Malaysia Smelting Corporation Bhd (MSC) is selling a 19.92% stake in BCD Resources NL, an Australian gold producer, to Bendigo Mining Ltd for a total of A$10.8 million (RM30.8 million) in cash and share swap transactions, in line with its revised strategy to focus on its original core business in tin.
In a statement yesterday, MSC said it had inked a share purchase and call option deed with Bendigo for the proposed sale of 45 million and the grant of a call option over a further 39 million BCD shares to Bendigo, representing 10.67% and 9.25% respectively of BCD.
MSC currently holds 90 million BCD shares, representing a 21.3% stake. MSC said pursuant to the disposal, it would end up with six million BCD shares which may be divested in due course. It did not say why the six million shares were being retained.
The call option is based on a scheme implementation agreement relating to, and an announcement of, a merger between BCD and Bendigo by means of a scheme of agreement to be approved by BCD’s shareholders.
MSC said the outright sale of 45 million shares would be priced at A$0.115 per BCD share, representing the 30-day volume weighted average price (VWAP), while the consideration for the call option would be the same as provided for in the scheme implementation agreement.
Under the scheme, BCD shareholders will transfer their shares to Bendigo in exchange for ordinary shares in Bendigo at the ratio of one BCD share for 0.72 Bendigo share, valuing a BCD share at A$0.144 per BCD share, representing a 25% premium to the 30-day VWAP.
MSC said it may also divest the Bendigo shares in due course.
BCD owns the Tasmania Mine in Northern Tasmania and is also advancing a copper project in Victoria with significant copper resources at two adjacent locations.
MSC said the Tasmania Mine had a history of high grade production with a known endowment of 2.5 million ounces of gold and production in excess of 800,000 ounces of gold since 1999.
MSC said the group had rolled out a diversification strategy in 2007 and thereafter made several strategic alliances and long-term investments in tin, nickel and gold. MSC’s entry into gold was achieved in 2008 with its acquisition of an 18.9% interest in Beaconsfield Gold NL, thereafter renamed BCD.
“However, on the back of liquidity crunch as a result of economic crisis and financial meltdown, the board of directors of MSC undertook another strategic review in 2009 of its growth strategy.
“The board took cognisance of the need to strengthen MSC’s balance sheet and to maintain a sound gearing level. Hence in the light of the financial constraints and the need to ensure financial prudence, the board decided that the Group should reposition itself to focus on its original core business of tin,” it said.
MSC said it intended to use the proceeds of the sale to reduce its bank borrowings and improve its gearing ratio. It expects the transactions with Bendigo to be completed by Nov 30, 2010.
MSC had posted a net loss of RM29.13 million in its first quarter ended March 31, 2010 versus a net loss of RM5.59 million a year earlier, mainly due to an impairment provision of RM48 million. Revenue rose 85% to RM651.18 million from RM351.64 million, with net assets per share of 3.46 sen as at March 31.
The stock yesterday slipped two sen to close at RM3.60, with 47,200 shares transacted. Trading of MSC shares was halted for an hour from 10.41am yesterday, pursuant to the announcement of the asset disposal.
The counter traded to a 52-week high of RM3.91 on Jan 12, 2010 and a low of RM2.92 on July 22, 2009. It has fallen 2.96% year-to-date.
This article appeared in The Edge Financial Daily, July 23, 2010.
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