LION DIVERSIFIED HOLDINGS BERHAD (9428-T) (Incorporated in Malaysia)

Transcription

1 THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. If you are in any doubt as to the course of action you should take, you should consult your stockbroker, bank manager, solicitor, accountant or other professional adviser immediately. Bursa Malaysia Securities Berhad takes no responsibility for the contents of this Circular, makes no representation as to its accuracy or completeness and expressly disclaims any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this Circular. LION DIVERSIFIED HOLDINGS BERHAD (9428-T) (Incorporated in Malaysia) CIRCULAR TO SHAREHOLDERS IN RELATION TO THE PROPOSED CONTRACT-TO-WORK AGREEMENT BETWEEN BANTING RESOURCES SDN BHD, A WHOLLY-OWNED SUBSIDIARY OF THE COMPANY AND LION TIN SDN BHD IN RESPECT OF THE MINING ACTIVITIES (AS DEFINED HEREIN) ON THE SIX (6) PIECES OF LAND LOCATED IN MUKIM TANJUNG DUABELAS, DAERAH KUALA LANGAT, NEGERI SELANGOR ( PROPOSED AWARD OF CONTRACT ) AND NOTICE OF EXTRAORDINARY GENERAL MEETING The Notice convening the Extraordinary General Meeting ( EGM ) of the Company to be held at the Meeting Hall, Level 16, Lion Office Tower, No. 1 Jalan Nagasari, Kuala Lumpur, Wilayah Persekutuan on Wednesday, 22 November 2017 at 3.00 pm, or immediately after the conclusion or adjournment of the 47th Annual General Meeting of the Company ( 47th AGM ), scheduled to be held at the same venue and on the same date at 2.00 pm, whichever is the later, together with the Form of Proxy are enclosed herewith. You are requested to complete the enclosed Form of Proxy and deposit it at the Office of the Registrar of the Company at Level 13, Lion Office Tower, No. 1 Jalan Nagasari, Kuala Lumpur, Wilayah Persekutuan on or before the date and time indicated below if you are not able to attend the EGM. The lodging of the Form of Proxy shall not preclude you from attending and voting in person at the EGM should you subsequently wish to do so. Last date and time for lodging the Form of Proxy : Monday, 20 November 2017 at 3.00 pm Date and time of the EGM : Wednesday, 22 November 2017 at 3.00 pm, or immediately after the conclusion or adjournment of the 47th AGM, scheduled to be held at the same venue and on the same date at 2.00 pm, whichever is the later This Circular is dated 7 November 2017

2 DEFINITIONS For the purpose of this Circular, except where the context otherwise requires, the following terms and expressions shall have the following meanings: Act : Companies Act 2016 as amended from time to time including any re-enactment thereof AGM : Annual General Meeting of the Company Agreement : A contract-to-work agreement dated 11 October 2017 entered into between BRSB and LTSB whereby BRSB appointed LTSB as its independent contractor and granted LTSB the exclusive right to undertake Mining Activities on the Mining Land AMSB : Amsteel Mills Sdn Bhd Antara : Antara Steel Mills Sdn Bhd Board : Board of Directors of LDHB BRSB : Banting Resources Sdn Bhd, a wholly-owned subsidiary of LDHB Bursa Depository : Bursa Malaysia Depository Sdn Bhd Bursa Securities : Bursa Malaysia Securities Berhad Circular : This Circular dated 7 November 2017 in relation to the Proposed Award of Contract CPB Enterprise : CPB Enterprise Sdn Bhd, a wholly-owned subsidiary of LDHB Dynamic Horizon : Dynamic Horizon Holdings Limited EGM : Extraordinary General Meeting of the Company EPS : Earnings per share GST : Goods and Services Tax LDHB Group or the Group : LDHB and its subsidiaries, collectively LDHB or the Company : Lion Diversified Holdings Berhad LDP : Lion Development (Penang) Sdn Bhd LHPL : Lion Holdings Private Limited LICB : Lion Industries Corporation Berhad Likom Computer : Likom Computer System Sdn Bhd Listing Requirements : Main Market Listing Requirements of Bursa Securities LLB Steel : LLB Steel Industries Sdn Bhd LPD : 31 October 2017, being the latest practicable date prior to the printing of this Circular LTSB : Lion Tin Sdn Bhd Minerals : Tin and other mineral deposits found either in or upon the soil of earth or in the rocks beneath the soil, including but not limited to, sand, silica, clay and amang i

3 DEFINITIONS (CONT D) Mining Activities : Plan, study, research, explore prospect, extract, mine, remove, develop, produce, handle, mill or other processing of Minerals by whatever methods and to whatever extent that LTSB shall deem advisable in its sole discretion and to manage, administer, market, sell and receive for its own account and benefit, the sale proceeds of the Minerals mined by LTSB on the Mining Land Mining Land : Collectively, the six (6) pieces of land beneficially owned by BRSB under the following documents of title: (i) Geran Lot 12236; (ii) Geran Lot 2324; (iii) Geran Lot 8379; (iv) Geran Lot 12164; (v) PN Lot 2697; and (vi) PN22678 Lot 2699 measuring approximately 800 acres in total, all in Mukim Tanjung Duabelas, Daerah Kuala Langat, Negeri Selangor Mining Tribute : Mining tribute equivalent to 10% of the revenue net of royalty (royalty is payable to the State Government of Selangor) of each type of mineral mined, processed and sold, calculated based on Mining Tribute Statements Mining Tribute Statements : Statements outlining the amount of mining tribute payable to BRSB prepared by LTSB pursuant to the Agreement Narajaya : Narajaya Sdn Bhd NL : Net liabilities Original Agreement : A contract-to-work agreement dated 2 September 2013 entered into between BRSB and LTSB whereby BRSB appointed LTSB as its independent contractor and granted LTSB the exclusive right to undertake Mining Activities on the Mining Land Proposed Award of Contract : Proposed contract-to-work agreement between BRSB and LTSB in respect of the Mining Activities on the Mining Land Record of Depositors : Record of depositors provided by Bursa Depository to the Company under the Rules of Bursa Depository Ributasi : Ributasi Holdings Sdn Bhd Right of Way : Access or right of way of the service roads within the boundary of the Mining Land RM and sen : Ringgit Malaysia and sen respectively SJ Securities : SJ Securities Sdn Bhd Steelcorp : Steelcorp Sdn Bhd Supplemental Letter : A supplemental letter dated 2 November 2017 entered into between BRSB and LTSB to vary and amend the term in relation to the Right of Way TSAC : Y. Bhg. Tan Sri Cheng Yong Kim TSWC : Y. Bhg. Tan Sri William H.J. Cheng WCSB : William Cheng Sdn Bhd ii

