(PMHL) Prosperity Minerals Hldgs

3 April 2012

Prosperity Minerals Holdings Limited

 ("Prosperity" or "PMHL" or "the Company")

Holdings in Company

The Company has been notified on 2 April 2012 that on 29 March 2012 LIM Asia Multi-Strategy Fund Inc. and LIM Asia Special Situations Master Fund Limited increased their collective holding in the ordinary shares of 1p each in the Company ("Ordinary Shares") from 5,660,396 Ordinary Shares to 5,760,396 Ordinary Shares. This represents approximately 4.02 per cent. of the Company's issued ordinary share capital.

Further enquiries:

Prosperity Minerals Holdings Limited                                                 +852 3187 2618      

Patrick Li

Neelke Kruger-Logan

www.pmhl.co.uk

Daniel Stewart & Company plc                                                           +44 (0) 20 7776 6550      

Nominated Advisor and Broker

Corporate Finance: Noelle Greenaway, Emma Earl

Corporate Broking: Martin Lampshire

Citigate Dewe Rogerson                                                                      +44 (0) 20 7638 9571      

Martin Jackson

Kate Lehane

Notes to Editors:

Prosperity (AIM: PMHL) is:

 - an iron ore operator serving the PRC;

 - a specialised real estate owner and developer in the same market; and

 - an investor in two cement plants, also in the PRC.

Prosperity's iron ore business has been operating since 1992 and sources iron ore, for shipment and use in the PRC, from major international iron ore producers in South Africa, Brazil and Australia, as well as from South East Asia, Thailand and Malaysia in particular. The majority of the Company's iron ore is sold to large steel manufacturers in the PRC. In the fiscal years ended 31 March 2010 and 2011, Prosperity shipped 7.9 million tonnes and 6.3 million tonnes of iron ore respectively. In December 2010, Prosperity acquired a 35% effective interest in a Brazilian mining operation which owns approximately 602 square kilometres of exploration rights and 3.01 square kilometres of mining concession in the State of Ceara.  During the first half year ended 30 September 2011, 159,000 tonnes of iron ore was shipped.

Prosperity has operated a real estate investment and development division since February 2010 which is focused on creating a portfolio of PRC property and development assets with good upside potential and manageable risk. The Company has entered into a number of agreements with its partners to develop recreational, commercial and residential projects in Guangzhou City and Changzhou City in the southern PRC and Hangzhou City in the east. Prosperity also acquired interests in an existing commercial building in Guangzhou which is the largest city in the southern PRC and the third largest in the Country (after Beijing and Shanghai). It has a population in excess of 12 million people and is located in the Pearl River Delta, the foremost economic zone in the southern PRC.

In April 2010, Prosperity disposed of its cement business in the PRC but retained its 33.06% interest in Anhui Chaodong Cement Company Limited (ACC). ACC is located in Anhui Province in the eastern PRC and is listed on the Shanghai Stock Exchange (600318:CH). The designed sellable output capacity of ACC is 5.1 million tonnes of cement and clinker per annum. On 1 September 2010, Prosperity acquired a 25% equity interest in Liaoning Changqing in Liaoning Province, in the northern PRC. Liaoning Changqing completed construction of a new 2 million tonnes per annum cement and clinker production line in April 2010 and normal production commenced on 2 July 2010. Following the completion of a share issuance in August 2011, Prosperity's interest in Liaoning Changqing was diluted to 16.11%.

The PRC is the World's second largest economy (behind the US) and the biggest buyer of iron ore; it is also the largest producer and consumer of cement.

7 March 2012

Prosperity Minerals Holdings Limited

 ("Prosperity" or "PMHL" or "the Company")

Proposed investment in Malaysian iron ore mines: additional information

On 10 February 2012 the Company announced a conditional Sale and Purchase Agreement ("Prosperity Sale and Purchase Agreement") between Pro-Rise Limited ("Pro-Rise"), a wholly owned subsidiary of the Company, and Elite Force (Asia) Limited ("Elite Force") whereby, subject to conditions precedents (which have yet to be fulfilled),  Pro-Rise proposed to acquire a 5% interest in All Wealthy Capital Limited ("AWC"), an iron ore resource development company, from Elite Force for US$25 million (approximately £15.8 million).

As stated in the 10 February announcement, Elite Force currently owns an 80% interest in AWC with 10% held by Hong Kong Jinteng International Co. Ltd, a subsidiary of Nanjing Iron and Steel Co. Ltd ("Jinteng" or "Nanjing Steel"), and the balance by two independent non-related third parties. In turn, Elite Force is 100% owned by Mr. David Wong, the Chairman and CEO of the Company. If the transaction is completed, the Company will hold an effective 3.5% interest in a Malaysian iron ore operation.

In addition, PMHL has signed (on 13 January 2012), an option agreement ("Option Agreement") with Prosperity International Holdings (H.K.) Limited ("PIHL"). This will allow it to participate in the acquisition of further interests in AWC alongside PIHL, which is also Prosperity's parent company and listed on the Hong Kong Stock Exchange. In order to secure this opportunity, the Company paid a refundable deposit ("Option Deposit").

