TIDMCRO
RNS Number : 7884H
Creon Resources PLC
17 July 2012
For Immediate release: 17 July 2012
Creon Resources Plc
("Creon" or "the Company")
Investment in Joint Venture
Introduction
The Directors of Creon are delighted to announce that the
Company has entered into a joint venture with multi-billion dollar
China based shipbuilding giant, Yangzijiang Shipbuilding (Holdings)
Pte Ltd ("YZJ Holdings"), in the offshore oil and gas
infrastructure sector ("JV Agreement").
Under the terms of the JV Agreement, Creon and YZJ Holdings will
each invest into the joint venture company, YZJ Offshore
Engineering Pte Ltd ("YZJ Offshore"), a Singapore registered
company recently set up by YZJ Holdings to be a leading player in
the design and construction of marine offshore oil and gas vessels
(jack-up and semi-submersible rigs) ("the Investment"). Creon will
invest US$15.33 million, with YZJ Holdings and its associates
investing a further US$14.67 million, into YZJ Offshore.
The Investment is Creon's first significant investment under its
Investment Policy and represents a major endorsement of Creon's
management and access to expertise and partners in the oil and gas
infrastructure sector.
YZJ Holdings - the joint venture partner
YZJ Holdings, which is listed on the main board of the Singapore
stock exchange, was established in 1956 and is the largest
non-state owned container shipbuilder in China. In 2011, YZJ
Holdings generated sales of approximately US$2.12 billion and net
profits of approximately US$0.62 billion. YZJ Holdings reported net
assets of approximately US$2.06 billion as at 31 December 2011 and
as at the close of business 16 July 2012 had a market
capitalisation of approximately US$3.16 billion.
YZJ Holdings is a highly regarded company with an experienced
management team, immense resources and strong balance sheet. The
Directors have been aware that YZJ Holdings has been exploring
opportunities to diversify into the offshore oil and gas
infrastructure sector for some time and open to collaborating with
partners with access and expertise.
YZJ Holdings has invited Creon to participate in the Investment
to further enhance YZJ Offshore's access to the necessary skills
and expertise in rig design, sales and procurement so as to enable
YZJ Offshore to grow into a successful and significant business.
The Directors believe that YZJ Offshore is close to securing a
number of orders for new offshore marine vessels, including jack-up
and semi-submersible rigs, which are expected to be built initially
in YZJ Holding's existing yards. However YZJ Offshore's longer term
strategy is to own and construct its own purpose built rig-building
yard in China.
YZJ Offshore - the joint venture company
To date, YZJ Offshore has been capitalised with approximately
US$3.0 million of equity subscribed for at par value of US$1.0 per
share, of which approximately 50% was subscribed for by YJZ
Holdings and the remainder by third party strategic investors. As
at 30 June 2012, according to management accounts, YZJ Offshore had
net assets of approximately US$2.85 million and made an operating
loss of approximately US$0.15 million in the six month period to 30
June 2012.
The majority of the funds invested into YZJ Offshore to date
have gone towards securing land rights to approximately 1.6 million
square metres of prime shorefront land in Taicang, Jiangsu Province
on China's east coast, some 50 miles north of Shanghai ("Land").
The total cost of the Land will be approximately US$65 million.
YZJ Holdings, its third party strategic investors and Creon (the
"Parties") believe the Land is the ideal location for the
construction of YZJ Offshore's new rig yard ("New Yard") due to its
deep water and absence of bridges en route to the open sea. The
Land is expected to be acquired through an associate company,
Jiangsu Yangzijiang Offshore Engineering Co. Ltd. ("YZJOE China"),
recently incorporated in mainland China, which is 40% owned by YZJ
Offshore and 60% by YZJ Holdings. YZJ Offshore will provide 40%
(US$26 million) of the consideration to acquire the Land for the
New Yard, with the balance of 60% (US$39 million) provided directly
by YZJ Holdings.
YZJ Offshore will provide marketing, procurement, front end
engineering and design, and management consultancy services for the
construction, fabrication and repair of oil and gas marine vessels
and platforms.
In addition to the ownership and construction of the New Yard,
YZJOE China will undertake the business of turnkey construction,
fabrication and repair of offshore oil and gas marine vessels and
platforms.
Background on the offshore oil and gas market
The Directors believe that the offshore marine rig vessel market
is an attractive one, underpinned by sustained high global demand
and a high oil price environment. Global rig utilisation rates and
day rates have been rising since early 2011, particularly for
jack-up rigs. Furthermore, the Directors believe demand for newly
designed rigs will be underpinned by the phasing out of the
existing stock of rigs. The Directors understand that by the end of
2012, the average age of jack-up rigs will be 24 years, with almost
half of the fleet older than 30 years. Based on the current stock
and new rig builds in the pipeline, there could be an under supply
by almost 200 jack-up rigs by 2020.
