Wrap Text
Kinetic Development Group to invest US$90 million in MC Mining Limited
MC Mining Limited
Previously Coal of Africa Limited
(Incorporated and registered in Australia)
Registration number ABN 008 905 388
ISIN AU000000MCM9
JSE share code: MCZ
ASX/AIM code: MCM
ANNOUNCEMENT
28 August 2024
KINETIC DEVELOPMENT GROUP TO INVEST US$90 MILLION IN MC MINING LIMITED
MC Mining Limited (MC Mining or the Company) is pleased to announce that the Company has
reached an agreement with Hong Kong Stock Exchange (HKSE) main board listed Kinetic Development
Group Limited (KDG) (1277.HK) the terms of which provide that KDG (or its designee) will subscribe,
in two tranches, for a total of 51% of the post transaction issued share capital of MC Mining.
The proposed investment by KDG will not only advance MC Mining's flagship Makhado steelmaking,
hard coking coal project into production, but is also expected to accelerate the broader strategy of
the group to develop its various tenements in the Vhembe region of Limpopo Province, including the
Greater Soutpansberg Projects (GSP) and the Vele Aluwani Colliery (Vele). KDG is an integrated coal
mining and trading group incorporated in the Cayman Islands with extensive operational experience
and expertise, and a successful history of production from its assets that it operates in the
autonomous regions of Inner Mongolia and Ningxia, China for over a decade.
Under the terms of the agreement, KDG will subscribe for an initial 13.04% of MC Mining for an
aggregate consideration of US$12,970,588 and implied price per share of US$0.2089 1 (at the
prevailing exchange rates, AU$0.3083 2 or ZAR3.72061 per share) which subscription shall be effected
no later than 5:00 pm Hong Kong Time on 4 September 2024, subject to the satisfaction of certain
conditions outlined below. The second subscription for the remaining aggregate US$77,029,412 will
be effected within seven (7) business days of the fulfilment or waiver of the conditions precedent
applicable to that subscription including obtaining shareholder approval at an Extraordinary General
Meeting (EGM) and receiving all relevant regulatory approvals.
1
Based on the number of MC Mining shares expected to be to be issued on first closing
2
Financial times cross rates as at 09:30 British Standard Time, 26 August 2024
Transaction Highlights
The transaction is expected to:
• create a diversified international coal mining group with operations in two of the fastest
growing continents in the world;
• unlock the potential of the Makhado steelmaking, coking coal project to become the largest
hard coking coal operation in South Africa providing opportunity for import substitution for
local large scale industry;
• leverage cross pollination of international best practice and local knowledge from the skills
available to KDG and MC Mining to minimise implementation risk and optimise operational
efficiency across the MC Mining projects;
• facilitate, due to the scale of the projects planned, deployment of new capital to develop
business support infrastructure such as logistics and utilities delivery;
• result in direct investment into a region with a deep, supportive and skilled labour pool; and
• enable MC Mining to take advantage of business development incentives offered by the
adjacent Musina Makhado Special Economic Zone further creating vertical integration
opportunities for industrial development of the region
Mathews Senosi, Chairman of MC Mining stated:
"We are privileged to be in a position to attract high quality investment from a strategic equity partner
with the capacity and capability of Kinetic Development Group. The transaction re-affirms the quality
of assets that MC Mining has been nurturing over a number of years. We are pleased to have finally
achieved our objective to be in a position to finalise full financing for the Makhado Project as the start
of a growth journey that we look forward to embarking on with excellent partners."
Wenzhong Ju, Chairman of the board and executive director of Kinetic Development Group stated:
"The investment in MC Mining is the next step of our intent to diversify and deepen both our product
mix between thermal and steelmaking coal as well as extend our geographic footprint into prospective
and high growth regions, taking advantage of our access to both high quality financial and human
resources for the coal sector.
We are enthusiastic about the long-term prospects of MC Mining and its potential as a substantive
contributor in the industrial coal space in the region and exporter of high-quality coal products. We
look forward to working with the MC Mining team and the Company's broader stakeholders in
realising what is a commendable vision that is aligned with our own."
Key Transaction Terms
The key terms of the agreement include:
• KDG (or its designee) will subscribe for 13.04% of the post subscription issued share capital of
MC Mining for a consideration of US$12,970,588 as first close funding to allow MC Mining to
commence development and construction of its early coal plan for the Makhado steelmaking
coal project;
• Utilisation of the proceeds raised under the transaction will be in accordance with a use of
proceeds plan (Use of Proceeds Plan) that will be provided by MC Mining to KDG prior to first
closing, which specifies that the proceeds raised under the transaction will be used to advance
the Company's Makhado and other core coal projects 3;
• The appointment of senior KDG executive Mr. Huang Muhui, who has been nominated by KDG
given his extensive experience in managing and driving KDG's global mergers and acquisitions
activities, to the board of MC Mining effective from the first close;
• The issue of 62,102,002 4 new MC Mining shares on the first close will be carried out by
utilising the Company's placement capacity under ASX Listing Rule 7.1 and so will not be
subject to shareholder approval;
• On the second close, KDG (or its designee) will subscribe for such number of additional shares
as is required to give it a total holding of 51% of the post transaction issued share capital of
MC Mining for a further US$77,029,412;
3
Please see Schedule 1 for further information
4
This number may increase to 63,302,002 if certain unquoted management options are exercised prior to first
closing. In such circumstances, the implied issue price referred to in footnote 2 will decrease to US$0.2049
• The shares issued by MC Mining to KDG (or its designee) will be subject to up to a 12 month
period of voluntary escrow, with the escrow period for each tranche commencing on the
relevant issue date 5;
• The second closing is subject to a number of conditions including:
- The Company's shareholders pass the second closing resolution at an EGM by the
majorities required under item 7 of section 611 of the Corporations Act; and
- To the extent applicable, the approval, if any, as required under the South African
Competition Act, is obtained from the relevant authorities 6;
• The second closing is to be completed within 270 days of the agreement, failing which KDG
has the right, if the second closing has not occurred other than as a result of KDG's breach, to
request the Company to buy back the first close shares in compliance with all applicable laws
including with the approval of the Company's shareholders at a general meeting 7;
• Following completion of the second closing, KDG will also be entitled (and is expected) to
appoint additional directors to the board such that its nominee directors constitute a majority
of MC Mining's directors; and
• A more detailed summary of the key terms of the subscription agreement (including the
various conditions precedent to completion of the second closing) will be included in the
meeting documents for the proposed EGM 8
A copy of KDG's disclosure to HKSE, which includes additional disclosures required under the listing
rules of HKSE, accompanies this announcement.
