Wrap Text
Notice of defeating conditions
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF ARTICLE 7
OF THE MARKET ABUSE REGULATION (596/2014/EU) AS THE SAME HAS BEEN RETAINED IN
UK LAW AS AMENDED BY THE MARKET ABUSE (AMENDMENT) (EU EXIT) REGULATIONS (SI
2019/310). UPON THE PUBLICATION OF THIS ANNOUNCEMENT, THIS INSIDE INFORMATION IS
NOW CONSIDERED TO BE IN THE PUBLIC DOMAIN.
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART, DIRECTLY OR
INDIRECTLY IN, INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE
A VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF SUCH JURISDICTION.
FOR IMMEDIATE RELEASE
Goldway Capital Investment Limited
(Incorporated in Hong Kong)
CR No. 3294426
Off-market takeover offer for all of the
ordinary shares in:
MC Mining Limited
Previously Coal of Africa Limited
(Incorporated and registered in Australia)
Registration number ABN 008 905 388
ISIN AU000000MCM9
JSE share code: MCZASX/AIM code: MCM
22 March 2024
Goldway Capital Investment Limited - Third Supplementary Bidder's Statement
Goldway Capital Investment Limited (company registration number 3294426) (Goldway) refers to its
bidder's statement dated 2 February 2024, first supplementary bidder's statement dated 15 February
2024 and second supplementary bidder's statement dated 14 March 2024 in relation to its off-market
takeover offer for all of the ordinary shares in MC Mining Limited ACN 008 905 388 (ASX: MCM)
(MCM).
In accordance with section 647(3)(a)(ii) of the Corporations Act 2001 (Cth), a copy of Goldway's third
supplementary bidder's statement dated 21 March 2024 (Third Supplementary Bidder's Statement)
is enclosed.
A copy of the Third Supplementary Bidder's Statement was lodged with the Australian Securities and
Investments Commission and served on MCM on 21 March 2024.
Third Supplementary Bidder's Statement
ACCEPT
Offer by
Goldway Capital Investment Limited
CR No. 3294426
to acquire all of your ordinary shares in
MC Mining Limited ACN 008 905 388
for
A$0.16 cash per MCM Share
TO ACCEPT THE OFFER YOU MUST
Complete and sign the Acceptance Form accompanying the Original
Bidder's Statement and return it to the address set out on the form
before the Offer closes.
This is an important document and requires your immediate attention.
If you are in any doubt about how to deal with this document, you should contact your legal, financial,
tax or other professional advisor immediately.
Page 1
Third Supplementary Bidder's Statement
1. Introduction
This document is the third supplementary bidder's statement (Third Supplementary
Bidder's Statement) to the bidder's statement dated and lodged with ASIC on 2 February
2024 (Original Bidder's Statement) and to the first supplementary bidder's statement dated
and lodged with ASIC on 15 February 2024 (First Supplementary Bidder's Statement) and
second supplementary bidder's statement dated and lodged with ASIC on 14 March 2024
(Second Supplementary Bidder's Statement), issued by Goldway Capital Investment
Limited (company registration number 3294426) (Goldway) in relation to its off-market
takeover bid for all of the ordinary shares in MC Mining Limited ACN 008 905 388 (MCM).
This Third Supplementary Bidder's Statement is given pursuant to Division 4 of Part 6.5 of the
Corporations Act 2001 (Cth) (Corporations Act) in compliance with the requirements of
section 643 of the Corporations Act.
This Third Supplementary Bidder's Statement supplements and should be read together with
the Original Bidder's Statement, the First Supplementary Bidder's Statement and the Second
Bidder's Statement. Unless the context otherwise requires, terms defined in this Third
Supplementary Bidder's Statement have the same meaning as in the Original Bidder's
Statement.
This Third Supplementary Bidder's Statement is dated 21 March 2024 and was lodged with
ASIC and given to ASX on that date. Neither ASIC, nor the ASX, nor any of their respective
officers takes any responsibility for the content of this Third Supplementary Bidder's
Statement.
This is an important document and requires your immediate attention.
If you are in any doubt about how to deal with this document, you should contact
your legal, financial, tax or other professional advisor immediately.
