17th Oct 2007 16:23
Summit Resources plc17 October 2007 Summit Resources Plc ("Summit" or the "Company"; Ticker: (SUMR)) ------------------------------------------- • Proposed acquisition of the Stockton Coal Group• Proposed waiver of obligations under Rule 9 of the City Code• Change of name to "Atlantic Coal plc"• Application for admission of the Enlarged Share Capital to AIM• Notice of Extraordinary General Meeting The Directors of Summit Resources plc are pleased to announce today, that theCompany has entered into an agreement to acquire the Stockton Coal Group, (the"Acquisition Agreement"). The Acquisition Agreement is conditional, inter alia,on the approval of certain resolutions by shareholders at an ExtraordinaryGeneral Meeting to be held on 13 November 2007, notice of which will becontained in the Readmission Document which will shortly be sent toshareholders. Subsequent to shareholders approval, the Company will bereadmitted to AIM as Atlantic Coal plc (ticker: ATC). The Stockton Coal Group ("SGC")-------------------------------The Stockton Coal Group comprises of a group of US companies and partnershipsnamely Coal Contractors (1991) Inc. Stockton Anthracite LP and StocktonAnthracite LLC. The business of SGC consists of the ownership and operation of the StocktonColliery which comprises the Stockton Mine, an established union free anthracitesurface mine which encompasses about 900 land acres in the Hazle Creek Valley,Pennsylvania, USA and an anthracite preparation plant which currently produces avariety of sizes of clean coal products for sale. Due to its high carbon qualityand the specialised markets it serves, Pennsylvania anthracite is considered a"niche industry" within the US coal sector. Most of the original surface area of the Stockton Mine is overlain by previoussurface mine spoil material. The current Stockton Mine operations are beingconducted under a valid mining permit issued by the Pennsylvania Department ofEnvironmental Protection. SGC also holds additional permits on three othersites, which are reportedly depleted of economically recoverable coal, and SGCis in the process of fulfilling reclamation obligations in respect of these. The Stockton Mine operation was temporarily idled in December, 2005 pendingthe construction and commissioning of the anthracite preparation plant which wasdesigned to produce various sizes of clean coal products for sale, which thecurrent management believed would be highly advantageous for the business. Resumption of mining operations was commenced in November 2006 with the start-upof the new anthracite preparation plant in February 2007. The preparation plantis a 150-200 tons per hour Parnaby coal preparation plant located adjacent tothe open-pit anthracite mine. Sales of a variety of washed anthracite productsbegan in February 2007. The preparation plant can process approximately 300,000ROM tons of anthracite coal annually from the Stockton Mine into various productsizes for sale to both retail and industrial consumers. The plant is projectedto recover approximately 50 per cent. of the material processed, thus yieldingapproximately 150,000 tons of clean coal per year, which is currently saleablelocally at an average price of circa $120 per ton. The Competent Person, J T Boyd Company, estimates that there is over 10 years ofmine life from existing reserves at an average production rate of 400,000 ROMtons per annum. The Stockton Mine has previously achieved annual revenues ofover $11 million per year and an annual output of over 450,000 ROM tons of coal.Based on historic production levels, the mine is capable of and is projected toproduce approximately 450,000 ROM tons of coal per year. It is anticipated thatof the 450,000 ROM tons produced, 300,000 tons will be processed by the newpreparation plant to yield approximately 150,000 tons of clean anthraciteproduct and the remaining 150,000 tons of ROM output will be sold under existingROM sales commitments. General Electric Capital Corporation (''GECC'') SettlementFollowing the settlement of a claim by GECC, (which arose from the bankruptcyproceedings of the previous owner of the Stockton Mine) SGC entities areobligated to pay GECC $3,000,000 in principal amount over time. Three of thevendors of SGC have undertaken to Coal Contractors to pay the first $1,000,000,and SGC will thereafter make 48 monthly payments of $60,420.76 beginning 15December 2008. Valuation