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Tenement Disposal and Investing Policy 17-Oct-2012

17 October 2012

Creat Resources Holdings Limited

("CRHL" or "the Company")
Proposed sale of the Company’s mining assets and the proposed approval of the Company’s Investing Policy and Notice of General Meeting

 

The board of Creat Resources Holdings Limited announces that on 17 October 2012, the Company and its wholly owned subsidiary ZZ Exploration Pty Limited, entered into a conditional agreement (the "Agreement") with Australian Hualong Pty Ltd (the "Purchaser") to dispose of all the existing mining assets ("Mining Assets") currently held by the Group in Tasmania, Australia together with all associated plant and equipment (the "Sale") for a total consideration of AUD$4million in cash (the "Consideration").

Due to the fundamental nature of the Sale, it is a requirement of the AIM Rules that the Sale be approved by Shareholders at a general meeting of the Company (the "General Meeting"). The Sale will also result in the Company becoming an investing company, within the meaning of the AIM Rules and the Company therefore proposes to adopt an investing policy (the "Investing Policy"). Further details of the Sale and the Investing Policy are set out at the bottom of this announcement./p

A circular containing details of the Sale, the Investing Policy and a notice of general meeting at which the resolutions will be proposed to approve the Sale and the Investing Policy (the “Resolutions”) is expected to be posted to Shareholders in due course (the “Circular”). The Circular will be available shortly on the Company’s website at www.creatresources.com.

The purpose of the Circular is to provide background on and set out the reasons for the Sale, to explain why the directors of the Company consider the Sale to be in the best interests of the Company and its Shareholders as a whole and to set out the Resolutions to be considered at the General Meeting.

The Proposed Sale is conditional on the approval of Shareholders at the General Meeting, which is expected to be held at the offices of Watson, Farley & Williams LLP, Units 1703-1707, One Pacific Place, 88 Queensway, Hong Kong at 3 p.m. Hong Kong time (7 a.m. London time, 6 p.m. Australian Eastern Standard time) on 13 November 2012.

For further information please visit www.creatresources.com or contact:>

Creat Resources Holdings Limited

 

Tel: +61 3 6216 2700     

Morris R. Hansen, Executive Director, Company Secretary & General Manager

 

 

 

 

 

Daniel Stewart & Company Plc

Paul Shackleton

 

Tel: +44 20 77766550     

Emma Earl

 

 

 

About Creat Resources Holdings Limited

CRHL is an early stage mining exploration company holding 4 Exploration Licences and 3 Retention Licences covering 109 square kilometres around the mineral rich Zeehan area in western Tasmania. CRHL is a major shareholder of Galaxy Resources Limited ("Galaxy") with an interest of 7.52%. Galaxy is an Australianbased integrated lithium mining, chemicals and battery company listed on the Australian Securities Exchange (Code: GXY) and is an S&P/ASX 300 Index Company. Galaxy plans to be one of the world's largest lithium carbonate producers and is positioning itself to be involved in every step of the lithium supply chain.

EDITED EXTRACTS FROM THE CIRCULAR

All defined terms used in this announcement shall have the meaning given to them in the Circular unless otherwise defined herein.

Background

The Company today announces the proposed sale of all of the Group’s mining and exploration licences around the mineral rich Zeehan area in western Tasmania, Australia for AUD$4million in cash (plus any applicable Australian goods and services tax which is payable by the Purchaser). Should the Sale complete, it will result in the Group having divested of substantially all of its trading business and assets, resulting in the Company being treated as an investing company for the purposes of the AIM Rules. Accordingly it is a requirement of the AIM Rules that the Sale be approved by Shareholders at a General Meeting of the Company. The Sale is therefore conditional on, amongst other things, the passing of a resolution to approve the Sale. The Mining Assets (together with associated plant and equipment included in the Sale) have no significant attributable net book value in the Group’s balance sheet. The Group will recognise a gross receipt upon completion of the Sale of AUD$4.0m. Subject to completion of the Sale, the bond deposits paid by the Group to the relevant authorities in respect of the Mining Assets will be refunded to the Group. This amount is expected to be AUD$2.6m.