Following the 10 February announcement, a number of shareholders has raised questions with the Company about the proposed transactions. Accordingly, and for the benefit of all shareholders and further clarification, the Company sets out below additional information concerning the proposed transactions.

Information about the Malaysian Iron Ore Operation

The Malaysian iron ore operation is owned by Phoenix Lake Sdn Bhd ("Phoenix Lake") which is a 70% subsidiary of AWC. The iron ore operation consists of three long term mining operating rights located at three sites at Sri Jaya, Kuantan, Malaysia. Two of the sites (identified as Sri Jaya II and Sri Jaya III) are connected sites with a total mining area of 412 acres. The third, a site of 169 acres, located near the other two sites (identified as Sri Jaya I), is currently being used as a processing plant site.

A new iron ore processing plant has recently been built on Sri Jaya I. The plant is currently undergoing pre-production trials and Phoenix Lake expects it to be fully commissioned by April 2012. The Company understands that the processing plant is expected to be able to process up to 3 million metric tonnes of iron ore annually commencing from its fourth year of operation.

Phoenix Lake has also started trial production at Sri Jaya II and Sri Jaya III and to date, approximately 1.75 million metric tonnes of unprocessed iron ore have been extracted. Phoenix Lake expects commercial production to commence no later than April 2012, with a gradual increase in production volume.

Sri Jaya is located approximately 100 kilometres from Kuantan Port, the main logistics hub for the shipment of iron ore, and it is linked by good transport infrastructure. In order to minimise delivery time, Phoenix Lake also has priority use of a private pier at the Kuantan Port for berthing and storage. Similarly, in order to prevent possible interruption to processing of iron ore, Phoenix Lake also has priority use of an existing iron ore processing plant with processing capacity of 1 million metric tonnes per annum at Gebeng (approximately 92 kilometres from Sri Jaya) which is owned by an independent third party.

An independent feasibility study and early excavations show that the Malaysian mines have the potential to yield a significant output of iron ore annually.

Valuation of AWC

The valuation of US$500 million for the purposes of the Prosperity Sale and Purchase Agreement is a reference point (which is subject to adjustment as set out below). It was based, materially, on a transaction between Elite Force and Nanjing Steel, which is one of the largest steel mill operators in the PRC. It is also regarded as an independent third party in the Prosperity Sale and Purchase Agreement. On 10 May 2011, Nanjing Steel invested US$50 million for a 10% interest in AWC (the "Nanjing Steel Sale and Purchase Agreement").

AWC's Liquidity Event

It is AWC's intention to trigger a liquidity event ("Liquidity Event") as soon as possible, whereby the shares of AWC will either be listed or in receipt of an offer to purchase from a listed entity.  The most likely Liquidity Event is an acquisition by PIHL of the controlling stake in AWC, subject to fulfilment of all relevant Hong Kong regulatory requirements (including the Hong Kong Listing Rules) and the approval of PIHL's Independent Shareholders.

PIHL has a memorandum of understanding ("MOU") including an exclusivity clause, with the shareholders of AWC to acquire the entire interests in it (other than those to be acquired by the Company pursuant to the Prosperity Sale and Purchase Agreement). This MOU was signed on 2 September 2010 and, since then, PIHL has conducted due diligence on AWC and has informed the Company that this exercise is substantially complete.

Subject to obtaining a satisfactory independent competent person's report on the viability of the mine and an independent valuation report, PIHL will then be in a position to negotiate the consideration for AWC (which is not likely to be higher than the independent valuation) and put the transaction to the Hong Kong Stock Exchange and its Independent Shareholders for approval. However, due to Hong Kong regulatory requirements, the Directors of PMHL have been informed that it will be some months before PIHL is able to complete the acquisition (assuming that it enters into the acquisition agreement).

Benefits to the Company

As shareholders have been advised previously, it is imperative to the Company's iron ore trading business that it maintains a reliable supply of iron ore at competitive prices.

Under the Nanjing Steel Sale and Purchase Agreement, in consideration of the investment in AWC, Nanjing Steel has been granted a ten year off-take agreement to purchase up to 19 million metric tonnes of iron ore at a discounted price. The Directors of PMHL believe that a similar off-take arrangement will be beneficial to PMHL.

Subsequently, the Company sought and agreed with PIHL the following (i) for PMHL to take an early stake in AWC upon substantially the same terms as the Nanjing Steel Sale and Purchase Agreement, and (ii) to take additional interests in AWC upon substantially the same terms as PIHL's acquisition of AWC (should this materialise).

The Directors of PMHL consider that there is an alignment of interests between PIHL and the Company and, based on the proposed transactions, the Company stands to create value on two fronts:

(i)         A guaranteed supply of iron ore at a substantial discount to market price

Based on the off-take arrangement mirroring the Nanjing Steel Sale and Purchase Agreement, PMHL will be guaranteed 9.5 million metric tonnes over ten years at a price which is calculated at 95% of the reference price for a similar grade of iron ore published by Singapore Platts less an additional US$3 per dry metric tonne.

