TIDMTMC
19 March 2013
FOR IMMEDIATE RELEASE
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART IN, INTO OR
FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE
RELEVANT LAWS OR REGULATIONS OF THAT JURISDICTION.
Toledo Mining Corporation plc
("Toledo" or the "Company")
Mandatory Cash Offer for Toledo
Posting of response circular from the Independent Directors
The Independent Directors of Toledo announce that the Company has today posted a
response document (the "Response Circular") setting the views of the Independent
Directors on the mandatory cash offer by DMCI Mining to acquire all of the
issued and to be issued Ordinary Shares not already owned by DMCI Mining (the
"Offer") for the purposes of the City Code on Takeovers and Mergers (the
"Code"). A document containing the full terms and conditions of the Offer was
posted to shareholders by DMCI Mining on 5 March 2013.
The Response Circular sets out the background to and recommendation of the
Independent Directors to shareholders to accept the Offer.
The information contained in this announcement is derived from, and should be
read in conjunction with, the Response Circular. Shareholders should read the
whole of the Response Circular, in particular the letter from the Chairman of
Toledo, and not rely solely upon the information set out below. Terms defined in
the Response Circular have the same meanings in the extracts contained below.
Introduction
On 15 February 2013, DMCI Mining increased its stake in Toledo from
approximately 17.0 per cent. to approximately 37.7 per cent. through the
acquisition of the entire 20.7 per cent. stake held in Toledo by Mr. Jason
Cropper at a price of 50 pence per Toledo Share and announced that DMCI Mining
would be making a mandatory cash offer to acquire the entire issued and to be
issued share capital of Toledo not already owned by DMCI Mining at a price of
50 pence per Toledo Share.
The Offer is conditional only upon the receipt of valid acceptances which,
together with Toledo Shares acquired or agreed to be acquired before or during
the Offer, will result in DMCI Mining holding Toledo Shares carrying more than
50 per cent. of the voting rights in Toledo.
Letters of Intent
DMCI Mining has received letters of intent indicating an intention to accept the
Offer in respect of a total of 3,801,019 Toledo Shares, representing in
aggregate approximately 7.6 per cent. of the existing issued share capital of
Toledo. In aggregate, therefore, DMCI Mining owns or has received letters of
intent to accept the Offer in respect of 22,619,363 Toledo Shares, representing
approximately 45.4 per cent. of Toledo's existing issued share capital.
Toledo has received letters of intent from each of Fevamotinico SARL and Forth
Asset Management Ltd., which are under common beneficial ownership, indicating
that they do not intend to accept the Offer in respect of a total of 12,552,000
Toledo shares representing 25.18 per cent. of Toledo's existing issued share
capital.
Information on Toledo
Toledo is focused on the mining and development of nickel laterite deposits on
the island of Palawan in the Philippines. The principal asset of Toledo is its
56.2 per cent. economic interest in the Berong Nickel Mine and the associated
deposits of Berong, Long Point and Moorsom (which are all held or made
application for by Toledo's associate, BNC). In addition, Toledo holds a 52 per
cent. economic interest in Ipilan Nickel Corporation, a lateritic nickel deposit
covering an area of 2,835 hectares and a 58 per cent. economic interest in the
Ulugan Nickel Corporation which has acquired rights for Exploration Permit
applications which cover more than 16,000 hectares in total.
Current trading
Toledo's interim results for the six month period ended 30 September 2012,
released on 31 December 2012, stated that Toledo recorded a profit from
operations of GBP265,853 after accounting for foreign exchange losses of GBP152,692
which arose primarily from the currency translation of the US dollar denominated
loans advanced by Toledo to its Philippines associated undertakings. The
attributable profit was a significant improvement on the loss of GBP310,127 for
the comparable 2011 period.
Toledo had cash holdings of GBP1.558 million at 30 September 2012. On 9 October
2012, Toledo received from BNC a loan repayment of US$2.774 million ( GBP1.726
million) which has substantially improved Toledo's cash position.
