Zeehan Zinc Limited ("ZZL" or the "Company") Notice of Extraordinary General Meeting

Transcription

1 8 July 2009 Zeehan Zinc Limited ("ZZL" or the "Company") Notice of Extraordinary General Meeting The Company today announces its Extraordinary General Meeting ("EGM") is to be held at 10am on 31 July 2009 at the office of the Company, Level 1/199 Macquarie Street, Hobart, Tasmania, The Notice of EGM and Explanatory Memorandum will be sent to shareholders on Thursday 9 July The Resolutions are proposed against the background of a change in strategy of the Company from confining its resources solely to its licenses in Tasmania to seeking to achieve the expansion of the Company s operations nationally and globally and through resource diversification. The Directors believe that there are a variety of attractive potential transactions in the market currently that would facilitate the spread of risk for ZZL. Included within the Resolutions to be proposed at the EGM and which are explained in detail within the Explanatory Memorandum, is the deletion of an article of the Constitution of the Company limiting the borrowing powers of the Company and proposing that the Company borrow US$30 million from RZB Austria Finance (Hong Kong) Limited in order to facilitate this expansion of the Company and resource diversification. Further Resolutions cover the dis-application of pre-emption rights and a proposed change of name to Creat Resources Holdings Limited, All the resolutions are recommended by the appropriate Directors of the Company. For further information please visit or contact: Zeehan Zinc Limited Yasmine Healy Tel: +61 (03) Nominated Adviser, Grant Thornton UK LLP Philip Secrett, Maureen Tai Tel:+44 (0) Broker, Alexander David Securities Limited Ian Rice, Nick Martin Tel: +44 (0) Bankside Consultants, PR Simon Rothschild, Oliver Winters Tel: +44 (0)

2 Notice of Extraordinary General Meeting Friday 31 July 2009 Pursuant to rule of the Constitution, and sections 249J and 249H(1) of the Corporations Act, notice is hereby given that an Extraordinary General Meeting of shareholders of Zeehan Zinc Limited (the "Company") will be held at the office of the Company Level 1/199 Macquarie Street, Hobart, Tasmania, 7000 at 10am on 31 July AGENDA 1. Chairman Welcome and Open Meeting 2. Deletion of Rule 18.1 of the Constitution (Borrowing Powers) That, for the purposes of section 136(2) of the Corporations Act, approval be given for the deletion of rule 18.1 of the Constitution in its entirety. 3. Approval under Rule 18.1 of the Constitution (Borrowing of the Company) In the event that the special resolution in Agenda Item 2 is not passed, to consider and, if thought fit, to pass the following resolution as an ordinary resolution: That, for the purposes of rule of the Constitution, approval be given for the Company to enter into a Loan Agreement with the financial institution RZB Austria Finance (Hong Kong) Limited of 200 Beijing International Club 21 Jiangguomenwai Dajie Beijing PRC to borrow US$30,000,000 ("Loan Agreement"), guaranteed by its related parties Marvel Link Group Limited and Kingswealth Finance Limited, for the reasons described in the attached Explanatory Memorandum. 4. Deletion of Rule 17.1 of the Constitution (Directors Authority to Allot) That, for the purposes of section 136(2) of the Corporations Act, approval be given for the deletion of rule 17.1 of the Constitution in its entirety. 5. Amendment to Rule 17.2 of the Constitution (Pre-emption Rights and disapplication) That, for the purposes of section 136(2) of the Corporations Act, approval be given for: (a) the deletion of the first paragraph of rule of the Constitution in its entirety and its replacement with the following paragraph: "The Directors may be given power by special resolution to allot Equity Securities as if:" (b) (c) the deletion of rule and rule of the Constitution in their entirety; and the deletion of rule of the Constitution in its entirety and its replacement with the following rule: "Notwithstanding rule 17.2 above, in the period following the general meeting held on 31 July 2009 (the Current Meeting ) until the 2010 annual general meeting, rules to (inclusive) do not apply to the allotment of such number of Equity Securities which does not exceed 50% of the outstanding number of shares at the date of the Current Meeting ("Disapplication Limit"), provided that in the period following the annual general meeting held in 2010 and each year thereafter the Disapplication Limit shall be 30% of the outstanding number of shares at the date of the 2010 annual general meeting. 6. Removal of Auditor

