7th Apr 2008 07:01
Cambrian Mining PLC07 April 2008 AIM: CBM Cambrian Mining Plc Outcome of Strategic Review London, 7 April 2008: Cambrian Mining Plc ("Cambrian" or "the Company" or "theGroup") is pleased to announce the outcome of its Strategic Review ("the Review"). The objective of the Review was to address the following: • Simplify Cambrian's structure and clarify its corporate objectives; • Unlock value traps and build a platform to create further value; and • Capitalise on the current environment of strong coal and gold prices. The conclusion of the Review is that Cambrian should instigate a series oftransactions to complete its transformation from an investment holding companyinto an operating mining group with control over a more focussed, but stilldiversified, group of assets. The key initiatives are: • Maximise value from its interests in Western Canadian Coal Corp ("WCCC"); • Seek to acquire up to 100% of Coal International; and • Liberate value from Xtract Energy plc. The Board is confident that the implementation of the Review will makeunderlying value more transparent. • Cambrian's unaudited net assets (book value), as at 31 December 2007, and as announced on 31 March 2008, were £1.60 per share. • The current market value of Cambrian's listed investments is £222.70 million, equivalent to 228p per share as at 4 April 2008. • The Board believes there is additional potential upside if the Company is able to take advantage of higher coal prices and organic growth opportunities. • Given its transformation into an operating mining group, the Board believe that Cambrian should become easier to value based on trading multiples. Results of the Strategic Review 1. Maximise Value from Western Canadian Coal Corp. The Company will work closely with WCCC as part of their own strategicinitiative to maximise value for their shareholders. Based on the current marketprice of WCCC shares, Cambrian's interest in WCCC is valued at £177.8 million or182p per Cambrian share (see table at end of release). While there may be a number of outcomes from the WCCC process, Cambrian isfocussed on either divesting of the Company's interest, or working alongside anew industry investor in WCCC to ensure the assets meet their potential. Withrecord high coal prices, operating improvements and organic growth opportunitiesexpected to materialise over coming months at WCCC, we believe that this is anideal stage in Cambrian's evolution to consider its strategic alternatives withrespect to WCCC. On 19 February 2008, WCCC appointed Morgan Stanley as a strategic advisor, itsremit including capturing the potential available to WCCC shareholders. TheBoard believes that there is significant unrealised potential in excess of itscurrent value in WCCC as it continues on its own process of maximising value. Arepresentative of Cambrian sits on WCCC's Steering Committee, which hasresponsibility for advancing their strategic review process. 2. Potential offer to acquire up to 100% of Coal International Plc Further to Coal International's announcement on 24 January 2008, Cambrian ispleased to confirm that it is in discussions with the independent executivedirector* of Coal International with regard to a potential acquisition of up to100% of Coal International, most likely by way of a share for share exchange. Cambrian believes that an acquisition of Coal International represents asignificant step towards the creation of an operating company in line with itsstrategy. The transaction would also give opportunity to the integration ofhighly complementary management teams, with low post merger integration risk. Inaddition, Cambrian believes that the business of Coal International would bestrengthened through the integration with Cambrian and its increased financialsupport. Cambrian's current corporate and working capital support for Coal Internationalwill continue. The discussions between Cambrian and Coal International are ongoing and therecan be no certainty that the discussions will lead to an offer being made byCambrian to Coal International shareholders. Cambrian currently owns 34% of the issued share capital of Coal Internationaland has a convertible loan of US$25 million. (* the two non-executive directors of Coal International are also executivedirectors of Cambrian) 3. Liberate value from Xtract Energy Plc The Company is in discussion with a number of investors interested in acquiringa stake in Xtract from Cambrian. Cambrian believes that Xtract has a promisingfuture and that it will create significant value for its shareholders but theCompany also recognises that Xtract's structure and focus on developingearly-stage energy assets is not compatible with Cambrian's strategic direction.The Company will therefore evaluate maintaining its investment in Xtract.Depending on the outcome of discussions with potential investors, Cambrian willexpect to maximise shareholder value through one or a combination of: • selling to long-term investors for cash and/or • distributing Cambrian's Xtract shares to Cambrian shareholders Cambrian does not intend to sell its Xtract shares in the market but will take ameasured approach over a suitable period of time to ensure that the processworks in the interest of maximising value and it will enable some of Xtract'sunderlying assets to gain better traction and visibility. Cambrian, together with its wholly owned subsidiary, Cambrian InvestmentHoldings Ltd, currently owns approximately 369.8 million shares or 50.1% of theissued share capital of Xtract and has 36.5 million warrants. Potential Impact While there