On 31 December 2012, the Company acquired from ENK plc for a total cash
consideration of US$6,552,000 an 18.7 per cent. direct shareholding in BNC for
US$4,762,780 and rights to a loan to BNC of US$1,789,220. On 31 December 2012,
the Company disposed to DMCI Mining for cash consideration of US$6,552,000 a 31
per cent. shareholding in Nickeline. The disposal resulted in a capital gain of
approximately GBP1,840,000 on which a corporation tax liability of GBP275,000 has
been computed, in the absence of any offsetting capital or trading losses (the
computation of the gain is based on an apportionment of an economic interest,
rather than a strict acquisition cost of the shares and could therefore be
subject to challenge by HMRC). Since the period end, an unrealised foreign
exchange gain has arisen on translation of US Dollar denominated loan
investments of approximately GBP828,000.
Key considerations and impact of the offer on Toledo
Toledo has consistently believed that the best way to build value for its
Shareholders has been to pursue an added-value nickel process for the mineable
ore from its operations, to realise the maximum value from the long term,
sustainable operation of its strategic nickel deposits.
The Independent Directors believe that the Offer has been made at an opportune
time for DMCI Mining when the Toledo share price has been depressed by the
current state of the junior mining sector. Further the Company has realised only
the shorter-term DSO part of its business plan, with the commissioning of an
update to the order of magnitude and environment studies for HPAL, in pursuit of
its intended and much communicated long-term strategy to realise value from its
nickel assets through the development of added-value processing, still at an
early stage.
The Independent Directors understand that DMCI Mining prefers and would intend
to pursue primarily a DSO operation. Despite this, and in light of an internal
valuation exercise and having been so advised by RFC Ambrian, the Independent
Directors recognise that there are risks attached to taking a longer-term view
of the Company and therefore the opportunity for Shareholders to realise cash in
respect of their Toledo Shares in a short timeframe provides a more certain
outcome and that, in these circumstances, the terms of the Offer are fair and
reasonable and accepting the Offer is in the best interests of the Shareholders.
In arriving at this view, the Independent Directors have taken into account the
other following factors:
Controlling Shareholders
DMCI Mining now owns 37.7 per cent. of the issued share capital of the Company
giving it significant influence over the future strategic direction of the
Company and the ability to ensure the rejection, if it so wishes, of special
resolutions of the Company including, for example, the disapplication of pre-
emption rights.
If DMCI Mining obtains a sufficient number of valid acceptances under the Offer
(or otherwise makes further share purchases) to take their interest to over 50
per cent. of Toledo's Shares, then DMCI Mining will de facto have actual control
over the Company. In order to achieve a shareholding in excess of 50 per cent.
of the Toledo Shares in issue, after taking into account its existing
shareholding and the letter of intent to accept the Offer, DMCI Mining will only
need to acquire, whether under the Offer or through market purchases 2,303,304
Toledo Shares, representing 4.6 per cent. of the issued share capital of the
Company.
Shareholders should be aware that if DMCI Mining acquires more than 50 per cent.
of the Company's voting rights, DMCI Mining will also be in a position to ensure
the approval, or rejection if it so wishes, of ordinary resolutions of the
Company including, for example, the appointment and removal of directors of the
Company.
Loss of Code protections
In the circumstances where DMCI Mining holds more than 50 per cent. of the
Company's voting rights, DMCI Mining may increase its shareholding in the
Company without restriction and without incurring a further obligation under
Rule 9 of the Code to make another offer for the remaining Toledo Shares that it
does not then own or control.
Liquidity and Trading on AIM
The Independent Directors believe that it is not in the best interests of
Shareholders to remain in a minority equity position in a company where there
may not be sufficient liquidity due to the likely small size of the remaining
free float. The Independent Directors maintain this belief notwithstanding that
DMCI Mining will not receive sufficient acceptances under the Offer, to procure
that Toledo cancels the admission to trading of its shares on AIM, given that
letters of intent to not accept the Offer, in respect of 12,552,000 Shares
representing 25.18 per cent. of Toledo's existing issued share capital, have
been received from Fevamotinico SARL and Forth Asset Management Ltd.