3 To consider and, if thought fit, to pass the following resolution as an ordinary resolution: That the firm, UHY Haines Norton, be removed as auditors of the Company. 7. Appointment of Auditor That, subject to the passing of the resolution contained in Agenda Item 6 and for the purposes of section 327D(2) of the Corporations Act, approval be given for the appointment of Deloitte Touche Tohmatsu of Level 9, 22 Elizabeth Street Hobart in Tasmania as the auditor of the Company. 8. Change of Company Name That, for the purposes of section 157 of the Corporations Act, approval be given to change the Company s name from "Zeehan Zinc Limited" to "Creat Resources Holdings Limited", effective from the time Australian Securities and Investments Commission alters the details of the Company's registration. 9. Change in Strategy To consider and, if thought fit, to pass the following resolution as an ordinary resolution: That, for the purposes of the AIM Rules for Companies published by the London Stock Exchange, approval be given for the Company to focus on expansion of its mining operations and resource diversification within the resource industry as described in the attached Explanatory Memorandum. 10. Meeting Close By order of the Board Yasmine Healy Company Secretary Hobart, 7 July 2009

4 EGM ITEMS EXPLANATORY MEMORANDUM This Explanatory Memorandum provides information in relation to the Business of the 2009 Extraordinary General Meeting. At the Annual General Meeting of the Company on 14 November 2008, and in the context of the Company's then urgent need for funding to satisfy its current and long term liabilities, member approval was given for the Creat Group (which includes Marvel Link Group Limited and Kingswealth Finance Limited), an existing shareholder of the Company, to subscribe for a total of million additional shares at approximately 1 pence per share. This resulted in the Company raising approximately A$7,200,000. These funds have, and will continue to be, applied to fund the Company s operations and meet its objectives. As a result of this share issue, the Creat Group has an ownership interest in and controls 70% of the shares on issue of the Company. Two directors of the Company, Mr Xiaojian Ren and Dr Yuewen Zheng have controlling ownership interests in the Creat Group and its subsidiaries Marvel Link Group Limited and Kingswealth Finance Limited. Agenda Item 2 In light of the prevailing global economic climate and current resource prices, the Board of Directors considers it would be in the best interests of the Company to expand the Company s operations and business interests in mining nationally and globally, at the same time as continuing to further its exploration activities on its Tasmanian licenses with a view to extracting, producing and selling any viable commercial quantities of resources discovered. In order to facilitate this expansion and to achieve resource diversification, it is proposed that the Company borrow US$30,000,000 from the financial institution, RZB Austria Finance (Hong Kong) Limited (the "Lender"), and that this facility be guaranteed by the Company's related parties Marvel Link Group Limited and Kingswealth Finance Limited (both subsidiaries of the Creat Group). Based on the Company s preliminary discussions, the Directors consider the Company has the potential to acquire distressed mining businesses through share sales, purchases of assets or similar for a price that reflects the current global economic climate. Rule of the Constitution currently provides that the Company cannot borrow an amount in excess of three times the adjusted capital of the Company without shareholder approval. In light of the potential opportunities for the Company to expand referred to above, the Directors consider that this limit on the ability of the Company to borrow funds is unnecessarily restrictive and limits the Company's ability to act quickly in order to take advantage of opportunities in the market place as they present themselves and propose that rule 18.1 be deleted in its entirety to give the Company more flexibility. The Board recommends that shareholders vote in favour of this resolution. Agenda Item 3 As an example of the requirement to borrow amounts in excess of 3 times adjusted capital and as referred to above, the Board of Directors are proposing that the Company borrow US$30,000,000 from the financial institution, RZB Austria Finance (Hong Kong) Limited in order to facilitate the expansion of the Company and to achieve resource diversification. It is proposed that the loan will be to the Company as borrower, with the Company's related parties Marvel Link Group Limited and Kingswealth Finance Limited, guaranteeing the Company's obligations under that facility. Rule of the Constitution provides that the Company cannot borrow an amount in excess of three times the adjusted capital of the Company without shareholder approval. The proposed loan of US$30,000,000 is approximately 4.6 times the adjusted capital of the Company as at the date of this Notice of Meeting. Accordingly, if the resolution contained in Agenda Item 2 ("Resolution 1") is not passed by shareholders, the Company will seek shareholder approval to enter into the loan agreement for the purposes of rule of the Constitution. If Resolution 1 is passed by shareholders, the Company will not be required to seek shareholder approval for the purposes of rule of the Constitution. The material terms of the Loan Agreement are summarised below: Lender: RZB Austria Finance (Hong Kong) Limited.

