Terratech Offer Document (Clean)

2 Kaki Bukit Place, #07-00 Eunos Techpark,
Singapore 416180
Tel: (65) 6848 2567 | Fax: (65) 6848 2568
www.terratechresources.com
OFFER DOCUMENT DATED 21 JULY 2014
(Registered by the Singapore Exchange Securities Trading
Limited (the SGX-ST), acting as agent on behalf of the Monetary
Authority of Singapore (the Authority) on 21 July 2014)
THIS OFFER IS MADE IN OR ACCOMPANIED BY AN OFFER
DOCUMENT (THE OFFER DOCUMENT) THAT HAS BEEN
REGISTERED BY THE SGX-ST, ACTING AS AGENT ON BEHALF
OF THE AUTHORITY ON 21 JULY 2014. THE REGISTRATION OF
THIS OFFER DOCUMENT BY THE SGX-ST, ACTING AS AGENT
ON BEHALF OF THE AUTHORITY DOES NOT IMPLY THAT THE
SECURITIES AND FUTURES ACT (CHAPTER 289) OF SINGAPORE,
OR ANY OTHER LEGAL OR REGULATORY REQUIREMENTS, OR
REQUIREMENTS UNDER THE SGX-STS LISTING RULES, HAVE
BEEN COMPLIED WITH.
This document is important. If you are in any doubt as to the
action you should take, you should consult your legal, financial,
tax or other professional adviser(s).
PrimePartners Corporate Finance Pte. Ltd. (the Sponsor) has
made an application to the SGX-ST for permission to deal in,
and for quotation of, all the ordinary shares (the Shares) in
the capital of Terratech Group Limited (the Company) already
issued (including the Vendor Shares (as defined herein)) and the
new Shares which are the subject of this Placement (the New
Shares (as defined herein) and together with the Vendor Shares,
collectively the Placement Shares) to be listed for quotation
on Catalist. Acceptance of applications will be conditional upon,
inter alia, issue of the New Shares and permission being granted
by the SGX-ST for the listing and quotation of all our existing
issued Shares (including the Vendor Shares) and the New Shares
on Catalist. Monies paid in respect of any application accepted
will be returned if the admission and listing do not proceed. The
dealing in and quotation of the Shares will be in Singapore dollars.
Companies listed on Catalist may carry higher investment risk
when compared with larger or more established companies
listed on the SGX-ST Main Board. In particular, companies may
list on Catalist without a track record of profitability and there
is no assurance that there will be a liquid market in the shares
or units of shares traded on Catalist. You should be aware of the
risks of investing in such companies and should make the decision
to invest only after careful consideration and, if appropriate,
consultation with your professional adviser(s).
Neither the Authority nor the SGX-ST has examined or approved
the contents of this Offer Document. Neither the Authority nor the
SGX-ST assumes any responsibility for the contents of this Offer
Document, including the correctness of any of the statements or
opinions made or reports contained in this Offer Document. The
SGX-ST does not normally review the application for admission to
Catalist but relies on the Sponsor to confirm that the Company
is suitable to be listed and complies with the Catalist Rules (as
defined herein). Neither the Authority nor the SGX-ST has in any
way considered the merits of the Shares or units of Shares being
offered for investment.
We have not lodged this Offer Document in any other jurisdiction.
INVESTING IN OUR SHARES INVOLVES RISKS WHICH ARE
DESCRIBED IN THE SECTION ENTITLED RISK FACTORS OF
THIS OFFER DOCUMENT. IN PARTICULAR, YOU SHOULD NOTE
THE FOLLOWING RISKS FURTHER DESCRIBED IN THIS OFFER
DOCUMENT: (1) OUR BUSINESS VIABILITY DEPENDS ON A
SINGLE QUARRYING SITE; (2) WE HAVE YET TO ESTABLISH
A STRONG SALES TRACK RECORD; (3) WE HAVE STARTED
PRODUCTION ON A COMMERCIAL SCALE ONLY ON TWO OF
OUR MARBLE HILLS AND WE CANNOT GUARANTEE THAT WE
WILL BE ABLE TO IMPLEMENT COMMERCIAL PRODUCTION
FOR ALL OUR MARBLE HILLS IN A TIMELY MANNER; (4) OUR
BUSINESS IS EXPOSED TO UNCERTAINTIES IN RELATION TO
OUR PRODUCTION PLAN; AND (5) OUR GROUPS ABILITY
TO CARRY ON THE BUSINESS IS SUBJECT TO US OBTAINING
AND MAINTAINING ALL NECESSARY LICENCES, PERMITS,
APPROVALS OR CONSENTS AND COMPLYING WITH THE LOCAL
LAWS AND REGULATIONS APPLICABLE TO OUR BUSINESS,
INCLUDING CERTAIN LICENCES, PERMITS OR APPROVALS
WHICH WE NEED TO OBTAIN BEFORE WE CAN COMMENCE
OPERATION OF OUR ON-SITE MARBLE SLAB PROCESSING
FACILITY AND AGGREGATES PROCESSING FACILITY.
After the expiration of six (6) months from the date of
registration of this Offer Document, no person shall make an
offer of securities, or allot, issue or sell any securities, on the
basis of this Offer Document; and no officer or equivalent person
or promoter of the Company will authorise or permit the offer of
any securities or the allotment, issue or sale of any securities, on
the basis of this Offer Document.
TERRATECH GROUP LIMITED ()
(Company Registration No.: CT-276295)
(Incorporated in the Cayman Islands on 15 March 2013)
PRODUCER OF PREMIUM-QUALITY MARBLE

Sponsor, Issue Manager and Joint Placement Agent
PRIMEPARTNERS CORPORATE FINANCE PTE. LTD.
(Company Registration No.: 200207389D)
(Incorporated in the Republic of Singapore)
Placement of 108,700,000
Placement Shares comprising
43,500,000 New Shares and
65,200,000 Vendor Shares at S$0.23
for each Placement Share,
payable in full on application
WHO WE ARE
WHAT WE DO
Operate in the natural resources
sector, a producer of premium-
quality marble blocks and marble
slabs at our Kelantan Marble Quarry
in Malaysia, consisting of four marble
hills (hill 1, hill 2A, hill 2B and hill 3)
Granted Sub-Lease in respect of the
Kelantan Marble Quarry for a term of
33 years from 27 January 2011 to 26
January 2044, with exclusive rights
to undertake the Marble Business
Commenced commercial production
at hill 3 and hill 2B in March 2012 and
2013 respectively
Exploration, development, quarrying,
extraction, removal and processing
of marble from the Kelantan Marble
Quarry
Commercial sale of marble and
marble products
HILL 1
HILL 1
HILL 2A
HILL 2A
HILL 2B
HILL 2B
HILL 3
HILL 3
PROPERTIES OF
OUR MARBLE
MARKET VALUATION
OF QUARRY
Most of our marble will comprise of the Kelantan Purplish
White variety followed by the Kelantan Black Spotted
White variety and then the Kelantan Misty White variety
Range of fair market value of Kelantan Marble
Quarry as at 31 March 2014
Kelantan
Purplish White
Kelantan
Black-Spotted
White
Kelantan
Misty White
100 0 200 300 400 500
(S$million)
Approximately S$170 million to
Preferred Value: Approximately S$260 million
Source: Censere Singapore Pte Ltd (Independent Valuer)
Joint Placement Agent
DMG & PARTNERS SECURITIES PTE. LTD.
(Company Registration No.: 198701140E)
Approximately S$420 million
Singapore 416180
Tel: (65) 6848 2567 | Fax: (65) 6848 2568
BEEN COMPLIED WITH.

WHO WE ARE
WHAT WE DO
2013 respectively
Quarry
marble products
HILL 1
HILL 1
HILL 2A
HILL 2A
HILL 2B
HILL 2B
HILL 3
HILL 3
PROPERTIES OF
OUR MARBLE
MARKET VALUATION
OF QUARRY
Kelantan
Purplish White
Kelantan
Black-Spotted
White
Kelantan
Misty White
100 0 200 300 400 500
(S$million)
INVESTMENT MERITS
OPERATIONAL HIGHLIGHTS
PRODUCTION PLAN
GROWTH STRATEGIES
Dimension stone blocks
of near perfect or
perfect shape
Processed from cutting,
burnishing and polishing
the dimension stone
blocks
Indoor decorative materials
Decoration of high-end
commercial and public
buildings and residential
uses
Produced by crushing
marble pieces which are
unsuitable to be sold as
marble blocks or slabs
Used for construction
or as raw material for
calcium carbonate powder
production
Industrial purposes such
as paints, rubber, paper
and as a ller
MARBLE
BLOCKS
AGGREGATES
(Future plan to produce)
CALCIUM
CARBONATE POWDER
MARBLE
SLABS
Sizeable marble Reserves which can provide a stable
supply of products to customers
Approximately 10.53 million m
3
of Proven Reserves
and approximately 0.49 million m
3
of Probable
Reserves
Marble Reserves which are homogeneous and
consistent, and suitable for decoration of high-end
commercial and public buildings and residential uses
Suitable for big construction/infrastructure projects
which demand large amounts of marble products
with consistent quality
Compares favourably with other foreign marble
products from Europe
Our marble products, being considered a foreign
imported product, generally enjoy a premium in the
PRC market
Competitive advantage over the PRC domestic
marble products in terms of pricing and
margins

Easily accessible and conveniently located quarry
Well-established network of roads and railways
permits cost-efficient transportation of our marble
products

Proven and experienced management team
Our management team has collectively more than
37 years of experience in the marble industry

Surface dimension stone quarrying
Does not require expensive and specialised
machinery, equipment or supporting structures
compared to underground mining or quarrying
which may require more complex processes
Source: Rockhound Limited
(Independent Qualied Person)
Secured first sale of our marble slabs to third-party
customers in February 2014
Entered into sales agreements with nine (9) end-
users and one (1) franchise agreement with a
distributor in the PRC as at the Latest Practicable
Date
Expansion of production capacity and processing
facilities
Enhance quarrying and extracting capabilities
Increase marble slab processing facilities
Significantly increase production rate of dimension
stone blocks, marble blocks and marble slabs
through the Production Plan
Production Plan to extract about 230,000 m
3
per
annum of dimension stone blocks when in full
production by FY2018 onwards

Venture into the calcium carbonate powder production
business
Initial plans to construct a small-scale calcium
carbonate powder production plant
Building of a larger-scale facility in due course
Intend to acquire relevant machinery and
equipment for such facilities
Possible acquisition of other operating calcium
carbonate powder processing facilities
Possible acquisitions of additional stone quarries
Increase stone resources through possible strategic
acquisitions of marble, granite or other stone quarries
Evaluate acquisition opportunities as and when they
arise
Establishing a broad customer base with strong
customer relationships
Increase exposure to our products by attending
industry events to establish communication with
industry players
Expect to have stronger pricing power in line with
increased production capacities and increased
recognition of our products

Maintaining a safe and environmentally friendly
quarrying operation
Established procedures relating to environmental,
health and safety issues
Continue to organise relevant training and
workshops for our employees
Monitor safety and environmental standards
continually
FY2014 FY2015 FY2016 FY2017 FY2018
Production
(1)
(m
3
) 19,500 103,000 160,000 208,000 230,000
Marble blocks
(2)
(m
3
) 2,100 24,000 39,000 46,000 57,000
Marble slabs
(3)
(m
2
) - 44,000 175,000 443,000 708,000
(1) This refers to the gross production rate and is the volume of the marble Reserves which is mined out as dimension stone blocks. The part of the production volume that is not suitable to be sold either as marble blocks and/or
slabs can be sold or used, inter alia, as aggregates, which is used, inter alia, as a raw material in the production of calcium carbonate powder to be used for specic industrial applications.
(2) This refers to dimension stone blocks of A and B classication which are considered to be of good shape. Dimension stone blocks of A classication are usually sold directly as marble blocks while dimension stone blocks of B
classication are usually processed into marble slabs in the PRC prior to delivery to customers. Poorer quality dimension stone blocks (those of C and D classication) will also be produced with a view to processing them into
marble slabs in Malaysia. The balance of the material which is not turned into blocks, that is, the marble pieces that are retained on site, will be stockpiled and crushed and sold as aggregates or used as a raw material for the
production of calcium carbonate powder.
(3) The marble slab quantities refer to those marble slabs to be processed on-site at the Kelantan Marble Quarry or in Malaysia (using dimension stone blocks of C and D classication).
OUR PRODUCTS
Total
Measured,
Indicated and
Inferred Resources
estimated at
20.29 million m
3
Total Proved and Probable
Reserves estimated at
11.02 million m
3
4 hills with an
extraction area of
up to approximately
25.94 ha
An order book for our marble products of approximately S$23.46 million as at the Latest Practicable Date
A significant proportion of the order book is expected to be recognised as revenue within FY2015
ORDER BOOK
Production achieved utilisation rate of 26% of the
production capacity as at the Latest Practicable
Date
INVESTMENT MERITS
OPERATIONAL HIGHLIGHTS
PRODUCTION PLAN
GROWTH STRATEGIES
Dimension stone blocks
of near perfect or
perfect shape
Processed from cutting,
burnishing and polishing
the dimension stone
blocks
Indoor decorative materials
Decoration of high-end
commercial and public
buildings and residential
uses
Produced by crushing
marble pieces which are
unsuitable to be sold as
marble blocks or slabs
Used for construction
or as raw material for
calcium carbonate powder
production
Industrial purposes such
as paints, rubber, paper
and as a ller
MARBLE
BLOCKS
AGGREGATES
CALCIUM
CARBONATE POWDER
MARBLE
SLABS
Sizeable marble Reserves which can provide a stable
supply of products to customers
Approximately 10.53 million m
3
of Proven Reserves
and approximately 0.49 million m
3
of Probable
Reserves
Marble Reserves which are homogeneous and
consistent, and suitable for decoration of high-end
commercial and public buildings and residential uses
Suitable for big construction/infrastructure projects
which demand large amounts of marble products
with consistent quality
Compares favourably with other foreign marble
products from Europe
Our marble products, being considered a foreign
imported product, generally enjoy a premium in the
PRC market
Competitive advantage over the PRC domestic
marble products in terms of pricing and
margins

Easily accessible and conveniently located quarry
Well-established network of roads and railways
permits cost-efficient transportation of our marble
products

Proven and experienced management team
Our management team has collectively more than
37 years of experience in the marble industry

Surface dimension stone quarrying
Does not require expensive and specialised
machinery, equipment or supporting structures
compared to underground mining or quarrying
which may require more complex processes
Source: Rockhound Limited
(Independent Qualied Person)
Secured first sale of our marble slabs to third-party
customers in February 2014
Entered into sales agreements with nine (9) end-
users and one (1) franchise agreement with a
distributor in the PRC as at the Latest Practicable
Date
Expansion of production capacity and processing
facilities
Enhance quarrying and extracting capabilities
Increase marble slab processing facilities
Significantly increase production rate of dimension
stone blocks, marble blocks and marble slabs
through the Production Plan
Production Plan to extract about 230,000 m
3
per
annum of dimension stone blocks when in full
production by FY2018 onwards

Venture into the calcium carbonate powder production
business
Initial plans to construct a small-scale calcium
carbonate powder production plant
Building of a larger-scale facility in due course
Intend to acquire relevant machinery and
equipment for such facilities
Possible acquisition of other operating calcium
carbonate powder processing facilities
Possible acquisitions of additional stone quarries
Increase stone resources through possible strategic
acquisitions of marble, granite or other stone quarries
Evaluate acquisition opportunities as and when they
arise
Establishing a broad customer base with strong
customer relationships
Increase exposure to our products by attending
industry events to establish communication with
industry players
Expect to have stronger pricing power in line with
increased production capacities and increased
recognition of our products