DMCI mining's strategic plans for Toledo
DMCI Mining has indicated that it intends to grow the business by scaling up the
DSO operations of BNC. Given the current resource estimate at high grade, the
Independent Directors believe that increasing the scale of DSO operations would
result in a proportionately shorter mine life. With this in mind and given the
large potential of the lower grade exploration targets, the Independent
Directors believe that shareholder value would be maximised through the
additional pursuit of a value added processing strategy to treat the lower grade
ore, which makes up a substantial proportion of BNC's resources. Accordingly,
SNC Lavalin has been retained to update its past order of magnitude study and
GHD, an Australian engineering consultant, has also been retained to conduct an
environmental engineering study.
Toledo has previously reported on BNC's plans to extend and improve the causeway
in the port area which will improve barge-loading efficiency. An alternative
investment in the port facilities to support an extended shipment window is
already under review by BNC, which is anticipated to be financed from BNC's
internally generated cash. While this would not necessarily allow investment as
rapidly as external finance, either via equity injection into BNC or debt
financing, it provides BNC with certainty and would be non-dilutive to the BNC
joint venture partners and ultimately to the Toledo Shareholders.
While tree-cutting permits are required in order to continue mining at the
current rates, the Independent Directors believe that Toledo's historic
management of these situations demonstrates the Company's ability to continue
operations. It should be noted that all requirements for BNC's tree cutting
permits have been complied with and since publication in the Philippines of the
Executive Order and the Implementation of Rules and Regulations in 2012, BNC's
application has been recommended for approval and the Independent Directors are
hopeful that final sign-off will be received in the current year. In addition,
BNC is not solely represented by Toledo but with its long-standing venture
partner and Philippines listed company, Atlas. The Independent Directors
acknowledge that there is significant benefit in the local permitting process
from having Atlas, and already indirectly DMCI Mining, as partners in BNC.
Given that DMCI Mining's strategic plans for Toledo are subject to completion of
a strategic review, it is not possible to provide Shareholders with an
assessment of what DMCI Mining's eventual plans for the Company will mean for
them or for Toledo's business and operations.
Management, employees and locations
The Independent Directors note DMCI Mining's assurance that the existing
contractual and statutory employment rights and pension rights of all employees
will be safeguarded and the Toledo Group employers will continue to comply with
the contractual and other entitlements in relation to pension and employment
rights of existing employees.
However, as noted above, DMCI Mining intends to undertake a strategic review of
the Toledo Group and therefore it is possible that there may be changes to the
employee base, locations and organisational structure.
In particular, DMCI Mining already has an 18.6 per cent. indirect interest in
BNC. If there were to be a re-organisation of DMCI Mining's holding structure of
BNC this may have consequential effects on Toledo's interest in BNC and on
Toledo's employee base. DMCI Mining has stated that it may seek to change the
composition of Toledo's Board and increase the representation of DMCI Mining
(currently represented by Isidro Consunji) should the Offer become
unconditional.
Compulsory acquisition, cancellation of aim admission and re-registration
DMCI Mining has stated that if it receives acceptances under the Offer, and/or
acquires Toledo Shares such that it controls 75 per cent. or more of the Toledo
Shares by nominal value and voting rights attaching to such shares, DMCI Mining
intends, subject to the AIM Rules, to procure that Toledo makes on application
to the London Stock Exchange to cancel the admission to trading in Toledo Shares
on AIM.
If the Toledo Shares ceased to be traded on AIM Shareholders who elect not to
accept the Offer will continue to own shares in an unquoted company, with
significantly reduced liquidity and marketability, and with a dominant
shareholder. Therefore there will be no readily available market price or
valuation ascribed to the Toledo Shares. In addition, Shareholders will not have
the benefit of the protections set out in the AIM Rules including, for example,
in relation to the provision of information which is material to the Company and
Shareholders.