5
The escrow agreement is subject to certain exceptions and its enforceability is subject to the ASX Listing Rules
and applicable laws
6
Please see Schedule 1 for further information
7
In such circumstances, the escrow restrictions applicable to MC Mining shares held by KDG (or its designee)
will also be lifted
8
The proposed EGM is expected to be held before the end of 2024
About Kinetic Development Group
KDG is an integrated coal mining group listed on the HKSE and has a current market capitalization of
over US$1.2 billion 9. KDG's business covers the full coal value chain including mining, processing,
logistics and marketing. The key coal resource under operation of the Group is the underground
thermal coal Dafanpu Coal Mine.
About MC Mining Limited
MC Mining is an ASX and JSE-listed coal exploration, development and mining company operating in
South Africa. MC Mining's key projects include the Uitkomst Colliery (metallurgical and thermal coal),
Makhado Project (hard coking coal), Vele Colliery (semi-soft coking and thermal coal), and the Greater
Soutpansberg Projects (coking and thermal coal).
This announcement has been approved by the Company's Disclosure Committee.
Transaction Advisors:
Kinetic Development Group Limited:
Morgan, Lewis and Bockius Hong Kong Legal Advisors
Clayton Utz Australian Legal Advisors
Webber Wentzel South African Legal Advisors
MC Mining Limited:
R&A Strategic Communications Financial PR (South Africa)
BSM Sponsors Proprietary Limited JSE Sponsor
K&L Gates Australian Legal Advisors to MC Mining Limited
Falcon & Hume Attorneys Inc South African Legal Advisors to MC Mining Limited
Ares Capital Proprietary Limited Financial advisor to MC Mining Limited
9
Financial Times, 26 August 2024
Schedule 1
Use of Proceeds
MC Mining intends to use the proceeds raised from the issuance of new shares to KDG primarily for
the following purposes:
• Maintenance, security and compliance costs related to all the projects including Makhado,
Vele and the GSP.
• Commissioning of a coal handling and preparation plant at Makhado.
• Establishment of power and water infrastructure and civil works at the Makhado project.
• The partial repayment of certain outstanding loans.
Each of these matters will be set out in detail in the Use of Proceeds Plan.
Conditions precedent
There are a number of conditions precedent in the subscription agreement between MC Mining and
KDG that need to be satisfied before the first closing (i.e. the completion of the issue of the first
tranche of shares to KDG) and the second closing (i.e. the completion of the issue of the second
tranche of MC Mining shares to KDG) may be effected the more material of which are as follows:
Conditions precedent for the first closing
• MC Mining shall have taken all necessary corporate action such that immediately on the first
closing its board of directors shall have not more than seven members, including Mr Huang
Muhui; and
• MC Mining shall have prepared and provided to KDG the Use of Proceeds Plan;
Conditions precedent for the second closing
• MC Mining's shareholders pass all resolution/s required under the Corporations Act (including
a resolution for the purposes of Item 7 of section 611 of the Corporations Act) and the ASX
Listing Rules (if applicable);
• MC Mining shall have taken all necessary corporate action such that immediately on the
second closing KDG nominee directors constitute the majority of MC Mining's board (including
as a result of the appointment/removal of directors as specified by KDG);
• the technical reports commissioned by KDG conclude that the geology and quality of coal at
the Makhado Project is substantially consistent with the findings of MC Mining's competent
person reports as previously disclosed by MC Mining to KDG; and
• if applicable, receipt of any approval required by the Competition Act of South Africa for the
implementation of the Subscription Agreement shall have been granted, either
unconditionally or subject to such conditions as have been approved in writing by that date,
by the parties affected by such conditions, it being agreed that such approval shall not be
unreasonably withheld or delayed.
Additional conditions precedent applicable to the first closing and the second closing are set out in
KDG's disclosure to HKSE, a copy of which accompanies this announcement.
Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited
take no responsibility for the contents of this announcement, make no representation as to
its accuracy or completeness and expressly disclaim any liability whatsoever for any loss
howsoever arising from or in reliance upon the whole or any part of the contents of this
announcement.
Kinetic Development Group Limited
(Incorporated in the Cayman Islands with limited liability)
(Stock Code: 1277)
DISCLOSEABLE TRANSACTION
SUBSCRIPTION OF SHARES IN MC MINING
THE SUBSCRIPTION
The Board is pleased to announce that on 26 August 2024 (after trading hours), the
Company and MC Mining entered into the Share Subscription Agreement, pursuant to
which the Company has conditionally agreed to subscribe for the Subscription Shares at
the Subscription Price.
