Elemental provides update on Dingyi Offer

Highlights

• Dingyi has requested a review of Hong Kong Stock Exchange Decision (as defined below)
• Elemental remains committed to supporting Dingyi in the review process and the parties have agreed conditional timetable extensions to facilitate this process
• The Majority Directors continue to recommend the Dingyi Offer. Until there is greater clarity on the response of the SEHK review, they suggest Shareholders wait for that decision before taking further steps in respect of the Dingyi Offer
• Up to $10 million should be available for drawdown in the coming weeks under the existing convertible loan facility provided by Dingyi to Elemental, subject to satisfaction of conditions.

PERTH, Australia, Dec. 23, 2013 /CNW/ - Elemental Minerals Ltd. (ASX, TSX: ELM) ("Elemental" or the "Company") provides the following update on the off-market takeover offer for all of the fully-paid ordinary shares of Elemental ("Dingyi Offer") by Dingyi Group Investment Limited ("Dingyi"), a company incorporated in Bermuda and listed on The Stock Exchange of Hong Kong Limited ("SEHK").

Background to the Dingyi Offer

On 1 July 2013, Elemental and Dingyi entered into the Bid Implementation Agreement pursuant to which the parties agreed that Dingyi would make the Dingyi Offer.

Execution of the Bid Implementation Agreement was the culmination of a strategic review of the Company's alternatives and the completion by Dingyi of a thorough legal, technical and financial due diligence on the Company and its flagship Sintoukola potash project.

Your Directors were unanimous in the view that the Dingyi Offer of 66 cents per Share should be put to and considered by Shareholders given that it represented a significant premium to the trading price of an Elemental Share at the point in time at which Elemental announced it was in exclusive discussions with Dingyi.

Dingyi Shareholder Approval Condition and SEHK decision

As Shareholders are aware, the Dingyi Offer is subject to a range of conditions including the Dingyi Shareholder Approval Condition. This condition is required because under the rules of the SEHK, transactions of listed issuers such as Dingyi are subject to various disclosure and/or shareholder approval requirements depending on the classification of the transaction (a classification of which must be confirmed by the SEHK).

Despite Dingyi and Elemental working constructively together to obtain this required regulatory confirmation, it has taken considerably longer than Dingyi, Elemental and their respective advisers expected.

On 16 December 2013 Dingyi received a written decision from the SEHK advising it that the SEHK has classified the Dingyi Offer as a reverse takeover under Rule 14.06(6) of the SEHK Listing Rules (SEHK Decision).

The consequence of the SEHK Decision on the Dingyi Offer is that unless the SEHK changes its decision, Dingyi has outlined in its First Supplementary Bidder's Statement that:

• Dingyi will not be able to satisfy the Dingyi Shareholder Approval Condition because it will not be able to obtain the clearance required from the SEHK for Dingyi to issue the documentation required to obtain the Dingyi Shareholder Approval Condition;
• the Dingyi Offer will therefore lapse at the end of the Offer Period because the Dingyi Shareholder Approval Condition will not have been satisfied; and
• all acceptances under the Dingyi Offer which have been received by Dingyi and which are not validly withdraw will become void at the end of the Offer Period and those accepting Elemental Shareholders will retain their Elemental Shares.

Under the SEHK Listing Rules, Dingyi may request the decision of the SEHK Listing Division be referred to the SEHK Listing Committee, which may in its sole discretion, review the decision. Dingyi has informed Elemental that it has requested a review of this decision by the SEHK Listing Committee and thus Elemental intends to do all it can to support Dingyi in this appeal process and will continually assess it progress. However, there can be no guarantee of success or that a decision will be made in a timely fashion.

The terms of the Bid Implementation Agreement also provide Elemental with a right to terminate that document if the Dingyi Shareholder Approval Condition becomes incapable of being satisfied prior to the Shareholder Approval Condition End Date. That same agreement also provides both parties with a right of termination if the SEHK classified the Dingyi Offer as a reverse takeover (as it deems the Dingyi Shareholder Approval Condition to have become incapable of satisfaction). To enable the review process to continue and sufficient time for draw down on the existing convertible loan facility to occur with the Bid Implementation Agreement remaining 'on foot', the parties have agreed not to exercise these rights until on or after 15 January 2014. If monies are drawn down under the existing convertible note, these rights to terminate the Bid Implementation Agreement will be waived.

Both parties retain at all times a right to terminate the Bid Implementation Agreement is the outcome of the SEHK review is unsuccessful.

Elemental's position in respect of the Dingyi Offer

Since Elemental received notice of the SEHK decision on 18 December 2013, Elemental and Dingyi have worked together to ascertain the implications for the Dingyi Offer and the process of appealing the decision. These discussions remain ongoing and encompass a range of ways in which the parties may work together now and in the future.

