Embed Size (px)
Citation preview
INDAGO RESOURCES LTD ACN 009 150 618
INFORMATION MEMORANDUM
This Information Memorandum is not a prospectus and has been prepared for the purposes of satisfying Chapters 1 and 2 of the ASX Listing Rules following a change to the nature of the Company’s activities.
No securities are being issued on the basis of this Information Memorandum.
IMPORTANT INFORMATION
This is an important document that should be read in its entirety. If you do not understand it you should consult your professional advisers without delay.
For
per
sona
l use
onl
y
1
CHA N GE IN N A TUR E OF A CT IV I T IES A N D R ECOM P L IA N CE W ITH CHA P TER S 1 A N D 2 OF THE A SX L IS T IN G R U LES
At a general meeting of the Company held on 10 February 2010, the Company obtained approval from its Shareholders to change the nature of its activities under ASX Listing Rule 11.1. As a result, the Company must re-comply with Chapters 1 and 2 of the ASX Listing Rules.
IM P OR TA N T N OTICE
This Information Memorandum is dated 8 July 2010 and was lodged with ASX on that date. ASX and its officers take no responsibility for the contents of this Information Memorandum or the merits of the investment in the Company to which this Information Memorandum relates. The fact that ASX may approve the reinstatement to trading of the Company’s securities on the Official List is not to be taken in any way as an indication of the merits of the Company.
No securities are being issued on the basis of this Information Memorandum.
This Information Memorandum has been prepared to comply with the requirements of ASX Listing Rule 1.1, condition 3. Under this condition, ASX has agreed that the Company may issue an Information Memorandum that complies with the information memorandum requirements of Appendix 1A of the ASX Listing Rules.
All the information that would be required under section 710 of the Corporations Act if this Information Memorandum were a prospectus offering for subscription securities in the Company is contained in this Information Memorandum.
The Company has not raised any capital for the 3 months before the date of issue of this Information Memorandum. The Company will not raise any further capital for at least 3 months after the date of issue of this Information Memorandum.
A supplementary Information Memorandum will be issued if the Company becomes aware of any of the following between the date of issue of this Information Memorandum and the date of reinstatement to trading of the Company’s securities on the Official List:
(a) a material statement in the Information Memorandum is false or misleading;
(b) there is a material omission from the Information Memorandum;
(c) there has been a significant change affecting a matter included in the Information Memorandum; or
(d) a significant new matter has arisen and it would have been required to be included in the Information Memorandum.
R ESTR ICT ION S ON D IS TR IB U T ION
This Information Memorandum has been prepared by the Company. The Company has taken reasonable steps to ensure that the information in this Information Memorandum is not false or misleading. In doing so, the Company has had regard to the prospectus requirements of the Corporations Act, although it is not obliged to strictly follow those requirements.
This Information Memorandum is not a prospectus and does not constitute an offer of securities in any place.
W EB S I TE – E LE CTR ON IC IN FOR M A TION M EM ORA N D UM
A copy of this Information Memorandum can be downloaded at www.asx.com.au
For
per
sona
l use
onl
y
2
CON TEN TS
1. CORPORATE DIRECTORY .................................................................................................. 4
2. CHAIRMAN’S LETTER .......................................................................................................... 5
3. COMPANY BACKGROUND AND NEW BUSINESS PLAN .................................................. 6
4. DIRECTORS AND CORPORATE GOVERNANCE .............................................................13
5. FINANCIAL INFORMATION .............................................................................................16
6. RISK FACTORS ..................................................................................................................18
7. ADDITIONAL INFORMATION ...........................................................................................21
8. DIRECTORS’ AUTHORISATION .........................................................................................30
9. GLOSSARY ........................................................................................................................31
For
per
sona
l use
onl
y
3
KEY R IS KS
Shareholders should be aware that the Company will be changing its activities to become a listed alternative investment company. Such a change is subject to various risk factors set out in Section 6, which include the following:
• Economic conditions and financial market volatility.
• Risks associated with individual investments in the Company’s investment portfolio.
• Interest Rate Risk impacting on investment valuations and returns on cash deposits.
• Liquidity risk on investments.
• Risks associated with potential acquisitions of or significant investments in resource projects and joint ventures.
T IM ETA B LE OF IM P OR TA N T D A TES
Shareholders’ meeting approving change to nature of activities
10 February 2010
Suspension of trading of Company’s securities on ASX
10 February 2010 (Commencement of trade)
Lodgement of Information Memorandum with ASX 8 July 2010
Dispatch of Information Memorandum* 12 July 2010
Reinstatement to trading of Company’s securities on ASX*
16 July 2010
* These dates are indicative only based on the expectations of the Directors and are subject to change.
For
per
sona
l use
onl
y
4
1. CORPORATE DIRECTORY
Directors
Mr Paul Hardie Non Executive Chairman
Mr Peter Pynes Executive Director
Mr Tim Kestell Executive Director
Mr Matthew Fitzgerald Non Executive Director
Share Registry*
Security Transfer Registrars Pty Ltd 770 Canning Highway APPLECROSS WA 6153
Telephone: (08) 9315 2333 Facsimile: (08) 9315 2233
Joint Company Secretary
Damien Kelly
Alex Neuling
Solicitors
Steinepreis Paganin Lawyers and Consultants Level 4, the Read Buildings 16 Milligan Street PERTH WA 6000
Registered Office
Level 1 248 Hay Street SUBIACO WA 6008
Telephone: (08) 6380 2066 Facsimile: (08) 6380 2088
ASX: IDG/ IDGOA
Auditors*
BDO Kendalls Audit and Assurance (WA) Pty Ltd Level 8 256 St Georges Terrace PERTH WA 6000
* These entities have been included for information purposes only and have not been involved in the preparation of this Information Memorandum.
For
per
sona
l use
onl
y
5
2. CHAIRMAN’S LETTER
8 July 2010
Dear Shareholders,
On 4 January 2010, Indago announced a proposal for a significant change in its business activities from a mineral exploration company to a listed alternative investment company (with a focus on investment in the resources sector).
The Company has obtained Shareholder approval for the change in the nature of its business activities under ASX Listing Rule 11.1. As a result, the Company has prepared this Information Memorandum for the purpose of re-complying with Chapters 1 and 2 of the Listing Rules.