Maintaining a safe and environmentally friendly
quarrying operation
Established procedures relating to environmental,
health and safety issues
Continue to organise relevant training and
workshops for our employees
Monitor safety and environmental standards
continually
FY2014 FY2015 FY2016 FY2017 FY2018
Production
(1)
(m
3
) 19,500 103,000 160,000 208,000 230,000
Marble blocks
(2)
(m
3
) 2,100 24,000 39,000 46,000 57,000
Marble slabs
(3)
(m
2
) - 44,000 175,000 443,000 708,000
(1) This refers to the gross production rate and is the volume of the marble Reserves which is mined out as dimension stone blocks. The part of the production volume that is not suitable to be sold either as marble blocks and/or
slabs can be sold or used, inter alia, as aggregates, which is used, inter alia, as a raw material in the production of calcium carbonate powder to be used for specic industrial applications.
(2) This refers to dimension stone blocks of A and B classication which are considered to be of good shape. Dimension stone blocks of A classication are usually sold directly as marble blocks while dimension stone blocks of B
classication are usually processed into marble slabs in the PRC prior to delivery to customers. Poorer quality dimension stone blocks (those of C and D classication) will also be produced with a view to processing them into
marble slabs in Malaysia. The balance of the material which is not turned into blocks, that is, the marble pieces that are retained on site, will be stockpiled and crushed and sold as aggregates or used as a raw material for the
production of calcium carbonate powder.
(3) The marble slab quantities refer to those marble slabs to be processed on-site at the Kelantan Marble Quarry or in Malaysia (using dimension stone blocks of C and D classication).
OUR PRODUCTS
Total
Measured,
Indicated and
Inferred Resources
estimated at
20.29 million m
3
Total Proved and Probable
Reserves estimated at
11.02 million m
3
4 hills with an
extraction area of
up to approximately
25.94 ha
An order book for our marble products of approximately S$23.46 million as at the Latest Practicable Date
A significant proportion of the order book is expected to be recognised as revenue within FY2015
ORDER BOOK
Production achieved utilisation rate of 26% of the
production capacity as at the Latest Practicable
Date
CORPORATE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
GLOSSARY OF TECHNICAL TERMS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
CAUTIONARY NOTE ON FORWARD-LOOKING STATEMENTS . . . . . . . . . . . . . . . . . . . 23
SELLING RESTRICTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
DETAILS OF THE PLACEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
LISTING ON CATALIST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
INDICATIVE TIMETABLE FOR LISTING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
PLAN OF DISTRIBUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
OFFER DOCUMENT SUMMARY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
OUR COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
OUR BUSINESS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
SUMMARY OF OUR FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
OUR COMPETITIVE STRENGTHS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
OUR PROSPECTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
OUR BUSINESS STRATEGIES AND FUTURE PLANS . . . . . . . . . . . . . . . . . . . . . . . . . 36
OUR CONTACT DETAILS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
THE PLACEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
EXCHANGE RATES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
RISK FACTORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
RISKS RELATING TO OUR BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
RISKS RELATING TO OUR INDUSTRY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
RISKS RELATING TO BUSINESS OPERATIONS IN MALAYSIA . . . . . . . . . . . . . . . . . 52
RISKS RELATING TO BUSINESS OPERATION IN THE PRC . . . . . . . . . . . . . . . . . . . 54
RISKS RELATING TO THE PLACEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
ISSUE STATISTICS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
USE OF PROCEEDS AND LISTING EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
DIVIDEND POLICY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
SHARE CAPITAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
SHAREHOLDING AND OWNERSHIP STRUCTURE . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
TABLE OF CONTENTS
1
SIGNIFICANT CHANGES IN PERCENTAGE OF OWNERSHIP. . . . . . . . . . . . . . . . . . . 70
VENDORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
MORATORIUM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
CAPITALISATION AND INDEBTEDNESS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
WORKING CAPITAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
DILUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
RESTRUCTURING EXERCISE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
PRE-IPO INVESTMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
GROUP STRUCTURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
SELECTED COMBINED FINANCIAL INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
MANAGEMENTS DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL POSITION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
OVERVIEW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
RESULTS OF OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
REVIEW OF PAST PERFORMANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
REVIEW OF FINANCIAL POSITION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
LIQUIDITY AND CAPITAL RESOURCES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
CAPITAL EXPENDITURE AND DIVESTMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
FOREIGN EXCHANGE MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
SIGNIFICANT ACCOUNTING POLICY CHANGES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
GENERAL INFORMATION ON OUR COMPANY AND OUR GROUP. . . . . . . . . . . . . . . . 103
HISTORY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
BUSINESS OVERVIEW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105
KELANTAN MARBLE QUARRY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106
RESOURCE AND RESERVES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110
INDEPENDENT VALUATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112
OUR MARBLE AND OUR MARBLE PRODUCTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113
MARBLE QUARRYING AND EXTRACTION PROCESS . . . . . . . . . . . . . . . . . . . . . . . . 116
PRODUCTION CAPACITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120
QUALITY ASSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120
OUR MAJOR CUSTOMERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120
OUR MAJOR SUPPLIERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121
TABLE OF CONTENTS
2
CREDIT POLICY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123
INVENTORY MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123
SALES AND MARKETING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124
INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124
INTELLECTUAL PROPERTY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125
LICENCES, PERMITS AND APPROVALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125
APPLICABLE GOVERNMENT LAWS AND REGULATIONS. . . . . . . . . . . . . . . . . . . . . . 133
STAFF TRAINING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137
ENVIRONMENTAL PROTECTION AND COMMUNITY DEVELOPMENT . . . . . . . . . . . . 137
INFRASTRUCTURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138
SAFETY POLICY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138
RESEARCH AND DEVELOPMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138
COMPETITION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138
COMPETITIVE STRENGTHS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139
PROPERTIES AND FIXED ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 143
INDUSTRY OVERVIEW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 145
PROSPECTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 152
TREND INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 152
BUSINESS STRATEGIES AND FUTURE PLANS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 153
ORDER BOOK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 155
DIRECTORS, MANAGEMENT AND STAFF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 156
DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 156
KEY EXECUTIVE OFFICERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 160
MANAGEMENT REPORTING STRUCTURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 162
EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 163
REMUNERATION OF DIRECTORS, EXECUTIVE OFFICERS AND RELATED
EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 164
SERVICE AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 165
CORPORATE GOVERNANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 168
INTERESTED PERSON TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 174
PAST INTERESTED PERSON TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 174
PRESENT AND ON-GOING INTERESTED PERSON TRANSACTIONS . . . . . . . . . . . . 179
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3
GUIDELINES AND REVIEW PROCEDURES FOR ON-GOING AND FUTURE
INTERESTED PERSON TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 181
POTENTIAL CONFLICT OF INTERESTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 184
DESCRIPTION OF ORDINARY SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 185
EXCHANGE CONTROLS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 192
TAXATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 193
CLEARANCE AND SETTLEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 199
GENERAL AND STATUTORY INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200
INFORMATION ON DIRECTORS AND EXECUTIVE OFFICERS . . . . . . . . . . . . . . . . . . 200
SHARE CAPITAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 201
MEMORANDUM AND ARTICLES OF ASSOCIATION. . . . . . . . . . . . . . . . . . . . . . . . . . . 202
MATERIAL CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 202
MATERIAL LITIGATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 203
MANAGEMENT AND PLACEMENT ARRANGEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . 203
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 205
CONSENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 207
RESPONSIBILITY STATEMENT BY OUR DIRECTORS. . . . . . . . . . . . . . . . . . . . . . . . . 208
RESPONSIBILITY STATEMENT BY THE VENDORS. . . . . . . . . . . . . . . . . . . . . . . . . . . 208
DOCUMENTS FOR INSPECTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 208
APPENDIX A INDEPENDENT AUDITORS REPORT FOR THE YEARS ENDED
31 MARCH 2011, 2012, 2013 AND THE NINE MONTHS ENDED
31 DECEMBER 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
APPENDIX B SUMMARY OF CERTAIN PROVISIONS OF THE CAYMAN ISLANDS
COMPANIES LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-1
APPENDIX C SELECTED EXTRACTS OF OUR ARTICLES OF ASSOCIATION. . . . C-1
APPENDIX D LEGAL OPINION FROM ROZLAN KHUEN . . . . . . . . . . . . . . . . . . . . . D-1
APPENDIX E INDEPENDENT QUALIFIED PERSONS REPORT . . . . . . . . . . . . . . . E-1
APPENDIX F INDEPENDENT VALUATION REPORT . . . . . . . . . . . . . . . . . . . . . . . . F-1
APPENDIX G TERMS, CONDITIONS AND PROCEDURES FOR APPLICATION AND
ACCEPTANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . G-1
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4
BOARD OF DIRECTORS : Dr Wang Xiaoning (Non-Executive Chairman)
Dr Loh Chang Kaan (CEO and Executive Director)
Aw Eng Hai (Lead Independent Director)
Prof. Zhao Jian (Independent Director)
Wong Kuan Meng Mark (Independent Director)
JOINT COMPANY SECRETARIES : Lee Pih Peng
LLB, MBA
Advocate & Solicitor, Singapore
Codan Trust Company (Cayman) Limited
1
REGISTERED OFFICE : The offices of Codan Trust Company (Cayman)
Limited
Cricket Square, Hutchins Drive
P.O. Box 2681
Grand Cayman KY1 1111
Cayman Islands
SPONSOR, ISSUE MANAGER AND
JOINT PLACEMENT AGENT
: PrimePartners Corporate Finance Pte. Ltd.
20 Cecil Street
#21-02 Equity Plaza
Singapore 049705
JOINT PLACEMENT AGENT : DMG & Partners Securities Pte. Ltd.
10 Collyer Quay
#09-08 Ocean Financial Centre
Singapore 049315
REPORTING ACCOUNTANTS AND
INDEPENDENT AUDITORS
: Ernst & Young Hong Kong
22/F CITIC Tower
1 Tim Mei Avenue
Central, Hong Kong
Partner-in-charge: Ada Lam
(a member of the Hong Kong Institute of Certified
Public Accountants)
SOLICITORS TO THE PLACEMENT
AND LEGAL ADVISER TO OUR
COMPANY ON SINGAPORE LAW
: Lee & Lee
50 Raffles Place
#06-00 Singapore Land Tower
Singapore 048623
LEGAL ADVISER TO OUR
COMPANY ON MALAYSIA LAW
: Rozlan Khuen Advocates & Solicitors
23-2, Block B
The Suites, Jaya 1
Jalan Universiti
46200 Petaling Jaya
Selangor, Malaysia
1
Codan Trust Company (Cayman) Limited will resign as Joint Company Secretary and be appointed Assistant
Company Secretary upon the Listing.
CORPORATE INFORMATION
5
COMPANY ON PRC LAW
: Global Law Office
1501-1502 of Tower 1
Excellence Century Centre
Fuhua 3 Road
Futian District
Shenzhen 518048
The PRC
COMPANY ON CAYMAN ISLANDS
LAW
: Conyers Dill & Pearman Pte. Ltd.
9 Battery Road
#20-01 Straits Trading Building
Singapore 049910
INDEPENDENT QUALIFIED
PERSON
: Rockhound Limited
Unit A, 12th Floor
Times Media Centre
133 Wanchai Road
Hong Kong
INDEPENDENT VALUER : Censere Singapore Pte Ltd
11 Keng Cheow Street
#03-11 Riverside Piazza
Singapore 059608
INDEPENDENT INDUSTRY
EXPERT
: Beijing Antaike Information Development Co., Ltd.
7th Floor
No. 31 Suzhou Street
Haidian District
Beijing 100080
The PRC
SINGAPORE SHARE REGISTRAR
AND SHARE TRANSFER AGENT
: Boardroom Corporate & Advisory Services Pte. Ltd.
50 Raffles Place
#32-01 Singapore Land Tower
Singapore 048623
PRINCIPAL BANKER : DBS Bank Ltd
12 Marina Boulevard
Marina Bay Financial Centre
Tower Three
Singapore 018982
RECEIVING BANKER : The Bank of East Asia, Limited
60 Robinson Road
BEA Building
Singapore 068892
VENDORS : Luminor Pacific Fund 1 Ltd.
80 Raffles Place
#32-01
Singapore 048624
Kwan Chee Seng
36 White House Park
Singapore 257614
CORPORATE INFORMATION
6
In this Offer Document and the accompanying Application Form, unless the context otherwise
requires, the following definitions apply throughout where the context so admits:
Companies within our Group
CEP : CEP Resources Entity Sdn. Bhd., a company
incorporated in Malaysia on 16 March 2006, an indirect
wholly-owned subsidiary of our Company
Company : Terratech Group Limited (|l([+), an
exempted company incorporated in the Cayman Islands
with limited liability on 15 March 2013
Group or Group
Companies
: Our Company and our subsidiaries as at the date of this
Offer Document
Qingdao Terratech : Qingdao Terratech Resources Co., Ltd. (|!J(
[+), a wholly foreign-owned enterprise established in
the PRC on 26 June 2013, an indirect wholly-owned
subsidiary of our Company
Terratech Resources : Terratech Resources Pte. Ltd., a company incorporated
in Singapore on 5 July 2007, a direct wholly-owned
subsidiary of our Company
Companies within the TGL Group
Beijing Wisetec : Beijing WiseTec Technologies Co., Ltd., a company
established in the PRC and a wholly-owned subsidiary of
TGL
Presscrete Engineering : Presscrete Engineering Pte Ltd, a company incorporated
in Singapore and a wholly-owned subsidiary of TGL
Syseng : Syseng (S) Pte Ltd, a company incorporated in
Singapore and a wholly-owned subsidiary of TGL
Terra Tritech : Terra Tritech Engineering (M) Sdn Bhd, a company
incorporated in Malaysia and a wholly-owned subsidiary
of TGL
TGL : Tritech Group Limited, a company incorporated in
Singapore and listed on Catalist, a Controlling
Shareholder of the Company
TGL Group : TGL and its subsidiaries (other than our Group)
Tritech Consultants : Tritech Consultants Pte Ltd, a company incorporated in
Singapore and a wholly-owned subsidiary of TGL
Tritech Engineering : Tritech Engineering & Testing (Singapore) Pte Ltd, a
company incorporated in Singapore and a wholly-owned
subsidiary of TGL
DEFINITIONS
7
Tritech International : Tritech International Holdings Pte. Ltd., a company
incorporated in Singapore and a Controlling Shareholder
of TGL
Tritech Qingdao : Tritech (Qingdao) Membrane Industry Co., Ltd., a
company incorporated in the PRC and a wholly-owned
subsidiary of TGL
Tritech Water : Tritech Water Technologies Pte Ltd., a company
incorporated in Singapore and a wholly-owned
subsidiary of TGL
Other Companies, Organisations and Agencies
ACRA : Accounting and Corporate Regulatory Authority of
Singapore
Antaike : Beijing Antaike Information Development Co., Ltd.
Authority : Monetary Authority of Singapore
CDP or Depository : The Central Depository (Pte) Limited
Censere : Censere Singapore Pte Ltd
CPF : Central Provident Fund
Crescent : Crescent Worldwide Investment Ltd
CSMA : China Stone Material Association
DMG : DMG & Partners Securities Pte. Ltd.
IASB : International Accounting Standards Board
IRAS : Inland Revenue Authority of Singapore
Issue Manager, Sponsor,
Joint Placement Agent or
PPCF
: PrimePartners Corporate Finance Pte. Ltd.
Joint Placement Agents : PPCF and DMG and Joint Placement Agent shall refer
to PPCF or DMG
Kelstone : Kelstone Sdn Bhd
KSEDC : Kelantan State Economic Development Corporation
Kwan Chee Seng : Kwan Chee Seng, one of the Pre-IPO Investors
Luminor Capital : Luminor Capital Pte. Ltd., the manager of Luminor
Pacific Fund 1
DEFINITIONS
8
Luminor Pacific Fund 1 : Luminor Pacific Fund 1 Ltd., one of the Pre-IPO
Investors
Receiving Banker : The Bank of East Asia, Limited
Rockhound : Rockhound Limited
Rozlan Khuen or
Malaysian Legal Advisers
: Rozlan Khuen Advocates & Solicitors, our legal advisers
on Malaysian law
SAFE : The PRC State Administration of Foreign Exchange
SCCS : Securities Clearing & Computer Services (Pte) Ltd
SGX-ST : Singapore Exchange Securities Trading Limited
Share Registrar : Boardroom Corporate & Advisory Services Pte. Ltd.
Singapore Legal Advisers : Lee & Lee
Successive Investments : Successive Investments Limited
General
3Q : Financial period ended or ending 31 December, as the
case may be
Acquisition : The acquisition of Terratech Resources by TGL from
Tritech International and Chua Eng Pu, particulars of
which are set out in the section entitled History
Acquisition of Terratech Resources by TGL of this Offer
Document
Additional Site : An area of approximately 10.17 ha at the Kelantan
Marble Quarry which is not part of Lot 1781
Agreed Proportion : The proportion of approximately 84.19% and 15.81% of
the aggregate cash listing expenses to be borne by the
Company and the Vendors respectively
Application Form : The official printed application form to be used for the
purpose of the Placement and which form part of this
Offer Document
Application List : The list of applications for the subscription and/or
purchase of the Placement Shares
Articles or Articles of
Association
: The articles of association of our Company, as amended,
supplemented or modified from time to time, extracts of
which are contained in the section entitled Selected
Extracts of Our Articles of Association set out in
Appendix C of this Offer Document
DEFINITIONS
9
Associates : (a) in relation to any director, chief executive officer,
substantial shareholder or controlling shareholder
(being an individual) means:
(i) his immediately family;
(ii) the trustees, acting in their capacity as such
trustees, of any trust of which he or his
immediate family is a beneficiary or, in the
case of a discretionary trust, is a discretionary
object; or
(b) in relation to a substantial shareholder or a
controlling shareholder (being a company) means
any other company which is its subsidiary or
holding company or is a fellow subsidiary of any
such holding company or one in the equity of which
it and/or such other company or companies taken
together (directly or indirectly) have an interest of
30% or more of the total votes attached to all the
voting Shares
Associated Company : In relation to a corporation, means:
(a) any corporation in which the corporation or its
subsidiaries have, or the corporation and its
subsidiaries together have, a direct interest of not
less than 20% but not more than 50% of the
aggregate of the total votes attached to all the
voting shares; or
(b) any corporation, other than subsidiaries of the
corporation or a corporation which is an associated
company by virtue of paragraph (a), the policies of
which the corporation or its subsidiary, or the
corporation together with its subsidiaries, is able to
control or influence materially
Audit Committee : The audit committee of our Company as at the date of
this Offer Document, unless otherwise stated
Board or Board of
Directors
: The board of Directors of our Company as at the date of
CAGR : Compound annual growth rate
Catalist : The sponsor-supervised listing platform of the SGX-ST
Catalist Rules : Any or all of the rules in the SGX-ST Listing Manual
Section B: Rules of Catalist, as the case may be, as
amended, supplemented or modified from time to time
Cayman Companies Law : The Companies Law, Cap. 22 (Law 3 of 1961, as
consolidated and revised) of the Cayman Islands
DEFINITIONS
10
CBA : The convertible bond agreement dated 16 November
2012 entered into among Terratech Resources, TGL,
Luminor Capital (the manager of Luminor Pacific Fund 1)
and Kwan Chee Seng
CEO : Our Companys chief executive officer from time to time
Companies Act : Companies Act (Chapter 50) of Singapore, as amended,
supplemented or modified from time to time
Consideration Shares : The 429,999,999 Shares issued to TGL by our Company,
in satisfaction of the Terratech Acquisition Consideration,
particulars of which are set out in the section entitled
Restructuring Exercise of this Offer Document
Controlling Shareholder : In relation to a corporation, means, a person who:
(a) holds directly or indirectly 15% or more of the
nominal amount of all voting shares in the
corporation. The Exchange may determine that a
person who satisfies this paragraph is not a
controlling shareholder; or
(b) in fact exercises control over a corporation
Conversion Amount : The aggregate principal amount of the Convertible
Bonds of S$15,000,000 and the outstanding accrued
interest thereon of approximately S$677,260 up to and
including 16 June 2014
Conversion Shares : The 136,324,003 new Shares issued and allotted to the
Pre-IPO Investors, credited as fully paid up, upon
conversion of the Convertible Bonds, particulars of which
are set out in the section entitled Pre-IPO Investment of
this Offer Document
Convertible Bonds : The convertible bonds issued by Terratech Resources
and subscribed for by the Pre-IPO Investors as
described in the section entitled Pre-IPO Investment of
this Offer Document
Convertible Bonds
Settlement Amount
: The amount equal to the Conversion Amount, which was
deemed due and owing by Terratech Resources to our
Company as a result of our Company assuming the
liability to repay or procure the conversion of the
Conversion Amount into Conversion Shares, in place of
Terratech Resources, particulars of which are set out in
the section entitled Restructuring Exercise of this Offer
Document
DEFINITIONS
11
Convertible Bonds
Settlement Shares
: The 156,772,600 new ordinary shares in the capital of
Terratech Resources issued to our Company by way of
the capitalisation of the Convertible Bonds Settlement
Amount, particulars of which are set out in the section
entitled Restructuring Exercise of this Offer Document
Crescent Shares : The 24,601,000 Shares being equal to 4.0% of the
post-Placement share capital of 615,042,003 Shares
transferred by TGL to Crescent
Director : A director of our Company as at the date of this Offer
Document
Entity at Risk : (a) Our Company; (b) a subsidiary of our Company that
is not listed on the SGX-ST or an approved exchange; or
(c) an Associated Company that is not listed on the
SGX-ST or an approved exchange, provided that our
Group or our Group and our Interested Person(s), has
control over the Associated Company
EPS : Earnings per Share
Executive Directors : The executive Directors of our Company as at the date of
Executive Officers : The executive officers of our Company as at the date of
this Offer Document, who are also key executives as
defined under the SFR, unless otherwise stated
FY : Financial year ended or ending 31 March as the case
may be
GDP : Gross Domestic Product
Gua Musang Property : The plot of land situated at PN5329, Lot 5497, Bandar
Gua Musang, Jajahan Gua Musang, Kelantan, Malaysia
of approximately 17,262 m
2
, further particulars of which
are set out in the section entitled Properties and Fixed
Assets of this Offer Document
IAS : International Accounting Standards
IFRS : International Financial Reporting Standards
Independent Directors : The independent Directors of our Company as at the
date of this Offer Document, unless otherwise stated
Independent Valuation
Report
: The valuation report dated 31 March 2014 prepared by
Censere relating to the independent valuation of the fair
market value of the Kelantan Marble Quarry in relation to
the Listing as set out in Appendix F of this Offer
Document
DEFINITIONS
12
Industry Report : The report dated 30 April 2014 prepared by Antaike in
relation to the white marble market in Malaysia and the
PRC for use in whole or in part in this Offer Document
Interested Person : (a) a director, chief executive officer or Controlling
Shareholder of our Company; or
(b) an Associate of any such director, chief executive
officer or Controlling Shareholder
Interested Person
Transaction
: A transaction between an Entity at Risk and an
Interested Person
Kelantan : A state in the Federation of Malaysia
Kelantan Marble Quarry : The quarry located at Mukim Ulu Nenggiri, Jajahan Gua
Musang, Kelantan, Malaysia, comprising four (4) hills
(termed hills 1, 2A, 2B and 3)
Kelstone Agreement : The agreement dated 9 September 2007 entered into
between CEP and Kelstone, pursuant to which Kelstone
has agreed to procure KSEDC to grant a sub-lease of the
Kelantan Marble Quarry to CEP for a term of 33 years
from the date of registration of the sub-lease, with the
exclusive rights to explore, develop, quarry, extract,
remove and sell marble and/or other stones for
commercial sale or consumption
Land Code : The Malaysian National Land Code 1965
Latest Practicable Date or
LPD
: 20 June 2014, being the latest practicable date before
the lodgement of this Offer Document with the SGX-ST,
acting as agent on behalf of the Authority
Listing : The listing of the Shares on Catalist
LPS : Loss per Share
Management Agreement : The full sponsorship and management agreement
entered into between our Company, the Vendors and
PPCF pursuant to which PPCF shall sponsor and
manage the Listing, details as described in the sections
entitled Plan of Distribution and Management and
Placement Arrangements of this Offer Document
Marble Business : The exploration, development, quarrying, extraction and
removal of marble from the Kelantan Marble Quarry, and
the commercial sale of marble and marble products
Market Day : A day on which the SGX-ST is open for trading in
securities
DEFINITIONS
13
Memorandum : The memorandum of association of the Company, as
may be amended, supplemented or modified from time to
time
N.A. : Not applicable
NAV : Net asset value
New Shares : The 43,500,000 new Shares for which our Company
invites applications to subscribe for pursuant to the
Placement, subject to and on the terms and conditions
set out in this Offer Document
Nominating Committee : The nominating committee of our Company as at the
Non-Executive Directors : The non-executive Directors of our Company (including
the Independent Directors) as at the date of this Offer
Document, unless otherwise stated
NTA : Net tangible assets
Offer Document : This Offer Document dated 21 July 2014 issued by our
Company in respect of the Placement
period under review : The period which comprises FY2011, FY2012, FY2013
and 3Q2014
Placement : The placement of the Placement Shares by the Joint
Placement Agents on behalf of our Company and the
Vendors for subscription and/or purchase at the
Placement Price subject to and on the terms and
conditions as set out in this Offer Document
Placement Agreement : The placement agreement entered into between our
Company, the Vendors and the Joint Placement Agents
pursuant to which the Joint Placement Agents agreed to
procure subscriptions and/or purchases for the
Placement Shares at the Placement Price as described
in the sections entitled Plan of Distribution and
Management and Placement Arrangements of this
Offer Document
Placement Price : S$0.23 for each Placement Share
Placement Shares : The 108,700,000 Shares which are the subject of the
Placement, comprising 43,500,000 New Shares and
65,200,000 Vendor Shares
PPCF Shares : The 5,218,000 new Shares to be issued and allotted to
PPCF by our Company as part of PPCFs management
fee as the Sponsor and Issue Manager
DEFINITIONS
14
PRC : The Peoples Republic of China, excluding the special
administrative regions, Hong Kong and Macau, and
Taiwan for the purpose of this Offer Document and for
geographical reference only
PRC Government : The central government of the PRC, including all
governmental subdivisions (including provincial,
municipal and other regional or local government
entities) and instrumentalities thereof, or where the
context require, any of them
Pre-IPO Investors : Collectively, Luminor Pacific Fund 1 and Kwan Chee
Seng
Production Plan : Our projected production capacity, details of which are
set out in the section entitled Business Strategies and
Future Plans of this Offer Document
Qualified Person : Paul Fowler, the Managing Director of Rockhound, being
a qualified person as defined under the Catalist Rules
Qualified Persons Report : The report dated 31 March 2014 prepared by Rockhound
set out in Appendix E of this Offer Document
Quarry Scheme Approval : The approval from the Kelantan Department of Minerals
and Geoscience of the quarry scheme filed by CEP
allowing our Group to commence and/or undertake
quarrying activities at the Kelantan Marble Quarry
Remuneration Committee : The remuneration committee of our Company as at the
Restructuring Agreement : The agreement dated 20 June 2014 entered into by our
Company, Terratech Resources and TGL, particulars of
which are set out in the section entitled Restructuring
Exercise of this Offer Document
Restructuring Exercise : The corporate restructuring exercise implemented in
connection with the Listing, more fully described in the
section entitled Restructuring Exercise of this Offer
Document
Securities Account : The securities account maintained by a Depositor with
CDP but does not include a securities sub-account
Securities and Futures
Act or SFA
: The Securities and Futures Act (Chapter 289) of
Singapore, as amended, supplemented or modified from
time to time
DEFINITIONS
15
Service Agreements : The service agreements entered into between our
Company and our CEO and Executive Director, Dr Loh
Chang Kaan and our Executive Officer, Mui Siew Yun, as
described in the section entitled Service Agreements of
this Offer Document
SFR : The Securities and Futures (Offers of Investments)
(Shares and Debentures) Regulations 2005 of
Singapore, as amended, supplemented or modified from
time to time
Share(s) : Ordinary share(s) of par value S$0.01 each in the capital
of our Company
Shareholder(s) : Registered holders of Shares
Shareholders Loans : The advances and loans of an aggregate principal
amount of S$8.436 million made by TGL to Terratech
Resources
Shareholders Loans
Shares
: The 84,360,000 new ordinary shares in the capital of
Terratech Resources issued to TGL by way of the
capitalisation of the Shareholders Loans, particulars of
which are set out in the section entitled Restructuring
Exercise of this Offer Document
Singapore : The Republic of Singapore
Substantial
Shareholder(s)
: Persons who have an interest in one or more voting
shares, and the total votes attaching to that share or
those shares, represent not less than 5.0% of the total
votes attaching to all the voting shares in our Company
Sub-Lease : The sub-lease granted in favour of CEP in respect of the
Kelantan Marble Quarry
Sub-Lease Term : The term of the Sub-Lease from 27 January 2011 up to
its expiry date of 26 January 2044
Successive Investments
Shares
: The 18,451,000 Shares being equal to 3.0% of the
post-Placement share capital of 615,042,003 Shares
transferred by TGL to Successive Investments
Terratech Acquisition
Consideration
: The purchase consideration payable by our Company to
TGL for the acquisition of Terratech Resources under the
Restructuring Agreement, particulars of which are set out
in the section entitled Restructuring Exercise of this
Offer Document
USA : United States of America
DEFINITIONS
16
Vendor Shares : The 65,200,000 issued and fully paid-up Shares owned
by the Vendors for which the Vendors invite applications
to purchase pursuant to the Placement, subject to and on
the terms and conditions set out in this Offer Document
Currencies, Units and Others
RM or Ringgit : Malaysian ringgit
RMB : PRC Renminbi
HK$ : Hong Kong dollars
S$ and cents : Singapore dollars and cents, respectively
US$ : USA dollars
ha : Hectare(s) (one hectare = 10,000 m
2
)
g : Gram(s)
kg : Kilogram(s)
km : Kilometre(s)
m : Metre(s)
m
2
or sq m : Square metre(s)
m
3
: Cubic metre(s)
mm : Millimetre(s)
Mpa : Megapascal (106 Newton per sq m)
t : Tonnes metric unit of weight which is equivalent to
1,000 kilograms
t/m
3
: Tonnes per cubic metre
% or per cent. : Per centum or percentage
The expression subsidiary shall have the meaning ascribed to it in the SFR and the Companies
Act.
The expression business trust has the same meaning ascribed to it in Section 2 of the Business
Trusts Act (Chapter 31A) of Singapore.
The expression Entity includes a corporation, an unincorporated association, a partnership and
the government of any state, but does not include a trust.
The expressions Depositor, Depository Agent and Depository Register shall have the
meanings ascribed to them respectively in Section 130A of the Companies Act.
DEFINITIONS
17
References in this Offer Document to Appendix or Appendices are references to an appendix or
appendices respectively in this Offer Document.
Any discrepancies in tables included herein between the total sum of amounts listed and the totals
shown thereof are due to rounding. Accordingly, figures shown as totals in certain tables may not
be an arithmetic aggregation of the figures which precede them.
Words importing the singular shall, where applicable, include the plural and vice versa and words
importing the masculine gender shall, where applicable, include the feminine and neuter genders
and vice versa. References to persons shall include corporations.
Certain names with Chinese characters have been translated into English names for the
convenience of readers. Such translations may not be recognised with the relevant PRC
authorities and should not be construed as representing the Chinese characters. In the event of
any inconsistency between the official Chinese names and the translated English names, the
official Chinese names shall prevail.
Any reference in this Offer Document and the Application Form to any statute or enactment is a
reference to that statute or enactment as for the time being amended or re-enacted.
Any word defined under the Companies Act, the Cayman Companies Law, the SFA, SFR or any
statutory modification thereof and used in this Offer Document and the Application Form shall,
where applicable, have the meaning ascribed to it under the Companies Act, the Cayman
Companies Law, the SFA, SFR or any statutory modification thereof, as the case may be.
Any reference in this Offer Document and the Application Form to Shares being allotted and/or
allocated to an applicant includes allotment and/or allocation to CDP for the account of that
applicant.
Any reference to a time of day in this Offer Document and the Application Form is a reference to
Singapore time unless otherwise stated.
Any reference in this Offer Document to we, our, us or their other grammatical variations is
a reference to our Company, or our Group, or any member of our Group, as the context requires.
DEFINITIONS
18
To facilitate a better understanding of the business of our Group, the following glossary provides
a description of some of the technical terms and abbreviations commonly used in our industry. The
terms and their assigned meanings may not correspond to standard industry or common
meanings or usage of these terms:
aggregates : A granular rock product obtained by processing of natural
materials through crushing and screening which in the case of
dimension stone quarrying is produced from pieces of rock.
which are not suitable to be processed into blocks or slabs
ASTM Standards : The standards issued by the American Society for Testing and
Materials
block rate : The percentage of the marble resources that can be mined out
as marble dimension stone blocks
brightness : A measure of how much light is reflected by a material under
specified conditions and is usually reported as a percentage
of how much light is reflected
calcite : The most stable crystalline form of calcium carbonate
(CaCO
3
)
dimension stone : Natural stone that has been trimmed, cut, drilled or ground to
specific sizes or shapes
dimension stone blocks : Stone which is cut from untrimmed quarry stone into a cuboid
shape. We classify these to be Blocks of A, B, C and D
classification and as such any shape ranging from a near or
complete shape (i.e. Blocks classed as A) to those of poor
shape (i.e. Blocks classed as D)
dolomite : Mineral composed of calcium magnesium carbonate
CaMg(CO
3
)
2
. Pure dolomite contains 30.4% CaO and 21.9%
MgO. Dolomite also refers to the name of a sedimentary
carbonate rock
Feasibility Study : A comprehensive technical and economic study of the
selected development option for a mineral project that
includes appropriately detailed assessments of applicable
Modifying Factors together with other relevant operational
factors and detailed financial analysis that are necessary to
demonstrate at the time of reporting that extraction is
reasonably justified (economically mineable). The results of
the study may reasonably serve as the basis for a final
decision by a proponent or financial institution to proceed
with, or finance, the development of the project. The
confidence level of the study will be higher than that of a
Pre-Feasibility Study
GLOSSARY OF TECHNICAL TERMS
19
Indicated Mineral
Resource or Indicated
Resource
: That part of a Mineral Resource for which quantity, grade (or
quality), densities, shape and physical characteristics are
estimated with sufficient confidence to allow the application of
Modifying Factors in sufficient detail to support mine planning
and evaluation of the economic viability of the deposit
Geological evidence is derived from adequately detailed and
reliable exploration, sampling and testing gathered through
appropriate techniques from locations such as outcrops,
trenches, pits, workings and drill holes, and is sufficient to
assume geological and grade (or quality) continuity between
points of observation where data and samples are gathered
An Indicated Mineral Resource has a lower level of
confidence than that applying to a Measured Mineral
Resource and may only be converted to a Probable Ore
Reserve
Inferred Mineral Resource
or Inferred Resource
: That part of a Mineral Resource for which quantity and grade
(or quality) are estimated on the basis of limited geological
evidence and sampling. Geological evidence is sufficient to
imply but not verify geological and grade (or quality)
continuity. It is based on exploration, sampling and testing
information gathered through appropriate techniques from
locations such as outcrops, trenches, pits, workings and drill
holes
An Inferred Mineral Resource has a lower level of confidence
than that applying to a Indicated Mineral Resource and must
not be converted to an Ore Reserve. It is reasonably expected
that the majority of Inferred Mineral Resources could be
upgraded to Indicated Mineral Resources with continued
exploration
JORC : Joint Ore Reserves Committee
JORC Code : The Australasian Code for Reporting of Exploration Results,
Mineral Resources and Ore Reserves (2012 edition), as
published by the Joint Ore Reserves Committee
karst landscape : Landscape formed from the dissolution of soluble rocks
including limestone, dolomite and gypsum
limestone : Sedimentary rock composed largely of calcium carbonate
(CaCO
3
)
marble : Non-foliated metamorphic rock that is produced from the
metamorphism of limestone or dolomite. It is thoroughly
recrystallised and much, if not all, of the sedimentary and
biological textures are obliterated
20
marble blocks : We use this term to describe dimension stone blocks cut from
marble belonging to the A and B classification (i.e. those
where blocks are of good shape)
marble pieces : Marble not suitable to be sold as blocks, such as broken
blocks and loose fragments
marble slabs : Marble stones that are processed from dimension stone
blocks. Depending on the market, slabs are typically 20mm or
25mm thick
Measured Mineral
Resource or Measured
Resource
: That part of a Mineral Resource for which quantity, grade (or
quality), densities, shape and physical characteristics are
estimated with confidence sufficient to allow the application of
Modifying Factors to support detailed mine planning and final
evaluation of the economic viability of the deposit
Geological evidence is derived from detailed and reliable
exploration, sampling and testing gathered through
appropriate techniques from locations such as outcrops,
trenches, pits, workings and drill holes, and is sufficient to
confirm geological and grade (or quality) continuity between
points of observation where data and samples are gathered
A Measured Mineral Resource has a higher level of
confidence than that applying to either an Indicated Mineral
Resource or an Inferred Mineral Resource. It may be
converted to a Proved Ore Reserve or under certain
circumstances to a Probable Ore Reserve
Mineral Resource or
Resource
: A concentration or occurrence of solid material of economic
interest in or on the Earths crust in such form, grade (or
quality), and quantity that there are reasonable prospects for
eventual economic extraction. The location, quantity, grade
(or quality), continuity and other geological characteristics of
a Mineral Resource are known, estimated or interpreted from
specific geological evidence and knowledge, including
sampling. Mineral Resources are sub-divided, in order of
increasing geological confidence, into Inferred, Indicated and
Measured categories
metamorphic rock : A rock which has undergone profound physical and/or
chemical change due to high pressure or heat
Modifying Factors : Considerations used to convert Mineral Resources to Ore
Reserves. These include, but are not restricted to, mining,
processing, metallurgical, infrastructure, economic marketing,
legal, environment, social and governmental factors
21
Ore Reserves or
Reserves
: The economically mineable part of a Measured and/or
Indicated Mineral Resource. It includes diluting materials and
allowances for losses, which may occur when the material is
mined or extracted and is defined by studies at Pre-Feasibility
or Feasibility level as appropriate that include the application
of Modifying Factors. Such studies demonstrate that, at the
time of reporting, extraction could reasonably be justified. Ore
Reserves are sub-divided in order of increasing confidence
into Probable Ore Reserves and Proved Ore Reserves
Pre-Feasibility Study : A comprehensive study of a range of options for the technical
and economic viability of a mineral project that has advanced
to a stage where a preferred mining method, in the case of
underground mining, or the pit configuration, in the case of an
open pit, is established and an effective method of mineral
processing is determined. It includes a financial analysis
based on reasonable assumptions on the Modifying Factors
and the evaluation of any other relevant factors which are
sufficient for a Competent Person (as defined in the JORC
Code), acting reasonably, to determine if all or part of the
Mineral Resources may be converted to an Ore Reserve at
the time of reporting. A Pre-Feasibility Study is at a lower
confidence level than a Feasibility Study
Probable Ore Reserves or
Probable Reserves
: The economically mineable part of an Indicated, and in some
circumstances, a Measured Mineral Resource. The confidence in
the Modifying Factors applying to a Probable Ore Reserve is
lower than applying to a Proved Ore Reserve
Proved Ore Reserves or
Proved Reserves
: The economically mineable part of a Measured Mineral
Resource. A Proved Ore Reserve implies a high degree of
confidence in the Modifying Factors
quarrying : A process which involves the surface exploitation of rock
where after such quarrying process most, if not all, of the rock
is ultimately processed to form a useful end product, typically
blocks, slabs and aggregates
VALMIN Code : The Code for the Technical Assessment and Valuation of
Mineral and Petroleum Assets and Securities for Independent
Expert Reports (2005 edition), as prepared by the VALMIN
Committee, a joint committee of The Australasian Institute of
Mining and Metallurgy, the Australian Institute of
Geoscientists and the Mineral Industry Consultants
Association, as amended from time to time
whiteness : A measure of how white a material should be compared to a
standard. The colour white is distinguished by its high
lightness with a low saturation, where a bluish cast is felt to be
more attractive than a yellowish cast
22
All statements contained in this Offer Document, statements made in press releases and oral
statements that may be made by the Vendors, us or our Directors, Executive Officers or
employees acting on our behalf, that are not statements of historical fact, constitute forward-
looking statements. You can identify some of these forward-looking statements by terms such as
expects, believes, plans, intends, estimates, anticipates, may, will, would and
could or similar words. However, you should note that these words are not the exclusive means
of identifying forward-looking statements. All statements regarding our expected financial
position, business strategies, plans and prospects are forward-looking statements.
These forward-looking statements, including without limitation, include statements as to the
following:
(a) our revenue and profitability;
(b) expected growth in demand;
(c) expected industry trends;
(d) anticipated expansion plans and development; and
(e) other matters discussed in this Offer Document regarding matters that are not historical fact,
are only predictions. These forward-looking statements involve known and unknown risks,
uncertainties and other factors that may cause our actual results, performance or achievements
to be materially different from any future results, performance or achievements expected,
expressed or implied by these forward-looking statements. These risks, uncertainties and other
factors include, among others:
(a) changes in political, social and economic conditions and the regulatory environment in which
we conduct business;
(b) our anticipated growth strategies and expected internal growth;
(c) changes in the availability and prices of utilities and supplies which we require for the
operation of our business;
(d) changes in competitive conditions and our ability to compete under such conditions;
(e) changes in our future capital needs and the availability of financing and capital to fund such
needs;
(f) changes in currency exchange rates; and
(g) other factors beyond our control.
Some of these risk factors are discussed in more detail under the section entitled Risk Factors
of this Offer Document. All forward-looking statements by or attributable to us, or persons acting
on our behalf, contained in this Offer Document are expressly qualified in their entirety by such
factors.
CAUTIONARY NOTE ON FORWARD-LOOKING STATEMENTS
23
Given the risks and uncertainties that may cause our actual future results, performance or
achievements to be materially different from that expected, expressed or implied by the
forward-looking statements in this Offer Document, undue reliance must not be placed on these
statements which apply only as at the date of this Offer Document. Neither our Company, the
Vendors, the Sponsor and Issue Manager and the Joint Placement Agents, nor any other person
represents or warrants that our Groups actual future results, performance or achievements will be
as discussed in those statements.
Our actual results may differ materially from those anticipated in these forward-looking statements
as a result of the risks faced by us. We, the Vendors, the Sponsor and Issue Manager and the Joint
Placement Agents, disclaim any responsibility to update any of those forward-looking statements
or publicly announce any revisions to those forward-looking statements to reflect future
developments, events or circumstances, even if new information becomes available or other
events occur in the future. We are, however, subject to the provisions of the SFA and the Catalist
Rules regarding corporate disclosure. In particular, pursuant to Section 241 of the SFA, if after the
registration of the Offer Document but before the close of the Placement, our Company becomes
aware of (a) a false or misleading statement or matter in the Offer Document; (b) an omission from
the Offer Document of any information that should have been included in it under Section 243 of
the SFA; or (c) a new circumstance that has arisen since the Offer Document was lodged with the
SGX-ST, acting as agent on behalf of the Authority and would have been required by Section 243
of the SFA to be included in the Offer Document if it had arisen before the Offer Document was
lodged and that is materially adverse from the point of view of an investor, our Company may
lodge a supplementary or replacement offer document with the SGX-ST, acting as agent on behalf
of the Authority.
CAUTIONARY NOTE ON FORWARD-LOOKING STATEMENTS
24
This Offer Document does not constitute an offer, solicitation or invitation to subscribe for and/or
purchase our Placement Shares in any jurisdiction in which such offer, solicitation or invitation is
unlawful or is not authorised or to any person to whom it is unlawful to make such offer, solicitation
or invitation. No action has been or will be taken under the requirements of the legislation or
regulations of, or of the legal or regulatory requirements of any jurisdiction, except for the
lodgement and/or registration of this Offer Document in Singapore in order to permit a public
offering of our Placement Shares and the public distribution of this Offer Document in Singapore.
The distribution of this Offer Document and the offering of our Placement Shares in certain
jurisdictions may be restricted by the relevant laws in such jurisdictions. Persons who may come
into possession of this Offer Document are required by our Company, the Vendors, the Sponsor
and Issue Manager and the Joint Placement Agents to inform themselves about, and to observe
and comply with, any such restrictions at their own expense and without liability to us, the
Vendors, the Sponsor and Issue Manager as well as the Joint Placement Agents.
SELLING RESTRICTIONS
25
LISTING ON CATALIST
A copy of this Offer Document has been lodged with the SGX-ST acting as agent on behalf of the
Authority. The registration of this Offer Document by the SGX-ST, acting on behalf of the Authority
does not imply that the SFA, the Catalist Rules or any other legal or regulatory requirements, have
been complied with. The SGX-ST has not, in any way, considered the merits of our existing issued
Shares and the Placement Shares, as the case may be, being offered or in respect of the
Placement is made. We have not lodged this Offer Document in any other jurisdiction.
We have made an application to the SGX-ST for permission to deal in, and for quotation of, all our
Shares already issued (including the Vendor Shares which are subject to the Placement) and the
New Shares which are the subject of the Placement on Catalist. Such permission will be granted
when we have been admitted to Catalist. Acceptance of applications will be conditional upon, inter
alia, the issue of the New Shares and permission being granted by the SGX-ST for the listing and
quotation of all our existing issued Shares (including the Vendor Shares) and the New Shares on
Catalist. If the admission, listing and trading of our Shares already issued (including the Vendor
Shares) and the New Shares do not proceed or the said permission is not granted for any reason,
monies paid in respect of any application accepted will be returned, subject to compliance with the
Cayman Companies Law, without interest or any share of revenue or other benefit arising
therefrom and at the applicants own risk, and the applicant will not have any claim against us, the
Vendors, the Sponsor and Issue Manager and the Joint Placement Agents. No Shares will be
allotted and/or allocated on the basis of this Offer Document later than six (6) months after the
date of registration of this Offer Document by the SGX-ST, acting as agent on behalf of the
Authority.
Companies listed on Catalist may carry higher investment risk when compared with larger or more
established companies listed on the Main Board of the SGX-ST. In particular, companies may list
on Catalist without a track record of profitability and there is no assurance that there will be a liquid
market in the shares or units of shares traded on Catalist. You should be aware of the risks of
investing in such companies and should make the decision to invest only after careful
consideration and, if appropriate, consultation with your professional adviser(s).
Neither the Authority nor the SGX-ST has examined or approved the contents of this Offer
Document. Neither the Authority nor the SGX-ST assumes any responsibility for the contents of
this Offer Document, including the correctness of any of the statements or opinions made or
reports contained in this Offer Document. The SGX-ST does not normally review the application
for admission to Catalist but relies on the Sponsor to confirm that our Company is suitable to be
listed and complies with the Catalist Rules. Neither the Authority nor the SGX-ST has, in any way,
considered the merits of the Shares or units of Shares being offered for investment.
Admission to Catalist is not to be taken as an indication of the merits of the Placement, our
Company, our subsidiaries, our existing issued Shares (including the Vendor Shares) or the New
Shares.
We are subject to the provisions of the SFA and the Catalist Rules regarding corporate disclosure.
In particular, if after the registration of this Offer Document but before the close of the Placement,
we become aware of:
(a) a false or misleading statement or matter in the Offer Document;
(b) an omission from the Offer Document of any information that should have been included in
it under Section 243 of the SFA; or
DETAILS OF THE PLACEMENT
26
(c) a new circumstance that has arisen since the Offer Document was lodged with the SGX-ST,
acting as agent on behalf of the Authority, that would have been required by Section 243 of
the SFA to be included in the Offer Document if it had arisen before this Offer Document was
lodged,
that is materially adverse from the point of view of an investor, we may lodge a supplementary or
replacement offer document with the SGX-ST, acting as agent on behalf of the Authority.
In the event that a supplementary or replacement offer document is lodged with the SGX-ST,
acting as agent on behalf of the Authority, the Placement shall be kept open for at least 14 days
after the lodgement of such supplementary or replacement offer document.
Where prior to the lodgement of the supplementary or replacement offer document, applications
have been made under this Offer Document to subscribe for and/or purchase the Placement
Shares and:
(a) where the Placement Shares have not been issued and/or transferred to the applicants, our
Company and the Vendors shall:
(i) within two (2) days (excluding any Saturday, Sunday or public holiday) from the date of
lodgement of the supplementary or replacement offer document, give the applicants
notice in writing of how to obtain, or arrange to receive, a copy of the supplementary or
replacement offer document, and provide the applicants with an option to withdraw their
applications and take all reasonable steps to make available within a reasonable period
the supplementary or replacement offer document to the applicants who have indicated
that they wish to obtain, or have arranged to receive, a copy of the supplementary or
replacement offer document;
(ii) within seven (7) days from the date of lodgement of the supplementary or replacement
offer document, give the applicants the supplementary or replacement offer document,
as the case may be, and provide the applicants with an option to withdraw their
applications; or
(iii) treat the applications as withdrawn and cancelled, in which case the applications shall
be deemed to have been withdrawn and cancelled, and within seven (7) days from the
date of lodgement of the supplementary or replacement offer document, our Company
(and on behalf of the Vendors) shall return all monies paid in respect of any application,
without interest or any share of revenue or other benefit arising therefrom and at the
applicants own risk; or
(b) where the Placement Shares have been issued and/or transferred to the applicants, our
Company and the Vendors shall:
lodgement of the supplementary or replacement offer document, give the applicants
notice in writing of how to obtain, or arrange to receive, a copy of the supplementary or
replacement offer document, and provide the applicants with an option to return to our
Company and/or the Vendors the Placement Shares which they do not wish to retain
title in, and take all reasonable steps to make available within a reasonable period the
supplementary or replacement offer document to the applicants who have indicated that
they wish to obtain, or have arranged to receive, a copy of the supplementary or
replacement offer document; or
27
(ii) within seven (7) days from the date of lodgement of the supplementary or replacement
offer document, give the applicants the supplementary or replacement offer document,
as the case may be, and provide the applicants with an option to return to our Company
the Placement Shares, which they do not wish to retain title in.
Any applicant who wishes to exercise his option under paragraph (a)(i) or (a)(ii) to withdraw his
application shall, within 14 days from the date of lodgement of the supplementary or replacement
offer document, notify our Company of this, whereupon our Company (and on behalf of the
Vendors) shall, within seven (7) days from the receipt of such notification, pay to him all monies
paid by him on account of his application for the Placement Shares without interest or any share
of revenue or other benefit arising therefrom and at his own risk, and he will not have any claim
against our Company, the Vendors, the Sponsor and Issue Manager and the Joint Placement
Agents.
An applicant who wishes to exercise his option under paragraph (b)(i) or (b)(ii) to return the
Placement Shares allocated and/or issued to him shall, within 14 days from the date of lodgement
of the supplementary or replacement offer document, notify our Company of this and return all
documents, if any, purporting to be evidence of title to those Placement Shares to our Company,
whereupon our Company (and on behalf of the Vendors) shall, within seven (7) days from the
receipt of such notification and documents, subject to compliance with the Cayman Companies
Law, purchase the applicable Placement Shares at the Placement Price and, pay to him all monies
paid by him for those Placement Shares, without interest or any share of revenue or other benefit
arising therefrom and at his own risk and he will not have any claim against our Company, the
Vendors, the Sponsor and Issue Manager and the Joint Placement Agents.
Pursuant to Section 242 of the SFA, the Authority may, in certain circumstances issue a stop order
(the Stop Order) to our Company, directing that no Shares or no further Shares to which this
Offer Document relates, be allotted or issued. Such circumstances will include a situation where
this Offer Document (i) contains any statement or matter which, in the Authoritys opinion, is false
or misleading, (ii) omits any information that should have been included in it under the SFA, or (iii)
does not, in the Authoritys opinion, comply with the requirements of the SFA.
In the event that the Authority issues a Stop Order and applications to subscribe for and/or
purchase the Placement Shares have been made prior to the Stop Order, then:
(a) where the Placement Shares have not been issued and/or transferred to the applicants, the
applications for the Placement Shares shall be deemed to have been withdrawn and
cancelled and our Company (and on behalf of the Vendors) shall, within 14 days from the
date of the Stop Order, pay to the applicants all monies the applicants have paid on account
of their applications for the Placement Shares; or
(b) where the Placement Shares have been issued and/or transferred to the applicants, the SFA
provides that the issue of the Placement Shares shall be deemed to be void and our
Company (and on behalf of the Vendors) is required to, within 14 days from the date of the
Stop Order, pay to the applicants all monies paid by them for the Placement Shares.
Such monies paid in respect of an application will be returned to the applicants at their own risk,
without interest or any share of revenue or other benefit arising therefrom, and they will not have
any claims against our Company, the Vendors, the Sponsor and Issue Manager and the Joint
Placement Agents.
28
If our Company is required by applicable Singapore laws to cancel issued Placement Shares and
repay application monies to applicants (including instances where a Stop Order under the SFA is
issued), subject to compliance with the Cayman Companies Law, our Company will purchase the
Placement Shares at the Placement Price.
This Offer Document has been seen and approved by our Directors and the Vendors and they
individually and collectively accept full responsibility for the accuracy of the information given in
this Offer Document and confirm, after making all reasonable enquiries, that to the best of their
knowledge and belief, this Offer Document constitutes full and true disclosure of all material facts
about the Placement, the Company and its subsidiaries, and our Directors and the Vendors are
not aware of any facts the omission of which would make any statement in this Offer Document
misleading.
Where information in this Offer Document has been extracted from published or otherwise publicly
available sources or obtained from a named source, the sole responsibility of our Directors and
the Vendors has been to ensure that such information has been accurately and correctly extracted
from those sources and/or reproduced in this Offer Document in its proper form and context.
Neither our Company, the Vendors, the Sponsor and Issue Manager and the Joint Placement
Agents nor any other parties involved in the Placement is making any representation to any
person regarding the legality of an investment by such person under any investment or other laws
or regulations. No information in this Offer Document should be considered as being business,
legal or tax advice regarding an investment in our Shares. Each prospective investor should
consult his own professional or other advisers for business, legal or tax advice regarding an
investment in our Shares and the Placement Shares.
No person has been or is authorised to give any information or to make any representation not
contained in this Offer Document in connection with the Placement and, if given or made, such
information or representation must not be relied upon as having been authorised by us, the
Vendors, the Sponsor and Issue Manager and/or the Joint Placement Agents. Neither the delivery
of this Offer Document and the Application Form nor any documents relating to the Placement, nor
the Placement shall, under any circumstances, constitute a continuing representation or create
any suggestion or implication that there has been no change in our affairs or in the statements of
fact or information contained in this Offer Document since the date of this Offer Document. Where
such changes occur and are material or are required to be disclosed by law, the SGX-ST and/or
any other regulatory or supervisory body or agency, we may make an announcement of the same
to the SGX-ST and/or the Authority and/or the public and if required, we may lodge a
supplementary or replacement offer document with the SGX-ST, acting as agent on behalf of the
Authority and will comply with the requirements of the SFA and/or any other requirements of the
SGX-ST and/or the Authority. All applicants should take note of any such announcements and,
upon the release of such an announcement, shall be deemed to have notice of such changes.
Save as expressly stated in this Offer Document, nothing herein is, or may be relied upon as, a
promise or representation as to our future performance or policies. The Placement Shares are
offered for subscription and/or purchase solely on the basis of the information contained and
representations made in this Offer Document.
This Offer Document has been prepared solely for the purpose of the Placement and may not be
relied upon by any other persons other than the applicants in connection with their application for
the Placement Shares or for any other purpose.
29
This Offer Document does not constitute an offer, solicitation or invitation of the Placement
Shares in any jurisdiction in which such offer, solicitation or invitation is unlawful or
unauthorised nor does it constitute an offer, solicitation or invitation to any person to
whom it is unlawful to make such offer, solicitation or invitation.
Copies of this Offer Document and the Application Form may be obtained on request, subject to
availability during office hours, from:
PrimePartners Corporate Finance Pte. Ltd.
20 Cecil Street
#21-02 Equity Plaza
Singapore 049705
DMG & Partners Securities Pte. Ltd.
10 Collyer Quay
#09-08 Ocean Financial Centre
Singapore 049315
A copy of this Offer Document is also available on the SGX-ST website http://www.sgx.com.
The Placement will be open from 21 July 2014 (immediately upon the registration of the
Offer Document by the SGX-ST, acting as agent on behalf of the Authority (the
Registration)) to 25 July 2014.
The Application List will open immediately upon the Registration on 21 July 2014 and will
remain open until 12.00 noon on 25 July 2014 or for such further period or periods as our
Directors and the Vendors may, in consultation with the Sponsor and Issue Manager and
the Joint Placement Agents, in their absolute discretion decide, subject to any limitation
under all applicable laws and regulations. In the event a supplementary offer document or
replacement offer document is lodged with the SGX-ST, acting as agent on behalf of the
Authority, the Application List will remain open for at least 14 days after the lodgement of
the supplementary or replacement offer document.
Details of the procedures for application of the Placement Shares are set out in Appendix
G of this Offer Document.
30
INDICATIVE TIMETABLE FOR LISTING
An indicative timetable on the trading of our Shares is set out below:
Indicative date/time Event
21 July 2014, immediately upon the
Registration
Open of Placement
25 July 2014, 12.00 noon Close of Application List
30 July 2014, 9.00 a.m. Commence trading on a ready basis
4 August 2014 Settlement date for all trades done on a ready basis
The above timetable is only indicative as it assumes that the date of closing of the Application List
will be on 25 July 2014, the date of admission of our Shares to Catalist will be 30 July 2014, the
SGX-ST shareholding spread requirement will be complied with and the Placement Shares will be
issued and fully paid-up and/or purchased prior to 30 July 2014.
The above timetable and procedures may be subject to such modification(s) as the SGX-ST may,
in its absolute discretion, decide, including the commencement of trading on a ready basis and
the commencement date of such trading.
In the event of any changes in the closure of the Application List or the time period during which
the Placement is open, we will publicly announce the same:
(i) through a SGXNET announcement to be posted on the Internet at the SGX-ST website
http://www.sgx.com; and
(ii) in a local newspaper(s).
We will publicly announce the level of subscription and/or purchase and the results of the
distribution of the Placement Shares pursuant to the Placement, as soon as it is practicable after
the close of the Application List through channels in (i) and (ii) above.
You should consult the SGX-STs announcement on the ready trading date released on
the Internet (at the SGX-ST website http://www.sgx.com) or the local newspapers, or check
with your brokers on the date on which trading on a ready basis will commence.
31
The Placement is for 108,700,000 Placement Shares offered in Singapore and the Listing is
managed and sponsored by PPCF.
Prior to the Placement, there has been no public market for our Shares. The Placement Price is
determined by us and the Vendors in consultation with the Sponsor and Issue Manager and the
Joint Placement Agents, taking into account, inter alia, prevailing market conditions and the
estimated market demand for the Placement Shares, determined through a book-building
process. The Placement Price is the same for all Placement Shares and is payable in full on
application.
Pursuant to the Management Agreement entered into between us, the Vendors and PPCF as set
out in the section entitled Management and Placement Arrangements of this Offer Document, we
and the Vendors have appointed PPCF and PPCF has agreed to manage and to act as the full
Sponsor of the Listing.
PLACEMENT SHARES
The Placement Shares are made available to retail and institutional investors in Singapore who
may apply through their brokers or financial institutions by way of the Application Form.
Application for the Placement Shares may only be made by way of the Application Form. The
terms, conditions and procedures for application and acceptance are set out in Appendix G of this
Offer Document entitled Terms, Conditions and Procedures for Application and Acceptance.
Pursuant to the Placement Agreement, we and the Vendors have appointed PPCF and DMG as
the Joint Placement Agents and PPCF and DMG have agreed to procure subscribers and/or
purchasers for the Placement Shares for a placement commission of 5.0% of the aggregate
Placement Price for the total number of Placement Shares successfully subscribed for or
purchased, payable by our Company and the Vendors in the Agreed Proportion. Subject to any
applicable laws and regulations, our Company agrees that the Joint Placement Agents may, at
their absolute discretion, appoint one or more sub-placement agents for the Placement Shares
upon such terms and conditions as the Joint Placement Agents may deem fit.
Subscribers and/or purchasers of the Placement Shares may be required to pay brokerage or
selling commission of up to 1.0% of the Placement Price (and the prevailing goods and services
tax thereon, if applicable) to the Joint Placement Agents or any sub-placement agent that may be
appointed by the Joint Placement Agents.
SUBSCRIPTION FOR AND/OR PURCHASES OF PLACEMENT SHARES
None of our Directors or Substantial Shareholders intends to subscribe for and/or purchase the
Placement Shares. As far as we are aware, none of our Independent Directors, the members of
our Companys management or employees intends to subscribe for and/or purchase more than
5.0% of the Placement Shares in the Placement.
To the best of our knowledge and belief, as at the date of this Offer Document, we are not aware
of any person who intends to subscribe for and/or purchase more than 5.0% of the Placement
Shares. However, through a book-building process to assess market demand for our Shares,
there may be person(s) who may indicate an interest to subscribe for and/or purchase Shares
amounting to more than 5.0% of the Placement Shares. If such person(s) were to make an
application for more than 5.0% of the Placement Shares pursuant to the Placement and are
subsequently allotted and/or allocated such number of Shares, we will make the necessary
PLAN OF DISTRIBUTION
32
announcements at an appropriate time. The final allotment and allocation of Shares will be in
accordance with the shareholding spread and distribution guidelines as set out in Rule 406 of the
Catalist Rules.
No Shares shall be issued and allotted and/or allocated on the basis of this Offer Document later
than six (6) months after the date of registration of this Offer Document.
INTERESTS OF SPONSOR, ISSUE MANAGER AND JOINT PLACEMENT AGENT
In the reasonable opinion of our Directors, the Sponsor, Issue Manager and Joint Placement
Agent, PPCF, does not have any material relationship with our Company, save as disclosed below
and in the section entitled Management and Placement Arrangements of this Offer Document:
(a) PPCF is the Sponsor, Issue Manager and Joint Placement Agent in relation to the Listing;
(b) PPCF will be the continuing Sponsor of our Company for a period of three (3) years from the
date our Company is admitted to and listed on Catalist; and
(c) Pursuant to the Management Agreement and as part of PPCFs fees as the Sponsor and
Issue Manager, our Company issued and allotted 5,218,000 new Shares to PPCF
representing 0.91% of the issued and paid-up share capital of our Company prior to the
Placement, at the Placement Price for each Share. After completion of the relevant
moratorium period as set out in the section Moratorium of this Offer Document, PPCF will
dispose of its shareholding interest in our Company at its discretion.
INTERESTS OF JOINT PLACEMENT AGENT
In the reasonable opinion of our Directors, the Joint Placement Agent, DMG, does not have a
material relationship with our Company, save for DMG being the Joint Placement Agent in relation
to the Listing and as disclosed in the section entitled Management and Placement Arrangements
of this Offer Document.
PLAN OF DISTRIBUTION
33
The following summary is qualified in its entirety by, and is subject to, the more detailed
information (including the notes thereto) appearing elsewhere in this Offer Document. Terms
defined elsewhere in this Offer Document have the same meaning when used herein. You should
carefully consider all the information presented in this Offer Document, particularly the matters set
out in the section entitled Risk Factors of this Offer Document before deciding to invest in our
Shares.
OUR COMPANY
On 15 March 2013, our Company was incorporated in the Cayman Islands as an exempted
company with limited liability. Our Company registration number is CT-276295.
Pursuant to the Restructuring Exercise as described in the section entitled Restructuring
Exercise of this Offer Document, our Company became the holding company of our Group on 20
June 2014.
OUR BUSINESS
We are principally engaged in the business of the exploration, development, quarrying, extraction,
removal and processing of marble from the Kelantan Marble Quarry, and the commercial sale of
marble and marble products.
A detailed discussion of our business and the products we provide is set out in the section entitled
Business Overview of this Offer Document.
SUMMARY OF OUR FINANCIAL INFORMATION
The following summary financial data should be read in conjunction with the full text of this Offer
Document, including the section entitled Managements Discussion and Analysis of Results of
Operations and Financial Position of this Offer Document and the Independent Auditors Report
for the Years Ended 31 March 2011, 2012 and 2013 and the Nine Months ended 31 December
2013 as set out in Appendix A of this Offer Document.
Audited
(S$000) FY2011 FY2012 FY2013 3Q2013 3Q2014
Revenue
Loss before tax
(1)
(25) (1,588) (5,445) (2,579) (10,649)
Loss for the year/period
attributable to equity holders
of the Company
(1)
(25) (1,588) (5,445) (2,579) (10,649)
LPS (cents)
(1)(2)
n.m.
(4)
0.28 0.95 0.45 1.86
Adjusted LPS (cents)
(3)
n.m.
(4)
0.26 0.89 0.42 1.73
Notes:
(1) Had the Service Agreements (as set out in the section entitled Service Agreements of this Offer Document) been
in place since 1 April 2012, our combined loss before tax, loss for the year attributable to equity holders of the
Company and LPS computed based on the post-Placement share capital of 615,042,003 for FY2013 would have
been approximately S$6.02 million, S$6.02 million and 0.98 cents respectively.
(2) For comparative purposes, LPS for the period under review have been calculated based on loss attributable to
owners of the Company and the pre-Placement share capital of 571,542,003 Shares.
(3) For comparative purposes, LPS for the period under review have been calculated based on loss attributable to
owners of the Company and the post-Placement share capital of 615,042,003 Shares.
(4) n.m. means not meaningful.
OFFER DOCUMENT SUMMARY
34
Audited
(S$000) 31 March 2013 31 December 2013
Non-current assets 5,494 6,818
Current assets 11,322 7,554
Total assets 16,816 14,372
Current liabilities 10,397 17,874
Non-current liabilities 12,924 13,507
Total liabilities 23,321 31,381
Net liabilities (6,505) (17,009)
Total equity (6,505) (17,009)
Total liabilities and equity 16,816 14,372
NAV per Share (cents) N.A. N.A.
OUR COMPETITIVE STRENGTHS
Our Directors believe that our competitive strengths are as follows:
Our Kelantan Marble Quarry has sizable marble Reserves which can provide a stable supply
of our products to our customers
Our marble Reserves are homogeneous and consistent
Our marble products are exclusive to our Group
Our marble Reserves are likely to have a relatively high purity calcium carbonate content
with less than 3.0% of other minerals
Our Kelantan Marble Quarry produces marble products which are suitable for high-end
commercial and public buildings, such as hotels, office buildings, museums, memorial halls
and mosques, and residential uses
Our marble products, being foreign imports, should generally enjoy a premium in the PRC
market
Our marble products are competitive against other foreign products
Our Kelantan Marble Quarry is easily accessible and conveniently located
The nature of surface dimension stone quarrying involves lower capital expenditure and
lower operational risks compared to other types of quarrying and mining
We are confident of being able to contain or minimise the environmental and social impact
of our quarrying operations at the Kelantan Marble Quarry
We have a high level of operational safety
We have a proven and experienced management team
35
A detailed discussion of our competitive strengths is set out in the section entitled Competitive
Strengths of this Offer Document.
OUR PROSPECTS
Our Directors believe that the prospects of our Group are encouraging for the following reasons:
Chinese marble consumption is projected to increase
Price outlook is stable
Growth of the calcium carbonate powder business in Malaysia
OUR BUSINESS STRATEGIES AND FUTURE PLANS
Our business strategies and future plans for the continued growth of our business are as follows:
Expansion of production capacity and processing facilities
Venture into the calcium carbonate powder production business
Acquisition of additional stone quarries
Establishing a broad customer base with strong customer relationships
Maintaining a safe and environmentally friendly quarrying operation
A detailed discussion of our prospects, business strategies and future plans is set out in the
sections entitled Prospects and Business Strategies and Future Plans of this Offer Document.
OUR CONTACT DETAILS
Our Companys principal place of business is 2 Kaki Bukit Place, #07-00 Eunos Techpark,
Singapore 416180. Our Companys telephone number is +65 6848 2567 and our facsimile number
is +65 6848 2568. Our Companys website is http://www.terratechresources.com. Information
contained in our website does not constitute part of this Offer Document.
36
Placement Price : S$0.23 for each Placement Share, payable in full on
application.
Placement Size : 108,700,000 Placement Shares comprising 43,500,000 New
Shares and 65,200,000 Vendor Shares.
The New Shares, upon issue and allotment, will rank pari
passu in all respects with the existing issued Shares.
The Placement : The Placement comprises a placement of 108,700,000
Placement Shares at the Placement Price, subject to and on
the terms and conditions of this Offer Document.
Purpose of the Placement : Our Directors consider that the listing and quotation of our
Shares on Catalist will enhance our public image locally and
overseas and enable us to tap the capital markets for the
expansion of our business operations.
The Placement will also provide the members of the public,
our management, employees and business associates who
have contributed to our success with an opportunity to
participate in the equity of our Company. In addition, the
proceeds of the issue of the New Shares will also provide us
with, inter alia, funds for expansion of our production capacity
and processing facilities and additional working capital to
finance our business expansion.
Listing Status : Prior to the Listing, there has been no public market for our
Shares. Our Shares will be quoted on Catalist, subject to
admission of our Company to Catalist and permission for
dealing in, and for quotation of, our Shares being granted by
the SGX-ST.
Risk Factors : Investing in our Shares involves risks which are described in
the section entitled Risk Factors of this Offer Document.
Use of Proceeds : Please refer to the section entitled Use of Proceeds and
Listing Expenses of this Offer Document for more details.
THE PLACEMENT
37
The exchange rate between US$ and S$ as at the Latest Practicable Date is US$0.8006 to
S$1.00.
The table below sets out the highest and lowest exchange rates between US$ and S$1.00 in each
of the six (6) completed months prior to the Latest Practicable Date. The table indicates how much
US$ may be bought with S$1.00 in each such month.
US$: S$1.00
Highest
(1)
Lowest
(1)
December 2013 0.8001 0.7875
January 2014 0.7919 0.7812
February 2014 0.7940 0.7826
March 2014 0.7940 0.7838
April 2014 0.8011 0.7918
May 2014 0.8011 0.7961
June 2014
(2)
0.8006 0.7950
The table below sets out, for each of the financial years and periods indicated, the average and
closing exchange rates between US$ and S$. The average exchange rate is calculated by using
the average of the exchange rates on the last day of each month during each financial year/period.
Where applicable, the exchange rates in this table are used for the translation of our Groups
financial statements disclosed elsewhere in this Offer Document.
US$: S$1.00
Average
(1)
Closing
(1)
FY2011 0.7513 0.7922
FY2012 0.7977 0.7953
FY2013 0.8046 0.8060
3Q2013 0.8035 0.8169
3Q2014 0.7963 0.7882
The above exchange rates should not be construed as representations that the US$ amounts
actually represent such S$ amounts or could be converted into S$, at the rates indicated, at any
other rate or at all.
Notes:
(1) The above exchange rates have been quoted or calculated with reference to exchange rates quoted from
www.oanda.com. Oanda Corporation has not provided its consent, for the purposes of section 249 of the SFA, to
the inclusion of the information extracted from the relevant reports and is therefore not liable for such information
under sections 253 and 254 of the SFA. While we have taken reasonable actions to ensure that the information is
extracted accurately and fairly from such reports, and has been included in this Offer Document in its proper form
and context, neither we nor any party has conducted an independent review of the information contained in such
reports nor verified the accuracy of the contents of the relevant information.
(2) For the period from 1 June 2014 to the Latest Practicable Date.
EXCHANGE RATES
38
The exchange rate between RM and S$ as at the Latest Practicable Date is RM2.5761 to S$1.00.
The table below sets out the highest and lowest exchange rates between RM and S$1.00 in each
RM may be bought with S$1.00 in each such month.
RM: S$1.00
Highest
(1)
Lowest
(1)
December 2013 2.6006 2.5232
January 2014 2.6194 2.5738
February 2014 2.6290 2.5889
March 2014 2.6011 2.5679
April 2014 2.6029 2.5824
May 2014 2.6042 2.5545
June 2014
(2)
2.5773 2.5559
closing exchange rates between RM and S$. The average exchange rate is calculated by using
RM: S$1.00
Average
(1)
Closing
(1)
FY2011 2.3511 2.3947
FY2012 2.4376 2.4348
FY2013 2.4777 2.4783
3Q2013 2.4776 2.4432
3Q2014 2.5159 2.5941
The above exchange rates should not be construed as representations that the RM amounts
Notes:
EXCHANGE RATES
39
The exchange rate between RMB and S$ as at the Latest Practicable Date is RMB4.9301 to
S$1.00.
The table below sets out the highest and lowest exchange rates between RMB and S$1.00 in each
RMB may be bought with S$1.00 in each such month.
RMB: S$1.00
Highest
(1)
Lowest
(1)
December 2013 4.8885 4.8126
January 2014 4.8350 4.7652
February 2014 4.8464 4.7783
March 2014 4.8923 4.8238
April 2014 4.9374 4.8838
May 2014 4.9308 4.9061
June 2014
(2)
4.9301 4.9052
closing exchange rates between RMB and S$. The average exchange rate is calculated by using
RMB: S$1.00
Average
(1)
Closing
(1)
FY2011 5.0305 5.1892
FY2012 5.0955 5.0202
FY2013 5.0678 5.0511
3Q2013 5.0662 5.1477
3Q2014 4.9068 4.8159
The above exchange rates should not be construed as representations that the RMB amounts
Notes:
EXCHANGE RATES
40
RISKS RELATING TO OUR BUSINESS
Our business viability depends on a single quarrying site
Our operations only focus on a single quarrying site at the Kelantan Marble Quarry, which we
expect to be our only operating business in the near term and on which we will depend on for
substantially all of our operating revenue, profits and cash flows in the near term. As at 31
December 2013, our Group had a negative working capital of S$10.32 million and was in a net
liability position of S$17.01 million. We did not generate any revenue during the period under
review as we were principally engaged in quarry planning and construction and infrastructure
development, and only commenced commercial production in March 2012. Although going
forward, our Group is expected to have sufficient resources to meet our working capital needs and
to service our debt obligations as and when they fall due (after taking into consideration, inter alia,
the net proceeds from the Placement and the expected positive cashflow from the fulfilment of our
order book), any significant operational or other difficulties in the quarrying, processing, storing or
transporting of our products at or from the Kelantan Marble Quarry or the occurrence of any event
that causes it to operate at less-than-optimal capacity and/or generate lower than expected sales,
revenue and/or profits earned from the sale of our products or any other negative development
affecting our Marble Business, could cause our business, financial condition and results of
operations to be materially and adversely affected.
We have yet to establish a strong sales track record
We started production of our marble blocks and marble slabs on a commercial scale in March
2012. Since then, our sales and marketing teams have been actively marketing our products in
several target markets, in particular the PRC, and seeking to establish our sales channels and
network in such markets by seeking out potential distributors as well as end-users. As we are a
new player in the market, the orders which we have received to date are relatively modest in
number and size. In the event we are unable to secure a stable or regular source of sales or
revenue through entry into and fulfilment of offtake agreements and/or are unable to establish our
sales channels and network in our target markets, our revenue and cash flow will be adversely
affected. This will in turn have an adverse effect on our financial position or results, prospects and
future growth.
We have started production on a commercial scale only on two (2) of our marble hills and
we cannot guarantee that we will be able to implement commercial production for all our
marble hills in a timely manner
The Kelantan Marble Quarry comprises four (4) hills (termed hills 1, 2A, 2B and 3). We have only
started production on a commercial scale on hills 2B and 3, which are the two (2) smaller hills with
fewer marble Resources compared to hills 1 and 2A. With regards to hills 1 and 2A, primary
access to the hilltops including the construction of haulage roads have been completed and the
development of production platforms is in progress. In the event that we are to encounter any
operational problems or difficulties in the course of undertaking the developmental work on hills
1 and 2A, our plans for further commercial production from these hills will be delayed, and sales
and marketing of our products may have to be delayed or disrupted as a result of this. This may
have an adverse effect on the business operations, financial position or results and future growth
of our Group.
RISK FACTORS
41
Our business is exposed to uncertainties in relation to our Production Plan
An integral part of our business strategy is to expand our production capacity and processing
facilities. Our current Production Plan is to extract approximately 230,000 m
3
per annum of
dimension stone blocks by FY2018 onwards. Please refer to the section entitled Business
Strategies and Future Plans of this Offer Document for further details of our Production Plan.
To achieve our Production Plan, we will need funds for the capital expenditure and other costs to
be incurred, inter alia, in connection with the construction of infrastructure, and the acquisition of
quarrying and extraction equipment and machineries and the setting up of additional processing
facilities required for the production of marble slabs. While we have set aside part of the proceeds
from the Placement for the purpose of the expansion of production capacity and processing
facilities to achieve our Production Plan, our actual capital expenditure and costs may vary from
our projected capital expenditure and costs as it is difficult to ascertain the actual capital
expenditure and costs with certainty given our limited operating history.
It may take longer than we currently anticipate to achieve our Production Plan as there may be
unforeseen delays before our quarrying operations and processing facilities are able to operate at
our planned capacity, and such delay may result in cost overruns. We may also fail to obtain the
intended economic benefits from our Production Plan due to lower than expected sales, revenue
and/or profits earned from our expanded production capacity or due to other reasons, and this
may adversely and materially affect our business, financial condition and results of operations.
Our Groups ability to carry on the business is subject to us obtaining and maintaining all
necessary licences, permits, approvals or consents and complying with the local laws and
regulations applicable to our business, including certain licences, permits or approvals
which we need to obtain before we can commence operation of our on-site marble slab
processing facility and aggregates processing facility
Our business is subject to the relevant approvals, licences and permits being obtained from the
relevant authorities and continuing compliance with the local laws and regulations applicable to
our quarrying business. A summary of the key licences, permits and approvals to be obtained from
the relevant authorities in connection with our quarrying business and an overview of the local
laws and regulations applicable to our quarrying business is set out in the sections entitled
Licences, Permits and Approvals and Applicable Government Laws and Regulations of this
Offer Document. In particular, following the completion of the setting up of a marble slab
processing facility and aggregates processing facility on-site at the Kelantan Marble Quarry, we
are in the midst of applying for certain licences, permits or approvals which we will need to obtain
before we can commence operation of such facilities. Please see the section entitled Licences,
Permits and Approvals Licences, Permits and Approvals Pending Applications or Approval of
this Offer Document.
There is no assurance that we will be able to renew, maintain or obtain such approvals, licences
and permits and failure to do so may result in temporary or permanent suspension of some or all
of our operations or (in the case of our marble slab processing facility and aggregates processing
facility) cause us to be unable to commence operation of such facilities. Furthermore, additional
licences, certificates and permits may be required and higher compliance standards may be
required in future with the introduction of any new Malaysian laws and/or regulations or changes
in the interpretation to any existing Malaysian laws and regulations. In the event of any
introduction of any new Malaysian laws and/or regulations or changes in the interpretation to any
RISK FACTORS
42
existing Malaysian laws and regulations that may escalate our compliance costs or prohibit us to
continue with any part of our business operations, our operations may have to be restricted and
our results of operations may be materially and adversely affected.
The estimates and quality of marble Resources and Reserves of our Kelantan Marble
Quarry are based on a number of assumptions and the actual Resources and Reserves may
be less than the estimates or of a lower quality than expected
The marble Resource, Reserve and the block rate estimates for our Kelantan Marble Quarry are
based on a number of assumptions that have been made by the Qualified Person in accordance
with the JORC Code as set out in the Qualified Persons Report, and the fair market value of the
Kelantan Marble Quarry that has been assessed by Censere as set out in the Independent
Valuation Report is subject to certain bases and assumptions as stated in their Independent
Valuation Report. Resource and Reserve estimates involve expressions of judgment based on
various factors such as knowledge, experience and industry practice, and the accuracy of these
estimates may be affected by many factors, including the quality of the results from geological
mapping, drilling and analysis of marble samples, as well as the procedures adopted by and the
experience of the person making the estimates.
Estimates of the marble Resources, Reserves and the block rate at our Kelantan Marble Quarry
may change significantly as excavation proceeds or new factors arise, and interpretations and
deductions on which Resource, Reserve and block rate estimates are based may prove to be
inaccurate. Should we encounter a geological profile different from that predicted by past drilling,
sampling and examination, our marble Resource and/or Reserve and/or block rate estimates may
have to be adjusted downward. The occurrence of any of the foregoing could materially affect our
development and quarrying plans, which could materially and adversely affect our business and
results of operations and thereby materially affect the fair market value of our Kelantan Marble
Quarry as set out in the Independent Valuation Report.
In addition, the mineralogical and chemical composition, bulk density, hardness and water
absorption, mechanical properties and radioactivity potential of the marble ultimately quarried
may differ from those indicated by laboratory testing and/or sampling. In the event that the marble
quarried is of a lower quality than expected, the demand for, and realisable price of, our marble
products may decrease. In particular, while we expect that the chemical properties of our marble
contain a high content of calcium carbonate, high whiteness and brightness percentages, making
it a suitable raw material in the calcium carbonate powder business, our ability to sell our
aggregates as raw material for the calcium carbonate powder business and/or to venture into the
production of calcium carbonate powder in due course will be adversely affected if the quality of
our marble is not homogeneous and suitable for such use. This could cause our business,
financial condition and results of operations to be materially and adversely affected.
Our rights to explore, develop, quarry, extract, remove and sell marble and/or other stones
from the Kelantan Marble Quarry for commercial sale or consumption is derived from the
Kelstone Agreement