Elemental does not doubt Dingyi and its major shareholder Mr Li's commitment to the Sintoukola project. Since the Dingyi Offer has been made, Dingyi has informed Elemental and the SEHK that is has managed to secure non-binding letters of intent by Chinese and Hong Kong based banks to provide up to US$1.8 billion in project financing.

While the review process continues, Dingyi has indicated its preparedness to continue to fund Elemental. The parties have agreed the amendments to the terms of the existing facility such that, subject to satisfaction of certain outstanding conditions precedent to that facility (including registration of security), up to $10 million of the $15 million is to be made available for draw down.

The amended arrangements also alter Elemental's existing 'non-compensation amount financing' ability (being the right to raise capital without having to pay a break fee) such that conditional upon draw down of monies referenced above this right is limited to a raising conducted after 1 March 2014 and then only if the third tranche of $5m due under the convertible loan facility (totalling $5m) is unavailable or if it is necessary to repay the convertible notes to Dingyi (subject to certain prescribed exceptions which are in effect instances where the convertible loan must be repaid due to circumstances within the control of Elemental).

The amended arrangements also include certain procedures for expenditure of funds which if breached by Dingyi allows Elemental to again raise capital from alternative sources as an 'Approved Financing' (a raising that will not give rise to a breach of the Bid Implementation Agreement or a defeating condition to the Dingyi Offer). If the amount raised in this manner exceeds the amount owing to Dingyi Elemental will use those funds to repay Dingyi.

Chairman of Elemental, Mr Sam Middlemas said: "The Board has carefully considered its funding options (including raising funds from existing shareholders). The funding from Dingyi under the convertible loan funding not only re-affirms its continued commitment to the Company but ensures that any fundraising preserves the opportunity for the Dingyi Offer to proceed. Funding the Company in this manner does not breach a condition to the Dingyi Offer and enables the Company to continue to progress further work on its Sintoukola Project while the bid process continues. While the Board continues to believe Shareholders should be given the opportunity to accept an offer at 66 cents per share, it will act to maximise the potential for that offer to be put to shareholders."

The key commercial terms of this facility remain unchanged from those summarised in the original transaction announcement of 1 July 2013.

Subject to these arrangements being finalised, Elemental intends to utilise a portion of its existing ASX Listing Rule 7.1 capacity of the issue of convertible notes and accordingly Shareholder approval is not required as a condition to drawdown.

Timetable extensions

To provide further time for the SEHK review process, the parties have agreed certain timetable extensions to facilitate the implementation of the Dingyi Offer. The timetable extensions are conditional upon Elemental having successfully drawn down on the convertible loan facility (which is targeted for 15 January 2014) so a further announcement will be made when they become effective.

1 Dingyi has agreed to further extend this date, to 21 days after the Dingyi shareholder meeting to approve the Offer, unless the Dingyi Shareholder Approval Condition becomes incapable of satisfaction by the Dingyi shareholder approval long stop date.

2 This is a target date only and subject to change.

The ability to meet this extended timetable remains dependent upon the SEHK review process. There can be no guarantee that a positive regulatory outcome will be obtained from the SEHK or received in time to facilitate the obtaining of Dingyi shareholder approval within this specified timeframe.

Revised Directors recommendation

The Majority Directors remain of the view that if capable of being successfully completed, the Dingyi Offer is in the best interests of Elemental Shareholders and should be accepted unless a superior proposal emerges and the Dingyi Shareholder Approval Condition is capable of acceptance by the Shareholder Approval Condition End Date.

However, in light of the SEHK Decision and its impact on the Dingyi Offer, each of the Majority Directors recommends that Shareholders who have not yet accepted the Dingyi Offer take no further action in respect of the Dingyi Offer until the outcome of any SEHK appeal process is known or the Majority Directors recommend otherwise.

Mr Iain Macpherson maintains his original recommendation in respect of the Dingyi Offer for the reasons set out in the Target's Statement.

About Elemental Minerals

Elemental Minerals Ltd. is an advanced mining exploration and development company that aims to grow shareholder value through its 93%-owned Sintoukola Potash Project on the Republic of Congo coastline. Elemental Minerals is dual listed on the Australian Stock Exchange and the Toronto Stock Exchange under the symbol ELM. For more information, visit www.elementalminerals.com

About Dingyi Group Investment

Dingyi Group Investment Limited is a company incorporated in Bermuda and listed on the Hong Kong Stock Exchange. Dingyi is an investment company with interests based primarily in Hong Kong and Mainland China. Dingyi is a company controlled by Mr. Li Kwong Yuk, a Chinese entrepreneur. Mr. Li also controls a number of other substantial Mainland Chinese and international business interests in sectors including infrastructure, real estate, financial institutions and natural resource, among others. http://www.dingyi.hk/

SOURCE Elemental Minerals Ltd.