This Information Memorandum provides detailed information in relation to the new business plan for Indago as an ASX listed alternative investment company moving forward. The Board intends to focus on investments in the resources sector either through direct asset or company acquisitions or passive investments with a trading or development view.
As at the date of this Information Memorandum, the net cash at bank for Indago is approximately $52.82 million. This amount has been boosted substantially as a result of the successful takeover bid by Barrick Gold Corporation for Tusker Gold Limited in which Indago had a majority controlling interest.
The Directors of Indago have broad experience in international wholesale financial markets and diverse operating and transaction and investment experience to enable the Company to pursue opportunities in the resource sector to grow Shareholder wealth.
The Board of Indago encourages you to read this Information Memorandum in full to understand the change in focus and direction of the business in this exciting new time for the Company.
Yours sincerely
Paul Hardie Chairman
For
per
sona
l use
onl
y
6
3. COMPANY BACKGROUND AND NEW BUSINESS PLAN
3.1 Background
On 4 January 2010, the Company announced a proposal for a significant change in its business activities from a mineral exploration company to a listed alternative investment company (with a focus on investment in the resources sector).
At a general meeting of the Company held on 10 February 2010, the Company obtained approval from its Shareholders to change the nature of its activities under ASX Listing Rule 11.1. As a result, the Company is required re-comply with Chapters 1 and 2 of the ASX Listing Rules.
3.2 Asset divestment and restructure
As part of its strategy of repositioning the Company for growth, the board resolved to divest a number of assets and restructure its operations during 2009 and 2010, further information on which is set out below.
Snowbird Base Metals Project (Canada) and Mid Continent Nickel Project (USA)
On 7 September 2009, the Company announced that it had agreed to sell the Snowbird Project in Canada and the Mid Continent Project in the USA to Lumacom Limited (Lumacom), in consideration for:
(a) $500,000 in cash (of which $200,000 has been received as a deposit);
(b) 10,000,000 options in Lumacom exercisable at 3 cents with a 3 year expiry date; and
(c) $2,000,000 in cash upon commencement of production with reserves greater than 250,000 ounces of gold equivalent.
Of the cash consideration, $300,000 is payable within 9 months of the date of final transfer of the Projects to Lumacom.
Lumacom has completed due diligence on the projects and all of the conditions precedent have been satisfied. Settlement of the transaction occurred on 26 February 2010.
Tanzanian Uranium Assets
On 30 October 2009, the Company announced that it had entered into an agreement to sell its Tanzanian Uranium assets to AIM listed Uranium Resources PLC (URA), in consideration for:
(a) $2,500,000 in cash; and
(b) $400,000 equivalent in URA shares.
The transaction was completed on 13 January 2010 and the URA shares have subsequently been sold by the Company.
For
per
sona
l use
onl
y
7
Spin-off of Tanzanian Gold Assets
On 11 November 2009, the Company announced the spin-off of its Tanzanian gold assets into a new listed company, Tusker Gold Limited (Tusker), following the lodgement of a prospectus with the ASIC (Prospectus).
Under the transaction, the Company received 50 million shares in Tusker valued at 20 cents each as vendor consideration for the Tanzanian gold assets.
Tusker successfully raised $10 million through the issue of 50 million shares at 20 cents each under the Prospectus. The Company subscribed for 17.5 million shares under the initial public offer representing a $3.5 million investment (at an issue price of 20 cents per share), for a total controlling interest in 67.5% of the issued shares of Tusker.
A priority offer of 5,000,000 shares in Tusker was set aside for Shareholders in the Company on the register at the date of lodgement of the Prospectus.
On 11 December 2009, Tusker was admitted to the official list of ASX and quotation of its shares commenced on 16 December 2009.
Takeover Bid for Tusker by Barrick Gold Corporation
On 8 February 2010, Tusker and Barrick Gold Corporation (Barrick) executed an Implementation Agreement pursuant to which Barrick (or a subsidiary of Barrick) agreed to make an off-market takeover bid to acquire all the issued shares in Tusker for 80 cents per Tusker share (Offer).
Indago entered into a pre-bid acceptance agreement with Barrick under which it agreed to accept the Offer in respect of 17,500,000 Tusker shares not subject to ASX imposed escrow.
On 17 March 2010, BUK Holdco Limited (a subsidiary of Barrick) lodged a bidder’s statement with ASIC in relation to the Offer.
ASX provided its consent to the removal of a holding lock on 50,000,000 Tusker shares held by Indago to enable it to accept the Offer, subject to satisfaction of certain conditions.
On 7 April 2010, Indago accepted the Offer in respect of its remaining holding of 50,000,000 Tusker shares.
On 20 April 2010 the Offer was declared unconditional. The Offer closed on 27 April 2010, with Barrick holding a relevant interest in approximately 99.51% of the issued shares of Tusker. On 27 May 2010, Barrick completed the process of compulsory acquisition in relation to the outstanding Tusker shares for which acceptances had not been received upon which Tusker was removed from the Official List of ASX.
As a result of accepting the Offer, Indago received $54,000,000 in cash (before tax).
West Georgetown Base Metals Project (Queensland)
The West Gerorgetown Project is located 280 kms west of Townsville in North Queensland, prospective for base metals, namely silver-lead-zinc deposits and Mt Isa style copper mineralisation.
For
per
sona
l use
onl
y
8
No field work was been completed on this project during 2010. As a result of a review of the West Georgetown Project, Indago provided BHP Billiton with written notice of the Company’s intention to withdraw from a Memorandum of Agreement in relation to the project. BHP Billiton has acknowledged the receipt of Indago’s intention to withdraw from the Memorandum of Agreement and Indago has lodged a notice of relinquishment with the Queensland Mines Department.
Secured Loan to Crescent Gold Limited
On 30 June 2010, the Company announced that it had entered into a Secured Loan Facility Agreement (Loan Agreement) with ASX Listed Crescent Gold Limited (Crescent) (ASX:CRE), pursuant to which the Company has agreed to loan to Crescent $15,000,000, to be used for the development of the Laverton Gold Project in Western Australia as well as for general working capital requirements.