Pursuant to the Kelstone Agreement, CEP was granted the Sub-Lease of the Kelantan Marble
Quarry by KSEDC with possession for the Sub-Lease Term, with the exclusive rights to explore,
develop, quarry, extract, remove and sell marble and/or other stones for commercial sale or
consumption. The Kelstone Agreement further provides that the Sub-Lease will be automatically
terminated upon termination of the Kelstone Agreement.
RISK FACTORS
43
Accordingly, our rights to explore, develop, quarry, extract, remove and sell marble and/or other
stones from the Kelantan Marble Quarry for commercial sale or consumption is subject to the
Kelstone Agreement remaining in full force and effect.
In the event of the Kelstone Agreement being terminated for whatever reason (including
termination due to Kelstones exercise of its right of termination under the Kelstone Agreement, as
further elaborated below), we will cease to have the right to possess or to operate the Kelantan
Marble Quarry. Such termination may adversely affect the business operations, financial position
or results and future growth of both CEP and our Group.
Under the terms of the Kelstone Agreement, Kelstone has the right to terminate the Kelstone
Agreement if, inter alia, CEP commits a breach of a fundamental term or material obligation under
the Kelstone Agreement that cannot be remedied (irremediable breach) or a breach of any term
or obligation under the Kelstone Agreement without just cause (other than an irremediable breach)
which is not remedied within 28 days after receiving notice from Kelstone, or is wound up or
liquidated or upon similar insolvency events occurring, or if CEP fails to make any payment which
has become due pursuant to the Kelstone Agreement or if CEP suspends the marble quarry
operations for a period exceeding three (3) months without just cause.
Please refer to the section entitled Kelantan Marble Quarry Kelstone Agreement and the
Sub-Lease of the Kelantan Marble Quarry of this Offer Document for further details on the terms
of the Kelstone Agreement.
Our business is capital intensive
The quarrying business is capital intensive. During the period under review, our estimated total
capital expenditure incurred in the development of the Kelantan Marble Quarry was approximately
S$6.07 million.
Apart from the funds required to achieve our Production Plan, we may need additional funds in
connection with our intention to venture into the production of calcium carbonate powder in due
course, as further discussed in the section entitled Business Strategies and Future Plans of this
Offer Document.
There can be no assurance that we will be able to generate sufficient cash flows from our
operations to fund all or part of our capital expenditure requirements from time to time. In the event
that we do not have such cash flows, we may be required to seek alternative financing, including
debt and equity financing, which may be subject to uncertainties beyond our control and may also
subject us to additional cost (such as interest costs) and/or restrictions (for instance, financial
covenants or dividend restrictions) and/or result in a a dilution of the shareholding interests of
existing Shareholders of our Company. Our business performance, financial condition and results
of operations will be adversely affected if we fail to generate sufficient cash flows for our
operations in the future and are unable to obtain alternative financing to fund our capital
expenditure requirements.
We may be affected by adverse changes in the political, economic, regulatory or social
conditions in the overseas markets where our potential customers are located
We intend to sell our marble products in various countries, including the PRC (our main target
market for our marble blocks), Malaysia, India, Indonesia (aggregates) and South East Asia
(marble slabs), and hence our Group may be subject to the country risks in these countries. Our
ability to successfully penetrate such markets is dependent on the existence of favourable
RISK FACTORS
44
political, economic, regulatory and social conditions in the relevant markets, and events including,
but not limited to, any economic downturn, currency and/or interest rate fluctuations, capital
controls or capital restrictions, changes in laws or regulations such as environmental protection
laws and regulations, duties and taxation, tariffs, quotas and limitations on imports and exports in
these countries. The performance of our business depends largely on the economic situation and
the demand for marble in the relevant markets. Our Group may face certain constraints on our
ability to implement our business strategies.
Should the general economy or the market for marble in any of our target markets experience a
downturn and/or there are currency fluctuations and/or interest rate fluctuations, capital controls
or capital restrictions and/or changes in applicable laws or regulations, there is no assurance that
there will not be any adverse impact on our Groups business operations, financial performance
and future growth.
We will derive revenue from a limited number of products
Our products are marble blocks, marble slabs, aggregates and (in due course) calcium carbonate
powder. We expect the majority of our revenue to be derived from the sale of our marble blocks
and marble slabs which are primarily used as decorative surfacing materials for the decoration of
high-end commercial and public buildings, such as hotels, office buildings, museums, memorial
halls and mosques, and residential uses. As a result, our business and profitability are dependent
on our end customers preferences and demand for our marble products. Any adverse change in
market demand, customer preference or market prices of our marble products could have a
material adverse effect on our results of operations.
The quality of our products is subject to uncertainties
As marble is a natural resource, there is no assurance that the colour, texture, quality and other
characteristics of the dimension stone blocks quarried in the future will be consistent with the
samples currently available. Any failure to meet the requirements of any of our customers due to
inferior product quality may result in harm to our reputation and reduction in orders or termination
of our sales contracts, which in turn may materially and adversely affect our business, our future
revenue and results of operations. In addition, the demand, pricing and profit margins of our
products are dependent on the quality and standards of the marble produced. If the quality of
marble produced is not of a sufficient or consistent quality or standard, this may have an adverse
effect on our business, our future revenue and results of operations.
Our business depends on the availability of reliable and adequate transportation capacity
for our products
As further elaborated in the section entitled Infrastructure in this Offer Document, we rely on the
network of roads and railways connecting our Kelantan Marble Quarry to the nearest town, Gua
Musang, and the relevant ports for movement and transportation of our marble products as well
as the supplies which we require for our operations. If any such roads, railways or ports are
significantly damaged or if operations are disrupted for any reason or cut off for an extended
period of time, the delivery of our products and supplies would be significantly affected, and we
may lose our customers and breach existing sales contracts, and the continuity of our operations
may be adversely affected. In addition, we expect to export and ship out a significant portion of
our products to overseas customers. There can be no assurance that adequate transport capacity
will be made available to our operations, that we will not experience any material delay in
transporting our products to our customers or that all our marble products can be delivered to our
customers in a timely manner.
RISK FACTORS
45
As transportation costs generally comprise a significant component of the costs of purchase for
our customers, any fluctuation in transportation costs may have an adverse effect on the demand
for our products. Any material increase in the transportation costs would cause our customers to
select suppliers who are able to supply similar products at lower prices than our products. Any
such adverse development could have a material adverse effect on our business, financial
condition and results of operations.
Our business is subject to forces of nature and accidents
There are force majeure or other unforeseen events and circumstances relating to quarrying and
extraction activities, such as the risk of landslides, natural disasters and calamities including
heavy rainfall or floods which can adversely affect our working conditions and continuing
operations at the Kelantan Marble Quarry and may also lead to lower production output and/or
higher operating costs. The occurrence of such risks or conditions may adversely affect our
performance and results of operations.
We may also, from time to time, experience work-site accidents which may delay or disrupt
operations at the quarry and/or result in damage to property and/or death or injuries to our
employees or other personnel present at the work-site. According to the relevant Malaysian laws
and regulations, we may be liable for losses and costs arising from accidents resulting from any
fault or omission on our part or on the part of our employees. Should any accidents happen due
to negligence on our part or on the part of our employees, we could be confronted with civil
litigation or criminal litigation, which may lead to substantial losses or liabilities on our part.
As at the Latest Practicable Date, we have obtained certain insurance policies such as all-risks
insurance, workmen and personal injuries insurance, plant and equipment insurance and motor
vehicles insurance. While our current insurance protects us from certain potential losses and
liabilities which is in line with the practice in the quarrying industry, it does not fully cover us from
all potential risks, losses and liabilities arising from our operations. In the event that we incur
substantial losses or liabilities from our operations but we are not insured against such losses or
liabilities, or our insurance is unavailable or inadequate to cover such losses or liabilities, our
business, financial condition and results of operations could be materially and adversely affected.
We face risks and uncertainties associated with our quarrying and processing operations
Our quarrying and processing operations are subject to a number of operating risks and hazards,
some of which are beyond our control. These operating risks and hazards include: (i) unexpected
maintenance or technical problems; (ii) periodic interruptions to our quarrying operations due to
inclement and/or hazardous weather conditions and/or natural disasters; (iii) industrial accidents;
(iv) power or fuel supply interruptions; (v) critical equipment failures in our quarrying and
processing operations; and/or (vi) unusual or unexpected variations in the quarry and geological
conditions, such as instability of the slopes and subsidence of the working areas. These risks and
hazards may result in personal injury, damage to, or destruction of, properties or processing
facilities, environmental damage, business interruptions and damage to our business reputation.
In addition, the breakdown of machinery and equipment, difficulties or delays in obtaining
replacement machinery and equipment, natural disasters, industrial accidents or other events
could temporarily disrupt our operations.
Any disruption for a sustained period to the operations of our quarry or processing facilities or
supporting infrastructure, or any change to the natural environment surrounding our quarry, may
have a material adverse effect on our business, financial condition and results of operations.
RISK FACTORS
46
Our operations are exposed to risks relating to environmental protection, occupational
hazards and production safety
As a quarrying business, we are subject to extensive laws, rules and regulations imposed in our
industry regarding environmental protection, occupational hazards and production safety.
As part of the process of obtaining our Quarry Scheme Approval, we were required to submit and
obtain the approval of the relevant authorities of an environment impact assessment report and
environmental management plan (setting out, inter alia, the relevant mitigating measures and
controls to be implemented to reduce the potential environment impact arising from such
operation) in respect of our quarrying operation at the Kelantan Marble Quarry, and we are also
required to put in place a monitoring programme to monitor the effectiveness of such mitigating
measures and controls. The annual renewal of our Quarry Scheme Approval is subject to, inter
alia, our continuing compliance with such environmental protection requirements, and any
non-compliance thereof may result in fines and penalties or even possible revocation of our
Quarry Scheme Approval, or any other consent, approvals or authorisations obtained from the
relevant authorities. Please refer to the section entitled Licences, Permits and Approvals of this
Offer Document for further information.
In addition, our operations involve the use of heavy machinery and the operation of processing
facilities, which involves inherent risks that cannot be completely eliminated through preventive
efforts. We, or our third-party contractors, may encounter accidents, maintenance or technical
difficulties, mechanical failures or breakdowns during the quarrying and production processes.
The occurrence of such accidents may disrupt or result in a suspension of our operations,
increased production costs, result in liability to us and/or harm our reputation. Such incidents may
also result in a breach of the conditions of our Quarry Scheme Approval, or any other consent,
approvals or authorisations obtained from the relevant authorities, which may result in fines and
penalties or even possible revocation of our Quarry Scheme Approval.
There is no assurance that accidents such as fires, equipment mishandling, mechanical failures,
rockfalls or accidental falls which may result in property damage, severe personal injuries or even
fatalities will not occur during the course of our operations.
Should we fail to comply with any relevant laws, regulations or policies or should any accident
occur as a result of any of the foregoing events, our business, reputation, financial condition and
results of operations may be adversely affected.
We face keen competition in our industry
There are established and large-scale companies operating in marble quarrying and related
businesses, both in Malaysia and overseas, who are or will be our Groups competitors. As a new
participant in the marble quarrying industry, our Groups ability to compete effectively against such
competitors will depend on, inter alia, our technical competence, price competitiveness, ability to
market our products and cost-effectiveness as compared to our competitors. In addition, the
barriers to entry in the marble industry are relatively lower compared to other types quarrying
operations and new competitors may emerge from time to time if they are able to secure the
relevant rights to exploit marble resources. If we are unable to compete successfully, the business
operations and financial condition of our Group will be adversely affected.
RISK FACTORS
47
We rely on contractors for certain of our operations
Operations that we have outsourced to contractors include preliminary construction of quarry
infrastructure, processing of dimension stone blocks into marble slabs, blasting and installation of
diesel generators while services that we have outsourced include transportation and other
logistics services. We may appoint additional third-party contractors for other required operations
and services in future. These independent third-party contractors may not perform adequately or
abide by our agreements, and we may have disputes with these contractors over the performance
of our agreements. Any failure by these contractors to meet our quality, safety and environmental
standards may result in us incurring liability to third parties or any failure by these contractors to
comply with applicable laws and regulations may have a material and adverse effect on our
business, financial condition and results of operations.
Our business is dependent on our ability to recruit and retain a sufficient work force
Our Groups performance and growth will depend substantially on our ability to recruit and retain
such number of staff and workers required to maintain a sufficient work force, especially
experienced quarry workers with the requisite expertise for our quarrying operations. Further, we
may not be able to successfully attract and recruit the necessary additional staff or personnel
whom we may require in future in line with our future plans. If we are unable to recruit or retain
the necessary personnel, our Groups business, financial condition, results of operations and
prospects may be adversely affected.
We place substantial reliance on the experience and knowledge of our key personnel
We place substantial reliance on the experience and knowledge of our key personnel, such as our
Executive Director and our management team whose biographies are set out in the section
entitled Directors, Management and Staff of this Offer Document. We cannot prevent our key
personnel from terminating their respective contracts in accordance with the relevant agreed
conditions. Finding suitable replacements for such key personnel could be difficult and time-
consuming. The loss of the services of one or more members of our key personnel due to their
departure or other reasons may materially and adversely affect our business, financial condition
and results of operations.
Our limited operating history makes it difficult to evaluate our business from our results of
operations during the period under review
Due to our limited operating history and the fact that we will still have to incur significant capital
expenditure to achieve our Production Plan and to enhance the value of our extracted Resources,
it may be difficult to evaluate our business and/or to make any prediction of our future operating
results and prospects from our results of operations during the period under review. We believe
that period-to-period comparisons of our operating results during the period under review may not
be meaningful and the results for any period thereof should not be relied upon as an indication of
future performance.
In addition, we are subject to risks which are faced by most companies in a similar phase of
production, including but not limited to, the ability to increase production capacities according to
plan, the ability to manage large-scale quarrying operations and maintain effective control over
our operating costs and the ability to develop adequate internal control systems to comply with
applicable regulatory requirements which are extensive.
RISK FACTORS
48
We may incur impairment losses related to our quarrying rights and related assets, which
may adversely affect our results of operations
Based on our accounting policies, our quarrying rights which are stated at cost less accumulated
amortisation and any impairment losses, are amortised over the estimated useful life of the quarry
of the Sub-Lease Term, in accordance with our Production Plans and the Proved and Probable
Reserves of the Kelantan Marble Quarry using the straight line method. The process of estimating
quantities of Reserves is inherently uncertain and complex and requires significant judgments and
decisions based on available geological, engineering and economic data. Accordingly, if the value
of our quarrying rights arising from our Reserves is over-estimated, the over-estimated amounts
will be recognised as impairment losses, which in turn may have a material adverse effect on our
results of operations.
Property, plant and equipment, other than construction in progress, are stated at cost less
accumulated depreciation and any impairment losses. The carrying amounts of the property, plant
and equipment, including quarrying infrastructure and quarrying rights, are reviewed for
impairment when events or changes in circumstances indicate that the carrying amount may not
be recoverable. Any impairment on the carrying value of our quarrying infrastructure and quarrying
rights may have a material adverse effect on our business, financial condition and results of
operations.
Exposure to currency risks
The functional currency of our main operating subsidiary, CEP, is the RM while revenue generated
from our sales in the PRC will be denominated in RMB. Our revenue arising from sales in other
countries besides Singapore may also be denominated in US$ or other currencies. Accordingly,
to the extent that revenue, purchases and expenses are not naturally matched in the same
currency and there are timing differences between invoicing and collection or payment, we are
exposed to fluctuations of any foreign currencies against the S$.
Further, our financial results will be reported in S$. As such, in the event that there are significant
fluctuations in the currency exchange rates between the S$ and the RM, RMB or other currencies,
the financial performance of our Group as reported in S$ may be materially and adversely
affected.
We have not entered into any hedging transactions to manage our currency exposure to the RM,
the RMB or other foreign currencies in which our costs, expenses and revenue are incurred or
generated. As such, changes in exchange rates may materially and adversely affect our business,
financial condition, results of operations and cash flow.
RISKS RELATING TO OUR INDUSTRY
We may face fluctuations in the market price of our products which could materially and
adversely affect our business, financial condition and results of operations
Our products are marble blocks, marble slabs, aggregates and (in due course) calcium carbonate
powder. The prices of our marble blocks and marble slabs are determined mainly by the colour
and texture of our marble and the prices of our aggregates are determined mainly by the chemical
properties of our marble. As marble is a natural resource, we cannot guarantee that all our marble
Resources and Reserves will be of a premium or homogeneous quality, and we may have to sell
our marble products at a lower price corresponding to a lower quality of marble.
RISK FACTORS
49
There may also be fluctuations in the price of our products arising from changes in demand and
supply. For instance, marble, being primarily used for decorative and aesthetic purposes in
construction, may be replaced by other types of stones or building and construction materials in
the event the price of marble becomes uncompetitive compared to the alternatives. Other
imbalances in the supply of and demand for marble products in local, national and global markets
could also adversely affect the price of our products.
In the PRC, the preference of consumers for imported marble over domestically-sourced marble
(as elaborated in the section entitled Industry Overview of this Offer Document) may change
over time, and if so, our products may no longer command the premium in price over
domestically-sourced marble which they currently enjoy. In addition, the discovery of more or
higher-quality marble resources in the PRC may also have an impact on the pricing of marble in
the PRC.
Overall, government policies, macroeconomic factors, the global economic environment and other
factors beyond our control could significantly result in an oversupply or decrease in demand for
marble products, which in turn would result in fluctuations in the market price. There can be no
assurance that the market price of marble products will not decline in the future or that such prices
will otherwise remain at sufficiently high levels to support our profitability. A significant decline in
the market prices of marble products could materially and adversely affect our business, financial
Our products are primarily used in the building and construction industry and our sales
derived from our marble products may be affected by a significant downturn in the building
and construction industry
The demand for our products is affected primarily by the growth of the commercial and residential
building and construction industries in the markets in which we have or will have a presence in.
The growth prospect of our products in these markets in turn is affected by a number of factors,
such as the strength of the commercial and residential property markets in such markets.
Accordingly, any decrease in construction and development activities in the building and
construction industry in general may result in a decrease in demand and associated decrease in
sales volume or selling prices of our products, reduced profit margins and tightened liquidity
available to us, any of which may have a material adverse effect on our business, financial
Demand for our products may decrease with customers changing preferences and tastes
The use of marble for decorative and aesthetic purposes in building and construction as well as
for arts and decoration, marble furniture and other articles is underpinned by customer
preferences and tastes for such material as compared to other types of stones or materials.
However, the popularity of our products could decline due to customers changing preferences and
tastes, leading to a fall in demand for, and/or the price of our products, and this could have a
material adverse effect on our business, financial condition and results of operations.
RISK FACTORS
50
Changes in legal requirements and governmental policies concerning environmental
protection and other areas of laws could impact our industry
Our operations are affected by numerous national, provincial and local laws and regulations
related to environmental protection, land use, occupational health, production safety and other
matters that govern our operations. There are inherent risks of liabilities in our business
operations. These potential liabilities arising from any non-compliance could have an adverse
impact on our operations and profitability.
Our revenue is dependent on the continued operations of our Kelantan Marble Quarry in Malaysia.
Our Groups ability to carry out our business in Malaysia is subject to various environmental
protection regulations relating to a broad range of environmental protection matters, such as air
emissions, noise control, discharge of waste water and pollution and waste disposal relating to our
production activities. Any violation of these environmental protection regulations may subject us
to a substantial fine, damage our reputation, result in delays in production and/or result in a
temporary or permanent closing of some or all of our production facilities. We cannot assure you
that the national or local authorities will not enact additional laws or regulations or amend existing
laws or regulations or enforce new regulations in a more rigorous manner. Changes in
environmental protection regulations may require us and/or our suppliers to alter production
processes, which could result in increased costs and could harm our financial condition and
results of operations.
We are also subject to changes in existing laws and/or regulations and/or enforcement policies,
which may result in additional compliance and other additional costs. Stricter laws and
regulations, or more stringent interpretations of existing laws or regulations, may impose new
liabilities on us, reduce operating hours, require additional investment by us in pollution control
equipment, or impede the opening of new facilities or the expansion of existing facilities. We could
be forced to invest in preventive or remedial action, such as pollution control facilities, which could
result in us incurring substantial costs. Such costs, liabilities and/or disruptions in operations may
materially and adversely affect our business, financial condition and results of operations.
Changes to applicable laws, regulations and governmental policies for the marble
quarrying industry may adversely impact our performance
As we conduct substantial business operations, and hold substantial assets in Malaysia, any
changes to the existing laws, regulations, policies, standards and requirements or to the
interpretation or enforcement thereof in relation to the marble quarrying industry in Malaysia may
require additional compliance efforts and increase our operating costs and thus adversely affect
our business, financial condition and results of operations.
In addition, our operations are subject to laws and regulations relating to occupational health and
safety for the marble quarrying industry. For additional information regarding our Companys
compliance with respect to occupational health and safety laws and regulations, please refer to
the section entitled Safety Policy of this Offer Document. Quarrying companies that fail to comply
with the applicable safety laws and regulations may be subject to fines, penalties or even
suspension of operations. At the same time, relevant government authorities regularly conduct
safety inspections of the quarries and facilities of quarrying companies. Failure to pass such
safety inspections may harm our corporate image, reputation and the credibility of our
management, and thus have a material adverse effect on our financial condition and results of
operations.
RISK FACTORS
51
There is no assurance that we will be able to comply with any new laws, regulations, policies,
standards and requirements applicable to the marble quarrying industry or any changes in existing
laws, regulations, policies, standards and requirements. Furthermore, any such new laws,
regulations, policies, standards and requirements or any such changes in existing laws,
regulations, policies, standards and requirements may also constrain our future expansion and/or
Production Plan and in turn adversely affect our profitability.
RISKS RELATING TO BUSINESS OPERATIONS IN MALAYSIA
Restrictions on foreign investment in the Malaysian mineral industry could materially and
adversely affect our business and operating results
Pursuant to Malaysias current National Mineral Policy, to encourage exploration and a beneficial
expansion of the mineral industry in Malaysia, the Malaysian government currently permits foreign
entities exploring minerals in Malaysia to do so on a 100% foreign held equity basis and for
projects which involve the extraction, quarrying or processing of mineral resources, initial majority
foreign equity participation of up to 100% may be permitted. Our subsidiary, CEP, is permitted
under the current National Mineral Policy to explore, quarry and extract minerals in Malaysia.
There is no assurance that the National Mineral Policy will not be changed or modified in any way
in future. Any restriction on foreign investment in the Malaysian quarrying or mineral industry in
future could materially and adversely affect our business and results of operations.
In addition, the Land Code permits the relevant state authority to make rules generally for the
carrying out of the objects and purpose of the Land Code, including imposing equity shareholding
requirements, on a case-by-case basis, on entities which are granted a license to extract rocks
and minerals in Kelantan. We have been advised by our Malaysian Legal Advisers that this
requirement is generally only imposed on the direct licence holder.
Since it is KSEDC and not CEP that was granted the lease in respect of the Kelantan Marble
Quarry by the Gua Musang Land Office, and CEP is merely a sub-lessee pursuant to the Kelstone
Agreement and the Sub-Lease, any equity condition to be imposed (if applicable) by the relevant
authority should not be applicable to CEP. However, there is no assurance that the authorities will
not revise this requirement or policy in future, which may in turn materially and adversely affect
our Group in the event we are compelled to dispose of part of our interest in CEP as a result of
the same.
Malaysia is an emerging market and we are exposed to the general risks associated with
operating in emerging markets
We are generally subject to greater risks, including legal, regulatory, economic and political risks
in an emerging market such as Malaysia compared to more developed markets.
Emerging economies are generally subject to rapid changes, and the information set out in this
Offer Document may quickly become outdated. Accordingly, investors should exercise particular
care in evaluating the risks involved and should consider whether, in light of these risks, investing
in the shares of a company which assets and operations are based in an emerging market is
appropriate. Investment in a company whose assets and operations are located in an emerging
market is generally suitable only for sophisticated investors who fully appreciate the significance
of the risks involved. Investors are urged to consult with their own legal and financial advisors
before making an investment in the Shares.
RISK FACTORS
52
The availability of credit to entities operating within emerging markets is significantly influenced
by the level of investor confidence in these markets, and, as such, any factor that impacts market
confidence, for example, a decrease in credit ratings or state or central bank intervention in one
market may affect the price and/or availability of funding for entities within any of these markets.
Companies with significant assets and operations in countries in emerging markets may be
particularly susceptible to global financial turmoil and reductions in the availability of credit or
increased financing costs, which could have a material adverse effect on our Groups business,
financial condition, results of operations and prospects.
We could face enhanced risk and uncertainty upon a change in the political climate or
regulatory environment in Malaysia
Substantially all of our operating assets are located in Malaysia. Accordingly, our operating
results, financial position and prospects may be affected to a significant degree by the economic,
political and legal developments in Malaysia. Our Group may face enhanced risk and uncertainty
should there be a change in government or a change in the political climate. In the event of a
change in leadership, social or political disruption or unforeseen circumstances affecting the
political and economic climate in Malaysia, our operations and our financial performance in
Malaysia may be materially and adversely affected.
In addition, our business operations are exposed to the laws and regulations in Malaysia. In the
event that we fail to meet the relevant statutory requirements or comply with the laws and
regulations as a result of legal developments in Malaysia, we may not be able to obtain all the
requisite licences, permits and approvals or renew the necessary licences, permits or approvals
for our operations and consequently this will adversely affect our operations. Please refer to the
section entitled Licences, Permits and Approvals of this Offer Document for further details on the
relevant laws and regulations governing our business.
Resource extraction operations in Malaysia are subject to laws and regulations concerning,
among others, the issuance and renewal of permits and licences
Malaysian regulatory authorities exercise considerable discretion in the interpretation and
enforcement of local laws and regulations. At times, such authorities may require compliance with
requirements which are not set out in the applicable legislation, particularly in respect to licence
issuance and renewal. These requirements imposed by the applicable regulatory authorities may
be costly and time-consuming and may result in delays in the commencement or continuation of
production operations. Any violation of Malaysian law may result in the suspension of operations
or revocation of permits and/or licences.
Regulatory authorities may impose more stringent requirements and obligations than those
currently in effect. Although our Group is unable to predict the costs of compliance with such
amended laws, regulations and permits, the costs could be substantial and could materially and
adversely affect our Groups business, financial condition, results of operations and prospects.
Potential fines for certain past non-compliances
Certain licences, permits and/or approvals required by CEP in its business had not been obtained
by CEP in the past, although as at the Latest Practicable Date, we have taken the necessary steps
to rectify these non-compliances as well as to apply for the required licences, permits and
approvals, where required.
RISK FACTORS
53
For instance, CEP had previously constructed a double-storey wooden structure at the quarry site
which it had used as a site office, without having obtained the relevant approval from the relevant
authority. The double-storey wooden structure has since been demolished as at the Latest
Practicable Date. CEP had also previously stored marble blocks on some adjoining land to the
quarry site without obtaining the relevant approvals from the relevant authorities, which it has
ceased to do so as at the Latest Practicable Date (although CEP has made the relevant
applications for the requisite approvals for the future use of such land. For further details, please
refer to the section entitled Licences, Permits and Approvals Licences, Permits and Approvals
Pending Applications or Approval of this Offer Document). In addition, CEP had previously not
obtained the relevant permit required for the purchase and storage of diesel at the quarry site,
although it has since applied for and obtained such permit as at the Latest Practicable Date.
These rectification actions do not exonerate CEP from such past non-compliances. Consequently,
CEP may still be liable for statutory penalties and enforcement actions including, inter alia, fines
enforced by the relevant authorities for the past non-compliances, although no enforcement
actions have been taken against us as at the Latest Practicable Date.
We may be subject to foreign exchange controls in Malaysia
As at the Latest Practicable Date, the Foreign Exchange Administration Rules in Malaysia do not
impose restrictions on foreign direct investors or portfolio investors in respect of the repatriation
of capital, profits, dividends, rental, fees and interest arising from investments in Malaysia.
However, in the event that the Malaysian government were to tighten or otherwise change the
relevant laws and regulations and/or if the operations carried out by our Group expands, such
exchange controls may affect our repatriation of profits from CEP and may in turn limit our ability
to repatriate dividends out of Malaysia.
Exchange rate policy could have an adverse impact on our Group
In the event that the Malaysian government imposes more restrictive or additional foreign
exchange controls, any imposition, variation or removal of exchange controls may lead to less
independence in the Malaysian governments conduct of its domestic monetary policy and
increase exposure of the Malaysian economy to the potential risks and vulnerabilities of external
developments in the international markets. Consequently, this may adversely affect our business
prospects, financial condition and results of operations in Malaysia.
RISKS RELATING TO BUSINESS OPERATIONS IN THE PRC
Potential fines for non-registration
Qingdao Terratech and Qingdao Terratech, Chengdu Branch had previously not complied with the
registration requirements for the lease agreements which were entered into in respect of the lease
of the office premises in Jiaonan, the PRC and Chengdu, the PRC respectively, although as at the
Latest Practicable Date, such registration requirements have been complied with. These
rectification actions do not exonerate Qingdao Terratech or Qingdao Terratech, Chengdu Branch
from such past non-compliance. Consequently, Qingdao Terratech and/or Qingdao Terratech,
Chengdu Branch may still be liable for the statutory penalties including, inter alia, fines ranging
from RMB1,000 to RMB10,000 enforced by the relevant authorities for the non-registration,
although no enforcement actions have been taken against us as at the Latest Practicable Date.
RISK FACTORS
54
The PRC Governments control of currency conversion may limit our ability to utilise our
cash effectively
The PRC Government imposes controls on the convertibility between RMB and foreign currencies
and, in certain cases, the remittance of foreign currency into and out of the PRC. Under the
existing PRC foreign exchange regulations, payments of current account items, including, inter
alia, dividend distributions, interest payments and expenditures from trade related transactions,
can be made without prior approval from the SAFE, but it is required for relevant documentary
evidence of such transactions to be presented and such transactions are to be conducted at
designated foreign exchange banks within the PRC. However, approval from the SAFE or its local
counterpart is required where RMB is to be converted into foreign currency and remitted out of the
PRC to make the payments under the capital account, such as the repayment of loans
denominated in foreign currencies. We cannot predict whether the PRC Government may, at its
own discretion, restrict the access to foreign currencies for current account transactions in the
future.
The PRC is our primary target market for sale of our marble blocks and marble slabs, which means
that a majority of our future sales income may be denominated in RMB and any existing or future
restrictions on currency exchange may limit our ability to utilise our cash effectively.
The PRCs economic, political and social conditions could affect our business and results
of operations
Our primary target market for sale of our products is the PRC. Accordingly, we could be adversely
affected if there are any adverse changes in the PRCs economy, political or social conditions
including its GDP or domestic consumption growth. The PRCs economy differs from the
economies of most developed countries in many respects, including the fact that it (i) has a high
level of government involvement; (ii) is in the early stages of development of a market-oriented
economy; (iii) has experienced rapid growth; and (iv) has a tightly controlled foreign exchange
policy.
The PRCs economy has grown significantly in recent years, however, there is no assurance that
such growth will continue. The PRC Government has exercised control over the PRCs economic
growth through the allocation of resources, controlling payment of foreign currency-denominated
obligations, setting monetary policy and providing incentives to particular industries or companies.
Although these measures are intended to benefit the overall PRC economy, some may have a
negative effect on our business. As such, our future success is, to some extent, dependent on the
economic conditions in the PRC, and any significant downturn in the market conditions,
particularly the demand for marble in the PRC, may adversely affect our business, prospects,
financial condition and results of operations.
The PRC legal system has inherent uncertainties that could negatively impact our
business, and the current PRC legal environment could limit the legal protection available
to us
Our business and operations in the PRC are governed by the PRC legal system which is a civil
law system based on written statutes. Unlike common law systems, prior court decisions may be
cited for reference but have limited value as precedents, if at all. Since 1979, the PRC legal
system has evolved rapidly and numerous laws and regulations governing economic matters such
as foreign investment, corporate organisation and governance, commerce, taxation and trade
have been promulgated by the relevant authorities. As these laws and regulations are relatively
new, interpretation and enforcement of these laws and regulations involve significant uncertainties
RISK FACTORS
55
and varying degrees of inconsistency. Some of these laws and regulations are still in the
developmental stage and are therefore subject to policy changes. We cannot predict the effect of
future legal developments in the PRC, including the promulgation of new laws, changes in existing
laws and their interpretation and enforcement. These uncertainties could limit the legal protection
available to us and our Shareholders. Furthermore, due to the limited volume of published cases
and the non-binding nature of prior court decisions, the outcome of dispute resolution may not be
as predictable as in other countries with common law systems. In addition, any litigation in the
PRC may be protracted, resulting in substantial costs and diversion of our resources and
management attention. These inherent uncertainties may limit the legal protection available to us
when any dispute arises out of or relating to our sales contracts with the purchasers based in the
PRC.
RISKS RELATING TO THE PLACEMENT
There has been no prior public market for our Shares and an active trading market for our
Shares may not develop or be sustained following the placement
Prior to the Listing, there has been no public market for our Shares. Although we have applied to
the SGX-ST for the dealing and quotation of our Shares on Catalist, there is no assurance that an
active trading market for our Shares will develop or if developed, be sustained after the
Placement. In addition, there is no assurance that the market price for our Shares will not decline
below the Placement Price. The Placement Price for the Shares is expected to be fixed after
consultations between the Sponsor and Issue Manager, the Joint Placement Agents, the Vendors
and us, and may not be indicative of the market price of the Shares following the completion of
the Placement. Investors may not be able to resell their Shares at or above the Placement Price.
If an active trading market for our Shares does not develop or is not sustained after the Placement,
the market price and liquidity of the Shares could be materially and adversely affected.
The trading prices of our Shares may be volatile in the future which could result in
substantial losses for investors purchasing the Placement Shares
The trading prices of our Shares may be volatile and could fluctuate significantly in response to
factors beyond our control, including general market conditions of the securities markets in
Singapore, the Cayman Islands, the PRC, the United States and elsewhere in the world. In
particular, the trading price performance of other quarrying companies based in Asia may affect
the trading price of our Shares. These broad market and industry factors may significantly affect
the market price and volatility of our Shares, regardless of our actual operating performance.
In addition to market and industry factors, the price and trading volume of our Shares may be
highly volatile for specific business reasons. In particular, factors such as quality of our marble and
prices of our marble products could cause the market price of our Shares to change substantially.
Any of these factors may result in large and sudden changes in the trading volume and trading
price of our Shares.
The sale or availability for sale of substantial amounts of our Shares could adversely affect
their trading price
Sales of substantial amounts of our Shares in the public market after the completion of the
Placement, or the perception that these sales could occur, could adversely affect the market price
of our Shares and could materially impair our future ability to raise capital through offerings of our
Shares.
RISK FACTORS
56
The Shares owned by our Controlling Shareholder are subject to certain moratorium periods.
There can be no assurance that our Controlling Shareholder will not dispose of these Shares
following the expiration of the moratorium periods, or any Shares they may come to own in the
future. We cannot predict what effect, if any, significant future sales will have on the market price
of our Shares.
The laws of the Cayman Islands relating to the protection of the interests of minority
shareholders are different from those in Singapore
Our corporate affairs are governed by our Memorandum and Articles of Association and by the
Cayman Companies Law and common law of the Cayman Islands. The laws of the Cayman
Islands relating to the protection of the interests of minority shareholders differ in some respects
from those established under statutes or judicial precedents in existence in Singapore. This may
mean that the remedies available to our Companys minority shareholders may be different from
those under the laws of Singapore. A summary of the Cayman Companies law is set out in
Appendix B to this Offer Document.
Our Controlling Shareholder has substantial influence over our Group and its interests may
not be aligned with the interests of our other Shareholders
Immediately following completion of the Placement, our Controlling Shareholder, TGL, will remain
as the Controlling Shareholder of our Company with substantial control over our issued share
capital. We cannot assure that it will not have significant influence over our business and affairs,
including, but not limited to, decisions with respect to: (i) mergers or other business combinations;
(ii) acquisition or disposals of assets; (iii) issuance of additional shares or other equity securities;
(iv) timing and amount of dividend payments; and (v) appointment of senior management.
Our Controlling Shareholder may cause us to, or prevent us from, entering into certain
transactions, the result of which might not be in, or may conflict with, the best interests of our other
Shareholders. We cannot assure you that our Controlling Shareholder will vote on Shareholders
resolutions in a way that will benefit all of our other Shareholders.
Future financing may cause a dilution in your shareholding or place restrictions on our
operations
We believe that our current cash and cash equivalents, anticipated cash flows from operations
and the proceeds from the Placement will be sufficient to meet our anticipated cash needs for the
foreseeable future. We may, however, require additional cash resources due to changes in
business conditions or other future developments relating to our existing operations, mergers and
acquisitions, joint ventures or strategic partnerships. If additional funds are raised through the
issuance of new equity or equity-linked securities of our Company other than on a pro-rata basis
to existing Shareholders, the percentage ownership of such Shareholders in our Company may be
reduced, and such new securities may confer rights and privileges that take priority over those
conferred by the Shares. Alternatively, if we meet such funding requirements by way of additional
debt financing, we may have restrictions placed on us through such debt financing arrangements
which may (i) limit our ability to pay dividends or require us to seek consents prior to the payment
of dividends; (ii) require us to dedicate a substantial portion of our cash flows from operations to
service our debt obligations, thereby reducing the availability of our cash flows to fund capital
expenditure, working capital requirements and other general corporate needs; and (iii) limit our
flexibility in planning for, or reacting to, changes in our business and our industry.
RISK FACTORS
57
Investors should not place undue reliance on facts, forecasts and other statistics in this
Offer Document
Facts, forecasts and other statistics in this Offer Document relating to the economy and the supply
of marble products from the quarrying business on an international, regional and country-specific
basis have been collected from materials from official government sources and industry sources.
While we have exercised reasonable care in compiling and reproducing such information and
statistics derived from government publications and we have no reason to believe that such
information is false or misleading or that any fact has been omitted that would render such
information false or misleading, neither we nor any of our respective affiliates or advisers have
independently verified the accuracy or completeness of such information directly or indirectly
derived from official government sources and industry sources. Therefore, no representation is
given as to the accuracy of such information or statistics. In particular, due to possibly flawed or
ineffective collection methods or discrepancies between published information and market
practice, such information and statistics may be inaccurate or may not be comparable to
information and statistics produced with respect to other countries. Statistics, industry data and
other information relating to the economy and the industry derived from the official government
sources and industry sources used in this Offer Document may not be consistent with other
information available from other sources and therefore, investors should not unduly rely upon
such facts, forecasts and statistics while making investment decisions.
RISK FACTORS
58
PLACEMENT PRICE 23.0 cents
NTA PER SHARE
NTA per Share based on the audited interim combined balance sheet of
our Group as at 31 December 2013 after adjusting for the capitalisation
of the Shareholders Loans and the conversion of the Convertible Bonds
(Adjusted NTA):
(a) before adjusting for the estimated net proceeds from the issue of
New Shares and based on the pre-Placement share capital of
571,542,003 Shares
2.39 cents
(b) after adjusting for the estimated net proceeds from the issue of New
Shares and based on the post-Placement share capital of
615,042,003 Shares
3.36 cents
Premium of Placement Price over the Adjusted NTA per Share as at
31 December 2013:
(a) before adjusting for the estimated net proceeds from the issue of
New Shares and based on the pre-Placement share capital of
571,542,003 Shares
862.34%
(b) after adjusting for the estimated net proceeds from the issue of New
Shares and based on the post-Placement share capital of
615,042,003 Shares
584.52%
LOSS PER SHARE
Audited net loss per Share of our Group for FY2013 based on our
Companys pre-Placement share capital of 571,542,003 Shares
(0.95) cents
Audited net loss per Share of our Group for FY2013 based on our
Companys pre-Placement share capital of 571,542,003 Shares,
assuming that the Service Agreements had been in place from the
beginning of FY2013
(1.05) cents
PRICE EARNINGS RATIO
Audited price earnings ratio based on the Placement Price and the
audited net EPS of our Group for FY2013
N.A.
Audited price earnings ratio based on the Placement Price and the
audited net EPS of our Group for FY2013, assuming that the Service
Agreements had been in place from the beginning of FY2013
N.A.
NET OPERATING CASH FLOW
(1)
Audited net operating cash flow per Share of our Group for FY2013 based
on the pre-Placement share capital of 571,542,003 Shares
(0.47) cents
ISSUE STATISTICS
59
Audited net operating cash flow per Share of our Group for FY2013 based
on the pre-Placement share capital of 571,542,003 Shares, assuming
that the Service Agreements had been in place from the beginning of
FY2013
(0.57) cents
Price to Net Operating Cash Flow Ratio
Ratio of Placement Price to audited net operating cash flow per Share of
our Group for FY2013 based on the pre-Placement share capital of
571,542,003 Shares
N.A.
Ratio of Placement Price to audited net operating cash flow per Share of
our Group for FY2013 based on the pre-Placement share capital of
571,542,003 Shares, assuming that the Service Agreements had been in
place from the beginning of FY2013
N.A.
Market Capitalisation
Market capitalisation based on the Placement Price and post-Placement
share capital of 615,042,003 Shares
S$141.46 million
Note:
(1) Net operating cash flow refers to net cash used in operating activities.
ISSUE STATISTICS
60
USE OF PROCEEDS
The total net proceeds to be raised from the Placement (comprising the New Shares and the
Vendor Shares), after deducting the aggregate estimated cash expenses in relation to the
Placement of approximately S$3.57 million, is estimated to amount to approximately S$21.43
million.
We will not receive any of the proceeds from the Vendor Shares sold by the Vendors in the
Placement. The net proceeds attributable to the Vendors from the sale of the Vendor Shares, after
deducting the Vendors share of the estimated cash expenses of approximately S$0.57 million, will
be approximately S$14.43 million.
The net proceeds to be raised by our Company from the issue of the New Shares, after deducting
our share of the estimated cash expenses to be borne by us of approximately S$3.00 million, will
be approximately S$7.00 million.
The following table sets out the breakdown of the use of proceeds to be raised by our Company:
Purpose
Amount in Aggregate
(S$000)
Estimated amount
allocated for each dollar of
the gross proceeds raised
from the issue of
the New Shares
(as a percentage of the
gross proceeds)
(%)
Expansion of production capacity
and processing facilities 1,000 10.00
Working capital 5,996 59.93
Cash listing expenses to be borne by
our Company 3,009 30.07
Total 10,005 100.00
Further details of our use of proceeds may be found in the section entitled Business Strategies
and Future Plans of this Offer Document.
The foregoing discussion represents our Companys best estimate of its allocation of the net
proceeds of the Placement attributable to our Company based on our current plans and estimates
regarding our anticipated expenditures. Actual expenditures may vary from these estimates and
our Company may find it necessary or advisable to reallocate the net proceeds within the
categories described above or to use portions of the net proceeds for other purposes. In the event
that our Company decides to reallocate such net proceeds for other purposes, our Company will
publicly announce its intention to do so through a SGXNET announcement on the internet at the
SGX-ST website, http://www.sgx.com. In addition, our Company will make periodic
announcements on the use of the proceeds from the Placement attributable to our Company as
and when the proceeds from the Placement are materially disbursed, and provide a status report
on the use of the proceeds from the Placement in our annual reports.
USE OF PROCEEDS AND LISTING EXPENSES
61
Pending the deployment of the net proceeds from the issue of New Shares as aforesaid, the funds
may be placed as deposits with financial institutions or used for investment in short-term money
market instruments as our Directors may, in their absolute discretion, deem fit.
In the reasonable opinion of our Directors, there is no minimum amount which must be raised from
the Placement.
None of the proceeds of the Placement will be used to discharge, reduce or retire any
indebtedness of our Group.
LISTING EXPENSES
The aggregate estimated amount of expenses of the Placement and of the application for Listing,
including the placement commission, management fees, legal and audit fees, fees payable to the
SGX-ST and all other incidental expenses in relation to this Placement (but excluding that part of
the management fees payable to the Sponsor and Issue Manager to be satisfied by the issuance
of the PPCF Shares) is approximately S$3.57 million. Our Company and the Vendors will bear
approximately 84.19% and 15.81% of the aggregate cash listing expenses respectively.
A breakdown of the listing expenses to be borne by our Company in relation to the Placement is
as follows:
Expenses borne by our Company
Estimated Amount
(S$000)
Estimated amount
allocated for each dollar of
the gross proceeds raised
from the issue of
the New Shares
(as a percentage of the
gross proceeds)
(%)
Listing and application fees 27 0.27
Professional fees
(1)
3,046 30.44
Placement commission
(2)
1,052 10.51
Miscellaneous expenses 84 0.84
Total 4,209 42.06
Notes:
(1) The professional fees include part of the management fee amounting to S$1.20 million payable to the Sponsor and
Issue Manager pursuant to the Management Agreement which has been satisfied in full by the issuance and
allotment of the 5,218,000 new Shares to PPCF representing approximately 0.91% of the issued share capital of our
Company prior to the Placement, at the Placement Price for each Share. For details, please refer to the section
entitled Shareholding and Ownership Structure of this Offer Document.
(2) The amount of placement commission per Placement Share, agreed upon between the Joint Placement Agents, the
Vendors and our Company is 5.0% of the Placement Price payable for each Placement Share. Please refer to the
section entitled Management and Placement Arrangements of this Offer Document for more details.
USE OF PROCEEDS AND LISTING EXPENSES
62
Our Company has not declared or paid any dividends since its incorporation and our subsidiaries
have not declared or paid any dividends in FY2011, FY2012, FY2013 or 3Q2014.
We currently do not have a fixed dividend policy. The form, frequency and amount of future
dividends on our Shares will depend on our earnings, general financial position, results of
operations, capital requirements, cash flow, general business condition, our development plans
and other factors as our Directors may, in their absolute discretion, deem appropriate. Therefore,
there can be no assurance that dividends will be paid in the future or of the amount or timing of
any dividends that will be paid in the future.
All dividends are paid pro-rata among the Shareholders in proportion to the amount paid up on
each Shareholders Shares, unless the rights attaching to an issue of any Share provides
otherwise.
Subject to the Cayman Companies Law and the Articles, our Shareholders in general meeting may
from time to time declare a dividend or other distribution but no dividend or other distribution shall
be declared in excess of the amount recommended by our Directors.
We expect to declare dividends in S$ and make payment of the dividends in S$.
For information relating to taxes payable on dividends, please refer to the section entitled
Taxation of this Offer Document.
DIVIDEND POLICY
63
As at the date of incorporation of our Company, our Companys authorised share capital was
HK$380,000 divided into 38,000,000 shares of a nominal or par value of HK$0.01 each, of which
one Share of a nominal or par value of HK$0.01 (the Subscriber Share) was issued as fully-paid
up to Codan Trust Company (Cayman) Limited as subscriber, and then transferred to TGL at par.
On 21 March 2014, our Company effected a change in the currency in which the share capital of
the Company is denominated from HK$ to S$, which involved, inter alia, the following steps:
(i) diminution of the authorised share capital of our Company by the cancellation of 37,999,999
authorised but unissued shares resulting in an authorised share capital of HK$0.01 divided
into 1 share of a nominal or par value of HK$0.01;
(ii) following the cancellation of shares above, increase of the authorised share capital of our
Company from HK$0.01 divided into 1 share of a nominal or par value of HK$0.01 to the
aggregate of HK$0.01 and S$50,000 divided into (i) 1 share of a nominal or par value of
HK$0.01; and (ii) 5,000,000 ordinary shares of a nominal or par value of S$0.01 each, by the
creation of 5,000,000 ordinary shares of a nominal or par value of S$0.01 each;
(iii) issuance by our Company of 1 ordinary share of a nominal or par value of S$0.01 to TGL,
credited as fully paid for cash at par, followed by the purchase by our Company from TGL of
the Subscriber Share for cash at par out of the capital of our Company (and cancelled); and
(iv) diminution of the authorised share capital of our Company by the cancellation of 1 authorised
but unissued share of a nominal or par value of HK$0.01, resulting in an authorised share
capital of S$50,000 divided into 5,000,000 ordinary shares of a nominal or par value of
S$0.01 each,
such that following the above, our Company had an authorised share capital of S$50,000 divided
into 5,000,000 ordinary shares of a nominal or par value of S$0.01 each, and an issued share
capital of S$0.01 divided into 1 ordinary share of a nominal or par value of S$0.01.
On 20 June 2014, our Company increased our authorised share capital from S$50,000 divided
into 5,000,000 ordinary shares of a nominal or par value of S$0.01 each, to S$10,000,000 divided
into 1,000,000,000 ordinary shares of a nominal or par value of S$0.01 each.
On 20 June 2014, our Company issued and allotted the Consideration Shares to TGL. Please refer
to the section entitled Restructuring Exercise of this Offer Document for more information on the
Consideration Shares.
On 15 July 2014, our Company issued and allotted the Conversion Shares to the Pre-IPO
Investors, credited as fully paid up, pursuant to the conversion of the Convertible Bonds. Please
refer to the section entitled Pre-IPO Investment of this Offer Document for more details.
SHARE CAPITAL
64
Pursuant to written resolutions dated 15 July 2014, the following was, inter alia, approved by the
sole shareholder:
(a) the allotment and issue of the 5,218,000 new Shares to PPCF in part satisfaction of their
management fee as Sponsor and Issue Manager;
(b) the allotment and issue of the New Shares which are the subject of the Placement on the
basis that the New Shares, when allotted, issued and fully paid, will rank pari passu in all
respects with the existing issued Shares;
(c) the approval of the listing and quotation of all the issued Shares (including the New Shares
to be issued and allotted pursuant to the Placement) on Catalist; and
(d) the authorisation for our Directors to:
(A) (i) issue Shares whether by way of rights, bonus or otherwise; and/or
(ii) make or grant offers, agreements or options (collectively, Instruments) that
might or would require Shares to be issued during the continuance of this authority
or thereafter, including but not limited to the creation and issue of (as well as
adjustments to) warrants, debentures, convertible securities or other instruments
convertible into Shares; and/or
(iii) notwithstanding that such authority may have ceased to be in force at the time that
Instruments are to be issued, issue additional Instruments arising from
adjustments made to the number of Instruments previously issued in the event of
rights, bonus or other capitalisation issues,
at any time and upon such terms and conditions and for such purposes and to such
persons as our Directors may in their absolute discretion deem fit; and
(B) issue Shares in pursuance of any Instrument made or granted by our Directors pursuant
to (A)(ii) and/or (A)(iii) above, while such authority was in force (notwithstanding that
such issue of Shares pursuant to the Instruments may occur after the expiration of the
authority contained in the resolution),
provided that:
(i) the aggregate number of Shares to be issued pursuant to such authority (including
the Shares to be issued in pursuance of Instruments made or granted pursuant to
this authority but excluding Shares which may be issued pursuant to any
adjustments (Adjustments) effected under any relevant Instrument, which
Adjustments shall be made in compliance with the provisions of the Catalist Rules
for the time being in force (unless such compliance has been waived by the
SGX-ST) and the Articles of Association for the time being of our Company, does
not exceed 100% of the post-Placement issued share capital excluding treasury
shares, and provided further that the aggregate number of Shares to be issued
other than on a pro rata basis to Shareholders (including Shares to be issued in
pursuance of Instruments made or granted pursuant to such authority but
excluding Shares which may be issued pursuant to Adjustments effected under
any relevant Instrument) shall not exceed 50% of the post-Placement issued share
capital excluding treasury shares;
SHARE CAPITAL
65
(ii) in exercising such authority, our Company shall comply with the provisions of the
Catalist Rules for the time being in force (unless such compliance has been
waived by the SGX-ST) and the Articles of Association for the time being of our
Company; and
(iii) unless revoked or varied by our Company in general meeting by ordinary
resolution, the authority so conferred shall continue in force until the conclusion of
the next annual general meeting of our Company or the date by which the next
annual general meeting of our Company is required by law to be held, whichever
is the earlier.
For the purposes of this resolution and pursuant to Rules 806(3) and 806(4) of the Catalist
Rules, the post-Placement issued share capital shall mean the total number of issued
Shares of our Company (excluding treasury shares) immediately after the Placement, after
adjusting for: (i) new Shares arising from the conversion or exercise of any convertible
securities; (ii) new Shares arising from exercising share options or vesting of share awards
outstanding or subsisting at the time such authority is given, provided the options or share
awards were granted in compliance with the Catalist Rules; and (iii) any subsequent bonus
issue, consolidation or sub-division of Shares.
As at the date of this Offer Document, there is only one class of Shares in the capital of our
Company, being the Shares. A summary of the Articles of Association of our Company relating to,
among others, the voting rights of our Shareholders are set out in Appendix C entitled Selected
Extracts of our Articles of Association of this Offer Document.
As at the date of this Offer Document, the authorised share capital of our Company is
S$10,000,000 divided into 1,000,000,000 Shares of a nominal or par value of S$0.01 each and the
issued and paid-up share capital of our Company is S$5,715,420.03 comprising 571,542,003
Shares. Upon the issue and allotment of the New Shares as part of the Placement, the resultant
issued and paid-up share capital of our Company will be increased to S$6,150,420.03 comprising
615,042,003 Shares.
There are no founder, management, deferred or unissued Shares reserved for issuance for any
purpose. The Placement Shares shall have the same interest and voting rights as our existing
Shares that were issued prior to this Placement and there are no restrictions to the free
transferability of our Shares.
No person has, or has the right to be given, an option to subscribe for or purchase any securities
of our Company or our subsidiaries. As at the Latest Practicable Date, no option to subscribe for
Shares in our Company has been granted to, or was exercised by, any of our Directors or
Executive Officers.
SHARE CAPITAL
66
Details of the changes in the issued and paid-up share capital of our Company since the date of
incorporation and immediately after the Placement are set out below:
Number of
Issued Shares
Issued and
paid-up
share capital
Issued and fully paid ordinary shares as at
incorporation
(1)
1 HK$0.01
Issue of one (1) ordinary share of a nominal or par
value of S$0.01 to TGL pursuant to the currency
conversion
(2)
1 S$0.01
Issued and fully paid ordinary shares of a nominal or
par value of S$0.01 each immediately after the
currency conversion
(2)
1 S$0.01
Issue of 429,999,999
(3)
Consideration Shares
pursuant to the completion of the Restructuring
Exercise 429,999,999 S$4,299,999.99
Issue of Conversion Shares to the Pre-IPO Investors
pursuant to the conversion of the Convertible Bonds 136,324,003 S$1,363,240.03
Issued and fully paid Shares immediately after the
completion of the Restructuring Exercise and the
conversion of the Convertible Bonds 566,324,003 S$5,663,240.03
Issue of the PPCF Shares to PPCF in satisfaction of
part of the management fee payable to PPCF as
Sponsor and Issue Manager 5,218,000 S$52,180.00
Pre-Placement issued and paid-up share capital 571,542,003 S$5,715,420.03
New Shares issued pursuant to the Placement 43,500,000 S$435,000.00
Post-Placement issued and paid-up share capital 615,042,003 S$6,150,420.03
Notes:
(1) As at the date of incorporation of our Company, the Subscriber Share was issued as fully-paid up to Codan Trust
Company (Cayman) Limited as subscriber and then transferred to TGL at par before subsequently being purchased
by our Company from TGL for cash at par out of the capital of our Company and cancelled, in connection with the
change in the currency in which the share capital of our Company is denominated from HK$ to S$, as detailed above
in this section entitled Share Capital of this Offer Document.
(2) The issuance of one (1) ordinary share of a nominal or par value of S$0.01 to TGL, credited as fully paid for cash
at par, was followed by the purchase by our Company from TGL of the Subscriber Share, carried out in connection
with the change in the currency in which the share capital of our Company is denominated from HK$ to S$, as
detailed above in this section entitled Share Capital of this Offer Document.
(3) The Consideration Shares were issued to TGL pursuant to the Restructuring Exercise. Please refer to the section
entitled Restructuring Exercise of this Offer Document for more information on the Consideration Shares.
Save as disclosed above, there have been no other changes in the share capital of our Company
since the date of its incorporation on 15 March 2013.
SHARE CAPITAL
67
Save as set out in the following table, there were no changes in the issued and paid-up share
capital or the number and classes of shares of each of our subsidiaries, within the three (3) years
preceding the Latest Practicable Date:
Name of
Subsidiary
Date of
shares issued/
registered
capital
contributed
Number of
shares issued/
registered
share capital
contributed
Issue
price
per share
Purpose of
change in
capital
Resultant
paid-up share
capital/
registered share
capital
Terratech
Resources
Pte. Ltd.
20 June 2014 84,360,000
(1)
S$0.10 Capitalisation
of the
Shareholders
Loans
S$8,866,107.50
20 June 2014 156,772,600
(2)
S$0.10 Capitalisation
of the
Convertible
Bonds
Settlement
Amount
S$24,543,367.50
Qingdao
Terratech
Resources
Co., Ltd
(3)
30 July
2013
US$100,000 N.A. Payment of
registered
capital
US$100,000
26 November
2013
US$380,000 N.A. Payment of
registered
capital
US$480,000
Notes:
(1) On 20 June 2014, Terratech Resources issued and allotted the 84,360,000 Shareholders Loans Shares to TGL by
way of the capitalisation of the Shareholders Loans owing by it to TGL, following which the Shareholders Loans
was deemed repaid in full. Subsequently, on 20 June 2014, the Shareholders Loan Shares were transferred by TGL
to our Company pursuant to the Restructuring Exercise. Please refer to the section entitled Past Interested Person
Transactions Loans and Advances from our Controlling Shareholder, TGL and its Subsidiaries of this Offer
Document for details relating to the capitalisation of the Shareholders Loans and the section entitled Restructuring
Exercise of this Offer Document for details relating to the Restructuring Exercise.
(2) On 20 June 2014, Terratech Resources issued and allotted the 156,772,600 Convertible Bonds Settlement Shares
to our Company by way of the capitalisation of the Convertible Bonds Settlement Amount, owing by Terratech
Resources to our Company as a result of our Company assuming the liability to repay or procure the conversion of
the Conversion Amount into Conversion Shares in place of Terratech Resources, pursuant to which the Convertible
Bonds Settlement Amount was deemed satisfied, released and discharged in full as between Terratech Resources
and our Company. Please refer to the sections entitled Pre-IPO Investment and Restructuring Exercise of this
Offer Document for details relating to the capitalisation of the Convertible Bonds Settlement Amount.
(3) Qingdao Terratech was incorporated on 26 July 2013 with a registered capital of US$100,000. On 20 February 2014,
Qingdao Terratech increased its registered capital by US$1,900,000 following which the registered capital of
Qingdao Terratech became US$2,000,000. As at the Latest Practicable Date, the registered capital has been paid
up to an amount of US$480,000.
Save as disclosed in this section, no shares in or debentures of our Company or our subsidiaries
have been issued, or are proposed to be issued, as fully or partly paid-up for cash, or for a
consideration other than cash, during the last three (3) years preceding the date of lodgement of
SHARE CAPITAL
68
SHAREHOLDING AND OWNERSHIP STRUCTURE
Our Directors and Substantial Shareholders and their respective shareholdings immediately
before and after the Placement are summarised below:
Before the Placement After the Placement
Direct Interest Deemed Interest Direct Interest Deemed Interest
Number
of Shares
(000) %
Number
of Shares
(000) %
Number
of Shares
(000) %
Number
of Shares
(000) %
Directors
Dr Wang Xiaoning
(1)
386,948 67.70 386,948 62.92
Dr Loh Chang Kaan
Aw Eng Hai
Prof. Zhao Jian
Wong Kuan Meng Mark
Controlling Shareholders
TGL
(1)(2)
386,948 67.70 386,948 62.92
Tritech International
(1)
386,948 67.70 386,948 62.92
Substantial Shareholders (other than Directors)
Luminor Pacific Fund 1
(3)(4)
118,147 20.67 61,641 10.02
Luminor Capital
(4)
118,147 20.67 61,641 10.02
Kwan Chee Seng 18,177 3.18 9,483 1.54
Other Shareholders
PPCF
(5)
5,218 0.91 5,218 0.85
Successive Investments
(2)
18,451 3.23 18,451 3.00
Crescent
(2)
24,601 4.31 24,601 4.00
Public 108,700 17.67
TOTAL 571,542 100.00 615,042 100.00
Notes:
(1) TGL has a direct shareholding interest in 386,948,000 Shares in the capital of our Company. Tritech International
has a deemed interest in the Shares of our Company held by TGL by virtue of its 40.11% shareholding interest in
TGL, pursuant to Section 7(4)(A) of the Companies Act. Dr Wang Xiaoning has a deemed interest in the aforesaid
Shares of our Company held by TGL, by virtue of his 30.20% shareholding interest in Tritech International, pursuant
to Section 7(4A) of the Companies Act.
(2) Pursuant to the arrangements between TGL and Successive Investments and Crescent, TGL transferred the
Successive Investments Shares to Successive Investments and the Crescent Shares to Crescent. Please refer to
the section entitled Dilution of this Offer Document for further details.
(3) As Luminor Pacific Fund 1 has a direct shareholding interest of 118,147,469 Shares in the capital of our Company
representing approximately 20.67% of the issued share capital of our Company prior to the Placement, it is a
Controlling Shareholder of our Company as at the date of this Offer Document. However, its shareholding interest
will be reduced to 10.02% after the sale of the relevant Vendor Shares by it pursuant to the Placement and it will
become a Substantial Shareholder of our Company post Placement.
(4) Luminor Capital, which is the manager of Luminor Pacific Fund 1, has a deemed interest in the Shares of our
Company held by Luminor Pacific Fund 1 pursuant to Section 7(6)(d) of the Companies Act.
(5) Pursuant to the Management Agreement and as part of PPCFs fees as the Sponsor and Issue Manager, our
Company issued and allotted PPCF 5,218,000 new Shares, representing 0.91% of the issued share capital of our
Company prior to the Placement, at the Placement Price for each Share. Upon completion of the relevant
moratorium period as set out in the section entitled Moratorium of this Offer Document, PPCF will dispose of its
relevant shareholding interests in our Company at its discretion.
SHARE CAPITAL
69
Save as disclosed above and in the section entitled Directors, Management and Staff of this
Offer Document, there are no other relationships among our Directors, Substantial Shareholders
and Executive Officers.
The Shares held by our Directors and Substantial Shareholders do not carry voting rights that are
different from the Placement Shares. Our Directors are not aware of any arrangement, the
operation of which may, at a subsequent date, result in a change in control of our Company.
As at the Latest Practicable Date, our Company has only one class of shares, being the Shares
which are in registered form. There is no restriction on the transfer of fully paid ordinary shares
in scripless form except where required by law or the Catalist Rules.
There has not been any public take-over offer by a third party in respect of the Shares or by our
Company in respect of the shares of another corporation or units of business trust which has
occurred between the date of incorporation of our Company to the Latest Practicable Date.
Save as disclosed above, our Company is not directly or indirectly owned or controlled, whether
severally or jointly by any other corporation, government or person.
Save as disclosed above and in the sections entitled Restructuring Exercise, Pre-IPO
Investment and Share Capital of this Offer Document, no shares or debentures were issued or
agreed to be issued by our Company for cash or for a consideration other than cash during the
last three (3) years preceding the date of lodgement of this Offer Document.
There are no Shares in our Company that are held by or on behalf of our Company or by the
subsidiaries of our Company.
SIGNIFICANT CHANGES IN PERCENTAGE OF OWNERSHIP
Save as disclosed above and in the sections entitled Share Capital, Pre-IPO Investment and
Restructuring Exercise of this Offer Document, there were no significant changes in the
percentage of ownership of our Directors and Substantial Shareholders in our Company between
the date of incorporation of our Company on 15 March 2013 and the Latest Practicable Date.
VENDORS
The names of the Vendors and the number of Vendor Shares which the Vendors will offer for
purchase pursuant to the Placement are set out below:
Shares held
immediately before
the Placement
Vendor Shares offered pursuant
to the Placement
Shares held after
the Placement
Name
Number
of
Shares
(000)
% of pre-
Placement
share
capital
Number
of
Shares
(000)
% of pre-
Placement
share
capital
% of post-
Placement
share
capital
Number
of
Shares
(000)
% of post-
Placement
share
capital
Luminor Pacific Fund 1 118,147 20.67 56,506 9.89 9.19 61,641 10.02
Kwan Chee Seng 18,177 3.18 8,694 1.52 1.41 9,483 1.54
SHARE CAPITAL
70
MORATORIUM
TGL
To demonstrate their commitment to our Group, TGL, being the Controlling Shareholder of our
Company has, pursuant to Rule 443 of the Catalist Rules, undertaken to our Company and the
Sponsor and Issue Manager not to, amongst others, sell, transfer, assign, dispose of, realise,
pledge, grant any option to purchase or enter into any agreement that will directly or indirectly
constitute or will be deemed as a disposal of any part of its shareholding interests in our Company
immediately after the Listing for a period of twelve (12) months commencing from our Companys
date of admission to Catalist, and for a period of six (6) months thereafter not to sell, transfer,
assign, dispose of, realise, pledge, grant any option to purchase or enter into any agreement that
will directly or indirectly constitute or will be deemed as a disposal of any part of its shareholding
interests in our Company to below 50.0% of its original shareholdings (adjusted for any bonus
issue or subdivision) in our Company.
The total number of Shares which will be moratorised for the relevant moratorium periods as
aforesaid are as follows:
Shareholder Number of Shares
Percentage (%) of
post-Placement
share capital
TGL 386,948,000 62.92
Pre-IPO Investors
Pursuant to Rule 422(2) of the Catalist Rules and to demonstrate their commitment to our Group,
the Pre-IPO Investors have undertaken to our Company and the Sponsor and Issue Manager not
to, amongst others, sell, transfer, assign, dispose of, realise, pledge, grant any option to purchase
or enter into any agreement that will directly or indirectly constitute or will be deemed as a disposal
of any part of their respective shareholding interests in our Company immediately after the Listing,
being the profit portion of their investment, for a period of twelve (12) months commencing from
our Companys date of admission to Catalist. The total number of Shares which will be
moratorised are as follows:
Shareholders Number of Shares
Percentage (%) of
post-Placement
share capital
Luminor Pacific Fund 1 61,625,730 10.02
Kwan Chee Seng 9,480,882 1.54
Others
Pursuant to the Management Agreement and as part of PPCFs management fees as the Sponsor
and Issue Manager, our Company issued and allotted the PPCF Shares to PPCF at the Placement
Price for each Share.
SHARE CAPITAL
71
PPCF has undertaken to our Company not to sell, transfer, assign, dispose of, realise, pledge,
grant any option to purchase or enter into any agreement that will directly or indirectly constitute
or will be deemed as a disposal of any part of its shareholding interests in our Company for a
period of three (3) months commencing from our Companys date of admission to Catalist. Upon
completion of the aforesaid relevant moratorium period, PPCF will dispose of its relevant
shareholding interests in our Company at its discretion.
In addition, to demonstrate their commitment to our Group, Crescent and Successive Investments
have undertaken to our Company and the Sponsor and Issue Manager not to sell, transfer, assign,
dispose of, realise, pledge, grant any option to purchase or enter into any agreement that will
directly or indirectly constitute or will be deemed as a disposal of any part of their respective
shareholding interests in our Company for a period of six (6) months commencing from our
Companys date of admission to Catalist.
Shareholders Number of Shares
Percentage (%) of
post-Placement
share capital
PPCF 5,218,000 0.85
Successive Investments 18,451,000 3.00
Crescent 24,601,000 4.00
SHARE CAPITAL
72
The following table, which should be read in conjunction with the Independent Auditors Report
for the Years Ended 31 March 2011, 2012 and 2013 and the Nine Months ended 31 December
2013 as set out in Appendix A of this Offer Document and the section entitled Managements
Discussion and Analysis of Results of Operations and Financial Position of this Offer Document,
shows our cash and cash equivalents, capitalisation and indebtedness:
(i) as at 31 December 2013 based on our audited interim combined financial statements;
(ii) as at 30 April 2014 based on our unaudited consolidated management accounts as adjusted
to give effect to the Restructuring Exercise, the capitalisation of the Shareholders Loans and
the conversion of the Convertible Bonds; and
(iii) as adjusted to give effect to the application of the net proceeds from the Placement, after
deducting estimated listing expenses related to the Placement.
(S$000)
As at
31 December 2013
(audited)
As at
30 April 2014
(unaudited)
As adjusted
for the net
proceeds from
the Placement
(unaudited)
Cash and cash equivalents 4,045 3,728 10,724
Indebtedness
Current
Bank overdraft, secured 1,030
Convertible loan 9,967
Finance lease liabilities 755 455 455
11,752 455 455
Non-current
Convertible loan 13,003
Finance lease liabilities 504 373 373
Total indebtedness 25,259 828 828
Total shareholders equity (17,009) 12,642 19,638
Total capitalisation and
indebtedness 8,250 13,470 20,466
CAPITALISATION AND INDEBTEDNESS
73
Banking Facilities
As at the Latest Practicable Date, our Groups banking facilities from the financial institutions are
as follows:
Financial
Institution
Nature of
facility
Facility
amount
(S$000)
Utilised
amount
(S$000)
Unutilised
amount
(S$000) Interest rate Maturity profile
DBS Bank Ltd Overdraft 1,500 501 999 4.75% per annum Repayable on
demand
DBS Bank Ltd Internationalisation
Finance Scheme
Non-revolving
hire purchase
line
2,718 2,077 641 Flat rate of 3.0%
per annum or
annualised
reference rate of
6.02%
Each hire
purchase
agreement
entered into
under the facility
is repayable
within 36 months
UOB Bank Ltd Internationalisation
Finance Scheme
Non-revolving
hire purchase
line
1,200 646 554 Fixed interest of
2.10% per annum
calculated on a
monthly rest
basis
Each hire
purchase
agreement
entered into
under the facility
is repayable
within 48 months
Total 5,418 3,224 2,194
Notes:
(1) TGL and certain subsidiaries of the TGL Group, namely Tritech Consultants, Tritech Engineering, Presscrete
Engineering and Syseng, had provided corporate guarantees to secure the above facilities from DBS Bank Ltd and
TGL had provided a corporate guarantee to secure the above facility from UOB Bank Ltd. Please refer to the section
entitled Present and On-going Interested Person Transactions Provision of Corporate Guarantees by TGL and
Financial Support Undertaking and/or Certain Subsidiaries of the TGL Group of this Offer Document for further
details.
(2) The Internationalisation Finance Scheme Non-Revolving hire purchase facility from DBS Bank Ltd is to be secured
by a Charge on Fixed Deposits over all fixed deposits in S$ or other accepted currencies placed or to be placed by
the Company from time to time with DBS Bank Ltd. Pursuant to the foregoing, there is an existing all monies owing
charge (Charge No.: C201112058) created on 2 September 2011 in favour of DBS Bank Ltd.
As at the Latest Practicable Date, we have total banking facilities of approximately S$5.42 million,
of which approximately S$3.22 million have been utilised. Such banking facilities comprise
overdraft and hire purchase facilities. Interest on the banking facilities range between 2.10% to
6.02% per annum or such other rate(s) as the bank may determine from time to time.
To the best of our Directors knowledge, our Group is not in breach of any of the terms and
conditions or covenants associated with any of our financing arrangements which could materially
affect our Groups financial position and results or business operations, or the investments of our
Shareholders.
Save as disclosed above and save for the Convertible Bonds, as at the Latest Practicable Date,
our Group has no other borrowings or indebtedness in the nature of borrowings.
74
Save as disclosed above and changes in our Groups retained earnings arising from our
day-to-day operations in the ordinary course of business, there were no material changes to our
total capitalisation and indebtedness since 31 December 2013 to the Latest Practicable Date.
Hire-Purchase Commitments
Our Group acquired the bulk of our quarrying and processing equipment under hire-purchase
agreements. As at 31 December 2013 and the Latest Practicable Date, the future minimum
instalments payable under the hire-purchase agreements are as follows:
(S$000)
As at
31 December 2013
As at the Latest
Practicable Date
Within one (1) year 798 456
After one (1) year but within five (5) years 525 328
Total 1,323 784
Capital Commitments
The capital commitments of our Group are mainly financed by shareholders advances and the
proceeds from the Convertible Bonds. As at 31 December 2013 and the Latest Practicable Date,
our Group has the following capital commitments:
(S$000)
As at
31 December 2013
As at the Latest
Practicable Date
Procurement of property, plant and equipment 77 115
Total 77 115
Contingent Liabilities
As at the Latest Practicable Date, to the best of our knowledge, information and belief, save as
disclosed above, we are not aware of any contingent liabilities which may have a material effect
on the financial position and profitability of our Group.
75
Our Group financed our operations through both internal and external sources of funds. Internal
sources of funds comprise cash generated by capital investment or advances from Shareholders.
External sources of funds comprise mainly borrowings from financial institutions, proceeds arising
from the Convertible Bonds and credit granted by suppliers. The principal uses of these funds are
to finance capital expenditure and operating expenses such as rental, employees compensation
and administrative expenses.
Our Group generated positive operating cash flows of S$2.08 million in FY2012, mainly in the form
of advances from the TGL Group, and negative operating cash flows in FY2011, FY2013 and
3Q2014 of S$0.09 million, S$2.67 million and S$5.03 million respectively, as our Group had
focused our business activities on quarry planning, construction and infrastructure development
and building of inventory for sales during the period under review, and accordingly, no revenue
was generated in FY2011, FY2012, FY2013 and 3Q2014. As at 31 December 2013, our Group had
cash and cash equivalents (including bank overdrafts) of approximately S$3.01 million. As at the
Latest Practicable Date, our Group has cash and cash equivalents (including bank overdraft)
amounting to S$2.81 million.
Our Group recorded positive working capital of S$0.92 million and negative working capital of
S$10.32 million as at 31 March 2013 and 31 December 2013 respectively.
Notwithstanding the negative working capital position of our Group as at 31 December 2013, our
Directors are of the opinion that our Group has sufficient resources to meet our working capital
needs and service our debt obligations as and when they fall due, having taken into consideration,
inter alia, the expected positive cashflow from the fulfilment of our order book and other factors
as set out below:
(a) Our Group will be in a positive working capital position following the capitalisation of the
Shareholders Loans and the conversion of the Convertible Bonds; and
(b) Our current production capacity is sufficient to support our order book of approximately
S$23.46 million as at the Latest Practicable Date, a significant proportion of which we expect
to fulfil within FY2015.
Our Board is of the reasonable opinion that, after having made due and careful enquiry and after
taking into account the cash flows to be generated from our Groups operations and the existing
cash and cash equivalents, the working capital available to our Group is sufficient for present
requirements and for at least 18 months after the listing of our Company on Catalist.
The Sponsor is of the reasonable opinion that, after having made due and careful enquiry and
after taking into account the cash flows to be generated from our Groups operations and the
existing cash and cash equivalents, the working capital available to our Group is sufficient for
present requirements and for at least 18 months after the listing of our Company on Catalist.
WORKING CAPITAL
76
Dilution is the amount by which the Placement Price paid by the subscribers or purchasers of our
Shares in this Placement exceeds our NTA per Share immediately after the Placement. Our NTA
per Share as at 31 December 2013, after adjusting for the capitalisation of the Shareholders
Loans and the conversion of the Convertible Bonds but before adjusting for the estimated net
proceeds due to our Company from the Placement and based on our Companys pre-Placement
issued and paid-up share capital of 571,542,003 Shares, was approximately 2.39 cents per Share.
Pursuant to the Placement in respect of, inter alia, 43,500,000 New Shares at the Placement
Price, our NTA per Share as at 31 December 2013, after adjusting for the capitalisation of the
Shareholders Loans and the conversion of the Convertible Bonds, and the estimated net
proceeds due to our Company from the Placement and based on our Companys post-Placement
issued and paid-up share capital of 615,042,003 Shares would have been approximately 3.36
cents. This represents an immediate increase in NTA per Share of approximately 0.97 cents to our
existing Shareholders and an immediate dilution in NTA per Share of approximately 19.64 cents
or approximately 85.39% to our new public investors.
The following table illustrates the dilution on a per Share basis as at 31 December 2013:
Cents
Placement Price per Share 23.00
NTA per Share adjusted for the capitalisation of Shareholders Loans,
conversion of the Convertible Bonds and based on the pre-Placement share
capital of 571,542,003 Shares 2.39
Increase in NTA per Share attributable to existing Shareholders 0.97
NTA per Share after the issue of New Shares and based on the post-
Placement share capital of 615,042,003 Shares 3.36
Dilution in NTA per Share to new public investors 19.64
Dilution in NTA per Share to new public investors (%) 85.39
Our Directors have not acquired any Shares since incorporation. The following table summarises
the total number of ordinary shares in the capital of our Company acquired by our Shareholders
since our incorporation, the total consideration paid by them and the average effective cash cost
per Share to our Shareholders of ordinary shares in the capital of our Company acquired by them
from the date of incorporation, and the public Shareholders who subscribe for and/or purchase the
Placement Shares at the Placement Price pursuant to the Placement:
Number of Shares
Total
consideration
Average Effective
cash cost per
Share
TGL
At incorporation One ordinary share
of par value
HK$0.01 each
(1)
HK$0.01 HK$0.01
Upon share capital
currency conversion
1 S$0.01 S$0.01
DILUTION
77
Number of Shares
Total
consideration
Average Effective
cash cost per
Share
Pursuant to the
Restructuring Exercise
429,999,999
(2)
S$4,299,999.99
(3)
S$0.01
Pre-IPO Investors 136,324,003 S$15,677,260 S$0.11
(4)
PPCF
(5)
5,218,000 S$1,200,140 S$0.23
Successive Investments 18,451,000 N.A.
(6)
Crescent 24,601,000 N.A.

