Laurence Read, CEO of Bezant, commented: The Mankayan Project is a significant copper-gold property and this agreement enables us to secure funding to progress the project whilst generating value for the Company and its shareholders going forwards from a 20% shareholding in Asean Copper and a potential additional indirect minority interest in the project via a shareholding in a Singapore listed entity.
If Bezant’s shareholders duly approve the Proposed Transaction at the requisite general meeting, which will be convened shortly, we look forward to working with MMIH to progress operations and new exploration opportunities at Mankayan as MMIH continues its preparations in respect of the proposed listing of MMJV on the Singapore Stock Exchange in the RTO Transaction.”
Bezant (AIM: BZT), the copper-gold exploration and development company, is pleased to announce that on 4 October 2019 (the “Transaction Date”) it entered into a conditional transaction agreement (the “Transaction Agreement”) with Mining and Minerals Industries Holding Pte. Ltd.
(“MMIH”), a private company incorporated in Singapore, with respect to the proposed disposal of 80 per cent. of the Company’s interest in the Mankayan copper-gold project in the Philippines (the “Mankayan Project”) (the “Proposed Transaction”).
MMIH has itself previously entered into a separate agreement to vend certain mining assets in the Philippines to China Hongxing Sports Limited (“CHX”), a public company listed on the Main Board of the Singapore Exchange Securities Trading Limited (the “Singapore Stock Exchange” or “SGX”), which, if successfully completed, would constitute a reverse takeover (the “RTO Transaction”) by CHX under the listing rules of the SGX.
Pursuant to the terms of the Transaction Agreement, MMJV Pte. Ltd. (“MMJV”), a wholly-owned subsidiary of MMIH, will acquire an 80 per cent. shareholding (the “MMJV Shares”) in Asean Copper Investments limited (“Asean Copper”) (the “Acquisition”). Asean Copper, incorporated in the British Virgin Islands, is the special purpose vehicle through which Bezant owns its interest in the Mankayan Project.
Asean Copper holds a 40 per cent. shareholding in Crescent Mining and Development Corporation (“CMDC”), which is incorporated in the Philippines and is the sole holder of Mineral Production Sharing Agreement No. 057-96-CAR (the “MPSA”) in respect of the Mankayan Project. Asean Copper also holds a 40 per cent. shareholding in Bezant Holdings Inc., which is incorporated in the Philippines and holds the balancing 60 per cent. interest in CMDC, and has an option (scheduled to expire on 30 June 2022) to acquire the balancing 60 per cent. of Bezant Holdings Inc. (together, the “Asean Copper Ownership Structure”).
The project’s MPSA was originally issued for a standard 25 year period, which expires on 11 November 2021, and the current exploration period under the MPSA, which is subject to certain work programme commitments (the “Exploration Period Requirements”), is scheduled to expire in April 2020.
The consideration payable by MMIH comprises:
i) a funding commitment of up to US$2.25m (approximately £1.82m) to be deployed, inter alia, to satisfy the Exploration Period Requirements;
ii) subject to the MPSA being renewed following completion of the Exploration Period Requirements to the satisfaction of the relevant Philippine authorities, a further funding commitment of up to S$5.5m (approximately £3.23m) to be applied in undertaking a definitive feasibility study; and
iii) the issue of S$10m (approximately £5.87m) of shares in CHX or other listed entity holding MMJV on the Singapore Stock Exchange (“ListCo”), subject to successful completion of the abovementioned RTO Transaction.
The funding commitments in i) and ii) collectively are the “Total Funding Commitment”. Further information on the Proposed Transaction is set out below.
