Power Capital Global Limited (AIM:PCGB), the Asia based natural resources trading and logistics business, has today published its audited results for the year ended 31 December 2012.
Parallel investment programme targeting partner companies offering in-market access to commodity trading opportunities that might otherwise be inaccessible progressed in Indonesia, Mongolia, Afghanistan and Myanmar;
In Indonesia, $1.06m (£0.67 million) of thermal coal shipments profitably completed through majority owned in-country joint venture, increasing to $1.5million post year end to date; and
In Mongolia, a 1.2% equity stake taken in the country's leading foreign invested conglomerate, Asia Pacific Investment Partners Limited, which the Company believes will provide it with fast track opportunities in Mongolia's burgeoning natural resources sector.
In April, financial restructuring completed through the conversion of all issued convertible loan notes, resulting in an increase in the free float of the Company from 21% to 38% and a substantial reduction in the gearing of business;
In Indonesia, an off-take agreement entered into with PT Perdana Maju Utama to acquire up to one million metric tonnes of thermal coal;
Further coal off-take, supply chain and non coal related opportunities being advanced in Indonesia including potential investment into a vertically integrated tin dredging and smelting operation located in Bangka; and
Terms of $1 million (£637,000) loan to TSI being substantially revised.
Chairman of Power Capital Global, Kung-Min Lin, commented:
"The development activities completed in the year have substantially advanced the Company's plan to build Power Capital Global into a highly regarded Asian commodity trading business. We will continue advancing our two distinct but complementary corporate aims of building a scaleable physical commodity trading and logistics business in China that is able to operate on a direct to buyer basis wherever possible whilst at the same time investing in partner companies in key off-take supply markets to China that provide opportunities that might otherwise have been inaccessible or unknown to the Company. The Board is likewise pleased with the successful conclusion of the balance sheet strengthening activity post year-end"
A full copy of the 2012 Report and Accounts will shortly be available for download from the Company's web site: www.powercapitalglobal.com
We have made important progress in the development of an Asia based natural resources trading and logistics platform during the past twelve months to 31 December 2012.
Our development strategy has remained unchanged throughout the year under review and has been focused on executing two distinct but complementary corporate aims.
First, we are committed to building a scaleable physical commodity trading and logistics business with a commodity sourcing market footprint that is global and which supplies a commercial client base located in the key industrial regions of the People's Republic of China on a direct-to-buyer basis wherever possible.
Secondly, we are focused on executing a parallel investment program targeting partner companies that offer the Company in-market access to commodity trading opportunities that might otherwise be inaccessible or unknown to us. Specifically, this strategy has evolved over the past twelve months to target partner companies in four identified off-take supply markets, namely Indonesia, Mongolia, Afghanistan and Myanmar. Partner company investment opportunities are assessed by reference to the following; (i) in-market competitive advantage related to mining licenses and / or mineral off-take opportunities; (ii) our in-market access to senior management; together with (iii) more traditional private equity consideration of the intrinsic valuation of the investment opportunity, the target company's market share (we focus on best in sector companies), quality of management and our investment exit strategy. We believe that this parallel investment strategy will yield successful and accelerated scale into our primary physical commodity trading activities from each of our target commodity supply markets as referenced above.
In May 2012, the Company announced that it has subscribed, through its wholly owned subsidiary PCG Mongolia Limited, for a 1.2% equity stake in Asia Pacific Investment Partners Limited ("APIP"). The Company believes that its direct investment in Mongolia's leading foreign invested conglomerate will provide the Company with fast track opportunities in the burgeoning natural resources sector in Mongolia. APIP is currently developing an early stage exploration license targeting an identified major copper-gold porphyry system located in the South Gobi and also operates the country's third largest cement crushing facility which is located in the capital city, Ulaan Baatar.
We announced the incorporation of a 75% owned Indonesian domestic thermal coal trading joint venture in our interim results published in September 2012. In the period under review, sales by the joint venture amounted to $1.06m (£0.67 million). To date, the joint venture has completed six thermal coal shipments, totalling approximately 32,000 metric tonnes of thermal coal with an aggregate sales value of US$1.5 million. All six trades were profitable. The domestic thermal coal trading business in Indonesia is seasonal and is subject to significant price volatility as small traders step in and out the market affecting the short term demand supply balance. We suspended barge shipments in January 2013 into a period of softened market pricing and we will recommence trading activity once market conditions improve.
Subsequent to the end of 2012, the Company, through its subsidiary, PCG Coal (Indonesia) Limited ("PCI"), entered into an off-take agreement with PT Perdana Maju Utama ("PMU") to acquire up to one million metric tonnes of thermal coal. PMU owns a coal concession totalling approximately 4,700 hectares located in East Kalimantan, Indonesia. PCI's branding and marketing of the coal has commenced to our end buyers and the contracted coal volume is forecast to be delivered by PMU over a twelve-month trading period following completion of the first batch delivery which is expected in the coming month.
We continue to explore other coal off-take and supply chain opportunities in the Kalimantan region of Indonesia such as the takeover of an established road haulage network and barge loading facility serving the thermal coal producers adjacent to PMU in East Kalimantan.
We continue to explore non-coal related investment opportunities. The Company is in what it considers an advanced stage of discussion with an investor party affiliated with PMU seeking funds to further develop a vertically integrated tin dredging and smelting operation located in Bangka, Indonesia inside the main Pacific Rim tin zone. Indonesia has proven tin (Sn) reserves of over 800,000 metric tonnes and supplied nearly 40% of all global demand in 2012 according to the International Tin Research Institute. Tin is one of the few metals that has been used and traded by humans for more than 5,000 years and it has many advantages and market uses. It has a low melting point, excellent malleability properties, high resistance to corrosion and fatigue and the ability to alloy with other metals. Cassiterite is by far the most important tin ore and it is found in abundance in large placer deposits located in oceanic submerged river channels in the shallow waters surrounding the Indonesian islands of Bangka and Belitung. The Company will make appropriate announcements in respect of this opportunity in due course.
Following the completion of its due diligence on TSI Holdings Limited ("TSI") during the year under review, the Company determined to substantially revise its original investment term sheet and instead agreed a loan arrangement with TSI to provide it with substantial working, business development, and business expansion capital. The loan amount is US$1 million (£637,000) and is today fully drawn. The loan arrangement was initially for a two year term and carried interest at five percent (5%) per annum. A recent agreement to extend the term of the loan and introduce certain penalties in the event of default under the TSI loan arrangement has in principal now been reached between the parties but is currently unsigned. The Company will arrange to have the appropriate loan documentation executed in the near future and will make an announcement once this has been completed.
The Company issued 16,233,765 ordinary shares pursuant to conversion notices from the holders of the US$5 million unsecured convertible loan notes ("CLNs") in late April 2013. This represents full conversion of all CLNs in issue at the end of the year under review and completes the financial restructuring announced by the Company in July 2012. It has added new investors in PCGB and increased the free float in its shares from approximately 21% to 38%. It has also substantially reduced the balance sheet gearing of the Company.
The Company was pleased to welcome Heng-Jui Lin to its Board in March 2013 as a non-executive director. Heng-Jui (or Henry) is the majority shareholder of Kolarmy Technology INC, which is currently providing the Group with financial support in the form of a loan facility. Henry is the brother of Kung-Min Lin, the controlling shareholder of the Company.
We believe that these important development activities have substantially advanced the Company in its pursuit of a plan to build Power Capital Global into a highly regarded Asian commodity trading business.
28 June 2013