(7)
New public investors 108,700,000 S$25,001,000 S$0.23

Notes:
(1) This issued ordinary share was purchased by our Company and cancelled in connection with the conversion of the
currency of our share capital from HK$ to S$. For further details, please refer to the section entitled Share Capital
(2) The Consideration Shares were issued by our Company to TGL in settlement and satisfaction of the Terratech
Acquisition Consideration under the Restructuring Exercise. For further details, please refer to the section entitled
Restructuring Exercise of this Offer Document.
(3) The Terratech Acquisition Consideration is equivalent to the aggregate par value of the Consideration Shares, which
was arrived at after taking into account, inter alia, TGLs pro-rata share of the NTA of Terratech Resources and its
subsidiaries as at 31 December 2013 of S$9.82 million after adjusting for the capitalisation of the Shareholders
Loans and the Convertible Bonds Settlement Amount, as further described in the sections entitled Restructuring
Exercise and Pre-IPO Investment of this Offer Document.
(4) The effective cash cost per Share for the Conversion Shares acquired by the Pre-IPO Investors is S$0.11 per Share,
obtained by dividing the Conversion Amount by the total number of Conversion Shares.
(5) Pursuant to the Management Agreement and as part of PPCFs fees as the Sponsor and Issue Manager, our
Company issued and allotted to PPCF 5,218,000 new Shares, representing 0.91% of the issued and paid-up share
capital of our Company prior to the Placement, at the Placement Price for each Share. Upon completion of the
relevant moratorium period as set out in the section entitled Moratorium of this Offer Document, PPCF will be
disposing of its relevant shareholding interests in our Company at its discretion.
(6) TGL had previously sought the services of Successive Investments to seek and introduce potential investors and/or
customers to our Company, in consideration of which TGL had agreed to procure the issue and allotment or the
transfer of the Successive Investments Shares to Successive Investments. TGL had on 15 July 2014 transferred the
Successive Investments Shares to Successive Investments. The Successive Investments Shares represent 3.0% of
the post-Placement share capital of 615,042,003 Shares, and are subject to the relevant moratorium period as set
out in the section entitled Moratorium of this Offer Document.
(7) Our Company had previously sought the services of Crescent to assist in the then proposed listing exercise of our
Company on the Stock Exchange of Hong Kong Limited, in consideration of which our Company had agreed to
procure the issue and allotment or transfer of the Crescent Shares to Crescent in the event of a successful initial
public offering on the relevant stock exchange, and TGL had, pursuant to a letter agreement dated 1 May 2014,
agreed to assume the obligation and liability of our Company by procuring the issue and/or allotment or transfer of
the Crescent Shares to Crescent. TGL had on 15 July 2014 transferred the Crescent Shares to Crescent. The
Crescent Shares represent 4.0% of post-Placement share capital of 615,042,003 Shares, and are subject to the
relevant moratorium period as set out in the section entitled Moratorium of this Offer Document.
DILUTION
78
The Restructuring Exercise was effected in preparation for the Listing and included the major
steps set out below.
Our Group was formed through the Restructuring Exercise which involved, inter alia, an
acquisition by our Company of the entire equity interest legally and beneficially owned by TGL in
Terratech Resources. Pursuant to the Restructuring Exercise, our Company became the holding
company of our Group.
On 20 June 2014, our Company, Terratech Resources and TGL entered into an agreement (the
Restructuring Agreement) pursuant to which, inter alia:
(a) our Company agreed to assume the liability of Terratech Resources to repay or procure a
conversion of the Conversion Amount in respect of the Convertible Bonds into Conversion
Shares in accordance with the terms of the CBA, and in settlement and satisfaction of the
corresponding amount deemed due and owing by Terratech Resources to our Company as
a result thereof (the Convertible Bonds Settlement Amount), Terratech Resources
agreed to issue and allot 156,772,600 new ordinary shares in the capital of Terratech
Resources to our Company (the Convertible Bonds Settlement Shares);
(b) TGL agreed to subscribe for and Terratech Resources agreed to issue and allot 84,360,000
new ordinary shares in the capital of Terratech Resources (the Shareholders Loans
Shares) by way of capitalisation of advances and loans of an aggregate principal amount
of S$8.436 million made by TGL to Terratech Resources (the Shareholders Loans); and
(c) TGL agreed to sell, and our Company agreed to purchase, the entire equity interest legally
and beneficially owned by TGL in Terratech Resources comprising:
(i) 4,301,075 shares in the capital of Terratech Resources held by TGL pursuant to the
Acquisition (the Existing Shares); and
(ii) the Shareholders Loans Shares held by TGL pursuant to capitalisation of the
Shareholders Loans as further described in paragraph (b) above,
and amounting to 36.12% of the enlarged share capital of Terratech Resources following the
issuance of the Convertible Bonds Settlement Shares and the Shareholders Loans Shares,
for a consideration of S$4,299,999.99 (the Terratech Acquisition Consideration), to be
settled and satisfied by way of the issue and allotment of 429,999,999 new Shares, credited
as fully paid up, to be issued and allotted to TGL (the Consideration Shares).
The Terratech Acquisition Consideration is equivalent to the aggregate par value of the
Consideration Shares, and was arrived at after taking into account, inter alia, TGLs pro-rata
share of the NTA of Terratech Resources and its subsidiaries as at 31 December 2013 of
S$9.82 million after adjusting for the capitalisation of the Shareholders Loans and the
Convertible Bonds Settlement Amount.
On 20 June 2014, following the issue and allotment of the Shareholders Loans Shares by
Terratech Resources to TGL, TGL transferred the Existing Shares and the Shareholders
Loans Shares to our Company, and our Company issued and allotted the Consideration
Shares to TGL.
Pursuant to the completion of the Restructuring Agreement, (i) our Company held 100% of the
enlarged issued and paid-up share capital of Terratech Resources of S$24,543,367.50,
comprising 245,433,675 ordinary shares in the capital of Terratech Resources; and (ii) TGL held
100% of the enlarged issued and paid-up share capital of our Company of S$4,300,000,
comprising 430,000,000 ordinary shares of par value S$0.01 each in the share capital of our
Company.
RESTRUCTURING EXERCISE
79
Investment by the Pre-IPO Investors
Terratech Resources had on 23 November 2012 (the Pre-IPO Investment Completion Date)
issued the Convertible Bonds with an aggregate principal amount of S$15,000,000 to the Pre-IPO
Investors (with Luminor Pacific Fund 1 subscribing for Convertible Bonds with an aggregate
principal amount of S$13,000,000 and Kwan Chee Seng subscribing for Convertible Bonds with
an aggregate principal amount of S$2,000,000), subject to the terms and conditions of the
convertible bond agreement dated 16 November 2012 and entered into among Terratech
Resources, TGL, Luminor Capital (the manager of Luminor Pacific Fund 1) and Kwan Chee Seng.
Under the terms of the CBA, the proceeds of the Convertible Bonds were to be utilised in the
following manner:
(a) S$500,000 to fund the costs and expenses to be incurred in connection with the JORC report
on the Kelantan Marble Quarry;
(b) S$4,000,000 to fund the professional costs and expenses to be incurred in connection with
the Listing;
(c) S$1,500,000 to fund the capital expenditure for the Marble Business; and
(d) S$9,000,000 to fund the working capital for the Marble Business.
As at the Latest Practicable Date, all of the proceeds of the Convertible Bonds have been utilised
in the manner as aforesaid.
Interest on the Convertible Bonds
The Convertible Bonds were interest-bearing. Interest had accrued on the Convertible Bonds at
the rate of 4% per annum for the first 12 months from the Pre-IPO Investment Completion Date,
which was paid in cash by Terratech Resources to the Pre-IPO Investors on 24 October 2013, and
at the rate of 8% per annum for the period thereafter up to and including the date of conversion
of the Convertible Bonds on 15 July 2014 (the Conversion Date) of which the accrued interest
for the period from 23 November 2013 up to and including 16 June 2014 was added to the
principal amount of the Convertible Bonds as part of the Conversion Amount (as defined below),
while the remaining accrued interest for the period from 17 June 2014 up to and including the
Conversion Date was paid in cash by Terratech Resources to the Pre-IPO Investors on 15 July
2014.
Conversion of Convertible Bonds
Under the terms of the CBA, the Pre-IPO Investors are entitled to convert the Convertible Bonds
into such number of new Shares (the Conversion Shares), which are equal to the Conversion
Amount (as defined below) divided by an issue price which is equal to 50% of the Placement Price
(the Conversion Price).
PRE-IPO INVESTMENT
80
For purposes of facilitating the conversion of the Convertible Bonds into the Conversion Shares:
(i) the Pre-IPO Investors agreed to convert the entire principal amount of the Convertible Bonds
of S$15,000,000 and the outstanding accrued interest thereon for the period from 23
November 2013 up to and including 16 June 2014 amounting in aggregate to approximately
S$677,260 (the collective amount of S$15,677,260 to be referred to as the Conversion
Amount) into Conversion Shares in accordance with the terms of the CBA; and
(ii) our Company assumed the liability of Terratech Resources to repay or procure a conversion
of the Conversion Amount into the Conversion Shares in accordance with the terms of the
CBA (please refer to the section entitled Restructuring Exercise of this Offer Document for
further details).
On 15 July 2014, our Company issued and allotted 136,324,003
(1)
Conversion Shares to the
Pre-IPO Investors, credited as fully paid up, pursuant to the conversion of the Convertible Bonds.
The number of Conversion Shares issued and allotted to each Pre-IPO Investor was as follows:
Name of Pre-IPO Investor
Number of
Conversion Shares
Luminor Pacific Fund 1 118,147,469
Kwan Chee Seng 18,176,534
Total 136,324,003
Note:
(1) The number of Conversion Shares issued and allotted to the Pre-IPO Investors was calculated by dividing the
Conversion Amount by the Conversion Price.
The Conversion Shares represent approximately 23.85% of the total issued share capital of our
Company prior to the Placement.
PRE-IPO INVESTMENT
81
Our Group structure immediately after the Restructuring Exercise and as at the Latest Practicable
Date is as follows:
Company
(1)
Terratech
Resources
CEP Qingdao Terratech
100%
(2)
100%
(3)
100%
(3)
Notes:
(1) The holding company of our Company as at the Latest Practicable Date is TGL, holding 100% of the issued share
capital of our Company.
(2) Following the completion of the Restructuring Exercise, the total issued share capital of Terratech Resources
comprises the Existing Shares, the Shareholders Loans Shares and the Convertible Bonds Settlement Shares.
(3) Please refer to the table below in the section entitled Group Structure Our Subsidiaries of this Offer Document
for details of the share capital of CEP and registered capital of Qingdao Terratech respectively.
Our Subsidiaries
The details of our subsidiaries are as follows:
Company
Date and Place of
Incorporation
Paid-up and
Issued/Registered
Share Capital
Principal Business
Activities/Principal Place
of Business
% Ownership
Interest held by
our Company
Terratech
Resources
5 July 2007/
Singapore
S$24,543,367.50 Investment holding, sales
and marketing outside of
the PRC/Singapore
100%
CEP 16 March 2006/
Malaysia
RM500,000 Exploration, development
and extraction of marble
and production of marble
products/Malaysia
100%
Qingdao
Terratech
(1)
26 June 2013/
the PRC
US$480,000
(2)
Sales and marketing in
the PRC/the PRC
100%
Notes:
(1) Qingdao Terratech has registered branch offices in Chengdu and Xiamen.
(2) Qingdao Terratech has a total registered capital of US$2,000,000 of which US$480,000 is paid up as at the Latest
Practicable Date.
Save as disclosed above, our Group does not have any subsidiaries or associated companies.
Save as disclosed in this Offer Document, none of our Directors, Substantial Shareholders or their
respective Associates has any interest, whether direct or indirect, in our Group or any of our
subsidiaries and associated companies of our Group.
Our subsidiaries are not listed on any stock exchange.
GROUP STRUCTURE
82
The following summary financial information should be read in conjunction with the full text of this
Offer Document, including the sections entitled Managements Discussion and Analysis of
Results of Operations and Financial Position and the Independent Auditors Report for the Years
Ended 31 March 2011, 2012 and 2013 and the Nine Months ended 31 December 2013 as set out
in Appendix A of this Offer Document.
A summary of the financial information of our Group in respect of FY2011, FY2012, FY2013,
3Q2013 and 3Q2014 is set out below:
Results of operations of our Group
Audited
(S$000) FY2011 FY2012 FY2013 3Q2013 3Q2014
Revenue
Cost of sales
Gross profit
Other income and gains 114 268 32
Selling and distribution expenses (1) (30) (120) (99) (193)
General and administrative
expenses (24) (1,511) (3,021) (2,148) (3,518)
Other expenses, net (871) (5,715)
Finance costs (47) (1,547) (600) (1,255)
Loss before tax
(1)
(25) (1,588) (5,445) (2,579) (10,649)
Income tax expense
Loss for the year/period
attributable to equity holders of
the Company
(1)
(25) (1,588) (5,445) (2,579) (10,649)
Other comprehensive income/(loss)
to be reclassified to profit or loss in
subsequent periods:
Exchange differences on translation
of foreign operations (14) 4 35 64 146
Total comprehensive loss for the
year/period (39) (1,584) (5,410) (2,515) (10,503)
LPS (cents)
(1)(2)
n.m.
(4)
0.28 0.95 0.45 1.86
Adjusted LPS (cents)
(3)
n.m.
(4)
0.26 0.89 0.42 1.73
Notes:
(1) Had the Service Agreements (as set out in the section entitled Service Agreements of this Offer Document) been
in effect since 1 April 2012, our audited combined loss before tax, loss attributable to equity holders of the Company
and adjusted LPS computed based on our post-Placement share capital of 615,042,003 Shares for FY2013 would
have been approximately S$6.02 million, S$6.02 million and 0.98 cents respectively.
(2) For comparative purposes, the LPS for the period under review has been calculated based on the loss attributable
to equity holders of the Company and the pre-Placement share capital of 571,542,003 Shares.
(3) For comparative purposes, the LPS for the period under review has been calculated based on the loss attributable
to equity holders of the Company and the post-Placement share capital of 615,042,003 Shares.
SELECTED COMBINED FINANCIAL INFORMATION
83
Financial Position of Our Group
Audited
(S$000)
As at
31 March 2013
As at
31 December 2013
NON-CURRENT ASSETS
Property, plant and equipment 4,396 5,094
Intangible assets 772 748
Prepayments and deposits 326 976
Total non-current assets 5,494 6,818
CURRENT ASSETS
Inventories 1,200 2,944
Prepayments, deposits and other receivables 154 374
Due from a fellow subsidiary 114
Pledged deposits 191 191
Cash and cash equivalents 9,663 4,045
Total current assets 11,322 7,554
CURRENT LIABILITIES
Trade payables 38 42
Other payables and accruals
(1)
541 898
Derivative financial instruments 4,336 9,968
Interest-bearing bank and other borrowings 652 1,785
Due to the immediate holding company 4,625 4,299
Due to fellow subsidiaries 205 882
Total current liabilities 10,397 17,874
NET CURRENT ASSETS/(LIABILITIES) 925 (10,320)
TOTAL ASSETS LESS CURRENT LIABILITIES 6,419 (3,502)
NON-CURRENT LIABILITIES
Convertible bonds 12,326 13,003
Interest-bearing bank and other borrowings 598 504
Total non-current liabilities 12,924 13,507
Net assets/(liabilities) (6,505) (17,009)
EQUITY
Equity attributable to equity holder of
the Company
Share capital 430 430
Reserves (6,935) (17,439)
Total equity/(net deficiency in assets) (6,505) (17,009)
Note:
(1) Accruals consist of, inter alia, provision of withholding tax of approximately S$0.07 million and S$0.10 million as at
31 March 2013 and 31 December 2013 respectively and provision of withholding tax penalty of S$6,557 and
S$10,174 as at 31 March 2013 and 31 December 2013 respectively.
SELECTED COMBINED FINANCIAL INFORMATION
84
The following discussion of our results of operations and financial position should be read in
conjunction with the Independent Auditors Report for the Years Ended 31 March 2011, 2012 and
2013 and the Nine Months ended 31 December 2013 as set out in Appendix A of this Offer
Document. This discussion contains forward-looking statements that involve risks and
uncertainties. Our actual results may differ significantly from those projected in the forward-
looking statements. Factors that might cause future results to differ significantly from those
projected in the forward-looking statements include, but are not limited to, those discussed below
and elsewhere in this Offer Document, particularly in the section entitled Risk Factors of this
Offer Document. Under no circumstances should the inclusion of such forward-looking statements
herein be regarded as a representation, warranty or prediction with respect to the accuracy of the
underlying assumptions by our Company, the Vendors, the Sponsor and Issue Manager and the
Joint Placement Agents or any other person. Investors are cautioned not to place undue reliance
on these forward-looking statements that speak only as of the date hereof. Please refer to the
section entitled Cautionary Note on Forward-Looking Statements of this Offer Document.
Except as otherwise indicated, the following discussion is based on our audited financial
statements, which have been prepared in accordance with the International Financial Reporting
Standards.
OVERVIEW
Revenue
Our Group is principally engaged in the business of the exploration, development, quarrying,
extraction, removal and processing of marble from the Kelantan Marble Quarry, and the
commercial sale of marble and marble products. Our products are marble blocks, marble slabs,
aggregates and (in due course) calcium carbonate powder. We expect a majority of our revenue
to be derived from the sale of our marble blocks and marble slabs.
Revenue from the sale of our marble products is recognised when ownership is passed to
customers. Our Group generally recognises revenue from the sales of our marble products upon
delivery of our marble products to customers, subject to the terms of payment provided for in the
sales contracts.
Our Group commenced commercial production in March 2012 and recorded its first sale to a
third-party customer in February 2014. Prior to this, our Group focused our business activities on
quarry planning, construction and infrastructure development and building of inventory for sale.
Our revenue is mainly dependent on the following factors:
(a) our ability to continue production on a commercial scale as planned;
(b) the actual quantity of Resources and Reserves available for quarrying;
(c) the consistency in the quality or standard of the marble quarried;
(d) our ability to generate or maintain sales; and
(e) the demand for our products in our main target markets, namely Malaysia and the PRC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL POSITION
85
Please refer to the section entitled Risk Factors of this Offer Document for other factors which
may affect our revenue.
Other income and gains
Other income and gains comprised mainly sample sales, bank interest income, government grants
and fair value gains on the Convertible Bonds. Other income and gains was approximately S$0.11
million, S$0.27 million and S$0.03 million for FY2013, 3Q2013 and 3Q2014 respectively.
Operating expenses
Our operating expenses comprised mainly (i) selling and distribution expenses; (ii) general and
administrative expenses; and (iii) other expenses. Our total operating expenses were
approximately S$0.02 million, S$1.54 million, S$4.01 million, S$2.25 million and S$9.43 million in
FY2011, FY2012, FY2013, 3Q2013 and 3Q2014 respectively.
Selling and distribution expenses
Selling and distribution expenses comprised mainly transportation expenses, export charges,
upkeep of motor vehicles, advertising expenses, marketing staff salaries (including skills
development levy and contributions to the Central Provident Fund) and depreciation of motor
vehicles. Selling and distribution expenses accounted for approximately 4.51%, 1.95%, 2.99%,
4.44% and 2.01% of our total operating expenses in FY2011, FY2012, FY2013, 3Q2013 and
3Q2014 respectively.
General and administrative expenses
General and administrative expenses comprised mainly start up costs, salaries, professional fees,
management fees, depreciation of machineries and equipment and net foreign exchange losses.
General and administrative expenses accounted for 95.49%, 98.05%, 75.31%, 95.56% and
37.33% of our total operating expenses in FY2011, FY2012, FY2013, 3Q2013 and 3Q2014
respectively.
Other expenses
Other expenses comprised mainly of fair value losses on the Convertible Bonds and amounts
written off for damaged machinery and equipment. The Convertible Bonds were issued on 23
November 2012 and hence did not account for any fair value adjustments in FY2011 and FY2012.
Amounts written off for damaged equipment were insignificant in FY2013 and 3Q2013. For
3Q2014, the amount written off was in respect of a one-off occurrence for a particular item of
damaged machinery.
Other expenses accounted for 21.70% and 60.66% of our total operating expenses in FY2013 and
3Q2014 respectively.
86
Finance costs
Finance costs comprised mainly interest costs on the Convertible Bonds, finance leases and bank
overdrafts. Finance costs were S$0.05 million, S$1.55 million, S$0.60 million and S$1.25 million
for FY2012, FY2013, 3Q2013 and 3Q2014 respectively.
RESULTS OF OPERATIONS
Breakdown of our past performance by business division and geographical markets
Our Group focused our business activities on quarry planning, construction and infrastructure
development and building of inventory for sale during the periods under review. No revenue was
generated by our Group during such periods. Accordingly, a segmentation of our financial
performance by business division and geographical regions will not be meaningful.
REVIEW OF PAST PERFORMANCE
FY2012 compared with FY2011
Revenue
No revenue was generated by our Group in FY2011 and FY2012.
Our Group was principally engaged in quarry planning and construction and infrastructure
development in FY2011 and FY2012, and only commenced commercial production in March 2012.
Our group did not generate any significant other income and gains in FY2011 and FY2012.
Operating expenses
Total operating expenses increased by S$1.52 million from S$0.02 million in FY2011 to S$1.54
million in FY2012 as a result of the commencement of quarrying operations by our Group after
TGL acquired Terratech Resources from Tritech International and Chua Eng Pu. The increase was
due to an increase in general and administrative expenses of S$1.49 million and selling and
distribution expenses of S$0.03 million.
The increase in general and administrative expenses of S$1.49 million from S$0.02 million in
FY2011 to S$1.51 million for FY2012 was mainly due to an increase in employee related expenses
such as staff salaries, employment pass and staff welfare costs of S$0.38 million, depreciation
charges on machineries and equipment of S$0.28 million, start-up costs of S$0.24 million,
management fees of S$0.24 million, travel expenses of S$0.03 million, land taxes of S$0.02
million, professional fees of S$0.02 million, provision for withholding tax and tax penalty of S$0.04
million relating to the fees paid to Tritech Qingdao for the secondment of foreign workers and other
expenses (which includes, inter alia, insurance and office expenses) amounting to S$0.24 million.
87
The increase in selling and distribution expenses of S$0.03 million from an insignificant amount
in FY2011 to S$0.03 million in FY2012 was mainly due to an increase in depreciation and
expenses required to upkeep motor vehicles at the Kelantan Marble Quarry of S$0.02 and staff
transport expenses of S$0.01 million.
Finance costs
Finance costs increased to S$0.05 million in FY2012 mainly due to bank overdraft interest of
S$0.02 million and interest on finance leases of S$0.03 million. No finance costs were recorded
in FY2011 as no such bank overdraft or finance leases were taken up by our Group in FY2011.
Loss before tax
Loss before tax increased by approximately S$1.57 million from S$0.02 million in FY2011 to
S$1.59 million in FY2012 in line with the increase in operating expenses of S$1.52 million and the
increase in finance costs of S$0.05 million.
FY2013 compared with FY2012
Revenue
During the financial years ended FY2012 and FY2013, we focused on quarrying planning and
construction and infrastructure development and building of inventory for sale, and we did not
generate revenue from our operations.
Our other income and gains increased by S$0.11 million, from an insignificant amount in FY2012
to S$0.11 million in FY2013. This was mainly due to the sale of marble samples to the PRC.
Operating expenses
Total operating expenses increased by S$2.47 million or 160.39% from S$1.54 million in FY2012
to S$4.01 million in FY2013 as a result of increased activities in the quarrying operations. The
increase was mainly due to the increase in selling and distribution expenses of S$0.09 million,
general and administrative expenses of S$1.51 million and other expenses of S$0.87 million.
The increase in selling and distribution expenses of S$0.09 million from S$0.03 million in FY2012
to S$0.12 million in FY2013 was mainly due to transport expenses of S$0.07 million, and upkeep
of motor vehicles of S$0.02 million.
The increase in general and administrative expenses of S$1.51 million from S$1.51 million in
FY2012 to S$3.02 million in FY2013 was mainly due to (i) one-off professional fees incurred for
the then proposed Hong Kong listing exercise of S$1.09 million; (ii) increase in staff and workers
salaries, employment pass and staff welfare costs of S$0.27 million; (iii) increase in depreciation
on machineries and equipment of S$0.12 million; and (iv) increase in provision for withholding tax
and tax penalty of S$0.03 million relating to the fees paid to Tritech Qingdao for the secondment
of foreign workers.
88
The increase in other expenses of S$0.87 million was mainly due to the fair value loss of the
Convertible Bonds of S$0.87 million.
Finance costs
Finance costs increased by S$1.50 million from S$0.05 million in FY2012 to S$1.55 million in
FY2013 mainly due to interest on the Convertible Bonds issued on 23 November 2012 of S$1.43
million and an increase in interest on the finance leases and bank overdraft of S$0.07 million
arising from additional finance leases and bank overdrafts taken up by our Group in FY2013.
Loss before tax
Loss before tax increased by approximately S$3.86 million or approximately 242.77% from S$1.59
million in FY2012 to S$5.45 million in FY2013 as a result of the increase in operating expenses
of approximately S$2.47 million and the increase in finance costs of approximately S$1.50 million,
offset by a slight increase in other income and gains of S$0.11 million.
3Q2014 compared with 3Q2013
Revenue
No revenue was generated by our Group in 3Q2014 and 3Q2013. Our Group was principally
focused on quarry planning and construction and infrastructure development and building of
inventory for sale.
Our other income and gains decreased by S$0.24 million or approximately 88.89%, from S$0.27
million in 3Q2013 to S$0.03 million in 3Q2014. This was mainly due to (i) a fair value gain on
derivative financial instrument of S$0.16 million in 3Q2013; and (ii) the repurchase of marble
blocks of S$0.11 million from Beijing Wisetec by our Group pursuant to the repurchase contract
effective 31 December 2013 between Terratech Resources, CEP, Qingdao Terratech and Beijing
Wisetec. The marble blocks had been placed with Beijing Wisetec for the purpose of enabling
Beijing Wisetec to secure sales of such marble blocks to customers in the PRC. As no sales to
third parties were subsequently made by Beijing Wisetec and following the incorporation of
Qingdao Terratech (pursuant to which our Group is able to undertake sales and marketing of our
products directly), the parties have entered into a repurchase contract for Qingdao Terratech to
repurchase the marble blocks from Beijing Wisetec at the same costs at which they were sold to
Beijing Wisetec, with such date of repurchase being effective as of 31 December 2013. This was
offset by one-off non-recurring income of S$0.03 million in 3Q2014.
Operating expenses
Total operating expenses increased by S$7.18 million or approximately 319.11% from S$2.25
million in 3Q2013 to S$9.43 million in 3Q2014. The increase arose as a result of an increase in
selling and distribution expenses of S$0.09 million, general and administrative expenses of
S$1.37 million and other expenses of S$5.72 million.
89
The increase in selling and distribution expenses of S$0.09 million was mainly due to transport
and export charges of S$0.08 million and upkeep of motor vehicles and depreciation of motor
vehicles of S$0.01 million.
The increase in general and administrative expenses of S$1.37 million was mainly due to one-off
professional fees incurred for the then proposed Hong Kong listing exercise of S$0.38 million,
increase in foreign exchange loss of S$0.15 million, increase in depreciation, repair and
maintenance of machineries and equipment of S$0.14 million, increase in management fee of
S$0.19 million, increase in travelling expenses of S$0.16 million, increase in salaries, staff welfare
and employment pass related cost of S$0.07 million, increase in provision of withholding tax and
tax penalty of S$0.06 million and other expenses (which includes, inter alia, office-related
expenses and entertainment expenses) amounting to S$0.22 million.
The increase of S$5.72 million in other expenses was mainly due to fair value loss of the
Convertible Bonds of S$5.64 million and amounts written off for a particular item of damaged
machinery of S$0.08 million.
Finance costs
Finance costs increased by S$0.65 million or approximately 108.33% from S$0.60 million in
3Q2013 to S$1.25 million in 3Q2014 mainly due to interest expenses on the Convertible Bonds of
S$0.68 million and is slightly offset by a decrease in interest on bank overdrafts of S$0.03 million.
Loss before tax
Loss before tax increased by approximately S$8.07 million from S$2.58 million in 3Q2013 to
S$10.65 million in 3Q2014 as a result of the increase in operating expenses of approximately
S$7.18 million, the increase in finance costs of approximately S$0.65 million and the decrease in
other income and gains of approximately S$0.24 million.
REVIEW OF FINANCIAL POSITION
As at 31 March 2013
Non-current assets
As at 31 March 2013, our non-current assets of approximately S$5.49 million accounted for
approximately 32.66% of our total assets. Our non-current assets comprised mainly of the
following:
(a) Property, plant and equipment of approximately S$4.39 million constituted 79.96% of our
total non-current assets. This comprised of plant and machinery, furniture, fixtures and
equipment, motor vehicles, quarrying infrastructure and construction in progress of the
aggregates processing facility;
(b) Intangible assets which comprised of our quarrying rights to our Kelantan Marble Quarry of
approximately S$0.77 million or approximately 14.03% of our total non-current assets; and
90
(c) Prepayments and deposits of approximately S$0.33 million constituted 6.01% of our total
non-current assets. This comprised of deposits paid for the purchase of machinery and
equipment and a plot of land situated at PN5329, Lot 5497, Bandar Gua Musang, Jajahan
Gua Musang, Kelantan of S$0.29 million and S$0.04 million respectively.
Current assets
As at 31 March 2013, our current assets of approximately S$11.32 million accounted for
approximately 67.34% of our total assets. Our current assets comprised mainly of the following:
(a) Inventories comprising of marble blocks which accounted for approximately S$1.20 million or
10.60% of our total current assets;
(b) Prepayments, deposits and other receivables of approximately S$0.16 million constituting
approximately 1.41% of our total current assets;
(c) Amount due from a fellow subsidiary of approximately S$0.11 million constituting 0.97% of
our total current assets. The amount was in relation to marble blocks that had been
previously placed with Beijing Wisetec for the purpose of enabling Beijing Wisetec to secure
sales of such marble blocks to customers in the PRC. As no sales to third parties were
subsequently made by Beijing Wisetec and following the incorporation of Qingdao Terratech
(pursuant to which our Group is able to undertake sales and marketing of our products
directly), the parties have entered into a supplemental agreement whereby our subsidiary
Qingdao Terratech had repurchased the marble blocks from Beijing Wisetec at the same
costs at which they were sold to Beijing Wisetec, with such date of repurchase being effective
as of 31 December 2013, and such repurchase amount became an amount owing by
Qingdao Terratech to CEP and Terratech Resources;
(d) Pledged deposits of approximately S$0.19 million, accounting for approximately 1.68% of
our total current assets; and
(e) Cash and cash equivalents of approximately S$9.66 million, which accounted for
approximately 85.34% of our total current assets.
Current liabilities
As at 31 March 2013, our current liabilities of approximately S$10.40 million, which accounted for
approximately 44.60% of our total liabilities. Our current liabilities comprised mainly of the
following:
(a) Derivative financial instruments
(1)
of approximately S$4.34 million, constituting 41.73% of
our total current liabilities;
(b) Trade and other payables and accruals amounting to approximately S$0.58 million or 5.58%
of our total current liabilities of which S$0.54 million relates to accrued interest on
Convertible Bonds and other accruals while S$0.04 million relates to trade payables;
91
(c) Amounts due to TGL and fellow subsidiaries of approximately S$4.83 million, constituting
46.44% of our total current liabilities; and
(d) Interest-bearing bank borrowings of approximately S$0.65 million which represented
approximately 6.25% of our total current liabilities.
Note:
(1) Derivative financial instruments relates solely to the convertible option embedded in the Convertible Bonds. The fair
value of the embedded derivate is the residual amount after computation of fair value of the host contract.
Non-current liabilities
As at 31 March 2013, our non-current liabilities of approximately S$12.92 million accounted for
approximately 55.40% of our total liabilities. Our non-current liabilities comprised mainly of the
following:
(a) Convertible Bonds
(1)
of approximately S$12.32 million constituted 95.36% of our total
non-current liabilities; and
(b) Interest-bearing bank borrowings of approximately S$0.60 million, accounting for 4.64% of
our total non-current liabilities.
Note:
(1) Based on the terms and conditions of the Convertible Bonds, it is a hybrid instrument. This hybrid instrument is
separated into two (2) components, being financial liability and embedded derivative. The fair value of the liability
component is included in non-current liabilities. The residual amount representing the value of the derivative
financial instrument, is included in the current liabilities.
Equity attributable to equity holder of the Company
As at 31 March 2013, we were in a net liabilities position of S$6.51 million comprising mainly
S$0.43 million of issued share capital and S$0.03 million of foreign currency translation reserves
and deemed contribution from the issue of Convertible Bonds of S$0.09 million which was offset
by S$7.06 million of accumulated losses.
As at 31 December 2013
Non-current assets
As at 31 December 2013, our non-current assets of approximately S$6.82 million accounted for
approximately 47.46% of our total assets. Our non-current assets comprised mainly of the
following:
(a) Property, plant and equipment of approximately S$5.09 million, which constituted 74.63% of
our total non-current assets. This comprised of plant and machinery, furniture, fixtures and
equipment, motor vehicles, quarrying infrastructure and construction in progress of
aggregates and marble slab processing facilities;
92
(b) Intangible assets which comprise of our quarrying rights for our Kelantan Marble Quarry of
approximately S$0.75 million or 11.00% of our total non-current assets; and
(c) Prepayments and deposits amounted to approximately S$0.98 million, accounting for
14.37% of our total non-current assets. This comprised of deposits paid for the purchase of
machinery and equipment of S$0.58 million and amounts paid for a plot of land situated at
PN5329, Lot 5497, Bandar Gua Musang, Jajahan Gua Musang, Kelantan of S$0.40 million.
Current assets
As at 31 December 2013, our current assets of approximately S$7.55 million accounted for
approximately 52.54% of our total assets. Our current assets comprised mainly of the following:
(a) Inventories which comprised of marble blocks amounting to approximately S$2.94 million,
which accounted for 38.94% of our total current assets;
(b) Prepayments, deposits and other receivables of approximately S$0.37 million constituting
approximately 4.90% of our total current assets;
(c) Pledged deposits of approximately S$0.19 million, accounting for approximately 2.52% of
our total current assets; and
(d) Cash and cash equivalents of approximately S$4.05 million which accounted for
approximately 53.64% of our total current assets.
Current liabilities
As at 31 December 2013, our current liabilities of approximately S$17.87 million accounted for
approximately 56.95% of our total liabilities. Our current liabilities comprised mainly of the
following:
(a) Derivative financial instruments
(1)
of approximately S$9.96 million constituted 55.74% of our
total current liabilities;
(b) Trade and other payables and accruals amounting to approximately S$0.94 million or 5.26%
of our total current liabilities of which S$0.90 million relates to accrued interest on
Convertible Bonds and other accruals while S$0.04 million relates to trade payables;
(c) Amount due to TGL and fellow subsidiaries of approximately S$5.18 million, constituting
28.99% of our total current liabilities; and
(d) Interest bearing bank borrowings of approximately S$1.79 million which represented
approximately 10.01% of our total current liabilities.
Note:
(1) Derivative financial instruments relates to the convertible option embedded in the Convertible Bonds. The fair value
of the embedded derivate is the residual amount after computation of fair value of the host contract.
93
Non-current liabilities
As at 31 December 2013, our non-current liabilities of approximately S$13.51 million accounted
for approximately 43.05% of our total liabilities. Our non-current liabilities comprised mainly of the
following:
(c) Convertible Bonds
(1)
of approximately S$13.01 million constituted 96.30% of our total
non-current liabilities; and
(d) Interest bearing bank borrowings amounting to approximately S$0.50 million or 3.70% of our
total non-current liabilities.
Note:
(1) Based on the terms and conditions of the Convertible Bonds, it is a hybrid instrument. This hybrid instrument is
separated into two (2) components, being financial liability and embedded derivative. The fair value of the liability
component is included in non-current liabilities. The residual amount representing the value of the derivative
financial instrument, is included in the current liabilities.
Equity attributable to equity holder of the Company
As at 31 December 2013, we were in a net liabilities position of S$17.01 million comprising mainly
S$0.43 million of issued share capital and S$0.17 million of foreign currency translation reserve
and deemed contribution from the issue of Convertible Bonds of S$0.09 million which was offset
by S$17.70 million of accumulated losses.
LIQUIDITY AND CAPITAL RESOURCES
As at the Latest Practicable Date, our Group financed our operations through both internal and
external sources. Internal sources of funds comprise cash generated by capital investment from
Shareholders. External sources of funds comprise mainly borrowings from financial institutions,
proceeds arising from the Convertible Bonds and credit granted by suppliers. The principal uses
of these cash sources are to finance purchases of consumable materials, capital expenditure and
operating expenses such as rental of equipment and office premises, payroll and administrative
expenses.
94
The following table sets out a summary of our Groups cash flows for FY2011, FY2012, FY2013,
3Q2013 and 3Q2014.
(S$000) FY2011 FY2012 FY2013 3Q2013 3Q2014
Net cash from/(used in) operating
activities (94) 2,084 (2,674) (1,778) (5,025)
Net cash (used in) investing
activities (151) (1,805) (1,289) (498) (616)
Net cash from/(used in) financing
activities 229 (145) 13,396 13,553 (1,186)
Net increase/(decrease) in cash
and cash equivalents (16) 134 9,433 11,277 (6,827)
Cash and cash equivalents at the
beginning of the period 47 27 173 173 9,663
Net effect of foreign exchange rate
changes (4) 12 57 95 179
Cash and cash equivalents at the
end of the period 27 173 9,663 11,545 3,015
FY2011
In FY2011, we recorded a net cash flow used in operating activities of S$0.09 million, which was
a result of operating loss before changes in working capital of S$0.02 million, adjusted for net
working capital outflows of S$0.07 million. The working capital outflows were due to the following:
(a) Cash outflow for prepayments, deposits and other receivables of S$0.02 million; and
(b) Cash outflow for payment to other payables and accruals of S$0.08 million.
The above working capital outflows were partially offset by cash inflows from TGL and fellow
subsidiaries of S$0.03 million.
Net cash used in investing activities amounted to S$0.15 million, which was attributable to
increased exploration and evaluation assets.
Net cash inflow from financing activities amounted to S$0.23 million, which was due to an increase
in amounts due to Tritech International.
As at 31 March 2011, our cash and cash equivalents were S$0.03 million.
FY2012
In FY2012, we recorded a net cash inflow from operating activities of S$2.08 million, which was
a result of operating loss before changes in working capital of S$1.22 million, adjusted for net
working capital inflows of S$3.35 million and net interest paid of S$0.05 million. The net working
capital inflows were due to the following:
95
(a) Cash inflow from TGL and fellow subsidiaries of S$3.34 million; and
(b) Increase in trade and other payables and accruals of S$0.11 million.
The above working capital inflows were partially offset by cash outflows for prepayments, deposits
and other receivables of S$0.10 million.
Net cash used in investing activities amounted to S$1.80 million, which was attributable to (i)
purchase of property, plant and equipment of S$1.67 million; and (ii) increase in pledged deposits
of S$0.13 million.
Net cash used in financing activities amounted to S$0.15 million, which was due to repayment of
finance lease obligations.
Net cash inflow from foreign exchange rate changes was S$0.01 million.
FY2013
In FY2013, we recorded net cash used in operating activities of S$2.67 million, which was a result
of operating loss before changes in working capital of S$2.59 million, adjusted for working capital
inflows of S$0.03 million and net interest paid of S$0.11 million. The net working capital inflows
were due to the following:
(a) Net cash inflows from TGL of S$1.99 million; and
(b) Increase in trade and other payables and accrual of S$0.23 million.
The above working capital inflows were partially offset by:
(a) Cash outflow from an increase in inventories of S$1.20 million;
(b) Cash outflow for prepayments, deposits and other receivables of S$0.35 million; and
(c) Net cash outflows to fellow subsidiaries of S$0.64 million.
of S$0.05 million.
Net cash from financing activities amounted to S$13.40 million, which was due to proceeds from
the issue of Convertible Bonds of S$14.66 million partially offset by cash outflows due to
repayment of finance lease obligations of S$0.56 million and payments to Tritech International of
S$0.70 million.
96
3Q2013
In 3Q2013, we recorded net cash used in operating activities of S$1.78 million, which was a result
of operating loss before changes in working capital of S$1.84 million, adjusted for net working
capital inflows of S$0.15 million and net interest paid of S$0.09 million. The net working capital
inflows were due to the following:
(a) Cash inflows from TGL of S$2.41 million; and
(b) Increase in trade and other payables and accruals of S$0.13 million.
The above working capital inflows were partially offset by:
(c) Net cash outflows to fellow subsidiaries of S$0.84 million.
of S$0.05 million.
Net cash flow from financing activities amounted to S$13.56 million, which was due to proceeds
from the issue of Convertible Bonds of S$14.66 million partially offset by cash outflow due to
repayment of finance lease obligations of S$0.40 million and payment to Tritech International of
S$0.70 million.
As at 31 December 2012, our cash and cash equivalents were S$11.55 million.
3Q2014
In 3Q2014, we recorded a net cash used in operating activities of S$5.02 million, which was a
result of operating loss before changes in working capital of S$3.28 million, adjusted for working
capital outflows of S$1.68 million and net interest paid of S$0.06 million. The net working capital
outflows were due to the following:
(c) Net cash outflows to TGL of S$0.32 million.
The above working capital outflows were partially offset by:
(a) Increase in trade and other payables and accruals of S$0.45 million; and
(b) Net cash inflows from fellow subsidiaries of S$0.81 million.
97
Net cash used in investing activities amounted to S$0.62 million, which was mainly attributable to
purchase of property, plant and equipment of S$0.62 million.
Net cash outflow from financing activities amounted to S$1.19 million, which was due to interest
paid on Convertible Bonds of S$0.60 million and repayment of finance lease obligations of S$0.59
million.
As at 31 December 2013, our cash and cash equivalents were S$3.01 million.
CAPITAL EXPENDITURE AND DIVESTMENTS
The capital expenditures and divestments made by our Group in FY2011, FY2012, FY2013,
3Q2013 and 3Q2014 and for the period from 1 January 2014 up to the Latest Practicable Date
were as follows:
(S$000) FY2011 FY2012 FY2013 3Q2014
From
1 January 2014
to the Latest
Practicable
Date
Expenditures
Quarry development
expenditure 2 48
Plant and machinery 2,663 1,240 891 550
Furniture, fixtures and
equipment 36 29 12 64
Motor vehicle 62 41 2 10
Construction in progress 314 471 305 66
Total 3,077 1,781 1,210 738
98
The above capital expenditures were primarily financed by internal and external sources. Internal
sources of funds comprise cash generated by capital investment and advances from Shareholders
and external sources of funds comprise mainly borrowings from financial institutions and proceeds
arising from the Convertible Bonds and credit granted by suppliers.
FOREIGN EXCHANGE MANAGEMENT
Accounting Treatment of Foreign Currencies
Our combined financial statements are presented in S$, which is the Companys functional and
presentation currency. Each entity in the Group determines its own functional currency and items
included in the financial statements of each entity are measured using that functional currency.
Foreign currency transactions recorded by the entities in the Group are initially recorded using
their respective functional currency rates prevailing at the dates of the transactions.
Monetary assets and liabilities denominated in foreign currencies are translated at the functional
currency rates of exchange ruling at the end of the reporting period. Differences arising on
settlement or translation of monetary items are recognised in the statements of profit or loss.
Non-monetary items that are measured in terms of historical cost in a foreign currency are
translated using the exchange rates at the dates of the initial transactions. Non-monetary items
measured at fair value in a foreign currency are translated using the exchange rates at the date
when the fair value was measured.
The functional currencies of certain overseas subsidiaries are currencies other than S$. As at the
end of the reporting period, the assets and liabilities of these entities are translated into the
presentation currency of the Company at the exchange rates prevailing at the end of the reporting
period and their statements of profit or loss are translated into S$ at the weighted average
exchange rates for the year.
The resulting exchange differences are recognised in other comprehensive income and
accumulated in the foreign currency translation reserve. On disposal of a foreign operation, the
component of other comprehensive income relating to that particular foreign operation is
recognised in the statements of profit or loss.
Any goodwill arising on the acquisition of a foreign operation and any fair value adjustments to the
carrying amounts of assets and liabilities arising on acquisition are treated as assets and liabilities
of the foreign operation and translated at the closing rate.
For the purpose of the combined statements of cash flows, the cash flows of overseas subsidiaries
are translated into S$ at the exchange rates ruling at the dates of the cash flows. Frequently
recurring cash flows of overseas subsidiaries which arise throughout the year are translated into
S$ at the weighted average exchange rates for the year.
Foreign Exchange Exposure
No revenue was generated by our Group for the periods under review and accordingly there was
no foreign exchange exposure for our revenue and cost of sales.
99
The proportions of expenses denominated in S$ and foreign currencies are as follows:
Percentage of expenses
denominated in
FY2011
(%)
FY2012
(%)
FY2013
(%)
3Q2013
(%)
3Q2014
(%)
US$ 1.07 1.76 0.56
RMB 15.04 8.56 16.98 8.87
HK$ 8.46 8.21
RM 49.81 42.83 12.56 21.33 3.78
S$ 50.19 42.13 69.35 59.93 78.58
100.00 100.00 100.00 100.00 100.00
To the extent that our purchases and expenses are not naturally matched in the same currency
and to the extent that there are timing differences between invoicing and payment, we will be
exposed to adverse fluctuations of the various currencies against the S$, which will adversely
affect our earnings.
Our net foreign exchange exposure for FY2011, FY2012, FY2013, 3Q2013 and 3Q2014 were as
follows:
(S$000) FY2011 FY2012 FY2013 3Q2013 3Q2014
Net foreign exchange
gain/(loss) (S$) (22) (96) (128) (277)
As a percentage of revenue (%) N.A. N.A. N.A. N.A. N.A.
As a percentage of profit before
tax (%) n.m.
(1)
n.m. n.m. n.m. n.m.
As a percentage of total
expenses (%) 1.41 1.72 4.48 2.60
Note:
We do not currently have a formal hedging policy although we may, subject to the approval of our
Board, enter into relevant transactions when necessary, to hedge our exposure to foreign currency
fluctuations. We will also put in place, where necessary, procedures to hedge our exposure to
foreign currency fluctuations. Such procedures will be reviewed and approved by our Audit
Committee and our Board.
100
SIGNIFICANT ACCOUNTING POLICY CHANGES
Our Group has not applied the following new and revised IFRS, that have been issued but are not
yet effective, in these financial statements:
IFRS 9 Financial Instruments
(3)
IFRS 9, IFRS 7 and IAS 39 Amendments Hedge Accounting and amendments to IFRS 9,
IFRS 7 and IAS 39
(3)
IFRS 10, IFRS 12 and IAS 27 (Revised)
Amendments
Amendments to IFRS 10, IFRS 12 and IAS 27
(Revised) Investment Entities
(1)
IFRS 11 Amendments Amendments to IFRS 11 Joint Arrangements
Accounting for Acquisitions of Interests in Joint
Operations
(4)
IFRS 14 Regulatory Deferral Accounts
(4)
IFRS 15 Revenue from Contracts with Customers
(5)
IAS 16 and IAS 38 Amendments Amendments to IAS 16 and IAS 38 Clarification
of Acceptable Methods of Depreciation and
Amortisation
(4)
IAS 19 Amendments Amendments to IAS 19 Employee Benefits
Defined Benefit Plans: Employee Contributions
(2)
IAS 32 Amendments Amendments to IAS 32 Financial Instruments:
Presentation Offsetting Financial Assets and
Financial Liabilities
(1)
IAS 36 Amendments Amendments to IAS 36 Impairment of Assets
Recoverable Amount Disclosures for
Non-Financial Assets
(1)
Recognition and Measurement Novation of
Derivatives and Continuation of Hedge
Accounting
(1)
IFRIC 21 Levies
(1)
Annual Improvements 2010-2012 Cycle Amendments to a number of IFRSs issued in
January 2014
(2)
Annual Improvements 2011-2013 Cycle Amendments to a number of IFRSs issued in
January 2014
(2)
Notes:
(1) Effective for annual periods beginning on or after 1 January 2014
(2) Effective for annual periods beginning on or after 1 July 2014
(3) No mandatory effective date yet determined but is available for adoption
(4) Effective for periods beginning on or after 1 January 2016
(5) Effective for periods beginning on or after 1 January 2017
101
Further information on the IFRS that are expected to be applicable to our Group is as follows:
IFRS 9 issued in November 2009 is the first part of phase 1 of a comprehensive project to entirely
replace IAS 39 Financial Instruments: Recognition and Measurement. This phase focuses on the
classification and measurement of financial assets. Instead of classifying financial assets into four
categories, an entity shall classify financial assets as subsequently measured at either amortised
cost or fair value, on the basis of both the entitys business model for managing the financial
assets and the contractual cash flow characteristics of the financial assets. This aims to improve
and simplify the approach for the classification and measurement of financial assets compared
with the requirements of IAS 39.
In October 2010, the IASB issued additions to IFRS 9 to address financial liabilities (the
Additions) and incorporated in IFRS 9 the current derecognition principles of financial
instruments of IAS 39. Most of the Additions were carried forward unchanged from IAS 39, while
changes were made to the measurement of financial liabilities designated as at fair value through
profit or loss using the fair value option (FVO). For these FVO liabilities, the amount of change
in the fair value of a liability that is attributable to changes in credit risk must be presented in other
comprehensive income (OCI). The remainder of the change in fair value is presented in profit or
loss, unless presentation of the fair value change in respect of the liabilitys credit risk in OCI
would create or enlarge an accounting mismatch in profit or loss. However, loan commitments and
financial guarantee contracts which have been designated under the FVO are scoped out of the
Additions.
IAS 39 is aimed to be replaced by IFRS 9 in its entirety. Before this entire replacement, the
guidance in IAS 39 on impairment of financial assets continues to apply. The previous mandatory
effective date of IFRS 9 was removed by the IASB in November 2013 and a mandatory effective
date will be determined after the entire replacement of IAS 39 is completed. However, the
standard is available for application now. The Group will quantify the effect in conjunction with
other phases, when the final standard including all phases is issued.
The amendments to IFRS 9 relax the requirements for assessing hedge effectiveness which result
in more risk management strategies being eligible for hedge accounting. The amendments also
allow greater flexibility on the hedged items and relax the rules on using purchased options and
non-derivative financial instruments as hedging instruments. In addition, the amendments to IFRS
9 allow an entity to apply only the improved accounting for own credit risk-related fair value gains
and losses arising on FVO liabilities as introduced in 2010 without applying the other IFRS 9
requirements at the same time.
The IAS 32 Amendments clarify the meaning of currently has a legally enforceable right to set off
for offsetting financial assets and financial liabilities. The amendments also clarify the application
of the offsetting criteria in IAS 32 to settlement systems (such as central clearing house systems)
which apply gross settlement mechanisms that are not simultaneous. The amendments are not
expected to have any impact on the financial position or performance of the Group upon adoption
on 1 January 2014.
IAS 16 and IAS 38 both establish the principle for the basis of depreciation and amortisation as
being the expected pattern of consumption of the future economic benefits of an asset. The
amendments clarify that the use of revenue-based methods to calculate the depreciation of an
asset is not appropriate because revenue generated by an activity that includes the use of an
asset generally reflects factors other than the consumption of the economic benefits embodied in
the asset. The amendments also clarify that revenue is generally presumed to be an inappropriate
basis for measuring the consumption of the economic benefits embodied in an intangible asset.
This presumption, however, can be rebutted in certain limited circumstances.
102
The following discussion on our Groups marble exploration and quarrying activities should be
read in conjunction with the Qualified Persons Report as set out in Appendix E of this Offer
Document.
HISTORY
Overview
Our Company was incorporated in the Cayman Islands as an exempted company with limited
liability on 15 March 2013. We operate our Marble Business through Terratech Resources, a direct
wholly-owned subsidiary, and CEP and Qingdao Terratech, both being wholly-owned subsidiaries
of Terratech Resources.
CEP, a company incorporated in Malaysia, holds the quarrying rights to and operates the Kelantan
Marble Quarry. Qingdao Terratech, a company incorporated in the PRC, is engaged in the sales
and marketing of our products in the PRC while CEP and Terratech Resources, a company
incorporated in Singapore, conduct the sales and marketing in Malaysia and other markets.
Please refer to the section entitled Group Structure of this Offer Document for further details of
our corporate structure.
The Commencement of our Marble Business
We obtained our quarrying rights in respect of the Kelantan Marble Quarry pursuant to the
Kelstone Agreement that was entered into in September 2007 between CEP and Kelstone.
Pursuant to the Kelstone Agreement, CEP was granted the right to possess the Kelantan Marble
Quarry for a term of 33 years from the date of registration of the Sub-Lease (as mentioned below)
with exclusive rights to explore, develop, quarry, extract, remove and sell marble and/or other
stones for commercial sale or consumption, and Kelstone agreed to arrange for KSEDC (the
holder of the state lease for a period of 50 years expiring on 20 March 2057 in respect of the
Kelantan Marble Quarry) to grant CEP the Sub-Lease in respect of the Kelantan Marble Quarry,
subject to the terms and conditions of the Kelstone Agreement.
The Sub-Lease was duly registered on 27 January 2011, and hence CEPs rights to the Kelantan
Marble Quarry would be for the period up to 26 January 2044, being the Sub-Lease Term.
Although CEP, which was incorporated in 2006, was originally wholly owned by Chua Eng Pu, Dr
Wang Xiaoning, our non-executive Chairman, was closely involved in the acquisition of the
quarrying rights to the Kelantan Marble Quarry. In 2009, Chua Eng Pu transferred all of his shares
in CEP to Terratech Resources in exchange for shares in Terratech Resources and became a
shareholder of Terratech Resources (owning 7% of Terratech Resources) together with Tritech
International, an investment holding company owned by, inter alia, Dr Wang Xiaoning and Dr Loh
Chang Kaan, our CEO and Executive Director.
Acquisition of Terratech Resources by TGL
On 31 December 2010, TGL entered into a sale and purchase agreement with Tritech International
and Chua Eng Pu (together the Sellers), as supplemented by a supplemental letter dated
16 February 2011, pursuant to which TGL acquired 100% of the issued and paid up capital of
Terratech Resources (the Acquisition). At the time of the Acquisition, Tritech International and
Chua Eng Pu owned 93% and 7% equity interests in Terratech Resources respectively.
GENERAL INFORMATION ON OUR COMPANY AND OUR GROUP
103
The consideration for the Acquisition was RM23,220,000 which was determined based on 60% of
the value of the Marble Business as determined by the then independent valuer and was satisfied
by the allotment and issuance of certain new shares in the capital of TGL to the Sellers in their
respective shareholding proportions. The Acquisition was completed in March 2011. In connection
with the Acquisition, TGL also agreed on a profit incentive arrangement (the Profit Incentive
Arrangement) with the Sellers whereby the Sellers would be paid an additional amount of up to
20% of the value of the Marble Business by TGL, to be satisfied through the allotment and
issuance of additional shares in the capital of TGL,should Terratech Resources achieve certain
targets or milestones for its audited consolidated net profit after tax in respect of the financial
years ended 31 March 2012 and 31 March 2013. However, as the aforesaid targets and
milestones were not achieved, no additional shares were allotted and issued to the Sellers
pursuant to the Profit Incentive Arrangement.
Development of the Marble Business
The Marble Business had been undergoing an exploration and development phase which, as at
the Latest Practicable Date, has been substantially completed, and we have now commenced
commercial production and/or sales of our marble blocks and slabs, although as at the Latest
Practicable Date, commercial operation of our marble slab processing facility and aggregate
processing facility are still pending relevant approvals and licences, further details of which are set
out in the section entitled Licences, Permits and Approvals Licences, Permits and Approvals
Pending Applications or Approvals of this Offer Document.
During the exploration and development stage, we had undertaken, inter alia, the following
activities:
Undertaking of land and geological surveys, feasibility studies, environmental assessments
and preparation of relevant reports in connection therewith, including environmental
assessment reports, environmental management plans, quarry scheme reports and
valuation reports
Obtaining of the necessary licences and approvals required to commence quarrying at the
Kelantan Marble Quarry
Clearing of vegetation and building of access roads to hill 2B and hill 3
Selective blasting to level out the ground to form working platforms at hills 2B and 3 (this is
required in order to prepare the site for the installation of the cutting machines and
equipment required for the extraction of marble)
Building of site offices and workers accommodation on-site
Building of plant(s) or structure(s) to house our marble slab processing facility and our
aggregates processing facility
Production of marble blocks commenced in March 2012 with the excavation of layers of the marble
from hill 3, and production of marble blocks from working platforms commenced at hill 2B in July
2013. The clearance and development of working platforms on the remaining hills 2A and 1, which
are the bigger two (2) of the four (4) hills at the Kelantan Marble Quarry, has commenced, with
some limited production expected to start in late 2014.
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We entered into an agreement with KSEDC on 26 March 2013 to acquire an additional piece of
land, the Gua Musang Property, which is located at an industrial park in Gua Musang, the nearest
town to our Kelantan Marble Quarry. Our intention is to build our calcium carbonate powder
processing facilities there in due course. Please refer to the sections entitled Properties and
Fixed Assets and Business Strategies and Future Plans of this Offer Document.
Sales and Marketing
We recorded our first sales of our products, comprising marble slabs, to third-party customers in
February 2014, and as at the Latest Practicable Date, we have committed orders for our products
of approximately S$23.46 million.
Prior to the incorporation of Qingdao Terratech in June 2013, sales and marketing of our products
in the PRC was carried out through Beijing Wisetec, a subsidiary of our Controlling Shareholder
TGL, but this arrangement has ceased following the incorporation of Qingdao Terratech.
BUSINESS OVERVIEW
We are a company operating in the natural resources sector, and are principally engaged in the
business of the exploration, development, quarrying, extraction, removal and processing of
marble from the Kelantan Marble Quarry, and the commercial sale of marble and marble products.
Our products include premium-quality marble blocks, marble slabs, aggregates and (in due
course) calcium carbonate powder. Our marble blocks and slabs are used mainly in the building
and construction industry, as materials for cladding or decorative surfaces, for arts and
decoration, marble furniture and other marble articles. Our aggregates have a number of potential
uses including in construction and as a raw material for the manufacture of calcium carbonate
powder. Calcium carbonate powder is produced from marble aggregates of a certain high
purity-level quality, and has wide industrial applications and is also used in the construction
industry.
We have commenced commercial production and/or sales of marble blocks and marble slabs from
two (2) of the hills at our Kelantan Marble Quarry. We have set-up a marble slab processing facility
and a crushing and screening facility to produce aggregates from marble pieces, which will be
ready to commence operations once we obtain the relevant approvals and licences required in
connection therewith. Our marble slab processing facility will allow us to cut and process our
dimension stone blocks into standard-size and custom-sized slabs from non-standard sized
blocks ourselves, while our aggregates processing facility will allow us to produce aggregates
from the marble pieces from our Kelantan Marble Quarry which are not suitable to be sold as
blocks or slabs, such as broken blocks and loose fragments. Our marble slab processing facility
and aggregates processing facility are located on-site at our Kelantan Marble Quarry and are in
close proximity to well-developed transportation networks, enabling us to deliver our products to
our customers in a timely and cost-efficient manner via roads, railways and ports.
We also intend to become a manufacturer of calcium carbonate powder in due course. We have
entered into an agreement to acquire a piece of land in Gua Musang and we have plans to
construct a small-scale calcium carbonate powder processing facility there, with the construction
of a larger-scale facility to follow thereafter if the market response to our calcium carbonate
powder products is positive.
105
As further elaborated in the section entitled Competitive Strengths of this Offer Document, we
are well-positioned to capture the business opportunities arising from the growth of the marble
market. Our overall strategic objective is to exploit our competitive strengths to become a leading
producer of marble blocks and slabs, aggregates and (in due course) calcium carbonate powder.
KELANTAN MARBLE QUARRY
The Kelantan Marble Quarry is located approximately two (2) km from a paved road along a
well-maintained off-road gravel track. The paved road provides access to the town of Gua Musang
approximately 22 km to the south. Gua Musang is a major town in the state of Kelantan on the east
side of Peninsular Malaysia, approximately 348 km by travelling distance from Kuala Lumpur, the
capital city of Malaysia and approximately 169 km away from Ipoh City, the capital of Perak State.
The port city of Kelantan, Tok Bali, is approximately 120 km from Gua Musang, and from Gua
Musang there is a well-established network of roads and railways. To transport our products to our
customers, we use ports in Pasir Gudang (in Johor state), Kuantan (in Pahang state) and Klang
(in Selangor state), which are easily accessible by road and/or rail.
The map below illustrates the location of the Kelantan Marble Quarry and surrounding areas:
Our quarry site comprises four (4) hills (termed hills 1, 2A, 2B and 3) which are defined by
near-vertical white cliffs which dramatically protrude out of the adjacent plain, and additional areas
allocated for offices, workshops, workers quarters, storage areas and processing facilities.
106
Production at the Kelantan Marble Quarry
We commenced development at our Kelantan Marble Quarry in early 2011 by the clearance of
vegetation, building of access roads and excavation of rock to form access and to open up working
platforms. By December 2011, we had created the first working platform at hill 3. The development
of hill 2B followed closely with working platforms created in 2012. The commercial production of
marble blocks began in March 2012 for hill 3 and in 2013 for hill 2B.
With the completion of the construction and infrastructure development and commencement of
commercial production at hill 2B and hill 3, we have been able to start generating income from
sales of our marble products from these two (2) hills, while concurrently undertaking further
development of hills 1 and 2A. With regards to hills 1 and 2A, where over 85% of our marble
Resources are located, primary access to the hilltops, including the construction of haulage roads,
has been completed and the development of production working platforms is currently in progress,
with some limited production expected to start in late 2014.
We achieved a production rate of approximately 12,600 m
3
per annum from two (2) of the hills
(being hills 2B and 3) within our Kelantan Marble Quarry in FY2013 and we expect to increase
production over the next four (4) years as quarrying progresses to the two (2) larger hills (being
hills 1 and 2A) and our plan is to be able to achieve a production rate of approximately 230,000
m
3
of dimension stone blocks per annum from FY2018 onwards. Such dimension stone blocks can
be used in the production of marble blocks, marble slabs, aggregates and (in due course) calcium
carbonate powder. Please refer to the section entitled Business Strategies and Future Plans of
this Offer Document for more details of our Production Plan.
Kelstone Agreement and the Sub-Lease of the Kelantan Marble Quarry
Sub-Lease Term
Pursuant to the State Lease dated 21 March 2007 issued by the Gua Musang Land Office in favour
of KSEDC, KSEDC is the registered owner of the Kelantan Marble Quarry for a period of 50 years,
ending on 20 March 2057.
Pursuant to the Kelstone Agreement, Kelstone agreed to arrange for KSEDC to grant CEP the
Sub-Lease in respect of the Kelantan Marble Quarry for a term of 33 years from 27 January 2011
to 26 January 2044, with the exclusive rights to undertake the Marble Business. Kelstone is a
wholly-owned subsidiary of KSEDC, and had been appointed by KSEDC to develop the marble
quarrying operations at the Kelantan Marble Quarry. Under the Kelstone Agreement, CEP is
deemed to be an agent of KSEDC in respect of the marble quarrying operations at the Kelantan
Marble Quarry. On 9 September 2007, KSEDC agreed to the arrangement between Kelstone and
CEP under the terms of the Kelstone Agreement and agreed to grant the Sub-Lease to CEP.
Approval from the Gua Musang Land Office for the Sub-Lease was granted in favour of CEP on
26 August 2009 pursuant to a certificate dated 26 August 2009 issued under Section 120 of the
Land Code. The Sub-Lease in favour of CEP has been duly registered with the relevant authorities
on 27 January 2011 and is valid until 26 January 2044.
107
Key terms of the Kelstone Agreement
Consideration for the Sub-Lease
Pursuant to the Kelstone Agreement, the consideration for the Sub-Lease shall be paid, inter alia,
as follows:
(a) Upfront Fees
CEP shall pay Kelstone various upfront payments upon the signing of the Kelstone
Agreement, within 14 days from the date of the approval of the quarry scheme and within six
(6) months from the date on which the Kelstone Agreement becomes unconditional or before
the commencement of operations of the Kelantan Marble Quarry, whichever is the earlier. As
at the Latest Practicable Date, all such upfront payments of an aggregate amount of
approximately RM373,828 have been paid by CEP.
(b) Tribute
During the continuance of the Kelstone Agreement, CEP shall pay Kelstone a tribute of eight
per cent. (8%) of the market value or sales value, whichever is higher, of the blocks or
products of marble extracted or any production produced from the Kelantan Marble Quarry
in RM.
(c) Royalty
CEP shall pay royalty to the Kelantan state authorities at a rate of five per cent. (5%), or any
prescribed rate in the Kelantan Mineral Regulations (2002) or any amendment thereof, of the
gross proceeds of sales value of marble produced.
(d) Percentage of profits from quarrying
CEP shall also pay Kelstone fifteen per cent. (15%) of its profits from quarrying at the
Kelantan Marble Quarry based on year-end financial performance.
Termination
Pursuant to the terms of the Kelstone Agreement, either party may terminate the Kelstone
Agreement, inter alia, if the other party commits an irremediable breach, or a breach of any term
or obligation without just cause (other than an irremediable breach) which is not remedied within
28 days after receiving notice from the first-mentioned party, or an order is made for the winding
up or voluntary dissolution of the other party, and/or the other party becomes insolvent, stops
payment of or is unable to pay its debt.
Under the terms of the Kelstone Agreement, CEP shall be deemed to have breached its
obligations and terminated the Kelstone Agreement if CEP suspends operations for more than
three (3) months.
Upon termination of the Kelstone Agreement, all rights and obligations of the parties shall
altogether cease to have effect unless expressly stated and the Sub-Lease shall automatically
terminate.
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If CEP is the defaulting party or if at any time, CEP withdraws or discontinues with the Kelstone
Agreement for whatever reason, all monies paid to Kelstone by CEP shall be forfeited absolutely
by Kelstone and CEP shall not be entitled to any damages whatsoever. The Kelantan Marble
Quarry shall also be handed back to Kelstone immediately upon termination, free from
encumbrances.
Alleged breaches
On 9 February 2014, our subsidiary, CEP, received a notice from Kelstone in respect of certain
alleged breaches of CEPs obligations under the Kelstone Agreement, including, inter alia, CEPs
obligation to appoint two (2) nominees from Kelstone as directors of CEP, to allow staff or
representatives of Kelstone to be seconded to the mining operation team at the Kelantan Marble
Quarry, and to organise a technical exercise scheme for training of the staff of Kelstone.
CEP has since clarified with Kelstone that it stands ready to perform such obligations once
Kelstone nominates or identifies the appropriate persons for the purposes as aforesaid (in
connection with which CEP has requested that Kelstone furnishes the requisite particulars of the
relevant persons, procures their co-operation and ascertains that they have the necessary
qualifications or experience) and provides the requisite details to enable CEP to fulfil such
obligations. Kelstone has responded in writing, inter alia, to acknowledge CEPs clarification and
has indicated that they will revert to CEP in respect of the relevant matters in due course.
Following thereto, Kelstone has arranged for four (4) persons to be seconded to the mining
operation team at the Kelantan Marble Quarry and for CEP to make the relevant salary payments
and transport arrangements for such persons and for an additional Kelstone staff to be stationed
at the Kelantan Marble Quarry.
Save as aforesaid, Kelstone has not raised any further objections or issues in relation to the
Kelstone Agreement, including any other instances of alleged breaches arising under the Kelstone
Agreement, and has not objected to parties continuing co-operation and collaboration under the
Kelstone Agreement.
Tenure of the Marble Business
Pursuant to the terms of the Kelstone Agreement and the Sub-Lease, our Groups possession of
the Kelantan Marble Quarry and right to undertake the Marble Business (unless renewed or
extended) is only for the period of the Sub-Lease Term.
KSEDC, who granted CEP the Sub-Lease in respect of the Kelantan Marble Quarry, holds a lease
in respect of the Kelantan Marble Quarry for a period of 50 years ending on 20 March 2057 under
the terms of the state lease entered into with the Gua Musang Land Office. Under the terms of the
Kelstone Agreement, CEP may request for a renewal of the Sub-Lease prior to the expiry thereof,
but it will be within the sole discretion of Kelstone whether to grant such renewal and the period
of renewal shall be subject to the approval of KSEDC and/or the relevant state authority. In the
event we are to obtain a renewal or extension of the Sub-Lease, we will then be able to extract
and monetise the marble Resources and Reserves available at the Kelantan Marble Quarry
beyond what is currently contemplated, but there is no assurance or certainty that we will be able
to do so in due course.
Accordingly, notwithstanding that the Qualified Persons Report has indicated that the Kelantan
Marble Quarry has a quarry life in excess of 50 years based on the available marble Resource
and/or Reserves, we have not taken into account the potential commercial value of operating the
quarry beyond the Sub-Lease Term in projecting or mapping out our business strategies and
109
future plans for the Marble Business. Likewise, the Fair Market Value attributed to the Kelantan
Marble Quarry in the Independent Valuation Report has not taken into account the potential
commercial value of operating the quarry beyond the Sub-Lease Term.
RESOURCE AND RESERVES
Resource and Reserves statements
According to the Qualified Persons Report, the Resource and Reserves estimates in our Kelantan
Marble Quarry are reported in conformity with the JORC Code. A summary of statements of
Resource and Reserves at the Kelantan Marble Quarry as at 31 March 2014 is as set out below:
Category Mineral Type
Gross
volume attributable to
licence
(million m
3
)
(1)
Net volume
attributable to our
Group
(million m
3
)
(1)
Resource
(2)
Measured White Marble 18.63 18.63
Indicated White Marble 0.90 0.90
Inferred White Marble 0.76 0.76
Total Resource 20.29 20.29
Reserves
(3)
Proved White Marble 10.53 10.53
Probable White Marble 0.49 0.49
Total Reserves 11.02 11.02
Notes:
(1) Although we have been granted the sole exclusive right for operation and commercial exploitation of the Kelantan
Marble Quarry for the Sub-Lease Term by KSEDC pursuant to the terms of the Kelstone Agreement, we have agreed
to make certain tribute, royalty and profit sharing payments under the Kelstone Agreement, and accordingly any
gross revenue attributable to us arising from the extraction and sale of the Reserves of the Kelantan Marble Quarry
will be subject to, inter alia, such expenses to be incurred under the Kelstone Agreement. Please refer to the section
entitled Kelantan Marble Quarry Kelstone Agreement and the Sub-Lease of the Kelantan Marble Quarry of this
Offer Document for details of the Kelstone Agreement.
(2) The procedures and parameters used for Resource estimation are set out in section 5.2 of the Qualified Persons
Report.
(3) The procedures and parameters used for Reserves estimation are set out in section 5.5 of the Qualified Persons
Report.
Please refer to the section entitled Glossary of Technical Terms of this Offer Document for the
definitions of Measured, Indicated and Inferred Resource as well as Proved and Probable
Reserves.
As stated in the Reserves statement of the Qualified Persons Report, the total Reserves are
estimated at 11.02 million m
3
and with a planned production rate of 230,000 m
3
of dimension stone
blocks per annum from FY2018 onwards, the quarry life is close to 50 years, which is in excess
of the Sub-Lease Term. There is no certainty or assurance that we will be able to secure a renewal
of the Sub-Lease upon its expiry for such further period or periods corresponding to the actual
quarry life of the Kelantan Marble Quarry, as further described in the section entitled Kelantan
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Marble Quarry Kelstone Agreement and the Sub-Lease of the Kelantan Marble Quarry. Please
also refer to the section entitled Kelantan Marble Quarry Tenure of the Marble Business of this
Offer Document.
The Resource and Reserves estimates should not be regarded as a representation that all these
amounts can be achieved and/or be economically exploited and nothing contained herein should
be interpreted as an assurance of the economic life of our marble Reserves and Resource or the
economic viability of our future operations. The actual quarry life can also differ from the projected
quarry life for a number of reasons, including, inter alia, changes in the production rate and the
balance of production between dimension stone blocks and production of aggregates, inter alia,
as raw material for calcium carbonate powder. In addition, as we have possession of the Kelantan
Marble Quarry and the right to undertake the Marble Business only for the Sub-Lease Term, we
have assumed that there will be no renewal of the Sub-Lease upon its expiry, hence we may not
be able to fully extract and monetise the Resource and/or the Reserves available at the Kelantan
Marble Quarry.
Resource Estimation
For the purpose of arriving at the Resource estimation in the Kelantan Marble Quarry, the
Qualified Person assessed, inter alia, the topography and landform of the quarry area and carried
out a borehole investigation to understand the geology of the quarry area and to assess the quality
of the marble.
As the marble available at the Kelantan Marble Quarry appears to be homogeneous and forms
almost the entire mass of material that can be excavated from the landform, the Qualified Person
was able to arrive at the Resource estimation, inter alia, by comparing the final landform with the
existing landform and reducing the total volume to take into account cavities.
Much of the marble available for excavation at the Kelantan Marble Quarry is visibly and
dramatically exposed as high cliffs above the plain and above the forest reserve, and results from
boreholes, sampling and testing have shown the rock to be very consistent at surface and at depth
throughout the Kelantan Marble Quarry. Accordingly, of the total Resource estimation of 20.29
million m
3
, a significant majority (18.63 million m
3
) comprises Measured Resources (which, under
the JORC Code, represents the highest level of geological confidence), 0.90 million m
3
comprises
Indicated Resources (the mid level of geological confidence), and only a small portion (0.76
million m
3
) comprises Inferred Resources (the lowest level of geological confidence). The Inferred
Resource arises in respect of one (1) particular area behind hill 1 where, due to the difficulty of
gaining access to such area, it was not possible to carry out a borehole investigation or obtain
sufficient surface samples.
The Resource statement includes the marble available or found at the Kelantan Marble Quarry in
the Additional Site. CEP is currently in the process of seeking the relevant approvals for the right
to extract marble from the Additional Site. The Qualified Person has included the marble in the
Additional Site as a Resource on the premise that Kelstone has confirmed in their letter dated 30
April 2013 that it has no objections to CEPs application for the Additional Site and has, through
KSEDC, made the application to the Gua Musang Land Office to grant approval via a Permit 4B
for the right to extract marble from the Additional Site for a period of 30 years. For further details
please refer to the section entitled Licences, Permits and Approvals Licences, Permits and
Approvals Pending Applications or Approval of this Offer Document.
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Reserves Estimation
As the marble from the Kelantan Marble Quarry has the requisite physical and chemical
parameters or properties and appears to be consistent and homogeneous over the entire quarry
area, it is suitable for use both as dimension stone blocks to be turned into marble products,
primarily blocks and slabs, aggregates and as a raw material to be ground into calcium carbonate
powder for numerous industrial applications.
The process of arriving at the Reserves estimation for the Kelantan Marble Quarry mainly involved
a calculation of the waste that will be generated in the clearance process and ordinary operational
waste (from material lost during normal extraction operations), and the Qualified Person also took
into consideration other quarry related issues as well as relevant Modifying Factors, as further set
out in the Qualified Persons Report. These Reserves are included in the the total Mineral
Resource.
In particular, the amount of Reserves stated in the Qualified Persons Report only represents the
estimated volume of marble which can be mined out as dimension stone blocks at the Kelantan
Marble Quarry. In terms of the amount of Resource not transferred to a Reserve, the Qualified
Person considers that the Modifying Factors for the use of marble as a raw material in calcium
carbonate powder have not been totally fulfilled because whilst some initial marketing and
processing issues have been addressed, these are not advanced enough to allow the Resource
to be considered a Reserve.
In addition, while the marble in the Additional Site is included in the Resource statement, as such
Resource does not meet the Modifying Factors on legal matters, this volume of the Resource
(amounting to approximately 1.87 million m
3
) is also not considered as Reserves.
After taking into account, inter alia, all of the foregoing factors, an estimate of total Reserves of
marble dimension stone blocks of 11.02 million m
3
was arrived at, of which 10.53 million m
3
is
Proved Reserves and 0.49 million m
3
is Probable Reserves. There is an additional 1.87 million m
3
of marble Resource found in the Additional Site which can be converted to Reserves once CEP
obtains the relevant approvals for the right to extract marble from the Additional Site.
To the best of our knowledge, no material changes have occurred to the Kelantan Marble Quarry
and/or the Marble Business since the effective date of the Qualified Persons Report, being
31 March 2014, which has or may have a material impact on the key bases and assumptions
and/or the findings or opinions contained in the Qualified Persons Report.
Please refer to the Qualified Persons Report in Appendix E of this Offer Document for further
details of Resource and Reserves estimation in our Kelantan Marble Quarry.
INDEPENDENT VALUATION
As part of the Listing, the Directors have appointed Censere to conduct an independent valuation
of the Kelantan Marble Quarry. The Independent Valuation Report has been prepared in
accordance with the VALMIN Code. The valuation was carried out on a Fair Market Value basis.
Fair Market Value is defined as the amount of money (or the cash equivalent of some other
consideration) determined by the expert in accordance with the provisions of the VALMIN Code for
which the mineral or petroleum asset or security should change hands on the date of the Valuation
in an open and unrestricted market between a willing buyer and a willing seller in an arms length
transaction, with each party acting knowledgeably, prudently and without compulsion.
112
Based on the results of the investigations and analysis performed by Censere, as outlined in the
Independent Valuation Report, Censere is of the opinion that the Fair Market Value of the Kelantan
Marble Quarry as at 31 March 2014 is in the range of approximately S$170 million to S$420 million
with a preferred value of approximately S$260 million.
Please refer to the Independent Valuation Report in Appendix F of this Offer Document for further
details.
OUR MARBLE AND OUR MARBLE PRODUCTS
Properties of our marble
The high degree of purity, strength, hardness and bulk density as well as the low level of porosity
of the marble in the Kelantan Marble Quarry makes it suitable for use as premium quality marble
blocks and slabs for decorative surfacing purposes. According to the Qualified Persons Report,
the Kelantan Marble Quarry contains high-quality marble Reserves, and the colour and texture of
the marble products are similar to those of the well-recognised, premium international branded
marble products currently available in the market. The physical properties and the appearance of
our marble samples make them suitable for use in the decoration of high-end commercial and
public buildings, such as hotels, office buildings, museums, memorial halls and mosques, and for
residential uses.
The chemical properties of our marble with high contents of calcium carbonate, high whiteness
and brightness percentages also makes it a suitable raw material in the calcium carbonate powder
business. Calcium carbonate powder generated from our marble is suitable for use in paints,
rubber, paper and as a filler.
The primary colour of our marble Resources in the Kelantan Marble Quarry is white and greyish
white, with slight colour variations. The marble from hill 1 contains black spots, the marble from
hills 2A and 2B has a slight purplish/light grey tint and the marble from hill 3 has irregular greyish
streaks. The marketing names used by us to describe the marble from each of our hills, in the
order of marketing value are (a) Kelantan Black Spotted White (to describe marble from hill 1),
(b) Kelantan Purplish White (to describe marble from hills 2A and 2B); and (c) Kelantan Misty
White (to describe marble from hill 3). Therefore, there are three (3) types of colour and texture
combinations for products that will be produced from the Kelantan Marble Quarry. As it is likely that
colour variations exist within each of our four (4) hills and as we are still in the process of quarry
development, the exact volume of each type of marble cannot be confirmed at this stage. Based
solely on the Resources of each hill as set out in the Qualified Persons Report, most of our marble
will comprise of the Kelantan Purplish White variety followed by the Kelantan Black Spotted White
variety and then the Kelantan Misty White variety. Based on our marketing efforts and market
feedback, we expect that the Kelantan Black Spotted White variety will achieve the highest sales
price, followed by the Kelantan Purplish White variety and then the Kelantan Misty White variety.
Based on measurements conducted on 35 core samples taken from specified depths in eight (8)
boreholes from the four (4) hills, the bulk density of the marble ranges from 2.702 t/m
3
to 2.779
t/m
3
. The natural water absorption is between 0.088% and 0.15% which is well within the
specification requirement of <0.20% under the ASTM Standards. The unconfined compressive
strength ranges from 59.9 Mpa to 150 Mpa, significantly in excess of the specification requirement
of >50 Mpa under the ASTM Standards. The flexural strength, both wet and dry, ranges from 10
Mpa to 19.3 Mpa, averaging 12.5 Mpa, again well exceeding the specification requirements under
the ASTM Standards. The abrasion resistance satisfies the minimum requirement for natural
marble construction material under the ASTM Standards.
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Main usage of marble
Marble is used mainly for the following purposes:
(a) as building materials
Typically in the form of marble slabs and marble tiles as cladding or decorative surfaces for
outdoor and indoor walls and floors. In addition marble is also used as building materials for
other features such as columns, staircases, handrails, doorframes, windows, fountains and
pedestals
(b) for arts and decoration
Marble carvings, ornamental pillars, sculptures and statues are the common products for the
usage of marble in this category
(c) marble furniture
Common marble products in this category include tables, chairs, vanity tops and side tables
(d) other marble articles
These include tomb and funerary articles (such as tablets, memorial stones and funerary
urns) and daily use articles (such as lamps, flowers pots, vases and candle holders)
(e) aggregates
Aggregates are produced by the crushing of smaller loose pieces of marble produced as
by-products in the course of marble quarrying, or which are not suitable for use as marble
blocks or slabs. Aggregates are used as raw materials for concrete, masonry, asphalt, and
as base materials for roads, landfills and buildings, and as a raw material for the production
of calcium carbonate powder
(f) calcium carbonate powder
Calcium carbonate powder has numerous industrial applications, including being used for
purification in the iron-making and steel-making process, in the oil industry, for the production
of paint, rubber, paper, and as a filler for other products
Our marble products
Our primary products are marble blocks and slabs. We also produce aggregates and (in due
course) calcium carbonate powder.
Marble blocks
Marble blocks produced by us are approximately 6 m
3
to 9 m
3
, also referred to as standard-sized
blocks. The sales price of marble blocks varies according to quality, texture, size, supply volume
and delivery cycle.
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Marble Slabs
Marble slabs are usually used as indoor decorative materials, such as floors and walls. Marble
slab processing involves cutting marble blocks into slabs and further processing by burnishing and
polishing.
Marble slabs can be cut from standard sized blocks or non-standard sized blocks. Our
standard-sized blocks are transported to specialist factories, mainly in the PRC, for processing
into large slabs, as these large slabs are primarily intended to be sold in the PRC.
Non-standard sized blocks produced as part of our operations will be cut at our marble slab
processing facility on-site or in Malaysia. Slabs to be produced by us on-site are 20 mm thick and
generally of a standard 600 mm by 600 mm or 300 mm by 300 mm size, referred to as
standard-sized slabs. Our marble slab processing facility on-site will also be able to
accommodate custom specifications from customers, and such slabs are referred to as
custom-sized slabs.
Prior to the commencement of the commercial operations of our marble slab processing facility,
we engage third-party specialist factories to process all our non-standard sized blocks into marble
slabs.
Aggregates
We also intend to process marble pieces to be sold as aggregates. The marble pieces will be
crushed and screened on-site in a facility with the capacity to produce 60,000 tonnes of
aggregates per month which has already been constructed. The three (3) main product sizes of
our aggregates will be: 10 mm to 40 mm, 40 mm to 60 mm and 150 mm to 230 mm as these are
the common sizes of products sold as aggregates. However, products will be customised to suit
customers, and products which fall outside these sizes will be stockpiled for future use or
purchase. Aggregates can be used for construction or as raw material for calcium carbonate
powder production.
Prior to the commencement of the commercial operations of our aggregates processing facility, we
can engage third-party specialist factories to process all our marble pieces into aggregates.
Calcium carbonate powder
We also intend to become a producer of calcium carbonate powder in due course, through setting
up of a small-scale facility initially, and a larger-scale facility to follow thereafter if the market
response to our calcium carbonate powder is positive.
Calcium carbonate powder can be used for industrial purposes such as paints, rubber, paper and
as a filler for other products. The chemical properties of our marble, especially at hill 1 and hill 2A
with a high content of calcium carbonate and high whiteness and brightness percentages make
our marble suitable as a raw material for calcium carbonate powder.
Based on the Qualified Persons Report, it is estimated that approximately 70% of the Resource
will be suitable for the manufacture of blocks and slabs with the rest being suitable for use in the
production of aggregates and calcium carbonate powder.
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MARBLE QUARRYING AND EXTRACTION PROCESS
The quarrying process starts with access construction and clearance of trees and vegetation to
the top of the hill. Excavation then commences to form working platforms from which we cut our
marble into dimension stone blocks. As cutting takes place using disc saws and diamond-wire
cutters, dimension stone blocks are removed to storage and the level of the platforms is lowered.
As this happens, the platforms increase in plan area, and the volume of marble excavated is
accordingly increased. At the working platform, the foreman will reference and categorise the
standard-sized blocks, the non-standard sized blocks and loose marble fragments, prior to
removal for storage or further processing (where applicable). The non-standard sized blocks and
loose marble fragments are to be processed by cutting into standard-sized or custom-sized slabs
or crushing into aggregates either off-site or (in due course) at our on-site marble slab processing
facility and aggregates processing facility.
Throughout our operations, measures are in place to control dust, noise impact and water
discharge to ensure that our obligations on environmental protection are met. Our operations
teams are also required to wear masks, ear protectors, helmets and proper footwear as part of our
health and safety requirements. Access tracks are kept in good condition.
The following is a diagrammatic illustration of the marble quarrying and extraction process at the
Kelantan Marble Quarry:
Clearance and formation
of working platforms
Cutting of marble into
dimension stone
blocks
Removal of
standard-sized blocks
to storage area
Removal of non-standard
blocks for further processing
Removal of loose marble
fragments not suitable to be
processed into blocks for
further processing
Clearance and formation of working platforms
The process of clearance and formation of working platforms at our Kelantan Marble Quarry is
relatively straightforward as tree cover is patchy and ground vegetation is minimal. Vegetation
growth is restricted to cavities, hollows and gaps between marble pinnacles, which are typical of
a karst landscape. Where possible the vegetation will be separated, consolidated and put back
into the forest to decompose.
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The marble being excavated is very strong even at the surface and much of the development to
form working platforms is done by drilling and blasting. Blasting will be localised and closer to the
level of potential working platforms. Relatively smaller blasting charges will be used to reduce the
potential of damage to the marble.
Rock excavated during clearance will be used for aggregates production. Attractive rock forms
may be preserved and sold as garden ornaments. Once working platforms of a meaningful size
are created, the marble is then cut into dimension stone blocks.
Cutting of marble into dimension stone blocks
We carry out this process using disc saws and diamond wire saws. The ideal shape of blocks is
1.2 m to 1.8 m (in width) by 1.2 m to 1.5 m (in height) by 3 m (in length). Initially, two (2) rails are
set up at a spacing of 1.5 m and a disc saw machine is set up to cut two parallel 1.2 m to 1.5 m
deep slots into the platform. Diamond wire saws are then used to cut a vertical surface 3 m back
from the front face and also to cut a horizontal surface to separate the block along its base. Prior
to the blocks being released and moved using an excavator, they are given a unique reference
number and measured. The marble dimension stone blocks will be classified as A, B, C or D
depending on the number of complete sides formed. Category A is the highest quality with a good
form to all six (6) sides. The exact grade which a block will be categorised as is dependent on
whether the block has a regular shape and the extent of fractures in the marble.
Non-standard sized blocks and marble pieces will be removed for further processing into marble
slabs and aggregates. Whilst large working platforms are most ideal because of the wider surface
area available for excavation, when hills 1 and 2A are being developed, several smaller platforms
will be used due to the steep terrain of hills 1 and 2A.
This cycle of work will continue as the blocks are separated and removed, the next layer removed
and the hill further reduced in height.
Removal of standard-sized blocks to storage area
The marble blocks are transported by truck to the storage areas until they are sold. Buyers may
visit the storage areas to select the marble blocks. Prior to transportation out of the Kelantan
Marble Quarry, the marble blocks will be cleaned before being loaded into containers for
transportation to the buyer.
Removal of non-standard sized blocks for further processing
Non-standard sized blocks which have been side-cast down-slope are excavated at the foot of the
slope where they will be transported to off-site or (in due course) our on-site marble slab
processing facilities for further processing.
Removal of loose marble fragments not suitable to be processed into blocks for further processing
As part of the selection process to choose blocks for processing into marble slabs, loose marble
fragments will be separated out. This material will be collected using an excavator and loaded into
a truck to be transported to our on-site aggregates processing facility. Here, subsequent to
obtaining the relevant approvals for commencement of commercial operations of such facility, the
rock will be reduced in size into aggregates of three (3) product sizes or customised as ordered.
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Marble slab processing facility for standard-sized slabs and custom-sized slabs
As at the Latest Practicable Date, we have set up on-site at the Kelantan Marble Quarry, a marble
slab processing facility with the capacity to produce 600 m
2
of slabs per day from non-standard
sized marble blocks, although commercial operations have not commenced pending the receipt of
the relevant approvals. During the processing, non-standard sized blocks are saw-cut into marble
slabs.
The following diagram sets forth the steps taken to process our marble slabs:
Saw cutting
Drying, adhibiting repairing
or masking and curing
Polishing
Re-sizing according
to customers
requirements or
market demand
Saw cutting
Dimension stone blocks are cut into slabs with circular saws, sand saws or general saws.
Drying, adhibiting repairing or masking and curing
For cracked stones, stones with holes or easily breakable stones, we use gluing or masking to
increase their abrasion resistance.
Polishing
Polishing is a process by which material is precisely removed from a workpiece (or specimen) to
produce a desired dimension, surface finish or shape.
Re-sizing according to customers requirements or market demands
Marble slabs to be produced by us on-site are 20 mm thick and generally of standard 600 mm by
600 mm or 300 mm by 300 mm size, unless where specifically requested otherwise by our
customers.
Apart from our on-site marble slab processing facility, we may from time to time engage third-party
contractors in the PRC or Malaysia for processing of our dimension stone blocks to marble slabs
on an ad-hoc basis. We generally intend to export marble blocks instead of marble slabs to the
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PRC as the import of marble blocks into the PRC does not attract import tax, unlike marble slabs.
We may then engage third-party contractors in the PRC for the processing of our marble blocks
to marble slabs on an ad-hoc basis.
Aggregates processing facility
As at the Latest Practicable Date, we have set up on-site one crushing and screening aggregates
processing facility, although commercial operations have not commenced pending the receipt of
the relevant approvals. Such facility has the capacity to produce 60,000 tonnes of aggregates per
month. The closed side setting of the jaw crusher will be set at 230 mm. After crushing, the rock
will pass across a vibrating triple deck screen which will then separate out the rock into product
sizes which are 10 mm to 40 mm, 40 mm to 60 mm and 150 mm to 230 mm. These are the most
common sizes of aggregates purchased by companies which are in the calcium carbonate powder
business. The products will be stored in enclosed open bunkers with hard core bases to avoid
contamination.
Calcium carbonate powder production facility
As at the Latest Practicable Date, we do not have any facilities for the production of calcium
carbonate powder. Please refer to the section entitled Business Strategies and Future Plans of
this Offer Document for details on our intended venture into the calcium carbonate powder
business.
Delivery of products
The Kelantan Marble Quarry is accessible by two (2) highways. The Kelantan Marble Quarry is
located in close proximity to developed transportation networks, enabling us to deliver our
products in a timely and cost-efficient manner by a combination of roads and railways. We use
ports in Pasir Gudang (in Johor state), Kuantan (in Pahang state) and Klang (in Selangor state),
which are easily accessible by road and/or rail from Gua Musang although we have outsourced
the transportation of our marble products to the transhipment port in Kuala Lumpur to independent
third-party transportation companies on an ad-hoc basis while a Malaysian shipping company was
contracted to ship our marble products to the PRC. Going forward, we will negotiate with these
transportation and shipping companies with a view to entering into long-term contracts to reduce
our transportation costs.
Whilst we did not face any transportation bottleneck or other constraints up to the Latest
Practicable Date, our business depends on the availability of reliable transportation capacity for
our products.
Third-party contractors
We may, from time to time, engage third-party contractors in the PRC and Malaysia for the
processing of our dimension stone blocks into marble slabs on an ad-hoc basis. There are many
third-party contractors in the PRC and Malaysia that provide such services and our selection