Under the Loan Agreement, Indago will receive interest at the rate of 10% payable quarterly in advance as well as gold payments totalling 75,000 ounces at a fixed payment of $24 per ounce.
On 1 July 2010, the Company advanced to Crescent the full amount of the loan. The final repayment date of the loan is 1 July 2011.
A summary of the material terms and conditions of the Loan Agreement is set out in Section 7.3 of this Information Memorandum.
3.3 New Business Plan
Overview
The Board intends to implement a new business plan for the Company as an ASX listed alternative investment company with a view to recreating and growing Shareholder wealth. The investment mandate is intended to be broad and the new Board intends to have a wide discretion to determine what, how and when to invest (subject to the criteria outlined below).
The Board plans to focus its investments in the resources sector and may purchase an asset or company outright or acquire an interest in an asset or a company (including joint venture interests in resource projects) with a trading and/or development view. Indago sees a real opportunity in creating a company that has the monetary backing and the skills to move quickly to assist in or purchase whole or parts of projects or invest in companies where there is a value gap.
It is not proposed that Indago will become an “investment entity” for the purposes of the Listing Rules. While Indago may make some passive investments, it also intends, where appropriate, to seek some management control or board positions in relation to the companies in which it invests.
Until such time as the new Board makes a decision on additional appropriate investments, it is likely that Indago’s funds will continue to remain invested in cash (or cash equivalents) and securities. As at the date of this Information Memorandum, the net cash at bank for Indago is approximately $52.82 million.
Following a review of the Company’s activities up until 31 March 2010, Indago’s tax advisors, Ernst and Young have provided the board with an estimated tax
For
per
sona
l use
onl
y
9
liability position for the 2009/2010 tax year of approximately $5,032,000.00. The final tax assessment for Indago may differ from this estimate as a result of the company’s continued activities between the period 31 March 2010 and 30 June 2010.
Based on the above tax liability estimate and on a fully diluted basis (after allowing for the exercise of all outstanding options), Indago will have a NTA backing of approximately $0.60 per Share.
The new Board’s proposed strategy will provide Indago Shareholders with exposure to investments with the objective of delivering regular income and capital growth. Indago will have a mandate to be an active investor in assets with the flexibility to allocate capital to the most attractive asset class in a given economic cycle and permitted investments will include:
(a) listed and unlisted securities;
(b) convertible securities (including options);
(c) bank deposits;
(d) bills of exchange, promissory notes and other negotiable instruments;
(e) debentures, unsecured notes, bonds and mortgages; and
(f) units in cash and investment trusts.
Indago will focus on Return on Equity (ROE) with potential revenues from interest, dividends, fees and profit from realisation on asset sales.
It is the present intention of the new Board:
(a) to complete an operational review of Indago to ensure that all appropriate capital management initiatives (such as capital returns/raisings and buybacks) are contemplated so that all Shareholders benefit; and
(b) to examine the ability of Indago to access tax losses and franking credits for Indago Shareholders.
Risk Management
Indago will undertake a risk management and review process for all investments, including undertaking due diligence investigations in relation to acquiring interests in companies or assets with a development view (such as joint venture interests).
The Board will monitor the investment policy and standards including:
(a) investment returns;
(b) credit risk;
(c) asset and cash flow support;
(d) maturity profile;
For
per
sona
l use
onl
y
10
(e) liquidity; and
(f) concentration limits.
3.4 New Investments
The investment objectives of the Company are to achieve a consistent high real rate of return, comprising both income and capital growth whilst operating within acceptable risk parameters set by the Board.
The Directors intend to investigate and select potential assets or projects based on one or a combination of the following criteria:
(a) the project or asset should be of a sufficient size and development to be capable of generating support in the market place to raise further funds;
(b) the project should have the capacity to add value to the Company in the medium term; and
(c) the project or asset should have quality management in place or have the ability to attract such people.
The financial data that will be taken into account in assessing potential investments for the portfolio will include, but not be limited to, an assessment of the past and projected earnings and profits of a company, the price-earnings ratio underlying any proposed investment, balance sheet strength, share price and earnings momentum and dividend yield and imputation credit levels.
Every investment made by Indago will be continuously monitored and reviewed on a periodic basis. The Company will be willing to move quickly to realise investments when a view is formed that an investment is overvalued or an alternative, superior investment opportunity arises.
3.5 Role of Directors
The Directors of Indago have broad experience in legal, finance and corporate enterprise across a number of industries. They have senior relationships in the Australian and international wholesale financial markets and extensive diverse operating and transaction and investment experience. The background and profiles on each of the directors of Indago are set out in detail in Section 4 of this Information Memorandum.
3.6 Capital Structure
As at the date of this Information Memorandum, the Company has 99,449,536 Shares on issue.
Indago also has on issue the following Options:
Quoted exercisable at 35 cents on or before 31 October 2014 (trading under ASX code IDGOA)
18,646,333
Unquoted exercisable at 25 cents on or before 30 April 2011 50,000
Unquoted exercisable at 50 cents on or before 30 April 2011 1,800,000
For
per
sona
l use
onl
y
11
Unquoted exercisable at $2.60 on or before 30 June 2012 50,000
Unquoted exercisable at $2.00 on or before 30 June 2012 377,500
Unquoted exercisable at 70 cents on or before 28 February 2013
665,000
Unquoted exercisable at $1.50 on or before 28 February 2013 325,000
Unquoted exercisable at $0.40 on or before 31 October 2014 19,500,000
Unquoted exercisable at $0.60 on or before 25 June 2015 22,500,000
The terms of the Options are set out in Section 7.1(b) of this Information Memorandum.
3.7 Buy Back
At a general meeting held on 25 June 2010, the Company obtained Shareholder approval to buy back up to 29,834,860 Shares during the 12 months from the date of approval (Share Buy-back).
Shareholders should note that this approval is for the maximum number of Shares that may be repurchased rather than the actual number which will definitely be bought back by the Company. The Company is therefore not committed to buy back the maximum number of Shares outlined above. The approval is designed to give the Company flexibility in determining the timing of on-market Share buy-backs over the next 12 months.
The number of Shares bought back will depend on a range of factors, in particular, an assessment of the value to the Company of buying back Shares at particular market prices, alternative uses for the cash, maintaining an appropriate level of liquidity and the Directors' perception of the fair value of the Shares at the time of the proposed buy-back acquisition. The Company reserves its rights as to when Shares will be bought back and, in any case, reserve their right not to buy-back any Shares at all.