Upon completion of the Subscription, MC Mining will be held as to 51% by the Group
and become a non-wholly owned subsidiary of the Group and its financial results will be
consolidated into the Group.
LISTING RULES IMPLICATIONS
As one or more of the applicable percentage ratios in respect of the Subscription are more
than 5% and all of the applicable percentage ratios are less than 25%, the Subscription
constitutes a discloseable transaction for the Company and is subject to the reporting and
announcement requirements under Chapter 14 of the Listing Rules.
Shareholders and potential investors should be aware that the completion of the
Subscription is conditional upon the satisfaction of multiple conditions precedent,
which may or may not be satisfied. Shareholders and potential investors should exercise
caution when dealing in the securities of the Company.
–1–
I. SHARE SUBSCRIPTION AGREEMENT
The principal terms of the Share Subscription Agreement are described below:
Date: 26 August 2024 (after trading hours)
Parties: (i) The Company; and
(ii) MC Mining
Subscription Shares: The Company agrees to subscribe for and purchase, and
MC Mining agrees to issue and sell to the Company
certain new shares in MC Mining in the following
manners:
(i) at the First Closing (as defined below), the Company
agrees to subscribe for and purchase, and MC
Mining agrees to issue and sell to the Company such
number of new shares in MC Mining (the "First
Closing Shares"), representing approximately
13.04% of the issued share capital of MC Mining
immediately after the First Closing; and
(ii) at the Second Closing (as defined below), the
Company agrees to subscribe for and purchase,
and MC Mining agrees to issue and sell to the
Company such number of new shares in MC Mining
(the "Second Closing Shares"), which shall,
together with the First Closing Shares, account for
approximately 51% of the issued share capital of
MC Mining immediately after the Second Closing.
Total consideration and The total consideration payable by the Company under the
payment: Share Subscription Agreement amounts to US$90,000,000,
which comprises (i) US$12,970,588 to be paid at the First
Closing (as defined below); and (ii) US$77,029,412 to be
paid at the Second Closing (as defined below).
–2–
Use of proceeds: MC Mining shall use the proceeds from the issuance and
sale of the First Closing Shares and the Second Closing
Shares to develop, exploit and operate its coal business
solely and only in accordance with a plan to be delivered
by MC Mining to the Company prior to the First Closing,
which shall set out in reasonable detail projected time
and purpose for each use of the proceeds (the "Use of
Proceeds Plan").
Closings: First Closing
Subject to the closing conditions for each Closing and
for the First Closing specified in the Share Subscription
Agreement having been waived or satisfied, the
consummation of the issuance of the First Closing
Shares (the "First Closing") shall take place as soon as
practicable, but in no event later than seven (7) Business
Days after the date of the Share Subscription Agreement,
or at such other time and place as the Company and MC
Mining shall mutually agree in writing.
On the First Closing, MC Mining shall issue the First
Closing Shares to the designee of the Company and enter
its name in the register of members of MC Mining as the
registered holder of the First Closing Shares.
Second Closing
The consummation of the issuance of the Second Closing
Shares (the "Second Closing") shall take place as soon as
practicable, but in no event later than seven (7) Business
Days after the closing conditions for each Closing and for
the Second Closing specified in the Share Subscription
Agreement have been waived or satisfied, or at such other
time and place as the Company and MC Mining shall
mutually agree in writing (together with the First Closing,
the "Closings", each a "Closing").
On the Second Closing, MC Mining shall issue the
Second Closing Shares to the Company or its designee (as
applicable) and enter its name in the register of members
of MC Mining as the registered holder of the Second
Closing Shares.
–3–
Conditions precedent: Completion of the Share Subscription Agreement is
conditional upon the following conditions having been
fulfilled, or waived by the Company, provided that below
conditions precedent numbered (i)(a), (iii)(e), (iii)(f) and
(iii)(g) shall not be waived:
(i) Conditions precedent for each Closing
(a) MC Mining shall have performed and complied
in all material respects with all obligations
and conditions contained in the Transaction
Documents that are required to be performed or
complied with by it on or before such Closing.
(b) No provision of any applicable Laws shall
prohibit the consummation of any transactions
contemplated by the Transaction Documents.
(c) All corporate and other proceedings in
connection with the Subscription and the
other Transaction Documents to be completed
at such Closing and all documents incident
thereto shall have been completed, and
the Company shall have received all such
counterpart original or other copies of such
documents as it may reasonably request.
(d) Each of the parties to the Transaction
Documents (other than the Company) shall
have executed and delivered such Transaction
Documents to the Company.
(e) The chief executive officer of MC Mining shall
have executed and delivered to the Company
at such Closing a certificate dated as of such
Closing stating that the conditions specified in
the Share Subscription Agreement have been
fulfilled as of such Closing.
–4–
(ii) Additional conditions precedent for the First
Closing
(a) MC Mining shall have taken all necessary
corporate action such that immediately on
the First Closing its board of directors shall
have six (6) or seven (7) members, including
appointment of Mr. Huang Muhui, who is
designated by the Company as a member of the
board of MC Mining with effect as of the First
Closing, and evidence thereof shall have been
delivered to the Company.
(b) MC Mining shall have prepared and provided
to the Company the Use of Proceeds Plan.
(c) the Company shall have received opinions
from the Australian counsel and the South
African counsel for MC Mining, dated as of
the date of the First Closing.