DMCI Mining has also stated that if they receive acceptances under the Offer in
respect of, and/or otherwise acquires, 90 per cent. or more of the Toledo Shares
to which the Offer relates and the Offer becomes or is declared unconditional in
all respects, they may exercise their right pursuant to the provisions of
sections 974 to 991 (inclusive) of the Act to acquire compulsorily any
outstanding Toledo Shares not acquired or agreed to be acquired pursuant to the
Offer or otherwise.
However the Independent Directors wish to draw Shareholders' attention to the
letters of intent Toledo has received from Fevamotinico SARL and Forth Asset
Management Ltd indicating that they do not intend to accept the Offer in respect
of a total of 12,552,000 Shares representing 25.18 per cent. of Toledo's
existing issued share capital. Given this intention, DMCI Mining will not
control 75 per cent. or more of Toledo's Shares to make an application to the
London Stock Exchange to cancel the admission to trading in Toledo Shares on
AIM, or the 90 per cent. or more of Toledo Shares to acquire compulsorily any
outstanding Toledo Shares not acquired or agreed to be acquired pursuant to the
Offer.
Employee consultation
In accordance with the requirements of Rule 2.12 of the Code, Toledo has made
available to employees a copy of the Offer Document and has informed employees
of the right of employee representatives under Rule 25.9 of the Code to require
that a separate opinion of the employee representatives on the effects of the
Offer on employment be appended to this document. The employees of Toledo have
confirmed that no such opinion is required.
Conclusion
With approximately 37.7 per cent. of the voting rights of Toledo, DMCI Mining is
already in a position to exercise a level of de facto control over the Company
as the single largest shareholder. If the Offer becomes unconditional, DMCI
Mining will hold a majority of the voting rights of Toledo and will also be free
to increase its shareholding without making a further offer for the Company.
This will give DMCI Mining significant influence over the future strategic
direction of the Company and composition of the Board. It may also lead to the
loss of certain Code protections as if DMCI Mining holds more than 50 per cent.
of the Company's voting rights DMCI Mining may increase its aggregate
shareholding in Toledo without restriction and without incurring a further
obligation under Rule 9 of the Code. In order to achieve a shareholding in
excess of 50 per cent. DMCI Mining will only need to acquire, or receive
acceptances under the Offer for, a further 2,303,304 Toledo Shares representing
approximately 4.6 per cent. of the issued share capital of the Company in
addition to its existing shareholding and share pledged under letters of intent
to accept the Offer.
The Offer provides Shareholders with the opportunity to realise their investment
in Toledo within a short timeframe at a cash price of 50 pence per Toledo Share.
This represents a premium to the Closing Price of a Toledo Share of 61 per cent.
on 14 February 2013 (being the last Business Day before the announcement of the
Offer by DMCI Mining). There can be no assurance that DMCI Mining (or any other
party) in the event the Offer lapses will offer Shareholders a similar exit in
the future.
Shareholders should also be aware that there can be no guarantee that either of
Toledo or DMCI Mining will achieve their business objectives.
The Independent Directors believe that DMCI Mining is taking advantage of the
current junior mining sector conditions and of the fact that Toledo is still to
see the full benefits of operating the Berong Nickel Mine in a continuous
manner. However the Independent Directors are mindful that DMCI Mining may
obtain a majority of Toledo's issued share capital and that a further 25.18 per
cent. of holdings will remain under the control of a common beneficial owner and
therefore remaining as a Shareholder in a company with limited liquidity would
not be in the best interests of Toledo's Shareholders.
Recommendation
The Toledo Independent Directors, who have been so advised by RFC Ambrian,
advise Shareholders to accept the Offer.
In providing its advice to the Toledo Independent Directors, RFC Ambrian has
taken into account the commercial assessments of the Toledo Independent
Directors. RFC Ambrian is acting as the independent financial adviser to Toledo
for the purposes of providing independent advice to the Toledo Independent
Directors on the Offer under Rule 3 of the Code.