The effect of the proposed Share Buy-back on the capital structure of the Company would be as follows (assuming the maximum number of Shares are bought back):
Shares on issue as at the date of this Notice 99,449,536
Less Shares subject to buy-back and cancellation 29,834,860
Shares on issue upon completion of buy-back and cancellation
69,614,675
The consideration paid under any Share Buy-back would be cash and all Shares bought back by the Company would be cancelled.
Due to its current cash reserves, the proposed Share Buy-back will not impact in any way on the Company’s ability to discharge any indebtedness or to conduct its ordinary business.
For
per
sona
l use
onl
y
12
The Company intends to utilise existing cash reserves to implement the on-market Share Buy-backs.
Based on an average price of 40.5 cents per Share, a buyback of 29,834,860 Shares will cost the Company approximately $12,083,118 (excluding legal, brokerage and other associated costs). This is just an example and does not necessarily reflect the financial impact accurately.
3.8 Shareholders
As at the date of this Information Memorandum, the Company has 6,101 Shareholders. The top 20 Shareholders by number of Shares held is as follows:
Shareholder Number of Shares Percentage Interest
Desertfox Pty Ltd 8,000,000 8.04%
Blue Capital Limited 6,474,209 6.51%
Mr David Davidson 3,840,000 6.86%
ANZ Nominees Limited 3,511,429 3.53%
HSBC Custody Nominees 3,107,872 3.13%
Gejaso Pte Limited 2,800,000 2.82%
Mr Paul John De Matteo 1,511,934 1.52%
Citicorp Nominees Pty Limited 1,318,260 1.33%
Unity Resources Group Pte 1,059,556 1.07%
Mr Ross Campbell Williams 1,000,000 1.01%
Siren Nominees Pty Ltd 1,000,000 1.01%
Mr David Davidson 960,000 0.97%
Cleo Holdings Pty Ltd 750,000 0.75%
Mr Edward Kieffer Lippert 750,000 0.75%
Mr Phillip John Coulson 750,000 0.75%
ACN 139 886 025 Pty Ltd 713,000 0.72%
Merrill Lynch (Australia) 679,590 0.68%
Mr Vincenzo Maio 554,000 0.56%
Elltom Pty Ltd 500,000 0.50%
Totode Pty Ltd 500,000 0.50%
For
per
sona
l use
onl
y
13
4. DIRECTORS AND CORPORATE GOVERNANCE
4.1 Directors
Mr Peter Pynes Executive Director
Mr Pynes has in excess of 20 years experience in Australia and overseas capital markets. He previously worked at Deutsche Bank as a director, global markets where he gained extensive knowledge of global structured debt products as well as capital raising and syndication. Mr Pynes is a Fellow of the Australian Institute of Company Directors (FAICD) and a Senior Associate of Financial Services Institute of Australia (SA FIN).
Directorships: Emerald Capital Limited
Nexus Bonds Limited
Blue Capital Limited (ASX: BIV)
Past Directorships: Tusker Gold Limited (from 25 August 2009 to 3 May 2010)
Resource and Investments NL (from 28 April 2009 to 27 April 2010)
Centralian Minerals Limited (from October 2006 – June 2007)
Mr Tim Kestell Executive Director
Mr Kestell has over 12 years experience in capital markets including working for Australian stockbrokers Euroz Securities Limited and Patersons.
In the past six years, Mr Kestell has played a key role in forming and/or re capitalising publicly listed companies and finding new ventures for them, helping raise over $60m in the process.
Directorships: Emmerson Resources Limited (ASX: ERM)
Blue Capital Limited (ASX: BIV)
Tusker Gold Limited (ASX: TKA)
Past Directorships: Emerald Capital Limited (from 1 August 2005 to 10 June 2009)
Northern Energy Limited (2004-2005)
Biosignal Limited (formerly CTI Communications Limited) (2003-2004)
Centralian Minerals Limited (from October 2006 - June 2007)
For
per
sona
l use
onl
y
14
Mr Matthew Fitzgerald Non-Executive Director
Mr Fitzgerald is a Chartered Accountant and was both a Director and Chief Financial Officer of Kimberley Diamond Company and its ASX-listed exploration subsidiary, Blina Diamonds NL. Mr Fitzgerald has significant experience as a company director in listed companies and the preparation of all internal and external financial reports.
Past Directorships: Kimberley Diamond Company
Blina Diamonds NL
Mr Paul Hardie Non-Executive Chairman
Mr Hardie is a solicitor who specialises in providing corporate and general commercial advice to a number of public and private clients on a wide range of matters including mergers and acquisitions, initial public offerings and other capital raisings, property law and a variety of Corporations Act and Listing Rules compliance matters.
Prior to establishing his own law practice, Mr Hardie gained extensive experience in areas of business management, commercial litigation and property law and was part of the mergers and acquisitions team of a large national law firm.
Directorships: Cougar Minerals Limited
Part Directorships: Biosignal Limited (formerly CTI Communications Limited)
Centralian Minerals Limited
4.2 Corporate Governance
The Directors monitor the business affairs of the Company on behalf of Shareholders and have in place a corporate governance policy which is designed to encourage Directors to focus their attention on accountability, risk management and ethical conduct.
The Board is responsible for the overall corporate governance of the Company, and it recognises the need for the highest standards of behaviour and accountability. The Board has already developed and will continue to develop strategies for the Company, review strategic objectives, and monitor the performance against those objectives. The overall goals of the corporate governance process are to:
(a) drive Shareholder value;
(b) assure a prudential and ethical base to the Company’s conduct and activities; and
(c) ensure compliance with the Company’s legal and regulatory obligations.
Consistent with these goals, the Board assumes the following primary responsibilities:
For
per
sona
l use
onl
y
15
(a) formulation and approval of the strategic direction, objectives and goals of the Company;
(b) monitoring the financial performance of the Company, including approval of the Company’s financial statements;
(c) ensuring that adequate internal control systems and procedures exist and that compliance with these systems and procedures is maintained;
(d) the identification of significant business risks and ensuring that such risks are adequately managed;
(e) the review of performance and remuneration of executive Directors; and
(f) the establishment and maintenance of appropriate ethical standards.