Page 2
2. Observations on the Supplementary Target's Statement
Goldway has reviewed MCM's supplementary target's statement dated 18 March 2024
(Supplementary Target's Statement) including the independent expert's report (IER) issued
by BDO Corporate Finance (WA) Pty Ltd ACN 124 031 045 (BDO or Independent Expert)
and the independent specialist's report (SRK Report) issued by SRK Consulting (Australasia)
Pty Ltd ACN 074 271 720 (SRK).
Goldway expresses its overall disappointment that the MCM Independent Board Committee
(IBC) has decided not to recommend that MCM Shareholders accept Goldway's Offer.
Goldway believes that the Offer represents an attractive, certain exit price, which MCM
Shareholders should consider against several key points that call into question the
Supplementary Target's Statement view, as well as that of the Independent Expert and SRK,
on the value of MCM.
Goldway, having regard to the Supplementary Target's Statement, IER and SRK Report,
confirms that the Offer is its best and final offer with no increase to the Offer Price (of A$0.16
per MCM Share) or extension to the Offer Period in the absence of a competing proposal.
Responses to specific statements in the Supplementary Target's Statement, IER and
SRK Report
To assist MCM Shareholders in deciding whether to accept the Offer, Goldway wishes to
outline the further points set out below.
2.1. The IER has ignored several key disadvantages for MCM Shareholders failing to accept
the Offer
The Independent Expert has failed to address some key disadvantages or risks for
shareholders not accepting the Offer, including:
(a) Solvency – in the absence of accepting this Offer, MCM Shareholders face the
imminent risk of insolvency of MCM. As announced on 15 March 2024 in the half
yearly report for the period ended 31 December 2023, MCM reported cash and cash
equivalents of $2.0 million compared to cash and cash equivalents of $7.5 million at
30 June 2023. Assuming the same level of cash utilisation over the next half year to
30 June 2024, MCM requires an immediate or imminent injection of capital to remain
solvent. The prospect of an insolvency event should be a material consideration for
MCM Shareholders in deciding whether to accept the Offer and this was not
adequately highlighted in the IER. The IER acknowledged, on page 14, that MCM's
auditor "highlighted a material uncertainty that may cast significant doubt on
[MCM's] ability to continue as a going concern, in its audit reports for the years
ended 30 June 2022 and 30 June 2023 and its review report for the half-year ended
31 December 2023". In addition, the IER noted that MCM's auditor outlined that the
ability of MCM to continue as a going concern is dependent on "securing future debt
and equity funding at a level satisfactory to enable ongoing operations and
future developments to be completed". To date, the major arrangers and
underwriters of funding for MCM have been members of the Consortium including
their underwriting of the mentioned A$40 million rights issue announced in November
2022 which would otherwise have not been successful without the intervention of the
Consortium members. On page 10 of the Supplementary Target's Statement, MCM
Page 3
confirms that it is, once again, in discussions with the "Consortium Members
regarding the provision of interim funding".
ACCEPTING the Offer is advantageous to MCM Shareholders in light of the
potential solvency risk of MCM.
(b) Dilution risk – it is highly likely that MCM will require equity financing in the near
term to remain solvent. It will additionally require considerable future equity financing
to develop its projects. The last announced Life of Mine plan of the "shovel ready"
Makhado Project, issued on 30 June 2023, indicated peak funding requirements for
that asset alone of US$96 million,1 approximately 2.2 times the current market
capitalisation of MCM. In such event, MCM Shareholders would need to invest more
capital into MCM to avoid being diluted and face further price uncertainty depending
on the outcome of the long-planned commissioning of the Makhado mine.
ACCEPTING the Offer is advantageous to MCM Shareholders who wish to avoid
the risk of dilution and continued company performance risk.
(c) Financing Risk – the IER highlighted that MCM shareholders may "forego the
opportunity to participate in any potential upside of MC Mining's mineral assets" by
accepting the Offer. Any future upside is predicated on MCM financing its assets into
production. MCM's flagship project and largest contributor to the theoretical value
proposed in the IER, Makhado, has been unable to attract project finance capable of
being drawn to commence operations for over a decade. The second most valuable
asset in the portfolio (in terms of the IER), the Vele Aluwani Colliery (Vele), has failed
to operate profitably, ostensibly due to logistics and operating challenges that have
not been overcome for over a decade.
ACCEPTING the Offer is advantageous to MCM Shareholders who wish to avoid
exposure to MCM's financing risk.