Accordingly, the Toledo Independent Directors unanimously recommend that Toledo
Shareholders accept the Offer.
The Toledo Independent Directors have no beneficial shareholdings in the Toledo
Shares.
Enquiries:
Victor Kolesnikov, Chief Executive Officer, Toledo Mining Corporation
+44 (0) 20 7290 3100
John Harrison/Richard Morrison/Jen Boorer, RFC Ambrian Limited
Financial Adviser and Nominated Adviser
+44 (0) 20 3440 6800
Anthony Shewell , Fin Public Relations
+44 (0) 20 7608 2280
Carina Corbett, 4C Communications Ltd
+44 (0) 20 3170 7973
Copies of the Response Circular will be available, free of charge, at the
offices of RFC Ambrian, Condor House, 10 St Paul's Churchyard, London EC4M 8AL
and on the Company's website (www.toledomining.com).
The Independent Directors, accept responsibility for the information contained
in this announcement, except that the only responsibility accepted by them in
respect of the information contained in this document relating to DMCI Mining,
DMCI, its subsidiary undertakings and the directors of DMCI and/or any such
subsidiary undertakings, which has been compiled from published sources, is to
ensure that such information has been correctly and fairly reproduced and
presented. Subject to the aforesaid, to the best of the knowledge and belief of
the Independent Directors (who have taken all reasonable care to ensure that
such is the case), the information contained in this document for which they
accept responsibility is in accordance with the facts and does not omit anything
likely to affect the import of that information.
The Independent Directors are the directors of Toledo with the exception of
Isidro Consunji.
RFC Ambrian Limited (which is authorised and regulated in the United Kingdom by
the Financial Services Authority) is acting exclusively for the Company in
connection with the matters referred to above and no one else and will not be
responsible to anyone other than the Company for providing the protections
offered to clients of RFC Ambrian Limited nor for providing advice in relation
to the matters referred to above.
Definitions
"AIM" means AIM, a market operated by the
London Stock Exchange;
"AIM Rules" means the AIM Rules for Companies as
published by the London Stock Exchange
(as amended);
"acting in concert" has the meaning given to it in the
Code;
"RFC Ambrian" means RFC Ambrian Limited;
"associate" has the meaning given in section 988 of
the Companies Act;
"Atlas" Atlas Consolidated Mining and
Development Corporation;
"BNC" Berong Nickel Corporation;
"Board" means the board of Directors of Toledo
"Business Day" means a day, not being a public
holiday, Saturday or Sunday, on which
clearing banks in London are open for
normal business;
"Closing Price" means the middle market price of a
Toledo Share at the close of business
on the day to which such price relates,
derived from the Daily Official List of
the London Stock Exchange for that day;
"Companies Act" means the Companies Act 2006;
"Daily Official List" means the daily official list of the
London Stock Exchange;
"DSO" means direct shipping ore;
"DMCI" means DMCI Holdings;
"DMCI Mining" means DMCI Mining Corporation;
"FSA" means the Financial Services Authority
of the UK in its capacity as the
competent authority for the purposes of
Part VI of FSMA;
"HMRC" means H.M. Revenue & Customs;
"HPAL" means high pressure acid leaching;
"Independent Directors" or "Toledo means the Toledo Directors other than
Independent Directors" Isidro Consunji
"London Stock Exchange" means London Stock Exchange plc or its
successor;
"Ni" means nickel;
"Nickeline" means Nickeline Resource Holdings;
"Offer" means the mandatory cash offer made by
DMCI Mining to acquire the entire
issued and to be issued share capital
of Toledo not already owned by DMCI
Mining on the terms and subject to the
conditions to be set out in the Offer
Document;
"Offer Document" means the document posted by DMCI
Mining on 5 March 2013 and, where
appropriate, any other document(s)
containing terms and conditions of the
Offer, constituting the full terms and
conditions of the Offer;
"Panel" or "Takeover Panel" means the Panel on Takeovers and
Mergers;
"Rule" means the relevant rule of the Takeover
Code;
"subsidiary" or "subsidiary undertaking" having the meanings given to them by
the Companies Act;
"Takeover Code" or "Code" means the City Code on Takeovers and
Mergers;
"Toledo" or the "Company" means Toledo Mining Corporation Plc, a
public company incorporated in England
and Wales with registered number
05055833;
"Toledo Directors" each of Constantine Thanassoulas,
Victor Kolesnikov, Simon Purkiss, Jason
Cheng, Robert Jenkins, Isidro Consunji,
being all of the directors of Toledo;
"Toledo Group" means Toledo and its subsidiary
undertakings;
"Toledo Shareholders" or "Shareholders" means the holders of Toledo Shares from
time to time;
"Toledo Shares" means the ordinary shares of 5 pence
each in the capital of Toledo;
"United Kingdom" or "UK" means the United Kingdom of Great
Britain and Northern Ireland.