The Board has in place corporate governance policies and practices consistent, where considered appropriate having regard to the Company’s current size and structure, with the ASX Corporate Governance Council’s “Principles of Good Corporate Governance and Recommendations”. Such policies include, but are not limited to, the Board Charter, Board Code of Conduct, Audit Committee Charter, Continuous Disclosure, Trading in Securities and Risk Management Policies.
The Board also recognises its duty to ensure that its Shareholders and other stakeholders are informed of all major developments affecting the Company’s state of affairs.
For
per
sona
l use
onl
y
16
5. FINANCIAL INFORMATION
The unaudited Statement of Financial Position prepared as at 31 May 2010 has been prepared to provide Shareholders with information on the assets and liabilities of the Company. The financial information is presented in an abbreviated form, insofar as it does not include all of the disclosures required by Australian Accounting Standards applicable to annual financial statements.
Unaudited as at
31 May 2010
$'000 Current assets
Cash12 71,794 Trade & other receivables1 762 Listed investments3 124 Total current assets 72,680
Non-current assets Investments (I/Co) 6
Property Plant & Equipment 41 Total non-current assets 47 Total assets 72,727
Current liabilities Trade & other payables (388)
Provisions (5,214) Total current liabilities (5,602) Total liabilities (5,602)
Net assets 67,125
Issued Capital 49,039 Reserves 8,076 Retained Earnings 10,010 Total Equity 67,125
Notes:
1. On 30 June 2010, the Company executed a Secured Loan Facility Agreement (Loan Agreement) with Crescent Gold Limited (Crescent) pursuant to which the Company agreed to loan to Crescent $15,000,000. The material terms and conditions of the Loan Agreement are summarised in Section 7.3. Under the Loan Agreement, Indago will receive interest at the rate of 10% payable quarterly in advance as well as gold payments totalling 75,000 ounces at a fixed payment of $24 per ounce. On 1 July 2010, the Company advanced to Crescent the full amount of the loan. This has the effect on the unaudited Statement of Financial Position of:
(a) decreasing the cash position of the Company by the amount of the loan, $15,000,000, less the amount of the first interest payment of $375,000 plus the first instalment of $236,500 as a commitment fee payable by Crescent under the Loan Agreement; and
(b) increasing the amount of receivables by the principal amount of the loan plus interest which may be capitalised and the commitment fee payable quarterly.
2. The Company has an estimated tax liability for the 2009/2010 tax year of approximately $5,032,000.00 (refer to Section 3.3 for further details). This would have the effect of decreasing the cash position of the Company by a corresponding amount.
For
per
sona
l use
onl
y
17
3. Since the balance date of the unaudited Statement of Financial Position, the Company has made further investments in ASX listed companies, which as at the date of this Information Memorandum has a total market value of approximately $5,000,000. This includes investments in a junior gold exploration company, a uranium exploration company, a copper-gold explorer and a junior oil and gas exploration company (all of which are not related parties of the Company or any of the Directors).
For
per
sona
l use
onl
y
18
6. RISK FACTORS
6.1 Introduction
The business activities of the Company following implementation of the Business Plan are subject to risks which may impact on its future performance.
Set out below is a non-exhaustive list of some of the risk factors which the Company faces. Some of these risk factors can be mitigated by the use of safeguards and appropriate systems and actions, but many are outside the control of the Company and cannot be mitigated.
6.2 Economic Risks and External Market Factors
Factors such as, but not limited to, economic slow-down or recession, political movements, stock market trends, changing customer preferences, interest rates, inflation levels, technological innovation, industrial disruption, international competition, force majeure events, acts of terrorism and taxation changes may all have an adverse impact on the Company. These factors are beyond the control of the Company and the Company cannot, to any degree of certainty, predict how they will impact on the earnings and capital appreciation of the Company’s investments.
6.3 Investment Decisions
The profitability and success of the Company is highly dependent on the ability of the Directors to make appropriate investment decisions. There can be no guarantee that every investment decision of the Directors will prove to be profitable for the Company.
6.4 Individual Investment Risk
Individual investments made by the Company may fall in value for many reasons such as changes in the entity’s internal operations, management or in its business environment. If this occurs, the value of the NTA of the Company will fall which is likely to have a negative effect on the Company’s Share price.
6.5 Company Risk
Risks particular to the Company include that the Company may give different after-tax results than investing individually because of income or capital gains accrued in the Company.
6.6 Liquidity
The Company may invest in unlisted securities or in companies whose securities are thinly traded. Therefore, its ability to sell securities may be restricted.
6.7 Interest Rate Risk
Changes in interest rates can have an impact directly or indirectly on investment valuations and returns on any cash deposits held.
6.8 Industry Risk
There are a number of industry risk factors that may affect the future operational performance of the Company. These factors are outside the control of the
For
per
sona
l use
onl
y
19
Company. Such factors include increased regulatory and compliance costs, unforeseen Government legislation, and collapse in equity markets.
6.9 Financial Market Volatility
A fall in global or Australian equity markets, global or Australian bond markets or a rapid change in the value of the Australian dollar against other major currencies may discourage investors from moving money into or out of equity markets. This may have a negative effect on the value of the Company’s investments.
6.10 Performance of other Asset Classes
Good performance, or anticipated performance, of other asset classes can encourage individuals to divert money away from equity markets. This may have a negative impact on the investments of the Company.
6.11 Absolute Performance versus Relative Performance
It is the objective of the Company to show positive returns on its investment regardless of the underlying movement in value of the investment markets. With such an objective, the value of the investment portfolio cultivated by the Company may not change in line with the overall movements in the market and its performance may differ significantly from funds that seek to measure performance against the broader sharemarket.
6.12 Potential Acquisitions
As part of its business strategy, the Company may make acquisitions of or significant investments in other resource projects. Any such transactions would be accompanied by risks commonly encountered in making such acquisitions.
6.13 Strategic Alliances/Joint Ventures
The Company may in the future seek to enter into strategic alliances, with other parties, including joint venturers, some of which may be corporations much larger than the Company. There is a risk in managing strategic alliances and ventures with large corporations.
