on The Stock Exchange
of Hong Kong Limited ("SEHK").
Background to the Dingyi Offer
On 1 July 2013, Elemental and Dingyi entered into the Bid Implementation
Agreement pursuant to which the parties agreed that Dingyi would make
the Dingyi Offer.
Execution of the Bid Implementation Agreement was the culmination of a
strategic review of the Company's alternatives and the completion by
Dingyi of a thorough legal, technical and financial due diligence on
the Company and its flagship Sintoukola potash project.
Your Directors were unanimous in the view that the Dingyi Offer of 66
cents per Share should be put to and considered by Shareholders given
that it represented a significant premium to the trading price of an
Elemental Share at the point in time at which Elemental announced it
was in exclusive discussions with Dingyi.
Dingyi Shareholder Approval Condition and SEHK decision
As Shareholders are aware, the Dingyi Offer is subject to a range of
conditions including the Dingyi Shareholder Approval Condition. This
condition is required because under the rules of the SEHK, transactions
of listed issuers such as Dingyi are subject to various disclosure
and/or shareholder approval requirements depending on the
classification of the transaction (a classification of which must be
confirmed by the SEHK).
Despite Dingyi and Elemental working constructively together to obtain
this required regulatory confirmation, it has taken considerably longer
than Dingyi, Elemental and their respective advisers expected.
On 16 December 2013 Dingyi received a written decision from the SEHK
advising it that the SEHK has classified the Dingyi Offer as a reverse
takeover under Rule 14.06(6) of the SEHK Listing Rules (SEHK Decision).
The consequence of the SEHK Decision on the Dingyi Offer is that unless
the SEHK changes its decision, Dingyi has outlined in its First
Supplementary Bidder's Statement that:
Dingyi will not be able to satisfy the Dingyi Shareholder Approval
Condition because it will not be able to obtain the clearance required
from the SEHK for Dingyi to issue the documentation required to obtain
the Dingyi Shareholder Approval Condition;
the Dingyi Offer will therefore lapse at the end of the Offer Period
because the Dingyi Shareholder Approval Condition will not have been
all acceptances under the Dingyi Offer which have been received by
Dingyi and which are not validly withdraw will become void at the end
of the Offer Period and those accepting Elemental Shareholders will
retain their Elemental Shares.
Under the SEHK Listing Rules, Dingyi may request the decision of the
SEHK Listing Division be referred to the SEHK Listing Committee, which
may in its sole discretion, review the decision. Dingyi has informed
Elemental that it has requested a review of this decision by the SEHK
Listing Committee and thus Elemental intends to do all it can to
support Dingyi in this appeal process and will continually assess it
progress. However, there can be no guarantee of success or that a
decision will be made in a timely fashion.
The terms of the Bid Implementation Agreement also provide Elemental
with a right to terminate that document if the Dingyi Shareholder
Approval Condition becomes incapable of being satisfied prior to the
Shareholder Approval Condition End Date. That same agreement also
provides both parties with a right of termination if the SEHK
classified the Dingyi Offer as a reverse takeover (as it deems the
Dingyi Shareholder Approval Condition to have become incapable of
satisfaction). To enable the review process to continue and sufficient
time for draw down on the existing convertible loan facility to occur
with the Bid Implementation Agreement remaining 'on foot', the parties
have agreed not to exercise these rights until on or after 15 January
2014. If monies are drawn down under the existing convertible note,
these rights to terminate the Bid Implementation Agreement will be
Both parties retain at all times a right to terminate the Bid
Implementation Agreement is the outcome of the SEHK review is
Elemental's position in respect of the Dingyi Offer
Since Elemental received notice of the SEHK decision on 18 December
2013, Elemental and Dingyi have worked together to ascertain the
implications for the Dingyi Offer and the process of appealing the
decision. These discussions remain ongoing and encompass a range of
ways in which the parties may work together now and in the future.
Elemental does not doubt Dingyi and its major shareholder Mr Li's
commitment to the Sintoukola project. Since the Dingyi Offer has been
made, Dingyi has informed Elemental and the SEHK that is has managed to
secure non-binding letters of intent by Chinese and Hong Kong based
banks to provide up to US$1.8 billion in project financing.
While the review process continues, Dingyi has indicated its
preparedness to continue to fund Elemental. The parties have agreed the
amendments to the terms of the existing facility such that, subject to
satisfaction of certain outstanding conditions precedent to that
facility (including registration of security), up to $10 million of the
$15 million is to be made available for draw down.