Background to and rationale for the Proposed Transaction
As announced previously, the Company has for some time been seeking a strategic/funding partner to progress its Mankayan Project, a major copper-gold porphyry deposit located on the Northern Luzon Island of the Philippines. The Proposed Transaction, which is, inter alia, subject to the approval of Bezant’s shareholders at a duly convened general meeting, is the culmination of a comprehensive process to secure such a partner. In light of the level of investment required to fulfil the committed work programme and future development of the project, the Board of Bezant (“Board”) views this transaction as being the best option to secure medium to long term value from the Mankayan Project for the Company and its shareholders. Following satisfaction of the relevant conditions precedent, including approval by Bezant’s shareholders, Bezant will retain a 20 per cent. shareholding in Asean Copper (“Bezant’s Ongoing Investment”) and thereby a direct interest in the Mankayan Project. Following all conditions being satisfied, including the RTO Transaction, Bezant will also be issued with equity in the ListCo with a value of S$10m (approximately £5.9m), which is significantly higher than the Company’s prevailing market capitalisation.
The Board believes that the Proposed Transaction with MMIH, a company which has assembled a portfolio of mining projects within the Philippines and which has made significant funding commitments in relation the Mankayan Project, will secure the future of the project by providing the funding required to satisfy the licence’s current work commitments, and that the Mankayan Project should also ultimately benefit from the publicly quoted status of ListCo, in which Bezant will hold a minority interest, on the Singapore Stock Exchange subject to successful completion of the RTO Transaction. Furthermore, the introduction of a strategic partner at the asset level avoids the excessive dilution that would otherwise have arisen for Bezant’s shareholders should the Company have sought to raise sufficient equity funding from the UK’s capital markets.
Further Information on the Proposed Transaction
AIM Rule 15 and General Meeting: In accordance with AIM Rule 15, the Proposed Transaction will constitute a fundamental change of business for the Company and will therefore require the approval of shareholders at a duly convened general meeting. Accordingly, the Company will shortly be publishing a circular, incorporating a notice of general meeting, which will include customary salient information in relation to the Proposed Transaction (the “GM Notice”).
Conditions Precedent to the Proposed Transaction: Completion of the Proposed Transaction (“Completion”) is conditional upon, inter alia, the following conditions precedent (the “Conditions Precedent”):
(i) the approval of the Company’s shareholders at a duly convened general meeting (the “Bezant GM”);
(ii) MMIH, within 5 business days of Bezant meeting all regulatory requirements for the Proposed Transaction, amending its existing RTO Transaction agreements with CHX to include the Acquisition and specifically to include the completion of the Acquisition as a condition precedent to the completion of the RTO Transaction’s sale and purchase agreement;
(iii) MMIH not having given notice two business days before the date of the Bezant GM that its due diligence has not satisfied itself as to the validity of the ownership by CMDC of the MPSA and the Asean Copper Ownership Structure; and
(iv) other customary closing conditions for a transaction of this nature.
The Conditions Precedent are required to be satisfied or waived by the longstop date, being 40 days from the Transaction Date or such later date as agreed between the parties (the “Longstop Date”).
Future management of Asean Copper and ListCo: Upon Completion, MMIH will be responsible for the day to day management and control of Asean Copper and the Mankayan Project, but pursuant to a joint venture agreement to be entered into between Bezant and MMJV, Bezant will have information sharing and certain other rights to ensure that it can manage Bezant’s Ongoing Investment. The Company has no rights to participate in the management of MMIH, MMJV or ListCo. MMIH have indicated that they may, at their sole discretion, invite Laurence Read and /or another Bezant Board member to join the board of ListCo in the future as a non-executive director and/or to act as an adviser to assist with project continuity and in light of their experience with publicly listed resource companies, however there is no certainty that any such appointment(s) will be made and no agreement regarding the terms of any such appointment(s).
Background on MMIH and MMJV: MMIH and MMJV are private companies incorporated in Singapore. MMIH owns the entire issued share capital of MMJV. On 25 March 2019, CHX and MMIH announced on the SGX that they had entered into an agreement for the RTO Transaction. As set out in that announcement, it is intended that MMJV will hold two joint venture companies (the “JVs”), each of which will respectively own the following gold and copper mine concessions located in the Philippines:
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