criteria include considerations of technical capacity, track record and the price of the services of
such third-party contractors.
We have not entered into any long-term agreements and our engagements with such third-party
contractors are on a project-by-project basis. The fees are usually negotiated with the contractors
at arms length while the payments are generally made within 30 days from receipt of the invoices.
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PRODUCTION CAPACITY
The following table shows our Groups production capacity for dimension stone blocks for FY2011,
FY2012, FY2013 and 3Q2014:
FY2011 FY2012 FY2013 3Q2014
Production Capacity (m
3
) 60,000 63,000
Actual Production (m
3
) 12,600 15,200
Utilisation Rate (%) N.A. N.A. 21 24
As at the Latest Practicable Date, we achieved a 26% utilisation rate and intend to attain the full
planned production capacity under our Production Plan by FY2018.
During the period under review, we did not have any production or processing capacity for marble
slabs or aggregates and we intend to commence operations of our marble slab processing facility
and aggregates processing facility which we have set up on-site at the Kelantan Marble Quarry
upon obtaining all the relevant approvals, licences and permits required for the same.
As part of our planned increase in quarrying and processing capacities, we expect to significantly
increase our dimension stone block quarrying capacities to a total of 230,000 m
3
for FY2018
onwards. We have met our targeted production capacity for FY2014 of 19,500 m
3
per annum and
will increase this to 103,000 m
3
for FY2015 and 160,000 m
3
for FY2016. These planned quarrying
capacity amounts are calculated based on our quarrying operations scheduled for 10 months per
year, taking into account holidays, weather downtime and equipment maintenance, with working
hours of 10 hours per day. Maintenance of the various cutting tools and mobile equipment as well
as adequate supplies of spare parts and consumables are critical for maintaining the planned
monthly quarrying production. As such, repair and support facilities have been set up to support
the planned quarrying operations. With the increased production and processing, the numbers of
disc saws and diamond wire saws we require will increase and we will have to incur capital
expenditure to support this. Separate teams of workers will be engaged to work on different
platforms.
Please refer to the section entitled Business Strategies and Future Plans of this Offer Document
for more information on our Production Plan.
QUALITY ASSURANCE
Currently, we have certain procedures in place to monitor the quality of our products. We have
implemented measures such as (i) regular sample checks on the colour and texture of our marble
products; and (ii) monitoring of marble quality throughout the production, preparation and
transportation process.
OUR MAJOR CUSTOMERS
During the period under review, we had not made any sales as our Group had focused on quarry
planning, construction and infrastructure development and building of inventory for sale. As such,
there are no customers contributing 5.0% or more of our Groups total revenue for the period
under review.
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We recorded our first sales of our products, comprising marble slabs, to third-party customers in
February 2014. As at the Latest Practicable Date, we have entered into sales agreements with
nine (9) end-users and one (1) franchise agreement with a distributor in the PRC. The majority of
our sales agreements are for ad-hoc purchases of our products. The remaining sales agreements
(long-term sales contracts) are for a tenure of three (3) years, where there is an estimated sales
quantity and estimated total value, but the actual quantities of our products to be sold thereunder
will depend on our customers demand and the actual sale price will be adjusted based on the
quality of the particular batch of products to be sold. The franchise agreement we have entered
into provides for an agreed price at which our marble products of a prescribed quality will be sold
to the distributor. Please also refer to the section entitled Credit Policy of this Offer Document
for further details of the credit terms offered to our customers and the section entitled Order Book
of this Offer Document for particulars of our Order Book.
To the best of their knowledge, our Directors are not aware of any information or arrangement
which would lead to a cessation or termination of our sales agreements or franchise agreement
as aforesaid.
Our Group is not materially dependent on any contract with any customer and none of our
Directors, Executive Officers, Substantial Shareholders or their respective Associates has any
interest, direct or indirect, in any of our customers.
OUR MAJOR SUPPLIERS
Our suppliers include contractors and suppliers of materials, machinery and equipment. The major
suppliers accounting for 5.0% or more of our Groups total operating costs and exploration and
evaluation expenditure incurred for the period under review are set out below:
Products/
Services
supplied
Percentage of operating costs and
exploration and evaluation
expenditure (%)
Major Suppliers FY2011 FY2012 FY2013 3Q2014
Gua Musang Enterprise Sdn Bhd Diesel
(1)
23
Kejuruteraan & Alat-Alat Ganti
Bogam
Diesel
(1)
/
Hardware
(2)
13
Lubricleum Sdn Bhd Diesel
(1)
9
Polymath Sdn Bhd Subcontractor
(3)
51 19
Sealand Drillers (M) Sdn Bhd Site
investigation
services
9
Sengli Marketing Sdn Bhd Hardware
(2)
5
Soon Heng Trading Hardware
(2)
6
Strata Drill Sdn Bhd Site
investigation
services
6
Supermate Petroleum Trading Diesel
(1)
13 11
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Products/
Services
supplied
Percentage of operating costs and
exploration and evaluation
expenditure (%)
Major Suppliers FY2011 FY2012 FY2013 3Q2014
Wong Rock Blasting Enterprise Blasting
services
10 10
Notes:
(1) Required for the operation of machinery and equipment on-site at the Kelantan Marble Quarry.
(2) Includes consumables and tools required for quarrying operations.
(3) Provision of equipment and services for building of access roads and infrastructure.
During the initial exploration and development stage of the Kelantan Marble Quarry in FY2012, our
Group had focused on the building of access roads and infrastructure works which were essential
to commence quarrying and extraction of marble from the marble hills. Accordingly, the majority
of our Groups total operating costs and exploration and evaluation expenditure in FY2012
incurred were in relation to such building of access roads and infrastructure works.
Polymath Sdn Bhd (Polymath) is a subcontractor that provides equipment and services for the
building of access roads and infrastructure. As initial infrastructure works were completed and our
Company commenced production of marble blocks on a commercial scale in March 2012, fewer
purchases and/or services were required from Polymath in FY2013 and 3Q2014 as compared to
FY2012.
Following the commencement of commercial production in March 2012, the majority of our
Groups total operating costs and exploration and evaluation expenditure shifted from
infrastructural-related costs to production-related costs in FY2013.
Our main supply requirement is for diesel, which is required for the operation of machinery and
equipment on-site at the Kelantan Marble Quarry. As diesel is a commodity product, we do not rely
on any single supplier for our purchases, and we select our suppliers based mainly on price and
delivery considerations. Accordingly, our Group had used various diesel suppliers such as
Kejuruteraan & Alat-Alat Ganti Bogam, Lubricleum Sdn Bhd and Supermate Petroleum Trading for
the period under review.
The site investigation services provided by Sealand Drillers (M) Sdn Bhd and Strata Drill Sdn Bhd
relate to soil investigation and exploratory works conducted by our Group in FY2013 after the
necessary access roads and infrastructure were in place.
Our Group carefully evaluates and chooses experienced suppliers and will only work with those
who are able to provide good and timely services at competitive prices.
Our Group is not materially dependent on any contract with any supplier and none of our Directors,
Executive Officers or Substantial Shareholders has any interest, direct or indirect, in any of the
above suppliers.
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CREDIT POLICY
Credit terms offered to our customers
The credit terms which we offer to our customers vary depending on, inter alia, the type of
contracts and customers in question. For long term sales contracts, payment is in instalments,
with the first payment (for approximately 10% of the purchase price) due upon delivery and
acceptance of the products by the customer, the second payment (for approximately 85% of the
purchase price) due 60 days after such delivery and acceptance, and the last instalment (for
approximately 5% of the purchase price) due 365 days after such delivery and acceptance. For
other sales contracts, our customers are required to make a partial payment of the purchase price
(ranging from 10% to 35%) upon placing an order with us for a specified quantity and payment of
the remaining balance is required upon or prior to delivery of the order. For agreements which we
enter into with distributors, we will require our distributors to pay a deposit (ranging from 10% to
20%) for the products which we ship or deliver to them, with the remaining payment to be made
on a monthly basis based on actual sales made by such distributors.
We will review the credit terms to be offered to our customers on a periodic basis and such credit
terms to be offered will take into account, amongst others, the creditworthiness of the customer
as well as the size of the customers order.
Credit Terms Granted by Our Suppliers
In general, the credit period stipulated in the contracts signed between our Group and our
suppliers is within 30 days of delivery of goods or services. It is not meaningful to calculate the
trade payables turnover days of our Group for the period under review as the expenditure incurred
by our Group during the period under review was not of a trading nature.
INVENTORY MANAGEMENT
As at the Latest Practicable Date, our inventory comprises approximately 6,032 m
3
of marble
blocks and 12,775 m
2
of marble slabs, the majority of which are housed on-site at the Kelantan
Marble Quarry, with the remaining inventory being kept at warehouses in the PRC, mainly in
Shuitou, Xiamen, the PRC.
It is not meaningful to calculate the inventory turnover days of our Group for the period under
review in line with the absence of significant sales by our Group for such period.
Due to the nature of our business and the time required to extract and remove marble from the
hills, a large amount of inventory is usually stocked up on-site to meet the demand of our
customers as and when required. Contracts with our customers are typically entered into in
advance and the actual delivery of our marble products is at the discretion of our customers. Our
customers will typically provide a notice period for the delivery of our marble products and such
notice may generally range between one (1) month to six (6) months of the delivery date,
depending on the size of the order and the contract with the particular customer. In the event of
a short notice period or numerous customers requesting for delivery of the same type of marble
products at the same time, the inventory we have accumulated on site would generally be
sufficient to meet such demand.
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SALES AND MARKETING
Our current sales strategy for our marble blocks and marble slabs is to target customers primarily
in the PRC, where the demand for premium high-quality marble is increasing. The smaller slabs
to be processed by us on-site, which are referred to as standard-sized slabs or custom-sized
slabs, will be sold primarily in Malaysia and elsewhere in South East Asia. We also intend to sell
our marble blocks in other countries such as Malaysia, Singapore, Taiwan, India, Europe and the
USA.
We intend to sell our products primarily to end-user customers such as developers and
construction companies. Separately, we may enter into distribution agreements with marble
distributors and wholesalers for them to distribute our marble blocks and marble slabs. We select
distributors based on their track record, customer base and sales and marketing network. The
sales price of marble blocks varies according to quality, texture, size, supply volume and delivery
cycle.
We intend to increase customer and market exposure to our products by attending industry
forums, trade fairs and exhibitions. To date, we have attended trade fairs in the PRC, such as the
14
th
China Xiamen International Stone Fair, an internationally renowned industry event attended
by many stone industry participants, held in March 2014, where we received favourable responses
from industry participants attending the fair. At the same time, we are actively communicating and
engaging with marble industry participants, property developers, contractors, professionals such
as architects and designers and others who have significant influence over customer preferences
and purchasing decisions to create greater awareness of our products and branding.
In relation to our aggregates, our current sales strategy is to directly market and sell to end-users
in Malaysia, such as contractors in the construction industry as well as producers of calcium
carbonate powder. We also intend to sell our aggregates to other markets such as Indonesia and
India in due course.
All sales in the PRC are currently carried out through Qingdao Terratech. As at the Latest
Practicable Date, Qingdao Terratech has established sales offices in Beijing, Chengdu, Qingdao
and Xiamen in the PRC. CEP and Terratech Resources conduct our sales and marketing in
Malaysia and other markets. As at the Latest Practicable Date, we have three (3) employees
performing sales and marketing functions in the PRC and Singapore.
INSURANCE
We insure our business for, inter alia, the following:
(a) all-risks insurance;
(b) workmen and personal injuries insurance;
(c) plant and equipment insurance; and
(d) motor vehicles insurance.
As at the Latest Practicable Date, our Directors are of the view that the above insurance policies
are adequate for our Groups current operations. Our Directors will review the insurance coverage
of our Group from time to time to consider the sufficiency of its coverage.
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INTELLECTUAL PROPERTY
Currently, our business and profitability is not materially dependent on any intellectual property
such as patents, patent rights, licences and processes or other intangible assets. We have not
paid or received royalties for any licence or use of any intellectual property.
As at the Latest Practicable Date, we are the registered owner of, or have applied for, the following
trademarks:
Trademark Class
Country of
Registration
Date of
Registration/
Application Status
19
(1)
, 37
(2)
Singapore 5 December 2012 Approved
19 Singapore 16 July 2013 Pending
19 Hong Kong 18 December 2012 Approved
19 Hong Kong 2 August 2013 Approved
Notes:
(1) Class 19 is applicable to building materials (non-metallic); non-metallic rigid pipes for building; asphalt, pitch and
bitumen; non-metallic transportable buildings; monuments, not of metal.
(2) Class 37 is applicable to building construction; repair; installation services.
As at the Latest Practicable Date, we are not involved in any disputes or litigation relating to the
infringement of intellectual property rights, and we are not aware of any such claims either
pending or threatened.
LICENCES, PERMITS AND APPROVALS
As at the Latest Practicable Date, none of the licences, permits and approvals which we have
obtained and which are material to our business or operations have been suspended, revoked or
cancelled, although we are in the process of applying for approval and/or awaiting approval for
pending applications from the relevant authorities in relation to, inter alia, the structures in respect
of our marble slab processing facility and our aggregates processing facility, an extension of our
marble quarrying area, additional storage and stockpiling areas for our marble products and
expansion of our marble slab processing facility.
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Save as aforesaid and save as disclosed in the section entitled Risk Factors of this Offer
Document, to the best of our Directors knowledge and belief, we are not aware of any facts or
circumstances which would cause such licences, permits and approvals to be suspended, revoked
or cancelled, as the case may be, or for any applications for, or renewal of, any of these licences,
permits, approvals and certificates to be rejected by the relevant authorities.
Singapore
As at the Latest Practicable Date, our Groups business operations in Singapore are not subject
to any specific legislation, regulatory controls or environmental issues other than those generally
applicable to companies and businesses operating in Singapore. Our Group has not experienced
any adverse effect on our business in complying with these laws and regulations and our Directors
believe that our Group has complied with all relevant laws and regulations.
Malaysia
Our Groups quarrying operations in Malaysia are governed by various laws and regulations and
subject to various licences, permits and governmental approvals. A summary of the key licences,
permits and approvals obtained from the relevant authorities in connection with the Marble
Business as at the Latest Practicable Date is set out below.
Extraction of marble
There is no specific legislation that governs the extraction of marble, and each specific task in the
extraction of marble is governed by specific and separate legislation including the Environmental
Quality Act 1974 as amended by the Environmental Quality (Amendment) Acts 1985 and 1996 (the
EQA), the Kelantan Quarry Rules 1997 (the Quarry Rules), the Explosives Act 1957, the Land
Code and the Handbook of Environmental Impact Assessment Guidelines.
To be able to secure the approval to extract marble from the Kelantan Marble Quarry, CEP needs
to submit, and (where applicable) secure the approvals of the relevant authority for an
environment impact assessment report and quarry scheme report, and to submit an environmental
management plan, all of which have been obtained by or complied with by CEP as at the Latest
Practicable Date, and further details of which are set out below.
Environment Impact Assessment Report
Pursuant to Section 34A(2) of the EQA, a detailed environment impact assessment study must be
conducted and a report on the same prepared, submitted to and approved by the Kelantan
Department of Environment (the KDE) before CEP can commence the extraction and removal of
marble and other stones from the Kelantan Marble Quarry.
As required under the EQA, an environment impact assessment report and a supplemental
environment impact assessment report (collectively, the EIA Report) had been issued by EQM
Consultancy Services (EQM) (whose business has been assumed by EQM Ventures Sdn. Bhd.),
a consultant duly approved by the KDE, in respect of the Kelantan Marble Quarry in January 2008
and June 2009 respectively.
On 23 June 2009, the KDE issued a letter (the EIA Approval Letter) confirming that the EIA
Report complies with Section 34A(2) of the EQA and approved the same, subject to certain
conditions (the EIA Approval Conditions).
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The EIA Approval Conditions include but are not limited to the following requirements:
(i) the drainage system, pond, silt traps and detention ponds to be approved by the Department
of Irrigation and Drainage;
(ii) the prior consent in writing from the KDE to be secured for the construction of sewage
treatment systems;
(iii) the approval or consent in writing from the Director of the KDE to be secured for the
construction of any factory or placing of any combustion equipment prior to the
commencement of the construction works;
(iv) an environmental audit report with regards to the effectiveness of the mitigating measures
and controls as mentioned in the EIA Report to be submitted to the KDE every three (3)
months from the date of commencement of the earthworks;
(v) an environmental management plan to be prepared in accordance with the Handbook of
Environment Impact Assessment Guidelines and submitted to the KDE for certification within
three (3) months before the commencement of earthworks;
(vi) a copy of the EIA Approval Letter together with the EIA Approval Conditions and relevant
documents to be displayed at the site of the Kelantan Marble Quarry from the date of
commencement of works and throughout the duration of quarry operations; and
(vii) the appointment of qualified officers who shall be fully responsible for the enforcement of all
control measures and insulation of the environment throughout the construction period and
project operation.
Following the completion of the setting up of a marble slab processing facility and aggregates
processing facility on-site at the Kelantan Marble Quarry, an environment impact assessment was
conducted as required under the Environmental Quality (Prescribed Activities) Environmental
Assessment) Order 1987, and Section 34(A)(2) of the EQA, and a Supplemental Environmental
Impact Assessment report dated December 2013 was issued by KenEp Consultancy & Services
Sdn Bhd (the Second Supplemental EIA Report) and submitted to the KDE for approval, which
is required to be obtained prior to the commencement of operations of the marble slab processing
facility and the aggregates processing facility. The approval for the Second Supplemental EIA
Report was issued by the KDE on 25 June 2014. However, there are certain other licences,
permits or approvals which may be required to be obtained prior to the commencement of active
operations of the marble slab processing facility and aggregates processing facility. Please refer
to the section entitled Licences, Permits and Approvals Licences, Permits and Approvals
Pending Applications or Approval of this Offer Document.
Environmental Management Plan
In compliance with the EIA Approval Conditions under the EIA Approval Letter, an environmental
management plan dated July 2009 as supplemented by the Additional Information Environmental
Management Plan dated August 2009 (the Environmental Management Plan) was prepared by
EQM and submitted to the KDE.
The Environmental Management Plan has conditions or requirements (collectively, the EMP
Requirements) relating to, inter alia, the manner of drilling and blasting works to be carried out
at the Kelantan Marble Quarry, waste management, safety and emergency response procedures
127
(including training of staff, site and fire protection schemes and emergency and contingency
procedures), environmental compliance audit programme, and environmental requirements. As
part of the environmental requirements, the following environmental monitoring reports are
required to be submitted on a periodic basis:
(a) a monthly report in respect of environmental compliance;
(b) a monthly report in respect of water quality;
(c) a bi-weekly report in respect of air quality. Our Malaysian Legal Advisers have clarified that
such reports only need to be submitted quarterly, although air samples have to be collected
bi-weekly; and
(d) a quarterly report in respect of environmental audit.
We have engaged EQM Ventures Sdn. Bhd. (the company that assumed the business of EQM) to
undertake the necessary monitoring and compliance with the EMP Requirements.
As the Kelantan Marble Quarry has only been in operation for a relatively short period (since early
2012), the environmental measures and controls that have been put in place, including those as
contemplated under the EIA Report and/or the Environmental Management Plan, are being
modified or adapted on an on-going basis as we continue to increase our scale of operations,
and/or specific issues being identified on-site.
Quarry Scheme Report
The Quarry Rules stipulate that a quarry scheme report must be prepared, submitted and
approved before any quarry is allowed to operate, resume or reorganise its operation. The quarry
scheme report is required to contain information prescribed in the Guidelines for Preparation of a
Quarry Scheme issued by the Department of Minerals and Geoscience of Kelantan (DMGK). The
quarry scheme report is required to demonstrate that the quarrying activities are carried out in a
skillful and workman-like manner with due consideration towards the preservation of the
environment and resources and conclude that the quarrying can be successfully integrated into
the local environment without detrimental effects.
In compliance with the Quarry Rules, a quarry scheme report dated February 2008 was duly
prepared and submitted by EQM in respect of the Kelantan Marble Quarry. A letter dated 28
February 2010 was issued by the DMGK approving CEP to carry out quarrying operations (the
Quarry Scheme Approval Letter).
Renewal of the quarry scheme approval has to be done annually. In connection with a renewal
application, the company has to appoint an independent consultant to report on its operating
performance, including environmental matters and health and safety issues.
The current quarry scheme approval approving CEP to carry out quarrying operations at the
Kelantan Marble Quarry is valid until 19 May 2015, and is subject to certain conditions, including
but not limited to the following:
(i) the Quarry Scheme Approval Letter is required to be exhibited at the quarry office at all times;
(ii) the boundaries of land ownership must be marked clearly and accurately;
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(iii) CEP is required to obtain public liability insurance against any damage to public property;
and
(iv) CEP is required to report any major variations to the quarry scheme.
Removal and transportation of marble
A permit under Section 72 of the Land Code (the Form 4C), is required to be obtained from the
relevant state authority before any removal or transportation of rock material from a quarry. In
accordance with Section 5 of the Land Code, rock material includes marble. A Form 4C is not
required to be obtained in the event that no such activity is being undertaken. The purpose of such
Form 4C, inter alia, is to enable the state authority to determine the quantity of rock being removed
or transported and to assess the amount of tax or fees chargeable in connection therewith.
In the case of the Kelantan Marble Quarry, the Form 4C is issued by the Kelantan state authority
to KSEDC, as the lessor of the Kelantan Marble Quarry, whenever CEP (acting as agent of
KSEDC under the Kelstone Agreement) removes and transports marble from the quarry site. CEP
has secured the Form 4C at all material times prior to the Latest Practicable Date, and will
continue to apply for and secure the Form 4C whenever CEP transports marble from the Kelantan
Marble Quarry site.
As advised by our Malaysian Legal Advisers, as at the Latest Practicable Date, CEP has secured
all necessary approvals and permits required for the extraction and removal of marble from the
Kelantan Marble Quarry as well as for the operation of its business in the extraction, removal,
transportation, sale and export of marble, and they are not aware of any circumstances to indicate
that CEPs right to explore, develop, quarry, extract, remove, transport, sell and/or export marble
from the Kelantan Marble Quarry has been adversely affected or compromised.
Land ownership and usage
Sub-Lease of Lot 1781
The alienation and ownership of the land on which the Kelantan Marble Quarry is situated is
governed under the Land Code. Pursuant to Section 86 of the Land Code, a state lease dated
21 March 2007 (the KSEDC Lease) was issued in favour of KSEDC, and KSEDC is the
registered owner of the land on which the Kelantan Marble Quarry is situated for a period of 50
years, ending on 20 March 2057. Such land can only be used for the quarrying of marble. Pursuant
to the Sub-Lease which has been duly registered, CEP is the sub-lessee in respect of the Kelantan
Marble Quarry for a term of 33 years from 27 January 2011 to 26 January 2044. The Sub-Lease
serves as an additional security for CEP in respect of the rights granted to it under the Kelstone
Agreement (in particular the exclusive right to explore, develop, quarry, extract, remove and sell
marble and/or other stones in respect of the Kelantan Marble Quarry). The right to extract, remove
and transport marble and other rock materials from the Kelantan Marble Quarry, however, is not
constituted or granted under the KSEDC Lease or the Sub-Lease.
Use of land adjacent to Lot 1781
CEP has, through KSEDC, obtained a permit (Borang 4) to occupy and use land adjacent to the
Kelantan Marble Quarry which has been used for the setting-up of our aggregates processing
facility as well as for storing our equipment and marble. Borang 4, issued by the Kelantan Forestry
Department, permits KSEDC or its agent or servants to occupy and use such land. Our Malaysian
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Legal Advisers have confirmed that since CEP is an agent of KSEDC pursuant to the Kelstone
Agreement, it has the right to occupy and use the said land under Borang 4. The Borang 4 is
currently valid until 31 December 2014.
Access to forest roads leading to the Kelantan Marble Quarry
CEP has, through KSEDC, obtained a permit (Borang 7) to have access to the forest roads
leading to the Kelantan Marble Quarry. Borang 7, which was issued by the Kelantan Forestry
Department on 13 April 2010, permits KSEDC or its agent or servants to have access to specific
forest roads, and to use such roads to gain access to the Kelantan Marble Quarry, subject to
certain conditions. Our Malaysian Legal Advisers have confirmed that since CEP is an agent of
KSEDC pursuant to the Kelstone Agreement, it has the right to such access. The Borang 7 is
currently valid until 31 December 2014.
The conditions attached to Borang 7 include the requirement to maintain the road and drain
conditions to a satisfactory standard as required by the relevant authority, and to allow use of the
roads and other infrastructure built or maintained by CEP by such other persons as the relevant
authority may determine. As at the Latest Practicable Date, there is no other party using the
access roads to and from the Kelantan Marble Quarry.
Licences, Permits and Approvals Pending Applications or Approval
Extension of marble quarrying area
In the process of the development of the Kelantan Marble Quarry, it was ascertained that part of
two (2) of our four (4) marble hills, which were collectively the subject of the lease granted to
KSEDC (and the Sub-Lease in turn granted to CEP), extends beyond the boundaries of Lot 1781,
and the Additional Site encompasses an additional area of approximately 10.17 ha. Kelstone has
confirmed in their letter dated 30 April 2013 that it has no objections to CEPs application for the
Additional Site and has, through KSEDC, made an application to the Gua Musang Land Office on
29 April 2013 to grant approval via a Permit 4B for the right to extract marble from the Additional
Site for a period of 30 years. As at the Latest Practicable Date, such application is pending
approval.
Additional storage and stockpiling areas for our marble products and expansion of our marble slab
processing facility
CEP has, through KSEDC, applied to the Kelantan Forestry Department for an additional Borang
4 and to the Gua Musang Land Office for two (2) temporary occupation licences to occupy and use
various parcels of land adjacent to the Kelantan Marble Quarry for storage and stockpiling of our
marble products as well as for the expansion of our marble slab processing plant. As at the Latest
Practicable Date, such applications are pending approval.
Marble slab processing facility and aggregates processing facility
As at the Latest Practicable Date, CEP has yet to commence active operations of the marble slab
processing facility or aggregates processing facility. This is because certain licences, permits or
approvals may be required to be obtained in connection with the operation of the marble slab
processing facility and the aggregates processing facility, for instance, the structures housing the
marble slab processing facility and the aggregates processing facility may require relevant
approval from the Gua Musang district council and the processing activity and operation of
equipment and machinery in connection therewith may fall under the ambit of the Factories and
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Machinery Act 1967 (the FMA) and may require the obtaining of the relevant licence or approval
thereunder. We will make the necessary applications for, and obtain such licences, permits or
approvals, to the extent applicable or required, prior to commencing operations of the marble slab
processing facility and the aggregates processing facility.
For substation at quarry site
We have recently completed the construction of a substation at the quarry site (for the
transmission of electricity from the national power grid) which will allow us to tap on the national
grid for electricity supply, as we are currently relying on diesel generators for the generation of
electricity at the quarry site, and if required, we will obtain the relevant approval from the Gua
Musang district council before operating the same.
PRC
Our Groups sales and marketing operations in the PRC are governed by various laws and
regulations and subject to various licences, permits and governmental approvals. A summary of
the key approvals, licences and permits that need to be obtained from the relevant authorities in
connection with the Marble Business in the PRC is set out below:
Approval from Bureau of Commerce (|{[)
Pursuant to the Wholly Foreign-Owned Enterprise Law of the PRC (P+1l|Jc)
and its Implementing Rules and other relevant laws and regulations, the establishment of a
wholly-owned foreign enterprise in the PRC and any material changes in the enterprise since its
establishment are subject to the approvals of the competent bureau of commerce.
As at the Latest Practicable Date, our only subsidiary in the PRC, namely Qingdao Terratech, has
obtained the approval for establishment and the approvals for all the material changes since its
establishment issued by the Commerce Bureau of Huangdao District in Qingdao
(l{).
Business Licences
Pursuant to the Wholly Foreign-Owned Enterprise Law of the PRC (P+1l|Jc),
the Company Law of the PRC (P+1l+c) and other relevant laws and regulations, to
establish a wholly-owned foreign enterprise in the PRC, the investor must apply for registration
with the relevant authority with oversight of administration for industry and commerce.
As at the Latest Practicable Date, Qingdao Terratech has obtained the relevant Business Licence
for establishment issued by Jiaonan Municipal Administration Bureau for Industry and Commerce
(]]{T|l) dated 26 June 2013 and has obtained the latest Business Licence dated
4 July 2014.
Import and Export
Pursuant to the Foreign Trade Law of the PRC (P+1l)c), foreign trade dealers
who are engaged in the import or export of goods shall register with the authority responsible for
foreign trade under the State Council or its authorised bodies, unless otherwise exempted. Where
a foreign trade dealer fails to register as required, the customs authority shall not process the
procedures of declaration, examination and release for the imported and exported goods.
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As at the Latest Practicable Date, Qingdao Terratech has obtained the Certificate of the Archival
Filing and Registration for Foreign Trade Operators (No. 01504925) (){`j()
(`j(;`: 01504925), issued by the Qingdao Municipal Bureau of Commerce ({
) dated 30 April 2014.
Foreign Exchange
According to the records of Capital Account Information System (l,|l|4!J)-;
J))) issued by the SAFE Jiaonan Bureau, Qingdao Terratech is duly registered with the
SAFE.
Disclosures
Singapore
Non-compliance with requisite timing relating to holding of annual general meetings and timing of
accounts to be presented to shareholders at such meetings by Terratech Resources
Since its incorporation and up to the Latest Practicable Date, Terratech Resources had been
imposed with and had paid certain fines to the ACRA as penalties for not holding certain of its
annual general meetings within the time prescribed therefor under Section 201 of the Companies
Act and/or for presenting accounts at such annual general meeting(s) which were more than six
(6) months before the date of such annual general meeting(s) (which is not in accordance with the
requirement under Section 201 of the Companies Act). Since then, there have not been any further
fines, penalties or issues raised by ACRA in respect of such non-compliance. The management
of Terratech Resources has since taken the relevant steps and procedures to prevent any
non-compliance from recurring in the future.
Procedural irregularities relating to the annual general meeting held by Terratech Resources in
2011
Certain procedural irregularities (Procedural Irregularities) arose in connection with the annual
general meeting of Terratech Resources held on 25 March 2011 (2011 AGM), which was held
just prior to the completion of the sale and transfer of 100% of the issued capital of Terratech
Resources by the then existing shareholders of Terratech Resources, Tritech International
(holding 93% of the total issued shares of Terratech Resources) and Chua Eng Pu (holding 7% of
the total issued shares of Terratech Resources) to TGL. The 2011 AGM was convened and held
with only the corporate representative of Tritech International attending the meeting even though
at the date of the meeting, Chua Eng Pu was still a registered shareholder of the company
(completion of the sale and transfer as aforesaid did not take place until 30 March 2011) and
hence notice of the meeting should have been given to him, and the meeting did not meet the
requisite quorum of two (2) shareholders as required under the Articles of Association.
Section 392 of the Companies Act provides, inter alia, that a proceeding under the Companies Act
is not invalidated by reason of any procedural irregularity (including the absence of a quorum at
a meeting and a defect, irregularity or deficiency of time or notice) unless, inter alia, the Court is
of the opinion that the irregularity has caused or may cause substantial injustice.
Notwithstanding the Procedural Irregularities, the Singapore Legal Advisers have advised that the
resolutions passed at the 2011 AGM can be considered to have been duly passed given that
Tritech International (who was present and voting at the meeting via its corporate representative)
had approved the same at the meeting and after taking into account of, inter alia, Section 392 of
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the Companies Act and representations from Terratech Resources and Tritech International that
(a) the Procedural Irregularities were essentially of a procedural nature; (b) the Procedural
Irregularities were made or caused inadvertently; and (c) no insubstantial injustice has been or is
likely to be caused to any person as a result of any of the Procedural Irregularities, in view of, inter
alia, the nature of the proceedings and resolutions passed at the said meeting and Chua Eng Pus
cessation as a shareholder of Terratech Resources with effect from 30 March 2011 pursuant to the
sale and transfer of his shares to TGL on such date.
Separately, Tritech International has also agreed and undertaken to indemnify Terratech
Resources from and against, inter alia, any and all claims, actions, demands, proceedings, losses,
liabilities, costs and expenses which it may incur or suffer in relation to the Procedural
Irregularities, for a period of three (3) years from the date of Listing, which will serve to mitigate
Terratech Resources potential risk of claims, actions, demands, proceedings, losses, liabilities,
costs and expenses arising from the Procedural Irregularities.
Malaysia
Compounded offences under the EQA
CEP paid fines of a total aggregate amount of RM4,000 in relation to the compounding of certain
offences under the EQA in February 2012 and July 2013, in relation to the failure to obtain the prior
written consent of KDE for the installation of diesel generators at the quarry site, and for not
labelling and keeping a proper inventory listing of certain prescribed substances such as
lubricants and oils. As the offences have been compounded and CEP has since paid the relevant
fines, CEP should no longer be liable for any further statutory penalties or enforcement actions for
the non-compliance.
Certain non-compliance by CEP in respect of maintenance of its corporate secretarial records
There were certain incidences of non-compliance by CEP in respect of the maintenance of its
corporate secretarial records, including the failure to file the requisite form with the Companies
Commission of Malaysia in respect of the appointment of a former company secretary of CEP in
January 2008 (who has resigned since 30 September 2009), and the failure to obtain and/or keep
records of the written consents to act as auditors of two (2) of the auditors previously appointed
by CEP (and who have both since resigned, in May 2008 and September 2009 respectively). Due
to practical constraints, CEP has not been able to rectify such non-compliances as at the Latest
Practicable Date. However, this should not pose a material risk to CEP or our Group since the
person(s) involved are no longer acting for CEP, and the amount of fines involved if enforcement
action(s) were to be taken against CEP is not material. As at the Latest Practicable Date, no
enforcement actions have been taken against CEP or any of its directors in respect of any of the
foregoing matters. The management of CEP has since taken the relevant steps and procedures
to prevent any similar non-compliance from recurring in the future.
APPLICABLE GOVERNMENT LAWS AND REGULATIONS
Singapore
As at the Latest Practicable Date, our Groups business operations in Singapore are not subject
to any specific legislation, regulatory controls or environmental issues other than those generally
applicable to companies and businesses operating in Singapore. Our Group has not experienced
any adverse effect on our business in complying with these laws and regulations and our Directors
believe that our Group has complied with all relevant laws and regulations.
133
Malaysia
Our Groups quarrying operations in Malaysia are governed by various laws and regulations. Apart
from the applicable laws and regulations referred to or as further described above under the
section entitled Licences, Permits and Approvals of this Offer Document, a summary of some of
these and other laws and regulations of Malaysia which are or may be applicable to us in
connection with the Marble Business as at the Latest Practicable Date is set out below:
Workplace Safety and Health Measures
Under the Occupational Safety and Health Act 1994 (the OSHA) of Malaysia, all employers with
40 or more employees at the place of work (or as the Director General of Occupational Safety and
Health directs) must establish a safety and health committee to more effectively promote and
develop safety and health measures for employees at the place of work. More specific duties of
the employers are laid out in the Occupational Safety and Health (Safety and Health Officer)
Regulation 1997 (the OSHA Regulations). A company is also required under the OSHA to
appoint a safety and health officer (Safety and Health Officer) who is required to possess such
qualifications or have received such training as prescribed under the OSHA Regulations. The
Safety and Health Officer is required to submit a monthly report pertaining to the safety and health
activities carried out by the company to the Department of Occupational Safety and Health.
The OSHA also requires a company to notify the nearest occupational safety and health office of
any accident, dangerous occurrence, occupational poisoning or occupational disease which has
occurred or is likely to occur at the place of work.
A company is also required to prepare a chemical health risk assessment report and keep a
register of chemicals hazardous to health in accordance to the Occupational Safety and Health
(Use and Standards of Exposure of Chemicals Hazardous to Health) Regulations 2000.
Failure to comply with the requirements of OSHA and its regulations is an offence which may
result in liability in fines, terms of imprisonment or both.
Requirements under the FMA
Pursuant to the FMA, no person shall operate any machinery in respect of which a certificate of
fitness is required unless a valid certificate of fitness is in force or install any machinery or
machineries in respect of which a certificate of fitness is prescribed without the written approval
of the Chief Inspector of Factories and Machineries.
The FMA also requires any person who intends to use a premise as a factory to submit a
prescribed form to the Chief Inspector of Factories and Machineries one (1) month before
commencing use of the premises as a factory. Every factory is also required to keep a factory
general register in accordance with Section 38 of the FMA.
Failure to comply with the requirements under the FMA and its regulations is an offence which may
result in liability in fines, terms of imprisonment or both.
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Use of explosives
Section 20 of the Quarry Rules provides that no explosives shall be brought into, stored in, placed
in, moved about or used in any quarry except of such standard, in such places, in such quantities,
in such manner and under such conditions as shall be approved by the Quarry Inspector (as
defined in the Quarry Rules).
As all the blasting works at the Kelantan Marble Quarry have been undertaken by third-party
subcontractor(s) and not by CEP, CEP is not required to have, and does not have any permits or
approvals to purchase or use any explosives.
Installation of electric generators
It is an offence under Section 9 of the Electricity Supply Act 1990 for a person to possess or
operate an installation of diesel generators unless the installation is registered on a valid
Certificate of Registration issued by the Energy Commission of Malaysia. Failure to comply with
the said provision would result in a fine.
As the installation of the diesel generators at the Kelantan Marble Quarry was done by a supplier
and not CEP, CEP is not required to secure such certificate.
Purchase and storage of diesel
It is an offence under the Control of Supplies Act 1961 and its regulations to purchase or to store
diesel fuel without approval. Failure to comply with such requirement would result in a fine.
As at the Latest Practicable Date, CEP has obtained the requisite permit which is valid from 17
June 2014 to 16 June 2015 for the purchase and storage of diesel at the Kelantan Marble Quarry.
PRC
Our business and operations in the PRC are governed by various laws and regulations and
subject to various licences, permits and governmental approvals. Apart from the applicable laws
and regulations referred to or as further described above under the section entitled Licences,
Permits and Approvals of this Offer Document, a summary of laws and regulations of the PRC
which have a material impact on our Groups business or operations is set out below:
Importation and Exportation of Goods
Pursuant to the Foreign Trade Law of the PRC (P+1l)c), foreign trade dealers
who are engaged in the import or export of goods or technologies shall register with the authority
responsible for foreign trade under the State Council or its authorised bodies, unless otherwise
exempted. Where a foreign trade dealer fails to register as required, the customs authority shall
not process the procedures of declaration, examination and release for the imported and exported
goods.
According to the Customs Law of the PRC (P+1l(=c), the consignee of import goods
and the consignor of export goods shall make an accurate declaration and submit the import or
export licensing documents of the goods and other relevant documents to the Custom office for
examination. All import and export of goods shall be subject to customs examination except in
particular cases.
135
Inspection and Quarantine
According to the Notice on Adjustment to the Catalogue of Import and Export Commodities
Subject to the Inspection and Quarantine by Entry-Exit Inspection and Quarantine Agencies
(2009)()]'}fif)|]fif)'}{,!(2009))), marble (Il
|), travertine (|) and their related products have been removed from the list of goods subject
to compulsory inspection, and as a result, no supervision of entry inspection and quarantine will
be imposed on marble, travertine and their related products.
Foreign Investment in Commercial Fields
Pursuant to the Administrative Measures for Foreign Investment in Commercial Fields ({|
{J|l/c), a foreign-invested commercial enterprise may, upon approval, engage in one
or more kinds of retailing business or wholesaling business, such as wholesaling of commodities
and importing and exporting of goods. The kind of commodities it manages must be specified in
the contents regarding the scope of business as prescribed in the contract or articles of
association.
Taxation and Fees
According to the Enterprise Income Tax Law (P+1lJ"|c) and its implementation
rules, a unified enterprise income tax rate of 25% is applied equally to both domestic enterprises
and foreign invested enterprises.
Pursuant to the Provisional Regulations of the PRC on Value-Added Tax (P+1l"j|"
/), all entities or individuals engaged in the sale of goods, the supply of processing services,
repairs and replacement services, and the importation of goods in the PRC are required to pay
value-added tax. Taxpayers engaged in sale or import of goods shall pay value-added tax at a tax
rate of 13% or 17% depending on the kind of goods.
According to the Notice of the Customs Tariff Commission of the State Council on the Tariff
Execution Plan of 2014 (l[=||{(=2014=|]7j), a temporary zero
import tax shall continue to apply to all marble quarry and granite and sandstone quarry, and a
temporary 1% import tax apply to all dolomite.
Labour
Pursuant to the PRC Labour Law (P+1l;c) and the PRC Labour Contract Law (
P+1l;|[c) and its Implementation Rules, to establish a labor relationship, a written
labor contract shall be concluded. These relevant laws and regulations set out specific provisions
in relation to the execution, the terms and the termination of an employment contract and the
rights and obligations of the employees and the employers. At the time of hiring, the employer
shall truthfully inform the employee as to the scope of work, working conditions, working place,
occupational hazards, work safety, salary and other matters which the employee requests to be
informed about. The entities shall also establish and develop systems for occupational safety and
sanitation, implement the applicable rules and standards on occupational safety and sanitation,
educate employees on occupational safety and sanitation, prevent accidents at work and reduce
occupational hazards.
Pursuant to the Interim Regulations on the Collection and Payment of Social Insurance Premiums
(!|)^"/), the Interim Measures concerning the Administration of the Registration
of Social Insurance (!|`j|l"/c) and the PRC Social Insurance Law (P+1
136
l!|c), employers in the PRC are required to contribute, on behalf of their employees, to
a number of social security funds, including funds for basic pension insurance, for unemployment
insurance, for basic medical insurance, for work-related injury insurance and for maternity
insurance, which are collectively referred to as social insurance.
Pursuant to the Regulations on the Administration of Housing Fund (1;f|l/), PRC
companies must register with the competent housing fund management center and establish a
housing fund account in an entrusted bank. Employers in the PRC are required to contribute to the
housing fund and the deposit rate shall not be less than 5% of an individual employees monthly
average wage during the preceding year.
Legal Representative
As at the Latest Practicable Date, the legal representative (c)() of Qingdao Terratech was
our Non-Executive Chairman, Dr Wang Xiaoning. Effective from 4 July 2014, the legal
representative of Qingdao Terratech has been changed to our CEO and Executive Director, Dr Loh
Chang Kaan. Under the PRC laws, a legal representative has the power to represent and act on
behalf of the company, and the latter is generally bound by, and assumes civil liability for the acts
of the former. According to the Articles of Association of Qingdao Terratech, the Chairman of the
Board is the legal representative of Qingdao Terratech, and is appointed by the shareholder
(namely, Terratech Resources). Since Qingdao Terratech has only one shareholder, in the event
that its legal representative were to be unable to duly perform his duties or is guilty of misconduct
when representing the company at any time, Qingdao Terratech may remove the legal
representative by way of shareholders resolutions passed by Terratech Resources. Under PRC
laws, any change of the legal representative of the company shall also be subject to compliance
with the relevant formalities for change of registration.
STAFF TRAINING
To date, training of our staff have either been on a need-to basis or on-the-job training as most of
our staff are experienced quarry workers from the PRC and thus do not require extensive training.
We also employ a few local workers from the Gua Musang area who are assigned to more senior
foremen who instruct and provide training to such workers.
For training in safety matters, we have a designated Safety and Health Officer as well as some of
our quarrying specialists from the PRC who train our staff in safety measures. Moving forward, we
will also put in place a more formal training framework where appropriate.
Our Group did not incur significant staff training expenses for FY2011, FY2012, FY2013 and
3Q2014.
ENVIRONMENTAL PROTECTION AND COMMUNITY DEVELOPMENT
CEPs policy in respect of environmental protection and community development is to develop and
manage its quarrying operations with an aim to maximise its compliance with the environmental
regulations, as set out in the section entitled Licences, Permits and Approvals of this Offer
Document, and minimise any harm to the environment while remaining sensitive to local cultural
and community expectations.
Our Group has made efforts to integrate with the local population in the vicinity where our
Kelantan Marble Quarry is located and to assist them in social and economic development. We
have provided the local community with employment opportunities, as well as training and skills
137
development for our local staff and provided business opportunities for local businesses. We have
also made donations to a local school and a mosque and are also developing a corporate social
responsibility policy which will formally address our Groups impact on the local community.
INFRASTRUCTURE
Power to the Kelantan Marble Quarry is currently provided by diesel generators with a total
capacity of approximately 1,300 kilowatts. In future, an additional supply from the national power
grid is planned to be obtained via a substation which has been recently constructed. Natural water
is sourced from local streams and is directly piped to the quarry site. Offices, dormitories and
maintenance facilities have been constructed on site. Communications are based on a satellite
telephone system.
Our Kelantan Marble Quarry is located along a well-maintained, off-road gravel track
approximately 2 km from a paved road. The paved road provides access to the town of Gua
Musang 22 km to the south. Gua Musang is a major town in the Kelantan state on the east side
of Peninsular Malaysia, 348 km by travelling distance from Kuala Lumpur, the capital city of
Malaysia. From Gua Musang, there is a well-established network of roads and railways. We use
ports in Pasir Gudang (in Johor state), Kuantan (in Pahang state) and Klang (in Selangor state),
which are easily accessible by road and/or rail from Gua Musang.
The proximity to public roads and railway stations as well as the availability of existing
infrastructure and communication access enable our Group to transport our marble products as
well as receive supplies of diesel and other equipment or materials required in our quarrying
operations from our suppliers readily.
SAFETY POLICY
Due to the nature of our business, incidents that may have detrimental effects on the health and
safety of our workers and the condition of our machinery and equipment may occur from time to
time. Our Group aims to conduct our business in such a manner that all reasonable and
practicable measures will be taken to protect our workers and the condition of our machinery and
equipment from such detrimental effects. In order for our Group to achieve our aim, our Group has
an existing set of environmental, health and safety policies to protect the health and safety of our
staff and workers and maintain the good working condition of our machinery and equipment.
Since the commencement of our operations till the Latest Practicable Date, no accidents that have
resulted in death or serious injuries have occurred at the quarrying site operated by our Group.
RESEARCH AND DEVELOPMENT
Due to the nature of our business, our Group does not carry out any research and development
activities.
COMPETITION
Given the clear geographical demarcation of marble quarrying rights and licences and the distinct
colour and texture of the marble of different marble quarries, quarrying companies in general do
not compete directly with one another in terms of the supply or source of marble.
138
However, in selling our marble products we will compete with the other producers of marble
products of a similar nature, quality and/or for a similar usage. In general, marbles of a different
colour, texture and glossiness complement rather than compete with each other.
Some of the biggest stone enterprises in the PRC, recognised as the old four stone giants and
new four stone giants, are also engaged in marble quarrying. The old four stone giants are
Universal Marble & Granite Group Ltd., Best Cheer Stone Group, Dongguan Freetrue Marble Co.,
Ltd. and Kangli Stone Group while the new four stone giants are Fujian Dongsheng Stone
Industrial Inc., Xishi Group Development Co., Ltd., Wanlong Stone Co., Ltd and Taxing Group.
Although these companies produce marble blocks like we do, most of their blocks are not sold to
third parties but used by themselves for the purpose of producing other marble products like slabs.
Hence, they may in fact be potential customers for our marble blocks which they will use as raw
materials for further processing into other marble products, although we may compete with them
in selling other marble products like slabs. For more information, please refer to the section
entitled Industry Overview of this Offer Document.
In Malaysia, in addition to our Kelantan Marble Quarry, there are only three (3) other marble
quarries, two (2) of which are located in Ipoh, Perak and one (1) which is located in Sabah.
However, these quarries are on a much smaller scale compared to our Kelantan Marble Quarry,
with a combined production capacity which is significantly lower than our Kelantan Marble Quarry,
and moreover most of the marble blocks produced from such quarries are consumed domestically.
For more information, please refer to the section entitled Industry Overview of this Offer
Document.
As mentioned in the section entitled Industry Overview Marble Prices in the PRC, in the PRC
market, our marble products will generally be compared against other comparable imported
marble products rather than domestic marble products, and in this connection, we anticipate that
our main competitors will be marble quarrying companies and/or marble product producers in
countries such as Greece, Italy and France, including Topalidis S.A., Staminalstone S.R.L., Amso
International S.A.S. and Boyut Stone Co. Ltd.
We believe that we are able to provide premium marble products which meet our customers
needs and preferences when competing with marble products from our competitors.
For a discussion of the competitive risks that are faced by our Group in our marble quarrying
operations, please refer to the section entitled Risk Factors of this Offer Document.
To the best of our Directors knowledge, there are no published statistics that can be used to
accurately measure the market share of our business.
COMPETITIVE STRENGTHS
Our Directors consider the following to be our core competitive strengths:
Our Kelantan Marble Quarry has sizable marble Reserves which can provide a stable supply
of our products to our customers
Our Kelantan Marble Quarry is located in Kelantan, a state situated on the east side of Peninsular
Malaysia and comprises four (4) hills (termed hill 1, hill 2A, hill 2B and hill 3), with an extraction
area of up to approximately 25.94 ha. Our marble Reserves over the area of our Kelantan Marble
Quarry are relatively consistent and homogeneous in colour, strength, texture and appearance.
139
According to the Qualified Persons Report, our Kelantan Marble Quarry has approximately 10.53
million m
3
of Proved Reserves and approximately 0.49 million m
3
of Probable Reserves. Based on
the Qualified Persons Report, it is estimated that approximately 70% of the Resource from our
hills will be suitable for the manufacture of marble blocks and slabs with the rest being suitable
for use in the production of aggregates and calcium carbonate powder.
Our current Production Plan is to extract approximately 230,000 m
3
per annum of dimension stone
blocks when we reach full production by FY2018 onwards, sufficient to provide a constant supply
of marble blocks, slabs and aggregate and (in due course) calcium carbonate powder.
According to the Qualified Persons Report, based on our projected production capacity, the
quarry life is close to 50 years which is in excess of the Sub-Lease Term. There is no certainty or
assurance that we will be able to secure a renewal of the Sub-Lease upon its expiry for such
further period or periods corresponding to the actual quarry life of the Kelantan Marble Quarry, as
further described in the section entitled Kelantan Marble Quarry Kelstone Agreement and the
Sub-Lease of the Kelantan Marble Quarry of this Offer Document. Please also refer to the section
entitled Kelantan Marble Quarry Tenure of the Marble Business of this Offer Document.
Marble, being a natural resource, has to be extracted from existing or newly discovered marble
quarries, and hence supply is limited. Our Directors believe that our sizable marble Reserves will
give us the ability to provide a stable supply of marble products to meet the growing demand for
marble products.
Our marble Reserves are homogeneous and consistent
According to the Qualified Persons Report, our Reserves appear to be homogeneous and
consistent over large areas and this means that the quality of our products in terms of physical
properties and texture can be sustained, which makes our products suitable for big
construction/infrastructure projects which demand large amounts of marble products with
consistent quality. For large-scale projects with high demand for marble, such as a major
residential development with many multi-storey blocks, our ability to guarantee the supply of a
stable or consistent grade or quality of marble over many years will be a competitive advantage.
Our marble products are exclusive to our Group
Marble is a natural resource and the marble found in a particular quarry or area will have different
characteristics in terms of, inter alia, colour and texture from marble found in another quarry or
area. As CEP holds the exclusive quarrying rights to the Kelantan Marble Quarry under the
Kelstone Agreement, our marble products will be exclusive to our Group, since only we can use
the marble extracted from the Kelantan Marble Quarry for the production of, inter alia, marble
blocks and slabs and customers who may like the aesthetic appeal or quality of our marble will
have a preference for our marble products compared to the marble products of our competitors.
Our marble Reserves are likely to have a relatively high purity calcium carbonate content
with less than 3% of other minerals
Marble aggregates are used as a raw material in the calcium carbonate powder business. Calcium
carbonate powder, which can be in ground form or precipitate form, has many industrial
applications. For use as ground calcium carbonate, the marble must be almost pure calcium
carbonate with minimal impurities. Where there are significant amounts of magnesium carbonate
in the rock, the powder produced from this is of a lower value and in a different market segment
compared to calcium carbonate powder.
140
Based on our current assessment of the chemical properties or composition of our marble
Reserves, our marble Reserves over the area of our Kelantan Marble Quarry are likely to have a
relatively high purity content of calcium carbonate, with less than 3% of other minerals. Assuming
the chemical properties or composition of our marble continue to consistently exhibit a high
content of calcium carbonate, high whiteness and brightness percentages, the calcium carbonate
powder generated from our marble will then be suitable for use in paints, rubber, paper and as a
filler for other products, thereby giving us the opportunity to sell our marble aggregates as raw
material to be used for the making of such powder, and to venture into the production of calcium
carbonate powder ourselves in due course. Malaysia is a long-recognised producer and user of
calcium carbonate powder and therefore there are established markets and value chains already
present for such opportunities.
It is our intention to sell our aggregates as a raw material for calcium carbonate powder and, in
due course, to sell calcium carbonate powder primarily in Indonesia and India.
Our Kelantan Marble Quarry produces marble products which are suitable for high-end
commercial and public buildings, such as hotels, office buildings, museums, memorial
halls and mosques, and residential uses
The value of marble is determined by its colour and texture. The colour of our marble varies from
grey to banded grey to dark grey but is mostly whitish-grey and light grey. According to the
Qualified Persons Report, our quarry contains high-quality marble Reserves, and as set out in the
Industry Report, the colour and texture of our marble products are similar to those of
well-recognised, premium international branded marble products currently available in the market,
based on the physical specifications and the appearance of our marble samples. Due to these
characteristics, our marble products are suitable for use in the decoration of high-end commercial
and public buildings, such as hotels, office buildings, museums, memorial halls and mosques, and
residential uses.
Our marble products, being foreign imports, should generally enjoy a premium in the PRC
market
Our Companys products, being considered foreign imported products in the PRC, should
generally enjoy a premium in pricing in the PRC market as compared to similar domestic products,
once the sales and marketing of our products become more established. This should give our
Company a competitive advantage over the PRC domestic marble products in terms of pricing and
margins.
Our marble products are competitive against other foreign products
The texture and quality of our marble products are of a high grade, and our Directors believe that
our marble products will compare favourably with other foreign marble products from Europe such
as France and Greece.
Our Directors also believe that since Malaysia is closer to the PRC compared to Europe, our
Company benefits from lower transportation costs and efficient delivery of marble products to the
PRC market which gives our Company a competitive advantage over our competitors in Europe.
141
Our Kelantan Marble Quarry is easily accessible and conveniently located
We intend to sell our marble blocks primarily in the PRC and our marble slabs primarily in
Malaysia. It is also our intention to sell our aggregate and calcium carbonate powder primarily in
Malaysia, Indonesia and India. We believe that a reliable transportation network will greatly
enhance the quality of our services in delivering our products in a timely and cost-efficient manner.
Our quarry is located approximately 169 km away from Ipoh, the capital of Perak State and
approximately 348 km travelling distance from Kuala Lumpur, the capital city of Malaysia. As set
out in the Industry Report, Ipoh is one of the major centres of calcium carbonate powder
production in Malaysia.
The well-established network of roads and railways allows us to transport our products in a
cost-efficient manner. Due to our convenient location, we are able to provide our customers with
cost-savings in the transportation of our marble blocks and marble slabs. For details of the
location of our Kelantan Marble Quarry and the surrounding transportation infrastructure, please
refer to the section entitled Business Overview Kelantan Marble Quarry of this Offer Document.
The nature of surface dimension stone quarrying involves lower capital expenditure and
lower operational risks compared to other types of quarrying and mining
Being a surface operation, our quarry does not require expensive and specialised machinery,
equipment or supporting structures compared to underground mining or quarrying which may
require more complex processes. This leads to lower capital expenditure. Furthermore the
uncertainties in resources that are typical of an underground operation do not exist as the
resource is visible.
We are confident of being able to contain or minimise the environmental and social impact
of our quarrying operations at the Kelantan Marble Quarry
There are no residents located within our Kelantan Marble Quarry site nor within the other areas
surrounding the Kelantan Marble Quarry. The nearest habitation is a small village approximately
100 m from the southern end of our Kelantan Marble Quarry across the Sungai Nenggiri River.
Further, since our marble quarrying operations involve limited use of explosives due to the
geographical layout and terrain of the quarry, and minimal vehicle movement due to our
convenient location and easy access, we are confident of containing or minimising the
environmental and social impact of our quarrying operations at the Kelantan Marble Quarry.
As part of our on-going environmental obligations, we have implemented an environmental
management plan and independent consultants regularly monitor our performance in terms of,
inter alia, air, noise and water impact and as at the Latest Practicable Date, no major
environmental concerns or issues have been identified.
We have a high level of operational safety
Operational safety has always been one of our priorities. Being above ground, our marble
quarrying operations are much safer than underground operations as it involves limited use of
explosives and risks associated with rockfalls and collapse of tunnels and there are no poisonous
gases generated. Access roads on site have been and will continue to be developed to have a
more gradual gradient and the road surfaces covered with gravel to improve traction. During
heavy rain, access to the elevated working areas is stopped.
142
EQM Ventures Sdn. Bhd. which prepares a report to support our application for the yearly renewal
of our Quarry Scheme Approval takes into account our performance in relation to operational
safety.
We have a proven and experienced management team
We place strong emphasis on our management team, including our Executive Director and
Executive Officers whose biographies are set out in the sections entitled Directors and Key
Executive Officers in this Offer Document, which is critical to the success of our business. Our
management team has collectively more than 37 years of experience in the marble industry.
Dr Loh Chang Kaan has been overseeing our Marble Business and has been responsible for
various aspects of the operation of the Marble Business since 5 July 2007. Allan Leow Eng Teng,
our Executive Officer, also has approximately 30 years of experience in the marble and
marble-related industry and has previously worked with other quarrying companies.
Our site teams have been recruited from similar operations in the PRC. We have also carefully
selected our other key personnel and professionals to ensure that they are equipped with the
relevant knowledge and experience in various aspects of our business, including investigation,
extraction and marketing of marble products. We have also recruited a senior sales person, who
has over 10 years of experience in the sales and marketing of marble in the PRC, to enhance the
sales and marketing function of our Group.
PROPERTIES AND FIXED ASSETS
The following table sets out all the properties owned by our Group or in which our Group has an
interest in, as at the Latest Practicable Date:
Location
Approximate
Land Area (m
2
) Tenure Description of Use
PN5329, Lot 5497,
Bandar Gua Musang,
Jajahan Gua Musang,
Kelantan (the Gua
Musang Property)
17,262 Until 15 June 2109 For the future
construction and
operation of calcium
carbonate powder
processing facilities
In relation to the Gua Musang Property, CEP has entered into a sale and purchase agreement with
KSEDC on 26 March 2013 to acquire the leasehold interest in the property for an aggregate
consideration of approximately RM1,021,565. The formal land title has yet to be granted to CEP
pending the completion of the construction of the calcium carbonate powder processing facility.
143
The following table sets out all the properties leased by our Group as at the Latest Practicable
Date:
Tenant/
Lessee Location
Approximate
Land Area
(m
2
) Tenure
Annual
Rental
Description
of Use Lessor
CEP Lot 1781,
PN4112,
Mukim Ulu
Nenggiri,
Jajahan Gua
Musang,
Kelantan
(Lot 1781)
259,400 Until
26 January
2044
Please refer
to section
entitled
Kelantan
Marble
Quarry
Key terms
of the
Kelstone
Agreement
of this Offer
Document
Development,
quarrying and
extraction of
marble and
construction
and operation
of supporting
infrastructure
and marble
slab
processing
facility
KSEDC
Terratech
Resources
31 Changi
South
Avenue 2
Singapore
486478
300 Two (2) years
from date of
Listing
Nil Display area
and office
use
Presscrete
Engineering
Terratech
Resources
2 Kaki Bukit
Place, #07-00
Eunos
Techpark,
Singapore
416180
200 Two (2) years
from date of
Listing
Nil Office use Tritech
Engineering
Terratech
Resources
No. 1202,
12th Floor,
Tower Two,
Lippo Centre,
No. 89
Queensway,
Hong Kong
(1)
115 From
16 August 2013
to
15 August 2015
HKD680,940 Office use Yunnan Tin
(Hong
Kong) Yuan
Xin
Company
Limited
Qingdao
Terratech
No. 188,
Minfeng
Road,
Jiaonan City,
Qingdao,
PRC
50 From
1 September
2013 to
30 August 2018
RMB3,600 Office use Tritech
Qingdao
Qingdao
Terratech,
Chengdu
Branch
No. 1,
Building 17th,
Western
International
Decoration
Stones Town
II, Pixian
County,
Chengdu
City, PRC
160 From
1 April 2014 to
30 March 2016
RMB80,000 Office use Sun
Tingyong
Note:
(1) In relation to the leased office premises in Hong Kong, we intend to use the premises in connection with future
promotion and liaison activities to be carried out in Hong Kong. As many of the marble industry related participants
(such as designers) are based in Hong Kong, it is envisaged that the Hong Kong office will be used, inter alia, to
house members of any sales and marketing staff to be appointed to interact or liaise with such participants and/or
to store our sample products and/or marketing materials.
144
Our fixed assets consisting of property, plant and equipment had an aggregate net book value of
approximately S$5.09 million as at 31 December 2013, particulars of which are set out below:
Description Usage/Purpose
Approximate
Net Book
Value
(S$000) Location
Equipment and machinery
for excavation, quarrying
and cutting of marble
dimension stone blocks,
including excavators,
diamond wire cutters and
disc saws
Quarrying and extraction of
dimension stone blocks
3,408 Kelantan
Marble Quarry
for cutting, drying, adhibiting
and polishing
Marble slab processing
facility
754 Kelantan
Marble Quarry
for crushing and screening
of marble pieces
Aggregates processing
facility
814 Kelantan
Marble Quarry
Cabins, containers and
diesel generators and
substation
Staff dormitories, site office
and supporting infrastructure
58 Kelantan
Marble Quarry
Vehicles including cargo
trucks, 4-wheel drive
vehicles and cars
Transportation 61 Kelantan
Marble Quarry
To the best of our Directors knowledge and belief, there are no regulatory requirements that may
materially affect our Groups utilisation of tangible fixed assets.
INDUSTRY OVERVIEW
The section is a summary of certain salient information, statistics and data presented in the
Industry Report, as confirmed by Antaike. Certain information, statistics and data presented
elsewhere in this Offer Document have been derived from this section and/or the Industry Report.
While our Directors have taken reasonable action to ensure that the information, statistics and
data is extracted accurately and fairly, and has been included in this Offer Document in its proper
form and context, they have not independently verified the accuracy of the relevant information,
statistics and data.
Stone or rock is a naturally occurring solid aggregate of minerals. Rock is called stone in the
dimension stone business in which the principal natural stone types are classified as either granite
or marble. Marble is softer than granite but has a higher compressive strength. In the dimension
stone business the first stage in the production of stone products is to cut the rock from a quarry
face into blocks of cuboid shape. Slabs cut from these blocks are the most common final product.
Dimension stone is therefore rock which has been quarried to obtain blocks or slabs of different
shapes and sizes.
145
Marble is a metamorphic rock resulting from the recrystallization of carbonate rocks but in the
dimension stone business the term marble refers to other rock types with a range of geological
classifications such as limestone, dolomite, travertine and serpentinite. Marble from different
locations each has a unique colour and pattern which makes it an ideal material for construction,
decoration and art works.
According to the U.S. Geological Survey, stone resources of the world are sufficient for
foreseeable needs. However resources can be limited on a local level, or occasionally on a
regional level, by the lack of a particular type of stone. In 2011, world stone block production was
116.0 million tonnes, an increase from 92.8 million tonnes in 2006, at a CAGR (2006 to 2011) of
4.6%. The PRC, Turkey, Iran, Italy and Brazil are the main stone producing countries in the world.
Global Marble Resource Distribution
Globally, marble resources are mainly located in Turkey, Italy, the PRC, Spain, Austria, Croatia,
Greece, Oman, Iran, Portugal, India, Jordan, Germany, Indonesia and Slovenia. World marble
block production increased from 53.4 million tonnes in 2006 to 68.5 million tonnes in 2011, at a
CAGR (2006 to 2011) of 5.1%. The PRC, Turkey and Italy are the major marble producing
countries in the world. Italy has an abundance of high quality marble resources which, over the
years, have been exported to many parts of the world, positioning the nation as a key marble
producer and exporter.
MARBLE BLOCKS AND SLABS
Marble Consumption
The PRC
According to the Industry Report, demand for stone products in the PRC has been experiencing
significant growth. This has been driven by the rapid development of the PRC construction
industry and the evolution from using coating materials as a facing material in the late 1970s to
mosaic and ceramic products in the late 1980s to stone products over the last 10 to 15 years. In
the PRC, white marble is gradually becoming one of the main decorative materials for high-quality
commercial and public buildings, as well as residential buildings.
Chinese white marble block consumption increased from 1.5 million tonnes in 2006 to 8.2 million
tonnes in 2012, at a CAGR (2006 to 2012) of 32%. From 2006 to 2012, Chinese white marble slab
consumption grew at a CAGR of 33.4% to in excess of 62 million m
2
or roughly 27% of total marble
consumption.
According to the China Stone Material Association (the CSMA), the decorative building materials
industry is the largest marble consuming sector, and accounts for an estimated 50% of total
marble consumption. According to the Industry Report, as at the end of 2011, arts and carvings,
of which monumental stone and stone carvings are the most common products, is the second
largest consumer with 30% of the consumption share. Marble furniture accounts for another 10%
of the consumption share while other products such as marble flowerpots, lamps and lanterns
account for the remaining 10%. The main markets for white marble consumption are economically
developed regions, such as Beijing, Shanghai, Guangzhou, Shenzhen, where the building and
decorative markets are developing fast.
146
The outlook for marble usage is also good. Based on the development trends predicted by the
PRC Government for the Chinese economy over the period 2013 to 2018, future plans for hotels,
office buildings and residential buildings, and government plans and estimations made by CSMA,
the growth rate of Chinese marble block and white marble block consumption is expected to keep
at a relatively high rate (around 20% to 25%) from 2013 to 2018. According to the 12th Five-Year
plan released by the Ministry of Industry and Information Technology of the PRC, the
consumption of marble slabs is expected to grow at a CAGR (2010 to 2015) of 17.6%. In the next
few years, stone consumption, including marble, will grow at a relatively high speed due to:
Increase in urbanisation, and with it the development of infrastructure, building and
construction industry in general.
Continued development of the PRC economy, with growth in income and standard of
living in the PRC, hence incurring demand of marble as a decorative material.
Growth in the PRC tourism industry in the near future, which is expected to accelerate
the development of high-end hotels, one of the largest marble slab consuming sectors. Some
existing hotels are also expected to be redecorated to meet higher standards.
Increase in demand for marble slabs from residential buildings, due to: (a) increases of
income and consumer needs from improved living standards; and (b) with standardising of
marble slab sizes leading to increased application in residential buildings.
Malaysia
The construction industry is the major end user of marble in Malaysia with the cement industry
being the largest direct consumer. Marble is also used as feedstock in the calcium carbonate
powder business and in 2012, the total production capacity of ground calcium carbonate powder
in Malaysia was around 900,000 tonnes. In terms of dimension stone products, the construction
industry is also the biggest consumer accounting for over 70% of the total consumption with the
remaining 30% mainly consumed by the furniture industry.
According to the Malaysian Department of Statistics, in 2005, the total value of marble consumed
by the Malaysian construction industry was RM120 million, of which 31% by value was contributed
by white marble. In 2010, the total value of marble consumed by the Malaysian construction
industry increased to RM153 million, of which 20% by value was contributed by white marble.
According to the Industry Report, consumption of marble as dimension stone is expected to grow
at an annual rate of 5% in 2013 to 2018, which is similar to the growth rate in the period from 2005
to 2010. By 2018, Malaysian marble consumption as dimension stone is expected to grow to
90,000 tonnes.
Marble Production
The PRC
The PRC is the worlds largest stone producer, and accounts for approximately 31% of the world
total production in 2011. However, the stone industry in the PRC is highly fragmented. According
to the CSMA, there are approximately 6,000 stone quarry enterprises of varying sizes, with a large
majority of stone enterprises being of a small to medium size. There are a number of large
147
companies producing marble but these specialise in colours other than white. Those specializing
in white marble tend to be only small and medium-sized companies and as a result, there are
insufficient white marble resources in the PRC.
White marble block production is estimated to have risen from 1.0 million tonnes in 2008 to 7.2
million tonnes in 2012, with an increase of 38.5% compared to production in 2011. According to
the Ministry of Land and Resources of the PRC, marble resources in the PRC suited for dimension
stone production were estimated at 1.5 billion m
3
in 2012, an increase of 7.1% year on year, with
the majority in the south-west (Sichuan and Yunnan) followed by the central and southern parts
(Guangxi and Hebei).
White marble is mainly processed into slabs for indoor decoration applications. According to the
CSMA, domestic white marble slab production accounts for around 25% of total marble slab
production in the PRC. Chinese above-designated-size stone enterprises
1
produced 32 million m
2
of white marble slabs in 2012, rising 31.1% year-on-year. This includes slabs originating from both
imported and domestic white marble.
Malaysia
At present, there are only four (4) marble quarries in Malaysia, two (2) of which are located in Ipoh,
Perak, one (1) located in Sabah and one (1) in Gua Musang, Kelantan (the Kelantan Marble
Quarry which we operate). Based on the Industry Report, Malaysian marble block production
(excluding the Kelantan Marble Quarry) is estimated at only approximately 3,000 m
3
to 5,000 m
3
per annum, or 8,000 tonnes to 14,000 tonnes per annum in 2012.
There are approximately 34 major manufacturers of stone slabs in Malaysia. Of these 19 are
marble slab producers, 13 of which are located in Perak, with the remaining six (6) located in
Kuala Lumpur, Selangor and Sabah. Stone World Sdn. Bhd., Hock Heng Stone Industries Bhd and
OP Industries (M) Sdn. Bhd. are the three largest marble product producers.
Marble Trade
The PRC
The PRC is both the worlds largest stone raw material importer and worlds largest stone product
exporter. The PRC imported 13.6 million tonnes of stone (including stone raw materials and stone
products) with a value of US$2.69 billion in 2012. Meanwhile, 24 million tonnes were exported with
a total value of US$5.37 billion. This represents a stone trade surplus of US$2.68 billion. The PRC
is a net importer of marble and sandstone, and is a net exporter of granite, slate and others
(including stone powder and other stone materials).
The PRC is a net importer of marble blocks because marble resources of high quality are mainly
located outside the country. The PRCs imports of marble raw material (comprising blocks) have
been increasing over the past five (5) years increasing from 3.40 million tonnes in 2006 to 8.68
million tonnes in 2012, representing a CAGR of 16.9%. Turkey, Egypt, Iran, Spain and Italy are the
main sources of Chinese marble raw material imports.
According to customs data, the PRC exported marble to around 170 countries. Both raw material
and marble products are exported with marble products taking a significantly greater share.
1
Enterprises with annual sales revenue of RMB5 million or more, and of RMB20 million or more after the National
Bureau of Statistics of the PRC increased the qualification threshold from 2011
148
Exports of marble products are from both domestic and imported marble blocks. Products from
domestic blocks, most of which are of low and medium quality, are exported to developing
countries whilst products from imported blocks are exported to developed countries.
Exports are driven by strong demand from countries such as South Korea, USA and other South
East Asian countries. Chinese marble product exports showed an upward trend from 2006 to 2011,
growing from 1.23 million tonnes to 2.27 million tonnes, recording a CAGR of 13.1%. Exports of
raw materials remained a small component with only 102,800 tonnes exported in 2011. Due to the
slowdown of the world economy, the export volume of Chinese marble products stabilised at 2.21
million tonnes in 2012.
Marble products processed from blocks such as slabs as well as monumental stones and carvings
and building stones comprise the majority of Chinese marble product exports, accounting for over
99% of the total marble product exports in 2012.
Due to limited high-quality domestic marble resources, the PRCs demand for high end products
is met from countries with recognised high quality marble resources. Spain, Italy, Taiwan and
Myanmar were the main exporters to the PRC, which accounted for 35.0%, 26.9%, 5.0% and 4.9%
of total Chinese marble product imports in 2012 respectively.
In 2012, the PRC imported only 34,200 tonnes of processed marble products.
Malaysia
Generally Malaysia is a stone exporting country. During the period from 2007 to 2012, imports
were between 140,000 tonnes per annum to 190,000 tonnes per annum whilst exports were in the
range of 600,000 tonnes per annum to 3.3 million tonnes per annum over the same period. 2008
was an exceptional year with 3.3 million tonnes exported but in the other years exports ranged
between 600,000 tonnes per annum and 1.0 million tonnes per annum.
In terms of marble, Malaysia has to rely on imports to satisfy demand and over the 2007 to 2012
period, approximately 45,000 tonnes to 80,000 tonnes per annum were imported. The PRC (38%)
and Iran (31%) were the main sources of imported marble in 2012. Marble stone products
exported comprise a very small percentage compared to other stone types and are estimated to
be less than 50,000 tonnes per annum. Singapore (75%) and the PRC (20%) were the major
destinations of marble exports in 2012.
Marble Prices in the PRC
Generally, imported white marble is considered a premium product commanding higher prices
than products from domestic producers. The premium on prices from imported marble compared
to domestic marble varies according to origin, track record, reliability and quality of products
supplied, market acceptability, texture, colour, pattern and availability.
149
Market prices of imported white marble products in 2012 together with their brand names are as
follows:
Market Prices of Imported White Marble Products in 2012
Origin Types
Name of
Producer
Price
(RMB/m
2
)
(1)
Price
(RMB/tonne)
(2)
Greece Airston (|!) Topalidis
S.A.
625 to 1,000
Ajax ((!) Topalidis
S.A.
250 to 380
Sivec (])9!) Topalidis
S.A.
200 to 1,000+
Italy Snow Flower White
(|!)
Staminalstone
S.R.L
2,500 to 3,000
Big White Flower
(I!|)
Staminalstone
S.R.L
5,000 to
6,000
Carrera White
())!)
Amso
International
S.A.S.
3,200 to
3,500
France Picasso White
('),!)
Boyut Stone
Co., Ltd.
400
Notes:
(1) Prices are quoted for standard 18 mm thick marble slabs.
(2) Prices quoted for marble blocks.
Our white marble products would be priced in comparison to the price of other comparative
imported marble products rather than the price of comparative domestic marble products.
According to the Industry Report, our white marble products are similar in type to the Picasso
White ('),!) white marble products originating from France so the pricing for our products
may be benchmarked accordingly, subject to the other relevant factors including the grade of our
products.
AGGREGATES
Aggregates, such as crushed rock, manufactured sand, and natural sand and gravel, are the most
used materials in the world. 25 billion tonnes of aggregates are used per annum, at an average
of four (4) tonnes per person.
The primary use of aggregates produced by our Group will be as a raw material for other industrial
uses and in particular the calcium carbonate powder business. Depending on the chemical
properties and in particular the balance between magnesium and calcium and also how much of
other constituents are present, there are also a range of other applications in glass, rubber,
plastics and chemicals. Marble aggregates are also a raw material used in cement, drainage,
roads and other construction uses.
150
As aggregates are regarded as a low value raw material, they are considered not worth trading
over long distances. Generally, the price of limestone aggregates is lower than that of granite
aggregates.
We intend to sell our aggregates mainly in Malaysia, India and Indonesia and it is anticipated that
our aggregates will be sold as a raw material for the production of calcium carbonate powder.
Malaysia aggregates production increased from 75.9 million tonnes in 2008 to around 122 million
tonnes in 2012, at a CAGR (2008 to 2012) of 12.6%. Malaysian aggregates consumption
increased from 72.6 million tonnes in 2008 to 111.6 million tonnes in 2012, at a CAGR (2006 to
2012) of 11.4%.
Malaysia is also a net exporter of aggregates. In 2012, Malaysia exported 10.5 million tonnes of
aggregates, while only importing 50,000 tonnes in the same year. Singapore is the most
significant destination for Malaysian aggregates exports, accounting for approximately 90% of
total Malaysian aggregate exports in 2012.
According to customs data, Singapore is the largest aggregates importer in Southeast Asia and
imported approximately 13 million tonnes of aggregates in 2012, at an average price of US$14 per
tonne. India is also an important aggregates importing country and imported approximately 1.3
million tonnes of aggregates in 2012, at an average price of US$15 per tonne. Indonesia imported
459,766 tonnes of aggregates at an average price of US$13 per tonne in 2012.
CALCIUM CARBONATE (LIMESTONE) POWDER
As noted in the previous section, calcium carbonate powder has many different industrial
applications. The Malaysian calcium carbonate powder industry is small compared to other
countries but nevertheless it is an important part of the nations industrial base. In 2012, there
were 29 calcium carbonate powder producers with a significant majority producing limestone
powder (ground and precipitated calcium carbonate powder) and the rest dolomite powder, which
is produced from magnesium rich limestone.
In 2011, Malaysian limestone powder production increased to 1.5 million tonnes, up 12.3% year
on year. In the same year, the production value of limestone powder was RM283.9 million, with an
average value of RM189 per tonne of limestone powder.
In 2011, Malaysian limestone powder apparent consumption was 1.34 million tonnes, an increase
of 8.9% year on year.
In 2010, approximately 1.36 million tonnes worth RM308.7 million of limestone powder were
produced in Malaysia, an increase of 104% year on year, according to the Minerals and
Geoscience Department of Malaysia.
The main target markets for the calcium carbonate powder business (which requires high calcium
purity) to be produced by our Company are India and Indonesia.
India has very large Reserves and Resources of limestone but over 90% of limestone production
is used in cement. Paper grade reserves are only five (5) million tonnes with resources of 5.3
million tonnes. Much of the limestone in India tends to be too dolomitic and too abrasive to be used
in ground calcium carbonate. The availability of marble waste for ground calcium carbonate is
limited and it tends to be expensive. Imports of high grade limestone rose from 66,205 tonnes in
2008/2009 to 111,887 tonnes in 2009/2010.
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Indonesia has limited Resources suitable for ground calcium carbonate production. Most
limestone deposits are quarried to produce dimension stone. Supplies are limited and expensive.
Eight (8) companies are known to produce ground calcium carbonate and precipitated calcium
carbonate with a total capacity of 1.0 million tonnes as of 2012.
PROSPECTS
The following discussion about the marble industrys prospects includes forward-looking
statements that involve risks and uncertainties. Actual results could differ from those that may be
projected or implied in these forward-looking statements. Please refer to the section entitled
Cautionary Note on Forward-Looking Statements of this Offer Document.
Our Directors believe that the prospects for the marble industry are encouraging due to the
following factors:
Chinese marble consumption is projected to increase
Based on the development trend predicted by the PRC Government for the Chinese economy over
the period 2013 to 2018, future plans for hotels, office buildings and residential buildings, and
government plans and estimations made by CSMA, the growth rate of Chinese marble block and
white marble block consumption are expected to keep at a relatively high rate from 2013 to 2018.
For more details, please refer to the section entitled Industry Report of this Offer Document.
Price outlook is stable
Over the next few years, marble prices in the PRC are forecasted to remain stable or to slightly
increase, due to reasons as further elaborated in the section entitled Trend Information of this
Offer Document.
A stable price outlook for marble coupled with increased marble consumption in the PRC will give
our Company opportunities to increase our revenue from increasing sales in such market.
Growth of the calcium carbonate powder business in Malaysia
Malaysia has a well-developed industry for the production of calcium carbonate powder, with a
number of large producers of ground calcium carbonate powder based in Ipoh. The anticipated
increase in the production of calcium carbonate powder in Malaysia will lead to an increase in
demand for aggregates which are used as the raw material for the production of calcium carbonate
powder, which should in turn increase demand for our aggregates. For more details, please refer
to the section entitled Industry Report of this Offer Document.
TREND INFORMATION
Based on the Industry Report and insofar as our Directors are aware, our Directors have observed
the following trends for the current financial year:
Price of marble will either increase or be maintained as the sources of marble, especially
the high-grade quality marble, are increasingly depleted
Marble, being a natural resource, and especially those of high-grade quality, is prone to depletion
due to extraction. As supply dwindles, the price of marble will naturally increase if demand stays
constant, and such increase will be greater with increased demand. Existing marble quarry
owners, particularly those with high grade and rare stones, may also attempt to control or manage
prices by controlling the production and/or supply of the marble.
152
Quarrying cost likely to increase with increased environmental protection and other costs
but may be slightly offset by technical advancements
With increasing global awareness and the focus on environmental protection in recent years, there
has been a trend of increasingly stricter laws, regulations and policies on environmental protection
as well as enforcement thereof. This will increase the cost of production for marble quarries. The
prices of marble have slightly risen due to the increase in quarrying costs.
Apart from environmental protection costs, other costs such as the cost of oil, labour and
electricity is also forecasted to increase in the near future.
However, our Directors expect that technical advancements in quarrying and processing of marble
in future will increase operational efficiency and to some extent offset the increase of
environmental protection costs and other costs.
In the event that there is an overall increase in costs, and our Company is unable to pass on all
or part of such costs to the customers, our Company will be faced with lower margins.
BUSINESS STRATEGIES AND FUTURE PLANS
Our Group intends to implement the following growth strategies and future plans to drive our future
growth and we aspire to become a leading marble provider through implementation of the
following business strategies:
Expansion of production capacity and processing facilities
We intend to expand our production capacity by further enhancing our quarrying and extracting
capabilities particularly at hills 1 and 2A where we are still in the process of completing the working
platforms, and in this connection we may need to construct infrastructure and acquire further
quarrying and extraction machineries and equipment. We may also need to construct further
infrastructure such as access roads to improve the accessibility of our Kelantan Marble Quarry.
In addition we intend to increase our marble slab processing facilities for which we may need to
acquire additional land, machineries, equipment and/or other existing marble slab processing
facilities.
We expect to significantly increase our production rate of dimension stone blocks, marble blocks
and marble slabs by adopting the following production plan (the Production Plan):
FY2014 FY2015 FY2016 FY2017 FY2018
Production
(1)
(m
3
) 19,500 103,000 160,000 208,000 230,000
Marble blocks
(2)
(m
3
) 2,100 24,000 39,000 46,000 57,000
Marble slabs
(3)
(m
2
) 44,000 175,000 443,000 708,000
Notes:
(1) This refers to the gross production rate and is the volume of the marble Reserves which is mined out as
dimension stone blocks. The part of the production volume that is not suitable to be sold either as marble
blocks and/or slabs can be sold or used, inter alia, as aggregates, which is used, inter alia, as a raw material
in the production of calcium carbonate powder to be used for specific industrial applications.
153
(2) This refers to dimension stone blocks of A and B classification which are considered to be of good shape.
Dimension stone blocks of A classification are usually sold directly as marble blocks while dimension stone
blocks of B classification are usually processed into marble slabs in the PRC prior to delivery to customers.
Poorer quality dimension stone blocks (those of C and D classification) will also be produced with a view to
processing them into marble slabs in Malaysia. The balance of the material which is not turned into blocks,
that is, the marble pieces that are retained on site, will be stockpiled and crushed and sold as aggregates or
used as a raw material for the production of calcium carbonate powder.
(3) The marble slab quantities refer to those marble slabs to be processed on-site at the Kelantan Marble Quarry
or in Malaysia (using dimension stone blocks of C and D classification).
Our current Production Plan is to extract approximately 230,000 m
3
per annum of dimension stone
blocks when we reach full production by FY2018 onwards.
Venture into the calcium carbonate powder production business
It is our intention in due course to be a producer of calcium carbonate powder. Towards this end,
CEP entered into a sale and purchase agreement with KSEDC on 26 March 2013 to acquire the
Gua Musang Property. Initial plans have also been prepared to construct a small-scale calcium
carbonate production powder plant on the Gua Musang Property. Assuming there is a positive
response, we intend to build a larger-scale facility on the Gua Musang Property. In this connection,
we intend to acquire machinery and equipment required for such facilities including relevant
crushing, screening, grinding and classification machines.
We may, should the opportunity arise, also acquire other calcium carbonate powder processing
facilities that are already in operation.
We will comply with any law or regulations or other requirements which may be applicable to us,
including, but not limited to, the provisions of the Catalist Rules, at the material time prior to
venturing into the calcium carbonate powder production business.
Acquisition of additional stone quarries
We plan to continue to increase our stone resources through possible strategic acquisitions of
marble, granite or other stone quarries and will evaluate acquisition opportunities as and when
they arise. Currently, our Group is not engaged in discussions with any party for acquisitions, joint
ventures or strategic alliances in connection with the foregoing. Should such opportunity arise, we
will seek approval, where necessary, from Shareholders and the relevant authorities as required
by the relevant laws and regulations.
Establishing a broad customer base with strong customer relationships
We plan to continue developing relationships with customers as well as distributors that have a
strong track record, established customer base and broad sales and marketing networks. We also
intend to increase customer and market exposure to our products by attending industry forums,
trade fairs and exhibitions where we can establish communication with marble industry
participants, property developers, contractors, professionals such as architects and designers
and others who have significant influence over customer preferences and purchasing decisions.
As we increase our production capacities and our products gain increased recognition in the
market, we expect to have stronger pricing power.
154
Maintaining a safe and environmentally friendly quarrying operation
We plan to complement and support our quarrying operations with a safe and environmentally
friendly environment. We have established procedures relating to environmental, health and
safety issues. We will continue to organise relevant training and workshops for our employees,
formulate manuals and policies from the safety and environmental protection perspective, and
monitor the safety and environmental standards of our working environment.
ORDER BOOK
As at the Latest Practicable Date, we had an order book for our marble products of approximately
S$23.46 million. A significant proportion of the order book is expected to be recognised as revenue
within FY2015. As our products are primarily used in the building and construction industry, the
value of our order book is not indicative of our revenue for any succeeding period as the delivery
of our marble products to our customers is dependent on our customers project schedules.
155
DIRECTORS
Our Board of Directors is entrusted with the responsibility for the overall management of our
Group. The particulars of each of our Directors are set out below:
Name Age Residential Address
Country of
Principal
Residence
Designation/
Principal Occupation
Dr Wang Xiaoning 52 Blk 352
Yishun Ring Road
#04-1724
Singapore 760352
Singapore Non-Executive Chairman
Dr Loh Chang
Kaan
45 238 Miltonia Close
Singapore 768305
Singapore CEO and Executive
Director
Aw Eng Hai 46 993 Bukit Timah Road
#02-12 Maplewoods
Singapore 589631
Singapore Lead Independent
Director
Prof. Zhao Jian 53 15 Magenta Court,
Mount Waverley,
Victoria 3149, Australia
Australia/
Singapore
Independent Director
Wong Kuan Meng
Mark
46 135 Sunset Way
#01-07
Singapore 069535
Singapore Independent Director