(ii)        Potential capital appreciation and a low risk investment

Based on the current arrangements involving both the Nanjing Steel Sale and Purchase Agreement and the Prosperity Sale and Purchase Agreement, if no Liquidity Event is triggered by 31 May 2012 (or such later date as agreed between the parties) in the case of the Nanjing Steel Sale and Purchase Agreement or 13 January 2013 in the case of the Prosperity Sale and Purchase Agreement, Nanjing Steel and the Company have the option to recover their respective investments of US$50 million and US$25 million together with interest. The latter is calculated at: (a) in the case of Nanjing Steel at the one year lending rate published by the People's Bank of China; and (b) in the case of the Company at 8% per annum.

In addition, there is a further agreement between Nanjing Steel and Mr. David Wong (the controlling shareholder of Elite Force and the ultimate shareholder in PMHL). In the event that a Liquidity Event is triggered, and Nanjing Steel sells its AWC shares to a purchaser in exchange for securities of other companies ("Converted Securities"), Nanjing Steel is entitled to ask Mr. David Wong to purchase its Converted Securities after one year should it decide not to hold such Converted Securities. Similarly, Mr. David Wong is entitled (but not compelled) to purchase the Converted Securities after such period. The purchase price is calculated at a price equal to the amount paid by Nanjing Steel (being US$50 million) plus a return of 15% per annum from the completion date of the Nanjing Steel Sale and Purchase Agreement.

The Prosperity Sale and Purchase Agreement differs from the Nanjing Steel Sale and Purchase Agreement in that, instead of the call and put options referred to above, the Directors of PMHL have negotiated an upside adjustment for PMHL should the return from the Liquidity Event fall below a reference amount. The Directors of PMHL believe that, if a Liquidity Event occurs (and PIHL were to acquire the controlling interests in AWC), the Company's longer term interests will be better served by it being able to acquire an additional stake in AWC rather than being paid out.

Under the Prosperity Sale and Purchase Agreement, upon a Liquidity Event being triggered, the Company's resulting interest in AWC must be valued at a price which is not less than US$35.7 million (which would yield a potential return of approximately 43% on the Company's original US$25 million investment). Otherwise, the Company will be compensated either with cash or additional shares.

In summary and based on the current proposals, PMHL should generate a 43% return on investment if PIHL were to complete the acquisition of AWC and, if no Liquidity Event takes place, PMHL will receive a return of 8% per annum.

Option Agreement

In addition to the proposed acquisition of 5% of AWC, the Company has the option to buy more shares, alongside PIHL, in the event that PIHL acquires a controlling interest in AWC. In the first instance, PMHL taking an early stake in AWC will assist in increasing iron ore production as soon as possible and will guarantee it a regular supply of competitively priced iron ore. The second potential investment is attractive in its own right, the Independent Directors believe, and it will enable the Company to extend its investment in an iron ore company at potentially a good valuation. It is for these benefits and in reflection of PIHL's work so far, that the Company has paid the Option Deposit of US$6 million. However, there is no obligation on the part of the Company to invest if the Independent Directors do not like the valuation or other terms of the PIHL investment.

The Option Agreement to purchase additional interests in AWC has a neutral effect on the Company as it does not need to consider whether to exercise this option at this stage. The Option Deposit of US$6 million is refundable should PMHL decide, at any time, that it does not wish to purchase an additional interest in AWC or should PIHL not enter a definitive agreement for the acquisition of a majority interest in AWC by 12 January 2013.

Conclusion

Against this background, the Directors of PMHL believe it is appropriate to consider an investment in AWC, subject to completion of the Company's own due diligence. It therefore entered into the Prosperity Sale and Purchase Agreement, completion of which is conditional, as set out below, and the Option Agreement to invest alongside PIHL (at the same price as PIHL's acquisition of AWC).

Cross-trigger arrangements

Under the Prosperity Sale and Purchase Agreement, the Liquidity Event must be triggered before the expiry of the second anniversary of completion. The Company and Elite Force have further agreed that, notwithstanding the two year expiry date, if Nanjing Steel exercises its option to recover its investment prior to a Liquidity Event taking place, the Company will have a corresponding right to do so.

Regulatory Approvals Required

The Option Agreement itself does not constitute a transaction subject to disclosure under the AIM Rules. However, the Prosperity Sale and Purchase Agreement and the Off-take Agreement, individually and when aggregated with the Option Agreement, represent a substantial transaction for the Company under Rule 12 of the AIM Rules. The Prosperity Sale and Purchase Agreement and the Off-take Agreement also represent related party transactions for the Company under Rule 13 of the AIM Rules.