Should other participants in any strategic alliance not act in the best interests of the Company, this may have a material adverse effect on the Company’s operations.
The Directors are unable to predict the risk of financial failure or default by a participant in any strategic alliance or joint venture to which the Company may become a party.
6.14 Tax
Taxation and changes to tax systems can have an effect on returns but also the relative merit of putting monies in various asset classes and in an individual security. All of these items may have a negative impact on the Company.
6.15 Dependence on Key Personnel
There can be no guarantee that the Company will be able to retain its key Directors or, if those persons cease to be employed by the Company, that the
For
per
sona
l use
onl
y
20
Company will be able to attract and retain personnel of sufficient experience and expertise to manage the investments of the Company.
6.16 Regulatory Risk
Political, taxation, economic, legislative or regulatory change in Australia or in other countries where the Company invests may have an adverse effect on the Company’s investments.
For
per
sona
l use
onl
y
21
7. ADDITIONAL INFORMATION
7.1 Rights Attaching to Securities
(a) Ordinary Shares
The rights, privileges and restrictions attaching to Shares can be summarised as follows:
(i) General Meetings
Shareholders are entitled to be present in person, or by proxy, attorney or representative to attend and vote at general meetings of the Company.
Shareholders may requisition meetings in accordance with Section 249D of the Corporations Act and the Constitution of the Company.
(ii) Voting Rights
Subject to any rights or restrictions for the time being attached to any class or classes of shares, at general meetings of shareholders or classes of shareholders:
(A) each shareholder entitled to vote may vote in person or by proxy, attorney or representative;
(B) on a show of hands, every person present who is a shareholder or a proxy, attorney or representative of a shareholder has one vote; and
(C) on a poll, every person present who is a shareholder or a proxy, attorney or representative of a shareholder shall, in respect of each fully paid share held by him, or in respect of which he is appointed a proxy, attorney or representative, have one vote for the share, but in respect of partly paid shares shall have such number of votes as bears the same proportion to the total of such shares registered in the shareholder’s name as the amount paid (not credited) bears to the total amounts paid and payable (excluding amounts credited).
(iii) Dividend Rights
Subject to the rights of persons (if any) entitled to shares with special rights to dividend the Directors may declare a final dividend out of profits in accordance with the Corporations Act and may authorise the payment or crediting by the Company to the shareholders of such a dividend. The Directors may authorise the payment or crediting by the Company to the shareholders of such interim dividends as appear to the Directors to be justified by the profits of the Company. Subject to the rights of persons (if any) entitled to shares with special rights as to dividend all dividends are to be declared and paid according to the amounts paid or credited as paid on the shares in respect of which the dividend is paid. Interest may not
For
per
sona
l use
onl
y
22
be paid by the Company in respect of any dividend, whether final or interim.
(iv) Winding-Up
If the Company is wound up, the liquidator may, with the authority of a special resolution of the Company, divide among the shareholders in kind the whole or any part of the property of the Company, and may for that purpose set such value as he considers fair upon any property to be so divided, and may determine how the division is to be carried out as between the shareholders or different classes of shareholders. The liquidator may, with the authority of a special resolution of the Company, vest the whole or any part of any such property in trustees upon such trusts for the benefit of the contributories as the liquidator thinks fit, but so that no shareholder is compelled to accept any shares or other securities in respect of which there is any liability. Where an order is made for the winding up of the Company or it is resolved by special resolution to wind up the Company, then on a distribution of assets to members, shares classified by ASX as restricted securities at the time of the commencement of the winding up shall rank in priority after all other shares.
(v) Transfer of Shares
Generally, shares in the Company are freely transferable, subject to formal requirements, the registration of the transfer not resulting in a contravention of or failure to observe the provisions of a law of Australia and the transfer not being in breach of the Corporations Act or the Listing Rules.
(vi) Variation of Rights
Pursuant to Section 246B of the Corporations Act, the Company may, with the sanction of a special resolution passed at a meeting of shareholders vary or abrogate the rights attaching to shares.
If at any time the share capital is divided into different classes of shares, the rights attached to any class (unless otherwise provided by the terms of issue of the shares of that class), whether or not the Company is being wound up may be varied or abrogated with the consent in writing of the holders of three-quarters of the issued shares of that class, or if authorised by a special resolution passed at a separate meeting of the holders of the shares of that class.
(b) Options
In general, the material terms and conditions of the Options are as follows:
(i) each Option gives the holder the right to subscribe for one (1) Share in the Company.
(ii) the Options are exercisable by completing an option exercise form and delivering it together with the payment for the
For
per
sona
l use
onl
y
23
number of Shares in respect of which the Options are exercised to the registered office of the Company;
(iii) an Option does not confer the right to a change in exercise price or a change in the number of underlying securities over which the Option can be exercised;
(iv) subject to the Corporations Act, the Listing Rules and the Company’s Constitution, the Options are freely transferable;
(v) all Shares issued upon exercise of the Options will rank pari passu in all respects with the Company’s then issued Shares.
(vi) the Options do not confer on the holder any right to participate in dividends until Shares are allotted pursuant to the exercise of the Options;
(vii) there are no participating rights or entitlements inherent in the Options and holders will not be entitled to participate in new issues of capital offered to Shareholders during the currency of the Options. However, the Company will ensure that for the purposes of determining entitlements to any such issue, the record date will be at least 6 Business Days after the issue is announced. This will give Option holders the opportunity to exercise their Options prior to the date for determining entitlements to participate in any such issue; and
(viii) if at any time the issued capital of the Company is reconstructed, all rights of an Option holder are to be changed in a manner consistent with the Corporations Act and the Listing Rules.
7.2 Employee Incentive Option Scheme
The Board has adopted an Employee Incentive Option Scheme (Scheme) to allow individuals to be granted options (Employee Options) to acquire Shares in the Company, the principal terms of which are summarised below
Eligibility and Grant of Employee Options
The Board may grant the Employee Options to any director, officer or employee of the Company selected by the Board. Employee Options may be granted by the Board at any time when there are no restrictions on dealing in the Shares and the Company is not in a close period.
Consideration
Each Employee Option issued under the Scheme will be issued free of charge.
Exercise Price
The exercise price for Employee Options granted under the Scheme will be fixed by the Board prior to the grant of the Employee Option.