(d) Liquidity risk – MCM is an illiquid security which is subject to minimal trading
volumes. The IER, on page 36, has noted that 1.23% of MCM's current issued capital
has been traded in the twelve month period to 3 February 2024. There is no
guarantee that MCM Shareholders will have the opportunity to access another
liquidity event where they can exit for a certain price and for cash.
ACCEPTING the Offer provides certain liquidity at no cost to MCM
Shareholders.
2.2. An investment in MCM remains subject to a number of significant risks and
uncertainties
The Independent Expert notes that a disadvantage of accepting the Offer is that MCM
Shareholders will "forego the opportunity to participate in any potential upside of MC Mining's
mineral assets". Nonetheless, an investment in MCM remains subject to a number of
significant risks and uncertainties.
1 MCM ASX Announcement dated 30 June 2023.
Page 4
Most importantly, despite several capital raising rounds over an extended period of time in
excess of a decade, there is no certainty of MCM, in its current form, being in a position to
deliver on the upside potential referred to.
Additionally, MCM is a high-cost coal producer that faces coal price volatility. Operational
challenges are compounded by power, rail and logistical issues. 2 MCM's undeveloped coal
reserves and resources face the same challenges and are reliant on the same infrastructure
as the South African coal market. There are considerable risks relating to MCM's ambition to
economically produce coal.
In addition, as highlighted in the Second Supplementary Bidder's Statement, Goldway
reiterates that:
(a) Due to its underperformance, Vele has been under care and maintenance since
January 2024. It was only recommissioned in December 2022 after having been put
under care and maintenance previously in 2013.
(b) The Makhado Project has been in definitive feasibility study (DFS) status and "shovel
ready" for over a decade and has never produced any coal.
(c) The Uitkomst Colliery has been unable to consistently produce positive cash flow for
MCM. When cashflow positive, the cash generated from Uitkomst is immaterial and
insufficient to cover the excessive administrative and corporates costs of MCM.
(d) Since acquiring the Greater Soutpansberg Project (GSP) in 2012, the assets have
remained dormant and subject to on-going impairments by MCM.
2.3. The methodology in the SRK Report does not take into account the level of coal
production by MCM
SRK has relied upon previous transaction values of ZAR/t gross in situ resource in South
Africa (per Appendix A of the SRK Report). The vast majority of these previous transactions
involve productive and profitable mines. The SRK Report, at page 92, acknowledges that their
valuation does "not attempt to estimate or reflect the coal likely to be recovered as required
under the JORC Code (2012)". Accordingly, the methodology used by SRK does not reflect
the fact that MCM's coal mines have been uneconomic and undeveloped despite multiple
attempts to commercially produce coal.
For example, Vele's valuation of approximately ZAR584 million (approximately A$47.1 million)
in the SRK Report is based on its existing coal resources. Due to its poor financial
performance, Vele was put on care and maintenance in 2013 and recommissioned in
December 2022. Notwithstanding the stated vast resource base and return potential that
underpins the valuation of Vele, the asset only managed to produce 119,799 tonnes of
saleable thermal coal in H120243 before being forced to return on care and maintenance in
January 2024 after being recommissioned in December 2022. For over 10 years, Vele has
incurred considerable losses and will remain a cost centre as MCM retains the asset on care
and maintenance for the foreseeable future.
The Uitkomst Colliery has been unable to consistently produce positive cashflow for MCM.
2 Refer to MCM Quarterly Activities Reports including the report announced on 31 January 2024.
3 MCM Half Year Results for the Period ended 31 December 2023.
Page 5
Additionally, the GPS and Makhado Projects remain undeveloped and subject to considerable
financing and development risks. The SRK methodology only takes into account an assumed
confidence level of the coal resource and not its earnings potential as a profitable operation.
For over 10 years, the Makhado Project has been at DFS status and has failed to produce
any coal. Since 2012, the GSP asset has been dormant and subject to on-going impairments
by MCM. Like the Makhado Project and Vele, the GSP is a considerable distance from the
nearest port and its future viability is adversely impacted by persistent power and rail issues.
2.4. The Independent Expert's Valuation Methodology does not take into account
the considerable administrative overhead costs of MCM
The approach taken by the Independent Expert was to adopt the flawed sum of the parts
valuation methodology (as discussed more fully in section 2.3) in relation to the in situ, largely
non-operational, assets of the Makhado Project and simply deduct the current net liabilities as
at 31 December 2023 (please refer to paragraph 10.1 of the Independent Expert's Report).