Information on the business and working experience, education and professional qualifications, if
any, and areas of responsibilities of our Directors are set out below:
Dr Wang Xiaoning was appointed as a Director of our Company on 15 March 2013 and the
Non-Executive Chairman of our Company on 18 June 2014. Dr Wang Xiaoning is the founder of
our Marble Business and our Group and has approximately seven (7) years of experience in the
marble quarrying industry. He is involved in advising on the strategic and business planning, and
development of our Group. Dr Wang Xiaoning is also an executive director and the managing
director of our Controlling Shareholder, TGL. Dr Wang Xiaoning will remain as an executive
director and the managing director of TGL after the Listing.
Dr Wang Xiaoning founded the business of the TGL Group in 2000, culminating in the listing of
TGL on Catalist on 21 August 2008. From 1996 to 2000, Dr Wang Xiaoning was the chief engineer
of Econ Piling Pte Ltd responsible for the management, control and supervision of a large number
of infrastructural projects. Dr Wang Xiaoning was a senior geotechnical engineer of Moh &
Associates (S) Pte Ltd from February 1992 to April 1996 responsible for the design and
supervision of infrastructural projects.
Dr Wang Xiaoning obtained a bachelor degree and a masters degree in engineering majoring in
hydrology and engineering geology from the Southwest China Jiaotong University in July 1984
and September 1986 respectively. He also obtained a doctoral degree of sciences majoring in
hydrology and engineering geology from the Institute of Geology of the Chinese Academy of
Sciences in May 1989 as well as a degree of doctor of philosophy from the Department of Civil
Engineering, Faculty of Engineering of the National University of Singapore in September 2003.
DIRECTORS, MANAGEMENT AND STAFF
156
Dr Wang Xiaoning was awarded the Best Entrepreneur Award by the Faculty of Engineering of the
National University of Singapore in September 2007. He is also a member of the Institute of
Engineers, Singapore, a registered specialist professional engineer (Geotechnical) in Singapore.
Dr Loh Chang Kaan, our CEO and Executive Director, was appointed as a director of our
Company on 15 March 2013, and is responsible for the overall management and day-to-day
operations of our Group. Dr Loh Chang Kaan has approximately seven (7) years of relevant
experience in the marble quarrying industry.
Dr Loh Chang Kaan was involved in the founding of the TGL Group together with Dr Wang
Xiaoning, and was an executive director of TGL since its listing in 2008. During his tenure at TGL,
Dr Loh Chang Kaan was responsible for the supervision of the ground and structural engineering
services business segment of the TGL Group. Since the acquisition of the Marble Business by
TGL in March 2011, Dr Loh Chang Kaan has been responsible for overseeing our Marble
Business, including being actively involved in the formulation of the business and operation
strategies as well as the day-to-day management of our Marble Business. With effect from the
date of the Listing, Dr Loh Chang Kaan will resign as a director of TGL and its subsidiaries to focus
exclusively on the Marble Business.
Prior to joining our Group and the TGL Group, Dr Loh Chang Kaan was an executive engineer of
BBR Geotechnics (S) Pte Ltd (BBR) from 1999 to 2000 where he was mainly responsible for
various geotechnical designs and instrumental works as well as site planning, design and
supervision of infrastructural projects. Prior to his employment with BBR, Dr Loh Chang Kaan was
a research engineer with the National University of Singapore from 1994 to 1999. In the course
of his employment with BBR, the TGL Group and our Group, Dr Loh Chang Kaan has extensive
experience in managing various civil engineering and infrastructural projects.
Dr Loh Chang Kaan obtained his bachelor degree of civil engineering, with first class honours, in
August 1993 from the University of Technology Malaysia. Dr Loh Chang Kaan subsequently
obtained a master of engineering in December 1996 and a degree of doctor of philosophy in
October 2004, both from the National University of Singapore. Dr Loh Chang Kaan is a registered
specialist professional engineer (Geotechnical) in Singapore and a registered professional
engineer in Malaysia. He is also a registered member of The Institution of Engineers, Malaysia.
Aw Eng Hai was appointed as the Lead Independent Director, the chairman of the Audit
Committee, a member of the Nominating Committee and a member of the Remuneration
Committee of our Company on 18 June 2014. Aw Eng Hai has been an independent director of our
Controlling Shareholder, TGL since September 2009 and will remain as an independent director
of TGL after the Listing.
Aw Eng Hai is a public accountant and a partner of Foo Kon Tan Grant Thornton LLP where he
is in charge of the various departments providing specialist advisory services. Aw Eng Hai has
more than 11 years of experience providing business advisory services to companies. Prior to
joining the commercial sector, Aw Eng Hai was an investigator in the Commercial Affairs
Department where he was involved in complex commercial fraud investigations. Aw Eng Hai
graduated with a Bachelor of Business Administration (Honours) from the National University of
Singapore in 1992 and is a practising member of the Institute of Singapore Chartered
Accountants, a fellow of the Association of Chartered Certified Accountants, a fellow of Insolvency
Practitioners Association of Singapore and a member of INSOL International.
157
Prof. Zhao Jian was appointed as an Independent Director, the chairman of the Remuneration
Committee, a member of the Audit Committee and a member of the Nominating Committee of our
Company on 18 June 2014. Between 1990 and 2005, Prof. Zhao Jian worked with Nanyang
Technological University as an Associate Professor and also led the Underground Technology and
Rock Engineering Program. Since October 2005, Prof. Zhao Jian is a professor and director of the
Rock Mechanics Laboratory of the Swiss Federal Institute of Technology Lausanne, Switzerland
where he directs research and engineering activities on rock mechanics and tunnelling. From
2013, he is also concurrently the Chair Professor of Geomechanics, Mineral and Resources of
Monash University, Australia.
Prof. Zhao Jian obtained his bachelor of science degree, majoring in civil engineering, from the
University of Leeds in 1983 and his doctor of philosophy (Rock Mechanics) from Imperial College
London in 1987. Prof. Zhao Jian is a chartered engineer (Mining) in United Kingdom and a
registered professional engineer in Singapore. Prof. Zhao Jian is a member of various societies,
including the International Society for Rock Mechanics, the International Association of
Engineering Geology and the Environment, the International Tunnelling and Underground Space
Association, the Swiss Society of Soil and Rock Mechanics, the Swiss Tunnelling Society, the
Singapore Tunnelling and Underground Construction Society and the Singapore Society of Rock
Mechanics and Engineering Geology.
Wong Kuan Meng Mark was appointed as an Independent Director, the chairman of the
Nominating Committee, a member of the Audit Committee and a member of the Remuneration
Committee of the Company on 18 June 2014. Wong Kuan Meng Mark is currently the Managing
Director of PK Wong & Associates LLC, a Singapore law corporation, and director in charge of the
corporate and commercial department. He has over 20 years of experience in corporate and
commercial matters, including advising and representing clients on joint venture and
shareholders agreements, and consortiums on the establishment of corporate structures and
tendering for infrastructure projects.
Wong Kuan Meng Mark holds a Bachelor of Laws (Honours) from the University of Hull. He is
qualified to practice as an advocate and solicitor in Singapore and is admitted on the rolls as a
Barrister-at-Law (Middle Temple), in London. He is also a member of the Singapore Academy of
Law, the Law Society of Singapore and the Singapore Institute of Arbitrators.
Our Directors will be briefed by the Singapore Legal Advisers, on their roles and responsibilities
as directors of a listed company. Dr Wang Xiaoning, Dr Loh Chang Kaan and Aw Eng Hai have
current experience as a director of a public listed company in Singapore, and are familiar with the
roles and responsibilities of a director of a public listed company in Singapore. Prof. Zhao Jian and
Wong Kuan Meng Mark have attended the relevant training by the Singapore Institute of Directors
on 6 May 2014 to update and familiarise themselves with the roles and responsibilities of a
director of a public listed company in Singapore.
Save as disclosed in this section and in the section entitled Shareholding and Ownership
Structure of this Offer Document, none of our Directors are related to each other, our Executive
Officers or our Substantial Shareholders.
Save as disclosed in this section and in the section entitled Management Reporting Structure of
this Offer Document, our Independent Directors do not have any existing business or professional
relationship of a material nature with our Group, our Directors or Substantial Shareholders.
158
The list of present and past directorships of each Director over the last five (5) years preceding
the date of this Offer Document, excluding those held in our Group, is set out below:
Name Present Directorships Past Directorships
Dr Wang Xiaoning Tritech Group Limited
Presscrete Engineering Pte Ltd
Syseng (S) Pte Ltd
Tritech Engineering & Testing
(Singapore) Pte Ltd
Tritech International Holdings
Pte. Ltd.
Tritech Geotechnic Pte Ltd
Tritech Instruments Pte. Ltd.
Tritech Consultants Pte. Ltd.
Tritech Water Technologies
Pte. Ltd.
Geosoft Pte. Ltd.
TGL Engineering Group Pte. Ltd.
Tritech Water & Environment
Group Limited
Tritech (Qingdao) Membrane
Industry Co., Ltd.
Beijing WiseTec Technologies
Co., Ltd.
Biotech Group Pte. Ltd.
Biotech Pharmaceutical
(Singapore) Pte. Ltd.
Cambridge Education Group
Pte. Ltd.
Dr Loh Chang Kaan Tritech Group Limited
(1)
Presscrete Engineering Pte Ltd
(1)
Tritech Engineering & Testing
(Singapore) Pte Ltd
(1)
Tritech Geotechnic Pte Ltd
(1)
Tritech Instruments Pte. Ltd.
(1)
Tritech Consultants Pte. Ltd.
(1)
Tritech Water Technologies
Pte. Ltd.
(1)
TGL Engineering Group Pte.
Ltd.
(1)
Terra Tritech Engineering (M)
Sdn. Bhd.
(1)
Tritech International Holdings
Pte. Ltd.
Geosoft Pte. Ltd.
Biotech Group Pte. Ltd.
Cambridge Education Group
Pte. Ltd.
Aw Eng Hai Tritech Group Limited
Grant Thornton Advisory Services
Pte Ltd
Grant Thornton Transaction
Services Pte Ltd
Tritech (Qingdao) Membrane
Industry Co., Ltd.
Nil
Prof. Zhao Jian Nil Nil
159
Wong Kuan Meng Mark Alert Disaster Control (Asia)
Pte. Ltd.
Apex Dynamic Holdings Limited
Eagle Group Associates Limited
Eurocal Asia Pte Ltd
Ojas Venture Partners Pte. Ltd.
PK Wong & Associates LLC
Testaments & Trusts Pte. Ltd.
Solar Silicon Resources Group
Pte. Ltd.
Iris Property Pte. Ltd.
Bluebird Property Pte. Ltd.
Tractus Asia Consulting Pte. Ltd.
Yellowroot Consulting Pte. Ltd.
Vinatec Pte. Ltd.
Pittas & Associates Pte Ltd
Note:
(1) Dr Loh Chang Kaan will resign as a director of these companies under the TGL Group with effect from the date of
Listing.
KEY EXECUTIVE OFFICERS
The day-to-day operations are entrusted to our Executive Director who is assisted by an
experienced and qualified team of Executive Officers. The particulars of our Executive Officers are
set out below:
Name Age Residential Address
Country of
Principal
Residence Principal Occupation
Mui Siew Yun 50 90 St Francis Road
#08-04
Singapore 328071
Singapore Financial Controller
Allan Leow Eng Teng 64 56 Persiaran Bekor
3 Taman Pertama
30100 Ipoh
Perak, Malaysia
Malaysia Project Director
The business and working experience, education and professional qualifications, if any, and areas
of responsibility of our Executive Officers are set out below:
Mui Siew Yun was appointed as our Financial Controller on 20 June 2014. She is responsible for
matters relating to accounting, finance, compliance and the reporting requirements of our Group.
Prior to such appointment, she was the financial controller of TGL, where she was responsible for
leading the finance team and providing overall management of the operations of the finance
department of TGL. Since the acquisition of the Marble Business by TGL in 2011, Mui Siew Yun
has been involved in the accounting and financial matters of our Group which became a subsidiary
of TGL. Since September 2013, Mui Siew Yun has undertaken a dual portfolio whereby she has
also been directly responsible for the accounting and finance matters of our Group. With effect
from 20 June 2014, Mui Siew Yun has resigned as financial controller of TGL to focus exclusively
on our Group.
160
Mui Siew Yun joined the TGL Group as a senior accountant in 2005 and was promoted to the
position of financial controller of TGL since 1 July 2011. Prior to joining the TGL Group, Mui Siew
Yun worked as an accounts controller and accountant for Oxford Hotel Pte Ltd and Longgrand Pte
Ltd respectively during the period from 1996 to 2004. Mui Siew Yun is a fellow of the Association
of Chartered Certified Accountants.
Allan Leow Eng Teng was appointed as a Project Director of CEP in April 2012 and is responsible
for overseeing the operations of the Kelantan Marble Quarry as well as the marketing of our
marble products. Allan Leow Eng Teng has approximately 30 years of experience in the marble
and marble-related industry and has experience throughout the marble industry chain from
quarrying, crushing, grinding, burning and cutting.
Prior to joining our Group, from 2003 to 2012, Allan Leow Eng Teng was self-employed and acted
as a marble product consultant where he provided advice to his clients leveraging on his
experience in the marble industry. From 1999 to 2003, Allan Leow Eng Teng was an executive
director of S.R. Marble Sdn. Bhd. where he was responsible for developing and steering the
direction of its business. From July 1994 to 1997, Allan Leow Eng Teng was the marketing director
of Mega First Corporation Bhd (a subsidiary of LKK Holdings Group) and was in charge of setting
up a systematic and initiative driven sales and marketing team and was personally involved in
dealing with customers and their requirements. From July 1994 to June 1996, Allan Leow Eng
Teng was the marketing consultant of Lime and Lime Products (Sdn.) Bhd. where he was
responsible for preparing quarterly market reports on the market outlook for marble-based
industrial products, marble and granite slabs. From 1983 to 1994, Allan Leow Eng Teng was the
managing director of Sungai Raja Marble Industries Sdn Bhd which was engaged in the production
of marble slabs and at the same time operated four (4) quarries at Keramat Simpai Pulai.
Save as disclosed in this section and in the section entitled Shareholding and Ownership
Structure of this Offer Document, there is no family relationship between any of our Directors
and/or Executive Officers, or between any of our Directors, Executive Officers and Substantial
Shareholders.
To the best of our knowledge, there is no arrangement or understanding with any of our
Substantial Shareholders, customers, suppliers or any other person, pursuant to which any of our
Directors or Executive Officers was selected as our Director or Executive Officer.
The list of present and past directorships of each Executive Officer over the last five (5) years
preceding the date of this Offer Document, excluding those held in our Company, is set out below:
Mui Siew Yun Nil Nil
Allan Leow Eng Teng Nil Nil
161
MANAGEMENT REPORTING STRUCTURE
Our management reporting structure is as follows:
Chief Executive Officer
and Executive Director
Dr Loh Chang Kaan
Board of Directors
Project Director
Allan Leow Eng Teng
Financial Controller
Mui Siew Yun
Our non-Executive Chairman, Dr Wang Xiaoning, has been involved in advising our Group on the
strategic and business planning, and development of our Group, and will continue to undertake
such role after the Listing.
As Dr Wang Xiaoning was a founder of the Marble Business, as further detailed in the section
entitled History of this Offer Document, his continued role in our Group is intended to, inter alia,
preserve continuity in our Marble Business given his intimate knowledge of the business. Further,
as our Group will be focusing on export sales, in particular sales to the PRC market, given Dr
Wang Xiaonings knowledge and familiarity with the PRC market, his contribution to the sales and
marketing and business development strategies for our Marble Business will be important to the
development of our Marble Business and our Group after the Listing.
Dr Wang Xiaoning is not currently involved in, and will not be involved in the day-to-day operations
of our Group after the Listing. The majority of Dr Wang Xiaonings time and efforts will continue
to be expended on his role and responsibilities as an executive director and managing director of
TGL, where he is currently responsible for supervising and overseeing the water-related business
segment of the TGL Group and leading the overall strategic direction, planning and development
for the TGL Group. We contemplate however that it should be possible for Dr Wang Xiaoning to
gradually reduce his involvement in our Group and our Marble Business once the strategic
direction of our Group is more established and our Marble Business becomes more mature.
We have appointed Aw Eng Hai as our Lead Independent Director in view of, inter alia, his relevant
accounting and financial background, experience and credentials. His familiarity with our business
will also facilitate and make it easier for our Board of Directors to gain a more immediate
understanding of and make timely contributions to our business and operations. Although Aw Eng
Hai is concurrently an independent director of TGL and our Independent Director, he sits on our
Board of Directors in his own personal capacity and not as a nominee or representative of TGL,
and both TGL and Aw Eng Hai have confirmed in writing to our Nominating Committee and our
162
Board, inter alia, that Aw Eng Hai is not accustomed or obliged or bound, whether on a formal or
informal basis, to act in accordance with the directions, instructions or wishes of TGL in relation
to the corporate affairs of our Group, and is otherwise able and willing to exercise independent
business judgment with a view to the best interests of our Company and our Group.
Dr Wang Xiaoning and Aw Eng Hai will abstain from voting on any Board resolution which pertains
to any transaction between our Group and the TGL Group.
EMPLOYEES
All the full-time employees and other staff of our Group for the past three (3) financial years ended
31 March 2011, 2012 and 2013 and the financial period ended 31 December 2013 are based in
Singapore, Malaysia and the PRC. The functional distribution of full-time employees and other
staff of our Group as at 31 March 2011, 2012 and 2013, 31 December 2013 and as at the Latest
Practicable Date was as follows:
As at
31 March
2011
As at
31 March
2012
As at
31 March
2013
As at
31 December
2013
As at
Latest
Practicable
Date
Management
(1)
1 1 1 1
Finance, accounts and
administration
(2)
1 2 7 7
Sales and Marketing 4 3
Operations 26 58 55 58
Total 28 61 67 69
Notes:
(1) Our CEO and Executive Director, Dr Loh Chang Kaan was seconded to our Group from TGL during the period under
review.
(2) Our Financial Controller, Mui Siew Yun undertook a dual portfolio since September 2013 whereby she was
responsible for the accounting and finance matters of our Group and the TGL Group.
The geographical distribution of our Groups full-time employees and other staff as at 31 March
2011, 2012 and 2013, 31 December 2013 and as at the Latest Practicable Date are as follows:
Geographical
As at
31 March
2011
As at
31 March
2012
As at
31 March
2013
As at
31 December
2013
As at
Latest
Practicable
Date
Singapore 1 2 7 6
Malaysia 27 59 57 60
PRC 3 3
Total 28 61 67 69
163
The number of employees increased from 28 to 69 in line with the expansion of the business plans
and scope of our Group. Our Group does not employ a significant number of temporary
employees.
The management of our Group is of the opinion that our dedicated and efficient employees are
instrumental to our success. The relationship between the management of our Group and our
employees is good and is expected to continue and remain as such in the future. The employees
of our Group are not unionised and there have been no industrial disputes with the employees or
any work stoppage which has affected our Groups operations since we commenced operations.
Other than amounts set aside or accrued in respect of mandatory employee funds, we have not
set aside or accrued any amount of money to provide for pension, retirement or similar benefits
to our employees.
REMUNERATION OF DIRECTORS, EXECUTIVE OFFICERS AND RELATED EMPLOYEES
Directors and Executive Officers
The compensation paid to our Directors and our Executive Officers by our Group for FY2013 and
FY2014 (being the two (2) most recent completed financial years), and the estimated
compensation to be paid to our Directors and our Executive Officers for FY2015 by our Group (on
an aggregate basis and in remuneration bands
(1)
) are as follows:
FY2013 FY2014
FY2015
(Estimated)
Directors
Dr Wang Xiaoning A
Dr Loh Chang Kaan
(2)
(2)
B
(3)
Aw Eng Hai A
Prof. Zhao Jian A
Wong Kuan Meng Mark A
Executive Officers
Mui Siew Yun
(4)
(4)
A
Allan Leow Eng Teng A A A
Notes:
(1) A means between S$1 and S$250,000 per annum.
B means between S$250,001 and S$499,999 per annum.
(2) Dr Loh Chang Kaan was seconded to our Group from TGL during the relevant periods and management fees of
S$240,000 and S$540,975 was charged by TGL for FY2013 and FY2014 for management services provided,
including the secondment of Dr Loh Chang Kaans services.
(3) For the purpose of this estimation, no account is made for the bonuses or profit sharing that our CEO and Executive
Director, Dr Loh Chang Kaan is entitled under his service agreement, the details of which are set out under the
section Service Agreements of this Offer Document.
(4) Mui Siew Yun undertook a dual portfolio whereby she was responsible for the accounting and finance matters of our
Group and the TGL Group during the relevant periods at no cost to our Group.
164
Related Employees
As at the Latest Practicable Date, there was no employee who was related to the Directors and
Substantial Shareholders of our Company.
SERVICE AGREEMENTS
On 20 June 2014, our Company entered into separate service agreements (collectively, the
Service Agreements and individually, the Service Agreement) with Dr Loh Chang Kaan and
Mui Siew Yun (collectively, the Executives and individually, the Executive).
Each Service Agreement will continue for an initial period of five (5) years from the date of Listing
(Initial Term) and upon the expiry of the Initial Term, the employment of each Executive may, at
the option of our Company, be extended for such further period on terms and conditions to be
agreed between the parties. At least three (3) months before the end of the Initial Term, our
Company shall give the Executive written notice of whether we intend to exercise our option to
extend the term of the employment of the Executive beyond the Initial Term and the terms on
which such term is extended. Either party may terminate the Service Agreement by giving to the
other party not less than six (6) months written notice, or in lieu of notice, payment of an amount
equivalent to six (6) months salary based on the Executives last drawn monthly salary.
Notwithstanding any other provisions of the Service Agreements, our Company shall be entitled
to terminate the appointment of any Executive, but without prejudice to the rights and remedies
of our Company for any breach of the Service Agreement by such Executive and to the Executives
continuing obligations under the Service Agreement in, inter alia, any of the following cases:
(a) if the Executive is guilty of any gross default or grave misconduct in connection with or
affecting the business of our Group;
(b) in the event of any serious or repeated breach or non-observance by the Executive of any
of the stipulations contained in the Service Agreement;
(c) if the Executive becomes bankrupt or has a receiving order made against him or makes any
general composition with his creditors; or
(d) if the Executive suffers any physical or mental ailment or incapacity which prevents him from
performing any of the duties and obligations imposed by the Service Agreement.
There are no benefits payable to the Executives upon termination of their employment with our
Group.
Pursuant to the terms of the respective Service Agreements, the monthly salary of the respective
Executives will be as follows:
Monthly salary S$
Dr Loh Chang Kaan 35,000
Mui Siew Yun 10,000
165
Under the Service Agreements, the remuneration of the Executives is subject to review by our
Remuneration Committee on a yearly basis. The relevant Executive shall abstain from voting in
respect of any resolution or decision to be made by the Board in relation to the terms and renewal
of his or her Service Agreement (if applicable).
The Service Agreements provide that, during the continuance of their employment, the Executives
shall not, except with the consent in writing of our Company (such consent as may be given or
withheld or given with such conditions as our Company may determine in its sole and absolute
discretion) either on their own account or in conjunction with or on behalf of any person, firm or
company, directly or indirectly, carry on or be engaged, concerned or interested in, in any capacity
whether as shareholder, director, employee, partner, agent or otherwise and whether for reward
or gratuitously, any trade or business or occupation of a similar nature to or competitive with that
carried on by our Group. The Service Agreement between our Company and Dr Loh Chang Kaan
also provides for the aforesaid undertaking to be effective for the period of six (6) months after the
termination of his employment with our Group.
Save as disclosed below, there are no bonus or profit sharing plans or any other profit-linked
agreements or arrangements between our Company and any of our Directors or Executive
Officers.
Under the Service Agreement between our Company and Dr Loh Chang Kaan, Dr Loh Chang
Kaan is entitled to, inter alia:
(i) an annual wage supplement of one-month payable in arrears at the end of each year of
employment;
(ii) a monthly transportation allowance based on the actual amount of petrol, maintenance,
parking fee, road tax and insurance incurred, payable in arrears at the end of each month of
employment; and
(iii) in respect of each financial year of our Company falling within the tenure of the Service
Agreement, an incentive bonus based on the audited consolidated net profit before tax,
extraordinary items, exceptional items, minority interests and before the abovementioned
incentive bonus of the Group (NPBT) for such financial year, calculated as follows:
NPBT Attained Incentive Bonus
(i) For the first S$5 million 1.2% of the NPBT
(ii) More than S$5 million
but less than S$8 million
1.2% of the NPBT for the first S$5 million plus 1.8% on
the excess amount of NPBT from S$5,000,001
onward
(iii) More than S$8 million
but less than S$10 million
1.2% of the NPBT for the first S$5 million plus 1.8% of
the NPBT from S$5,000,001 to S$8,000,000 plus
3.0% on the excess amount of NPBT from
S$8,000,001 onward
(iv) More than S$10 million 1.2% of the NPBT for the first S$5 million plus 1.8% of
the NPBT from S$5,000,001 to S$8,000,000 plus
3.0% of the NPBT from S$8,000,001 to S$10,000,000
plus 3.5% on the excess amount of NPBT from
S$10,000,001 onward
166
Save as disclosed above, there are no existing or proposed service contracts entered into or to
be entered into by our Company or any of the subsidiaries of our Group with any of the Directors
or Executive Officers which provides for compensation in the form of stock options, or pension,
retirement or other similar benefits, or other benefits, upon the termination of employment with our
Group.
Subject to applicable laws and listing rules and the approvals of the Shareholders of our Company,
the SGX-ST and other regulatory authorities, where necessary, the Executives shall be eligible to
participate in any other employee scheme or plan to be implemented by our Company on such
terms as may be determined by our Remuneration Committee at its sole and absolute discretion.
167
Corporate governance refers to the processes and structure by which the business and affairs of
a company are directed and managed, in order to enhance long-term shareholder value through
enhancing corporate performance and accountability. Good corporate governance therefore
embodies both enterprise (performance) and accountability (conformance).
Our Directors recognise the importance of corporate governance and the offering of high
standards of accountability to our Shareholders, and will exert best efforts to implement the good
practices recommended in the Code of Corporate Governance 2012 and outlined in the Best
Practices Guide issued by SGX-ST. As a result, our Company has implemented the corporate
governance model as set out below:
Audit Committee
Chairman
Aw Eng Hai
Members
Wong Kuan Meng Mark
Prof. Zhao Jian
Chairman
Prof. Zhao Jian
Members
Wong Kuan Meng Mark
Aw Eng Hai
Dr Wang Xiaoning
Chairman
Wong Kuan Meng Mark
Members
Prof. Zhao Jian
Aw Eng Hai
Dr Wang Xiaoning
Board of Directors
Remuneration
Committee
Nominating
Committee
Based on the above, our Directors are of the view that there are sufficient safeguards and checks
to ensure that the process of decision-making by our Board is independent and based on
collective decision-making without our Non-Executive Chairman being able to exercise
considerable power or influence.
Board of Directors
We currently have five (5) Directors on our Board, comprising one (1) Executive Director, one (1)
Non-Executive Director and three (3) Independent Directors.
The Board will have overall responsibility for the corporate governance of our Group so as to
protect and enhance long-term shareholder value. It will set the overall strategy for our Group and
supervise executive management and monitor their performance. Apart from its statutory
responsibilities, the Board will be responsible for:
(i) reviewing the financial performance and condition of our Group;
(ii) approving our Groups strategic plans, key operational initiatives, major investment and
funding decisions; and
(iii) identifying principal risks of our Groups business and ensuring the implementation of
appropriate systems to manage the risks.
CORPORATE GOVERNANCE
168
The Board will hold quarterly meetings every year, with additional meetings for particular matters
convened when necessary. Our Directors shall also periodically review the internal control and
risk management systems of our Group to ensure that there are sufficient guidelines and
procedures in place to monitor its operations.
Audit Committee
Our Audit Committee, represented in the chart above, comprises our Independent Directors, Aw
Eng Hai, Prof. Zhao Jian and Wong Kuan Meng Mark. The Chairman of our Audit Committee is Aw
Eng Hai.
Our business and operations are presently under the management and close supervision of our
Executive Director who are assisted by our Executive Officers.
After our listing on Catalist, our Executive Director and Executive Officers will manage the
business and operations of our Group. Our Audit Committee will assist our Board of Directors with
regards to discharging its responsibility to safeguard our Companys assets, maintain adequate
accounting records, and develop and maintain effective systems of internal controls with an
overall objective to ensure that our management has created and maintained an effective control
environment in our Group, and that our management demonstrates and stimulates the necessary
aspects of our Groups internal control structure among all parties. Our Audit Committee will
provide a channel of communication between our Board, our management and the external
auditors of our Company on matters relating to audit.
Our Directors recognise the importance of corporate governance and the offering of high
standards of accountability to our Shareholders. Our Audit Committee will meet at least quarterly
to discuss and perform the following (non-exhaustive) functions where applicable:
(a) review with the external auditors the scope of their audit plan, their evaluation of the system
of internal controls, the results of their audit report, their management letter and our
managements response;
(b) review with the internal auditors the internal audit plan and their evaluation of the adequacy
and effectiveness of our internal control and accounting system, including financial,
operational, compliance and information technology controls, before submission of the
results of such review to our Board for approval prior to the incorporation of such results in
our annual report;
(c) review the financial statements before submission to our Board for approval, focusing in
particular, on changes in accounting policies and practices, significant financial reporting
issues and judgements, major risk areas, significant adjustments resulting from the audit, the
going concern statement, compliance with accounting standards as well as compliance with
any stock exchange and statutory or regulatory requirements so as to ensure the integrity of
the financial statements of our Company and any announcements relating to our financial
performance;
(d) review the internal control and procedures and ensure co-ordination between the external
auditors and our management, reviewing the assistance given by our management to the
auditors, and discuss problems and concerns, if any, arising from the interim and final audits,
and any matters which the auditors may wish to discuss (in the absence of our management
where necessary);
169
(e) review and discuss with the external auditors any suspected fraud or irregularity, or
suspected infringement of any relevant laws, rules or regulations, which has or is likely to
have a material impact on our Groups operating results or financial position, and our
managements response;
(f) review, where applicable, the scope and results of the internal audit procedures;
(g) review and approve interested person transactions and review procedures thereof;
(h) review potential conflicts of interest (if any) and to set out a framework to resolve or mitigate
any potential conflicts of interests;
(i) conduct periodic review of foreign exchange transactions and hedging policies (if any)
undertaken by our Group;
(j) consider the appointment or re-appointment of the external auditors, including their
independence and objectivity, and matters relating to resignation or dismissal of the auditors
and their remuneration and terms of engagement;
(k) review our Groups compliance with such functions and duties as may be required under the
relevant statutes or the Catalist Rules, including such amendments made thereto from time
to time;
(l) undertake such other reviews and projects as may be requested by our Board of Directors
and report to our Board its findings from time to time on matters arising and requiring the
attention of our Audit Committee; and
(m) generally to undertake such other functions and duties as may be required by statute or the
Catalist Rules, and by such amendments made thereto from time to time.
Notwithstanding the above, our Audit Committee shall also commission an annual internal controls
audit until such time as our Audit Committee is satisfied that our Groups internal controls are
robust and effective enough to mitigate our Groups internal control weaknesses that may arise (if
any). Prior to the decommissioning of such annual internal controls audit, our Board is required
to report to the SGX-ST and the Sponsor on how the key internal control weaknesses have been
rectified, and the basis for the Audit Committees decision to decommission the annual internal
controls audit. Thereafter, such audits may be initiated by our Audit Committee as and when it
deems fit to satisfy itself that our Groups internal controls remain robust and effective. Upon
completion of the internal controls audit, appropriate disclosure must be made via SGXNET on
any material, price-sensitive internal controls weaknesses and any follow-up actions to be taken
by the Board.
Currently, based on the internal controls established and maintained by our Group, work
performed by the internal and external auditors and reviews performed by our management, our
Board, with the concurrence of our Audit Committee, is of the opinion that the internal controls of
our Group are adequate to address the financial, operational and compliance risks.
Our Company will put in place a whistle-blowing framework endorsed by our Audit Committee
where employees of our Company may, without fear of reprisals or victimisation, and in
confidence, raise concerns about possible corporate improprieties in matters of financial reporting
or other matters and to ensure that arrangements are in place for the independent investigating
of such matters.
170
Our Audit Committee having (i) conducted an interview with Mui Siew Yun; (ii) considered the
qualifications and past working experience of Mui Siew Yun (as described in the section entitled
Key Executive Officers of this Offer Document); (iii) observed her abilities, familiarity and
diligence in relation to the financial matters and information of our Group; and (iv) noted the
absence of any negative feedback, is of the view that Mui Siew Yun is suitable for the position of
Financial Controller.
After making all reasonable enquiries, and to the best of their knowledge and belief, nothing has
come to the attention of the members of our Audit Committee to cause them to believe that Mui
Siew Yun, the Financial Controller, does not have the competence, character and integrity
expected of a Financial Controller of a listed company.
Apart from the duties listed above, our Audit Committee will also commission and review the
findings of internal investigations into matters where there is any suspected fraud or irregularity,
or failure of internal controls, or infringement of any Singapore law, rule or regulation which has
or is likely to have a material impact on our Groups operating results and/or financial position. In
the event that a member of our Audit Committee is interested in any matter being considered by
our Audit Committee, he will abstain from reviewing and deliberating on that particular transaction
or voting on that particular transaction.
In addition, all future transactions with related parties shall comply with the requirements of the
Catalist Rules. As required by paragraph 9(e) of Appendix 4C of the Catalist Rules, our Directors
shall also abstain from voting in any contract or arrangement or proposed contract or arrangement
in which he has a personal material interest.
Remuneration Committee
Our Remuneration Committee represented above comprises our Independent Directors,
Prof. Zhao Jian, Aw Eng Hai and Wong Kuan Meng Mark, and Dr Wang Xiaoning. The Chairman
of our Remuneration Committee is Prof. Zhao Jian. Our Remuneration Committee is responsible
for the following:
(a) to recommend to our Board a framework of remuneration for our Directors and Executive
Officers, and to determine specific remuneration packages for each Executive Director and
any Chief Executive Officer (or executive of equivalent rank), if a Chief Executive Officer is
not an Executive Director, such recommendations to be submitted for endorsement by our
entire Board and should cover all aspects of remuneration, including but not limited to
directors fees, salaries, allowances, bonuses, options, benefits in kind;
(b) in the case of service contracts (if any) for any Director or Executive Officer, to consider what
compensation commitments the Directors or Executive Officers contracts of service, if any,
would entail in the event of early termination with a view to be fair and avoid rewarding poor
performance; and
(c) in respect of any long-term incentive schemes including share schemes as may be
implemented, to consider whether any Director should be eligible for benefits under such
long-term incentive schemes.
Each member of our Remuneration Committee shall abstain from voting on any resolution and
making any recommendations and/or participating in any deliberations of our Remuneration
Committee in respect of matters in which he is interested.
171
The recommendations of our Remuneration Committee on remuneration of Directors should be
submitted for endorsement by our entire Board. All aspects of remuneration, including but not
limited to Directors Fees, salaries, allowances, bonuses, and benefits in kind shall be covered by
our Remuneration Committee.
The total remuneration of the employees who are related to our Directors will be reviewed annually
by the Remuneration Committee to ensure that their remuneration packages are in line with the
staff remuneration guidelines and commensurate with their respective job scopes and level of
responsibilities. In the event that a member of the Remuneration Committee is related to the
employee under review, he will abstain from such review.
The remuneration paid to employees who are immediate family members of our Directors will be
disclosed in the annual report in the event such remuneration exceeds S$150,000 for that
financial year.
Nominating Committee
Our Nominating Committee, represented in the chart above, comprises our Independent
Directors, Wong Kuan Meng Mark, Aw Eng Hai, and Prof. Zhao Jian, and Dr Wang Xiaoning. The
Chairman of our Nominating Committee is Wong Kuan Meng Mark.
Our Nominating Committee is responsible for the following:
(a) to make recommendations to the Board on all board appointments, including re-nominations,
having regard, to the directors contribution and performance (for example, attendance,
preparedness, participation and candour) including, if applicable, as an independent
director;
(b) all directors should be required to submit themselves for re-nomination and re-election at
regular intervals and at least every three (3) years;
(c) to determine annually whether or not a director is independent;
(d) in respect of a director who has multiple board representations on various companies, to
decide whether or not such director is able to and has been adequately carrying out his/her
duties as director, having regard to the competing time commitments that are faced when
serving on multiple boards;
(e) reviewing and approving any new employment of related persons and the proposed terms of
their employment; and
(f) to decide how our Boards performance is to be evaluated and propose objective
performance criteria, subject to the approval by our Board, which address how the Board has
enhanced long term shareholders value. Our Board will also implement a process to be
proposed by our Nominating Committee for assessing the effectiveness of our Board as a
whole and for assessing the contribution of each individual Director to the effectiveness of
our Board (if applicable).
Each member of our Nominating Committee shall abstain from voting on any resolution and
making any recommendations and/or participating in any deliberations of our Nominating
Committee in respect of the assessment of his performance or re-nomination as Director. In the
172
event that any member of the Nominating Committee has an interest in a matter being deliberated
upon by the Nominating Committee, he will abstain from participating in the review and approval
process relating to that matter.
Board Practices
Our Directors are appointed by our Shareholders at a general meeting. Each Director shall retire
from office once every three (3) years. A retiring Director shall be eligible for re-election at the
meeting at which he retires. Further details on the appointment and retirement of Directors can be
found in the section entitled Selected Extracts of Our Articles of Association in Appendix C of this
Offer Document.
173
In general, transactions between our Group and any of our Interested Persons (namely, our
Directors, Controlling Shareholder or the Associates of such persons) would constitute Interested
Person Transactions for the purposes of Chapter 9 of the Catalist Rules.
This section sets out the material Interested Person Transactions entered into by our Group for
FY2011, FY2012, FY2013 and 3Q2014 and the period from 1 January 2014 up to the Latest
Practicable Date (collectively, the Relevant Period) on the basis of each member of our Group
(namely, our Company and our subsidiaries) being an Entity at Risk and with Interested Persons
being construed accordingly.
Save as disclosed in this section and in the sections entitled Restructuring Exercise, Pre-IPO
Investment, Use of Proceeds and Listing Expenses, Remuneration of Directors, Executives
Officers and Related Employees and History of this Offer Document, there have been no
Interested Person Transactions over the Relevant Period involving our Group which are material
in the context of this Placement.
PAST INTERESTED PERSON TRANSACTIONS
Loans and advances from our Controlling Shareholder, TGL and its subsidiaries
Our Controlling Shareholder, TGL, and certain of its subsidiaries had during the Relevant Period
extended loans and/or advances to and/or made payments on behalf of Terratech Resources
and/or CEP (collectively, the TGL Group Advances).
The value of the TGL Group Advances that were extended to Terratech Resources and CEP for
the Relevant Period were as follows:
(S$000) FY2011 FY2012 FY2013 3Q2014
1 January
2014 to
Latest
Practicable
Date
Largest
Amount
Outstanding
for the
Relevant
Period
(1)
Amount
Outstanding
as at the
Latest
Practicable
Date
TGL Group Advances to Terratech Resources extended by:
TGL 2,377 2,652 4,003 2,000
Tritech International 230 120 120
Tritech Engineering 50 44 50
Tritech Consultants 434 1 201
TGL Group Advances to CEP extended by:
Tritech Consultants 203 201
Tritech Qingdao 239 433 748 125 239
Note:
(1) Based on month-end balances of such amounts.
Such amounts owing to the TGL Group were interest free, unsecured and had no fixed terms of
repayment and were not transacted on an arms length basis.
INTERESTED PERSON TRANSACTIONS
174
As at the Latest Practicable Date, all amounts due from our Group to the TGL Group have been
fully repaid including the Shareholders Loans which have been capitalised into the Shareholders
Loans Shares which were transferred to our Company pursuant to the Restructuring Exercise.
Please refer to the section entitled Restructuring Exercise of this Offer Document for details
relating to the Restructuring Exercise.
Loans and advances to our Controlling Shareholder, TGL, and its subsidiaries
Terratech Resources had during the Relevant Period extended loans and/or advances to and/or
made payments on behalf of our Controlling Shareholder, TGL and certain of its subsidiaries
(collectively, the Terratech Advances).
The value of the Terratech Advances that were extended by Terratech Resources to the relevant
members of the TGL Group for the Relevant Period is shown as follows:
(S$000) FY2011 FY2012 FY2013 3Q2014
1 January
2014 to
Latest
Practicable
Date
Largest
Amount
Outstanding
for the
Relevant
Period
(1)
Amount
Outstanding
as at the
Latest
Practicable
Date
Terratech Advances extended to:
TGL 194 254 36
Tritech Engineering 310 250
Tritech Water 50 50
Syseng 90 50
Note:
(1) Based on month-end balances of such amounts.
Such amounts owing to Terratech Resources by the relevant members of the TGL Group as
aforesaid were interest free, unsecured and had no fixed terms of repayment and were not
transacted on an arms length basis.
As at the Latest Practicable Date, all amounts due to Terratech Resources by the relevant
members of the TGL Group have been fully repaid or set-off against relevant amounts owing by
Terratech Resources to such members of the TGL Group, as the case may be.
Provision of management and other services by the TGL Group to Terratech Resources and
CEP
TGL had, during the Relevant Period, provided management services and seconded staff to
Terratech Resources. In addition, certain subsidiaries of TGL had provided support services to
Terratech Resources and CEP such as making arrangements for delivery and postage. The
management services, which comprise the provision of administrative services, had been
provided to Terratech Resources on a fixed fee of S$20,000 per month pursuant to a management
service agreement entered into between TGL and Terratech Resources dated 1 April 2011. The
other services provided by TGL are provided either at cost (for secondment of staff) or at cost plus
a nominal 10% administrative fee (for support services such as courier services and laboratory
services). Such services were transacted on an arms length basis.
175
The value of the foregoing services provided by the relevant parties to Terratech Resources and
CEP for the Relevant Period is shown as follows:
(S$000) FY2011 FY2012 FY2013 3Q2014
1 January
2014 to Latest
Practicable
Date
Management fee charged
by TGL for provision of
management services to
Terratech Resources
(1)
240 240 374 363
Fee charged by TGL for
secondment of staff to
Terratech Resources
24
Fee charged by Tritech
Engineering for provision
of support services to
Terratech Resources
1 8 46 2 26
Fee charged by Presscrete
of support services and
laboratory services to
Terratech Resources
3 3
Consultants for provision
of support services to
Terratech Resources
21
of support services to CEP
4 24 30
Fee charged by Presscrete
of support services to CEP
1 30 11
Note:
(1) The management fee payable by Terratech Resources to TGL is in consideration for the provision of administrative
services and the secondment of the services of Dr Loh Chang Kaan. Such fee will cease to be payable with effect
from 15 July 2014.
Purchase of fixed assets by our Group from the TGL Group
Our Group had during the Relevant Period purchased fixed assets such as machinery and office
equipment from certain subsidiaries of TGL. Such purchases were transacted on an arms length
basis.
176
The value of such purchases for the Relevant Period is shown as follows:
(S$000) FY2011 FY2012 FY2013 3Q2014
1 January
2014 to Latest
Practicable
Date
Purchase of machinery by
Terratech Resources from
Beijing Wisetec
116
Purchase of office
equipment by CEP from
Terra Tritech
1
Sale and re-purchase of our marble products to and from Beijing Wisetec
CEP had entered into a sales contract with Beijing Wisetec dated 12 June 2012 and Terratech
Resources had entered into three (3) sales contracts with Beijing Wisetec dated 16 June 2012 and
28 November 2012 (for two (2) contracts) (collectively, the Sales Contracts), pursuant to which
they had placed marble blocks with Beijing Wisetec (Initial Transfer) for the purpose of securing
sales of such marble blocks to customers in the PRC. The transactions were not entered into on
an arms length basis.
Beijing Wisetec, Terratech Resources, CEP and Qingdao Terratech had subsequently entered into
an agreement pursuant to which Qingdao Terratech agreed to re-purchase, at the same costs at
which they were sold to Beijing Wisetec pursuant to the Initial Transfer amounting in aggregate to
S$330,628, the marble blocks acquired by Beijing Wisetec under the Sales Contracts which
remained unsold as of the date of the agreement, with the effective date of re-purchase being 31
December 2013 (the Re-Purchase Contract).
Prior to the incorporation of our wholly-owned subsidiary, Qingdao Terratech, sales of our marble
products were contemplated to be carried out through Beijing Wisetec pursuant to the
arrangement under the Sales Contracts. As no sales to third parties were subsequently made by
Beijing Wisetec, and following the incorporation of Qingdao Terratech pursuant to which our Group
was able to undertake sales and marketing of our products directly, parties had entered into the
Re-Purchase Contract to enable our Group to take over the inventory of our marble products from
Beijing Wisetec, and such transactions were not transacted on an arms length basis.
177
The value of the Sales Contracts and the Re-Purchase Contract for the Relevant Period is shown
as follows:
(S$000) FY2011 FY2012 FY2013 3Q2014
1 January
2014 to Latest
Practicable
Date
Sales Contract between
Beijing Wisetec and
Terratech Resources
113 217
Sales Contract between
Beijing Wisetec and CEP
1
Re-Purchase Contract
between Beijing Wisetec,
Terratech Resources, CEP
and Qingdao Terratech
331
Pursuant to the terms of the Re-Purchase Contract, as at 1 January 2014, Beijing Wisetec has
ceased to hold any of our marble products acquired under the Sales Contracts, and such products
are now held as part of our inventory and there are no further amounts due or owing between the
relevant parties in relation to the sale and purchase of such marble products, save for
inter-company amounts owing as between Qingdao Terratech, Terratech Resources and CEP.
Going forward, we do not intend to enter into any further sales contract with Beijing Wisetec as
sales and marketing of our marble products in the PRC is now being carried out by Qingdao
Terratech. Please also refer to the section entitled Sales and Marketing of this Offer Document
for more details.
Secondment of foreign workers
In June 2011, CEP entered into an agreement with Tritech Qingdao, pursuant to which Tritech
Qingdao seconded a number of foreign workers to CEP to carry out quarry works at the Kelantan
Marble Quarry (the Secondment Agreement). The foreign workers were paid by Tritech
Qingdao and CEP paid Tritech Qingdao their aggregate remuneration costs with an additional 5%
handling charge. The transaction was entered into on an arms length basis and on normal
commercial terms.
The details of the fee payable to Tritech Qingdao for the secondment of foreign workers during the
Relevant Period were as follows:
(S$000) FY2011 FY2012 FY2013 3Q2014
1 January
2014 to the
Latest
Practicable
Date
Fee payable to Tritech
Qingdao
239 95 857
178
The Secondment Agreement was terminated with effect from 31 January 2014, following the
departure of the batch of foreign workers who were seconded to CEP under the arrangement of
the Secondment Agreement. The subsequent batch of foreign workers who joined our Group in
February 2014 are hired directly by our wholly-owned subsidiary, CEP.
Convertible Bonds issued to Luminor Pacific Fund 1
Luminor Pacific Fund 1 and Luminor Capital, being interested or deemed interested in an
aggregate of approximately 20.67% of the issued share capital of our Company prior to the
Placement, is a Controlling Shareholder of our Group. Accordingly, the entry by Terratech
Resources into the CBA and the issue of the Convertible Bonds by Terratech Resources to the
Pre-IPO Investors would be deemed to be an Interested Person Transaction.
The CBA was entered into on normal commercial terms and was transacted on an arms length
basis.
As at the date this Offer Document, all amounts due to the Pre-IPO Investors under the CBA have
been fully repaid following the conversion of the Conversion Amount in respect of the Convertible
Bonds into Conversion Shares and the payment in relation to the remaining outstanding interest
accrued thereon. For more information, please refer to the section entitled Pre-IPO Investment
PRESENT AND ON-GOING INTERESTED PERSON TRANSACTIONS
Office Rental Agreements
Our Group rents premises from certain subsidiaries of the TGL Group for use as offices in
Singapore and the PRC.
In Singapore, Terratech Resources has entered into an agreement with Tritech Engineering
pursuant to which Tritech Engineering has agreed to sublet part of its premises at 2 Kaki Bukit
Place, Eunos Techpark, Singapore 416180 to Terratech Resources for a period of two (2) years
commencing from the date of Listing (the Initial Rental Period) and an agreement with
Presscrete Engineering pursuant to which Presscrete Engineering has agreed to sublet part of its
premises at 31 Changi South Avenue 2, Singapore 486478 to Terratech Resources for the Initial
Rental Period. The terms of the foregoing agreements provide for the lease of the relevant
premises to Terratech Resources to be on a rent-free basis during the Initial Rental Period, and
are not on an arms length basis.
In the PRC, Qingdao Terratech has entered into an agreement with Tritech Qingdao pursuant to
which Tritech Qingdao has agreed to sublet part of its premises at No. 188, Minfeng Road,
Jiaonan City, Qingdao, to Qingdao Terratech from 1 September 2013 to 30 August 2018, for an
annual rental of RMB3,600. The terms of lease of the premises to Qingdao Terratech are not on
an arms length basis.
As each of Tritech Engineering, Presscrete Engineering and Tritech Qingdao is a direct
wholly-owned subsidiary of our Controlling Shareholder, TGL, each of such companies is an
interested person of our Company under the Catalist Rules.
179
Provision of Corporate Guarantees and Financial Support Undertaking by TGL and/or
Certain Subsidiaries of the TGL Group
TGL and certain subsidiaries of the TGL Group, namely Tritech Consultants, Tritech Engineering,
Presscrete Engineering and Syseng (collectively, the Guarantors), had provided corporate
guarantees to secure the following bank facilities and hire purchase facilities (as applicable).
The details of the corporate guarantees from the Guarantors during the Relevant Period were as
follows:
(S$000) FY2011 FY2012 FY2013 3Q2014
1 January
2014 to
Latest
Practicable
Date
Largest
Amount
Outstanding
for the
Relevant
Period
Amount
Outstanding
as at the
Latest
Practicable
Date
Details of Guarantee
Joint and several
guarantee by the
Guarantors of
S$1,500,000 for an
overdraft facility of
S$1,500,000 for
working capital
purposes given to
DBS Bank Ltd dated
31 August 2011
1,030 501 1,466 501
Joint and several
guarantee by the
Guarantors of
S$2,717,508 for
Internationalisation
Finance Scheme
Non-revolving hire
purchase line of
S$2,717,508 used to
finance the purchase
of, inter alia,
limestone quarrying
equipment given to
DBS Bank Ltd dated
31 August 2011
1,222 1,221 745 309 1,529 309
Corporate guarantee
by TGL of
S$1,200,000 for
Internationalisation
Finance Scheme
Non-revolving hire
purchase line of
S$1,200,000 used to
finance the purchase
of, inter alia,
limestone quarrying
equipment given to
UOB Bank Ltd dated
25 October 2012
515 444 584 444
180
The largest aggregate outstanding amount secured under the corporate guarantees during the
Relevant Period by the Guarantors was approximately S$1.5 million. As at the Latest Practicable
Date, the aggregate outstanding amount secured was approximately S$1.25 million.
Subsequent to the listing of our Shares on Catalist, our Company and/or the Guarantors intend to
request the respective banks to release and/or discharge the above corporate guarantees by
substituting or replacing the same with corporate guarantee(s) from our Company. Should the
terms and conditions of the existing facilities be affected by the withdrawal of the above corporate
guarantees, we are confident that after the listing of our Shares on Catalist, we should be able to
secure alternative bank facilities on terms similar to those applicable to the existing facilities. In
the event that the banks do not agree to release the Guarantors from the above guarantees and
security and we are unable to secure alternative bank facilities on similar terms, the Guarantors
will continue to provide the relevant guarantees and security, for so long as TGL holds more than
50% of total voting Shares of our Company, until such time when we are able to secure alternative
facilities from other financial institutions.
Pursuant to a letter dated 25 April 2014 (Financial Support Undertaking) from TGL to our
Company, TGL undertook and confirmed that for so long as TGL holds more than 50% of the total
voting shares of our Company, TGL shall, inter alia, provide continual financial support to our
Group, to assist our Group in meeting its liabilities as and when they fall due.
GUIDELINES AND REVIEW PROCEDURES FOR ON-GOING AND FUTURE INTERESTED
PERSON TRANSACTIONS
To ensure that future transactions with Interested Persons are undertaken on normal commercial
terms and are consistent with our Groups usual business practices and policies, which are
generally no more favourable than those extended to unrelated third parties, the following
procedures and Chapter 9 of the Catalist Rules will be implemented by our Group:
(a) The Financial Controller will maintain a register of Interested Persons. The register of
Interested Persons will be updated regularly and disclosed to the relevant personnel to
enable identification of Interested Persons. The register of Interested Persons will be
reviewed by our Audit Committee at least on a quarterly basis;
(b) The Financial Controller will maintain a register of Interested Person Transactions, recording
the basis on which Interested Person Transactions are entered into and the approval or
review by the Audit Committee, Financial Controller or any duly appointed Director as the
case may be. The register shall also record the basis for entry into the transactions, including
the quotations and other evidence obtained to support such basis. This register of Interested
Person Transactions shall be reviewed by our Audit Committee at least on a quarterly basis;
(c) In relation to any purchase of products or procurement of services from Interested Persons,
quotes from at least two (2) unrelated third parties in respect of the same or substantially the
same type of transactions will be used as comparison wherever possible. The purchase price
or procurement price shall not be higher than the most competitive price of the two (2)
comparative prices from the two (2) unrelated third parties. Our Audit Committee will review
the comparables, taking into account, the suitability, quality and cost of the product or
service, and the experience and expertise of the supplier;
181
(d) In relation to any sale of products or provision of services to Interested Persons, the price
and terms of two (2) other completed transactions of the same or substantially the same type
of transactions to unrelated third parties are to be used as comparison wherever possible.
The Interested Persons shall not be charged at rates lower than the lowest price of that
charged to the unrelated third parties;
(e) All interested persons transactions above S$100,000 are to be approved by a Director who
shall not be an Interested Person in respect of the particular transaction. Any contracts to be
made with an Interested Person shall not be approved unless the pricing is determined in
accordance with our Groups usual business practices and policies, consistent with the usual
margin given or price received by our Group for the same or substantially similar type of
transactions between our Group and unrelated parties and the terms are no more favourable
than those extended to or received from unrelated parties;
(f) For the purposes above, where applicable, contracts for the same or substantially similar
type of transactions entered into between our Group and unrelated third parties will be used
as a basis for comparison to determine whether the price and terms offered to or received
from the Interested Person are no more favourable than those extended to unrelated parties;
(g) In addition, our Group shall monitor all Interested Person Transactions entered into by
categorising the transactions as follows:
(i) a category one Interested Person Transaction is one where the value thereof is in
excess of 3.0% of the NTA of our Group; and
(ii) a category two Interested Person Transaction is one where the value thereof is below
or equal to 3.0% of the NTA of our Group.
All category one Interested Person Transactions must be approved by the Audit Committee
prior to entry whereas category two Interested Person Transactions need not be approved
by our Audit Committee prior to entry but shall be reviewed on a quarterly basis by our Audit
Committee; and
(h) When renting properties from or to an Interested Person, the Directors shall take appropriate
steps to ensure that such rent is commensurate with the prevailing market rates, including
adopting measures such as making relevant enquiries with landlords of similar properties
and obtaining suitable reports or reviews published by property agents (as necessary),
including independent valuation reports by property valuers, where appropriate. The rent
payable shall be based on the most competitive market rental rate of similar property in terms
of size and location, based on the results of the relevant enquiries. Such transactions shall
be subject to review by our Audit Committee on a quarterly basis.
Our Group will prepare relevant information to assist our Audit Committee in its review.
182
Before any agreement or arrangement with an Interested Person that is not in the ordinary course
of business of our Group is transacted, prior approval must be obtained from our Audit Committee.
Our Audit Committee will review all Interested Person Transactions, if any, on a quarterly basis to
ensure that they are carried out on an arms length basis and in accordance with the procedures
outlined above. It will take into account all relevant non-qualitative factors. In the event that a
member of our Audit Committee is interested in any Interested Person Transactions, he will
abstain from reviewing that particular transaction. Any decision to proceed with such an
agreement or arrangement would be recorded for review by our Audit Committee.
Disclosure will be made in our Groups annual report of the aggregate value of Interested Person
Transactions during the relevant financial year under review and in the subsequent annual reports
for the subsequent financial years of our Group.
Internal auditors will be appointed and their internal audit plan will incorporate a review of all the
Interested Person Transactions at least on an annual basis. The internal audit report will be
reviewed by our Audit Committee to ascertain whether the guidelines and procedures established
to monitor Interested Person Transactions have been compiled with.
Our Audit Committee shall also review from time to time such guidelines and procedures to
determine if they are adequate and/or commercially practicable in ensuring that Interested Person
Transactions are conducted on normal commercial terms, on an arms length basis and do not
prejudice the interests of our Group and our Shareholders. Further, if during these periodic
reviews by our Audit Committee, our Audit Committee is of the opinion that the guidelines and
procedures as stated above are not sufficient to ensure that Interested Person Transactions will
be on normal commercial terms, on an arms length basis and not prejudicial to the interests of our
Group and our Shareholders, our Audit Committee will adopt such new guidelines and review
procedures for future Interested Person Transactions as may be appropriate.
In addition, our Audit Committee will include the review of Interested Person Transactions as part
of the standard procedures while examining the adequacy of the internal controls of our Group.
Our Audit Committee will also review all Interested Person Transactions to ensure that the
prevailing rules and regulations of the SGX-ST (in particular, Chapter 9 of the Catalist Rules) are
complied with.
Our Group will also comply with the provisions in Chapter 9 of the Catalist Rules in respect of all
future Interested Person Transactions, and if required under the Catalist Rules, Listing Manual,
the Companies Act or the SFA, we will seek independent Shareholders approval for such
transactions.
All our Independent Directors, who are members of our Audit Committee, are of the view that the
review procedures and systematic monitoring mechanism of all Interested Person Transactions as
mentioned above, are adequate in ensuring that such transactions will be on normal commercial
terms and will not be prejudicial to the interests of Shareholders in any way.
183
POTENTIAL CONFLICT OF INTERESTS
Save as disclosed in the sections entitled Interested Person Transactions, Management
Reporting Structure, Service Agreements, Restructuring Exercise and Pre-IPO Investment
of this Offer Document, none of our Directors, Executive Officers, Controlling Shareholders or any
of their Associates has an interest, direct or indirect:
(a) in any transaction to which our Group was or is to be a party;
(b) in any entity carrying on the same business or dealing in similar services which competes
materially and directly with the existing business of our Group;
(c) in any enterprise or company; and
(d) in our Groups customer or supplier of goods and services.
Save as disclosed in the sections entitled Interested Person Transactions, Management
Reporting Structure, Service Agreements and Restructuring Exercise of this Offer Document,
none of our Directors has any interest in any existing contract or arrangement which is significant
in relation to the business of our Company and our subsidiaries, taken as a whole.
Interests of Experts
No expert is employed on a contingent basis by our Company or our subsidiaries; or has a material
interest, whether direct or indirect, in our Shares or the shares of our subsidiaries; or has a
material economic interest, whether direct or indirect, in our Company, including an interest in the
success of the Placement.
Interests of Sponsor, Issue Manager and Joint Placement Agent
In the reasonable opinion of our Directors, the Sponsor, Issue Manager and Joint Placement
Agent, PPCF, does not have any material relationship with our Company, save as disclosed below
and in the section entitled Management and Placement Arrangements of this Offer Document:
(a) PPCF is the Sponsor, Issue Manager and Joint Placement Agent in relation to the Listing;
(b) PPCF will be the continuing Sponsor of our Company for a period of three (3) years from the
date our Company is admitted to and listed on Catalist; and
Issue Manager, our Company issued and allotted 5,218,000 new Shares to PPCF
representing 0.91% of the issued and paid-up share capital of our Company prior to the
Placement, at the Placement Price for each Share. After completion of the relevant
moratorium period as set out in the section Moratorium of this Offer Document, PPCF will
dispose of its shareholding interest in our Company at its discretion.
Interests of Joint Placement Agent
In the reasonable opinion of our Directors, the Joint Placement Agent, DMG, does not have a
material relationship with our Company, save for DMG being the Joint Placement Agent in relation
to the Listing and as disclosed in the section entitled Management and Placement Arrangements
184
The following statements are brief summaries of the more important rights and privileges of
Shareholders conferred by the laws of the Cayman Islands, our Memorandum of Association and
Articles. These statements are only a summary and are qualified in their entirety by reference to
our Memorandum of Association and Articles and the Cayman Companies Law.
A copy of our Memorandum of Association and Articles is available for inspection at our principal
place of business during normal business hours for a period of six (6) months from the date of this
Offer Document.
Ordinary Shares
There are no founder, management, deferred or unissued shares reserved for issue for any
purpose. We have only one (1) class of shares, namely, our ordinary shares which have identical
rights in all respects and rank equally with one another. All of our Shares are in registered form.
New Shares
Subject to the Cayman Companies Law, no shares may be issued by our Board without the prior
approval of our Company in general meeting but subject thereto and to our Articles and without
prejudice to any special rights or restrictions for the time being attached to any shares or any class
of shares, the unissued shares of our Company shall be at the disposal of our Board of Directors
which may offer, allot, grant options over or otherwise dispose of them to such persons, at such
times and for such consideration and upon such terms and conditions as the Board of Directors
may in its absolute discretion determine but so that no Shares shall be issued at a discount,
provided always that subject to any direction to the contrary that may be given by our Company
in general meeting or except as permitted under the rules or regulations of the Designated Stock
Exchange, all new shares shall before issue be offered to such members in proportion as nearly
as may be to the number of shares of such class then held by them and the provisions of the
second sentence of Article 12(2) shall apply with such adaptations as are necessary shall apply.
Our Articles provide that subject to Cayman law and, where applicable, the rules or regulations of
the Designated Stock Exchange, our Company in general meeting may by ordinary resolution
grant to our Directors a general authority, either unconditionally or subject to such conditions as
may be specified in the said ordinary resolution (including, but not limited to, the aggregate
number of Shares which may be issued and the duration of the general authority), to issue shares
in the capital of our Company whether by way of rights, bonus or otherwise; and/or make or grant
offers, agreements or options (collectively, Instruments) that might or would require shares to
be issued, including but not limited to the creation and issue of (as well as adjustments to)
warrants, debentures or other instruments convertible into shares; provided that unless otherwise
specified in the ordinary resolution or required by any applicable rules or regulations of the
Designated Stock Exchange, such general authority will continue (notwithstanding the authority
conferred by the said ordinary resolution may have ceased to be in force) in relation to the issue
of shares pursuant to any Instrument made or granted by the Directors while the said ordinary
resolution was in force.
Shareholders
We maintain a register of members which contains the particulars as required under the Cayman
Companies Law, and only recognise as members of our Company such persons who are holders
or Shares and who are registered on the register of members. Except as required by law, no
person shall be recognised by the Company as holding any share upon any trust, and we will not
be bound by or required in any way to recognise (even when having notice thereof) any equitable,
DESCRIPTION OF ORDINARY SHARES
185
contingent, future or partial interest in any share or any fractional part of a share or (except only
as otherwise provided by these Articles or by law) any other rights in respect of any share except
an absolute right to the entirety thereof in the registered holder. If any Share stands jointly in the
names of two or more persons, the person first named in the register shall as regards service of
notices and, subject to the provisions of our Articles, all or any other matters connected with our
Company, except with respect to the transfer of Shares, be deemed the sole holder thereof.
Subject to the terms and conditions of any application of Shares, we may allot Shares applied for
within 10 market days of the closing date of any such application (or such other period as may be
approved by the Designated Stock Exchange).
Transfer of Shares
Subject to our Articles, any member may transfer all or any of his Shares by a duly signed
instrument of transfer in the form acceptable to the Board provided always that our Company shall
accept for registration an instrument of transfer in a form approved by the Designated Stock
Exchange (which includes the SGX-ST). Save as provided in our Articles, there shall be no
restriction on the transfer of fully paid up shares (except where required by law or the rules or
regulations of the Designated Stock Exchange). The Board may decline to register a transfer of
any share which is not fully paid or on which our Company has a lien. The Board may also decline
to recognise any instrument of transfer unless, among other things, it is duly stamped and is
presented for registration together with the share certificate and such other evidence as the Board
may reasonably require, and a fee of such sum (not exceeding two Singapore dollars (S$2.00) or
such other maximum sum as the Designated Stock Exchange may determine to be payable) as
the Board may from time to time require is paid to our Company in respect thereof. The registration
of transfers of shares may, after notice has been given by advertisement in an appointed
newspaper and in accordance with the requirements of the Designated Stock Exchange be
suspended at such times and for such periods (not exceeding in the whole thirty (30) days in any
year) as the Board may determine.
General Meetings of Shareholders
Under the Cayman Companies Law, there is no distinction between annual general meetings and
other general meetings.
Under our Articles, our Company may in each year hold a general meeting as its annual general
meeting and the Directors may, whenever they think fit, convene an extraordinary general
meeting.In addition, for so long as the shares of our Company are listed on the Designated Stock
Exchange (which includes the SGX-ST), the interval between the close of our Companys financial
year and the date of our Companys annual general meeting shall not exceed four (4) months or
such period as may be prescribed or permitted by the Designated Stock Exchange.
Subject to the Cayman Companies Law, members holding at the date of deposit of the requisition
not less than one-tenth of the paid up capital of our Company carrying the right of voting at general
meetings of our Company shall at all times have the right, by written requisition to the Board of
Directors or the Secretary of our Company, to require an extraordinary general meeting to be
called by the Board of Directors for the transaction of any business specified in such requisition;
and such meeting shall be held within two (2) months after the deposit of such requisition. If within
21 days of such deposit the Board of Directors fails to proceed to convene such meeting the
requisitionists themselves may do so in the same manner, and all reasonable expenses incurred
by the requisitionist(s) as a result of the failure of the Board of Directors shall be reimbursed to
the requisitionist(s) by our Company.
186
At least 14 days notice of a general meeting shall be given to each member entitled to attend and
vote thereat. A general meeting at which the passing of a special resolution is to be considered
shall be called by not less than 21 days notice. For so long as the shares of the Company are
listed on the Designated Stock Exchange, at least 14 days notice of any general meeting shall be
given by advertisement in an English daily newspaper in circulation in Singapore and in writing to
the Designated Stock Exchange.
Under the Cayman Companies Law, only persons who agree to become members of a company
and whose names are entered on the register of members of such company are considered
members, with rights to attend and vote at general meetings. Depositors holding Shares through
CDP are not recognised as members of our Company, and do not under the Cayman Companies
Law have a right to attend and to vote at general meetings of our Company. In the event that
Depositors wish to attend and vote at general meetings of our Company, CDP will have to appoint
them as proxies, pursuant to our Articles and the Cayman Companies Law.
In accordance with Article 77(1) of the Articles, unless CDP specifies otherwise in a written notice
to our Company, CDP shall be deemed to have appointed as CDPs proxies each of the Depositors
who are individuals and whose names are shown in the records of CDP, as at a time not earlier
than 48 hours prior to the time of the relevant general meeting, supplied by CDP to our Company,
and the appointment of these proxies shall not require a proxy form. Therefore, Depositors who
are individuals can attend and vote at the general meetings of our Company without the lodgment
of any proxy form.
Depositors who cannot attend a meeting personally may enable their nominees to attend as CDPs
proxies by completing and returning appropriate proxy forms. Depositors who are not individuals
can only be represented at a general meeting of our Company if their nominees are appointed by
CDP as CDPs proxies. Proxy forms appointing nominees of Depositors as proxies of CDP would
need to be executed by CDP as member and must be deposited at the place and within the time
frame specified by our Company to enable the nominees to attend and vote at the relevant general
meeting of our Company.
Voting Rights
Subject to any special rights or restrictions as to voting for the time being attached to any shares
by or in accordance with our Articles, at any general meeting (i) on a show of hands every member
present in person (or being a corporation, is present by a representative duly authorised under
Article 83) or by proxy shall have one vote and the chairman of the meeting shall determine which
proxy shall be entitled to vote where a member (other than CDP) is represented by two proxies,
and (ii) on a poll every member present in person or by proxy or, in the case of a member being
a corporation, by its duly authorised representative shall have one (1) vote for every fully paid
share of which he is the holder or which he represents and in respect of which all calls due to the
Company have been paid, but so that no amount paid up or credited as paid up on a share in
advance of calls or instalments is treated for the foregoing purposes as paid up on the share. If
the member is CDP, CDP may appoint more than two (2) proxies to attend and vote at the same
general meeting and each proxy shall be entitled to exercise the same powers on behalf of CDP
as CDP could exercise, including the right to vote individually on a show of hands.
187
Dividends
Subject to the Cayman Companies Law, our Company in general meeting may from time to time
declare dividends in any currency to be paid to the members but no dividend shall be declared in
excess of the amount recommended by the Board of Directors. Dividends may be declared and
paid out of the profits of our Company, realised or unrealised, or from any reserve set aside from
profits which the Directors determine is no longer needed. With the sanction of an ordinary
resolution, dividends may also be declared and paid out of the share premium account or any
other fund or account which may be authorised for this purpose in accordance with the Cayman
Companies Law, provided that no distribution or dividend may be paid to members out of the share
premium account unless, immediately following the date on which the distribution or dividend is
proposed to be paid, our Company shall be able to pay its debts as they fall due in the ordinary
course of business.
Whenever the Board of Directors or our Company in general meeting has resolved that a dividend
be paid or declared, the Board of Directors may further resolve that such dividend be satisfied
wholly or in part by the distribution of specific assets of any kind and in particular of paid up
shares, debentures or warrants to subscribe securities of our Company or any other company, or
in any one or more of such ways.
Capitalisation and Rights Issues
Upon the recommendation of the Board of the Directors, our Company in general meeting may
resolve to capitalise any reserves and distribute the same amongst the members who would be
entitled thereto if it were distributed by way of dividend and in the same proportions, on the footing
that the same is not paid in cash but is applied either in or towards paying up the amounts for the
time being unpaid on any shares in our Company held by such members respectively or in paying
up in full unissued shares, debentures or other obligations of our Company, to be allotted and
distributed credited as fully paid up among such members, or partly in one way and partly in the
other, subject always to the provisions of the Cayman Companies Law.
Takeovers
There are presently no Cayman Islands laws or regulations of general application which will
require persons who acquire significant holdings in our Shares to make take-over offers for our
Shares or to notify us.
However, pursuant to the SFA, Sections 138, 139 and 140 of the SFA and the Singapore Code on
Take-overs and Mergers (collectively the Singapore Take-over and Merger Laws and
Regulations) apply to take-over offers of companies which are incorporated outside Singapore
and all or any of the shares of which are listed for quotation on a securities exchange (as defined
in the SFA). Accordingly, the Singapore Take-over and Merger Laws and Regulations will apply to
take-over offers for our Shares for so long as our Shares are listed on a securities exchange,
which includes the SGX-ST.
Article 167 of our Articles provides that for so long as our Shares are listed on the Designated
Stock Exchange (as defined in our Articles), the Singapore Take-over and Merger Laws and
Regulations, including any amendments, modifications, revisions, variations or re-enactments
thereof, shall apply, as far as possible, to all take-over offers in respect of our Shares.
188
The Cayman Companies Law does not require disclosure of shareholder ownership beyond a
certain threshold. However, Article 167 of our Articles contains provisions to the effect that for so
long as the shares of our Company are listed on the Designated Stock Exchange (which includes
the SGX-ST), Directors and substantial shareholders (having the meaning ascribed to it in the
Singapore Companies Act) of our Company will have to disclose particulars of their interest in our
Company and any change in the percentage level of such interest. Article 167 of our Articles does
not apply to CDP.
Under the Singapore Code on Take-overs and Mergers (Singapore Take-over Code), issued by
the Authority pursuant to Section 321 of the SFA, any person acquiring an interest, either on his
own or together with parties acting in concert with him, in 30% or more of the voting Shares must
extend a takeover offer for the remaining voting Shares in accordance with the provisions of the
Singapore Takeover Code. In addition, a mandatory takeover offer is also required to be made if
a person holding, either on his own or together with parties acting in concert with him, between
30% and 50% of the voting rights acquires additional voting shares representing more than 1% of
the voting shares in any six (6) month period. Under the Singapore Take-over Code, the following
individuals and companies will be presumed to be persons acting in concert with each other
unless the contrary is established:
(a) the following companies:
(i) a company;
(ii) the parent company of (i);
(iii) the subsidiaries of (i);
(iv) the fellow subsidiaries of (i);
(v) the associated companies of (i), (ii), (iii) or (iv);
(vi) companies whose associated companies include any of (i), (ii), (iii), (iv) or (v); and
(vii) any person who has provided financial assistance (other than a bank in the ordinary
course of business) to any of the above for the purchase of voting rights;
(b) a company with any of its directors (together with their close relatives, related trusts as well
as companies controlled by any of the directors, their close relatives and related trusts);
(c) a company with any of its pension funds and employee share schemes;
(d) a person with any investment company, unit trust or other fund whose investment such
person manages on a discretionary basis, but only in respect of the investment account
which such person manages;
(e) a financial or other professional adviser, including a stockbroker, with its customer in respect
of the shareholdings of:
(i) the adviser and persons controlling, controlled by or under the same control as the
adviser; and
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(ii) all the funds which the adviser manages on a discretionary basis, where the
shareholdings of the adviser and any of those funds in the customer total 10% or more
of the customers equity share capital;
(f) directors of a company (together with their close relatives, related trusts and companies
controlled by any of such directors, their close relatives and related trusts) which is subject
to an offer or where the directors have reason to believe a bona fide offer for their company
may be imminent;
(g) partners; and
(h) the following persons and entities:
(i) an individual;
(ii) the close relatives of (i);
(iii) the related trusts of (i);
(iv) any person who is accustomed to act in accordance with the instructions of (i);
(v) companies controlled by any of (i), (ii), (iii) or (iv); and
(vi) any person who has provided financial assistance (other than a bank in the ordinary
course of business) to any of the above for the purchase of voting rights.
Under the Singapore Take-over Code, a mandatory offer made with consideration other than cash
must be accompanied by a cash alternative at not less than the highest price paid by the offeror
or any person acting in concert within the preceding six (6) months.
Liquidation or Other Return of Capital
Our Shareholders are entitled to the surplus assets of our Company in the event that it is wound
up.
Indemnity
Cayman Islands law does not limit the extent to which a companys articles of association may
provide for indemnification of officers and directors, except to the extent any such provision may
be held by the court to be contrary to public policy (e.g. for purporting to provide indemnification
against the consequences of committing a crime).
Our Articles provide that our Directors and officers shall be indemnified from and against all
liability which they incur in executing of their duty in their respective offices, provided that this
indemnity shall not extend to any matter in respect of any negligence, fraud, breach of fiduciary
obligations or dishonesty which may attach to any of the said persons.
Limitations on Rights to Hold or Vote Shares
There are no limitations, either under Cayman Islands law or our Articles, on the rights of owners
of our Companys shares to hold or vote their shares solely by reason that they are non-
Caymanians.
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Minority Rights
The Cayman Islands courts would ordinarily be expected to follow English case law precedents
which permit a minority shareholder to commence a representative action against or derivative
actions in the name of the company to challenge (a) an act which is ultra vires the company or
illegal; (b) an act which constitutes a fraud against the minority and the wrongdoers are
themselves in control of the company; and (c) an irregularity in the passing of a resolution which
requires a qualified (or special) majority.
Purchase of Shares/Treasury Shares
Under the laws of the Cayman Islands, a company may, if authorised by its articles of association,
purchase its own shares. Our Company has such power to purchase our own Shares under Article
3(2) of our Articles. Such power of our Company to purchase our own Shares shall, subject to the
Cayman Companies Law and our Articles (and, if applicable, the rules and regulations of the
SGX-ST and other regulatory authorities), be exercisable by the Directors upon such terms and
subject to such conditions as they think fit, in accordance with Article 3(2) of the Articles.
Under the laws of the Cayman Islands, such purchases may be effected out of profits of our
Company, out of the share premium account or out of the proceeds of a fresh issue of Shares
made for that purpose or, subject to section 37 of the Cayman Companies Law and in the manner
authorised by our Articles, by a payment out of capital. At no time may our Company purchase our
Shares if, as a result of the purchase, there would no longer be any issued Shares other than
Shares held as treasury shares. Only fully paid Shares may be purchased by our Company. A
payment out of capital by our Company for the purchase of our Shares is not lawful unless
immediately following the date on which the payment out of capital is proposed to be made, our
Company shall be able to pay its debts as they fall due in the ordinary course of business.
Shares purchased by our Company shall be treated as cancelled on purchase unless, subject to
our memorandum of association and Articles, the Directors resolve, prior to the purchase, to hold
such Shares in the name of the Company as treasury shares. Where the purchased Shares are
treated as cancelled, the amount of our Companys issued share capital shall be diminished by the
nominal value of those Shares. However, such purchase of Shares shall not be taken as reducing
the amount of our Companys authorised share capital.
Under Cayman Islands law, where Shares are held as treasury shares, our Company shall be
entered in the register of members as holding those Shares. However, notwithstanding the
foregoing, our Company shall not be treated as a member for any purpose and shall not exercise
any right in respect of the treasury shares, and any purported exercise of such a right shall be
void. A treasury share shall not be voted, directly or indirectly, at any meeting of our Company and
shall not be counted in determining the total number of issued Shares at any given time, whether
for the purposes of our Articles or the Cayman Companies Law. Further, no dividend may be
declared or paid, and no other distribution (whether in cash or otherwise) of our Companys assets
(including any distribution of assets to members on a winding up) may be made to our Company,
in respect of a treasury share.
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Singapore and Cayman Islands
As at the Latest Practicable Date, there are no laws or regulations in Singapore and Cayman
Islands that may affect (a) the repatriation of capital, including the availability of cash and cash
equivalents for use by our Group; and (b) the remittance of profits that may affect dividends,
interests or other payments to Shareholders.
Malaysia
The foreign exchange administration rules in Malaysia are applied uniformly to transactions
carried out with all countries, except for the State of Israel for which special restrictions apply.
There is no restriction on amount of repatriation of capital, profits, and income earned from
Malaysia. Repatriation of funds from divestment of Ringgit assets or profits and dividends arising
from the investments in Malaysia, however, must be made in foreign currency other than the
currency of the State of Israel.
PRC
Pursuant to the Regulations on Foreign Exchange Control of the PRC (P+1l,|l
/), payments made in foreign currencies for international transactions under the current account,
such as the sale or purchase of goods, are not subject to PRC Governmentals approval.
Organizations in the PRC, including foreign-invested enterprises, may purchase, sell and/or remit
foreign currencies at the banks authorised to conduct foreign exchange business upon the
enterprise providing valid commercial documents evidencing the international transactions.
However, approvals, registrations or filings are required for the relevant capital transactions which
involve direct investment, loans and investments in securities outside the PRC and so forth.
According to the Notice on Further Improving and Adjusting Management Policies on Foreign
Exchange of Direct Investment (=}[1)]||,|lTj), foreign
investors are no longer required to obtain approval from the SAFE to re-invest in the PRC by using
legal income generated in the PRC. No approval from the SAFE is required for opening a bank
account, payment into account, settlement of the foreign exchange and for the purchase and
external payment of foreign exchange in relation to direct foreign investments in the PRC. Also,
domestic transfer of foreign exchange under direct investment account is no longer subject to
approval by the SAFE.
EXCHANGE CONTROLS
192
The following is a discussion of certain tax matters arising under the current tax laws in Singapore,
Cayman Islands and Malaysia and is not intended to be and does not constitute legal or tax
advice.
While this discussion is considered to be a correct interpretation of existing laws in force as at the
date of this Offer Document, no assurance can be given that the courts or fiscal authorities
responsible for the administration of such laws will agree with this interpretation or that changes
in such law, which may be retrospective, will not occur. The discussion is limited to a general
description of certain tax consequences in Singapore, Cayman Islands and Malaysia with respect
to ownership of the Shares by Singapore investors, and does not purport to be a comprehensive
or exhaustive description of all of the tax considerations that may be relevant to a Shareholders
decision with regard to the ownership of the Shares.
Prospective investors should consult their tax advisers regarding Singapore, Cayman
Islands and Malaysia tax and other tax consequences of owning and disposing the Shares.
It is emphasised that neither our Company, the Vendors, our Directors nor any other
persons involved in this Placement accepts responsibility for any tax effects or liabilities
resulting from the subscription, purchase, holding or disposal of our Shares.
SINGAPORE TAXATION
The following discussion describes the material Singapore income tax, stamp duty, goods and
services tax and estate duty consequences of the purchase, ownership and disposal of the
Shares:
Singapore Income Tax
Individual income tax
Individual taxpayers who are Singapore tax residents are subject to tax on income accrued or
derived from Singapore, subject to certain exceptions. All foreign-sourced income (except for
income received through a partnership in Singapore) received or deemed received in Singapore
by tax resident individuals will be generally exempt from tax. Certain Singapore-sourced
investment income received or deemed received by tax resident individuals is also exempt from
tax.
A Singapore tax resident individual is taxed at progressive rates up to a maximum rate of 20%.
Non-resident individuals, subject to certain exceptions, are generally subject to income tax on
income accrued in or derived from Singapore at a flat rate of 20%, except that Singapore
employment income is taxed at a flat rate of 15% or at progressive resident rates, whichever yields
a higher tax.
An individual is regarded as a tax resident in Singapore if in the calendar year preceding the year
of assessment, he was physically present in Singapore or exercised an employment in Singapore
(other than as a director of a company) for 183 days or more, or if he ordinarily resides in
Singapore.
TAXATION
193
Corporate income tax
A Singapore tax resident corporate taxpayer is subject to Singapore income tax on:
income accrued in or derived from Singapore; and
foreign sourced income received or deemed received in Singapore, unless otherwise
exempted.
Foreign income in the form of branch profits, dividends and service fee income (specified
foreign income) received or deemed received in Singapore by a Singapore tax resident
corporate taxpayer are exempted from Singapore tax subject to meeting the qualifying conditions.
A company is regarded as tax resident in Singapore if the control and management of the
companys business is exercised in Singapore. Normally, control and management of the
company is vested in its board of directors and therefore if the board of directors meets and
conducts the companys business in Singapore, the company will be regarded as tax resident in
Singapore.
The corporate tax rate in Singapore is 17% after allowing partial tax exemption on the first
S$300,000 of a companys chargeable income as follows:
(i) 75% of up to the first S$10,000 of a companys chargeable income; and
(ii) 50% of up to the next S$290,000 of a companys chargeable income.
For the years of assessment (YA) 2013 to 2015, companies will be granted a 30% corporate tax
rebate capped at S$30,000 for each YA.
Dividend Distributions
As the Company will be tax resident in Singapore, dividends paid by the Company would be
considered as sourced from Singapore. Dividends received in respect of the Shares by either
Singapore tax resident or non-Singapore tax resident taxpayers are not subject to Singapore
withholding tax, even if paid to non-Singapore resident shareholders.
Under the one-tier corporate tax system, the tax paid by a resident company is a final tax and the
distributable profits of the company can be paid to shareholders as tax exempt (one-tier)
dividends, regardless of the tax residence status or the legal form of the shareholders. However,
foreign shareholders receiving tax exempt (one-tier) dividends are advised to consult their own tax
advisors to take into account the tax laws of their respective countries of residence and the
existence of any double taxation agreement which their country of residence may have with
Singapore.
TAXATION
194
Capital Gains Tax
Singapore does not impose a tax on capital gains. However, there are no specific laws or
regulations which deal with the characterisation of capital gains, and hence, gains may be
construed to be of an income nature and therefore be subject to tax if they arise from activities
which the IRAS regards as the carrying on of a trade or business in Singapore. Any gains from the
disposal of the Shares are generally not taxable in Singapore unless the seller is regarded as
having derived gains of an income nature in Singapore, in which case, the gains would be taxable
as income.
For any disposal of our Shares made during the period 1 June 2012 to 31 May 2017 (both dates
inclusive) by companies, there is certainty that any gains derived by the seller (a divesting
company) from its disposal of our Shares would not be taxable if immediately prior to the date of
share disposal, the divesting company has held at least 20% of our Shares for a continuous period
of at least 24 months.
In addition, corporate shareholders who apply, or who are required to apply, the Singapore
Financial Reporting Standard 39 Financial Instruments Recognition and Measurement (FRS
39) for the purposes of Singapore income tax may be required to recognise revenue gains or
losses (i.e. excluding capital gains or losses) in accordance with the provisions of SFRS 39 (as
modified by the applicable provisions of Singapore income tax law) even though no sale or
disposal of our Shares have been made.
Bonus Shares
Any bonus shares received by our Shareholders are not taxable.
Estate Duty
With effect from 15 February 2008, no estate duty will be leviable in respect of deaths occurring
on or after 15 February 2008.
Stamp Duty
There is no stamp duty payable on the subscription, allotment or holding of our Shares.
Stamp duty is payable on the instrument of transfer of our Shares at the rate of S$2.00 for every
S$1,000 or any part thereof, computed on the consideration paid or market value of our Shares
registered in Singapore, whichever is higher.
The purchaser is liable for stamp duty, unless there is an agreement to the contrary. No stamp duty
is payable if no instrument of transfer is executed (such as in the case of scripless shares, the
transfer of which does not require instruments of transfer to be executed) or if the instrument of
transfer is executed outside Singapore. However, stamp duty may be payable if the instrument of
transfer which is executed outside Singapore is subsequently received in Singapore.
However, as our Shares will be listed on Catalist and their transfers will be scripless transfers
via the CDP, no stamp duty will be imposed on the transfers of our Shares via the CDP.
TAXATION
195
Goods and Services Tax (GST)
The sale of the Shares by a GST-registered investor belonging to Singapore through a SGX-ST
member or to another person belonging in Singapore is an exempt sale not subject to GST. Any
GST directly or indirectly incurred by the investor in respect of this exempt sale will generally
become an additional cost to the investor.
Where our Shares are sold by a GST-registered investor in the course of a business to a person
belonging outside Singapore, and that person is outside Singapore when the sale is executed, the
sale should generally, subject to satisfaction of certain conditions, be considered a taxable supply
subject to GST at zero-rate. Any GST incurred by a GST-registered investor in the making of this
supply in the course of furtherance of a business may, subject to the provisions of the Goods and
Services Tax Act, be recoverable from the Comptroller of GST as input tax.
Services such as brokerage, handling and clearing services rendered by a GST-registered person
to an investor belonging in Singapore in connection with the investors purchase, sale or holding
of our Shares will be subject to GST at the current rate of 7%. Similar services rendered to an
investor belonging outside Singapore is generally subject to GST at zero-rate, provided that the
investor is outside Singapore when the services are performed and the services provided do not
benefit any Singapore persons.
Shareholders, whether or not domiciled in Singapore, should consult their own tax
advisers regarding the Singapore tax and estate duty consequences of their acquisition
ownership and/or disposal of our Shares.
CAYMAN ISLANDS TAXATION
Dividends remitted to shareholders resident outside the Cayman Islands will not be subject to
Cayman Islands withholding tax. There are no reciprocal tax treaties between the Cayman Islands
and Singapore. Further details are set out in the section entitled Summary of certain provisions
of the Cayman Islands Companies Law in Appendix B of this Offer Document.
MALAYSIAN TAXATION
The following discussion describes the material Malaysian tax on dividend and tax on gains from
sale:
Dividend Distributions
Under Malaysian law, income tax is payable on income accruing or derived from Malaysia or
received in Malaysia. Dividends paid or credited by a company which is tax resident in Malaysia
(Malaysian resident company) would be deemed to be derived from Malaysia and are thus
taxable in Malaysia.
A company is tax resident in Malaysia if the control and management of its business are exercised
in Malaysia.
A Malaysian resident company is entitled to deduct tax at the applicable corporate tax rate from
such dividends paid or credited to its shareholders in the basis period for the relevant year of
assessment.
TAXATION
196
Subject to certain exceptions, the tax rate for year of assessment 2013 is 25%. Credit for the tax
so deducted is given against the tax payable by the shareholder.
Dividends paid by a Malaysian resident company from its tax-exempt income are tax-exempt in
the hands of its shareholders.
The income of any person, other than a Malaysian resident company carrying on the business of
banking, insurance or sea or air transport, for the basis year for a year of assessment derived from
sources outside Malaysia and received in Malaysia, is tax-exempt under the Malaysia Income Tax
Act.
Gains on Disposal of the Shares in a Malaysian company