Information on the Mining Assets

CRHL holds three retention licences and four exploration licences situated in the mineral rich area around Zeehan in western Tasmania, Australia covering a total of 109 square kilometres. All tenement licences are currently up to date and in good standing. There has been minimal exploration carried out during the current fiscal year due to funding constraints and no drilling has occurred since January 2012. Basic geologic and environmental remedial work is ongoing to meet various governmental requirements and keep the tenements in good standing. Due to recent funding constraints, the Company’s efforts have been concentrated in seeking a joint venture or sale arrangement for the tenements.

Background to and reasons for the Sale

CRHL was admitted to trading on AIM on 6 March 2007 with an initial focus on zinc, lead and silver deposits in Western Tasmania, Australia. Since then, it has been the Company’s stated objective to pursue a strategy of acquisitions and other transactions that have resulted in the expansion and diversification of its mining operations both within and outside Australia, including the acquisition of a significant interest in Galaxy Resources, an Australian-based global lithium company with lithium production facilities, hard rock mines and brine assets in Australia, China, Canada and Argentina. Further information relating to Galaxy Resources can be found at www.galaxyresources.com.au.

For some time, Creat Group, as a 52.95 per cent. Shareholder, has made repeated attempts to attract additional investors and capital to the Company in order to further develop its exploration activities in relation to the Mining Assets. To date, no significant additional investment has been secured for the Group (other than loans and investment from Creat Group) and, as such, the Company remains dependant upon the financial support of Creat Group. However, due to certain constraints placed over Creat Group, particularly the foreign exchange controls of the PRC Government, the Company can no longer rely on the Creat Group as a source of funding.

In light of the challenges outlined above, the continuation of the current financial and economic uncertainty and the related adverse effect on the prices of globally traded commodities (including zinc, lead and precious metals which have experienced significant downwards pressure in the last 12 months), the Board has concluded that the Sale is in the best interest of Shareholders.

Principal terms and conditions of the agreement

Under the terms of the Agreement, the Company has agreed to sell and Australian Hualong has agreed to buy, the Mining Assets (together with all plant and equipment on site).

The consideration for the Sale is AUD$4m in cash (plus any applicable GST which is to be paid by Australian Hualong). Under the terms of the Agreement, the Group received a refundable deposit of AUD$0.2m (excluding GST) on 27 July 2012 from Australian Hualong. In the event that completion of the Sale does not occur, this amount is to be repaid (without any interest or penalties) to Australian Hualong within 30 days of Australian Hualong requesting repayment.

Australian Hualong will pay a further refundable deposit of AUD$0.2m (excluding GST) within 3 business days of entering into the Agreement. The remaining balance of the consideration of AUD$3.6m (excluding GST) will be payable upon receipt by Australian Hualong of an application for transfer to Australian Hualong of the Mining Assets which is expected to occur on or before 28th November 2012 (“Exchange”). These amounts are to be held by the Group's solicitor, until completion of the Sale, and will be refundable to Australian Hualong in the event that completion of the Sale does not occur.

The completion of the Sale is conditional upon, inter alia, the passing of an ordinary resolution at the General Meeting; all necessary regulatory, governmental or statutory approvals in relation to the acquisition of the Mining Assets by Australian Hualong being granted (including any approval required from the Foreign Investment Review Board in Australia) and registration of Australian Hualong as the holder of the Mining Assets. Indications are that these conditions will be satisfied within three months following Exchange, however Shareholders should be aware that there can be no guarantee of this. Further announcements will be made in due course to update Shareholders in respect of Exchange and Completion.