4 DEFINITIONS (CONT D) Words importing the singular shall, where applicable, include the plural and vice versa, and words importing the masculine gender shall, where applicable, include the feminine and/or neuter gender, and vice versa. References to persons shall include corporations, unless otherwise specified. Any reference in this Circular to any enactment or guidelines is a reference to that enactment or guidelines as for the time being amended or re-enacted. Any reference to a time of day in this Circular shall be a reference to the Malaysian time, unless otherwise stated. THE REST OF THIS PAGE IS INTENTIONALLY LEFT BLANK iii

5 TABLE OF CONTENTS LETTER FROM THE BOARD TO THE SHAREHOLDERS OF LDHB IN RELATION TO THE PROPOSED AWARD OF CONTRACT PAGE 1. INTRODUCTION 1 2. DETAILS OF THE PROPOSED AWARD OF CONTRACT 2 3. RATIONALE FOR THE PROPOSED AWARD OF CONTRACT 8 4. EFFECTS OF THE PROPOSED AWARD OF CONTRACT 8 5. RISK FACTORS IN RELATION TO THE PROPOSED AWARD OF CONTRACT 9 6. DIRECTORS AND MAJOR SHAREHOLDERS INTERESTS HIGHEST PERCENTAGE RATIO APPLICABLE APPROVALS REQUIRED FOR THE PROPOSED AWARD OF CONTRACT TRANSACTIONS WITH THE SAME RELATED PARTY FOR THE PRECEDING 12 MONTHS ESTIMATED TIME FRAME FOR COMPLETION CORPORATE EXERCISE/SCHEME ANNOUNCED BUT PENDING COMPLETION AUDIT COMMITTEE S STATEMENT DIRECTORS RECOMMENDATION INDEPENDENT ADVISER EGM FURTHER INFORMATION 13 APPENDIX APPENDIX I FURTHER INFORMATION 14 NOTICE OF EGM FORM OF PROXY ENCLOSED ENCLOSED iv

6 LION DIVERSIFIED HOLDINGS BERHAD (9428-T) (Incorporated in Malaysia) Registered Office: Level 14, Lion Office Tower No. 1 Jalan Nagasari Kuala Lumpur Wilayah Persekutuan 7 November 2017 Directors: Tan Sri William H.J. Cheng (Non-Independent Non-Executive Chairman) Tan Sri Cheng Yong Kim (Managing Director) Tan Sri Dato Seri Dr Aseh bin Haji Che Mat (Independent Non-Executive Director) Dato Mohamad Kamarudin bin Hassan (Independent Non-Executive Director) Tan Chee Chai (Independent Non-Executive Director) Ooi Kim Lai (Non-Independent Non-Executive Director) To: The Shareholders of Lion Diversified Holdings Berhad Dear Sir/Madam PROPOSED AWARD OF CONTRACT 1. INTRODUCTION On 11 October 2017, the Board had announced that BRSB had on even date entered into the Agreement with LTSB, whereby BRSB shall, in consideration of the Mining Tribute, grant LTSB the sole and exclusive right to carry out the Mining Activities on the Mining Land. Subsequently, the Board had on 2 November 2017 announced that BRSB had on even date entered into the Supplemental letter with LTSB to vary and amend the term in relation to the Right of Way as disclosed in Section 2.4(xiv) of the Circular. The purpose of this Circular is to provide the shareholders of LDHB with the details of the Proposed Award of Contract and to seek the approval of the shareholders of LDHB for the Ordinary Resolution pertaining to the Proposed Award of Contract to be tabled at the forthcoming EGM. The Notice of the EGM and the Form of Proxy are enclosed together with this Circular. The information contained in Appendix I forms part of this Circular. SHAREHOLDERS OF LDHB ARE ADVISED TO READ AND CONSIDER CAREFULLY THE CONTENTS OF THE CIRCULAR TOGETHER WITH THE APPENDIX BEFORE VOTING ON THE ORDINARY RESOLUTION TO GIVE EFFECT TO THE PROPOSED AWARD OF CONTRACT AT THE FORTHCOMING EGM. 1

