Regulatory Actions By SGX::Queries by SGX on the Al Maynard Valuation Report

Issuer & Securities

Issuer/ Manager
ISR CAPITAL LIMITED
Securities
ISR CAPITAL LIMITED - SG1P04916067 - 5EC
Stapled Security
No

Announcement Details

Announcement Title
Regulatory Actions By SGX
Date &Time of Broadcast
21-Nov-2016 15:50:48
Status
New
Announcement Sub Title
Queries by SGX on the Al Maynard Valuation Report
Announcement Reference
SG161121OTHRP1PC
Submitted By (Co./ Ind. Name)
Listing Compliance
Designation
Singapore Exchange
Effective Date and Time of the event
21/11/2016 17:06:00
Description (Please provide a detailed description of the event in the box below)
Please provide further information on the following in an announcement to be released via SGXNET by 23 November 2016. In your announcement, please disclose our questions and your corresponding answers to enable investors to understand the matters raised by the Exchange.


1) SGX questioned the Company's Audit Committee on its views about the consideration of S$40 million paid by the Company for the acquisition of 60% of Tantalum Holding (Mauritius) Ltd. SGX is concerned about whether the purchase consideration at purportedly 7 times the price of Euro 3.7 million paid by the Vendor, REO Magnetic Pte. Ltd just 6 months ago is fair and reasonable and in the interest of the Company and its shareholders. On 18 July 2016, the Audit Committee responded via SGXNet that the consideration is fair and reasonable as they had taken into account the market valuation of the asset and technical reports.

The first valuation report was prepared by Geologica Pty Ltd which did not meet the requirements under the Listing Rules as it was prepared by a sole proprietor. The Exchange then required the Company to appoint a valuer that meets with the Listing Rule requirements. The Company appoint Al Maynard & Associates Pty Ltd to prepare the valuation report ( Al Maynard Report ).

(a) Please confirm that Al Maynard & Associates Pty Ltd ("Al Maynard") is a Practitioner as defined in Clause 2.1 of the 2015 VALMIN Code and disclose the basis for the statement;

(b) Listing Rule 1014(2) requires the valuation report to be prepared in accordance with the VALMIN Code. According to AL Maynard, its valuation of US$1.11 billion is based on mineralization identified. The Al Maynard Report was undertaken without a site visit by Al Maynard for US$5,000. The VALMIN Code requires the Specialist to perform site visits where material Mineral Resources are reported. Please confirm how the Al Maynard Report, without a site visit, is in compliance with the VALMIN Code.

2) Clause 14 of the 2015 VALMIN Code requires a public report to be transparent and provide sufficient information to the reader, the presentation of which is clear and unambiguous, to understand the report and not be misled by this information or by omission of Material information that is known to the Practitioner. In arriving at a valuation of US$1.11 billion, the Al Maynard report did not disclose:

i) A discussion on the data collection, quality controls, etc for the Mineral Resource estimates. Please provide Al Maynard's assessment of these;

ii) A description of the resource estimates and make direct reference to the source of the estimates. Please provide Al Maynard's assessment of these estimates which it had used for its valuation and the source of its resource estimates;

iii) An opinion expressing the acceptability of the resource estimates for use in the valuation. Please provide Al Maynard's opinion the acceptability of these resources estimates and confirm that it is reasonable for an Expert under the VALMIN Code to use these specific estimates for its valuation; and

iv) Details on how the Mineral Resource estimates are derived. Noting the precision of the estimates (i.e. with up to nine significant figures) used to report the resource tonnages, please provide Al Maynard s calculation of these and how the bases used are reasonable and the valuation is reflective of the unprocessed minerals of the resource.

3) We note that whole sections of 4.1 to 4.7 & 4.8 to 4.9 of the AL Maynard Report appears to be similar to the first valuation report by Geologica Pty Ltd (the First Valuation Report ) specifically sections 1.1 to 1.7 and 1.9 & 1.10 of the First Valuation Report. In addition, section 5.2.1 of the Second Valuation Report on Empirical Method is the same as section 2.1. Method 1 - Yardstick Relative Ranking Scale in the First Valuation Report. Noting the similarity in the contents of the First Valuation Report and the AL Maynard Report, please explain how is the Al Maynard Report an independent valuation report and therefore meets the requirements under Listing Rule 210(9)(b) read with Listing Rule 1014(2).

4) Please confirm whether the Empirical Method, referred to in paragraph 5.2 of the Al Maynard Report, using a mineable value valuation methodology is the market-based, the income-based or the cost-based valuation approach to valuation as required under Clause 8.2 of the 2015 VALMIN Code. Please clarify if Al Maynard's valuation methodology is a commonly used industry practice for valuation under the VALMIN Code.

5) Please also provide details on whether Al Maynard & Associates Pty Ltd has taken into account the market risks when applying its Empirical Method of valuation and the evaluations done on movements in the spot prices. If not, please disclose the valuations taking these into account.

6) In paragraph 5.2.1 Empirical Method of the Al Maynard Report, references were made to assumptions of discovery chances, mineable values, chances of locating additional reserves etc. Please provide full details of the sources of these assumptions and how this is reasonably based as these have been used to derive the Al Maynard valuation.

7) The Al Maynard Report appears to have taken into account in-situ values of certain Measured and Indicated Mineral Resources undertaken 3 years ago and modified by metallurgical recoveries. Please disclose the metallurgical recoveries to date, the source of the recoveries relied upon in the AL Maynard Report and how these recoveries were verified.

8) Please disclose if the cost of mining, processing or refining the rare earth elements have been taken into account in deriving the Al Maynard valuation. If not, why this is not required. If such costs were taken into account, please provide the relevant data and disclose Al Maynard s assessment how these costs are reasonably based and reflects market conditions and risks.

9) Please disclose whether the assigned value of US$1.11 billion in the Al Maynard Report was estimated based on unprocessed rare earth element concentrate priced at the unprocessed rare earth element prices or based on pure and processed metal prices. For the above, if the unprocessed rare earth element concentrate was valued priced at the unprocessed prices, please clarify how the valuation of the Acquisition will be affected.

10) We note that the Al Maynard Report did not take into account actual and potential transactions (i.e. transactions of Tantalum Holding (Mauritius) Ltd between Tantalus Rare Earths AG and REO Magnetic Pte. Ltd and REO Magnetic Pte. Ltd and ISR Capital Limited). Please explain why this is not relevant as it relates to the same asset.