For
per
sona
l use
onl
y
24
Exercise Restrictions
The options granted under the Scheme may be subject to such other restrictions on exercise as may be fixed by the Directors prior to grant of the Employee Options including, without limitation, length of service by the employee and threshold prices at which Shares are traded on the ASX. Any restrictions so imposed by the Directors must be set out on the Employee Option certificate.
Participation in Dividends, Rights Issues and Bonus Issues
The Employee Options granted under the Scheme do not give any right to participate in dividends or rights issues until Shares are allotted pursuant to the exercise of the relevant Employee Option. The number of Shares issued on the exercise of Employee Options will be adjusted for bonus issues made prior to the exercise of the Employee Options.
Term of Employee Options
The Employee Options granted under the Scheme have a term specified on the face of each certificate.
Subdivision or Consolidation
If the Company, after having granted any Employee Option, reduces its issued Share capital or subdivides or consolidates its Shares, the number of the Shares issued to the option holder on exercise of an Employee Option will be reduced, subdivided or consolidated, as the case may be, in accordance with the ASX Listing Rules.
Restrictions on Transfer
Employee Options are not transferable.
Limitation on offers
If the Company makes an offer under the Scheme where:
(a) the total number of Shares to be received on exercise of Options the subject of that offer exceeds the limit set out in ASIC Class Order 03/184; or
(b) the Offer does not otherwise comply with the terms and conditions set out in ASIC Class Order 03/184,
the Company must comply with Chapter 6D of the Corporations Act at the time of that Offer.
7.3 Material Contracts
Secured Loan Agreement – Crescent Gold Limited
On 30 June 2010, the Company announced that it had entered into a Secured Loan Facility Agreement with Crescent pursuant to which the Company agreed to loan to Crescent $15,000,000.
For
per
sona
l use
onl
y
25
On 1 July 2010, the Company advanced the full amount of the loan to Crescent, following the satisfaction of the conditions precedent to the loan, including payment of the first interest payment and first instalment of the commitment fee.
The material terms and conditions of the Loan Agreement are as follows:
(a) (Final Repayment Date): the final repayment date of the loan is 1 July 2011.
(b) (Interest): interest on the loan is 10% payable quarterly in advance commencing on the date of drawdown of the loan. Crescent may capitalise any unpaid Interest at monthly intervals.
(c) (Security): the loan is secured by, inter alia, a fixed and floating charge in favour of the Company, over each of:
(i) Crescent’s rights, property and undertakings; and
(ii) Uranium West Limited’s (Guarantor) rights, property and undertakings, as guarantor under the Loan Agreement.
(d) (Gold Payments): Crescent must pay to the Company a fixed payment of $24 per ounce for the first 75,000 ounces and attributable ounces of gold product from Crescent’s Laverton Gold Project in Western Australia (Project).
(e) (Make Whole Payment): on the Final Repayment Date of the loan, Crescent must make a ‘make whole payment’ to Crescent, being $2,250,000 less the total amount of interest paid under the Loan Agreement.
(f) (Events of Default): certain acts, omissions or events are agreed to be a default of the Loan Agreement, upon the occurrence of which all outstanding amounts due and payable under the Loan Agreement shall become immediately due and payable to the Company at the Company’s option. These include:
(i) (Failure to pay): either Crescent or the Guarantor (Obligor) does not pay any part of the money payable to the Company under the Loan Agreement or any Transaction Document (as defined) by the due date;
(ii) (Untrue warranty): any representation, warranty or statement made, repeated or deemed to be made or repeated in any Transaction Document is proved to be untrue in any respect when made or repeated or deemed to be made or repeated (as the case may be);
(iii) (Breach of undertaking): any Obligor breaches any undertaking given at any time to the Company, or any Obligor fails to comply with any condition imposed by the Company in agreeing to any matter (including any waiver);
(iv) (Default under Transaction Document): any event of default (however defined) occurs under any Transaction Document or any Obligor breaches any provision of any Transaction
For
per
sona
l use
onl
y
26
Document or any Transaction Document is terminated for any reason;
(v) (Event of Insolvency): any Event of Insolvency (as defined) occurs in relation to any Obligor;
(vi) (Cessation or suspension of official quotation): Crescent ceases to be listed on the ASX, or trading in its shares is suspended for more than 5 consecutive days;
(vii) (Reduction in capital): without the prior written consent of the Company, Crescent or the Guarantor takes action to reduce its share capital;
(viii) (Material Adverse Effect): any event or series of events occurs whether related or not, which in the opinion of the Company has, or is reasonably likely to have, a Material Adverse Effect (as defined);
(ix) (Unauthorised Hedging): any Obligor enters into a Hedging Contract (as defined), without the Company’s written consent; or
(x) (Change in Control): without the prior written consent of the Company, (which the Company may grant or withhold at its absolute and unfettered discretion) the persons who at the date of the Loan Agreement have control of Crescent (being more than a 30% relevant interest) cease to have control of Crescent or one or more persons acquires control of Crescent after the date of the Loan Agreement.
The Loan Agreement otherwise contains standard representations and warranties (including in relation to the Project), indemnity, confidentiality and assignment provisions.
Executive Services Agreements
In December 2009, Indago entered into an executive services agreement with each of Mr Tim Kestell and Mr Peter Pynes (Executive) as executive directors of the Company (Executive Services Agreement).
The material terms of each Executive Services Agreement are as follows:
(a) (Term): the term of the Executive Services Agreement is ongoing, subject to the provision for termination set out in (l) below.
(b) (Salary): the salary payable to each Executive is $325,000 per annum (exclusive of superannuation) payable monthly in arrears.
(c) (Expenses): the Executive is entitled to be reimbursed for reasonable travelling, accommodation and other expenses that may be incurred by in carrying out his duties as an executive director.
(d) (Performance Bonus): the Company must pay to the Executive a performance based bonus over and above the Salary, equal to 2% of any increase in the book value of the Company’s net tangible assets over the previous financial year, as at 30 June (Bonus). For the purpose
For
per
sona
l use
onl
y
27
of calculating the book value, each of the investments of the Company are valued according to a set of principles and otherwise determined by an approved valuer.