can be no guarantee as to the successful outcome of all or any ofthe initiatives outlined above, the Cambrian Board believes that these stepswill result in: 1. Cambrian becoming a focussed mining company owning 100% of threeindividual mining operations and 50% of one other, producing four commodities(thermal coal, metallurgical coal, gold and antimony); 2. The value from the two largest value traps within our structure, WCCCand Xtract, will be maximised and unlocked with prospects of significant valuereturn to shareholders; and 3. Opportunities to create additional value will remain through organicgrowth of Cambrian's core assets, a stronger balance sheet, and maintainingCambrian's historic success in identifying new opportunities. The new Group structure will comprise substantially of wholly-owned subsidiarycompanies, listed investments and cash, with the core management focus onoperating subsidiaries that are 50% or 100% owned. Non operating investments andother assets will be held as part of an investment and business developmentportfolio and managed as financial investments. The accounting complexities ofseparately listed associated companies will be eliminated and the results of theGroup will reflect the operational activities of all companies and not just ashare of their profits. Other Assets The Cambrian Board plans to divest of a number of the Group's smaller holdingsover the coming months. Cambrian will continue to evaluate all of its assets andtheir relevance to the Company's portfolio on a regular basis. With respect to Costerfield, Cambrian is currently focussed on improvingoperating performance and increasing ore resources and will consider the bestway forward once these initiatives and the strategic review implementation arefurther advanced. Mark Burridge, CEO commented, "The asset base of the Company presents very significant value potential. Thestrategic review points the way to unlock this value with considerable anddemonstrable benefit to shareholders. While challenges remain in achieving theobjectives of the Strategic Review, the implementation process is alreadyunderway and well within the compass of the Group's financial and managerialresources. Hand in hand with the strategic review, we are also working tostrengthen the management of the business, for example, to address operatingperformance and financial reporting. I am confident that these initiatives will deliver positive results over thecoming year and leave the Company focussed on income producing assets, withexposure to commodities that are highly in demand and with a team in placecapable of maximising their potential." Relevant Securities in Issue In accordance with Rule 2.10 of the City Code on Takeovers and Mergers (the'Code'), the Company confirms that it has 97,466,500 Ordinary Shares of 20 penceeach in issue at the close of business on 4 April 2008 and the Company isadmitted to trading on the London Stock Exchange under the UK ISIN codeGB0031630527. In addition, the Company currently has US$27 million convertible loan notes inissue. The notes are convertible into fully paid ordinary shares of the Companyat any time during the period from 7 July 2006 to 7 May 2009. The number ofshares to be issued upon exercise of the conversion right shall be determined bydividing the principal amount of the note (translated into pounds sterling atthe fixed rate of US$1.8761/£1.00) by the conversion price. The conversion priceat the date of issue of the loan notes is 183.25 pence per share. Dealing Disclosure Requirements Under the provisions of Rule 8.3 of the Takeover Code (the "Code"), if anyperson is, or becomes, "interested" (directly or indirectly) in 1% or more ofany class of "relevant securities" of the offeror or of the offeree company, all"dealings" in any "relevant securities" of that company (including by means ofan option in respect of, or a derivative referenced to, any such "relevantsecurities") must be publicly disclosed by no later than 3.30 pm (London time)on the London business day following the date of the relevant transaction. Thisrequirement will continue until the date on which the offer becomes, or isdeclared, unconditional as to acceptances, lapses or is otherwise withdrawn oron which the "offer period" otherwise ends. If two or more persons act togetherpursuant to an agreement or understanding, whether formal or informal, toacquire an "interest" in "relevant securities" of the offeror or the offereecompany, they will be deemed to be a single person for the purpose of Rule 8.3. Under the provisions of Rule 8.1 of the Code, all "dealings" in "relevantsecurities" of the offeror or of the offeree company by the offeror or the offeree company, orby any of their respective "associates", must be disclosed by no later than12.00 noon (London time) on the London business day following the date of therelevant transaction. A disclosure table, giving details of the companies inwhose "relevant securities" "dealings" should be disclosed, and the number ofsuch securities in issue, can be found on the Takeover Panel's website atwww.thetakeoverpanel.org.uk. "Interests in securities" arise, in summary, when a person has long economicexposure, whether conditional or absolute, to changes in the price ofsecurities. In particular, a person will be treated as having an "interest" byvirtue of the ownership or control of securities, or by virtue of any option inrespect of, or derivative referenced to, securities. Terms in quotation marksare defined in the Code, which can also be found on the Panel's website. If youare in any doubt