(iii) Additional conditions precedent for the Second
Closing
(a) MC Mining shall have taken all necessary
corporate action such that immediately on
the Second Closing its board of directors
shall have the additional directors designated
by the Company as members of the board,
and removal of directors as required by the
Company from members of the board of MC
Mining with effect as of the Second Closing,
such that the Company will appoint a majority
of the nominee directors of the board of
directors, with the names of the directors to be
nominated and/or removed by the Company
to be provided to MC Mining at least five (5)
business days prior to the Second Closing, and
evidence thereof shall have been delivered
to the Company, including the delivery of
relevant approvals from the board and executed
director appointment letters.
–5–
(b) Subject to certain exceptions, qualifications and
disclosures specified in the Share Subscription
Agreement, each of the representations and
warranties of MC Mining contained in the
Share Subscription Agreement shall have been
true, correct, complete and not misleading
when made and shall be true correct, complete
and not misleading on and as of the Second
Closing with the same effect as though such
representations and warranties had been made
on and as of the date of the Second Closing,
except in either case for those representations
and warranties that address matters only as of a
particular date, which representations will have
been true and complete as of such particular
date.
(c) There shall have been no material adverse
effect as of the Second Closing.
(d) The technical reports commissioned by the
Company prior to the First Closing conclude
that the geology and quality of coal at the
Makhado Project is substantially consistent
with the findings of MC Mining's Competent
Persons' Reports previously disclosed to the
Company.
(e) MC Mining's shareholders pass a resolution
approving the Second Closing by the majorities
required under the Corporations Act and the
other applicable provisions of the Company's
constitution, the Corporations Act and the ASX
Listing Rules (as applicable).
(f) MC Mining's ordinary shares shall have
continued to be quoted for trading on ASX.
–6–
(g) To the extent applicable, the approval, if any,
required by the South African Competition
Ac t f or the imple me nta tion of the S h a r e
Subscr iption Agr e e ment sha ll ha ve be e n
granted, either unconditionally or subject to
such conditions as have been approved in
writing by that date, by the parties affected
by such conditions, it being agreed that such
approval shall not be unreasonably withheld or
delayed.
Company's right to share Subject to the Share Subscription Agreement, if the
buy-back: Second Closing does not occur for any reason, other
than as a result of a breach of the Share Subscription
Agreement by the Company, within 270 days after the
date of the Share Subscription Agreement, the Company
may give a notice ("Buy-Back Demand") to MC Mining
requesting MC Mining to buy-back the Company's First
Closing Shares.
On receipt of a Buy-Back Demand from the Company,
MC Mining shall, subject to the receipt by MC Mining of
requisite shareholders' approval under the Corporations
Act, proceed to buy-back MC Mining's First Closing
Shares, at the Subscription Price per First Closing Share.
Material representations MC Mining represents and warrants to the Company,
and warranties: among other things, that the following statements are true,
correct, complete and not misleading:
(i) Each Target Group Company is the sole record and
beneficial holder of all of the equity securities of
its applicable subsidiary(ies), free and clear of all
encumbrances of any kind other than those arising
under applicable law.
(ii) MC Mining is not required to obtain the approval
of its shareholders under the Corporations Act or
the ASX Listing Rules for the issuance of the First
Closing Shares to the Company.
–7–
(iii) As of the date on which MC Mining issues a
Cleansing Statement under the Share Subscription
Agreement, the Company is entitled to rely on the
sale offer exemption under section 708A(5) of the
Corporations Act in respect of the ordinary shares to
which the Cleansing Statement relates.
(iv) MC Mining has complied with all its disclosure
requirements under the Corporations Act and
the ASX Listing Rules and there is no material
information or circumstance which MC Mining
is not obliged to notify ASX about, pursuant to
ASX Listing Rule 3.1 and it is not withholding
any information in reliance on the exemption in
ASX Listing Rule 3.1A other than in respect of the
transactions contemplated by the Share Subscription
Agreement.
(v) The audited consolidated balance sheet and income
statements and cash flows for the Target Group as
of and for the twelve-months ended 30 June 2023
and the unaudited consolidated balance sheet (the
"Balance Sheet") and income statements and cash
flows for the Target Group as of and for the six-
months ended 31 December 2023 (the "Statement
Date") (a) have been prepared in accordance
with the books and records of the Target Group
Companies, (b) fairly present in all material respects
the financial condition and position of the Target
Group Companies as of the dates indicated therein
and the results of operations and cash flows of the
Target Group Companies for the periods indicated
therein, except in the case of unaudited financial
statements for the omission of notes thereto and
normal year-end audit adjustments that are not
expected to be material, and (c) were prepared in
accordance with the accounting standards applied on
a consistent basis throughout the periods involved.
(vi) Since the Statement Date, there has not been any
material adverse effect or any material change in
the way the Target Group Company conducts its
business.
–8–
(vii) No Target Group Company has any liabilities of the
type that would be disclosed on a balance sheet in
accordance with the applicable accounting standards,
except for (i) liabilities set forth in the Balance Sheet
that have not been satisfied since the Statement
Date, and (ii) current liabilities incurred since the
Statement Date in the ordinary course of the Target
Group Company business consistent with its past
practices and which do not exceed US$2,000,000 in
the aggregate.
(viii) The Target Group Companies are the holders of
the mining rights and there are no encumbrances
registered or otherwise existing in relation to the
mining rights.
(ix) Each Target Group Company operated the coal
business and the coal assets in compliance, and
the coal business and the coal assets are currently
in compliance in all material respects with all
applicable environmental, health and safety laws,
except where the failure to do so would not have a
material adverse effect.