The Bonus may be paid either wholly in cash or split between cash and Shares (based on the volume weighted average trading price of Shares for the period of 30 days prior to the date of payment of the Bonus).
(e) (Termination by the Company): the Company may terminate the employment by giving one month written notice if at any time the Executive:
(i) commits any serious breach of the Executive Services Agreement (that is not remedied);
(ii) does not perform his duties in a satisfactory manner (that is not remedied);
(iii) commits or becomes guilty of any gross misconduct; or
(iv) refuses or neglects to comply with any lawful reasonable direction or order given to him by the Company.
(f) (Termination without cause): the Executive or the Company may, at any time and without cause, terminate the employment by giving written notice equal to 3 months plus 1 additional month for every new year of service commenced by the Executive (up to a maximum of 12 months’ notice in total).
The Executive Services Agreement otherwise contains standard leave, confidentiality, dispute resolution and assignment provisions.
7.4 Disclosure of Interests
Directors are not required under the Constitution to hold any Securities. The relevant interests of the Directors in Securities as at the date of this Information Memorandum are as follows:
Director Shares Options (Unquoted)1
Options (Unquoted)2
Options (Quoted)
Mr Paul Hardie Nil 2,000,000 1,500,000 Nil
Mr Peter Pynes Nil 8,000,000 10,000,000 Nil
Mr Tim Kestell3 8,000,000 8,000,000 10,000,000 4,000,000
Mr Matthew Fitzgerald
Nil 1,500,000 1,000,000 Nil
Notes:
1. Exercisable at 40 cents each with an expiry date of 31 October 2014.
2. Exercisable at 60 cents each with an expiry date of 25 June 2015.
3. Held by Desertfox Pty Ltd, an entity controlled by Mr Kestell.
Refer to Section 7.1(b) for terms and conditions of the Options.
For
per
sona
l use
onl
y
28
7.5 Remuneration
The Constitution provides that the remuneration of non-executive Directors will be not more than the aggregate fixed sum determined by a general meeting. The aggregate remuneration for non-executive Directors has been set at an amount not to exceed $400,000 per annum.
The annual remuneration (exclusive of superannuation) payable to each of the Directors as the date of this Information Memorandum is as follows:
Director Annual Remuneration
Mr Paul Hardie $48,000
Mr Peter Pynes $325,000
Mr Tim Kestell $325,000
Mr Matthew Fitzgerald $36,000
7.6 Interests and Consents of Experts and Advisers
Other than as set out below or elsewhere in this Information Memorandum, no expert, promoter or any other person named in this Information Memorandum as performing a function in a professional advisory or other capacity in connection with the preparation or distribution of the Information Memorandum, nor any firm in which any of those persons is or was a partner, nor any company with which any of those persons is or was associated, has or in the last two years has had any interest in:
(a) the formation or promotion of the Company; or
(b) property acquired or proposed to be acquired by the Company in connection with its formation or promotion or the Offer of securities pursuant to this Prospectus,
and no amounts have been paid or agreed to be paid (in cash or Shares or otherwise) to any expert, promoter or any other person named in this Information Memorandum as performing a function in a professional advisory or other capacity in connection with the preparation or distribution of this Information Memorandum, or to any firm in which any of those persons is or was a partner, or to any company with which any of those persons is or was associated, for services rendered by that person, or by the firm or the company, in connection with the formation or promotion of the Company.
Steinepreis Paganin has given, and has not withdrawn its consent to being named as Solicitors to the Company in the Corporate Directory of this Information Memorandum in the form and context in which it is named. Steinepreis Paganin has not caused or authorised the issue of this Information Memorandum, does not make or purport to make any statement in this Information Memorandum and takes no responsibility for any part of this Information Memorandum.
Steinepreis Paganin act as solicitors to the Company and have been involved in due diligence enquiries on legal matters. Steinepreis Paganin will be paid approximately $20,000 for services in relation to this Information Memorandum.
For
per
sona
l use
onl
y
29
7.7 Expenses Associated with Preparation of the Information Memorandum
The total expenses associated with preparation of this Information Memorandum are estimated to be approximately $15,000.
7.8 Litigation
As at the date of this Information Memorandum, the Company is not involved in any material legal proceedings and the Directors are not aware of any material legal proceedings pending or threatened against the Company.
7.9 Taxation
The acquisition and disposal of Shares in the Company will have tax consequences, which will differ depending on the individual financial affairs of each investor. All potential investors in the Company are urged to obtain independent financial advice about the consequences of acquiring Shares from a taxation viewpoint and generally.
For
per
sona
l use
onl
y
30
8. DIRECTORS’ AUTHORISATION
This Information Memorandum is issued by the Company and its issue has been authorised by a resolution of the Directors.
_______________________________ Tim Kestell Director For and on behalf of Indago Resources Ltd
For
per
sona
l use
onl
y
31
9. GLOSSARY
Where the following terms are used in this Information Memorandum they have the following meanings:
A$ or $ means an Australian dollar.
ASIC means the Australian Securities & Investments Commission.
ASX means ASX Limited (ACN 008 624 691) or the Australian Securities Exchange (as the context requires).
Board means the board of Directors as constituted from time to time.
Business Day means Monday to Friday inclusive, except New Year’s Day, Good Friday, Easter Monday, Christmas Day, Boxing Day, and any other day that ASX declares is not a business day.
Business Plan means the business plan proposed to be implemented by the Company, approved by Shareholders, further details of which are set out in Section 3.
Company or Indago means Indago Resources Ltd (ACN 009 150 618) and, where the context requires, includes a reference to a subsidiary of the Company.
Constitution means the constitution of the Company.
Corporations Act means the Corporations Act 2001 (Cth).
Directors means the directors of the Company at the date of this Information Memorandum.
Information Memorandum means this Information Memorandum.
Listing Rules means the official listing rules of ASX.
Official List means the Official List of ASX.
Option means an option to acquire a Share on the terms and conditions set out in Section 7.1(b) of this Information Memorandum.
Securities means Shares and Options.
Share means a fully paid ordinary share in the capital of the Company.
Share Registry means Security Transfer Registrars Pty Ltd.
Shareholder means a holder of Shares.
WST means Western Standard Time, Perth, Western Australia. For
per
sona
l use
onl
y