7 2. DETAILS OF THE PROPOSED AWARD OF CONTRACT 2.1 Background of the Mining Activities BRSB had in March 2013 submitted the relevant applications to Pejabat Tanah dan Galian Selangor ( PTG Selangor ) for proprietary mining licences for the planning, studying, researching, exploration, extraction, mining, removal, development, production, handling, milling or other processing of the tin and other mineral deposits found either in or upon the soil of earth or in the rocks beneath the soil, including but not limited to, sand, silica, clay and amang to be undertaken and carried out on the Mining Land ( Proprietary Mining Licenses ). The approval for the Proprietary Mining Licenses is pending from PTG Selangor. BRSB and LTSB had on 2 September 2013 entered into the Original Agreement. Subsequently, LTSB started the Mining Activities on the Mining Land following BRSB obtaining a permit on 22 October 2013 to extract sand from part of the Mining Land measuring approximately 120 acres for the period until 31 December The permit was subsequently renewed on quarterly basis. The existing sand permit, which was renewed on 2 October 2017, is valid until 31 December The Proprietary Mining Licenses, which are pending approval from PTG Selangor to BRSB, will allow the undertaking of mining activities for minerals including tin, silica, clay and amang. Upon obtaining the Proprietary Mining Licenses, BRSB will then need to obtain permits for each of the Minerals from Jabatan Mineral and Geosains Malaysia to carry out the operation of the mining activities such as processing and sale of the Minerals. Approval of LDHB s shareholders for entering into recurrent related party transactions of a revenue or trading nature comprising tribute income in relation to mining activities, was obtained on 19 December 2013 at the 43rd Annual General Meeting of the Company. The renewal of the shareholders mandate for recurrent related party transactions was sought and obtained on a yearly basis thereafter. Since the commencement of the Mining Activities, the total mining tribute attributable to BRSB up to 30 September 2017 is RM0.92 million wherein all costs incurred on the Mining Activities were entirely borne by LTSB. For financial year ended 30 June 2017, the mining tribute attributable to BRSB was RM0.12 million whilst the mining tribute attributable to BRSB in financial year ended 30 June 2016 was RM0.13 million of which an illustration of the calculation is set out below: Amount (RM mil) Revenue from Mining Activities 2.49 Less: Royalty paid (0.66) Net revenue 1.83 Mining tribute (calculated at 7% of the net revenue) 0.13 BRSB and LTSB had entered into the Agreement for the Proposed Award of Contract to formally govern the long term relationship between the parties in respect of the Mining Activities to be undertaken and carried out on the Mining Land that will facilitate the Mining Activities upon obtaining the state authority s approval. 2

8 2.2 Information on LTSB LTSB was incorporated in Malaysia under the Act on 19 April 2012 as a private limited liability company. It is principally involved in sand and tin mining. LTSB has started its mining activities on the Mining Land in October 2013 and thereafter, had not undertaken other mining activities other than that on the Mining Land. As at the LPD, the issued share capital of LTSB is RM2,000,000 and the total number of issued shares of LTSB is 2,000,000 ordinary shares. The directors of LTSB are TSWC and TSAC. LTSB is a wholly-owned subsidiary of Lion Tin Investments Limited, which is in turn a wholly-owned subsidiary of Lion Tin Limited. Lion Tin Limited was incorporated in the Cayman Islands on 16 April The shareholders of Lion Tin Limited, which is the ultimate holding company of LTSB, are as follows: Shareholder Number of ordinary Percentage shareholding shares held TSWC 1 50% TSAC 1 50% Total 2 100% The senior management of LTSB has vast experience and expertise in mining activities and they are among the leading experts in Malaysia for alluvial mining methods and procedures. There are 7 senior management members and 4 of them have prior working experiences ranging from 14 to 21 years in MMC Corporation Berhad (formerly known as Malaysia Mining Corporation Berhad), a mining consultancy and geological and dredging survey company. 2.3 Basis and justification of the Mining Tribute In consideration of BRSB granting to LTSB the sole and exclusive right to carry out the Mining Activities on the Mining Land, LTSB shall pay to BRSB, a Mining Tribute equivalent to 10% of the revenue net of royalty (royalty is payable to the State Government of Selangor) of each type of mineral mined, processed and sold, calculated based on Mining Tribute Statements. The Mining Tribute was arrived at after negotiations and taking into consideration, inter alia, the following: (i) (ii) (iii) (iv) the intended Mining Activities to be undertaken by LTSB on the Mining Land for a period of ten (10) years and, in the event the initial term being extended, for a further period of five (5) years; the consideration of BRSB s Management in terms of the production levels and selling prices of the Minerals to be extracted from the Mining Land; the working capital requirement of approximately RM20 million and capital expenditure of approximately RM113 million for plant and machinery (which were arrived at after taking into consideration the mining plan for the extraction of the relevant Minerals) if the Group were to operate the Mining Activities on its own; the shortage of adequate skilled manpower, energy and other resources in the Group if the Group were to operate the Mining Activities on its owns; and 3

9 (v) risks factors associated with the Mining Activities on the Mining Land, as disclosed in Section 5 of the Circular. The amount of the Mining Tribute cannot be ascertained at this juncture as it is dependent on the sales volume and the market price of the Minerals that are extracted for sale pursuant to the Mining Activities to be carried out in the future. 2.4 Salient terms of the Agreement The salient terms of the Agreement include, inter alia, the following: (i) (ii) (iii) (iv) (v) BRSB shall grant LTSB, the sole and exclusive right to carry out the Mining Activities by whatever methods and to whatever extent that LTSB shall deem advisable in its sole discretion and to manage, administer, market, sell and receive for its own account and benefit, the sale proceeds of the Minerals mined by LTSB on the Mining Land; The Agreement is conditional upon BRSB obtaining the approval of the shareholders of LDHB ( Condition Precedent ) within four (4) months from the date of the Agreement or such other later date as the parties may mutually agree in writing ( Stop Date ); Upon the Condition Precedent being satisfied on or before the Stop Date ( Effective Date ), the Original Agreement shall be deemed to have been mutually terminated, ceases to have any effect and becomes null and void and both parties shall have no further claims against each other save for BRSB shall be entitled to all Mining Tribute payable to BRSB which have accrued prior to the Effective Date and for antecedent breach, if any; If the Condition Precedent cannot be satisfied on or before the Stop Date, the Agreement shall automatically terminate and the terms and conditions stipulated in the Original Agreement shall continue to be effective, valid and binding on the parties; The Agreement shall commence from the Effective Date and shall unless terminated under the terms of the Agreement, expire on:- (a) (b) the date falling ten (10) years from the Effective Date; or upon determination by LTSB (supported by an independent expert report by an independent expert jointly appointed by LTSB and BRSB) that it is no longer viable to continue with the Mining Activities on the Mining Land, whichever is earlier ( Initial Term ); (vi) Upon expiry of the Initial Term and provided always that LTSB determines (supported by an independent expert s report by an independent expert jointly appointed by LTSB and BRSB) that it is still commercially viable to continue with the Mining Activities on the Mining Land, the Agreement shall automatically be renewed for a further term of five (5) years on the same terms and conditions contained in the Agreement (save and except for the provision for renewal); 4