as to whether or not you are required to disclose a "dealing"under Rule 8, you should consult the Panel." - Ends - Cambrian Mining Plc +44 20 7409 0890 Mark Burridge / Vivian Silverman Landsbanki Securities (UK) Limited +44 20 7426 9000 Jeff Keating / Fred Walsh Seymour Pierce Limited +44 20 7107 8000 Mark Percy Scott Harris +44 20 7653 0030 Stephen Scott / Annabel Michie Bankside Consultants +44 20 7367 8888 Keith Irons / Simon Rothschild About Cambrian Mining Plc: Cambrian is a diversified mining house that manages and supports operations incoal and gold/antimony mining. The Group has been instrumental in the past threeyears in supporting the development of a number of mines and moving them intoproduction. These include: the Augusta gold and antimony mine in Victoria,Australia; the Wolverine hard coking coal mine in Western Canada; the Dillon andBrule PCI mines in Western Canada as well as metallurgical and thermal coalmines in West Virginia, USA. KEY LISTED INVESTMENTS* 4 April 2008 Shares Share Price** Value (million) (£ equivalent) (£ million) Coal International (CLN:AIM) 33.5 0.39 12.9 Energybuild Group (EBG:AIM) 35.8 0.18 6.3 Xtract Energy (XE:AIM) 376.8 0.03 10.9 Western CDN Coal (WTN:AIM/TSX) 48.3 2.08 100.3 Western CDN Coal - agreed FMC settlement 18.7 2.08 38.9 Western CDN Coal - listed debentures (WTN.DB:TSX) i) 530.55 15.4 Western CDN Coal - agreed FMC deferred settlement ii) 4.5 2.08 9.4 Western CDN Coal - C$5m convertible loan iii) 6.7 2.08 13.8 Coal International - convertible loan iv) 13.5 Vulcan Resources 13.1 0.10 1.3 Total Key Listed Investments 222.70 Estimated Value (£ million) £ 222.70Estimated Value (£ per share) £ 2.28 * This table refers to investments denominated in listed securities.In addition, Cambrian has a number of other assets, including AGD-Costerfield,and liabilities which can be assessed by reference to the interim and full-yearaccounts. ** £ equivalent closing market price as at 4 April 2008 i) C$29m face value, traded on the TSX. Price reflects the TSX closingprice of the debentures. This is convertible at C$4.00 / share = 7.25 millionshares. ii) Option to receive 4,534,088 shares at C$3.10 equivalent orC$14,055,67 in cash before 30 September 2008. The table above represents thecurrent market price of the shares, if received. iii) convertible into 6,666,667 shares, at C$0.75 each. The table aboverepresents the market price of the new shares if converted. iv) convertible at £0.60 / share = 22.5 million shares. The table aboverepresents the cash value of the loan. About Western Canadian Coal Corp Western Canadian Coal Corp. produces 3.7 million tonnes of high qualitymetallurgical coal from three mines located in the northeast of BritishColumbia. The Company also has interests in various coal properties in northernand southern British Columbia and a 50% interest in the Belcourt Saxon LimitedPartnership, which was formed to explore and develop the Belcourt and Saxongroup of properties in northern BC. Currently, these properties provide theCompany with an estimated 15 years of coal reserves at current productionlevels. On 29 February 2008, WCCC and Cambrian announced the terms of the transfer ofFalls Mountain Coal ("FMC") to WCCC. 18,740,898 new common shares will beissued to Cambrian upon the completion of the transfer of FMC, plus a receivableof C$14m which can be converted into approximately 4.5m shares. Summary of Cambrian's Interests in WCCC (held through wholly owned subsidiaries) • Current shareholding of 48,327,840 common shares in WCCC (equal to approximately 41.5% of WCCC's current outstanding common shares); • Entitlement to a further 18,740,898 new common shares of WCCC; • Option to take a further 4,534,088 new common shares of WCCC (subject to potential re-pricing adjustment); • C$5 million convertible loan - convertible into 6,666,667 new common shares of WCCC at a conversion price of C$0.75 per share; • 612,500 warrants to purchase new common shares in WCCC at an exercise price of C$3.25 expiring 28 June 2012; • 520,000 warrants to purchase new common shares in WCCC at an exercise price of C$3.25 expiring 30 September 2008; • C$29 million of convertible debentures. The convertible debentures bear interest at 7.5% per year, are payable semi-annually, mature March 24, 2011, and are convertible into common shares of WCCC at any time prior to maturity at a conversion price of C$4.00 per common share. About Coal International Plc Coal International has grown through the acquisition of coal properties which ithas placed into operation and through investments in other coal producers. Atlantic Development and Capital, "ADC" Coal International's 100% ownedsubsidiary, currently operates the Crooked Run Surface Mine and Silo Mainsunderground mine as well as the Gauley Eagle coal preparation plant and theDeepgreen West Virginia coal recovery operation. Coal International also purchases and washes third party coals and sells intoboth the thermal and metallurgical coal markets. Maple Coal Company operates two units in the Eagle No. 1 underground mine andthe Katie coal preparation plant, producing high quality metallurgical coal. About Xtract Energy plc Xtract identifies and invests in a diversified portfolio of early stage energysector technologies and businesses with very significant growth potential.Xtract aims to work closely with the associated management teams to achievecritical project milestones, to finance later development stages and to buildand crystallise value for all shareholders and partners. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Xtract