South Boulder Mines: Eritrea Strategic Geography for Potash Trade
South Boulder Mines Limited (“South Boulder” or “the Company” ASX: STB) confirms its intention to undertake a demerger of its non-potash assets, including listed investments as well as cash of $1m, to be held in Duketon Mining Limited (ACN 159 084 107) (“Duketon”).
The demerger will be via an in specie distribution of 100% of the shares in Duketon to shareholders of South Boulder on a one for four basis, comprising about 31 million Duketon shares to be issued.
The new Duketon board will then be uniquely placed to focus on further development of the non-potash assets and will be able to consider future fundraising opportunities to supplement working capital for exploration programs.
Background
South Boulder owns 100% of the gold and base metals rights in the Duketon Project, located within the well-known Achaean Duketon Greenstone Belt, which also contains Regis Resources NL’s Moolart Well Gold Project. Independence Group NL will be entitled to 70% of the nickel rights relating to the selected tenements subject to the Duketon Nickel Joint Venture entered into in 2004. The Company’s key Duketon Gold Prospects are the Terminator Gold Prospect and Thomson’s Bore Gold Prospect with numerous prospective targets to follow up on in the future. The Company holds ground in along strike and adjacent positions to the Garden Well Mine development and the producing Moolart Well Gold Mine, with combined resources of approximately 4.7Moz. (Regis Resources Limited December 2011 Half Year Report)
- The Company owns 100% interest in the following exploration licenses and exploration license applications:
- Lake Lefroy Project; and,
- Cutters Luck Project The Company also owns minority interests in the following exploration projects:
- Cardabia Project (20%);
- Pilgangoora Project (10%); and
Georgina Basin Project (10%). South Boulder has applied for exploration licences applications for the Lake Disappointment, Lake Burnside and Diorite Hill Projects in WA. All tenements for these projects are presently under application.
Together the above assets constitute the Duketon Assets or Duketon Projects and will comprise part of the assets to be transferred to Duketon.
Duketon Board
The Duketon Board will be independent but will include a representative from the South Boulder Board to ensure continuity of knowledge and experience in relation to the Duketon Assets. No additional assets are being acquired by Duketon from third parties prior to the proposed demerger.
South Boulder Shareholder Approval
South Boulder has prepared a notice of meeting seeking shareholder approval of the demerger and distribution in specie in to be held in late November or early December 2012. The record date for the distribution in specie will be 6 business days following the date of the Shareholder meeting.
Relief Against Prospectus for Duketon Shares’
South Boulder has lodged an application for the Australian Securities and Investment Commission (“ASIC”) for relief consistent with Regulatory Guide 188 such that the Company will not be required to issue a prospectus in relation to the Duketon Shares subject to the proposed distribution in specie. If ASIC relief is granted, South Boulder Shareholders will be provided with all the necessary information about the Duketon Shares with the Notice of Meeting. If ASIC relief is not granted South Boulder will issue a prospectus disclosing against the Duketon Shares, and the prospectus issued by South Boulder, with the consent of the Duketon Directors, will be despatched to shareholders of South Boulder with the notice of meeting seeking approval for the distribution in specie of the Duketon Shares.
ATO Class Ruling for Demerger Relief
The Company is also preparing an application to the Australian Taxation Office (“ATO”), seeking a class ruling to confirm the availability of demerger relief for tax purposes for both South Boulder and Duketon shareholders. The result of such an application will not be known before the South Boulder Shareholders are asked to vote in relation to the resolutions to be proposed at the general meeting to approve the distribution in specie of the Duketon shares to South Boulder Shareholders.
Benefits of Proposal to South Boulder Shareholders
The Company considers the proposed demerger and in specie distribution of Duketon presents the following advantages to South Boulder Shareholders:
- The Demerger will allow South Boulder to focus on the Colluli Potash Project and Duketon to focus on the Duketon Projects. The Demerger provides a strategic opportunity to develop Duketon as a standalone company and continue to explore and commercialise the existing assets.
- The demerger will allow the Company and Duketon to allocate their capital in accordance with their strategic goals.
- Shareholders will continue to hold an interest in Duketon Assets directly through their shareholding in Duketon Mining Limited.
South Boulder Managing Director Lorry Hughes said the non-potash asset separation will make each company more attractive for strategic investment.
“The in-specie distribution of shares in Duketon Mining Limited will allow South Boulder to focus on its worldclass Colluli Potash Project in Eritrea. This will allow two discrete and very different businesses to further develop in their own right, having regard to their business objectives and with the aim of becoming wholly independent of each other.”
South Boulder’s core projects are the world class Colluli Potash Project in Eritrea and the Duketon Gold and Base Metals Project in Western Australia.
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