Under AIM Rule 13, the Prosperity Sale and Purchase Agreement and the Off-take Agreement are conditional upon the approval of the Independent Directors of the Company ("PMHL Independent Directors"). Also, PMHL Independent Directors can only grant this approval after they have consulted the Company's Nominated Adviser, Daniel Stewart & Company plc ("Daniel Stewart"), as to whether the terms of the Prosperity Sale and Purchase Agreement and the Off-take Agreement are fair and reasonable insofar as all of the Company's shareholders are concerned.

For reasons set out below, Daniel Stewart has not yet given its views on the fairness and reasonableness of the transactions, nor have PMHL Independent Directors given their approval for the transactions.

The Company is a subsidiary of PIHL which is listed on the Hong Kong Stock Exchange. Under the Hong Kong Listing Rules, the Prosperity Sale and Purchase Agreement and the Off-take Agreement are connected transactions entered into between a subsidiary of PIHL and its controlling shareholder which requires: (i) PIHL to obtain a report from an independent financial adviser acceptable to the Hong Kong Stock Exchange ("Hong Kong IFA") on the fairness and reasonableness of the proposed transactions; (ii) PIHL to obtain the approval of its Independent Non-executive Directors; and (iii) PIHL to obtain the approval of its Independent Shareholders to allow the Company to enter into the transactions. PIHL has not yet obtained the Hong Kong IFA report nor has it obtained the approval of its Independent Shareholders.

Prior to formalising its opinion on the fairness and reasonableness of the transaction, Daniel Stewart would like to consider the views of the Hong Kong IFA. In addition, in order to form its fairness and reasonableness opinion, the Company will also need to provide Daniel Stewart with:

(i)         a satisfactory Independent Competent Person's Report ("CPR") (which complies with the applicable reporting standards set out in the AIM Note for Mining, Oil & Gas Companies); and

(ii)        an independent valuation report from a named competent person with the requisite experience in valuing iron ore mines ("Independent Valuation Report").

When will the PMHL Independent Directors make their decision?

The Prosperity Sale and Purchase Agreement and the Off-take Agreement encompass a proposed series of transactions which the Company can only complete if PMHL Independent Directors give their approval.

PMHL Independent Directors will only approve the transactions on the basis set out below:

(i)         PMHL Independent Directors having received, reviewed and being satisfied with the contents and recommendations of certain reports to enable them to form their opinions, including a satisfactory CPR, a satisfactory Independent Valuation Report and a satisfactory fairness and reasonableness opinion from Daniel Stewart;

(ii)         PMHL Independent Directors being satisfied that the pro-forma net asset value of AWC (as adjusted per the Independent Valuation Report) is not materially less than US$500 million;

(iii)        PMHL Independent Directors being satisfied with the financial soundness of AWC; and

(iv)        PMHL Independent Directors being satisfied that the Independent Shareholders of PIHL will approve the transactions.

It should also be noted that the above considerations are non-exhaustive. PMHL Independent Directors retain the discretion not to approve the transactions if they believe that, notwithstanding the above, it will not be in the best interests of the Company to enter into the transactions for any other reason.

If PMHL Independent Directors do not support the transaction, then they will not approve the acquisition and the Prosperity Sale and Purchase Agreement as well as the Off-take Agreement will terminate and the Company will recover its US$7 million deposit.

While the Option Agreement is not conditional upon the Prosperity Sale and Purchase Agreement being completed, the Company also intends to terminate the Option Agreement and recover the US$6 million Option Deposit should PMHL Independent Directors decide not to approve the Prosperity Sale and Purchase Agreement.

Timing

As set out in the announcement dated 10 February, if the Prosperity Sale and Purchase Agreement is approved, the Company had expected that completion would take place by end March 2012. However, following further discussions with the proposed independent competent person and proposed valuer, it is now estimated that realistically the CPR and Independent Valuation Report will only be available in April 2012.

Similarly, given the time required by PIHL's Hong Kong IFA to prepare its report and the time required by PIHL to prepare its notice of a shareholders' meeting and to hold the independent shareholders' meeting, completion (if it were to occur) is likely to be in late May 2012 which is mutually agreed between the parties.

The Company is in the process of appointing an international company to prepare the CPR and also an independent valuation by a company qualified to provide such valuation.

Further enquiries:

Prosperity Minerals Holdings Limited                                                  +852 3187 2618      

Patrick Li

Neelke Kruger-Logan

www.pmhl.co.uk

Daniel Stewart & Company plc                                                           +44 (0) 20 7776 6550      

Nominated Advisor and Broker

Corporate Finance: Paul Shackleton, Noelle Greenaway

Corporate Broking: Martin Lampshire

Citigate Dewe Rogerson                                                                      +44 (0) 20 7638 9571      

Martin Jackson

Kate Lehane

Notes to Editors:

Prosperity (AIM: PMHL) is:

 - an iron ore operator serving the PRC;

 - a specialised real estate owner and developer in the same market; and

 - an investor in two cement plants, also in the PRC.