II. BASIS OF DETERMINATION OF CONSIDERATION
The total consideration payable by the Company under the Subscription amounts to
US$90,000,000, which was negotiated on an arm's length basis between the Company
and MC Mining, and also taking into account, on the part of the Company, (i) the
valuation of 100% equity interest in MC Mining of US$217.1 million as at 30 June
2024 as appraised by an independent valuer adopting the discounted cash flow method
of the income approach and the market approach (the "Valuation"). Further details of
such Valuation are set out in the section headed "Valuation" below; (ii) the consolidated
assets and net assets of MC Mining as of 31 December 2023 of US$124,783,000 and
US$83,771,000 respectively; (iii) the total market capitalisation amount of MC Mining
of US$10,416,576 as quoted on ASX, where MC Mining maintains its primary listing,
and US$37,192,877 as quoted on JSE, where MC Mining maintains its secondary listing,
both as at 23 August 2024, being the last trading day of MC Mining's shares on ASX
and JSE prior to the date of this announcement; (iv) the liquidity and price history of the
shares of MC Mining on ASX and JSE; and (v) the proportional interest of the Group in
MC Mining and the fact that it will become a non-wholly owned subsidiary of the Group
upon completion of the Subscription.
The consideration will be funded by internal resources of the Group.
–9–
III. INFORMATION OF MC MINING
MC Mining is a company operating in South Africa primarily engaged in steelmaking,
coal and thermal coal exploration, development and mining. It has maintained a primary
listing on ASX with a secondary listing on the JSE. MC Mining's key projects include
the Uitkomst Colliery, Makhado Project, Vele Colliery and the Greater Soutpansberg
Projects, located in different regions of South Africa.
As at the date of this announcement, MC Mining has a total of 414,013,349 issued
shares, among which 93.69% are directly owned by Goldway Capital Investment Limited
and its members. Based on publicly available information, Goldway Capital Investment
Limited is in turn held as to 41.23% by Senosi Group Investment Holdings Proprietary
Limited, a company controlled by the family trust of Mr. Mathews Senosi, the Chairman
of MC Mining, and by other shareholders each holding less than 10% equity interest. To
the best of the Directors' knowledge, information and belief, having made all reasonable
enquiry, MC Mining and its ultimate beneficial owners are third party independent of the
Company and the connected persons of the Company.
Upon completion of the Subscription, MC Mining will be held as to 51% by the Group
and become a non-wholly owned subsidiary of the Group and its financial results will be
consolidated into the Group.
Major Assets and Operational Status
MC Mining currently owns four key projects with 27 mining rights in total, the details of
which are summarised below:
(1) Uitkomst Colliery
Uitkomst Colliery is an operating high-grade metallurgical and thermal coal
colliery with its single mining right held by Uitkomst Colliery Proprietary
Limited, a subsidiary indirectly owned by MC Mining as to 84%. The current
mining right was granted over various properties situated at magisterial district of
Utrech Coalfield, in the KwaZulu-Natal Province of South Africa, with an area of
11,169.40 hectares, and will expire on 20 November 2052.
Based on the public information disclosed by MC Mining on the ASX, Uitkomst
Colliery sells a 0 to 40 mm (duff) product into the metallurgical domestic market
for use as pulverised coal, and it supplies sized coal (peas) products to local energy
generation facilities and also sells smaller volumes of a high-ash, coarse discard
coal (middlings) product.
– 10 –
(2) Makhado Project
Makhado Project is a steelmaking hard coking and thermal coal exploration and
evaluation project with its mining right owned by Baobab Mining and Exploration
Proprietary Limited, a subsidiary indirectly owned by MC Mining as to 67.3%. The
project is situated in the Soutpansberg Coalfield, in the Limpopo Province of South
Africa, with an area of 7,651.28 hectares. The current mining right will expire on
25 January 2046.
Based on the public information disclosed by MC Mining on the ASX, MC Mining
has initiated certain early works at the Makhado Project and aims to develop the
project into South Africa's pre-eminent steelmaking hard coking coal producer.
(3) Vele Colliery
Vele Colliery is a semi-soft coking and thermal coal colliery with its mining right
held by Limpopo Coal Company Proprietary Limited, a wholly-owned subsidiary
of MC Mining. The coal is located in the Tuli Coalfield, in the Limpopo Province
of South Africa, with an area of 8,662.73 hectares. The current mining right will
expire on 18 March 2040.
Based on the public information disclosed by MC Mining on the ASX, Vele
Colliery was recommissioned in December 2022 after having been on care and
maintenance since late 2013.
(4) Greater Soutpansberg Projects
Greater Soutpansberg Projects are three exploration stage coking and thermal
coal projects, namely (i) Mopane – eight mining rights for this project have been
legally executed. The projects are located in the magisterial district of Makhado,
in the Limpopo Province of South Africa, and the mining rights are owned by
MC Mining and various non-wholly owned subsidiaries indirectly owned by MC
Mining as to 74%, covering a total area of 24,757.73 hectares and expiring between
the years 2047 and 2049 respectively; (ii) Generaal – eight mining rights for this
project have been legally executed. The project is located in the magisterial district
of Musina, Vhembe and Makhado, in the Limpopo Province of South Africa,
and the mining rights are owned by MC Mining and various non-wholly owned
subsidiaries indirectly owned by MC Mining as to 74%, covering a total area of
19,767.18 hectares and expiring between the years 2047 and 2049 respectively; and
(iii) Chapudi – eight mining rights for this project have been legally executed. The
project is located in the magisterial district of Makhado in the Limpopo Province
of South Africa and the mining rights are owned by MC Mining and various non-
wholly owned subsidiaries indirectly owned by MC Mining as to 74%, covering a
total area of 47,178.38 hectares and the mining rights are expiring in 2047.