and ConsiderationBased on the current mining projections the pre tax net present value of thefree cash flow from SGC's operations has been valued at $33,974,000 using adiscount rate of 10 per cent. and at $44,153,000 using a discount rate of 5 percent.. SGC had audited net liabilities of ($3,260,755) at 31 August 2006 andunaudited net liabilities of ($5,152,909) at 28 February 2007. Under the terms of the Acquisition Agreement the Company agreed to pay theconsideration by the allotment and issue on Completion of 400,000,000 newordinary shares of 0.07p (" the Consideration Shares") and 36,208,000 newordinary shares ("the Loan Conversion Shares") by the Company to the Vendors,credited as paid up at 2.5p per New Ordinary Share ("the Consideration SharePrice"). Pursuant to the Acquisition the Company will issue in aggregate494,131,736 new ordinary shares ("the New Ordinary Shares") to the owners ofSGC, and to certain creditors of SGC and to certain professional advisers of theCompany. The New Ordinary Shares will comprise the Consideration Shares, theLoan Conversion Shares, 42,857,136 new ordinary shares ("the DebentureConversion Shares"), 5,000,000 new ordinary shares ("the Broker Shares") and10,066,600 new ordinary shares ("the Introductory Shares"). At the Consideration Share Price the value of the Consideration Shares will be£10 million, and the value of all the New Ordinary Shares will be approximately£12.35 million. Immediately following completion of the Acquisition ("Completion") and admissionof the existing ordinary shares and the New Ordinary Shares ("Admission") theEnlarged Group's market capitalisation (at the Consideration Share Price) willbe £19.05 million. The New Ordinary Shares will represent 64.85 per cent of theEnlarged Share Capital and will, when issued, rank pari passu in all respectswith the other ordinary shares then in issue, including all rights to alldividends and other distributions declared, made or paid following Admission. Highlight Financial InformationIn the 12 months to 31 August 2006 SGC reported an audited net loss of$6,290,788. In the six months to 28 February 2007 SGC reported an unaudited netloss of $1,892,154. The primary focus of SGC during this period was to constructthe anthracite preparation plant and reactivate mining operations that had beenidled in December, 2005. The preparation plant began test operations in December2006 continuing into January 2007. Production of clean coal suitable for retailand industrial markets increased in February 2007 as operational adjustments tothe preparation plant were being completed. ROM coal, extracted from the basincut of the Stockton Mine, was delivered to the preparation plant for processingduring this period. The Board of the Enlarged GroupOn Completion Malcolm Raymond Scott James and Jade Lauren Styants will resign asDirectors and their appointment letters will be cancelled. The terms ofChristopher Walter Lambert's appointment as a non-executive director will bevaried so as to provide for fees of £2,000 per month to be paid to him for hisservices. Toby David Howell will retire as an Executive Director under hisexisting service agreement and, pursuant to a letter of appointment, he willbecome a non-executive director and be paid a fee of £2,500 per month forservices to be provided over 2.5 days per month. He will have particularresponsibility for investor relations and be entitled to fees for additionaltime as agreed by the Board. Gregory Kuenzel will become a non-executivedirector under a letter of appointment by which he will be paid a fee of £1,000per month for his services as a non-executive director, in addition to hisexisting contract to act as company secretary for £2,000 per month. He may beentitled to additional fees at the discretion of the Board. Stephen Best willenter into a service agreement with the Company by which he will become ManagingDirector of the Company for a salary of £60,000 per annum. He will also begranted options over 15,000,000 new ordinary shares, of which 5,000,000 optionswill be exercisable at 3.5p per share, 5,000,000 options will be exercisable at5.5p per share, and 5,000,000 options will be exercisable at 7.5p per share.Raymond John Petrilla will enter into a service agreement with the Company bywhich he will become Finance Director of the Company for a salary of $165,000per annum to include any current consideration in respect of his