Prosperity's iron ore business has been operating since 1992 and sources iron ore, for shipment and use in the PRC, from major international iron ore producers in South Africa, Brazil and Australia, as well as from South East Asia, Thailand and Malaysia in particular. The majority of the Company's iron ore is sold to large steel manufacturers in the PRC. In the fiscal years ended 31 March 2010 and 2011, Prosperity shipped 7.9 million tonnes and 6.3 million tonnes of iron ore respectively. In December 2010, Prosperity acquired a 35% effective interest in a Brazilian mining operation which owns approximately 602 square kilometres of exploration rights and 3.01 square kilometres of mining concession in the State of Ceara.  During the first half year ended 30 September 2011, 159,000 tonnes of iron ore was shipped.

Prosperity has operated a real estate investment and development division since February 2010 which is focused on creating a portfolio of PRC property and development assets with good upside potential and manageable risk. The Company has entered into a number of agreements with its partners to develop recreational, commercial and residential projects in Guangzhou City and Changzhou City in the southern PRC and Hangzhou City in the east. Prosperity also acquired interests in an existing commercial building in Guangzhou which is the largest city in the southern PRC and the third largest in the Country (after Beijing and Shanghai). It has a population in excess of 12 million people and is located in the Pearl River Delta, the foremost economic zone in the southern PRC.

In April 2010, Prosperity disposed of its cement business in the PRC but retained its 33.06% interest in Anhui Chaodong Cement Company Limited (ACC). ACC is located in Anhui Province in the eastern PRC and is listed on the Shanghai Stock Exchange (600318:CH). The designed sellable output capacity of ACC is 5.1 million tonnes of cement and clinker per annum. On 1 September 2010, Prosperity acquired a 25% equity interest in Liaoning Changqing in Liaoning Province, in the northern PRC. Liaoning Changqing completed construction of a new 2 million tonnes per annum cement and clinker production line in April 2010 and normal production commenced on 2 July 2010. Following the completion of a share issuance in August 2011, Prosperity's interest in Liaoning Changqing was diluted to 16.11%.

The PRC is the World's second largest economy (behind the US) and the biggest buyer of iron ore; it is also the largest producer and consumer of cement.

10 February 2012

Prosperity Minerals Holdings Limited

 ("Prosperity" or "the Company")

Proposed investment in Malaysian iron ore mines

Iron ore off-take agreement

Prosperity Minerals Holdings Limited ("PMHL.L") is an iron ore operator serving the People's Republic of China ("PRC") and a real estate owner and developer in the same market. It is also an investor in two PRC cement manufacturers. 

We are pleased to announce that on 10 February 2012, Pro-Rise Limited ("Pro-Rise"), a wholly owned subsidiary of the Company, entered into a conditional sale and purchase agreement to acquire a 5% interest in All Wealthy Capital Limited ("All Wealthy") an iron ore resource development company. 

On 13 January 2012, Prosperity signed an option agreement ("Option Agreement") with Prosperity International Holdings (H.K.) Limited ("PIHL") and paid US$6m as a refundable deposit (the "Option Deposit"). Under the Option Agreement, the Company has an option to participate in the acquisition of further interests in All Wealthy alongside PIHL.

Highlights

·      Pro-Rise has entered into a conditional sale and purchase agreement with Elite Force (Asia) Limited ("Elite Force") to acquire a 5% interest in All Wealthy for a total cash consideration of US$25 million (approximately £15.7 million) (the "Acquisition"); Elite Force, which owns an 80% interest in All Wealthy, is 100% owned by Mr David Wong, the Chairman and CEO of the Company. After the completion of the transaction the Company will hold an effective 3.5% interest in a Malaysian iron ore operation.

·      All Wealthy owns a 70% interest in exclusive mining rights in two Malaysian iron ore mines.  It also owns a processing plant in Malaysia adjacent to the mines, which are currently under trial production with a future target production capacity of 3 million tonnes per annum.

·      Prosperity will pay US$7 million (approximately £4.4 million) of the consideration by way of a refundable deposit ("Deposit") by 15 February 2012 with the balance of US$18 million (approximately £11.3 million) due upon completion.

·      If All Wealthy is not listed, directly or indirectly, on the Hong Kong Stock Exchange (or other stock exchange agreed by the parties) within 2 years of completion of the Acquisition,  Prosperity has an option to require Elite Force to buy back its All Wealthy shares at the original investment price plus interest on such amount at 8% per annum.

·      Upon completion of the Acquisition, Prosperity will secure the right, but not the obligation, to buy 9.5 million tonnes of iron ore over a 10 year period, at a discount to the prevailing market price ("Off-take Agreement").

·      Completion of the Acquisition is expected to take place by the end of March 2012, subject to all regulatory approvals and consents being obtained, including the approval of the Acquisition by the independent shareholders of PIHL, the Company's majority shareholder. If Completion does not occur by 30 March 2012, Elite Force will refund the Deposit.

·      Under the Option Agreement signed with PIHL on 13 January 2012, Prosperity has an option to participate in the acquisition of further interests in All Wealthy alongside PIHL.