Research among rig charterers shows that E&P companies
prefer more efficient modern equipment and are willing to pay
significant premiums for newer, higher specification rigs, thereby
firming up day rates further. The Parties believe that this
potential demand represents an excellent opportunity for the joint
venture.
Terms of the JV Agreement
Under the terms of the JV Agreement, Creon has agreed to invest
US$15.33 million for a 46.45% shareholding in YZJ Offshore, with
YZJ Holdings investing a total of US$14.85 million for 45% and
third parties investing a further US$2.82 million for the balancing
8.55%.
Creon is in the process of appointing 2 directors out of the 5
directors to be appointed to the board of YZJ Offshore, with YZJ
Holdings also appointing 2 directors and an independent director
being appointed. Creon will also appoint 2 directors to the board
of YZJOE China, with YZJ Holdings appointing the remaining 3.
The Parties agree that neither they, their parent, associate,
nor any of their related companies shall be involved in the
business of YZJ Offshore or YZJOE China ("JV Companies") other than
through the JV Companies and the Parties agree that all the
business of construction and repair of offshore oil and gas marine
vessels and platforms secured by YZJ Offshore and by YZJ Holdings
shall be channelled to, and be carried out exclusively by, YZJOE
China. The Parties also agree that YZJOE China must exclusively use
YZJ Offshore for, and YZJ Offshore shall exclusively supply to
YZJOE China its marketing, procurement, front end engineering and
design, and management consultancy services for the construction,
fabrication and repair of oil and gas marine vessels and
platforms.
Creon has the option, but not the obligation, to provide
additional funding to YZJ Offshore and Creon has obtained
assurances that the further funding required to complete the New
Yard over the next few years will be provided by the Parties in the
event that Creon chooses not to participate. The JV Agreement also
contains the usual warranties and protections in favour of Creon as
would be expected in an agreement of this nature.
As part of the Investment, Creon has set up a wholly owned
subsidiary, Creon Resources (Asia) Pte Ltd, into which the
Investment will, in due course, be transferred.
Following the Investment, Creon will have net cash balances of
approximately GBP2.0 million.
Jeswant Natarajan, CEO of the Company, stated:
"I am delighted we have made our first major investment and
especially to be investing jointly with such a significant and well
capitalised partner in YZJ Holdings. We believe that the offshore
marine construction industry will be a lucrative one for Creon and
we anticipate building YZJ Offshore into one of the major forces
within it. There remains a lot of work to do to complete the New
Yard but in the interim, we are confident that we can secure some
early orders for our rig designs and look forward to updating
shareholders on our progress."
Further information please contact:
Creon Resources plc
Jeswant Natarajan - CEO Tel: +44 (0) 20 7583 8304
+60 12 212 1332
Daniel Stewart & Company plc
Nominated Adviser & Broker
Paul Shackleton/Tessa Smith Tel: +44 (0) 20 7776 6550
GTH Communications Limited
Toby Hall/Suzanne Johnson-Walsh Tel: +44 (0) 20 3103 3900
Note to Editors:
The Company's Investment Policy is to invest principally, but
not exclusively in the resources and/or resources infrastructure
sectors, with no specific national or regional focus. The Company
may be either an active investor and acquire control of a single
company or it may acquire non-controlling shareholdings.
The proposed investments to be made by the Company may be either
quoted or unquoted; made by direct acquisition or through farm-ins;
may be in companies, partnerships, joint ventures; or direct
interests in resources projects. Target investments will generally
be involved in projects in the exploration and/or development
stage. The Company's equity interest in a proposed investment may
range from a minority position to 100 per cent. ownership.
The Company will initially focus on projects located in the
Middle East and Asia but will also consider investments in other
geographical regions.
The Company will identify and assess potential investment
targets and where it believes further investigation is required,
intends to appoint appropriately qualified advisers to assist.
The Company proposes to carry out a project review process in
which all material aspects of any potential investment will be
subject to due diligence, as appropriate. It is likely that the
Company's financial resources will be invested in a small number of
projects or potentially in just one investment which may be deemed
to be a reverse takeover under the AIM Rules.
Where this is the case, it is intended to mitigate risk by
undertaking an appropriate due diligence process. Any transaction
constituting a reverse takeover under the AIM Rules will require
Shareholder approval. The possibility of building a broader
portfolio of investment assets has not, however, been excluded.
The Company intends to deliver shareholder returns principally
through capital growth rather than capital distribution via
dividends. Given the nature of the Company's Investing Policy, the
Company does not intend to make regular periodic disclosures or
calculations of net asset value.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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