currentemployment with SGC. Additionally Raymond John Petrilla will be granted certainoptions to subscribe for 1,000,000 new ordinary shares at 3.5p per share, and1,000,000 new ordinary shares at 5.5p per share. Christopher Lambert, the Chairman of Summit Resources plc, today commented: "The Board is delighted to be able to announce the agreement for the acquisitionof the Stockton Coal Group. The Stockton Coal Group idled the Stockton Mine inDecember 2005 prior to a period of extensive investment in the construction of anew anthracite washing plant designed by Parnaby in the UK. Following thecommissioning of the new washing plant in February 2007 we believe that theStockton Coal Group is well placed to perform strongly and deliver value toshareholders by producing valuable processed anthracite coal to meet strongmarket demand. Furthermore the board believes that the acquisition of anoperating business in a low political risk environment with revenue andestablished customers will provide a sound base for the company's regionalgrowth. In addition to the regional plan the Enlarged Group shall look toimplement and execute an international strategy of identifying, developing andextracting value from incremental deposits of high grade and anthracitic coal." For further information:------------------------Toby HowellSummit Resources PlcTel: 0207 182 1747 Imran Ahmad / Rod Venables / Cecil JordaanHB CorporateTel: 0207 510 8561 Acquisition statistics:-----------------------Number of Ordinary Shares in issue prior to Admission 267,868,264Consideration Shares to be issued 400,000,000Consideration Share Price 2.5pLoan Conversion Shares to be issued 36,208,000Debenture Conversion Shares to be issued 42,857,136Introductory Shares to be issued 10,066,600Broker Shares to be issued 5,000,000Total number of New Ordinary Shares to be issued pursuant tothe Acquisition 494,131,736Number of Ordinary Shares in issue immediately following completion of the Acquisition and Admission 762,000,000Percentage of Enlarged Share Capital representedby the Consideration Shares 52.49 per cent.Percentage of Enlarged Share Capital representedby the New Ordinary Shares 64.85 per cent.Existing Ordinary Shares as a percentage of the Enlarged Share Capital 35.15 per cent.Market capitalisation of the Company at the Consideration Share Price immediately following Admission £19,050,000AIM symbol at Admission ATCInternational Security Identification Number (''ISIN'') GB00B142G994 Expected timetable of principal events:---------------------------------------Publication date of the admission document 17 October 2007Latest time and date for receipt of completed Forms of Proxy for the Extraordinary General Meeting 11 a.m. on 11 November 2007Extraordinary General Meeting 11 a.m. on 13 November 2007Completion of the Acquisition and Admission 19 November 2007Dealings in the Enlarged Share Capitalto commence on AIM and CREST accounts credited 19 November 2007Despatch of definitive share certificates by 3 December 2007 Proposed Directors of the Enlarged Group:-----------------------------------------Christopher Walter Lambert, Non-Executive Chairman (aged 49)Christopher Walter Lambert is currently the Executive Chairman of AIM quotedAltona Resources plc, a coal business with a JORC compliant resource of over 7.5billion tonnes of coal that is developing a coal to liquids and cogenerationpower plant, with capacities of 10 million barrels per annum of petroleumproducts and 562 Mega Watts of power. Additionally he is a non-executivedirector of Braemore Resources plc, and non-executive director of Cue Energy plc(all AIM quoted). He is also a non-executive director of Pepinnini MineralsLimited, (listed on the Australian Stock Exchange). Christopher Walter Lamberthas a financial background predominantly in the commodities markets within theCity of London. He joined Johnson Mathey Bankers in 1979 to specialise inbullion banking and trading, and went on to hold positions including director ofprecious metals trading Europe for Prudential Bache Securities Inc. and head ofprecious metals trading (UK) for Barclays Bank plc. Stephen Best, Managing Director (aged 50)Stephen Best is the Managing Director of the Stockton Coal Group. He has over 25years experience in opencast coal mining in the United Kingdom and the USA.Stephen Best started his career as a Junior Engineer in 1976 for projects underthe National Coal Board