Caledon – update on offer and flood

On 8 November 2010 the directors of Bidco, GRAM and Caledon announced that agreement in principle had been reached with GRAM on the terms of a Possible Acquisition of Caledon by Bidco, a wholly owned indirect subsidiary of GRAM.

Current status of pre-conditions
The announcement went on to state that any announcement by GRAM or Bidco of a firm intention to make an offer for Caledon pursuant to Rule 2.5 of the City Code, was subject to satisfaction or waiver of the following pre-conditions:

1. The unanimous recommendation of the board of Caledon of the terms of any such offer, having been advised by RBC Capital Markets that the terms of such an offer are fair and reasonable;
2. the receipt of all necessary approvals from regulatory authorities in China relating to the Possible Acquisition, including the following:
   project approval for outbound investment from the National Development and Reform Commission of China on behalf of the State Council;
   project approval for outbound investment from the State-owned Assets Supervision and Administration Commission on behalf of the Guangdong Province;
   approval for outbound investment from Ministry of Commerce of China; and
   approval for the remittance of foreign exchange out of China from the State Administration of Foreign Exchange of China; and
3. finalisation by GRAM of the terms of its financing for the Possible Acquisition.

 
While GRAM had expected to be in a position to satisfy or waive these pre-conditions no later than 31 December 2010 this has not been the case with the Chinese approval process taking longer than originally foreseen.
 
As a result of this delay it is unlikely that the Possible Acquisition will be completed prior to 28 February 2011 which is the maturity date for repayment of the £15.4m and A$4m loans due to Polo Resources Limited. GRAM is committed to completing the acquisition. GRAM has advised Caledon that it is seeking funding solutions to help Caledon meet its requirements. It is Caledon’s intention to extend the Non-Solicitation Agreement in early January 2011.
 
Mr Li Jinming, Chairman of GRAM said: “GRAM remains committed to completing the acquisition and is actively engaged with Chinese regulators in the approval process.”

 
Update on Flooding in Queensland

Queensland, in particular the Bowen Basin, has experienced heavy rain and severe flooding over the last month resulting in widespread disruption to the coal mining industry and the declaration of ‘force majeure’ at a growing number of mines. Whilst force majeure has not been declared at the Cook mine and no significant damage has been sustained, both road and rail access to the Blackwater township and the mine site has been repeatedly closed and this remains the case at the date of this release. As a result of these disruptions, 2010 sales will now be 543,000 tonnes versus a previously advised range of 550,000 to 570,000 tonnes.