10 (vii) Notwithstanding the non-default, LTSB shall have the right to terminate the Agreement by issuing a written notice to BRSB upon the occurrence of amongst others, any of the following events: (a) (b) (c) (d) LTSB determines (and supported by independent expert report by an independent expert jointly appointed by LTSB and BRSB) that it is no longer commercially viable to continue the Mining Activities on the Mining Land; any of the permits, licences and/or approvals necessary for the Mining Activities to be carried out on the Mining Land having been obtained, is revoked, cancelled or terminated due to no fault of either party and the parties having exhausted all avenues to restore the same resulting in LTSB being unable to lawfully carry out the Mining Activities on the Mining Land; the government or the relevant state authority or local authority or any other authority prohibits or disallows the Mining Activities to be carried out on the Mining Land for any reason whatsoever due to no fault of either party; and any change in laws, regulations or policies which result in the arrangement contemplated under this Agreement to be illegal or unlawful. (viii) LTSB shall endeavour to sell the Minerals at no less than the following minimum pricing ( Minimum Pricing ): (a) (b) (c) in respect of tin ingots, the minimum price shall be determined based on the market price of the Kuala Lumpur Tin Market; in respect of tin ore, the minimum price shall be determined based on the pricing provided by Malaysia Smelting Corporation Berhad or the other calculation formula to be agreed between LTSB and other smelters; and in respect of Minerals other than tin ingots and tin ore, the minimum price shall be determined based on the market price of such Minerals, provided always that where LTSB sells any of the Minerals below the Minimum Pricing, LTSB shall still pay Mining Tribute to BRSB calculated based on such Minimum Pricing. For the avoidance of doubt, where LTSB sells any of the Minerals above the Minimum Pricing, LTSB shall pay Mining Tribute to BRSB based on such price above the Minimum Pricing. (ix) LTSB shall pay to BRSB, Mining Tribute of 10% of the revenue net of royalty (royalty is payable to the State Government of Selangor) of each type of Mineral mined, processed and sold, calculated based on Mining Tribute Statements; 5

11 (x) For the purposes of calculating the Mining Tribute, LTSB shall issue and provide Mining Tribute Statements to BRSB as follows: (a) (b) in respect of Mining Tribute attributable to tin, LTSB shall issue Mining Tribute Statements to BRSB no later than seven (7) days from the fifteen (15th) and last day of each calendar month respectively; and in respect of Mining Tribute attributable to Minerals other than tin, LTSB shall issue and provide Mining Tribute Statements to BRSB no later than fourteen (14) days from the end of each calendar month. (xi) The Mining Tribute shall be paid by LTSB to BRSB as follows: (a) (b) for tax invoice issued for the Mining Tribute attributable for tin, payment shall be made no later than seven (7) days from the date of the relevant tax invoice; and for tax invoice issued for the Mining Tribute attributable for minerals other than tin, payment shall be made no later than fourteen (14) days from the date of the relevant tax invoice. (xii) (xiii) (xiv) BRSB shall grant to LTSB the option to purchase the Mining Land from BRSB, to be exercised by LTSB at any time commencing after six (6) months from the date of this Agreement and expiring on the expiry or termination of this Agreement at the price determined based on the average of the market value of the Mining Land as determined by the valuations of two (2) land valuers (to be separately appointed by the parties respectively), subject to BRSB obtaining any shareholders approval of its holding company and any other regulatory, governmental or third party approvals or consents which may be required; If BRSB receives an offer to purchase the Mining Land from a bona fide third party purchaser ( Third Party Purchaser ) and decides to sell the Mining Land during the term of the Agreement, BRSB shall grant LTSB the right of first refusal to purchase the Mining Land upon the same terms and conditions as proposed by such Third Party Purchaser ( Offer ); and In consideration of the Mining Tributes and the payment of a further sum of Ringgit Malaysia Ten (RM10.00) by LTSB upon the execution of the Agreement, BRSB will grant to LTSB the access or right of way of the service roads within the boundary of the Mining Land ( Right of Way ), and agree to the creation of an easement for the Right of Way to be registered on the titles of the Mining Land upon the written request of LTSB provided that all costs for the registration of the easement shall be borne by LTSB. The Right of Way shall remain in force and effect even after the expiry or termination of the Agreement for such period to be determined by LTSB, subject to payment of a further consideration (to be determined by an independent valuer to be jointly appointed by the parties). The Right of Way shall subsist for the said period until LTSB provides notice in writing to BRSB that LTSB determines in its sole discretion that the Right of Way is no longer necessary. 6

12 2.5 Table on material differences between the Original Agreement and the Agreement The table on material differences between the Original Agreement and the Agreement are set out in the table below: Items Original Agreement Agreement Duration The shareholders mandate for Please refer to Sections 2.4(v) recurrent related party and (vi) of the Circular transactions to be renewed on a yearly basis Mining tribute Minimum Pricing Payment terms No fault termination Option to purchase the Mining Land 7% of the revenue net of royalty of each type of Mineral mined and sold, provided always that no Mining Tribute shall be paid by LTSB to BRSB in the event LTSB suffers a net loss from the Mining Activities No similar clause The mining tribute shall be paid by LTSB to BRSB on a quarterly basis and no later than 45 days from the end of each calendar quarter (i) LTSB determines in its sole discretion that it is no longer commercially viable to continue the Mining Activities on the Mining Land; (ii) the expiration of any twoyear period during which no commercial Mining Activities on the Mining Land are undertaken; and (iii) any of the approvals necessary for the Mining Activities, having been obtained, is revoked, cancelled or terminated and LTSB could not lawfully carry out the Mining Activities on the Mining Land No similar clause Please refer to Section 2.4(ix) of the Circular Please refer to Section 2.4(viii) of the Circular Please refer to Sections 2.4(x) and (xi) of the Circular Please refer to Section 2.4(vii) of the Circular Please refer to Section 2.4(xii) of the Circular 7

