Novel Sunrise Investments Limited

February 24, 2015 12:53 ET

Novel Sunrise Announces Investment in SouthGobi Resources

TORONTO, ONTARIO--(Marketwired - Feb. 24, 2015) - Novel Sunrise Investments Limited ("Novel Sunrise") announces that it has entered into a private placement agreement (the "Private Placement Agreement") with SouthGobi Resources Ltd. ("SouthGobi") pursuant to which an aggregate of up to 21,750,000 common shares of SouthGobi are issuable for gross proceeds of approximately US$7.5 million. Novel Sunrise has concurrently entered into a sale and purchase agreement (the "Sale and Purchase Agreement") with Turquoise Hill Resources Ltd. ("Turquoise Hill"), the Company's largest shareholder, to purchase 48,705,155 common shares of SouthGobi currently held by Turquoise Hill.

Pursuant to the Private Placement Agreement, Novel Sunrise will subscribe for an initial tranche of 10,131,113 Mandatory Convertible Units at a purchase price of US$0.3454704 (CDN$0.432) per unit for subscription proceeds of approximately US$3.5 million. The initial tranche is expected to close March 3, 2015, subject to regulatory approvals and other customary closing conditions. Each Mandatory Convertible Unit is convertible on a one for one basis into common shares of SouthGobi (each, a "Common Share"). The Mandatory Convertible Units mandatorily convert into Common Shares upon either the closing of the Sale and Purchase Agreement or the termination thereof. The Mandatory Convertible Units do not have any voting rights until converted into Common Shares in accordance with their terms. Upon closing of the Sale and Purchase Agreement and the conversion of the Mandatory Convertible Units, the Private Placement Agreement provides for a further subscription by Novel Sunrise of 11,618,887 Common Shares at a purchase price of US$0.3454704 (CDN$0.432) per share for additional subscription proceeds of approximately US$4.0 million.

The completion of the private placement under the Private Placement Agreement and related transactions is subject to acceptance of notice of the placement by the Toronto Stock Exchange ("TSX") pursuant to the financial hardship provisions of the TSX Company Manual.

Concurrently with the Private Placement Agreement, Novel Sunrise has entered into the Sale and Purchase Agreement with Turquoise Hill to purchase 48,705,155 Common Shares currently held by Turquoise Hill. Under the terms of the Sale and Purchase Agreement, which was effected in accordance with and in reliance upon the "private agreement" exemption under the Canadian takeover bid regime, Novel Sunrise has agreed to purchase 48,705,155 Common Shares from Turquoise Hill at a price of CDN$0.35 per Common Share payable in cash. Half of the aggregate purchase price, representing approximately CDN$8.5 million, will be paid to Turquoise Hill at closing and the balance of approximately CDN$8.5 million will be payable on the first anniversary of the closing of the transaction.

In addition, Turquoise Hill has the option (the "Put Option") to require Novel Sunrise to acquire an additional number of Common Shares, also at a price of CDN$0.35 per share, in the event the transaction contemplated by the share purchase agreement entered into by Turquoise Hill with National United Resources Holdings Limited ("NUR") announced and entered into in July 2014 is not completed by April 30, 2015 (or such later outside date as may be extended by Turquoise Hill and NUR but no later than September 30, 2015 for the purposes of the Sale and Purchase Agreement). Under the Put Option, Novel Sunrise would be required to purchase up to a pre-agreed maximum number of additional shares and in any event provided Novel Sunrise will not be required to own more than 29.99% of the outstanding Common Shares following exercise of the Put Option.

The completion of the purchase under the Sale and Purchase Agreement is subject to certain closing conditions, including certain Canadian and Hong Kong stock exchange and securities regulatory matters. Closing is expected to occur no later than March 31, 2015.

Assuming final closing of the private placement under the Private Placement Agreement, including the conversion of the Mandatory Convertible Units, and closing of the purchase of Common Shares under the Sale and Purchase Agreement (but excluding the Put Option), Novel Sunrise will own and control 70,455,155 Common Shares, representing 29.3% of the total number of Common Shares outstanding on a post-issuance basis.

Novel Sunrise is acquiring the securities of SouthGobi for investment purposes. Depending on its evaluation of the business, prospects and financial condition of SouthGobi, the market for SouthGobi's securities, general economic conditions and other factors, Novel Sunrise may acquire additional securities of SouthGobi, or sell some or all of the securities of SouthGobi it will hold, in the open market, by private agreement or otherwise.

As a new significant shareholder and strategic partner of SouthGobi, Novel Sunrise intends to bring its operational and marketing expertise to SouthGobi. Novel Sunrise, together with its affiliated companies in China, is a leading private enterprise in the real estate, logistics and supply chain management industries. In this connection, Novel Sunrise has agreed to assist SouthGobi in the implementation of a funding plan intended to improve cash flow for SouthGobi and support its business strategy and operations in a difficult market, with the goal of positioning the Company with a strong future as a coal producer. The proposed plan includes introducing potential customers in China to SouthGobi to allow SouthGobi to expand its customer base further inland in China, and helping SouthGobi to secure longer-term coal offtake arrangements, thereby allowing SouthGobi to ramp up production to capacity. Novel Sunrise intends to help SouthGobi to establish relationships with commercial banks in China and Hong Kong to help SouthGobi to secure short term bridge loans, trading credit facilities and other types of financing.

Under the Private Placement Agreement, SouthGobi has agreed to grant Novel Sunrise the following rights:

  • Mr. Ted Chan to join the Company's Board of Directors contemporaneous with the closing of the first tranche of the private placement as an Executive Director, subject to TSX approval; and
  • two more nominees of Novel Sunrise to join the Board of Directors, plus additions to SouthGobi's management team, upon closing of the Private Placement Agreement;
  • Novel Sunrise to have pro rata participation rights in future financings; and
  • Novel Sunrise to have registration rights under Canadian provincial securities laws in connection with its shareholdings.

About Novel Sunrise

Novel Sunrise is an investment holding company registered in the British Virgin Islands. Novel Sunrise, together with its affiliated companies in China (collectively, the "Novel Group"), is a leading private enterprise in the real estate, logistics and supply chain management industries. The Novel Group began its real estate business in the 1990s through an entity named Beijing Wanhai Real Estate Development Co. Ltd., which developed several high quality residential and commercial properties in gateway cities of China. With the growth of its real estate business, the Novel Group significantly increased its involvement in the procurement of construction materials and established strong relationships, as a customer, with a number of the leading steel and cement manufacturers in China. In the 2000s, the Novel Group further expanded its business into the logistics and trading of construction materials including iron ore, coking coal, steel and cement products. The Novel Group has since grown these relationships and developed further relationships with well-established state owned trading corporations. As it has expanded its business, the Novel Group has also established strong relationships with key commercial banks in China and Hong Kong. Mr. Guogang (Wilson) Chen is the controlling shareholder of Novel Sunrise.

Novel Sunrise's address is P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands.

Contact Information

  • +86-151-0161-4876
    Jason Zhou