Coal

[mhlld]

Sennen retains E&Y to advise for MDL282 sale


2005-07-07 13:53 ET - News Release

Mr. Ian Rozier reports

ERNST & YOUNG APPOINTED AS TRANSACTION ADVISERS FOR THE SALE OF MIDDLEMOUNT MDL282

Sennen Resources Ltd. has appointed Ernst & Young Mergers and Acquisitions of Perth, Australia, as transaction advisers in relation to the sale process for the sale of Middlemount (MDL282).

E&Y became aware that Middlemount was available for purchase and through this process approached its bidder regarding its interest in Middlemount. During the course of the previous sale process, E&Y gained substantial knowledge of the economics of Middlemount and now considers that a number of parties would be interested in the acquisition of the project. E&Y has been involved in working with Indian and Chinese companies that have been looking to acquire coal assets in Australia and E&Y believes that there are a significant number of parties that have not been introduced to Middlemount, and therefore E&Y is well positioned to run a successful sale process. The sale transaction process will be private and confidential with respect to E&Y at all times until such time as a sale and purchase, or such other agreement has been reached, and a contract has been signed. The company retains the right to report any material event with respect to the sale.

E&Y's engagement is exclusive for a period of three months unless extended by mutual agreement. A detailed information memorandum (the IM) prepared by E&Y will be distributed to potential purchasers who have signed a confidentiality agreement. The IM will be specifically designed to highlight the unique features of Middlemount and the potential benefit to specific buyers. The IM will include a financial model prepared by E&Y to provide an indicative framework to assist potential purchasers evaluate Middlemount. At the discretion of the company, E&Y may assist with negotiations on terms and conditions of the final sale and purchase agreement. E&Y must provide a purchaser that will enter into an agreement to acquire Middlemount subject to statutory conditions precedent such as consent of the Foreign Investment Review Board of Australia.

E&Y has been engaged on a retainer fee plus a success fee arrangement on the following basis:


a retainer fee at a rate of $10,000 (Australian) for the first month and $15,000 (Australian) for the following two months, and thereafter by mutual agreement;
a success fee of 2.5 per cent of the sale consideration of Middlemount up to $50-million (Australia) and thereafter a further 0.5 per cent for every $5-million (Australia) additional funds in sale consideration received above $50-million (Australia), as follows; up to $50-million (Australian) 2.5 per cent; plus $50-million (Australian) to $55-million (Australian) 3.0 per cent; plus $55-million (Australian) to $60-million (Australian) 3.5 per cent; plus continuing $5-million (Australian) increments continuing 0.5 per cent increments;
E&Y to be reimbursed all reasonable out-of-pocket expenses incurred, to be rebated against the success fee; and
The sale consideration is defined as cash, cash equivalent, securities, assumption of debt and any other exchange of value. If the sale consideration includes a deferred component, E&Y will receive their success fee as if the deferred consideration was paid at settlement.

The appointment of E&Y has been made in order to maximize value for shareholders in any potential sale of the Middlemount (MDL282) coal deposit. E&Y possesses the requisite experience in the valuation, negotiation and can assist in preparation of sale and purchase documentation that is necessary to achieve maximum value for shareholders while at the same time ensuring that any post sale residual risks and liabilities for the company are minimized.

The company looks forward to working with E&Y Mergers and Acquisitions group with the objective of achieving the most beneficial sales consideration for the sale of Middlemount for the company. The company believes that the desire for commodities by South East Asia countries has not been satisfied at this point in time and the economies of China and India are expanding at rates which will see parties prepared to acquire resource assets in Australia, such as Middlemount, for prices in excess of recent valuations. The company is confident that a sale of Middlemount can be made through the services of E&Y.

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