- ENDS -
Disclosure requirements of the Takeover Code (the "Code")
Under Rule 8.3(a) of the Code, any person who is interested in 1% or more of any
class of relevant securities of an offeree company or of any paper offeror
(being any offeror other than an offeror in respect of which it has been
announced that its offer is, or is likely to be, solely in cash) must make an
Opening Position Disclosure following the commencement of the offer period and,
if later, following the announcement in which any paper offeror is first
identified. An Opening Position Disclosure must contain details of the person's
interests and short positions in, and rights to subscribe for, any relevant
securities of each of (i) the offeree company and (ii) any paper offeror(s). An
Opening Position Disclosure by a person to whom Rule 8.3(a) applies must be made
by no later than 3.30 pm (London time) on the 10th business day following the
commencement of the offer period and, if appropriate, by no later than 3.30 pm
(London time) on the 10th business day following the announcement in which any
paper offeror is first identified. Relevant persons who deal in the relevant
securities of the offeree company or of a paper offeror prior to the deadline
for making an Opening Position Disclosure must instead make a Dealing
Disclosure.
Under Rule 8.3(b) of the Code, any person who is, or becomes, interested in 1%
or more of any class of relevant securities of the offeree company or of any
paper offeror must make a Dealing Disclosure if the person deals in any relevant
securities of the offeree company or of any paper offeror. A Dealing Disclosure
must contain details of the dealing concerned and of the person's interests and
short positions in, and rights to subscribe for, any relevant securities of each
of (i) the offeree company and (ii) any paper offeror, save to the extent that
these details have previously been disclosed under Rule 8. A Dealing Disclosure
by a person to whom Rule 8.3(b) applies must be made by no later than 3.30 pm
(London time) on the business day following the date of the relevant dealing.
If two or more persons act together pursuant to an agreement or understanding,
whether formal or informal, to acquire or control an interest in relevant
securities of an offeree company or a paper offeror, they will be deemed to be a
single person for the purpose of Rule 8.3.
Opening Position Disclosures must also be made by the offeree company and by any
offeror and Dealing Disclosures must also be made by the offeree company, by any
offeror and by any persons acting in concert with any of them (see Rules
8.1, 8.2 and 8.4).
Details of the offeree and offeror companies in respect of whose relevant
securities Opening Position Disclosures and Dealing Disclosures must be made can
be found in the Disclosure Table on the Takeover Panel's website at
www.thetakeoverpanel.org.uk, including details of the number of relevant
securities in issue, when the offer period commenced and when any offeror was
first identified. You should contact the Panel's Market Surveillance Unit on
+44 (0)20 7638 0129 if you are in any doubt as to whether you are required to
make an Opening Position Disclosure or a Dealing Disclosure.
This announcement is distributed by Thomson Reuters on behalf of
Thomson Reuters clients. The owner of this announcement warrants that:
(i) the releases contained herein are protected by copyright and
other applicable laws; and
(ii) they are solely responsible for the content, accuracy and
originality of the information contained therein.
Source: Toledo Mining Corporation PLC via Thomson Reuters ONE
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