·      The proposed investment in All Wealthy and the Off-take Agreement is in line with the Company's strategy to continue to increase its investment in iron ore resources and to expand its access to reliable sources of iron ore at competitive prices for sale to end users in China.

Information on All Wealthy

Elite Force, which owns an 80% interest in All Wealthy, is 100% owned by Mr David Wong, the Chairman and CEO of the Company. 

All Wealthy, whose board comprises Mr David Wong as sole Director, is an investment holding company and through its subsidiaries, is engaged in the exploration, mining and processing of iron ore in Malaysia.  All Wealthy indirectly owns a 70% interest in exclusive mining rights in two iron ore mines situated in Sri Jaya, Pahang Province, Malaysia.  The acquisition of a 5% interest in All Wealthy will give Prosperity an effective 3.5% interest in the iron ore mines.  All Wealthy also owns a processing plant with 10 processing lines in Sri Jaya  which is adjacent to the mines.  The plant is under trial operation and has a future target production capacity of 3 million tonnes per annum. 

Reasons for the Proposed Transaction

The proposed investment in All Wealthy and the Off-take Agreement is in line with the Company's strategy to continue to increase its investment in iron ore resources and to expand its access to reliable sources of iron ore at competitive prices for sale to end users in China.

The Company intends to fund the Acquisition from its own cash resources. 

Acquisition Agreement

On 10 February 2012, Pro-Rise entered into a conditional sale and purchase agreement with Elite Force ("Acquisition Agreement") to acquire a 5% equity interest in All Wealthy for a total cash consideration of US$25 million (approximately £15.7 million) (the "Consideration"). 

Pro-Rise will pay the refundable Deposit of US$7 million (approximately £4.4 million) by 15 February 2012, with the balance of US$18 million (approximately £11.3 million) of the Consideration due on completion of the Acquisition Agreement ("Completion"). 

Elite Force agrees to procure, within 2 years of Completion ("Liquidity Event Date"), the listing of All Wealthy, directly or indirectly, on the Hong Kong Stock Exchange (or other stock exchange agreed by the parties) ("Liquidity Event").  If the Liquidity Event does not occur by the Liquidity Event Date, Pro-Rise has the right, within 30 days of the Liquidity Event Date, to require Elite Force to buy all its All Wealthy shares (the "Put Option").  The price payable by Elite Force per All Wealthy share is equal to the original Consideration of US$25,000,000 divided by 350 All Wealthy shares (being the number of All Wealthy shares acquired by Pro-Rise) that is, US$71,428.57 (approximately £44,979.00) per All Wealthy share plus interest on such amount at a rate of 8% per annum (the 'Option Price").  The total Option Price for the total number of All Wealthy shares acquired by Elite Force is payable by Elite Force within 3 months of the exercise of the Put Option. 

The Acquisition Agreement contains certain adjustment provisions applicable to a Liquidity Event and the number of All Wealthy shares held by Pro-Rise:

i.    the Pre-agreed Value per All Wealthy share to be held by Pro-Rise is equal to 70% of the price per All Wealthy share in relation to the Liquidity Event;

ii.    if this is less than the original investment amount of US$71,428.57 per All Wealthy share, Elite Force will transfer additional All Wealthy shares to Pro-Rise and/or pay such a cash amount to Pro-Rise (to be agreed by the parties), so that the original investment amount and the Pre-agreed Value are the same.

Prior to a Liquidity Event, Pro-Rise may only sell its All Wealthy shares to another person subject to Elite Force having the right of first refusal to repurchase such shares. This restriction does not apply to transfers of All Wealthy shares within the Prosperity group or to transfers of All Wealthy shares following a Liquidity Event

Completion of the Acquisition Agreement is expected to take place by the end of March 2012, subject to the satisfaction of all conditions, including all necessary approvals and consents being obtained by the Company and its majority shareholder, PIHL, as further explained below.  In the event the conditions are not satisfied or waived by 30 March 2012 or such other date agreed by the parties, Elite Force will refund the Deposit to Prosperity within 30 business days of such date and the Acquisition Agreement will terminate.

Off-take Agreement

At Completion, Prosperity will enter into an off-take agreement (the "Off-take Agreement") with Grace Wise Pte. Limited ("Grace Wise"), a 70%- owned subsidiary of All Wealthy.  Under the Off-take Agreement, Prosperity has the right to purchase from Grace Wise up to 9.5 million tonnes of iron ore over a ten year period, at intervals to be agreed between the parties. The base price per dry metric tonne of iron ore shall be calculated as: (i) 95% of the Base Fe Price; and (ii) less US$3 per dry metric tonne.  The Base Fe Price is calculated by reference to the average iron ore price for the five trading days prior to the bill of lading date as determined by reference to the published price of iron ore (CFR basis) by Singapore Platts with Fe content closest to the iron ore to be shipped.