13 Items Original Agreement Agreement Right of first refusal granted No similar clause Please refer to Section 2.4(xiii) of the Circular by BRSB to LTSB Right of Way No similar clause Please refer to Section 2.4(xiv) of the Circular 2.6 Proposed utilisation of Mining Tribute The Mining Tribute is expected to be utilised mainly for working capital, repayment of bank borrowings and/or investments for the Group in future wherein the timeframe of the utilisation cannot be determined at this juncture. The total borrowings of the Group as at the LPD is RM265.1 million. In the event the Mining Tribute is not immediately utilised, it will be placed in deposits with financial institution(s) and/or short term money market instrument(s). 3. RATIONALE FOR THE PROPOSED AWARD OF CONTRACT The Proposed Award of Contract will allow BRSB to realise potential earnings from the Mining Activities to be undertaken on the Mining Land without incurring material operational and capital costs in the process as LTSB is responsible for bearing such costs to extract the Minerals. The Proposed Award of Contract will facilitate the Mining Activities on the Mining Land and consequentially, provides a medium to long term source of revenue and profit through the receipt of the Mining Tributes which are based on the value of the Minerals extracted from the Mining Land. In any event, given LDHB s status pursuant to Practice Note 17 of the Listing Requirements, wherein there are shortages in financial resources to support any plan by LDHB to undertake the Mining Activities itself, considering the anticipated implementation timeframe of up to 18 months and the need to incur working capital of approximately RM20 million and capital expenditure of approximately RM113 million for plant and machinery. In addition, there would be cost incurred in employing a mining team to manage the Mining Activities. In contrast to the Proposed Award of Contract, undertaking the Mining Activities itself would expose LDHB to significant business risks, including but not restricted to productivity and operational cost issues, the shortage of skilled employees and other resources for mining operations. 4. EFFECTS OF THE PROPOSED AWARD OF CONTRACT 4.1 Share Capital and Substantial Shareholders Shareholdings The Proposed Award of Contract will not have any effect on the issued share capital of LDHB and the substantial shareholders shareholdings in LDHB as it does not involve the issuance of new LDHB shares. 4.2 NL, NL per Share and Gearing The Proposed Award of Contract is not expected to have any material impact on the NL, NL per share and gearing of the Group based on the audited consolidated statement of financial position of LDHB as at 30 June

14 4.3 Earnings and EPS The Proposed Award of Contract is not expected to have any material impact on the earnings and EPS of the Group for the financial year ending 30 June Nonetheless, the Proposed Award of Contract is expected to contribute positively to the future earnings of the Group when the expected profits from the Mining Tribute contemplated therein are realised. 5. RISK FACTORS IN RELATION TO THE PROPOSED AWARD OF CONTRACT The risk factors that may be inherent to the Group in relation to the Mining Tribute receivable by the Group pursuant to the Proposed Award of Contract include, amongst others, the following: (i) Risks inherent to the mining industry The Proposed Award of Contract is subject to risks inherent in the mining industry of which the Group is already exposed to. Such risks may include, adverse changes in mineral market prices (fluctuations in market prices will affect the actual value of the Minerals extracted from the Mining Land), changes in demand for Minerals, competition from other mining companies, changes in economic, social and political condition, which may not be favourable. Any adverse change in these conditions may have an adverse effect on the Mining Tribute receivable by the Group. (ii) Failure to obtain or renew licenses and certificates In the event applications to the relevant state authorities for proprietary mining licenses for the planning, studying, researching, exploration and other processing of the tin and other mineral deposits are rejected and/or existing licenses are unable to be renewed in the future when it approaches expiry, the Mining Activities may be disrupted resulting in a possible material adverse impact on the mining operations and Mining Tribute receivable by the Group. (iii) Completion/Default in respect of the Proposed Award of Contract The completion of the Proposed Award of Contract is subject to, among others, the fulfilment of the Condition Precedent and the performance by the relevant parties of their respective obligations as set out in the Agreement. Any breach of material obligations, amongst others, is an event of default and may entitle the non-breaching party to terminate the mining arrangements and the non-defaulting party could take actions necessary to claim damages or seek other remedies for any losses incurred as a result of the default or breach. As such, there is no assurance that the Group will realise the anticipated profits from the mining arrangement and/or to recover all costs or losses incurred arising from the termination. LDHB will endeavor to take proactive measures and reasonable steps, including having periodic dialogue with relevant authorities and LTSB, within their control to mitigate the abovementioned risks. In addition, actions will be taken to actively engage with LTSB and carry out periodic discussions with LTSB to avoid any default arising from either party under the Agreement. 9

