Net Asset Backing 20.3 cents to 78.8 cents
/New Zealand Exchange Limited
P.O. Box 2959
Wellington
4 December 2009
Dear Sir,
Widespread Portfolios net asset backing per share
We wish to advise that the unaudited net asset backing per Widespread Portfolios share, as at 9 a.m. today, ranges from 20.3 cents to 78.8 cents, depending on the valuation methodology applied to our major asset, our 6.47% shareholding in Asian Mineral Resources (“AMR”).
Share of AMR net assets
This net assets calculation assumes our Asian Mineral Resource shareholding is valued at our share of AMR’s audited net assets, an approach consistent with our major shareholding in AMR and continuing significant influence within the company. The recently published Asian Minerals annual report records net assets of CAD 48 million. This figure is based primarily on construction costs capitalised since the mining license was granted in December 2007. This carrying value has been sustained, in discussion with the AMR auditors, based on project valuations that obviously match or exceed CAD 48 million (as if they hadn’t an impairment write-down would have been necessary).
May 2009 20 day volume weighted average price
Our recently published audited financial statements include the AMR shareholding at the twenty day volume-weighted-average-market price as at 20 May 2009. This approach, dictated by New Zealand International Financial Reporting Standards, results in an NTA per WID share of 24.4 cents. We consider this price irrelevant as a) it assumes an efficient market exists for AMR shares and b) that the market value of small parcels of AMR shares is the same as that for large holdings. Neither assumption is correct in respect of Asian Minerals shares
AMR market price today
The last price the AMR shares traded at in Canada. We also consider this price irrelevant for the reasons already stated.
Malaysian Smelting Corporation project valuation
Malaysian Smelting Corporation, a Malaysian listed mining conglomerate also represented on the AMR board, holds the second largest shareholding. Its recent annual report records that its 18.2% Asian Minerals shareholding is valued at CAD 26.4 million, effectively valuing the company at CAD 145 million. This audited carrying value is based on an audited robust project valuation of the Ban Phuc Nickel Mine forecast cash flows. This project valuation obviously matches or exceeds CAD 145 million.
Our view
We prefer the bricks and mortar based net assets figure of CAD 48 million, partially because this would be the floor price if it were decided by Asian Minerals to sell the project together with the mining license, exploration programme data, and other intellectual property in the company. Approximately CAD 75 million has been invested in the project since 1989.
Your view
We have detailed the various valuation approaches that can be applied to our shareholding in AMR. Given the transparency of this information, our shareholders are now in a position where they can then decide for themselves what they consider to be the value of our shares.
Diluted Net Assets per share
Using the share of AMR’s net assets approach, the fully diluted NTA per WID share is 89 cents assuming the listed warrants are exercised @ $2.986 and the unlisted director-held warrants are exercised @ $3.286. All warrants expire on 30 June 2012.
This NTA per share information is also available on our website (www.widespread.co.nz) and is updated daily.
For and on behalf of the Board,
Chris D Castle
Onekaka, 4 December 2009