– 11 –
Based on the public information disclosed by MC Mining on the ASX, as at the
date of this announcement, the Greater Soutpansberg Projects are in exploration
and development stage.
Major Financial Data of MC Mining
According to the published consolidated financial statements of MC Mining, (i) for
the financial year ended 30 June 2022, its net losses before and after taxation were
US$20,719,000 and US$20,835,000 respectively; (ii) for the financial year ended 30
June 2023, its net losses before and after taxation were US$4,008,000 and US$4,398,000
respectively; and (iii) the consolidated assets and net assets of MC Mining as of 31
December 2023 were US$124,783,000 and US$ 83,771,000 respectively.
IV. INFORMATION OF THE COMPANY
The Company is a limited company incorporated in the Cayman Islands with limited
liability and its shares are listed on the main board of the Stock Exchange. The principal
business of the Company, together with its subsidiaries, is extraction and sales of coal
products.
V. VALUATION
Since the discounted cash flow method of the income approach was adopted in
the preparation of the Valuation, such Valuation constitutes profit forecasts under
Rule 14.61 of the Listing Rule. For the purpose of complying with Rule 14.60A of the
Listing Rules, details of the principal assumptions, including commercial assumptions,
upon which the Valuation was based are as follows:
(1) The Target Group will continue to operate as a going concern and has sufficient
liquidity and capability to achieve the business development; all relevant permits,
business certificates, licenses and legal approvals to operate the business in the
localities in which the Target Group operates or intends to operate would be
officially obtained and renewable upon expiry with de minimis expenses;
(2) There will be sufficient supply of technical staff in the industry in which the Target
Group operates or intends to operate, and the Target Group will retain competent
management, key personnel and technical staff to support their ongoing operations
and developments;
(3) There will be no major changes in the current taxation laws in the localities in
which the Target Group operates or intends to operate and that the rates of tax
payable shall remain unchanged and that all applicable laws and regulations will be
complied with;
– 12 –
(4) There were no major changes in the financial position and performance of the
Target Group between 30 June 2024 and the date of the valuation report, i.e. 26
August 2024;
(5) There will be no major changes in the political, legal, economic or market
conditions in the localities in which the Target Group operates or intends to
operate, which would adversely affect the revenues attributable to and profitability
of the Target Group;
(6) There will be no material changes in the relevant interest rates and exchange rates
that would impact the Target Group's business; and
(7) There are no undisclosed actual or contingent assets or liabilities, no unusual
obligations or substantial commitments, other than in the ordinary course of
business and as reflected in the financials, nor any litigation pending or threatened,
which would have a material impact on the value of the Target Group as of 30 June
2024.
The Board has confirmed that they have made the forecast after due and careful enquiry.
The letter from the Board has been set out in Appendix I. The reporting accountants of
the Company, KPMG, have reported on the calculations of the discounted future cash
flows used in the valuation. The report from KPMG on the calculations of the discounted
future cash flows used in the valuation has been set out in Appendix II. The discounted
future cash flows do not involve the adoption of accounting policies.
The following are the qualifications of the experts who have given their opinion in this
announcement:
Name Qualification
Win Bailey Valuation and Independent professional valuer
Advisory Limited
("Win Bailey")
KPMG Certified Public Accountants
As at the date of this announcement, to the best knowledge, information and belief of
the Directors having made all reasonable enquiries, each of Win Bailey and KPMG is an
independent third party. Neither Win Bailey nor KPMG has any shareholding, directly or
indirectly, in any member of the Group or any right (whether legally enforceable or not)
to subscribe for or to nominate person(s) to subscribe for securities in any member of the
Group.
– 13 –
As at the date of this announcement, neither Win Bailey nor KPMG had any direct or
indirect interests in any assets which have been, since 31 December 2023 (the date to
which the latest published audited financial statements of the Group were made up),
acquired or disposed of by or leased to any member of the Group, or are proposed to be
acquired or disposed of by or leased to any member of the Group.
Each of Win Bailey and KPMG has given and has not withdrawn its consent to the
publication of this announcement including its report or letter and all references to its
name in the form and context in which it respectively appears in this announcement.
VI. REASONS FOR AND BENEFITS OF THE SUBSCRIPTION
The Subscription represents a major milestone in the Company's strategy to expand its
global footprint. The Group has an established track record of successful and profitable
coal mining operations in the PRC, while MC Mining is holding various coal mining
assets in South Africa with promising potentials, which remains largely untapped as of
the date hereof. The Board believes that there are clear synergies for the cooperation
between the Group and MC Mining and is confident that, upon completion of the
Subscription and after consolidating MC Mining as a non-wholly owned subsidiary of
the Group and combining the respective management expertise of both the Group and
MC Mining, the business and operational prospects of MC Mining will be elevated to
the next level. As disclosed in the interim results announcement of the Company dated
19 August 2024, the Group is actively seeking potential mining project targets. The
Subscription aligns with the overall development strategies of the Group and allows the
Group to leverage its industry expertise to develop valuable mining assets across key
regions. The added scale and diversification from the Subscription will also improve
the Group's risk profile and long-term sustainability. The Board also believes that the
Subscription represents an attractive opportunity to expand its business overseas and to
create value to the Shareholders.
The terms and conditions of the Share Subscription Agreement are negotiated on an
arm's length basis between the parties thereto. The Board (including the independent
non-executive Directors) is of the view that the terms of the Share Subscription
Agreement are fair and reasonable, and the Subscription are in the interest of the
Company and Shareholders as a whole.