5 Borrower: Guarantors: Facility Limit: Interest Rate: Conditions: Termination: Repayment: Fees & Charges: Security Provided: the Company Marvel Link Group Limited and Kingswealth Finance Limited (both subsidiaries of the Creat Group) who shall guarantee the Company's liability for all Loans up to the Facility Limit. US$30,000,000. Equal to the sum of the Lender's "cost of funding" (being the cost expressed as a % to the Lender of funding or maintaining a Loan for 3 months from whatever source it may select) plus a margin of 3.5% payable every 3 months on the outstanding principal in relation to each Loan. For example, LIBOR + 3.5%. Drawdown conditional on no default, no breach of representations and warranties provided for in the agreement and the aggregate amount of loans not exceeding the Facility Limit. Availability of the Facility shall be subject to Lender's review from time to time and Lender reserves right to terminate Facility at any time by notice to the Borrower whereupon all outstanding principal and interest shall become immediately due and payable. Subject to termination rights of the Lender, the Borrower must repay all outstanding principal and interest on Final Maturity Date, being approximately 30 June Early repayment permitted and prepaid funds may be redrawn. Management fee payable to the Lender of US$150,000 (once off). The Borrower must pay all Lender's costs associated with the preparation, execution and enforcement of the Loan Agreement and all stamp duty and other taxes, fees etc. Includes a Fixed and Floating Charge over the assets of the Company and Fixed and Floating Charge over the assets and undertaking of each of Marvel Link Group Limited and Kingswealth Finance Limited, Share Mortgages over the shares in Marvel Link Group Limited and Kingswealth Finance Limited held by Dr Yuewen Zheng and Mr Xiaojian Ren, respectively, Share Mortgages over the shares in all the Australian companies wholly owned by the Borrower, Share Mortgage over the shares in the Company held by Marvel Link Group Limited, Personal Guarantees from some or all of the directors of each of Marvel Link Group Limited and Kingswealth Finance Limited which include Mr Xiaojian Ren and Dr Yuewen Zheng and a charge over the all cash and deposits in the accounts of the Company and the Guarantors held with Raiffeisen Zentralbank Oesterreich (RZB) Beijing Branch. The terms of the Loan Agreement currently provide that the funds drawn down under the Facility may only be applied toward the acquisition by the Company of one or both of two specific mining assets specified in the Loan Agreement, the names of which cannot be disclosed at this point in time due to confidentiality requirements associated with those negotiations. These acquisitions would take place through acquiring shares or other equity interests in the company or companies which currently own those mining assets (the "Acquisition"). In the event that the Acquisition does not occur within the 12 month period commencing on the date of the Loan Agreement, the Lender is entitled to terminate the Facility and the Loan Agreement. However, in those circumstances, it is the current intention of the Board to renegotiate the terms of the Loan Agreement with the Lender such that the funds available under the Facility may be applied toward alternative mining asset acquisitions. It is also a term of the Loan Agreement that the Company procure the investment of not less than $US30,000,000 by new investors in the Company within 18 months of the date of the Loan Agreement ("New Equity Investments"). On completion of the New Equity Investments the Company must apply the proceeds of such investment toward a mandatory pre-payment of the Loans made under the Facility. In the event that the Company is unable to procure all or any part of the New Equity Investments, the Company must apply funds to be held in a Debt Service Reserve Account which shall be received from the Creat Group Corp. Ltd in order to satisfy the mandatory repayment of the Loans. Directors' recommendation: The directors unanimously recommend shareholders vote in favour of the Resolution as it will: (a) allow the Company to diversify its business interests in mining and exploit additional resources thereby limiting risk of suffering a loss by concentrating on zinc, lead and silver only in a climate where those commodity prices have recently fallen;

