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Friday, August 20, 2010

ERI clarifies its position

Environmental Resources Investment PLC in a stock exchange filing sought to clarify its position with regard to the recent movements of its shares which, along with three other stocks, prompted the Colombo Stock Exchange to impose a 10 percent trading band.

The full text of the filing follows:

The Board of Environmental Resources Investment PLC [ERI] wishes to make the following announcement in order to clarify its position in the market about their investment in Environmental Resources Limited of the BVI [ERL].

Investment strategy

In or around 2007, Lionhart Investment Ltd committed to invest in Sri Lanka through a public listed company which was then named Walker and Greig Limited (and thereafter renamed Environmental Resources International Plc). Since there was concern at the time about volatility in the market (Ongoing Civil War) the funds would be focused on acquisitions of local Sri Lankan companies as well as to offset the volatility risk, to diversify into certain natural resource investments outside Sri Lanka, namely Environmental Resources Limited of BVI.

Based on this criterion Environmental Resources Investment PLC applied for and obtained the approval of the Central Bank of Sri Lanka for the use of part of the funds brought into Sri Lanka for the acquisition of ERL of the BVI which held a portfolio of foreign assets.

ERI BVI

ERL BVI is a company which is incorporated in the British Virgin Islands. It is owned by an entity named Osiris International Trustees [ÒOSITÓ] which is incorporated in BVI. The ultimate beneficiary of the trustees is Lionhart Investment Ltd. ERI has in agreement dated 14th December 2009 with OSTI whereby OSTI has agreed to sell the entirety of the ownership of ERL BVI to ERI a price of not more than USD 76Mn.

Assets of ERL BVI

The price of the company was based on a valuation of the portfolio obtained from Baker Tilly, a reputed accounting firm with an international presence. The Share Purchase Agreement further provides that the payments will be spread out over ten (10) tranches as per the Exchange Control Approval, subject to the receipt of funds by ERI from Lionhard through periodic Rights Issues and Warrants by ERI. Moreover, the amount of each tranche payable shall be based on a valuation of the portfolio prior to the date of payment, (subject to the overall cap of USD 76 million) thereby allowing for any additional appreciation above USD 76 million to pass freely to ERI. If the value of the portfolio is less than USD 76 million then the lesser value will be paid. ERL BVI’s assets include shares of Eastern Platinum (ERL) which is publicly listed Toronto Stock Exchange (Public -TSX; ELR), as well as included two unlisted corporate bonds. Since there were concerns that the bonds included in the portfolio were illiquid, ERI further succeeded in having them replaced with 2 portfolio of shares. Ile shares that replaced the bonds are named Mukuba Resources Limited (Public - TSX-Venture: MKU) which is a explorer of copper mine in Zambia and is listed on the Toronto Stock Exchange, and shares of Ferrox

Holdings Limited company, unlisted and incorporated in South Africa engaged in the exploration of natural resource of Iron ore and Titanium dioxide in South Africa.

Remittances made to date by ERI

We further wish to state for the completeness of disclosure that Lionhart has remitted a sum of Rs.1,943,243,300/- (USD 16,912474.33), Rs. 1,881,032,280 (USD 16,428,229-52) and Rs.1,595,000,000/- (USD 14,102,564.10) to ERI by way of subscription to two Rights Issues and warrants, out of which two (2) tranches dated 6th April and 19th May 2010 have been remitted in the sums of Rs. 432,454/-(USD 6,426,740.24) and Rs. 714,792,266 (USD 6,261,868.30) to OSTI to date. Third tranche from the warrant conversion of 2010 has yet to be paid.

Custody of securities

All securities owned by ERL BVI which includes Eastern, Platinum (ERL), Mukuba Resources Limited and Ferrox Holdings Limited are presently held in a custodian relationship by a company named Photon Global Limited, [‘PGL’] which is incorporated in BVI for the reason that PGL provides ERL BVI with custodian and settlement services and trading access on the Toronto Stock Exchange. However, ERI is presently seeking to. make arrangements for its securities to be held through a local custodian.

Further the Board Directors of ERI wish to state that it has constantly advised shareholders and investors to take caution by understanding the investment objective and strategy of the ERI and to make informed investment decisions when investing in the shares of the company.

source - www.island.lk