Balama is the subsidiary company through which New Energy holds its interest in the Caula Graphite and Vanadium Project in Mozambique.
Following completion, New Energy will have no further interest in the Caula project, which is the company’s main undertaking.
On completion of the sale, Auspicious Virtue Investment Holding Limited, an investment vehicle owned by Louis Ching, will be the sole shareholder of Balama, holding 100% of the shares on issue.
New Energy chairman Ian Daymond said: “Following several months of very careful examination of the company’s financial situation, and following the unsolicited approach by the company’s largest shareholder, New Energy directors have negotiated with its largest shareholder the highest sale price obtainable for the remaining 50% of the issued capital of Balama Resources Pty Ltd.
“The transaction has been negotiated with consideration to the disappointingly low prevailing share price, despite a series of excellent results being announced throughout 2018 in respect of the Caula Vanadium & Graphite Project.
“The board has also considered various alternatives for the future funding of the company and its projects, taking into account the need to avoid excessive dilution to existing shareholders, given the current share price and also within the context of the highly disputed and highly damaging statutory demand by Arena Investors.
“An unsolicited, non-binding offer was received from UBezTT at the end of November 2018, and although a public company takeover or scheme of arrangement involving the New Energy entity itself was considered in this process, it was considered to be a very costly form of corporate transaction for the company.
“As a result, the best price obtainable from the purchaser for the 50% shareholding was $7,000,000.
“The directors of New Energy unanimously reached the conclusion that the sale of the remaining 50% of the issued capital of Balama Resources Pty Ltd to Auspicious Virtue Investment Holding Limited should be considered to be in the best interests of the company and its shareholders excluding the purchaser and its associates and, accordingly, now recommend that shareholders approve the relevant resolutions to be proposed at the forthcoming EGM, but only in the absence of a superior proposal and subject to the Independent Expert’s Report being favourable.
“The distribution in cash to NXE shareholders of at least 60% of the sale proceeds net of transaction costs is considered, in all the circumstances, to be a significant benefit for all shareholders as well as for NXE itself.
“Shareholders will retain their existing shares in NXE and will therefore retain a stake in the company going forward.
“Assuming 60% of the net sale proceeds are distributed to NXE shareholders, then NXE will receive after closing 40% of the net sale proceeds (around $2.6 million to $ 2.7 million), to supplement NXE’s cash resources which will be further supplemented by receipt of the gross amount of $2.8 million upon closing of the sale of the ruby assets to Fura Gems Inc.
“NXE’s total cash resources will, of course, depend upon the outcome of the dispute with Arena Investors of which the outcome (as yet not known) could increase (or reduce) these cash resources.
“Our plan is for NXE to retain its ASX-listed status as an explorer and developer of mineral interests and for NXE to be adequately funded going forward.
“A review of potential mineral interest acquisition opportunities is already underway.
“Further announcements concerning future project opportunities and the status of the Arena dispute will be made as and when required.
“We urge and encourage shareholders to vote in favour of the various resolutions if no superior proposal emerges and if the Independent Expert’s Report is favourable.
“We also call upon shareholders actively to support the board and management going forward in the interests of the company and all shareholders.”