The base price shall be converted to an FOB ST (short tons) price per dry metric tonne (in the case of shipments made on a FOB ST basis) by adjustment for the shipping freight costs as agreed between the parties from time to time by reference to market rates.

Deliveries of iron ore are expected to commence in Prosperity's fiscal year 2012-13. The Off-take Agreement will provide Prosperity with access, at its discretion, to reliable supplies of iron ore at competitive prices. The Company will have no obligation to purchase this iron ore if it is able to source iron ore at more competitive prices elsewhere.

Option Agreement

In 2010, the Company's majority shareholder, PIHL, entered into a memorandum of understanding with the vendors of All Wealthy for the exclusive right to negotiate with the vendors with the view to acquiring All Wealthy.  On 13 January 2012, Prosperity entered into the Option Agreement with PIHL.  Under the Option Agreement, Prosperity paid PIHL the Option Deposit of US$6 million (approximately £3.78 million) for the right to negotiate and enter into the Acquisition Agreement and, in the event PIHL acquires a controlling interest in All Wealthy (the "All Wealthy Interest"), the right to acquire from PIHL all or part of the All Wealthy Interest at the same price per All Wealthy share as paid by PIHL to the vendors of All Wealthy (the "Option").  

Prosperity funded the Option Deposit from its own cash resources. If Prosperity decides to exercise its Option to acquire part of the All Wealthy Interest from PIHL, the Option Deposit will be converted into part of the consideration. Prosperity has no obligation to acquire any portion of the All Wealthy Interest from PIHL or the vendors of All Wealthy. PIHL is required to refund the Option Deposit, within 90 days, if Prosperity notifies PIHL of its intention not to acquire further shares in All Wealthy. PIHL must also refund the Option Deposit immediately in the event PIHL has not entered into definitive agreements to acquire the All Wealthy Interest by 12 January 2013.  

Financial Information on All Wealthy

Based on the unaudited consolidated financial statements of All Wealthy for the year ended 31March 2011 prepared in accordance with International Financial Reporting Standards and its interpretations adopted by the International Accounting Standards Board, All Wealthy incurred a profit of approximately US$1,766,000 for the period from 11 March 2010 (being the date of incorporation of All Wealthy) to 31 March 2011. Similarly, the net asset value of All Wealthy as at 31 March 2011 is approximately US$3,019,000.

AIM Rules Implications

Acquisition Agreement and Option Agreement

The Option Agreement is with PIHL, a substantial shareholder and therefore a related party of the Company under the AIM Rules. The Option Agreement individually does not constitute a related party transaction under AIM Rule 13 as it does not exceed 5% of any of the class tests under the AIM Rules.  

The transactions under the Acquisition Agreement and the Option Agreement are with same persons who are related parties of the Company as Mr David Wong holds a 100% interest in Elite Force and, with his associates, holds a combined indirect 64.11% interest in PIHL. The transactions are also of a similar nature. This means that the Company is required to aggregate these transactions under Rule 16 of the AIM Rules for the purposes of determining whether the Acquisition Agreement is a related party transaction under AIM Rule 13 and a substantial transaction under AIM Rule 12. The Acquisition Agreement, individually and when aggregated with the Option Agreement, represents a related party transaction under Rule 13 of the AIM Rules, as it exceeds 5% of certain of the class tests under the AIM Rules.

The Acquisition Agreement, individually and when aggregated with the Option Agreement, also represents a substantial transaction for the Company under Rule 12 of the AIM Rules.

Independent Directors of Prosperity's approval

Under AIM Rule 13, the Off-take Agreement (see below) and the Acquisition Agreement are therefore conditional upon the approval of the transactions under these agreements by the Directors of the Company (other than Mr Wong) (the "Independent Directors"). The Independent Directors can only grant this approval after they have consulted the Company's nominated adviser, Daniel Stewart & Company plc ("Daniel Stewart"), as to whether the terms of the Acquisition Agreement and the Off-take Agreement are fair and reasonable insofar as the Company's shareholders as a whole are concerned.  If the transactions are judged to be fair and reasonable, then the Acquisition Agreement is expected to complete by the end of March 2012, once PIHL's shareholders have voted at a special general meeting of PIHL ("SGM") (see below).

Prosperity's Independent Directors will consult with the Nominated Advisor; Daniel Stewart whether the transaction is fair and reasonable so far as all shareholders are concerned. A separate announcement will be released accordingly.

Off-take Agreements

On the 11 May 2011, the Company announced that Prosperity Materials Macao Commercial Offshore Limited ("PMMC") entered into an off-take agreement (the "Nanjing Agreement") with Nanjing Iron and Steel Group International Trade Co. Limited ("Nanjing") and Grace Wise. Under the Nanjing Agreement, PMMC acts as exclusive introducing agent for Grace Wise in respect of supplies of iron ore to Nanjing. On 15 November 2011, the Company announced that PMMC entered into an iron ore agency agreement (the "Jiangsu Agreement") with Jiangsu Prosperity Steel Limited ("Jiangsu Steel"). Under the Jiangsu Agreement, PMMC acts as Jiangsu Steel's agent in procuring the supply of iron ore to Jiangsu Steel.  Jiangsu Steel is indirectly owned 47.5% by Mr David Wong and Grace Wise is indirectly 58% owned by Mr David Wong and therefore both companies are related parties of the Company under the AIM Rules.