6 (b) (c) allow the Company to utilize the leveraging position of its related parties that are willing to provide security and guarantee the repayment of the loan in the event of the Company's default; and allow the Company to grow its value internationally with a view to enhancing shareholder value. Other information that is reasonably required by shareholders to make a decision and that is known to the Company or any of its directors: The proposed loan agreement requires that, in addition to the Company providing security in the form of a fixed and floating charge over the assets and undertaking of the Company and its subsidiaries, Marvel Link Group Limited provide a mortgage over the shares that it holds in the Company. Shareholders should therefore be aware that should the Company and the Guarantors default, the Lender would be able to, in addition to realizing the Company's assets in order to satisfy the loan, acquire a controlling interest in the Company through exercising its rights under the share mortgage. Such an acquisition of a relevant interest in the shares in the Company by the Lender would be exempt from the takeover prohibitions under the Corporations Act - see Item 6 of section 611 of the Corporations Act. Agenda Item 4 As referred to above, the Board are of the view that there may be significant opportunities for the Company to make acquisitions of either shares or assets in order to expand the Company s operations and business interests in mining nationally and globally and, given the current state of the economic climate, that these opportunities could be further enhanced due to the fact that such assets and shares may well be acquired from distressed mining businesses at reduced prices. Rule 17.1 of the Constitution restricts the Board of Director's ability to issues shares in the Company, save for a general authority to issue up to 1/3 of the outstanding issued share capital of the Company in the period following an annual general meeting of the Company until the next annual general meeting (i.e. an annual 1/3 limitation). In light of: (a) (b) the desire to be able to raise funds without the time restraints associated with having to hold a general meeting of shareholders in order to obtain approval; and the terms of the Loan Agreement referred to above under Agenda Item 3 requiring the Company to procure the New Equity Investments (of not less than $US30,000,000) in the Company within 18 months of the date of the Loan Agreement, the Board is proposing to delete Rule 17.1 of the Constitution in its entirety in order to give the Board more flexibility to allow the Company to take advantage of opportunities as they present themselves. Where it is proposed to issue securities for cash consideration, then pre-emption rights for existing shareholders will apply, subject to the existing limits provided for in Rule and, if passed, the limits proposed in the resolution contained in Agenda Item 5. Any issue of shares in the Company associated with the New Equity Investments referred to above shall have the effect of diluting the existing holdings of shareholders in the Company. The Board recommends that shareholders vote in favour of this resolution. Agenda Item 5 Assuming that the resolution contained in Agenda Item 4 is passed, Rule of the Constitution should be amended as set out in the resolution contained in Agenda Item 5 in order to account for the deletion of rule 17.1 of the Constitution. Further, if Rule 17.1 is deleted, Rules and become redundant and should therefore also be deleted. Rule of the Constitution currently provides that pre-emption rights on any proposed issue of shares or securities convertible into shares for cash could be disapplied by the Board for the issue of up to 15% of the outstanding issued share capital of the Company in the period following an annual general meeting of the Company until the next annual general meeting. It is customary for AIM companies to approve a level of pre-emption rights disapplication on an annual basis to allow the Board to make decisions to raise capital in relatively short periods of time if the need arises. The Board, in light of information referred to above under Agenda Items 2 and 4, proposes to amend the Constitution so that pre-emption rights