VII. MAJOR RISKS OF THE SUBSCRIPTION
(i) Risk of uncertainties in completion of the Subscription
Completion of the Subscription is subject to certain conditions precedent beyond
control of the Company and MC Mining (see the section headed "Conditions
precedent" above). There are uncertainties in whether the Subscription can be
completed.
– 14 –
(ii) Operational risk of the projects
The major assets of MC Mining are located in South Africa, where the politics,
economics and culture are different from those of China. The Company will bear
risks in management and operation after completion of the Subscription.
The Uitkomst Colliery is the MC Mining's only project in current production.
It is expected that MC Mining's profit will improve rapidly after the Makhado
Project commences production. However, MC Mining may bear certain short-term
difficulties in its operation. There are risks that the mining volume may not reach
the designated production capacity; there may be declining of ore grade; the grade
of mined ores may fall short of the designated grade, and the volumes of metals
mined and produced may be lower than expectation. These may adversely affect
the economic benefits of the Subscription.
(iii) Political and legal risks
The Subscription should observe the laws and regulations of relevant countries and
regions; hence there are risks of governments and regulatory authorities initiating
investigations or introducing policies against the Subscription. The execution of
the Subscription will strictly comply with the policies and laws of the relevant
countries and regions, in order to effectively control the policy and legal risks.
(iv) Foreign exchange risks
The Subscription will be settled in US$. The continuous fluctuations in the
exchange rate will bring foreign currency risks to the Subscription to a certain
extent.
(v) Market risks
Market risks lie in the future price trend of coal. If the coal prices fluctuate
substantially in the future, there will be uncertainties as to the profitability of the
project, which has impact on the value of MC Mining.
VIII. IMPLICATIONS UNDER THE LISTING RULES
As one or more of the applicable percentage ratios in respect of the Subscription
are more than 5% and all of the applicable percentage ratios are less than 25%, the
Subscription constitutes a discloseable transaction for the Company and is subject to the
reporting and announcement requirements under Chapter 14 of the Listing Rules.
Shareholders and potential investors should be aware that the completion of the
Subscription is conditional upon the satisfaction of multiple conditions precedent,
which may or may not be satisfied. Shareholders and potential investors should
exercise caution when dealing in the securities of the Company.
– 15 –
IX. DEFINITIONS
In this announcement, unless the context otherwise requires, the following expressions
have the following meanings:
"ASX" Australian Securities Exchange
"ASX Listing Rules" official listing rules of ASX, as amended from time to
time
"Board" the board of Directors
"Company" Kinetic Development Group Limited (formerly known
as Kinetic Mines and Energy Limited), a company
incorporated in the Cayman Islands with limited liability,
the shares of which are listed on the Stock Exchange
"Corporations Act" Corporations Act 2001 (Cth) of Australia
"Director(s)" the director(s) of the Company
"Group" the Company and its subsidiaries
"Hong Kong" the Hong Kong Special Administrative Region of the PRC
"JSE" Johannesburg Stock Exchange
"Listing Rules" the Rules Governing the Listing of Securities on the Stock
Exchange
"MC Mining" MC Mining Limited ACN 008 905 388, a company
incorporated under the Laws of Australia and its securities
are listed on the JSE and ASX (ASX: MCM)
"PRC" the People's Republic of China, for the purpose of this
announcement, excluding Hong Kong, Macau and Taiwan
"Share Subscription the share subscription agreement dated 26 August 2024
Agreement" entered into between the Company and MC Mining in
relation to the subscription of the Subscription Shares by
the Company
"Shareholders" the shareholders of the Company
"South Africa" the Republic of South Africa
– 16 –
"Stock Exchange" The Stock Exchange of Hong Kong Limited
"Subscription" the subscription of the Subscription Shares by the
Company pursuant to the terms of the Share Subscription
Agreement
"Subscription Price" US$90,000,000, being the total amount payable by the
Company to MC Mining for the Subscription pursuant to
the Share Subscription Agreement
"Subscription Share(s)" the First Closing Shares and the Second Closing Shares
"Target Group MC Mining and its subsidiaries
Company(ies)" or
"Target Group"
"Transaction Documents" the Share Subscription Agreement and each of such
agreements and documents as contemplated by, and/or
annexed and exhibited to, the Subscription, and each of
the other agreements and documents otherwise required
in connection with implementing the transactions
contemplated by any of the foregoing
"US$" United States dollars, the lawful currency of United States
"%" per cent
By Order of the Board
Kinetic Development Group Limited
Ju Wenzhong
Chairman and Executive Director
Hong Kong, 26 August 2024
As at the date of this announcement, the Board comprises seven Directors, of whom three
are executive Directors, namely Mr. Ju Wenzhong (Chairman), Mr. Li Bo (Chief Executive
Officer) and Mr. Ji Kunpeng; one is a non-executive Director, namely Ms. Zhang Lin; and
three are independent non-executive Directors, namely Ms. Liu Peilian, Mr. Chen Liangnuan
and Ms. Xue Hui.
– 17 –
APPENDIX I – LETTER FROM THE BOARD
26 August 2024
Listing Division
The Stock Exchange of Hong Kong Limited
12th Floor, Two Exchange Square,
8 Connaught Place, Central, Hong Kong
Dear Sirs,
DISCLOSEABLE TRANSACTION – SUBSCRIPTION OF SHARES IN MC MINING
We refer to the announcement of Kinetic Development Group Limited (the "Company") dated
26 August 2024 (the "Announcement") relating to the captioned transaction. Capitalized
terms used in this letter shall have the same meanings as those defined in the Announcement
unless stated otherwise.