The transactions under the Off-take Agreement, the Nanjing Agreement and the Jiangsu Agreement are with the same persons and are of a similar nature.  This means that the Company is required to aggregate these transactions under Rule 16 of the AIM Rules for the purposes of determining whether the Off-take Agreement is a related party transaction under AIM Rule 13. The Off-take Agreement, individually and when aggregated with the agency income of US$2 per tonne of the Nanjing Agreement and the agency income of up to US$4 per tonne (a commission of US$2 per dry metric tonne of iron ore plus a handling charge of US$2 per dry metric tonne of iron ore if the letter of credit in relation to shipment includes payment terms of 90 days) of the Jiangsu Agreement, represents a related party transaction under Rule 13 of the AIM Rules as it exceeds 5% of certain of the class tests under the AIM Rules.

Implications under HK Listing Rules

The Company's controlling shareholder, PIHL, is listed on the Hong Kong Stock Exchange. Under the Hong Kong Listing Rules, the Acquisition Agreement and the Off-take Agreement constitute connected transactions and are subject to the approval of the independent shareholders of PIHL at an SGM. PIHL is required to constitute an Independent Board Committee of PIHL to advise its independent shareholders on how to vote in respect of the resolution to be tabled to consider the agreements at the SGM. PIHL is also required to appoint an independent financial adviser to advise the Independent Board Committee and independent shareholders of PIHL on the transactions.

Next steps

We understand that the Independent Board Committee of PIHL is required to review the transaction to give its opinion of the fairness and reasonableness to PIHL's independent shareholders for their approval

PIHL expects to despatch further information to its shareholders regarding the transaction. As and when PIHL provides such information to its shareholders, the Company will update its shareholders at the same time.

Further enquiries:

Prosperity Minerals Holdings Limited                                                  +852 3187 2618      

Patrick Li

Neelke Kruger-Logan

www.pmhl.co.uk

Citigate Dewe Rogerson                                                                      +44 (0) 20 7638 9571      

Martin Jackson

Kate Lehane

Daniel Stewart & Company plc                                                            +44 (0) 20 7776 6550      

Nominated Advisor and Broker

Corporate Finance: Paul Shackleton, Noelle Greenaway

Corporate Broking: Martin Lampshire

Notes to Editors:

Prosperity (AIM: PMHL) is:

 - an iron ore operator serving the PRC;

 - a specialised real estate owner and developer in the same market; and

 - an investor in two cement plants, also in the PRC.

Prosperity's iron ore business has been operating since 1992 and sources iron ore, for shipment and use in the PRC, from major international iron ore producers in South Africa, Brazil and Australia, as well as from South East Asia, Thailand and Malaysia in particular. The majority of the Company's iron ore is sold to large steel manufacturers in the PRC. In the fiscal years ended 31 March 2010 and 2011, Prosperity shipped 7.9 million tonnes and 6.3 million tonnes of iron ore respectively. In December 2010, Prosperity acquired a 35% effective interest in a Brazilian mining operation which owns approximately 602 square kilometres of exploration rights and 3.01 square kilometres of mining concession in the State of Ceara. During the first half year ended 30 September 2011, 159,000 tonnes of iron ore was shipped.

Prosperity has operated a real estate investment and development division since February 2010 which is focused on creating a portfolio of PRC property and development assets with good upside potential and manageable risk. The Company has entered into a number of agreements with its partners to develop recreational, commercial and residential projects in Guangzhou City and Changzhou City in the southern PRC and Hangzhou City in the east. Prosperity also acquired interests in an existing commercial building in Guangzhou which is the largest city in the southern PRC and the third largest in the Country (after Beijing and Shanghai). It has a population in excess of 12 million people and is located in the Pearl River Delta, the foremost economic zone in the southern PRC.

In April 2010, Prosperity disposed of its cement business in the PRC but retained its 33.06% interest in Anhui Chaodong Cement Company Limited (ACC). ACC is located in Anhui Province in the eastern PRC and is listed on the Shanghai Stock Exchange (600318:CH). The designed sellable output capacity of ACC is 5.1 million tonnes of cement and clinker per annum. On 1 September 2010, Prosperity acquired a 25% equity interest in Liaoning Changqing in Liaoning Province, in the northern PRC. Liaoning Changqing completed construction of a new 2 million tonnes per annum cement and clinker production line in April 2010 and normal production commenced on 2 July 2010. Following the completion of a share issuance in August 2011, Prosperity's interest in Liaoning Changqing was diluted to 16.11%.

The PRC is the World's second largest economy (behind the US) and the biggest buyer of iron ore; it is also the largest producer and consumer of cement.