Hephaestus Holdings Limited — M&A Activity 2012

Sep 11, 2012

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.

PAN ASIA MINING LIMITED 宾亞礦業有限公司

(Incorporated in the Cayman Islands with limited liability)

(Stock code: 8173)

CONNECTED AND DISCLOSEABLE TRANSACTION

SECOND SUPPLEMENTAL AGREEMENT TO THE ACQUISITION OF YAOZHONG

COMPLETION

Reference is made to the Company's announcement dated 14 August 2012 (the "Announcement"). Unless the context requires otherwise, terms used herein have the same meanings as those defined in the Announcement.

BACKGROUND

The Company has stated in the Announcement that it would convene an EGM to seek the ratification, confirmation and approval of the terms of the Agreement and the transactions contemplated thereunder by the Independent Shareholders, and a circular will be despatched to the Shareholders as soon as practicable.

Since the Announcement, the proposed sale of coal by the Company to China Shipbuilding Logistics Company Limited ("CSLC"), of which coal will be primarily sourced from Indonesia, has reached a stage closer to actual business commencement as disclosed in the Company's announcement dated 23 August 2012. The Group has been actively negotiating with CSLC with an aim to commence the trading business with CSLC as soon as possible in order to meet the disclosed sales target for the last quarter in 2012.

SECOND SUPPLEMENTAL AGREEMENT

In light of the above, there have been further discussions among the Company, the Purchaser and the Vendor as regards the acquisition of the $95\%$ interest in Yaozhong by the Purchaser. Pursuant to such discussions, the Vendor, the Purchaser and the Company have reached an agreement and entered into a second supplemental agreement (the "Second Supplemental Agreement") on 11 September 2012 (after trading hours) to revise the transaction terms under the Agreement as follows (the "Revised Transaction Terms"):

1. Amount of consideration: The consideration for the sale and purchase of the Sale Shares was previously agreed at HK$9,500,000, to be satisfied by the allotment and

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issue of 19,000,000 Shares at a par value of HK$0.50 on the Completion Date. The total revised consideration under the Agreement will be reduced to HK$8,075,000.

1. Deferred payment: Instead of the Company issuing the Consideration Shares to the Vendor on the Completion Date, the consideration will be settled in cash by the Purchaser within 90 days after the Completion Date.

2. Completion: The revised arrangement is conditional upon completion under the Agreement being exempt from any independent shareholders’ approval requirements under the GEM Listing Rules.

REASONS FOR AND BENEFITS OF THE REVISED TRANSACTION TERMS

The key commercial reasons for adopting the Revised Transaction Terms are as follows:

1. Expedited business development

The Company will through Yaozhong source quality coal from Indonesia to supply CSLC and this will increase the business revenue of the Company. The faster the Company can complete the acquisition of Yaozhong, the earlier it will be able to commence its business and hence ramp up a higher total revenue for the financial year. Delay in acquiring Yaozhong will delay the Group’s proposed business with CSLC in Indonesia. The Revised Transaction Terms will expedite completion of the acquisition of Yaozhong and facilitate the CSLC business opportunity.

1. Savings in purchase consideration

Based on the Revised Transaction Terms, there will be an immediate tangible saving in purchase consideration of HK$1,425,000, which is beneficial to the Company and its Shareholders as a whole.

Besides, according to the requirements of Hong Kong Financial Reporting Standard 3, the consideration transferred in a business combination shall be measured at fair value, which shall be calculated as the sum of the acquisition-date fair values of the assets transferred by the acquirer, the liabilities incurred by the acquirer to former owners of the acquiree and the equity interests issued by the acquirer. Accordingly, under the original transaction terms which involved the issue of Consideration Shares, the book value of purchase consideration would be determined by value of the Consideration Shares which would be determined by the closing price on the Completion Date multiplied by the number of Consideration Shares to be issued. The trading price of the Shares has been quite volatile and trading potentially above its par value of HK$0.50, i.e. the proposed issue price of the Consideration Shares. If the Share price closes higher than HK$0.50 on the Completion Date (which is considered the acquisition date), the higher value of the Consideration Shares would translate into a higher investment cost in the accounts of the Company.

1. Reduced compliance costs

Under the Revised Transaction Terms, if the acquisition is exempt under the GEM Listing Rules from independent shareholders’ approval, the Company will have

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further savings from related compliance costs such as printing, translation, legal and financial advisory fees. If the transaction is not exempt, the Company has to proceed with the original transaction terms and the total investment cost (including purchase consideration and compliance costs) would be higher than that under the Revised Transaction Terms.

1. No change to existing shareholding

As there will be no issue of new shares under the Revised Transaction Terms, there will be no dilution to the Shareholders’ existing shareholdings.

The Directors (including the independent non-executive Directors but excluding Mr. Cheung who only recently became a director of the Company and has abstained from voting on all board resolutions in connection with the Supplemental Agreement and Second Supplemental Agreement) consider the terms of the Agreement as revised by the Second Supplemental Agreement (including the Revised Transaction Terms) and the transactions thereunder to be on normal commercial terms, fair and reasonable and in the interests of the Shareholders as a whole.

GENERAL

Under the GEM Listing Rules, given (i) all of the applicable percentage ratios are less than 25%; (ii) the total consideration is less than HK$10,000,000; and (iii) the Revised Transaction Terms do not involve the issue of new Shares by the Company as consideration, the Agreement (as supplemented by the Second Supplemental Agreement) and the transactions thereunder would be subject to the reporting and announcement requirements set out in Rules 20.45 to 20.47 of the GEM Listing Rules and exempt from independent shareholders’ approval requirements pursuant to Rule 20.32(2) of the GEM Listing Rules. Accordingly, in light of the Revised Transaction Terms, the Company will not convene any EGM nor form an independent board committee to consider the Agreement and the transactions thereunder; and no circular will be required to be prepared or issued to the shareholders of the Company. However, in accordance with Rule 20.45 of the GEM Listing Rules, the details of the Agreement and the transactions contemplated thereunder will be included in the Company’s next published annual report and accounts.

COMPLETION

Pursuant to the Second Supplemental Agreement and in view that all conditions to the Agreement have been fulfilled, the Purchaser and the Vendor agreed that completion under the Agreement has taken place on 11 September 2012. Accordingly, Yaozhong is now a non-wholly owned subsidiary of the Company and is owned as to 95% legally and beneficially by the Purchaser.

By order of the Board
Pan Asia Mining Limited
KOH Tat Lee, Michael
Chairman

Hong Kong, 11 September 2012

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As of the date of this announcement, the Board comprises three executive Directors, Mr. KOH Tat Lee, Michael, Mr. ENG Wee Meng and Mr. CHEUNG Hung Man, two non-executive Directors, Mr. YIN Mark Teh-min and Mr. LIANG Tong Wei, and three independent non-executive Directors, Mr. LAI Kai Jin, Michael, Mr. CHU Hung Lin, Victor and Mr. TONG Wan Sze.

This announcement, for which the Directors collectively and individually accept full responsibility, includes particulars given in compliance with the GEM Listing Rules for the purpose of giving information with regard to the Company. The Directors, having made all reasonable enquiries, confirm that to the best of their knowledge and belief the information contained in this announcement is accurate and complete in all material respects and not misleading or deceptive, and there are no other matters the omission of which would make any statement herein or this announcement misleading.

This announcement will remain on the page of "Latest Company Announcement" on the GEM website for at least seven days from the date of its positing.

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