15 6. DIRECTORS AND MAJOR SHAREHOLDERS INTERESTS 6.1 Directors Interests The following Directors of the Company do not consider themselves independent in respect of the Proposed Award of Contract by virtue of the following: (i) (ii) (iii) TSWC, the Chairman and a major shareholder of the Company, has a substantial interest in the ultimate holding company of LTSB, Lion Tin Limited, and hence, he is deemed to have a substantial interest in LTSB. TSWC is also a director of Lion Tin Limited, Lion Tin Investments Limited (the immediate holding company of LTSB) and LTSB; TSAC, the Managing Director and a major shareholder of the Company, has a substantial interest in the ultimate holding company of LTSB, Lion Tin Limited, and hence, he is deemed to have a substantial interest in LTSB. TSAC is also a director of BRSB, Lion Tin Limited, Lion Tin Investments Limited (the immediate holding company of LTSB) and LTSB. TSAC is the nephew of TSWC; and Mr Ooi Kim Lai, is an employee of a company in which TSWC and TSAC each has a substantial interest. (collectively, referred to as the Interested Directors ). The interests of the Interested Directors in LDHB as at LPD are set out in the following table: Direct Interest Deemed Interest Interested Directors No. of No. of % Ordinary shares Ordinary shares % TSWC 364,586, ,694,862 (a) TSAC 9,841, ,157,070 (b) Ooi Kim Lai 116 Negligible - - Notes: (a) (b) Deemed interested by virtue of Section 8 of the Act held via Likom Computer, Ributasi, LDP, Narajaya, LICB, AMSB, Antara and WCSB, and Section 59(11)(c) of the Act held by his spouse, Puan Sri Chan Chau Ha. Deemed interested by virtue of Section 8 of the Act held via Dynamic Horizon and LHPL, and Section 59(11)(c) of the Act held by his spouse, Puan Sri Ng Seok Kuan, and his children, Cheng Boon Lin and Cheng Wen Yi. Save as disclosed above, none of the other Directors of LDHB has any interest, direct and/or indirect, in the Proposed Award of Contract. The Interested Directors have abstained and will abstain from all Board s deliberation and voting in respect of the Proposed Award of Contract. Additionally, they will also abstain from voting in respect of their direct and/or indirect shareholdings in LDHB on the resolution pertaining to the Proposed Award of Contract at the forthcoming EGM. The Interested Directors will also ensure that persons connected with them who have interest in the shares of LDHB will abstain from voting in respect of their direct and/or indirect shareholdings in LDHB on the resolution pertaining to the Proposed Award of Contract at the forthcoming EGM. 10

16 6.2 Major Shareholders Interest The major shareholders of LDHB who are deemed interested in the Proposed Award of Contract by virtue of their interests in LDHB are TSWC, TSAC, Dynamic Horizon, AMSB, LICB, LLB Steel and Steelcorp ( Interested Major Shareholders ). The interests of the Interested Major Shareholders in LDHB as at LPD are set out in the following table: Direct Interest Deemed Interest Interested Major No. of No. of Shareholders % % Ordinary shares Ordinary shares TSWC 364,586, ,125,462 (a) TSAC 9,841, ,657,070 (b) Dynamic Horizon 325,400, AMSB 116,180, ,029,832 (c) 4.31 LICB 37,518, ,210,632 (d) LLB Steel ,210,632 (d) Steelcorp ,210,632 (d) Notes: (a) (b) (c) (d) Deemed interested by virtue of Section 8 of the Act held via Likom Computer, Ributasi, LDP, Narajaya, LICB, AMSB, Antara and WCSB. Deemed interested by virtue of Section 8 of the Act held via Dynamic Horizon and LHPL. Deemed interested by virtue of Section 8 of the Act held via Antara. Deemed interested by virtue of Section 8 of the Act held via AMSB and Antara. Save as disclosed above, none of the other major shareholders of the Company has any interest, direct and/or indirect, in the Proposed Award of Contract. The Interested Major Shareholders will abstain from voting in respect of their direct and/or indirect shareholdings in LDHB on the resolution pertaining to the Proposed Award of Contract to be tabled at the forthcoming EGM of LDHB. The Interested Major Shareholders have undertaken that they will also ensure that persons connected with them who have interest in the shares of LDHB will abstain from voting in respect of their direct and/or indirect shareholdings in LDHB on the resolution pertaining to the Proposed Award of Contract at the forthcoming EGM. 7. HIGHEST PERCENTAGE RATIO APPLICABLE The percentage ratios pursuant to Paragraph 10.02(g) of the Listing Requirements applicable to the Proposed Award of Contract produce anomalous results. Notwithstanding the above, the Board believes that in view of the related parties interests in the Proposed Award of Contract and the Agreement being a long term contract, the Company has set as a Condition Precedent to the Agreement, the seeking of approval of its non-interested shareholders for the Proposed Award of Contract. 11

17 8. APPROVALS REQUIRED FOR THE PROPOSED AWARD OF CONTRACT The Proposed Award of Contract is subject to the approvals being obtained from the following: (i) (ii) the shareholders of LDHB; and any other relevant authorities and/or parties, if required. The Proposed Award of Contract is not conditional upon any other corporate exercise/scheme being undertaken or to be undertaken by LDHB. 9. TRANSACTIONS WITH THE SAME RELATED PARTY FOR THE PRECEDING 12 MONTHS Save for the recurrent related party transactions of a revenue or trading nature, which have already been approved by the shareholders of the Company at the last annual general meeting of the Company held on 22 November 2016, there is no other transaction with LTSB, Lion Tin Investments Limited and Lion Tin Limited for the preceding 12 months. 10. ESTIMATED TIME FRAME FOR COMPLETION Barring any unforeseen circumstances and subject to the fulfilment of the Condition Precedent set out in the Agreement being obtained and fulfilled, the Proposed Award of Contract is expected to commence in the fourth (4th) quarter of CORPORATE EXERCISE/SCHEME ANNOUNCED BUT PENDING COMPLETION Save for the Proposed Award of Contract as contained in this Circular, there are no other corporate exercises or schemes which have been announced to Bursa Securities but not yet completed prior to the printing of this Circular. 12. AUDIT COMMITTEE S STATEMENT The Audit Committee of the Company (save for Mr Ooi Kim Lai), after having considered all aspects of the Proposed Award of Contract including but not limited to the terms and conditions, rationale, effects and risk factors of the Proposed Award of Contract and the evaluation of the Independent Adviser as set out in Part B of this Circular, is of the opinion that the Proposed Award of Contract is fair, reasonable and on normal commercial terms, not detrimental to the interests of the minority shareholders of the Company and in the best interests of the Company. 13. DIRECTORS RECOMMENDATION The Board (save for the Interested Directors), after having considered all relevant aspects of the Proposed Award of Contract including but not limited to the terms and conditions, rationale, effects and risk factors of the Proposed Award of Contract, is of the opinion that the Proposed Award of Contract is in the best interest of the Company. Accordingly, the Board (save for the Interested Directors) recommends that shareholders of LDHB vote in favour of the Ordinary Resolution in respect of the Proposed Award of Contract to be tabled at the forthcoming EGM. 12