We refer to the valuation report dated 26 August 2024 issued by Win Bailey (the "Valuation
Report") regarding the valuation of 100% equity interest of MC Mining of US$217.1 million as
at 30 June 2024 (the "Valuation") based on the market approach and discounted cash flows,
which constitutes a profit forecast under Rule 14.61 of the Listing Rules.
We have discussed with the Win Bailey about different aspects including the bases and
assumptions based upon which the Valuation has been prepared, and reviewed the Valuation
for which Win Bailey is responsible. We have also considered the report from KPMG dated
26 August 2024 regarding whether the discounted future cash flows used in the Valuation, so
far as the calculations are concerned, have been properly compiled in all material respects in
accordance with the bases and assumptions set out in the Valuation Report, which the Board
has relied on, in all material respects. We have noted that the profit forecasts in the Valuation
are mathematically accurate and the discounted cash flows will not be affected by accounting
policies.
Pursuant to the requirements of the Listing Rules, the Board confirmed that the Valuation
prepared by Win Bailey has been made after due and careful enquiry.
Yours faithfully,
For and on behalf of the Board
Kinetic Development Group Limited
Ju Wenzhong
Chairman and Executive Director
– 18 –
APPENDIX II – REPORT FROM KPMG
The following is the text of a report received from the Company's reporting accountants,
KPMG, Certified Public Accountants, Hong Kong, for inclusion in this announcement.
REPORT ON THE DISCOUNTED FUTURE CASH FLOWS IN CONNECTION WITH
THE VALUATION OF 100% EQUITY INTEREST IN MC MINING LIMITED AND
ITS SUBSIDIARIES
To the Board of Directors of Kinetic Development Group Limited
We refer to the discounted future cash flows on which the valuation (the "Valuation") dated
26 August 2024 prepared by Win Bailey Valuation and Advisory Limited in respect of the
appraisal of the fair market value of 100% equity interest in MC Mining Limited and its
subsidiaries (the "Target Group") as at 30 June 2024 is based. The Valuation is prepared
based in part on the discounted future cash flows and is regarded as a profit forecast under
paragraph 14.61 of the Rules Governing the Listing of Securities on The Stock Exchange of
Hong Kong Limited (the "Listing Rules").
Directors' Responsibilities
The directors of Kinetic Development Group Limited (the "Directors") are responsible for the
preparation of the discounted future cash flows in accordance with the bases and assumptions
determined by the Directors and as set out in the Valuation. This responsibility includes
carrying out appropriate procedures relevant to the preparation of the discounted future cash
flows for the Valuation and applying an appropriate basis of preparation; and making estimates
that are reasonable in the circumstances.
Our Independence and Quality Management
We have complied with the independence and other ethical requirements of the Code of
Ethics for Professional Accountants issued by the Hong Kong Institute of Certified Public
Accountants ("HKICPA"), which is founded on fundamental principles of integrity,
objectivity, professional competence and due care, confidentiality and professional behaviour.
Our firm applies Hong Kong Standard on Quality Management (HKSQM) 1 "Quality
Management for Firms that Perform Audits or Reviews of Financial Statements, or Other
Assurance or Related Services Engagements" which requires the firm to design, implement
and operate a system of quality management including policies or procedures regarding
compliance with ethical requirements, professional standards and applicable legal and
regulatory requirements.
– 19 –
Reporting Accountants' Responsibilities
Our responsibility is to report, as required by paragraph 14.60A(2) of the Listing Rules, on the
calculations of the discounted future cash flows used in the Valuation. The discounted future
cash flows do not involve the adoption of accounting policies.
Basis of Opinion
We conducted our engagement in accordance with the Hong Kong Standard on Assurance
Engagements 3000 (Revised) "Assurance Engagements Other Than Audits or Reviews
of Historical Financial Information" issued by the HKICPA. This standard requires that
we plan and perform our work to obtain reasonable assurance as to whether, so far as the
calculations are concerned, the Directors have properly compiled the discounted future cash
flows in accordance with the bases and assumptions adopted by the Directors as set out in the
Valuation. We performed procedures on the arithmetical calculations and the compilations of
the discounted future cash flows in accordance with the bases and assumptions adopted by the
Directors. Our work is substantially less in scope than an audit conducted in accordance with
Hong Kong Standards on Auditing issued by the HKICPA. Accordingly, we do not express an
audit opinion.
Opinion
In our opinion, so far as the calculations are concerned, the discounted future cash flows have
been properly compiled in all material respects in accordance with the bases and assumptions
adopted by the Directors as set out in the Valuation.
Other matters
Without qualifying our opinion, we draw to your attention that we are not reporting on the
appropriateness and validity of the bases and assumptions on which the discounted future
cash flows are based and our work does not constitute any valuation of the Target Group or an
expression of an audit or review opinion on the Valuation.
– 20 –
The discounted future cash flows depend on future events and on a number of assumptions
which cannot be confirmed and verified in the same way as past results and not all of which
may remain valid throughout the period. Further, since the discounted future cash flows
relates to the future, actual results are likely to be different from the discounted future
cash flows because events and circumstances frequently do not occur as expected, and the
differences may be material. Our work has been undertaken for the purpose of reporting solely
to you under paragraph 14.60A(2) of the Listing Rules and for no other purpose. We accept no
responsibility to any other person in respect of, arising out of or in connection with our work.
KPMG
Certified Public Accountants
Hong Kong
26 August 2024
– 21 –
Date: 28-08-2024 02:30:00
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