Subject to completion of the Sale, Australian Hualong will be required to lodge its own bonds in respect of the Mining Assets with the relevant authorities. The current bond deposits in respect of the Mining Assets will then be refunded to the Group. The total amount to be refunded to the Group is expected to be approximately AUD$2.6m, and is in addition to the purchase price payable by Australian Hualong in relation to the Sale.

Strategy of the Company following the sale and Investing Policy

Following completion of the Sale, the Group will have no operational activities. However, CRHL will continue to hold its real estate assets, being the registered office of the Company, as well as plant and equipment not related to the tenement licenses in Zeehan, Australia, through it’s subsidiary companies. It is envisaged that these assets will be leased, either to Australian Hualong and/or other interested mineral exploration firms operating in the area.

The Company’s sole investment following the Sale will be its 7.52 per cent. strategic investment in Galaxy Resources. The Company will therefore be classified as an investing company in accordance with Rule 15 of the AIM Rules following completion of the Sale. The Group will retain cash balances of approximately AUS$3.7m after paying certain expenses relating to the Sale. In addition, the Company is expected to receive a refund of AUD$2.6m from the relevant authorities which to date has been held as a bond deposit in relation to the Mining Assets for the purposes of any necessary environmental remediation.

The Group’s accounts for the year ended 30 June 2012 are being audited and will be published soon, however, the negative equity position of the Group has further deteriorated since the last reporting period. Therefore, part of the proceeds of the Sale will be applied to the payment of debts as they fall due and to working capital. In parallel with the above, in order to maximise returns to Shareholders and in compliance with the AIM Rules, the Company will look into new investment opportunities. Therefore, it is intended that part of the proceeds of the Sale will be applied to new investment opportunities. The Board has been informed by Creat Group, as the major creditor and major shareholder of the Company, that, subject to relevant regulatory approval, Creat Group will continue to support the Company in further investments which are considered to have good potential.

Investing Policy

Global demand for lower end resources is expected to remain sluggish due to the global economic environment and in combination with tighter environmental regulations, this has resulted in increased mining costs. Accordingly, the Directors consider that only resources or commodities with higher commercial value are likely to result in commercially viable investment opportunities. As such, the Directors’ main investment criteria are as follows:

• Companies or assets focused on commodities with high commercial value and / or other resources with special characteristics rather than traditional resources;

• Investment opportunities where the Company does not only contribute financially but can also utilise its management experience and the substantial connections of its holding company, Creat Group;

The Directors will consider investment opportunities in both high risk early stage assets and companies as well as lower risk investments in more mature assets and companies, seeking a higher expected rate of return where the risk is expected to be higher.

The Directors will consider investments that will result in either minority or majority holdings in private or publically listed companies.

These criteria are not intended to be exhaustive. However the Company may make an investment which does not fulfil all the investment criteria if the Directors believe that it is in the interests of Shareholders as a whole to proceed with such an investment. An investment constituting a reverse takeover under the AIM Rules will be conditional on the approval of Shareholders in a general meeting and will require the publication of an admission document.

As a result of the proposed Sale and in accordance with Rule 15 of the AIM Rules, the investing policy must be approved by Shareholders in general meeting and the Company must implement the investing policy within 12 months of its approval, otherwise trading in the Ordinary Shares on AIM will be suspended in accordance with Rule 40 of the AIM Rules. If following suspension of trading in the Ordinary Shares in accordance with Rule 40 of the AIM Rules, the Ordinary Shares have not been re-admitted to trading within six months, the admission of the Ordinary Shares to trading on AIM will be cancelled.

Notice of General Meeting

The Sale is conditional on the approval of the Shareholders at the General Meeting to be held at the offices of Watson, Farley & Williams LLP, Units 1703-1707, One Pacific Place, 88 Queensway, Hong Kong at 3 p.m. Hong Kong time (7 a.m. London time) on 13 November 2012. At the General Meeting the Resolutions will be proposed as ordinary resolutions to approve the Sale and the Investing Policy. The Resolutions will require passing by a simple majority of Shareholders.