18 14. INDEPENDENT ADVISER In view of the related parties interests in the Proposed Award of Contract and the Agreement being a long term contract, SJ Securities has been appointed by the Company to act as the independent adviser to advise the non-interested shareholders of the Company on the fairness and reasonableness of the Proposed Award of Contract and whether it is detrimental to the noninterested shareholders of the Company. The Independent Advice Letter from SJ Securities in relation to the Proposed Award of Contract will be issued separately to the shareholders of the Company in due course. You are advised to read both the Circular and the Independent Advice Letter carefully before voting on the Ordinary Resolution pertaining to the Proposed Award of Contract to be tabled at the forthcoming EGM. 15. EGM The EGM, the Notice of which is enclosed with this Circular, will be held at the Meeting Hall, Level 16, Lion Office Tower, No. 1 Jalan Nagasari, Kuala Lumpur, Wilayah Persekutuan on Wednesday, 22 November 2017 at 3.00 pm, or immediately after the conclusion or adjournment of the 47th AGM, scheduled to be held at the same venue and on the same date at 2.00 pm, whichever is the later, for the purpose of considering the Proposed Award of Contract contained herein and, if thought fit, passing the Ordinary Resolution to give effect to the Proposed Award of Contract. If you are unable to attend and vote in person at the EGM, you may complete, sign and return the enclosed Form of Proxy in accordance with the instructions contained therein as soon as possible, so as to arrive at the Office of the Registrar of the Company no later than forty-eight (48) hours before the time for holding the EGM, in any event, not later than 3.00 pm on 20 November The completion and lodging of the Form of Proxy shall not preclude you from attending and voting in person at the EGM should you subsequently wish to do so. 16. FURTHER INFORMATION Shareholders are requested to refer to the attached appendix for further information. Yours faithfully For and on behalf of the Board of LION DIVERSIFIED HOLDINGS BERHAD TAN SRI DATO SERI DR ASEH BIN HAJI CHE MAT Independent Director 13

19 APPENDIX I FURTHER INFORMATION 1. DIRECTOR S RESPONSIBILITY STATEMENT This Circular has been seen and approved by the Directors who individually and collectively accept full responsibility for the accuracy of the information given herein and confirm that, after making all reasonable enquiries to the best of their knowledge and belief, there are no other facts, the omission of which would make any statement herein misleading. 2. CONSENT 2.1 Consent SJ Securities, being the Independent Adviser for the Proposed Award of Contract, has given and has not subsequently withdrawn its written consent to the inclusion in this Circular of its name and/or letters and all references thereto in the form and context in which they so appear in this Circular. 2.2 Conflict of Interest SJ Securities has given its written confirmation that it is not aware of any possible conflict of interest which exists or is likely to exist in its capacity as the Independent Adviser for the Proposed Award of Contract. 3. MATERIAL LITIGATION, CLAIMS AND ARBITRATION As at the LPD, the Board is not aware of any material litigation, claims or arbitration involving the Mining Land. 4. MATERIAL COMMITMENTS AND CONTINGENT LIABILITIES 4.1 Material Commitments As at the LPD, the Board is not aware of any material commitments incurred or known to be incurred, which upon becoming enforceable may have a material impact on the profits or the NL of the Group. 4.2 Contingent Liabilities Save as disclosed below, as at the LPD, there are no contingent liabilities incurred or known to be incurred by the Group that is likely to have a material adverse effect on the financial position of the Group: (i) Claims from contractors Contractors for the Blast Furnace Project ( Project ) have made claims of RM96.0 million to recover the cost incurred for purchasing parts and components for the Project but not delivered, and the compensation for damages incurred by the contractors due to the delay, of which RM38.0 million has been provided in the financial statements. The remaining claims were not provided as the Management is unable to obtain appropriate and satisfactory evidence to satisfy themselves as to the validity of these claims. 14

20 APPENDIX I FURTHER INFORMATION (CONT D) (ii) Capital expenditure relating to the Project The Group is exposed to liabilities on parts purchased from contractors but not delivered to the site due to the delay in construction of the Project. As at the LPD, the contractors have yet to submit the invoices and proof of claims for parts purchased. The quantum of the liabilities will be determined based on a mutually agreed sum of work done. Neither the parts purchased nor the liabilities have been recognised in the financial statements as the Board is of the opinion that the claims from the contractors cannot be reliably measured as at the LPD. (iii) Material outstanding litigations On 6 July 2016, the solicitors of Lion Diversified Holdings Berhad were served with London High Court of Justice Queen s Bench Division Claim Form by Classic Maritime Inc. as claimant against (1) Limbungan Makmur Sdn Bhd (a wholly-owned subsidiary of Lion Diversified Holdings Berhad); and (2) Lion Diversified Holdings Berhad ( UK proceedings ). The claims are for the following: (a) (b) (c) As against Limbungan Makmur Sdn Bhd, damages for breach of contract of affreightment dated on or about 29 June 2009 ( COA ) in the sum of USD20,497, and/or USD431, and/or USD1,422, and/or USD171, and/or such other sums as is/are properly due and owing to Classic Maritime Inc. arising from alleged non-performance of 7 shipments; As against Lion Diversified Holdings Berhad pursuant to a contract of suretyship dated on or about 29 June 2009 pursuant to which Lion Diversified Holdings Berhad guaranteed the performance of Limbungan Makmur Sdn Bhd s obligations under the COA and/or agreed to pay to Classic Maritime Inc. on demand any and all amounts accruing to Classic Maritime Inc. from Limbungan Makmur Sdn Bhd under the COA; and As against both Limbungan Makmur Sdn Bhd and Lion Diversified Holdings Berhad, interest pursuant to section 35A of the Supreme Court Act 1981, to be assessed. On 12 April 2017, the High Court allowed judgement to be entered against 2 shipments ( 2 Index Shipments ) whilst dismissing Classic Maritime Inc. s application for summary judgement for the balance 5 shipments. Assessment of damages for these 2 Index Shipments shall be at the same time as trial of the balance 5 shipments which is fixed on 16 July According to the quantum expert report commissioned by Lion Diversified Holdings Berhad Group, Classic Maritime Inc. would not be able to profit if it had performed the 2 Index Shipments but rather would have incurred a loss. In respect of Classic Maritime Inc. s claims for balance 5 shipments, both Limbungan Makmur Sdn Bhd and Lion Diversified Holdings Berhad believe that they have a good defence to the above claims. 15