There is no capital gains tax in Malaysia except for real property gains tax (RPGT) which is
charged upon gains arising from the disposal of real property in Malaysia or shares in a real
property company incorporated in Malaysia. As such, any gains from the subsequent sale of the
shares in a Malaysian company not being a real property company would not be subject to RPGT
in Malaysia. However, any gains from the subsequent sales of shares in a Malaysian company by
a person who deals in shares may be regarded as income and is subject to income tax under the
Malaysia Income Tax Act.
Single Tier System
Prior to 1 January 2011, Malaysia adopted the imputation system which required the imposition of
tax on the profit at corporate level and again at shareholders level. The principle behind the
imputation system is to overcome the double taxation of income. Under the imputation system,
companies resident in Malaysia are required to deduct tax at source at the prevailing corporate tax
rate on dividends paid to their shareholders. The same income would be taxed twice if the credit
is not imputed to the shareholders.
The single-tier tax system was introduced in Budget 2011 to replace the imputation system with
effect from year of assessment 2011. Under this system, corporate income is taxed at corporate
level and this is a final tax. Dividends distributed to the shareholders are tax-exempted in their
hands.
Transitional provisions for resident companies are in place to take into account the following:
(a) Companies with no sec 108 credit balances as at 31 December 2007
On 1 January 2011, companies with no sec 108 credit balances will automatically move to the
single-tier tax system.
(b) Companies with sec 108 credit balances as at 31 December 2007
(i) Companies with sec 108 credit balances as at 31 December 2007 will be given a
six-year transitional period from 1 January 2011 to 31 December 2013 to fully utilise
credit balances.
(ii) These companies will automatically move to the single-tier tax system on 1 January
2014 although they may still have unutilised credit balances.
TAXATION
197
(iii) These companies will be given an option to make an irrevocable election to move to the
single-tier tax system.
(iv) These companies which have fully utilised the credit balances at any time during the
transitional period will automatically move to the single-tier tax system.
(v) These companies will only be allowed to adjust its sec 108 credit balances downwards
for any tax discharged, remitted or refunded in respect of taxes which have earlier been
accounted for.
(vi) The tax on dividends paid to shareholders by small and medium companies is to be
deducted from the sec 108 credit balance based on the highest current tax rate.
As our Group has elected to move to the single-tier tax system, the imputation system is no
longer applicable to us.
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198
Upon listing and quotation on Catalist, our Shares will be traded under the book-entry settlement
system of CDP, and all dealings in and transactions of the Shares through Catalist will be effected
in accordance with the terms and conditions for the operation of securities accounts with CDP, as
amended, modified or supplemented from time to time.
Our Shares will be registered in the name of CDP or its nominee and held by CDP for and on
behalf of persons who maintain, either directly or through depository agents, securities accounts
with CDP. Persons named as direct securities account holders and depository agents in the
depository register maintained by CDP will not be treated, under the Cayman Companies Law and
our Articles, as members of our Company in respect of the number of our Shares credited to their
respective securities accounts. The depositors and depository agents on whose behalf CDP holds
Shares for may not be accorded the full rights of membership such as voting rights, the right to
appoint proxies, or the right to receive shareholders circulars, proxy forms, annual reports,
prospectuses and takeover documents. In such an event, depositors and depository agents will be
accorded only such rights as CDP may make available to them pursuant to CDPs terms and
conditions to act as depository for foreign securities.
Persons holding our Shares in securities account with CDP may withdraw the number of Shares
they own from the book-entry settlement system in the form of physical share certificates. Such
share certificates will, however, not be valid for delivery pursuant to trades transacted on Catalist,
although they will be prima facie evidence of title and may be transferred in accordance with our
Articles. A fee of S$10.00 for each withdrawal of 1,000 Shares or less and a fee of S$25.00 for
each withdrawal of more than 1,000 Shares is payable upon withdrawing the Shares from the
book-entry settlement system and obtaining physical share certificates. In addition, a fee of
S$2.00 or such other amount as our Directors may decide, is payable to the share registrar for
each share certificate issued and a stamp duty of S$0.20 per S$100.00 or part thereof of the
last-transacted price where it is withdrawn in the name of a third-party. Persons holding physical
share certificates who wish to trade on Catalist must deposit with CDP their share certificates
together with the duly executed and stamped instruments of transfer in favour of CDP, and have
their respective securities accounts credited with the number of Shares deposited before they can
effect the desired trades. A fee of S$10.00 is payable upon the deposit of each instrument of
transfer with CDP. The above fees may be subject to such charges as may be in accordance with
CDPs prevailing policies or the current tax policies that may be in force in Singapore from time
to time.
Transactions in our Shares under the book-entry settlement system will be reflected by the sellers
securities account being debited with the number of Shares sold and the buyers securities
account being credited with the number of Shares acquired. No transfer of stamp duty is currently
payable for the Shares that are settled on a book-entry basis.
A Singapore clearing fee for trades in our Shares on Catalist is payable at the rate of 0.04% of the
transaction value subject to a maximum of S$600.00 per transaction. The clearing fee, instrument
of transfer deposit fee and share withdrawal fee may be subject to GST at the prevailing rate of
7% (or such other rate prevailing from time to time).
Dealings of our Shares will be carried out in Singapore dollars and will be effected for settlement
on CDP on a scripless basis. Settlement of trades on a normal ready basis on Catalist generally
takes place on the third Market Day following the transaction date, and payment for the securities
is generally settled on the following business day. CDP holds securities on behalf of investors in
securities accounts. An investor may open a direct account with CDP or a sub-account with a CDP
depository agent. The CDP depository agent may be a member company of the SGX-ST, bank,
merchant bank or trust company.
CLEARANCE AND SETTLEMENT
199
INFORMATION ON DIRECTORS AND EXECUTIVE OFFICERS
1. Save as disclosed below, none of our Directors, Executive Officers and Controlling
Shareholders:
(a) has, at any time during the last 10 years, had an application or a petition under any
bankruptcy laws of any jurisdiction filed against him or against a partnership of which
he was a partner at the time he was a partner or at any time within two (2) years from
the date he ceased to be a partner;
(b) has, at any time during the last 10 years, had an application or a petition under any law
of any jurisdiction filed against an entity (not being a partnership) of which he was a
director or an equivalent person or key executive at the time when he was a director or
an equivalent person or a key executive of that entity or at any time within two (2) years
from the date he ceased to be a director or an equivalent person or a key executive of
that entity, for the winding up or dissolution of that entity or, where that entity is the
trustee of a business trust, that business trust, on the ground of insolvency;
(c) has any unsatisfied judgement against him;
(d) has ever been convicted of any offence, in Singapore or elsewhere, involving fraud or
dishonesty which is punishable with imprisonment, or has been the subject of any
criminal proceedings (including any pending criminal proceedings of which he is aware)
for such purpose;
(e) has ever been convicted of any offence, in Singapore or elsewhere, involving a breach
of any law or regulatory requirement that relates to the securities or futures industry in
Singapore or elsewhere, or has been the subject of any criminal proceedings (including
any pending criminal proceedings of which he is aware) for such breach;
(f) has, at any time during the last 10 years, had judgement entered against him in any civil
proceedings in Singapore or elsewhere involving a breach of any law or regulatory
requirement that relates to the securities or futures industry in Singapore or elsewhere,
or a finding of fraud, misrepresentation or dishonesty on his part, nor has he been the
subject of any civil proceedings (including any pending civil proceedings of which he is
aware) involving an allegation of fraud, misrepresentation or dishonesty on his part;
(g) has ever been convicted in Singapore or elsewhere of any offence in connection with
the formation or management of any entity or business trust;
(h) has ever been disqualified from acting as a director or equivalent person of any entity
(including the trustee of a business trust), or from taking part directly or indirectly in the
management of any entity or business trust;
(i) has ever been the subject of any order, judgement or ruling of any court, tribunal or
governmental body, permanently or temporarily enjoining him from engaging in any type
of business practice or activity;
GENERAL AND STATUTORY INFORMATION
200
(j) has ever, to his knowledge, been concerned with the management or conduct, in
Singapore or elsewhere, of the affairs of:
(i) any corporation which has been investigated for a breach of any law or regulatory
requirement governing corporations in Singapore or elsewhere; or
(ii) any entity (not being a corporation) which has been investigated for a breach of
any law or regulatory requirement governing such entities in Singapore or
elsewhere; or
(iii) any business trust which has been investigated for a breach of any law or
regulatory requirement governing business trusts in Singapore or elsewhere; or
(iv) any entity or business trust which has been investigated for a breach of any law
or regulatory requirement that relates to the securities or futures industry in
Singapore or elsewhere,
in connection with any matter occurring or arising during the period when he was so
concerned with the corporation or partnership entity or business trust; and
(k) has ever been the subject of any current or past investigation or disciplinary
proceedings, or has been reprimanded or issued any warning, by the Authority or any
other regulatory authority, exchange, professional body or government agency, whether
in Singapore or elsewhere.
Disclosures pertaining to Wong Kuan Meng Mark
Wong Kuan Meng Mark was a director of Jenton Overseas Investment Pte Ltd. (Jenton)
from 16 June 1997 to 4 June 2004. Jenton became insolvent as a result of one (1) of the
other directors of Jenton unlawfully and illegally transferring a sum of money from a
subsidiary of Jenton, and Jenton was placed in creditors voluntary liquidation on 9 July
2004. The director in question was sued for the recovery of monies by Jenton and judgment
was obtained in favour of Jenton both at first instance in the High Court on 24 February 2006,
and on appeal to the Court of Appeal on 12 March 2007.
SHARE CAPITAL
2. As at the Latest Practicable Date, there is only one (1) class of shares in the capital of our
Company. There are no founder, management or deferred shares. The rights and privileges
attached to our Shares are stated in the Articles of Association of our Company.
3. Save as disclosed below and in the sections entitled Share Capital, Restructuring
Exercise and Pre-IPO Investment of this Offer Document, there are no changes in the
issued and paid-up share capital of our Company and our subsidiaries within the last three
(3) years preceding the date of this Offer Document.
4. Save as disclosed below and in the sections entitled Share Capital, Restructuring
Exercise and Pre-IPO Investment of this Offer Document, no Shares in, or debentures of,
our Company or any of our subsidiaries have been issued, or are proposed to be issued, as
fully or partially paid for cash or for a consideration other than cash, during the last three (3)
years preceding the date of lodgement of this Offer Document.
201
5. No option to subscribe for Shares in, or debentures of, our Company or our subsidiaries has
granted to, or was exercised by, any of our Directors or Executive Officers within the two (2)
financial years.
6. The interests of our Directors and Substantial Shareholders in our Shares as at the Latest
Practicable Date and as recorded in the Register of Directors Shareholdings and the
Register of Substantial Shareholders are set out in the section entitled Shareholding and
Ownership Structure of this Offer Document.
MEMORANDUM AND ARTICLES OF ASSOCIATION
7. Memorandum of Association
The Memorandum of Association of our Company states, inter alia, that the liability of
members of our Company is limited.
Our Companys objects are set out in full in the Memorandum of Association which is
available for inspection at our principal place of business as stated in the section entitled
Documents for Inspection of this Offer Document.
8. Articles of Association
An extract of the relevant provisions of our Articles of Association of our Company, providing,
inter alia, for the issue of Shares, directors voting rights, borrowing powers of directors and
dividend rights, are set out in Appendix C of this Offer Document.
The complete Articles of Association of our Company are available for inspection by
Shareholders at our principal place of business as stated in the section entitled Documents
for Inspection of this Offer Document.
MATERIAL CONTRACTS
9. The following contracts, not being contracts entered into in the ordinary course of business,
have been entered into by our Company and our subsidiaries within the two (2) years
preceding the date of lodgement of this Offer Document and are or may be material:
(i) the CBA dated 16 November 2012 entered into among Terratech Resources, TGL,
Luminor Capital (the manager of Luminor Pacific Fund 1) and Kwan Chee Seng;
(ii) the letters of confirmation dated 2 May 2014, 20 June 2014 and 15 July 2014 from the
Pre-IPO Investors relating to, inter alia, the conversion of the Convertible Bonds;
(iii) the agreement entered into between our Company and Crescent dated 1 July 2013 (the
Crescent Agreement);
(iv) the letter agreement entered into between our Company and TGL dated 1 May 2014 in
relation to the Crescent Agreement;
(v) the Management Agreement;
(vi) the Placement Agreement; and
202
(vii) the Restructuring Agreement dated 20 June 2014 entered into by the Company,
Terratech Resources and TGL.
Save as disclosed above, our Group has not entered into any material contracts, not being
contracts entered into in the ordinary course of business, within the two (2) years preceding
the date of this Offer Document.
MATERIAL LITIGATION
10. To the best of our knowledge and belief, having made all reasonable enquiries, neither our
Company nor any of our subsidiaries is engaged in any legal or arbitration proceedings as
plaintiff or defendant, including those which are pending or known to be contemplated, which
may have or which have had in the 12 months immediately preceding the date of lodgement
of the Offer Document, a material effect on our Groups financial position or profitability of our
Company or our subsidiaries or associated companies.
MANAGEMENT AND PLACEMENT ARRANGEMENTS
11. Pursuant to the Management Agreement dated 21 July 2014 entered into between our
Company, the Vendors and PPCF as the Sponsor and Issue Manager, our Company
appointed PPCF to sponsor and manage the Listing. PPCF will receive a management fee
for such services rendered.
12. Pursuant to the Placement Agreement dated 21 July 2014 entered into between our
Company, the Vendors, PPCF and DMG as the Joint Placement Agents, the Joint Placement
Agents have agreed to procure subscriptions and/or purchases for the Placement Shares for
a placement commission of 5.0% of the aggregate Placement Price for the total number of
Placement Shares successfully subscribed for or purchased, payable by our Company and
the Vendors in the Agreed Proportion. The Joint Placement Agents may, at their absolute
discretion, appoint one or more sub-placement agents for the Placement Shares.
13. Subscribers or purchasers of the Placement Shares may be required to pay a brokerage fee
of up to 1.0% of the Placement Price (and the prevailing GST, if applicable) to the Joint
Placement Agents or any sub-placement agent that may be appointed by the Joint Placement
Agents.
14. Other than pursuant to the Placement Agreement, there are no contracts, agreements or
understandings between our Company and any person or entity that would give rise to any
claim for brokerage commission, finders fees or other payments in connection with the
subscription or purchase of the Placement Shares.
15. Subject to the consent of the SGX-ST being obtained, the Management Agreement may be
terminated by PPCF at any time before the close of the Application List on the occurrence of
certain events including:
(a) PPCF becomes aware of any breach by our Company and/or its agent(s) and/or the
Vendors of any warranties, representations, covenants or undertakings given by our
Company or the Vendors to PPCF in the Management Agreement; or
(b) there shall have been, since the date of the Management Agreement any change or
prospective change in or any introduction or prospective introduction of any legislation,
regulation, policy, directive, guideline, rule or byelaw by any relevant government or
203
regulatory body, whether or not having the force of law, or any other occurrence of
similar nature that would materially change the scope of work, responsibility or liability
required of PPCF; or
(c) there is a conflict of interest for PPCF, or any dispute, conflict or disagreement with our
Company or the Vendors or our Company and/or the Vendors wilfully fail to comply with
any advice from or recommendation of PPCF.
16. The Placement Agreement and the obligations of the Joint Placement Agents under the
Placement Agreement are conditional upon:
(a) this Offer Document having been registered by the SGX-ST, acting as agent on behalf
of the Authority in accordance with the Catalist Rules or the SFA;
(b) the notice issued by the SGX-ST in relation to the registration of this Offer Document
(Registration Notice) being issued or granted by the SGX-ST, acting as agent on
behalf of the Authority and such Registration Notice not being revoked or withdrawn on
or prior to the date of settlement of subscriptions, sales and purchases of Placement
Shares (Closing Date);
(c) the compliance by our Company and the Vendors to the satisfaction of the SGX-ST with
all the conditions imposed by the SGX-ST in granting the Registration Notice (if any),
where such conditions are required to be complied with by the Closing Date;
(d) the SGX-ST not having withdrawn or changed the terms and conditions of its
Registration Notice and our Company having complied with any conditions contained
therein required to be complied with prior to the admission of our Company to Catalist
(Admission);
(e) such approvals as may be required for the transactions described in the Placement
Agreement and in this Offer Document in relation to the Admission and the Placement
being obtained, and not withdrawn or amended, on or before the date on which our
Company is admitted to Catalist (or such other date as our Company, the Vendors and
the Joint Placement Agents may agree in writing);
(f) there having been, in the opinion of the Joint Placement Agents, no material adverse
change or any development likely to result in a material adverse change in the financial
or other condition of our Group between the date of the Placement Agreement and the
Closing Date nor the occurrence of any event nor the discovery of any fact rendering
untrue or incorrect in any respect, as at the Closing Date, any of the warranties or
representations contained in Clause 6 of the Placement Agreement nor any breach by
our Company and the Vendors of any of their obligations thereunder;
(g) the compliance by our Company and the Vendors with all applicable laws and
regulations concerning the Admission, the Listing and the transactions contemplated in
the Placement Agreement and this Offer Document and no new laws, regulations and
directives having been promulgated, published and/or issued and/or having taken effect
or any other similar matter having occurred which, in the opinion of the Joint Placement
Agents, has or may have an adverse effect on the Placement and the Listing;
204
(h) the delivery by our Company and the Vendors to the Joint Placement Agents on the
Closing Date of a certificate, in the form set out in Schedule 2 of the Placement
Agreement, signed by a Director for and on behalf of our Company and the Vendors
respectively;
(i) the delivery to the Joint Placement Agents of a copy of the legal due diligence report
prepared by our Malaysian Legal Adviser in relation to the Admission and the Joint
Placement Agents being satisfied with the results, findings, advice, opinions and/or
conclusions set out in such report; and
(j) the letters of undertakings referred to in this Offer Document under the section entitled
Moratorium being executed and delivered to the Sponsor and Issue Manager and the
Joint Placement Agents before the date of registration of this Offer Document; and
(k) the Management Agreement and the Placement Agreement not being terminated or
rescinded pursuant to the provisions of the Management Agreement.
17. In the reasonable opinion of our Directors, PPCF and the Joint Placement Agents do not
have a material relationship with our Company, save as disclosed below:
(a) PPCF is the Sponsor and Issue Manager in relation to the Listing;
(b) PPCF will be the continuing Sponsor of our Company for a period of three (3) years from
the date our Company is admitted to and listed on Catalist;
Issue Manager, our Company issued and allotted 5,218,000 new Shares to PPCF,
representing 0.91% of the issued share capital of our Company prior to the Placement
at the Placement Price for each Share. After the completion of the relevant moratorium
period as set out in the section entitled Moratorium of this Offer Document, PPCF will
dispose its shareholding interest in our Company at its discretion; and
(d) PPCF and DMG are the Joint Placement Agents of the Placement.
MISCELLANEOUS
18. The nature of the business of our Company has been stated earlier in this Offer Document.
The corporations which by virtue of Section 6 of the Companies Act are deemed to be related
to our Company are set out in the section entitled Group Structure of this Offer Document.
19. There has been no previous issue of Shares by our Company or offer for sale of our Shares
to the public within the two (2) years preceding the date of this Offer Document.
20. There has not been any public takeover offer by a third-party in respect of our Shares or by
our Company in respect of shares of another corporation or units of a business trust which
has occurred between 3Q2014 and the Latest Practicable Date.
21. No expert is employed on a contingent basis by our Company or our subsidiaries, or has an
interest, whether direct or indirect, in the Shares of our Company or our subsidiaries, or has
a material economic interest, whether direct or indirect, in our Company, including an interest
in the success of the Placement.
205
22. No amount of cash or securities or benefit has been paid or given to any promoter within the
two (2) years preceding the Latest Practicable Date or is proposed or intended to be paid or
given to any promoter at any time.
23. Save as disclosed in the section entitled Management and Placement Agreements of this
Offer Document, no commission, discount or brokerage has been paid or other special terms
granted within the two (2) years preceding the Latest Practicable Date or is payable to any
Director, promoter, expert, proposed director or any other person for subscribing or agreeing
to subscribe or procuring or agreeing to procure subscriptions for any shares in, or
debentures of, our Company or our subsidiaries.
24. Application monies received by our Company in respect of successful applications (including
successful applications which are subsequently rejected) will be placed in a separate
non-interest bearing account with the Receiving Banker. In the ordinary course of business,
the Receiving Banker will deploy these monies in the inter-bank money market. All profits
derived from the deployment of such monies will accrue to the Receiving Banker. Any refund
of all or part of the application monies to unsuccessful or partially successful applicants will
be made without any interest or any share of revenue or any other benefit arising therefrom.
25. Save as disclosed in this Offer Document, our Directors are not aware of any relevant
material information including trading factors or risks which are unlikely to be known or
anticipated by the general public and which could materially affect the profits of our Company
and our subsidiaries.
26. Save as disclosed in this Offer Document, the financial condition and operations of our Group
are not likely to be affected by any of the following:
(a) known trends or demands, commitments, events or uncertainties that will result in or are
reasonably likely to result in our Groups liquidity increasing or decreasing in any
material way;
(b) material commitments for capital expenditure;
(c) unusual or infrequent events or transactions or any significant economic changes that
may materially affect the amount of reported income from operations; and
(d) the business and financial prospects and any significant recent trends in production,
sales and inventory, and in the costs and selling prices of products and services and
known trends or uncertainties that have had or that we reasonably expect will have a
material favourable or unfavourable impact on revenues, profitability, liquidity, capital
resources or operating income or that would cause financial information disclosed to be
not necessarily indicative of the future operating results or financial condition of our
Company.
27. Save as disclosed in this Offer Document, our Directors are not aware of any event which has
occurred since the end of 3Q2014 to the Latest Practicable Date which may have a material
effect on the financial position and results of our Group or the financial information provided
in this Offer Document.
28. We currently have no intention of changing our auditors after the listing of our Company on
Catalist.
206
CONSENTS
29. The Reporting Accountants and Independent Auditors, Ernst & Young Hong Kong, has given
and has not withdrawn its written consent to the issue of this Offer Document with the
inclusion herein of the Independent Auditors Report for the Years Ended 31 March 2011,
2012, 2013 and the Nine Months ended 31 December 2013 as set out in Appendix A of this
Offer Document and all references thereto, in the form and context in which it is respectively
included and the inclusion and all references to its name in the form and context in which it
appears in this Offer Document and to act in such capacity in relation to this Offer Document.
30. Rozlan Khuen has given and has not withdrawn its written consent to the issue of this Offer
Document with the inclusion herein of its legal opinion set out in Appendix D of this Offer
Document and all references thereto in the form and context in which it is respectively
included and the inclusion and all references to its name in the form and context in which it
appears in this Offer Document and to act in such capacity in relation to this Offer Document.
31. Rockhound has given and has not withdrawn its written consent to the issue of this Offer
Document with the inclusion herein of the Qualified Persons Report set out in Appendix E of
this Offer Document and all references thereto in the form and context in which it is
respectively included and the inclusion and all references to its name in the form and context
in which it appears in this Offer Document and to act in such capacity in relation to this Offer
Document.
32. Censere has given and has not withdrawn its written consent to the issue of this Offer
Document with the inclusion herein of the Independent Valuation Report set out in Appendix
F of this Offer Document and all references thereto in the form and context in which it is
respectively included and the inclusion and all references to its name in the form and context
in which it appears in this Offer Document and to act in such capacity in relation to this Offer
Document.
33. Antaike has given and has not withdrawn its written consent to the issue of this Offer
Document with the inclusion herein of the sections entitled Industry Overview, Prospects
and Trend Information of this Offer Document, which is extracted and summarised from the
Industry Report and all references to its name in the form and context in which it appears in
34. The Sponsor and Issue Manager, the Joint Placement Agents, the Solicitors to the Placement
and Legal Adviser to our Company on Singapore Law, the Legal Adviser to our Company on
PRC Law, the Legal Adviser to our Company on Cayman Islands Law, the Singapore Share
Registrar and Share Transfer Agent, the Principal Banker and the Receiving Banker, have
each given and have not withdrawn their written consents to the issue of this Offer Document
with the inclusion herein of their name and references thereto in the form and context in
which they respectively appear in this Offer Document and to act in such respective
capacities in relation to this Offer Document.
35. Each of the Solicitors to the Placement and Legal Adviser to our Company on Singapore Law,
the Legal Adviser to our Company on Malaysia Law, the Legal Adviser to our Company on
PRC Law, the Legal Adviser to our Company on Cayman Islands Law, the Singapore Share
Registrar and Share Transfer Agent, the Principal Banker and the Receiving Banker do not
make or purport to make any statement in this Offer Document or any statement upon which
a statement in this Offer Document is based and each of them makes no representation
regarding any statement in this Offer Document and to the maximum extent permitted by law,
207
expressly disclaims and takes no responsibility for any liability to any persons which is based
on, or arises out of, any statement, information or opinions in, or omission from, this Offer
Document.
RESPONSIBILITY STATEMENT BY OUR DIRECTORS
36. This Offer Document has been seen and approved by our Directors and they individually and
collectively accept full responsibility for the accuracy of the information given in this Offer
Document and confirm, after making all reasonable enquiries, that to the best of their
knowledge and belief, this Offer Document constitutes full and true disclosure of all material
facts about the Placement, the Company and its subsidiaries, and the Directors are not
aware of any facts the omission of which would make any statement in this Offer Document
misleading.
Where information in this Offer Document has been extracted from published or otherwise
publicly available sources or obtained from a named source, the sole responsibility of the
Directors has been to ensure that such information has been accurately and correctly
extracted from those sources and/or reproduced in this Offer Document in its proper form and
context.
RESPONSIBILITY STATEMENT BY THE VENDORS
37. This Offer Document has been seen and approved by the Vendors and (in the case of
Luminor Pacific Fund 1) the directors of Luminor Pacific Fund 1 and they individually and
collectively accept full responsibility for the accuracy of the information given in this Offer
Document and confirm, after making all reasonable enquiries, that to the best of their
knowledge and belief, this Offer Document constitutes full and true disclosure of all material
facts about the Placement, the Company and its subsidiaries, and the Vendors and (in the
case of Luminor Pacific Fund 1) the directors of Luminor Pacific Fund 1 are not aware of any
facts the omission of which would make any statement in this Offer Document misleading.
Where information in this Offer Document has been extracted from published or otherwise
publicly available sources or obtained from a named source, the sole responsibility of the
Vendors and (in the case of Luminor Pacific Fund 1) the directors of Luminor Pacific Fund 1
has been to ensure that such information has been accurately and correctly extracted from
those sources and/or reproduced in this Offer Document in its proper form and context.
DOCUMENTS FOR INSPECTION
38. The following documents or copies thereof may be inspected at our principal place of
business, during normal business hours for a period of six (6) months from the date of
registration of this Offer Document with the SGX-ST (acting as agent on behalf of the
Authority):
(i) the Memorandum and Articles of Association of our Company;
(ii) the Independent Auditors Report for the Years Ended 31 March 2011, 2012, 2013 and
the Nine Months ended 31 December 2013 as set out in Appendix A of this Offer
Document;
(iii) the legal opinion from Rozlan Khuen set out in Appendix D of this Offer Document;
208
(iv) the Qualified Persons Report set out in Appendix E of this Offer Document;
(v) the Independent Valuation Report set out in Appendix F of this Offer Document;
(vi) the Industry Report;
(vii) the Service Agreements referred to in this Offer Document;
(viii) the material contracts referred to in the section entitled Material Contracts of this Offer
Document; and
(ix) the letters of consent referred to in the section entitled Consents of this Offer
Document.
209
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21 July 2014
The Board of Directors
Terratech Group Limited
The offices of Codan Trust Company (Cayman) Limited
Cricket Square
Hutchins Drive
PO Box 2681
Grand Cayman
KY1-1111
Cayman Islands
Dear Sirs,
Report on the financial statements
We have audited the accompanying financial statements of Terratech Group Limited (the
Company) and its subsidiaries (collectively, the Group), which comprise the combined
statements of financial position as at 31 March 2011, 2012 and 2013 and 31 December 2013, and
the combined statements of profit or loss, combined statements of comprehensive income,
combined statements of changes in equity and combined statements of cash flows for the years
ended 31 March 2011, 2012 and 2013 and the nine months ended 31 December 2012 and 2013,
and a summary of significant accounting policies and other explanatory information.
Managements responsibility for the combined financial statements
Management is responsible for the preparation and fair presentation of these combined financial
statements in accordance with International Financial Reporting Standards, and for devising and
maintaining a system of internal accounting controls sufficient to provide a reasonable assurance
that assets are safeguarded against loss from unauthorised use or disposition; and transactions
are properly authorised and that they are recorded as necessary to permit the preparation of true
and fair profit and loss accounts and balance sheets and to maintain accountability of assets.
Auditors responsibility
Our responsibility is to express an opinion on these combined financial statements based on our
audit. We conducted our audits in accordance with International Standards on Auditing. Those
standards require that we comply with ethical requirements and plan and perform the audits to
obtain reasonable assurance about whether the combined financial statements are free from
material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and
disclosures in the combined financial statements. The procedures selected depend on the
auditors judgement, including the assessment of the risks of material misstatement of the
combined financial statements, whether due to fraud or error. In making those risk assessments,
the auditors consider internal control relevant to the entitys preparation and fair presentation of
combined financial statements in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entitys
APPENDIX A INDEPENDENT AUDITORS REPORT FOR
THE YEARS ENDED 31 MARCH 2011, 2012, 2013 AND
THE NINE MONTHS ENDED 31 DECEMBER 2013
A-1
internal control. An audit also includes evaluating the appropriateness of accounting policies used
and the reasonableness of accounting estimates made by management, as well as evaluating the
overall presentation of the combined financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our audit opinion.
Opinion
In our opinion, for the purpose of this report and on the basis of presentation set out in note 2
below, the abovementioned combined financial statements of the Group present fairly, in all
material respects, the state of affairs of the Group as at 31 March 2011, 2012 and 2013 and 31
December 2013 and the results of operations, changes in equity and cash flows of the Group for
each of the financial years ended 31 March 2011, 2012 and 2013 and the nine months ended
31 December 2012 and 2013 in accordance with International Financial Reporting Standards.
Restriction of distribution and use
This report is made solely to you as a body and for inclusion in the Offer Document of the
Company to be issued in relation to the proposed offering of the shares of the Company in
connection with the Companys listing on the Catalist Board of Singapore Exchange Securities
Trading Limited.
Ernst & Young
Certified Public Accountants
Hong Kong
Partner-in-charge: Ada Lam
21 July 2014
A-2
COMBINED STATEMENTS OF PROFIT OR LOSS
Years ended 31 March
Nine months ended
31 December
Notes 2011 2012 2013 2012 2013
SGD SGD SGD SGD SGD
REVENUE 8
Cost of sales
Gross profit
Other income and gains 8 2 113,942 267,980 31,856
Selling and distribution
expenses (1,142) (29,668) (120,433) (98,709) (193,273)
General and
administrative expenses (24,202) (1,511,020) (3,020,473) (2,148,488) (3,518,212)
Other expenses, net (871,126) (5,715,069)
Finance costs 10 (46,934) (1,547,414) (599,897) (1,254,373)
LOSS BEFORE TAX 9 (25,344) (1,587,620) (5,445,504) (2,579,114) (10,649,071)
Income tax expense 11 (3)
LOSS FOR THE
YEAR/PERIOD
ATTRIBUTABLE TO THE
EQUITY HOLDER OF
THE COMPANY (25,347) (1,587,620) (5,445,504) (2,579,114) (10,649,071)
LOSS PER SHARE
ATTRIBUTABLE TO THE
EQUITY HOLDER OF
THE COMPANY
Basic and diluted (cents) 12 (0.006) (0.369) (1.266) (0.600) (2.477)
A-3
COMBINED STATEMENTS OF COMPREHENSIVE INCOME
Nine months ended
31 December
2011 2012 2013 2012 2013
SGD SGD SGD SGD SGD
LOSS FOR THE
YEAR/PERIOD
ATTRIBUTABLE TO THE
EQUITY HOLDER OF THE
COMPANY (25,347) (1,587,620) (5,445,504) (2,579,114) (10,649,071)
Other comprehensive income
to be reclassified to profit or
loss in subsequent periods:
Exchange differences on
translation of foreign
operations (14,371) 3,520 35,176 64,194 145,565
TOTAL COMPREHENSIVE
LOSS FOR THE
YEAR/PERIOD (39,718) (1,584,100) (5,410,328) (2,514,920) (10,503,506)
A-4
COMBINED STATEMENTS OF FINANCIAL POSITION
31 March 31 March 31 March 31 December
Notes 2011 2012 2013 2013
SGD SGD SGD SGD
NON-CURRENT ASSETS
Property, plant and equipment 14 3,056,655 4,395,816 5,094,628
Exploration and evaluation assets 16 276,246
Intangible assets 15 828,846 801,298 771,777 748,105
Prepayments and deposits 18 88,715 326,152 975,751
Total non-current assets 1,105,092 3,946,668 5,493,745 6,818,484
CURRENT ASSETS
Inventories 17 1,200,503 2,944,350
Prepayments, deposits and other
receivables 18 22,321 38,046 153,554 373,797
Due from a fellow subsidiary 29(b) 113,862
Pledged deposits 19 135,926 190,635 190,866
Cash and cash equivalents 19 27,119 173,485 9,663,108 4,044,663
Total current assets 49,440 347,457 11,321,662 7,553,676
CURRENT LIABILITIES
Trade payables 20 16,887 37,590 41,911
Other payables and accruals 21 25,050 124,624 540,787 898,397
Derivative financial instruments 22 4,335,637 9,967,498
Interest-bearing bank and other
borrowings 25 446,871 652,236 1,785,006
Due to the ultimate holding company 29(b) 702,100 702,100
Due to the immediate holding company 29(b) 27,021 2,634,240 4,625,292 4,298,906
Due to fellow subsidiaries 29(b) 1,331 738,181 205,295 881,822
Tax payable 29
Total current liabilities 755,531 4,662,903 10,396,837 17,873,540
NET CURRENT ASSETS/(LIABILITIES) (706,091) (4,315,446) 924,825 (10,319,864)
TOTAL ASSETS LESS CURRENT
LIABILITIES 399,001 (368,778) (6,418,570) (3,501,380)
NON-CURRENT LIABILITIES
Convertible bonds 23 12,326,415 13,003,380
Interest-bearing bank and other
borrowings 25 816,321 597,751 504,342
Total non-current liabilities 816,321 12,924,166 13,507,722
Net assets/(liabilities) 399,001 (1,185,099) (6,505,596) (17,009,102)
EQUITY
Equity attributable to the equity holder
of the Company
Issued capital 26 430,108 430,108 430,108 430,108
Reserves (31,107) (1,615,207) (6,935,704) (17,439,210)
Total equity/(net deficiency in assets) 399,001 (1,185,099) (6,505,596) (17,009,102)
The accompanying accounting policies and explanatory notes form an integral part of the
audited combined financial statements.
A-5
COMBINED STATEMENTS OF CHANGES IN EQUITY
Issued
capital
Deemed
contribution*
Foreign
currency
translation
reserve*
Retained
profits/
(accumulated
losses)* Total
SGD SGD SGD SGD SGD
At 1 April 2010 430,108 4,977 3,634 438,719
Loss for the year (25,347) (25,347)
Other comprehensive income for
the year:
translation of foreign operations (14,371) (14,371)
year (14,371) (25,347) (39,718)
At 31 March 2011 and 1 April
2011 430,108 (9,394) (21,713) 399,001
Loss for the year (1,587,620) (1,587,620)
the year:
translation of foreign operations 3,520 3,520
year 3,520 (1,587,620) (1,584,100)
At 31 March 2012 and 1 April
2012 430,108 (5,874) (1,609,333) (1,185,099)
Loss for the year (5,445,504) (5,445,504)
the year:
year 35,176 (5,445,504) (5,410,328)
Issue of convertible bonds 89,831 89,831
At 31 March 2013 430,108 89,831 29,302 (7,054,837) (6,505,596)
At 1 April 2012 430,108 (5,874) (1,609,333) (1,185,099)
Loss for the period (2,579,114) (2,579,114)
the period:
period 64,194 (2,579,114) (2,514,920)
Issue of convertible bonds 89,831 89,831
At 31 December 2012 430,108 89,831 58,320 (4,188,447) (3,610,188)
At 1 April 2013 430,108 89,831 29,302 (7,054,837) (6,505,596)
Loss for the period (10,649,071) (10,649,071)
the period:
period 145,565 (10,649,071) (10,503,506)
At 31 December 2013 430,108 89,831 174,867 (17,703,908) (17,009,102)
* These reserve accounts comprise the combined reserves in the combined statements of financial position.
A-6
COMBINED STATEMENTS OF CASH FLOWS
Nine months ended
31 December
Notes 2011 2012 2013 2012 2013
SGD SGD SGD SGD SGD
CASH FLOWS FROM OPERATING
ACTIVITIES
Loss before tax (25,344) (1,587,620) (5,445,504) (2,579,114) (10,649,071)
Adjustments for:
Loss on disposal of items of
property, plant and equipment 9 236
Write-off of an item of property,
plant and equipment 9 83,208
Finance costs 10 46,934 1,547,414 599,897 1,254,373
Fair value loss/(gain) of derivative
financial instruments transactions
not qualifying as hedges 9 870,890 (154,560) 5,631,861
Depreciation of property, plant and
equipment 9 292,741 417,126 272,078 380,032
Amortisation of intangible assets 9 3,013 23,766 23,635 17,728 17,658
Interest income 8 (2) (69) (69) (329)
(22,331) (1,224,181) (2,586,272) (1,844,040) (3,282,268)
Increase in inventories (1,201,947) (1,000,264) (1,741,827)
Increase in prepayments, deposits
and other receivables (20,487) (104,825) (355,368) (546,128) (878,489)
Decrease/(increase) in an amount
due from a fellow subsidiary (113,865) (113,864) 113,842
Increase in trade payables 16,850 21,337 18,968 5,666
Increase/(decrease) in other
payables and accruals (80,231) 99,614 208,129 116,554 447,083
Increase/(decrease) in an amount
due to the immediate holding
company 27,397 2,607,219 1,991,052 2,410,223 (326,386)
Increase/(decrease) in amounts due
to fellow subsidiaries 1,332 736,314 (526,398) (728,229) 697,833
Cash generated from/(used in)
operations (94,320) 2,130,991 (2,563,332) (1,686,780) (4,964,546)
Interest received 2 69 69 329
Interest element of finance lease
rental payments (26,874) (79,642) (60,370) (56,861)
Interest paid (20,060) (31,361) (31,361) (4,383)
Malaysia taxes paid (28)
Net cash flows from/(used in)
operating activities (94,320) 2,084,031 (2,674,266) (1,778,442) (5,025,461)
A-7
COMBINED STATEMENTS OF CASH FLOWS (continued)
Nine months ended
31 December
Notes 2011 2012 2013 2012 2013
SGD SGD SGD SGD SGD
CASH FLOWS FROM INVESTING
ACTIVITIES
Purchases of items of property, plant
and equipment (1,668,641) (1,234,329) (443,088) (615,703)
Acquisition of exploration and
evaluation assets (151,479)
Increase in pledged deposits (135,926) (54,709) (54,709) (231)
Net cash flows used in investing
activities (151,479) (1,804,567) (1,289,038) (497,797) (615,934)
CASH FLOWS FROM FINANCING
ACTIVITIES
Increase/(decrease) in an amount
due to the ultimate holding company 229,743 (702,100) (702,100)
Net proceeds from issue of
convertible bonds 14,656,637 14,656,637
Interest paid on convertible bonds (600,000)
Repayments of obligation under
finance leases (145,385) (558,549) (401,301) (585,676)
Net cash flows from/(used in)
financing activities 229,743 (145,385) 13,395,988 13,553,236 (1,185,676)
NET INCREASE/(DECREASE) IN
CASH AND CASH EQUIVALENTS (16,056) 134,079 9,432,684 11,276,997 (6,827,071)
Cash and cash equivalents at
beginning of year/period 47,628 27,119 173,485 173,485 9,663,108
Effect of foreign exchange rate
changes, net (4,453) 12,287 56,939 94,779 178,667
CASH AND CASH EQUIVALENTS
AT END OF YEAR/PERIOD 27,119 173,485 9,663,108 11,545,261 3,014,704
ANALYSIS OF BALANCES OF
CASH AND CASH EQUIVALENTS
Cash and bank balances 27,119 173,485 9,663,108 11,545,261 4,044,663
Bank overdrafts (1,029,959)
Cash and cash equivalents as
stated in the statements of cash
flows 27,119 173,485 9,663,108 11,545,261 3,014,704
A-8
NOTES TO THE COMBINED FINANCIAL STATEMENTS
1. CORPORATE INFORMATION
1.1 The Company
The Company is a limited liability company incorporated in the Cayman Islands. The address
of the Companys registered office is the office of Codan Trust Company (Cayman) Limited,
Cricket Square, Hutchins Drive, PO Box 2681, Grand Cayman, KY1-1111, Cayman Islands.
The Company is an investment holding company. During the years ended 31 March 2011,
2012 and 2013 and the nine months ended 31 December 2012 and 2013, the Companys
subsidiaries were primarily in their development stage.
In the opinion of the directors of the Company, since its incorporation, the immediate holding
company of the Company is Tritech Group Limited (TGL), which is listed on the Catalist
Board of the Singapore Exchange, and the ultimate holding company of the Company is
Tritech International Holdings Pte. Ltd.. Both are incorporated in Singapore.
1.2 The Restructuring exercise
The Company and its subsidiaries now comprising the Group underwent the Restructuring
Exercise as set out in the section headed Restructuring Exercise in the offer document.
The Restructuring Exercise is as described below:
The Group was formed through the Restructuring Exercise which involved, inter alia, an
acquisition by the Company of the entire equity interest legally and beneficially owned by
Terratech Group Limited in Terratech Resources Pte. Ltd (Terratech Resources). Pursuant
to the Restructuring Exercise, the Company became the holding company of the Group.
On 20 June 2014, the Company, Terratech Resources and TGL entered into an agreement
(the Restructuring Agreement) pursuant to which, inter alia:
(a) the Company agreed to assume the liability of Terratech Resources to repay or procure
a conversion of the conversion amount in respect of the convertible bonds into
conversion Shares in accordance with the terms of the convertible bond agreement, and
in settlement and satisfaction of the corresponding amount deemed due and owing by
Terratech Resources to the Company as a result thereof (the Convertible Bonds
Settlement Amount), Terratech Resources agreed to issue and allot 156,772,600 new
ordinary shares in the capital of Terratech Resources to the Company (the Convertible
Bonds Settlement Shares);
(b) TGL agreed to subscribe for and Terratech Resources agreed to issue and allot
84,360,000 new ordinary shares in the capital of Terratech Resources (the
Shareholders Loans Shares) by way of capitalisation of advances and loans of an
aggregate principal amount of SGD8.436 million made by TGL to Terratech Resources
(the Shareholders Loans).
A-9
1. CORPORATE INFORMATION (continued)
1.2 The Restructuring exercise (continued)
(c) TGL agreed to sell, and the Company agreed to purchase, the entire equity interest
legally and beneficially owned by TGL in Terratech Resources comprising:
(i) 4,301,075 shares in the capital of Terratech Resources held by TGL pursuant to
the Acquisition (the Existing Shares); and
(ii) the Shareholders Loans Shares held by TGL pursuant to capitalisation of the
Shareholders Loans as further described in paragraph (b) above,
and amounting to 36.12% of the enlarged share capital of Terratech Resources following the
issuance of the Convertible Bonds Settlement Shares and the Shareholders Loans Shares,
for a consideration of S$4,299,999.99 (the Terratech Acquisition Consideration), to be
settled and satisfied by way of the issue and allotment of 429,999,999 new Shares, credited
as fully paid up, to be issued and allotted to TGL (the Consideration Shares).
The Terratech Acquisition Consideration is equivalent to the aggregate par value of the
Consideration Shares, and was arrived at after taking into account, inter alia, TGLs pro-rata
share of the NTA of Terratech Resources and its subsidiaries as at 31 December 2013 of
S$9.82 million after adjusting for the capitalisation of the Shareholders Loans and the
Convertible Bonds Settlement Amount.
On 20 June 2014, following the issue and allotment of the Shareholders Loans Shares by
Terratech Resources to TGL, TGL transferred the Existing Shares and the Shareholders
Loans Shares to the Company, and the Company issued and allotted the Consideration
Shares to TGL.
Pursuant to the completion of the Restructuring Agreement, (i) the Company held 100% of
the enlarged issued and paid-up share capital of Terratech Resources of S$24,543,367.50,
comprising 245,433,675 ordinary shares in the capital of Terratech Resources; and (ii) TGL
held 100% of the enlarged issued and paid-up share capital of the Company of S$4,300,000,
comprising 430,000,000 ordinary shares of par value S$0.01 each in the share capital of the
Company.
As a result of the Restructuring Exercise, the Company became the immediate holding
company of Terratech Resources Pte. Ltd. In the opinion of the directors of the Company, the
immediate holding company and the ultimate holding company of the Company are Tritech
Group Limited, a company listed on the Catalist Board of the Singapore Exchange, and
Tritech International Holdings Pte. Ltd., respectively. Both companies are incorporated in
Singapore.
A-10
1. CORPORATE INFORMATION (continued)
1.2 The Restructuring exercise (continued)
As at the date of this report, the Company has direct and indirect interests in its subsidiaries,
the particulars of which are set out below:
Name
Place and date
of incorporation/
registration and
operations
Nominal value
of issued
ordinary
share capital
Percentage of
equity attributable
to the Company
Principal
activities
Direct Indirect
Terratech
Resources
Pte. Ltd (note (a))
Singapore
5 July 2005
SGD24,543,368 100 Investment
holding, sales
and marketing
outside of
PRC/Singapore
CEP Resources
Entity Sdn. Bhd.
(CEP) (note (b))
Malaysia
16 March 2006
RM500,000 100 Exploration,
development and
extraction of
marble and
production of
marble products
|!J([
+ (note (c))
Peoples Republic
of China (PRC)/
Mainland China
26 June 2013
USD480,000 100 Sales and
marketing in the
PRC
Notes:
(a) The statutory financial statements of this entity for the years ended 31 March 2011, 2012 and 2013 under
Singapore Financial Reporting Standards were audited by BDO LLP., public accountants and certified public
accountants registered in Singapore.
(b) The statutory financial statements of this entity for the years ended 30 June 2009 and 2010 and the period
ended 31 March 2011 prepared under Financial Reporting Standards in Malaysia were audited by SE Lai
Associates, Chartered Accountants registered in Malaysia. The statutory financial statements of this entity for
the years ended 31 March 2012 and 2013 prepared under Financial Reporting Standards in Malaysia were
audited by BDO, Chartered Accountants registered in Malaysia.
(c) No statutory financial statements of this entity have been prepared as the local authority has not required the
entity to prepare audited financial statements.
A-11
2. BASIS OF PRESENTATION
Pursuant to the Restructuring Exercise as more fully explained in the section headed
Restructuring Exercise in the offer document, the Company became the holding company
of the companies now comprising the Group subsequent to the end of the years ended 31
March 2011, 2012 and 2013 and the nine months ended 31 December 2012 and 2013 on 20
June 2014. The companies now comprising the Group were under the common control of the
Controlling Shareholders (as defined in the offer document) before and after the
Restructuring Exercise. Accordingly, for the purpose of this report, the financial statements
have been prepared by applying the principles of merger accounting as if the Restructuring
Exercise had been completed on 1 April 2010.
The combined statements of profit or loss, statements of comprehensive income, statements
of changes in equity and statements of cash flows of the Group for the years ended 31 March
2011, 2012 and 2013 and the nine months ended 31 December 2012 and 2013 include the
results and cash flows of all companies now comprising the Group from the earliest date
presented or since the date when the subsidiaries and/or businesses first came under the
common control of the controlling shareholders, where this is a shorter period. The combined
statements of financial position of the Group as at 31 March 2011, 2012 and 2013 and 31
December 2013 have been prepared to present the assets and liabilities of the subsidiaries
and/or businesses using the existing book values from the controlling shareholders
perspective. No adjustments are made to reflect fair values, or recognise any new assets or
liabilities as a result of the Restructuring Exercise.
All intra-group transactions and balances have been eliminated on combination.
Going concern
As at 31 December 2013, the Group had cash and cash equivalents of SGD4,044,663 and
aggregate outstanding interest-bearing bank and other borrowings of SGD1,785,006
together with aggregate payables of SGD6,121,036, which are due within the next twelve
months. Notwithstanding this, the combined financial statements of the Group have been
prepared on a going concern basis, as the Companys immediate holding company, Tritech
Group Limited, has undertaken to provide continuing financial support to enable the Group
to operate as a going concern in the foreseeable future.
In addition, the derivative financial liability of SGD9,967,498 and the convertible bonds of
SGD13,003,380 as at 31 December 2013 have been settled through the conversion of the
convertible bonds on 15 July 2014 as disclosed in note 35 to the combined financial
statements.
A-12
3. BASIS OF PREPARATION
The financial statements have been prepared in accordance with International Financial
Reporting Standards (IFRSs), which comprise all standards and interpretations approved
by the International Accounting Standards Board (the IASB). All IFRSs effective for the
accounting period commencing from 1 April 2013, together with the relevant transitional
provisions, have been adopted/early adopted by the Group in the preparation of the financial
statements throughout the years ended 31 March 2011, 2012 and 2013 and the nine months
ended 31 December 2012 and 2013.
The combined financial statements have been prepared under the historical cost convention,
except for derivative financial instruments which have been measured at fair value. These
financial statements are presented in Singapore Dollars (SGD).
4. ISSUED BUT NOT YET EFFECTIVE INTERNATIONAL FINANCIAL REPORTING
STANDARDS
The Group has not applied the following new and revised IFRSs, that have been issued but
are not yet effective, in these financial statements.
IFRS 9 Financial Instruments
3
IFRS 9, IFRS 7 and IAS 39
Amendments
Hedge Accounting and amendments to IFRS 9,
IFRS 7 and IAS 39
3
IFRS 10, IFRS 12 and IAS 27
(Revised) Amendments
Amendments to IFRS 10, IFRS 12 and IAS 27
(Revised) Investment Entities
1
IFRS 11 Amendments Amendments to IFRS 11 Joint Arrangements
Accounting for Acquisitions of Interests in Joint
Operations
4
IFRS 14 Regulatory Deferral Accounts
4
IFRS 15 Revenue from Contracts with Customers
5
IAS 16 and IAS 38 Amendments Amendments to IAS 16 and IAS 38 Clarification
of Acceptable Methods of Depreciation and
Amortisation
4
IAS 19 Amendments Amendments to IAS 19 Employee Benefits
Defined Benefit Plans: Employee Contributions
2
Presentation Offsetting Financial Assets and
Financial Liabilities
1
A-13
STANDARDS (continued)
IAS 36 Amendments Amendments to IAS 36 Impairment of Assets
Recoverable Amount Disclosures for
Non-Financial Assets
1
Recognition and Measurement Novation of
Derivatives and Continuation of Hedge
Accounting
1
IFRIC 21 Levies
1
Annual Improvements 2010-2012
Cycle
Amendments to a number of IFRSs issued in
January 2014
2
Annual Improvements 2011-2013
Cycle
Amendments to a number of IFRSs issued in
January 2014
2
1
Effective for annual periods beginning on or after 1 January 2014
2
Effective for annual periods beginning on or after 1 July 2014
3
No mandatory effective date yet determined but is available for adoption
4
Effective for periods beginning on or after 1 January 2016
5
Effective for periods beginning on or after 1 January 2017
Further information about those IFRSs that are expected to be applicable to the Group is as
follows:
IFRS 9 issued in November 2009 is the first part of phase 1 of a comprehensive project to
entirely replace IAS 39 Financial Instruments: Recognition and Measurement. This phase
focuses on the classification and measurement of financial assets. Instead of classifying
financial assets into four categories, an entity shall classify financial assets as subsequently
measured at either amortised cost or fair value, on the basis of both the entitys business
model for managing the financial assets and the contractual cash flow characteristics of the
financial assets. This aims to improve and simplify the approach for the classification and
measurement of financial assets compared with the requirements of IAS 39.
In October 2010, the IASB issued additions to IFRS 9 to address financial liabilities (the
Additions) and incorporated in IFRS 9 the current derecognition principles of financial
instruments of IAS 39. Most of the Additions were carried forward unchanged from IAS 39,
while changes were made to the measurement of financial liabilities designated as at fair
value through profit or loss using the fair value option (FVO). For these FVO liabilities, the
amount of change in the fair value of a liability that is attributable to changes in credit risk
must be presented in other comprehensive income (OCI). The remainder of the change in
fair value is presented in profit or loss, unless presentation of the fair value change in respect
of the liabilitys credit risk in OCI would create or enlarge an accounting mismatch in profit
or loss. However, loan commitments and financial guarantee contracts which have been
designated under the FVO are scoped out of the Additions.
A-14
STANDARDS (continued)
IAS 39 is aimed to be replaced by IFRS 9 in its entirety. Before this entire replacement, the
guidance in IAS 39 on impairment of financial assets continues to apply. The previous
mandatory effective date of IFRS 9 was removed by the IASB in November 2013 and a
mandatory effective date will be determined after the entire replacement of IAS 39 is
completed. However, the standard is available for application now. The Group will quantify
the effect in conjunction with other phases, when the final standard including all phases is
issued.
The amendments to IFRS 9 relax the requirements for assessing hedge effectiveness which
result in more risk management strategies being eligible for hedge accounting. The
amendments also allow greater flexibility on the hedged items and relax the rules on using
purchased options and non-derivative financial instruments as hedging instruments. In
addition, the amendments to IFRS 9 allow an entity to apply only the improved accounting
for own credit risk-related fair value gains and losses arising on FVO liabilities as introduced
in 2010 without applying the other IFRS 9 requirements at the same time.
The IAS 32 Amendments clarify the meaning of currently has a legally enforceable right to
set off for offsetting financial assets and financial liabilities. The amendments also clarify the
application of the offsetting criteria in IAS 32 to settlement systems (such as central clearing
house systems) which apply gross settlement mechanisms that are not simultaneous. The
amendments are not expected to have any impact on the financial position or performance
of the Group upon adoption on 1 January 2014.
IAS 16 and IAS 38 both establish the principle for the basis of depreciation and amortisation
as being the expected pattern of consumption of the future economic benefits of an asset.
The amendments clarify that the use of revenue-based methods to calculate the depreciation
of an asset is not appropriate because revenue generated by an activity that includes the use
of an asset generally reflects factors other than the consumption of the economic benefits
embodied in the asset. The amendments also clarify that revenue is generally presumed to
be an inappropriate basis for measuring the consumption of the economic benefits embodied
in an intangible asset. This presumption, however, can be rebutted in certain limited
circumstances.
A-15
5. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Subsidiaries
A subsidiary is an entity (including a structured entity), directly or indirectly, controlled by the
Company. Control is achieved when the Group is exposed, or has rights, to variable returns
from its involvement with the investee and has the ability to affect those returns through its
power over the investee (i.e., existing rights that give the Group the current ability to direct
the relevant activities of the investee).
When the Company has, directly or indirectly, less than a majority of the voting or similar
rights of an investee, the Group considers all relevant facts and circumstances in assessing
whether it has power over an investee, including:
(a) the contractual arrangement with the other vote holders of the investee;
(b) rights arising from other contractual arrangements; and
(c) the Groups voting rights and potential voting rights.
Fair value measurement
The Group measures its derivative financial instruments at the end of each reporting period.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in
an orderly transaction between market participants at the measurement date. The fair value
measurement is based on the presumption that the transaction to sell the asset or transfer
the liability takes place either in the principal market for the asset or liability, or in the
absence of a principal market, in the most advantageous market for the asset or liability. The
principal or the most advantageous market must be accessible by the Group. The fair value
of an asset or a liability is measured using the assumptions that market participants would
use when pricing the asset or liability, assuming that market participants act in their economic
best interest.
A fair value measurement of a non-financial asset takes into account a market participants
ability to generate economic benefits by using the asset in its highest and best use or by
selling it to another market participant that would use the asset in its highest and best use.
The Group uses valuation techniques that are appropriate in the circumstances and for which
sufficient data are available to measure fair value, maximising the use of relevant observable
inputs and minimising the use of unobservable inputs.
A-16
5. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Fair value measurement (continued)
All assets and liabilities for which fair value is measured or disclosed in the financial
statements are categorised within the fair value hierarchy, described as follows, based on the
lowest level input that is significant to the fair value measurement as a whole:
Level 1 based on quoted prices (unadjusted) in active markets for identical assets or
liabilities
Level 2 based on valuation techniques for which the lowest level input that is
significant to the fair value measurement is observable, either directly or
indirectly
Level 3 based on valuation techniques for which the lowest level input that is
significant to the fair value measurement is unobservable
For assets and liabilities that are recognised in the financial statements on a recurring basis,
the Group determines whether transfers have occurred between levels in the hierarchy by
reassessing categorization (based on the lowest level input that is significant to the fair value
measurement as a whole) at the end of each reporting period.
Impairment of non-financial assets
Where an indication of impairment exists, or when annual impairment testing for an asset is
required (other than inventories and financial assets), the assets recoverable amount is
estimated. An assets recoverable amount is the higher of the assets or cash-generating
units value in use and its fair value less costs of disposal, and is determined for an individual
asset, unless the asset does not generate cash inflows that are largely independent of those
from other assets or groups of assets, in which case the recoverable amount is determined
for the cash-generating unit to which the asset belongs.
An impairment loss is recognised only if the carrying amount of an asset exceeds its
recoverable amount. In assessing value in use, the estimated future cash flows are
discounted to their present value using a pre-tax discount rate that reflects current market
assessments of the time value of money and the risks specific to the asset. An impairment
loss is charged to the statements of profit or loss in the period in which it arises in those
expense categories consistent with the function of the impaired asset.
An assessment is made at the end of each reporting period as to whether there is an
indication that previously recognised impairment losses may no longer exist or may have
decreased. If such an indication exists, the recoverable amount is estimated. A previously
recognised impairment loss of an asset other than goodwill is reversed only if there has been
a change in the estimates used to determine the recoverable amount of that asset, but not
to an amount higher than the carrying amount that would have been determined (net of any
depreciation/amortisation) had no impairment loss been recognised for the asset in prior
years.
A-17
Related parties
A party is considered to be related to the Group if:
(a) the party is a person or a close member of that persons family and that person:
(i) has control or joint control over the Group;
(ii) has significant influence over the Group; or
(iii) is a member of the key management personnel of the Group or of a parent of the
Group;
or
(b) the party is an entity where any of the following conditions applies:
(i) the entity and the Group are members of the same group;
(ii) one entity is an associate or joint venture of the other entity (or of a parent,
subsidiary or fellow subsidiary of the other entity);
(iii) the entity and the Group are joint ventures of the same third party;
(iv) one entity is a joint venture of a third entity and the other entity is an associate of
the third entity;
(v) the entity is a post-employment benefit plan for the benefit of employees of either
the Group or an entity related to the Group;
(vi) the entity is controlled or jointly controlled by a person identified in (a); and
(vii) a person identified in (a)(i) has significant influence over the entity or is a member
of the key management personnel of the entity (or of a parent of the entity).
Property, plant and equipment and depreciation
Property, plant and equipment, other than construction in progress, are stated at cost less
accumulated depreciation and any impairment losses. The cost of an item of property, plant
and equipment comprises its purchase price and any directly attributable costs of bringing
the asset to its working condition and location for its intended use.
A-18
Property, plant and equipment and depreciation (continued)
Expenditure incurred after items of property, plant and equipment have been put into
operation, such as repairs and maintenance, is normally charged to the statements of profit
or loss in the period in which it is incurred. In situations where the recognition criteria are
satisfied, the expenditure for a major inspection is capitalised in the carrying amount of the
asset as a replacement. Where significant parts of property, plant and equipment are
required to be replaced at intervals, the Group recognises such parts as individual assets
with specific useful lives and depreciates them accordingly.
Depreciation is calculated on the straight-line basis to write off the cost of each item of
property, plant and equipment to its residual value over its estimated useful life. The principal
annual rates used for this purpose are as follows:
Plant and machinery 10%
Furniture, fixtures and equipment 10-33.3%
Motor vehicles 16.6%
Mining infrastructure 3%
Where parts of an item of property, plant and equipment have different useful lives, the cost
of that item is allocated on a reasonable basis among the parts and each part is depreciated
separately. Residual values, useful lives and the depreciation method are reviewed, and
adjusted if appropriate, at least at each financial year end.
An item of property, plant and equipment including any significant part initially recognised is
derecognised upon disposal or when no future economic benefits are expected from its use
or disposal. Any gain or loss on disposal or retirement recognised in the statements of profit
or loss in the year the asset is derecognised is the difference between the net sales proceeds
and the carrying amount of the relevant asset.
Construction in progress represents property, plant and equipment under construction and
pending installation, including mining infrastructure. Construction in progress is stated at
cost less any impairment losses, and is not depreciated. Cost comprises the direct costs of
construction during the period of construction. Construction in progress is reclassified to the
appropriate category of property, plant and equipment when completed and ready for use.
Exploration rights and assets
Exploration rights and assets are stated at cost less impairment losses. Exploration rights
and assets include the cost of acquiring exploration rights, topographical and geological
surveys, exploratory drilling, sampling and trenching and activities in relation to commercial
and technical feasibility studies, and amortisation and depreciation charges in respect of
assets consumed during the exploration activities.
A-19
Exploration rights and assets (continued)
Expenditure incurred prior to accruing legal rights to explore an area is written off as
incurred.
When it can be reasonably ascertained that an exploration property is capable of commercial
production, exploration and evaluation costs capitalised are transferred to either mining
infrastructure or mining rights and reserves and depreciated/amortised by the straight-line
method based on the proven and probable mineral reserves. Costs incurred for exploration
which can be directly attributable to the development of mining infrastructure are transferred
to mining infrastructure when the exploration reaches the stage of commercial production. All
other costs will be transferred to quarrying right. Exploration rights and assets are written off
to the statements of profit or loss if the exploration property is abandoned.
Stripping activity asset
Stripping activity asset shall be recognised if, and only if, all of the following are met: (a) it
is probable that the future economic benefit (improved access to the ore body) associated
with the stripping activity will flow to the Group; (b) the Group can identify the component of
the ore body for which access has been improved; and (c) the costs relating to the stripping
activity associated with that component can be measured reliably.
When the costs of the stripping activity asset and the inventories produced are not separately
identifiable, the Group shall allocate the production stripping costs between the inventories
produced and the stripping activity asset by using an allocation basis that is based on
quantities of waste removed in stripping activity and inventory production.
The stripping activity asset shall be depreciated or amortised on a systematic basis, over the
expected useful life of the identified component of the ore body that becomes more
accessible as a result of the stripping activity.
Quarrying right
Quarrying right is stated at cost less accumulated amortisation and any impairment losses.
Quarrying right includes the cost of acquiring mining licenses, exploration and evaluation
costs transferred from exploration rights and assets upon determination that an exploration
property is capable of commercial production, and the cost of acquiring interests in the
mining reserves of existing mining properties. Quarrying right is amortised over the
estimated useful lives of the mines, in accordance with the production plans of the entities
concerned and the proved and probable reserves of the mines using the straight-line method.
Quarrying right is written off to the statements of profit or loss if the mining property is
abandoned.
A-20
Leases
Leases that transfer substantially all the rewards and risks of ownership of assets to the
Group, other than legal title, are accounted for as finance leases. At the inception of a finance
lease, the cost of the leased asset is capitalised at the present value of the minimum lease
payments and recorded together with the obligation, excluding the interest element, to reflect
the purchase and financing. Assets held under capitalised finance leases, including prepaid
land lease payments under finance leases, are included in property, plant and equipment,
and depreciated over the shorter of the lease terms and the estimated useful lives of the
assets. The finance costs of such leases are charged to the statements of profit or loss so
as to provide a constant periodic rate of charge over the lease terms.
Assets acquired through hire purchase contracts of a financing nature are accounted for as
finance leases, but are depreciated over their estimated useful lives.
Leases where substantially all the rewards and risks of ownership of assets remain with the
lessor are accounted for as operating leases. Where the Group is the lessee, rentals payable
under operating leases net of any incentives received from the lessor are charged to the
statements of profit or loss on the straight-line basis over the lease terms.
Investments and other financial assets
Initial recognition and measurement
Financial assets of the Group are classified, at initial recognition, as loans and receivables.
When financial assets are recognised initially, they are measured at fair value plus
transaction costs that are attributable to the acquisition of the financial assets.
All regular way purchases and sales of financial assets are recognised on the trade date, that
is, the date that the Group commits to purchase or sell the asset. Regular way purchases or
sales are purchases or sales of financial assets that require delivery of assets within the
period generally established by regulation or convention in the marketplace.
Subsequent measurement
Loans and receivables are non-derivative financial assets with fixed or determinable
payments that are not quoted in an active market. After initial measurement, such assets are
subsequently measured at amortised cost using the effective interest rate method less any
allowance for impairment. Amortised cost is calculated by taking into account any discount
or premium on acquisition and includes fees or costs that are an integral part of the effective
interest rate. The effective interest rate amortisation is included in other income and gains in
the statements of profit or loss. The loss arising from impairment is recognised in the
statements of profit or loss in finance costs for loans and in other expenses for receivables.
A-21
Derecognition of financial assets
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar
financial assets) is primarily derecognised (i.e., removed from the Groups combined
statements of financial position) when:
the rights to receive cash flows from the asset have expired; or
the Group has transferred its rights to receive cash flows from the asset or has assumed
an obligation to pay the received cash flows in full without material delay to a third party
under a pass-through arrangement; and either (a) the Group has transferred
substantially all the risks and rewards of the asset, or (b) the Group has neither
transferred nor retained substantially all the risks and rewards of the asset, but has
transferred control of the asset.
When the Group has transferred its rights to receive cash flows from an asset or has entered
into a pass-through arrangement, it evaluates if and to what extent it has retained the risk
and rewards of ownership of the asset. When it has neither transferred nor retained
substantially all the risks and rewards of the asset nor transferred control of the asset, the
Group continues to recognise the transferred asset to the extent of the Groups continuing
involvement. In that case, the Group also recognises an associated liability. The transferred
asset and the associated liability are measured on a basis that reflects the rights and
obligations that the Group has retained.
Impairment of financial assets
The Group assesses at the end of each reporting period whether there is objective evidence
that a financial asset or a group of financial assets is impaired. An impairment exists if one
or more events that occurred after the initial recognition of the asset have an impact on the
estimated future cash flows of the financial asset or the group of financial assets that can be
reliably estimated. Evidence of impairment may include indications that a debtor or a group
of debtors is experiencing significant financial difficulty, default or delinquency in interest or
principal payments, the probability that they will enter bankruptcy or other financial
reorganisation and observable data indicating that there is a measurable decrease in the
estimated future cash flows, such as changes in arrears or economic conditions that
correlate with defaults.
Financial assets carried at amortised cost
For financial assets carried at amortised cost, the Group first assesses whether impairment
exists individually for financial assets that are individually significant, or collectively for
financial assets that are not individually significant. If the Group determines that no objective
evidence of impairment exists for an individually assessed financial asset, whether
significant or not, it includes the asset in a group of financial assets with similar credit risk
characteristics and collectively assesses them for impairment. Assets that are individually
assessed for impairment and for which an impairment loss is, or continues to be, recognised
are not included in a collective assessment of impairment.
A-22
Impairment of financial assets (continued)
Financial assets carried at amortised cost (continued)
The amount of any impairment loss identified is measured as the difference between the
assets carrying amount and the present value of estimated future cash flows (excluding
future credit losses that have not yet been incurred). The present value of the estimated
future cash flows is discounted at the financial assets original effective interest rate (i.e., the
effective interest rate computed at initial recognition).
The carrying amount of the asset is reduced through the use of an allowance account and
the loss is recognised in the statements of profit or loss. Interest income continues to be
accrued on the reduced carrying amount and is accrued using the rate of interest used to
discount the future cash flows for the purpose of measuring the impairment loss. Loans and
receivables together with any associated allowance are written off when there is no realistic
prospect of future recovery and all collateral has been realised or has been transferred to the
Group.
If, in a subsequent period, the amount of the estimated impairment loss increases or
decreases because of an event occurring after the impairment was recognised, the
previously recognised impairment loss is increased or reduced by adjusting the allowance
account. If a write-off is later recovered, the recovery is credited to other expenses in the
statements of profit or loss.
Financial liabilities
Initial recognition and measurement
Financial liabilities of the Group are classified, at initial recognition, as financial liabilities at
fair value through profit or loss and loans and borrowings, as appropriate.
All financial liabilities are recognised initially at fair value and, in the case of loans and
borrowings, net of directly attributable transaction costs.
The Groups financial liabilities include trade payables, other payables and accruals,
derivative financial instruments, amounts due to the ultimate holding company, the
immediate holding company, and fellow subsidiaries, interest-bearing bank and other
borrowings and convertible bonds.
A-23
Financial liabilities (continued)
Subsequent measurement
The subsequent measurement of financial liabilities depends on their classification as
follows:
Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss include financial liabilities held for
trading and financial liabilities designated upon initial recognition as at fair value through
profit or loss.
Financial liabilities are classified as held for trading if they are acquired for the purpose of
repurchasing in the near term. This category includes derivative financial instruments
entered into by the Group that are not designated as hedging instruments in hedge
relationships as defined by IAS 39. Separated embedded derivatives are also classified as
held for trading unless they are designated as effective hedging instruments. Gains or losses
on liabilities held for trading are recognised in the statements of profit or loss. The net fair
value gain or loss recognised in the statements of profit or loss does not include any interest
charged on these financial liabilities.
Financial liabilities designated upon initial recognition as at fair value through profit or loss
are designated at the date of initial recognition and only if the criteria in IAS 39 are satisfied.
Loans and borrowings
After initial recognition, interest-bearing loans and borrowings are subsequently measured at
amortised cost, using the effective interest rate method unless the effect of discounting
would be immaterial, in which case they are stated at cost. Gains and losses are recognised
in the statements of profit or loss when the liabilities are derecognised as well as through the
effective interest rate amortisation process.
Amortised cost is calculated by taking into account any discount or premium on acquisition
and fees or costs that are an integral part of the effective interest rate. The effective interest
rate amortisation is included in finance costs in the statements of profit or loss.
Convertible bonds
The component of convertible bonds that exhibits characteristics of a liability is recognised
as a liability in the statements of financial position, net of transaction costs. On issuance of
convertible bonds, the fair value of the liability component is determined using a market rate
for an equivalent non-convertible bond; and this amount is carried as a long term liability on
the amortised cost basis until extinguished on conversion or redemption. The remainder of
the proceeds is allocated to the conversion option that is recognised and included in
A-24
Financial liabilities (continued)
Convertible bonds (continued)
shareholders equity, net of transaction costs. Transaction costs are apportioned between
the liability and equity components of the convertible bonds based on the allocation of
proceeds to the liability and equity components when the instruments are first recognised.
If the conversion option of convertible bonds exhibits characteristics of an embedded
derivative, it is separated from its liability component. On initial recognition, the derivative
component of the convertible bonds is measured at fair value and presented as part of
derivative financial instruments. Any excess of proceeds over the amount initially recognised
as the derivative component is recognised as the liability component. Transaction costs are
apportioned between the liability and derivative components of the convertible bonds based
on the allocation of proceeds to the liability and derivative components when the instruments
are initially recognised. The portion of the transaction costs relating to the liability component
is recognised initially as part of the liability. The portion relating to the derivative component
is recognised immediately in the statements of profit or loss.
Derecognition of financial liabilities
A financial liability is derecognised when the obligation under the liability is discharged or
cancelled, or expires.
When an existing financial liability is replaced by another from the same lender on
substantially different terms, or the terms of an existing liability are substantially modified,
such an exchange or modification is treated as a derecognition of the original liability and a
recognition of a new liability, and the difference between the respective carrying amounts is
Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the
statements of financial position if there is a currently enforceable legal right to offset the
recognised amounts and there is an intention to settle on a net basis, or to realise the assets
and settle the liabilities simultaneously.
Inventories
Inventories are stated at the lower of cost and net realisable value. Cost is determined on the
first-in, first-out basis and, in the case of finished goods, comprises direct materials, direct
labour and an appropriate proportion of overheads. Net realisable value is based on
estimated selling prices less any estimated costs to be incurred to completion and disposal.
A-25
Cash and cash equivalents
For the purpose of the combined statements of cash flows, cash and cash equivalents
comprise cash on hand and demand deposits, and short term highly liquid investments that
are readily convertible into known amounts of cash, are subject to an insignificant risk of
changes in value, and have a short maturity of generally within three months when acquired,
less bank overdrafts which are repayable on demand and form an integral part of the Groups
cash management.
For the purpose of the combined statements of financial position, cash and cash equivalents
comprise cash on hand and at banks, including term deposits, and assets similar in nature
to cash, which are not restricted as to use.
Provisions
A provision is recognised when a present obligation (legal or constructive) has arisen as a
result of a past event and it is probable that a future outflow of resources will be required to
settle the obligation, provided that a reliable estimate can be made of the amount of the
obligation.
When the effect of discounting is material, the amount recognised for a provision is the
present value at the end of the reporting period of the future expenditures expected to be
required to settle the obligation. The increase in the discounted present value amount arising
from the passage of time is included in finance costs in the statements of profit or loss.
Income tax
Income tax comprises current and deferred tax. Income tax relating to items recognised
outside profit or loss is recognised outside profit or loss, either in other comprehensive
income or directly in equity.
Current tax assets and liabilities for the current and prior periods are measured at the amount
expected to be recovered from or paid to the taxation authorities, based on tax rates (and tax
laws) that have been enacted or substantively enacted by the end of the reporting period,
taking into consideration interpretations and practices prevailing in the countries in which the
Group operates.
Deferred tax is provided, using the liability method, on all temporary differences at the end
of the reporting period between the tax bases of assets and liabilities and their carrying
amounts for financial reporting purposes.
A-26
Income tax (continued)
Deferred tax liabilities are recognised for all taxable temporary differences, except:
when the deferred tax liability arises from the initial recognition of goodwill or an asset
or liability in a transaction that is not a business combination and, at the time of the
transaction, affects neither the accounting profit nor taxable profit or loss; and
in respect of taxable temporary differences associated with investments in subsidiaries,
when the timing of the reversal of the temporary differences can be controlled and it is
probable that the temporary differences will not reverse in the foreseeable future.
Deferred tax assets are recognised for all deductible temporary differences, the carryforward
of unused tax credits and any unused tax losses. Deferred tax assets are recognised to the
extent that it is probable that taxable profit will be available against which the deductible
temporary differences, the carryforward of unused tax credits and unused tax losses can be
utilised, except:
when the deferred tax asset relating to the deductible temporary differences arises from
the initial recognition of an asset or liability in a transaction that is not a business
combination and, at the time of the transaction, affects neither the accounting profit nor
taxable profit or loss; and
in respect of deductible temporary differences associated with investments in
subsidiaries, deferred tax assets are only recognised to the extent that it is probable
that the temporary differences will reverse in the foreseeable future and taxable profit
will be available against which the temporary differences can be utilised.
The carrying amount of deferred tax assets is reviewed at the end of each reporting period
and reduced to the extent that it is no longer probable that sufficient taxable profit will be
available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred
tax assets are reassessed at the end of each reporting period and are recognised to the
extent that it has become probable that sufficient taxable profit will be available to allow all
or part of the deferred tax asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply
to the period when the asset is realised or the liability is settled, based on tax rates (and tax
laws) that have been enacted or substantively enacted by the end of the reporting period.
Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists
to set off current tax assets against current tax liabilities and the deferred taxes relate to the
same taxable entity and the same taxation authority.
A-27
Revenue recognition
Revenue is recognised when it is probable that the economic benefits will flow to the Group
and when the revenue can be measured reliably, on the following bases:
(a) from the sale of goods, when the significant risks and rewards of ownership have been
transferred to the buyer, provided that the Group maintains neither managerial
involvement to the degree usually associated with ownership, nor effective control over
the goods sold; and
(b) interest income, on an accrual basis using the effective interest method by applying the
rate that exactly discounts the estimated future cash receipts over the expected life of
the financial instrument or a shorter period, when appropriate, to the net carrying
amount of the financial asset.
Employee benefits
Retirement benefit schemes
The employees of the Groups subsidiaries which operate in Singapore, Malaysia and the
PRC are required to participate in central pension schemes operated by respective local
municipal governments. The municipal and provincial governments undertake to assume the
retirement benefit obligations payable to all existing and future retired employees under
these plans and the Group has no further obligation for post-retirement benefits beyond the
contributions made. The contributions are charged to the statements of profit or loss as they
become payable in accordance with the rules of the central pension scheme.
Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of
qualifying assets, i.e., assets that necessarily take a substantial period of time to get ready
for their intended use or sale, are capitalised as part of the cost of those assets. The
capitalisation of such borrowing costs ceases when the assets are substantially ready for
their intended use or sale. Investment income earned on the temporary investment of
specific borrowings pending their expenditure on qualifying assets is deducted from the
borrowing costs capitalised. All other borrowing costs are expensed in the period in which
they are incurred. Borrowing costs consist of interest and other costs that an entity incurs in
connection with the borrowing of funds.
Foreign currencies
These financial statements are presented in SGD, which is the Companys functional and
presentation currency. Each entity in the Group determines its own functional currency and
items included in the financial statements of each entity are measured using that functional
currency. Foreign currency transactions recorded by the entities in the Group are initially
recorded using their respective functional currency rates prevailing at the dates of the
A-28
Foreign currencies (continued)
transactions. Monetary assets and liabilities denominated in foreign currencies are
translated at the functional currency rates of exchange ruling at the end of the reporting
period. Differences arising on settlement or translation of monetary items are recognised in
the statements of profit or loss.
Non-monetary items that are measured in terms of historical cost in a foreign currency are
translated using the exchange rates at the dates of the initial transactions. Non-monetary
items measured at fair value in a foreign currency are translated using the exchange rates
at the date when the fair value was measured.
The functional currencies of certain overseas subsidiaries are currencies other than SGD. As
at the end of the reporting period, the assets and liabilities of these entities are translated into
the presentation currency of the Company at the exchange rates prevailing at the end of the
reporting period and their statements of profit or loss are translated into SGD at the weighted
average exchange rates for the year.
The resulting exchange differences are recognised in other comprehensive income and
accumulated in the foreign currency translation reserve. On disposal of a foreign operation,
the component of other comprehensive income relating to that particular foreign operation is
Any goodwill arising on the acquisition of a foreign operation and any fair value adjustments
to the carrying amounts of assets and liabilities arising on acquisition are treated as assets
and liabilities of the foreign operation and translated at the closing rate.
For the purpose of the combined statements of cash flows, the cash flows of overseas
subsidiaries are translated into SGD at the exchange rates ruling at the dates of the cash
flows. Frequently recurring cash flows of overseas subsidiaries which arise throughout the
year are translated into SGD at the weighted average exchange rates for the year.
6. SIGNIFICANT ACCOUNTING ESTIMATES
The preparation of the Groups financial statements requires management to make estimates
and assumptions that affect the reported amounts of revenues, expenses, assets and
liabilities, and their accompanying disclosures, and the disclosure of contingent liabilities.
Uncertainty about these assumptions and estimates could result in outcomes that could
require a material adjustment to the carrying amounts of the assets or liabilities affected in
the future.
A-29
6. SIGNIFICANT ACCOUNTING ESTIMATES (continued)
Judgement
In the process of applying the Groups accounting policies, management has made the
following judgement, apart from those involving estimations, which has the most significant
effect on the amounts recognised in the financial statements:
Determination of functional currency
The Group measures foreign currency transactions in the respective functional currencies of
the Company and its subsidiaries. In determining the functional currency of each entity of the
Group, judgement is required to determine and consider the currency that mainly influences
sales prices of goods and services and of the country/jurisdiction whose competitive forces
and regulations mainly determines the sales prices of goods and services; the currency that
mainly influences labour, materials and other costs of providing goods or services; the
currency in which funds from financing activities are generated; and the currency in which
receipts from operating activities are usually retained. The Companys principal activity is
investment holding with the management team mainly situated in Singapore, and its
operating expenses are mainly denominated in SGD so management considers SGD as the
Companys functional currency. The functional currency of each entity of the Group is
determined based on managements assessment of the primary economic environment in
which the entity operates. When the indicators are mixed and the functional currency is not
obvious, management uses its judgement to determine the functional currency that most
faithfully represents the economic effects of the underlying transactions, events and
conditions.
Estimation uncertainty
The key assumptions concerning the future and other key sources of estimation uncertainty
at the end of the reporting period, that have a significant risk of causing a material adjustment
to the carrying amounts of assets and liabilities within the next financial year, are described
below.
Impairment of non-financial assets
The Group assesses whether there are any indicators of impairment for all non-financial
assets at the end of each reporting period. Non-financial assets with finite useful lives are
tested for impairment when there are indicators that the carrying amounts may not be
recoverable. An impairment exists when the carrying value of an asset or a cash-generating
unit exceeds its recoverable amount, which is the higher of its fair value less costs of
disposal and its value in use. The calculation of the fair value less costs of disposal is based
on available data from binding sales transactions in an arms length transaction of similar
assets or observable market prices less incremental costs for disposing of the asset. When
value in use calculations are undertaken, management must estimate the expected future
cash flows from the asset or cash-generating unit and choose a suitable discount rate in
order to calculate the present value of those cash flows.
A-30
6. SIGNIFICANT ACCOUNTING ESTIMATES (continued)
Estimation uncertainty (continued)
Useful lives of property, plant and equipment
The Group estimates useful lives and related depreciation charges for its items of property,
plant and equipment. This estimate is based on the historical experience of the actual useful
lives of items of property, plant and equipment of similar nature and functions. It could
change significantly as a result of technical innovation and actions of the Groups
competitors. Management will increase the depreciation where useful lives are less than
those previously estimated, or it will record a reserve for technically obsolete assets that
have been abandoned. The carrying amounts of property, plant and equipment as at 31
March 2011, 2012 and 2013 and 31 December 2013 were nil, SGD3,056,655, SGD4,395,816
and SGD5,094,628, respectively.
Quarry reserves
Engineering estimates of the Groups quarry reserves are inherently imprecise and represent
only approximate amounts because of the significant judgements involved in developing
such information. There are authoritative guidelines regarding the engineering criteria that
have to be met before estimated quarry reserves can be designated as proved and
probable. Proved and probable quarry reserve estimates are updated at regular intervals
taking into account recent production and technical information about each quarry. In
addition, as prices and cost levels change from year to year, the estimate of proved and
probable quarry reserves also changes. This change is considered a change in estimate for
accounting purposes and is reflected on a prospective basis in the amortisation rate
calculated on a straight-line basis. Changes in the estimate of quarry reserves are also taken
into account in impairment assessments of non-current assets. Further details are contained
in note 15 to the financial statements.
Exploration and evaluation expenditure
The application of the Groups accounting policy for exploration and evaluation expenditure
requires judgement in determining whether it is likely that future economic benefits will result
either from future exploitation or sale or where activities have not reached a stage which
permits a reasonable assessment of existence of reserves. The determination of quarry
reserves is itself an estimation process that requires varying degrees of uncertainty
depending on sub-classification and these estimates directly impact the point of deferral of
exploration and evaluation expenditure. The deferral policy requires management to make
certain estimates and assumptions about future events or circumstances, in particular
whether an economically viable extraction operation can be established. Estimates and
assumptions made may change if new information becomes available. If, after expenditure
is capitalised, information becomes available suggesting that the recovery of expenditure is
unlikely, the amount capitalised is written off in the statements of profit or loss in the period
when the new information becomes available. Further details are contained in note 16 to the
financial statements.
A-31
7. OPERATING SEGMENT INFORMATION
For management purposes, the Group is organised into business units based on their
products and services. During the years ended 31 March 2011, 2012 and 2013 and the nine
months ended 31 December 2012 and 2013, the Groups operations consist principally of
mining development activities, which are regarded as a single reportable segment in a
manner consistent with the way in which information is reported internally to the Groups
management for the purposes of resources allocation and performance assessment. In
addition, all the principal assets employed by the Group are located in Kelantan Darul Naim,
Malaysia. Accordingly, no segment analysis is provided.
8. REVENUE AND OTHER INCOME AND GAINS
No revenue was generated for the years ended 31 March 2011, 2012 and 2013 and the nine
months ended 31 December 2012 and 2013.
An analysis of other income and gains is as follows:
Nine months ended
31 December
2011 2012 2013 2012 2013
SGD SGD SGD SGD SGD
Bank interest income 2 69 69 329
Sample sales 113,873 113,351 4,576
Fair value gain of
derivative financial
instruments transactions
not qualifying as hedges 154,560
Others 26,951
2 113,942 267,980 31,856
A-32
9. LOSS BEFORE TAX
The Groups loss before tax is arrived at after charging/(crediting):
Nine months ended
31 December
Notes 2011 2012 2013 2012 2013
SGD SGD SGD SGD SGD
Audit Fee:
Auditors of the Company 5,945 10,507 16,083 8,072 12,024
Non-audit fees:
Auditors of the Company 56,722 97,432
Depreciation of property, plant
and equipment 14 292,741 417,126 272,078 380,032
Amortisation of intangible assets 15 3,013 23,766 23,635 17,728 17,658
Minimum lease payments under
operating leases:
Equipment 4,303 932 932 2,532
Land and buildings 2,925 18,527 15,829 11,983 93,328
2,925 22,830 16,761 12,915 95,860
Employee benefit expense
(excluding directors remuneration
(note 29(c))):
Wages, salaries and bonuses 334,641 758,113 593,485 1,154,022
Pension scheme contributions
(defined contribution schemes) 4,318 13,036 10,213 32,655
Less: Amount capitalised (203,894) (163,600) (796,723)
338,959 567,255 440,098 389,954
Foreign exchange
differences, net 22,321 95,564 127,623 277,325
Fair value loss of derivative
financial instruments
transactions not qualifying
as hedges* 870,890 5,631,861
Fair value gain of derivative
financial instruments
transactions not qualifying
as hedges (154,560)
Write-off of an item of property,
plant and equipment* 83,208
Loss on disposal of items of
property, plant and equipment* 236
* These balances are included in Other expenses, net in the combined statements of profit or loss.
A-33
10. FINANCE COSTS
Nine months ended
31 December
2011 2012 2013 2012 2013
SGD SGD SGD SGD SGD
Interest on overdrafts wholly
repayable within five years 20,060 31,361 31,361 4,383
Interest on convertible bonds 1,436,411 508,166 1,193,129
Interest on finance leases 26,874 79,642 60,370 56,861
46,934 1,547,414 599,897 1,254,373
11. INCOME TAX
Pursuant to the rules and regulations of the Cayman Islands, the Group is not subject to any
income tax in the Cayman Islands.
No provision for profits tax has been made as the Group had no taxable profits derived during
the years ended 31 March 2011, 2012 and 2013 and the nine months ended 31 December
2012 and 2013.
Pursuant to the income tax rules and regulations in Singapore, Malaysia and the PRC, the
subsidiaries located in Singapore, Malaysia and the PRC are liable to Singapore corporate
income tax at 17%, Malaysia corporate income tax at 25% and the PRC corporate income tax
at 25%, respectively, on the assessable profits generated in these countries.
Nine months ended
31 December
2011 2012 2013 2012 2013
SGD SGD SGD SGD SGD
Singapore:
Provision for the year/period