7 can be disapplied on an annual basis, at a level which reflects the capital intensive nature of the Company's business and proposed expansion and development stages. Accordingly, immediately following this extraordinary general meeting (and in the period prior to the 2010 AGM) it is proposed that the Directors shall be entitled to issue Equity Securities up to a level of 50% of the issued number of shares at the time without having to apply the pre-emption rights in the Constitution provided for in rules to In addition, it is proposed that the Directors will be entitled to issue Equity Securities to a level equal to 30% of the issued number of shares in the Company in each year after the 2010 Annual General Meeting. This will allow the Company to comply with its obligations under the Loan Agreement to make the New Equity Investments (as referred to under Agenda Item 3). The Board recommends that shareholders vote in favour of this resolution. Agenda Item 6 Section 329 of the Corporations Act provides that an auditor of a Company may be removed from office by resolution at a general meeting of which notice of intention to the move the resolution has been given. The Company has received a notice of intention from Marvel Link Group Limited, being a shareholder of the Company, to remove the current auditors, UHY Haines Norton. Accordingly, shareholder approval is sought to remove the current auditors. It is understood that the reasons for the proposed removal of UHY Haines Norton are: the fees to date are significantly higher than the cost of services provided by a competitor; and the Auditor is based in Sydney, requiring the Company to spend significant resources on hosting the Auditor to complete the services, whereby appointing a local auditor would avoid this cost. The Board recommends that shareholders vote in favour of this resolution. Agenda Item 7 Section 327D of the Corporations Act provides that the Company, by way of special resolution at a general meeting, may appoint an auditor to replace an auditor removed in accordance with section 329. Accordingly, approval is sought from shareholders for the appointment of Deloitte Touche Tohmatsu as auditors of the Company (assuming that the resolution contained in Agenda Item 6 is passed). The Directors have received a notice of nomination from Marvel Link Group Limited, being a shareholder of the Company, for the appointment of Deloitte Touche Tohmatsu as auditors of the Company. A copy of this notice of nomination is set out in Schedule 1. Deloitte Touche Tohmatsu has given the Company the necessary consent to act as auditor of the Company. If the resolution contained in Agenda Item 6 and the special resolution contained in Agenda Item 7 are passed, Deloitte Touche Tohmatsu will hold office until the next Annual General Meeting of the Company where they, subject to receipt by the Company of a nomination from a shareholder or shareholders, will be eligible for re-election by shareholders at the Annual General Meeting. Agenda Item 8 In line with the Company s objectives of expanding the Company both in terms of resource diversification and acquiring business interests in mining nationally and globally, the Board of Directors consider it no longer appropriate that the Company s name represents one site of operations and one resource. Given the Company s biggest and controlling shareholder is providing the financial leverage to fund the Company s operations and expansion, the Directors consider it appropriate that the name of the Company reflect its proposed operations and is changed to "Creat Resources Holdings Limited". The independent Directors each recommend that shareholders vote in favour of this resolution. Agenda Item 9

8 As outlined above, the Directors consider there are a variety of attractive transactions in the market given the global financial climate has left many companies under financial distress that are looking to divest. The Directors consider it would be advantageous to the Company to proceed with acquisitions or other transactions that would result in expansion of its mining operations within and outside Australia and resource diversification (including gold, nickel, and a continued focus on lead, zinc and silver) in order to spread the risk of commodity fluctuations and take advantage of the deals on offer. Assuming member approval is sought to effect the loan agreement, the Company will have access to funds to enable it to proceed with attractive acquisitions. In addition the Creat Group Corp. Ltd., a significant stakeholder to the Company has indicated is continued financial and human resources support in executing the strategy. The Company has historically pursued a strategy of exploration and mining with a view to processing and selling commercial quantities of zinc, lead and silver within its leases on the West Coast of Tasmania. The Company now seeks to adopt a dual focus of continuing its exploration activities at the same time as expanding its mining operations and resource interests. Given the change in strategy represents a significant development and the requirement of the AIM Rules for Companies published by the London Stock Exchange to obtain shareholder approval, the Directors now seek member approval to proceed.