21 APPENDIX I FURTHER INFORMATION (CONT D) In addition to the UK proceedings, Classic Maritime Inc. has commenced legal action in the Superior Court of California, County of Los Angeles, United States of America. On 12 June 2017, Classic Maritime Inc. filed a verified compliant against Lion Diversified Holdings Berhad ( Complaint ) seeking for pre-judgement attachment of assets of Likom Caseworks USA Inc., a wholly-owned subsidiary of Lion Diversified Holdings Berhad. On 11 July 2017, Classic Maritime Inc. obtained a temporary protective order and corresponding writ of attachment ( Pre-Judgement Attachment Orders ) on all shares and assets of Likom Caseworks USA Inc., located at Castleton St., Suite 309, City of Industry, California, owned by Lion Diversified Holdings Berhad, whether held by Lion Diversified Holdings Berhad directly, or beneficially through Lion Diversified Holdings Berhad s wholly-owned subsidiary, Likom Caseworks Sdn Bhd. On 14 August 2017, Likom Caseworks USA Inc. received memorandum of garnishee arising from the Pre-Judgement Attachment Orders. Lion Diversified Holdings Berhad s attorneys are of the view that since there is no property of Lion Diversified Holdings Berhad in the possession of Likom Caseworks USA Inc., the Superior Court of California lacks jurisdiction and that the Complaint must be dismissed. Likom Caseworks USA Inc. is a separate corporate entity that cannot be made to answer for any alleged claims against Lion Diversified Holdings Berhad. Lion Diversified Holdings Berhad has instructed its attorneys to apply for a motion to quash the Pre-Judgement Attachment Orders and dismissal of the Complaint. 5. DOCUMENTS AVAILABLE FOR INSPECTION Copies of the following documents are available for inspection by shareholders of the Company at the Registered Office of the Company at Level 14, Lion Office Tower, No. 1 Jalan Nagasari, Kuala Lumpur, Wilayah Persekutuan during normal business hours from Mondays to Fridays (except public holidays) from the date of this Circular up to and including the date of the forthcoming EGM: (i) the Constitution of the Company; (ii) the audited consolidated financial statements of the Company for the past two (2) financial years ended 30 June 2016 and 2017; (iii) (iv) (v) the letter of consent referred to in Section 2 of this Appendix; the Agreement; and the Supplemental Letter. 16

22 LION DIVERSIFIED HOLDINGS BERHAD (9428-T) (Incorporated in Malaysia) NOTICE OF EXTRAORDINARY GENERAL MEETING NOTICE IS HEREBY GIVEN THAT an Extraordinary General Meeting of Lion Diversified Holdings Berhad ( LDHB or the Company ) will be held at the Meeting Hall, Level 16, Lion Office Tower, No. 1 Jalan Nagasari, Kuala Lumpur, Wilayah Persekutuan on Wednesday, 22 November 2017 at 3.00 pm, or immediately after the conclusion or adjournment of the 47th Annual General Meeting of LDHB, scheduled to be held at the same venue and on the same date at 2.00 pm, whichever is the later, for the purpose of considering and, if thought fit, passing the following resolution as an Ordinary Resolution: ORDINARY RESOLUTION PROPOSED AWARD OF CONTRACT THAT subject to the approvals being obtained from the relevant authorities, where required, approval be and is hereby given to Banting Resources Sdn Bhd ( BRSB ), a wholly-owned subsidiary of LDHB, to grant to Lion Tin Sdn Bhd ( LTSB ), in consideration of the mining tribute equivalent to 10% of the revenue net of royalty from each type of mineral mined, processed and sold payable by LTSB to BRSB, the sole and exclusive right to plan, study, research, explore prospect, extract, mine, remove, develop, produce, handle, mill or other processing of tin and other mineral deposits found either in or upon the soil of earth or in the rocks beneath the soil, including but not limited to, sand, silica, clay and amang ( Minerals ) by whatever methods and to whatever extent that LTSB shall deem advisable in its sole discretion and to manage, administer, market, sell and receive for its own account and benefit, the sale proceeds of the Minerals mined by LTSB on the six (6) pieces of land held under Geran Lot 12236, Geran Lot 2324, Geran Lot 8379, Geran Lot 12164, PN Lot 2697, and PN22678 Lot 2699 measuring approximately 800 acres in total, all in Mukim Tanjung Duabelas, Daerah Kuala Langat, Negeri Selangor, upon the terms and subject to the conditions as stipulated in the Contract-To-Work Agreement dated 11 October 2017 and the Supplemental Letter dated 2 November AND THAT the Directors of the Company be and are hereby authorised to do all acts and things and to execute all necessary documents, to give full effect to and complete the Proposed Award of Contract with full power to assent to or make any modifications, variations and/or amendments as may be required by the relevant authorities or as may be deemed necessary by the Directors of the Company and to take all steps and actions as may be required by the relevant authorities or as the Directors may deem necessary or expedient to finalise, implement and give full effect to and complete the Proposed Award of Contract. By Order of the Board LIM KWEE PENG (MAICSA ) CHOO YOON MAY (MAICSA ) Secretaries Kuala Lumpur 7 November 2017