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Prosperity Minerals to retain US$15 million debt after £300 million disposal in China, releases financial results for Upper Value

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Cement plant operator Prosperity Minerals Holdings (AIM: PMHL) provided further details relating to its recent sale of a Chinese cement business Upper Value Investments Limited for £300 million to TCC international Holdings (HKG: 1136), also disclosing financial information for the target company.

The company clarified that all debt relating to the cement business including the senior secured notes issued by the target company to Morgan Stanley & Co International and certain institutional investors with a current outstanding amount of US$90 million, but excluding a term loan with an US$15 million outstanding relating to the acquisition of Anhui Chaodong Cement Company Limited, will be transferred to TCC upon completion of the disposal, while Prosperity will retain its debtless iron ore trading business.

Following the transaction, the company will possess the iron ore trading business, a substantially increased cash position after bagging £300 million as a result of the sale along with a 33.06% interest in Shanghai-listed Anhui Chaodong, which has a market capitalisation of approximately £178 million and a share value attributable to Prosperity of about £65 million.

The company has also released the target company’s unaudited interim results for 2008 and 2009 including companies under the company which were excluded from the sale. The business posted revenues of US$94 million in the six month ended 30 September 2009 and US$87.6 million in the equivalent period of the previous year, while pre-tax profits amounted to US$1.43 million in 2009 and US$0.27 million the year before. Losses for the full year to 30 September stood at US$1.65 million compared to US$0.68 million a year ago.

The excluded companies posted full year losses of US$3.2 million in 2009 and US$0.7 million in 2008.

The agreement, which is expected to complete in March 2010, followed the MoU (memorandum of understanding), which was signed by the companies in late November. Shares in Prosperity rose 17% on the news of the MOU and were suspended from trading on 14 December, pending the issue of an announcement about the transaction. The suspension was lifted today and shares added a further 20%.

The sale will be terminated if not completed by 31 May 2010.

Shares in Prosperity added a further 7% on the news after shooting up from 104 pence to 120 pence following the announcement of the sale.

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