Highland Pacific Limited (ASX: HIG) is a successful operator in the Papua New Guinea region for more than 20 years. It is into minerals exploration, development and production, and operates in some of the country’s most important copper, gold and nickel assets.
Highland made a Scheme Implementation Agreement with Cobalt 27 Capital Corp, where the shareholders of Highland will be entitled to receive A10.5 cents cash per share and valuing the company at approximately A$115 million. However, the consideration will increase by 1.0 Australian cent cash per share to 11.5 Australian cents if, over the five consecutive trading days before 31 December 2019, the closing spot price of nickel crosses US$13,220 per tonne. Cobalt 27 is currently the largest shareholder of Highland Pacific with a stake of almost 19.99% shares in Highland. Cobalt has been trying for the acquisition of all the shares in Highlands, which is not owned by them yet through the scheme.
The previously announced streaming arrangement with Cobalt 27, for easier repayment of Highlands’ project loans for the Ramu project, has been terminated as its precedent conditions were unable to be met. However, the company is free to engage with third parties regarding alternative transactions until 15 February 2019.
Alternative transactions could include a competing corporate transaction, sale of Highlands’ interest in the Ramu project, or a transaction to support repayment of the project loans for the Ramu project. Cash totalled US$14.9 million at the end of December 2018.
The Managing Director of the company Craig Lennon said that the shareholders would get an opportunity from the scheme in realizing their full investment in the company for cash, at a price that represents a significant premium to current market prices.
The Director also added that the market condition is challenging, with nickel prices currently subdued and cobalt prices having retreated from last year’s record highs. Although the Ramu project continues to achieve several new operating milestones, there are still uncertainties and risks associated with the project including in relation to product shipments and the expansion proposal.
The Independent Directors wanted to convey to the shareholders for voting in favour of the Scheme of Arrangement in the absence of a superior proposal, after their careful consideration of the situation. The Scheme seems to be in the best interests of shareholders as per the conclusion of the Directors, subject to an independent expert.
Now let us quickly have a look at the Highland Pacific Group Limited’s stock performance and the return it has posted over the last few months. The stock last traded at $0.100 with a market capitalization of ~$109.27 million. It has generated a YTD return of 1.01% and generated a negative return of 23.08% over the last six months period. The stock has a 52-week high price of $0.150 and a 52-week low of $0.072 with an average trading volume of 2.81 million approximately. The stock is trading at a PE multiple of 1.070x with an EPS of A$0.093.
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