THIS IS MISLEADING AND IGNORES THE CONSIDERABLE IMMEDIATE CONTINUED
OVERHEAD CASH COSTS OF MCM AS AN ENTITY LISTED ON THREE MAJOR
EXCHANGES WITH AN ATTENDANT LARGE HEAD OFFICE INFRASTRUCTURE. This
cash cost is evidenced by the extremely rapid reduction of MCM's cash and cash equivalents
as mentioned in section 2.1(a) above. It is common market practice in undertaking such a
valuation that appropriate deductions are made for the head office overhead in addition to the
net liabilities.
2.5. The Basis of the Independent Expert's opinion that the Offer is Unreasonable is
Perplexing and Difficult to Comprehend Given the Weight of Evidence in the Valuation
Report
The Independent Expert only provides two disadvantages that they have considered in
arriving at their conclusion that the Offer is "unreasonable". In relation to the point regarding
"Shareholders will forego the opportunity to participate in any potential upside of MC Mining's
mineral assets" – The overwhelming challenges of the high operational risks and significant
capital required in realising the "potential upside" referred to by MCM is discussed in detail in
the Bidder's Statement, Supplementary Bidder's Statement, Second Supplementary Bidder's
Statement and summarised in section 2.2.
The Independent Expert goes on to mention the announced Vulcan Resources non-binding,
indicative offer which was withdrawn and by their own admission they state they are
"unaware of any other alternative proposal that might offer Shareholders a premium
over the value resulting from the Offer". In their analysis of the share price trends from
trading, they conclude that they "consider it possible that there may be a decline in MC
Mining's share price if the minimum subscription level of the Offer is not reached", it
being accepted that the Share price has only recently seen recovery as a result of the
premium offered by the Goldway Offer. Finally MCM also concedes that "as detailed in
Section 13.1.2 of our Report, we consider the Offer Consideration to provide certainty
of value to Shareholders". The opinion of unreasonableness was therefore based on a
flawed valuation reflecting an unrealistic transaction price that Vulcan Resources was
Page 6
ostensibly not willing to pursue with no material disadvantages capable of being
identified.
3. Proposal for conditional extension of the Offer Period
The Offer contains a condition (which cannot be waived) that Goldway needs to have
received acceptances for at least 50.1% or more of the MCM Shares that it does not have a
relevant interest at the commencement date of the Offer (Minimum Acceptance Condition).
If the Minimum Acceptance Condition is satisfied by 5 April 2024, Goldway's present intention
is to declare the Offer unconditional on the date that Goldway notifies the market that the
Minimum Acceptance Condition has been satisfied (Unconditional Date). Upon the Offer
being declared unconditional, Goldway intends to extend the Offer for 10 Business Days from
the Unconditional Date.
If the Minimum Acceptance Condition is not satisfied by 5 April 2024, then the Offer will not be
extended and will lapse on close of the Offer Period.
4. Consents and approval of the Third Supplementary Bidder's Statement
This Third Supplementary Bidder's Statement includes statements which are made in or
based on statements made in, documents lodged with ASIC or given to ASX. Under the terms
of ASIC Corporations (Takeover Bids) Instrument 2023/683, the parties making those
statements are not required to consent to, and have not consented to, inclusion of those
statements in this Third Supplementary Bidder's Statement. If you would like to receive a
copy of any of those documents, or the relevant parts of the documents containing the
statements (free of charge), during the Offer Period, please call the relevant Goldway Offer
Information Line. Goldway will provide these within 2 Business Days of the request.
A copy of this document was lodged with ASIC on 21 March 2024. This Third Supplementary
Bidder's Statement prevails to the extent of any inconsistency with the Original Bidder's
Statement, the First Supplementary Bidder's Statement or the Second Supplementary
Bidder's Statement. Neither ASIC nor any of its officers takes any responsibility for the
contents of this Third Supplementary Bidder's Statement.
Authorisation
This Third Supplementary Bidder's Statement has been approved by a resolution passed by
the sole director of Goldway.
Signed for on behalf of
Goldway Capital Investment Limited
Mr Jun Liu
Sole Director
Date: 21 March 2024
Page 7
Date: 22-03-2024 08:50:00
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