The amended arrangements also alter Elemental's existing
'non-compensation amount financing' ability (being the right to raise
capital without having to pay a break fee) such that conditional upon
draw down of monies referenced above this right is limited to a raising
conducted after 1 March 2014 and then only if the third tranche of $5m
due under the convertible loan facility (totalling $5m) is unavailable
or if it is necessary to repay the convertible notes to Dingyi (subject
to certain prescribed exceptions which are in effect instances where
the convertible loan must be repaid due to circumstances within the
control of Elemental).
The amended arrangements also include certain procedures for expenditure
of funds which if breached by Dingyi allows Elemental to again raise
capital from alternative sources as an 'Approved Financing' (a raising
that will not give rise to a breach of the Bid Implementation Agreement
or a defeating condition to the Dingyi Offer). If the amount raised in
this manner exceeds the amount owing to Dingyi Elemental will use those
funds to repay Dingyi.
Chairman of Elemental, Mr Sam Middlemas said: "The Board has carefully
considered its funding options (including raising funds from existing
shareholders). The funding from Dingyi under the convertible loan
funding not only re-affirms its continued commitment to the Company but
ensures that any fundraising preserves the opportunity for the Dingyi
Offer to proceed. Funding the Company in this manner does not breach a
condition to the Dingyi Offer and enables the Company to continue to
progress further work on its Sintoukola Project while the bid process
continues. While the Board continues to believe Shareholders should be
given the opportunity to accept an offer at 66 cents per share, it will
act to maximise the potential for that offer to be put to
The key commercial terms of this facility remain unchanged from those
summarised in the original transaction announcement of 1 July 2013.
Subject to these arrangements being finalised, Elemental intends to
utilise a portion of its existing ASX Listing Rule 7.1 capacity of the
issue of convertible notes and accordingly Shareholder approval is not
required as a condition to drawdown.
To provide further time for the SEHK review process, the parties have
agreed certain timetable extensions to facilitate the implementation of
the Dingyi Offer. The timetable extensions are conditional upon
Elemental having successfully drawn down on the convertible loan
facility (which is targeted for 15 January 2014) so a further
announcement will be made when they become effective.
Dingyi Offer closes (unless extended)
31 January 2014 (1)
Target date for holding Dingyi shareholder meeting (2)
late February 2014
Dingyi shareholder approval long stop date (unless extended)
31 March 2014
1 Dingyi has agreed to further extend this date, to 21 days after the
Dingyi shareholder meeting to approve the Offer, unless the Dingyi
Shareholder Approval Condition becomes incapable of satisfaction by the
Dingyi shareholder approval long stop date.
2 This is a target date only and subject to change.
The ability to meet this extended timetable remains dependent upon the
SEHK review process. There can be no guarantee that a positive
regulatory outcome will be obtained from the SEHK or received in time
to facilitate the obtaining of Dingyi shareholder approval within this
Revised Directors recommendation
The Majority Directors remain of the view that if capable of being
successfully completed, the Dingyi Offer is in the best interests of
Elemental Shareholders and should be accepted unless a superior
proposal emerges and the Dingyi Shareholder Approval Condition is
capable of acceptance by the Shareholder Approval Condition End Date.
However, in light of the SEHK Decision and its impact on the Dingyi
Offer, each of the Majority Directors recommends that Shareholders who
have not yet accepted the Dingyi Offer take no further action in
respect of the Dingyi Offer until the outcome of any SEHK appeal
process is known or the Majority Directors recommend otherwise.
Mr Iain Macpherson maintains his original recommendation in respect of
the Dingyi Offer for the reasons set out in the Target's Statement.
About Elemental Minerals
Elemental Minerals Limited is an advanced mining exploration and
development company that aims to grow shareholder value through its
93%-owned Sintoukola Potash Project on the Republic of Congo coastline.
Elemental Minerals is dual listed on the Australian Stock Exchange and
the Toronto Stock Exchange under the symbol ELM. For more information,
About Dingyi Group Investment
Dingyi Group Investment Limited is a company incorporated in Bermuda and
listed on the Hong Kong Stock Exchange. Dingyi is an investment company
with interests based primarily in Hong Kong and Mainland China. Dingyi
is a company controlled by Mr. Li Kwong Yuk, a Chinese entrepreneur.
Mr. Li also controls a number of other substantial Mainland Chinese and
international business interests in sectors including infrastructure,
real estate, financial institutions and natural resource, among others.
SOURCE: Elemental Minerals Limited
For further information:
Mr Sam Middlemas
Tel: +61 (419) 936 040
Mr Glenn Gatcliffe
Managing Director - BMO Capital Markets
Tel: +1 (416) 359 7048