Opencast Executive. In 1979 he became a site acquisitionmanager for H.J. Banks Limited, responsible for the negotiation andidentification of opencast coal sites throughout the UK. In 1984 he moved toLoumont Construction Limited (a subsidiary of SGB plc), as site acquisitionmanager responsible for the formation of a private opencast mining division inthe UK. Since the late 1980's Stephen Best has been involved in the formationand operation of a number of private companies specialising in the acquisitionof opencast coal mines and property development opportunities, including theconstruction of several new hotels in the United Kingdom. Raymond John Petrilla, Finance Director (aged 56)Raymond John Petrilla has been the Chief Financial Officer of the Stockton CoalGroup since 2002. He holds a Bachelor of Science in Accounting from PennsylvaniaState University, has passed the uniform certified public accountant examinationand has attended the Program for Management Development at the HarvardUniversity Graduate School of Business Administration. Prior to joining theStockton Coal Group Raymond John Petrilla gained 16 years of experience in thePennsylvanian anthracite industry. From 1984 until 1990 he managed treasury,accounting and management information systems for the Reading Anthracite Companyand was involved in the Schuylkill Energy Resources, Inc. project to constructan 80 Mega Watt electric power producer using anthracite coal as fuel. From 1990to 2000 Raymond John Petrilla was responsible for financial planning, reportingand budgeting at the Leigh Coal and Navigation Company, where he was alsoinvolved in strategic planning for anthracite production and marketing. In 2000he joined the Standard Energy Corporation in Utah where he developed themarketing and environmental plan for a $240 million energy project. Toby David Howell, Non-Executive Director (aged 31)Toby David Howell began his career in the Equities division at UBS Warburg inLondon and went on to help manage the investment division of Internet BusinessGroup plc. Since then he has specialised in smaller companies' corporatefinance, undertaking transactions on the Official List and AIM as well asprivate equity transactions. He is the CEO and a founder of Blomfield StreetSecurities Limited, a subsidiary of Hichens, Harrison and non-executive directorof MN Specialty Steels Limited (the UK holding company for a controlling stakein a steelworks with 1,500 employees). Additionally he is a non-executivedirector of AIM quoted Cue Energy plc, and non-executive chairman of PLUS quotedFairholt Resources plc. Toby David Howell is an officer in the Territorial Armyand served on operations in Iraq during 2004. Gregory Kuenzel, Non-Executive Director and Company Secretary (aged 36)Greg Kuenzel is a chartered accountant with over 12 years experience inaccounting and finance. After obtaining a Bachelor of Business Degree from EdithCowan University he joined the audit and corporate services division of HowarthPerth Chartered Accountants where he specialised in the resource and venturecapital sectors. During this time he was seconded to the New York office ofBerdon LLP, as Audit Manager for one of the city's largest property developmentgroups. From 2003 to 2004 Greg Kuenzel was involved in establishing the LondonOffice of Global Education Management Systems, a company managing a network ofinternational schools throughout the UK, USA and United Arab Emirates. From 2005to 2006 he was responsible for the UK based international financial accountingteam of Thomson Scientific Limited, an information solutions provider, withglobal group revenues exceeding US$1 billion. His role included implementing newfinancial processes, specifically focusing on the expansion of the ThomsonGroup, assisting with Sarbanes Oxley related projects and analysing accountingdifferences between US and UK GAAP. He is currently the chief financial officerof MN Specialty Steels Limited as well as a director of its 66.7 per cent.subsidiary Zeljezara Niksic AD, a steel plant with a workforce of 1,500 locatedin the Republic of Montenegro. Availability of Re-admission Document:--------------------------------------A copy of the Readmission Document will be mailed to the shareholders of theCompany. The document will also be made available on the Company's website,www.summitresourcesplc.com. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Atlantic Coal