Malaysia:
Provision for the year/period 3
3
The PRC:
Provision for the year/period

Total tax charge for the
year/period 3
A-34
11. INCOME TAX (continued)
A reconciliation of the tax applicable to loss before tax at the statutory rates for the countries
in which the Company and the majority of its subsidiaries are domiciled to the tax at the
effective tax rates, and a reconciliation of the applicable rates (i.e., the statutory tax rates)
to the effective tax rates, are as follows:
Nine months ended
31 December
2011 2012 2013 2012 2013
SGD SGD SGD SGD SGD
Loss before tax (25,344) (1,587,620) (5,445,504) (2,579,114) (10,649,071)
Tax at the statutory
tax rate (4,308) (269,895) (925,736) (438,449) (1,810,342)
Higher tax rate enacted
by local authorities (1,093) (72,764) (95,598) (75,312) (94,898)
Income not subject
to tax 3
Expenses not
deductible for tax 5,401 342,659 1,021,334 513,761 1,905,240
Tax charge at the
Groups effective rate 3
A-35
12. LOSS PER SHARE ATTRIBUTABLE TO HOLDER OF THE COMPANY
The calculation of basic loss per share amounts is based on the loss for the year/period
attributable to the equity holder of the Company, and the weighted average number of
ordinary shares in issue during the year/period, on the assumption that the restructuring
exercise had been completed on 1 April 2010.
Nine months ended
31 December
2011 2012 2013 2012 2013
Loss for the year
attributable to ordinary
equity holder of the
Company used in
computation of basic
loss per share (25,347) (1,587,620) (5,445,504) (2,579,114) (10,649,071)
Weighted average
number of ordinary
shares 430,000,000 430,000,000 430,000,000 430,000,000 430,000,000
The calculation of diluted loss per share amounts is based on the loss for the year/period
attributable to equity holder of the Company, adjusted to reflect the interest on the
convertible bonds and the fair value gain/loss on the derivative component of the convertible
bonds, where applicable.
No adjustment has been made to the basic loss per share amounts presented for the year
ended 31 March 2013 and the nine months ended 31 December 2012 and 2013 in respect
of a dilution as the impact of the convertible bonds outstanding had an anti-dilutive effect on
the basic loss per share amounts presented.
13. DIVIDENDS
No dividend has been paid or declared by the Company, Terratech Resources Pte. Ltd., CEP
Resources Entity Sdn. Bhd. or |!J([+during the years ended 31 March 2011,
2012 and 2013 and the nine months ended 31 December 2012 and 2013.
A-36
14. PROPERTY, PLANT AND EQUIPMENT
Plant and
machinery
Furniture,
fixtures and
equipment
Motor
vehicles
Mining
infrastructure
Construction
in progress Total
SGD SGD SGD SGD SGD SGD
31 March 2012
At 1 April 2011:
Cost
Accumulated
depreciation
Net carrying
amount
At 1 April 2011,
net of
accumulated
depreciation
Additions 2,663,445 35,508 62,194 2,159 313,822 3,077,128
Transfer from
exploration and
evaluation assets 209,429 61,320 270,749
Transfers 298,685 (298,685)
Depreciation
provided during
the year (266,345) (3,635) (10,366) (12,395) (292,741)
Exchange
realignment 71 70 115 1,095 168 1,519
At 31 March
2012, net of
accumulated
depreciation 2,397,171 31,943 51,943 498,973 76,625 3,056,655
At 31 March
2012:
Cost 2,663,523 35,586 62,331 511,396 76,625 3,349,461
Accumulated
depreciation (266,352) (3,643) (10,388) (12,423) (292,806)
Net carrying
amount 2,397,171 31,943 51,943 498,973 76,625 3,056,655
A-37
14. PROPERTY, PLANT AND EQUIPMENT (continued)
Plant and
machinery
Furniture,
fixtures and
equipment
Motor
vehicles
Mining
infrastructure
Construction
in progress Total
31 March 2013
At 31 March 2012
and at 1 April
2012:
Cost 2,663,523 35,586 62,331 511,396 76,625 3,349,461
Accumulated
depreciation (266,352) (3,643) (10,388) (12,423) (292,806)
Net carrying
amount 2,397,171 31,943 51,943 498,973 76,625 3,056,655
At 1 April 2012,
net of accumulated
depreciation 2,397,171 31,943 51,943 498,973 76,625 3,056,655
Additions 1,239,911 28,805 40,872 471,129 1,780,717
Disposals (236) (236)
Depreciation
provided during
the year (377,927) (6,932) (16,953) (15,314) (417,126)
Exchange
realignment (1,620) (1,078) (1,675) (14,516) (5,305) (24,194)
At 31 March 2013,
net of accumulated
depreciation 3,257,535 52,738 73,951 469,143 542,449 4,395,816
At 31 March 2013:
Cost 3,901,700 63,161 100,774 496,417 542,449 5,104,501
Accumulated
depreciation (644,165) (10,423) (26,823) (27,274) (708,685)
Net carrying
amount 3,257,535 52,738 73,951 469,143 542,449 4,395,816
A-38
14. PROPERTY, PLANT AND EQUIPMENT (continued)
Plant and
machinery
Furniture,
fixtures and
equipment
Motor
vehicles
Mining
infrastructure
Construction
in progress Total
31 December 2013
At 31 March 2013
and at 1 April 2013:
Cost 3,901,700 63,161 100,774 496,417 542,449 5,104,501
Accumulated
depreciation (644,165) (10,423) (26,823) (27,274) (708,685)
Net carrying
amount 3,257,535 52,738 73,951 469,143 542,449 4,395,816
At 1 April 2013,
net of accumulated
depreciation 3,257,535 52,738 73,951 469,143 542,449 4,395,816
Additions 891,301 12,290 2,090 305,338 1,211,019
Write-off (83,208) (83,208)
Depreciation
provided during
the period (350,096) (5,909) (12,710) (11,317) (380,032)
Exchange
realignment (5,351) (1,852) (2,125) (14,827) (24,812) (48,967)
At 31 December
2013, net of
accumulated
depreciation 3,710,181 57,267 61,206 442,999 822,975 5,094,628
At 31 December
2013:
Cost 4,673,698 73,122 99,570 480,440 822,975 6,149,805
Accumulated
depreciation (963,517) (15,855) (38,364) (37,441) (1,055,177)
Net carrying
amount 3,710,181 57,267 61,206 442,999 822,975 5,094,628
The net carrying amounts of the Groups fixed assets held under finance leases included in
the total amounts of plant and machinery and motor vehicles as at 31 March 2011, 2012 and
2013 and 31 December 2013 amounted to nil, SGD1,835,960, SGD2,324,246 and
SGD2,605,833, respectively.
During the nine months ended 31 December 2013, a machine used for quarrying purpose
with a carrying amount of SGD83,208 was damaged and management considered the
carrying amount to be irrecoverable.
A-39
15. INTANGIBLE ASSETS
Quarrying right
SGD
Cost:
At 1 April 2010
Cost 837,716
Exchange realignment (5,857)
At 31 March 2011 and 1 April 2011 831,859
At 31 December 2013 815,460
Accumulated amortisation:
At 1 April 2010
Provided during the year 3,013
Exchange realignment
Exchange realignment 14
Exchange realignment (226)
Provided during the period 17,658
Exchange realignment (505)
At 31 December 2013 67,355
Net book value:
At 31 March 2011 828,846
At 31 March 2012 801,298
At 31 March 2013 771,777
At 31 December 2013 748,105
The Groups quarrying rights represent rights for the mining of marble reserves, which
pertain to the sub-lease of a piece of land known as Lot 1781, PN 4112, Mukim Ulu Nenggiri,
Jajahan Gua Musang, Kelantan Darul Naim, measuring approximately 25.94 hectares which
is owned by Kelantan State Economic Development Corporation. This quarry is operated by
the Companys indirectly wholly-owned subsidiary, CEP. With the quarrying rights, the Group
has been granted quarrying permits for a term of 33 years ending 26 January 2044.
A-40
16. EXPLORATION AND EVALUATION ASSETS
SGD
31 March 2011
At 1 April 2010
Cost 130,341
Additions 151,479
At 31 March 2011 276,246
31 March 2012
At 31 March 2011 and 1 April 2011
Cost 276,246
Transferred to property, plant, and equipment (270,749)
At 31 March 2012
17. INVENTORIES
2011 2012 2013 2013
SGD SGD SGD SGD
Finished goods 1,200,503 2,944,350
18. PREPAYMENTS, DEPOSITS AND OTHER RECEIVABLES
2011 2012 2013 2013
SGD SGD SGD SGD
Prepayments 22,321 35,448 252,965 1,256,533
Deposits and other receivables 91,313 226,741 93,015
22,321 126,761 479,706 1,349,548
Less: non-current portion (88,715) (326,152) (975,751)
Current portion 22,321 38,046 153,554 373,797
None of the above assets is either past due or impaired. The financial assets included in the
above balances relate to receivables for which there was no recent history of default.
A-41
19. CASH AND CASH EQUIVALENTS
Note 2011 2012 2013 2013
SGD SGD SGD SGD
Cash and bank balances 27,119 173,485 9,663,108 4,044,663
Time deposits 135,926 190,635 190,866
27,119 309,411 9,853,743 4,235,529
Less: Pledged deposits:
Pledged for long term
bank loans 24 (135,926) (190,635) (190,866)
Cash and cash
equivalents 27,119 173,485 9,663,108 4,044,663
At 31 December 2013, the cash and bank balances of the Group denominated in Renminbi
(RMB) amounted to SGD122,904. The RMB is not freely convertible into other currencies,
however, under Mainland Chinas Foreign Exchange Control Regulations and Administration
of Settlement, Sale and Payment of Foreign Exchange Regulations, the Group is permitted
to exchange RMB for other currencies through banks authorised to conduct foreign exchange
business.
Cash at banks earns interest at floating rates based on daily bank deposit rates. Short term
time deposits are made for varying periods of between one day and three months depending
on the immediate cash requirements of the Group, and earn interest at the respective short
term time deposit rates. The bank balances and pledged deposits are deposited with
creditworthy banks with no recent history of default.
20. TRADE PAYABLES
Trade payables are non-interest-bearing and are normally settled on 30 days terms.
A-42
21. OTHER PAYABLES AND ACCRUALS
2011 2012 2013 2013
SGD SGD SGD SGD
Accrued interest on convertible bonds 212,055 128,219
Accruals and other payables 25,050 124,624 328,732 770,178
25,050 124,624 540,787 898,397
The convertible bonds bear interest at 4%-8% per annum.
22. DERIVATIVE FINANCIAL INSTRUMENTS
2011 2012 2013 2013
SGD SGD SGD SGD
Financial liabilities at fair value
through profit or loss 4,335,637 9,967,498
Further details of these derivative financial instruments related to the convertible bonds are
provided in note 23.
23. CONVERTIBLE BONDS
On 23 November 2012, a subsidiary, Terratech Resources Pte. Ltd., issued convertible
bonds with a nominal value of SGD15,000,000 with interest of 4% for the first twelve months,
and 8% thereafter up to the date that is 3 years from the date of issue of the convertible
bonds (Maturity Date). The convertible bonds are convertible into new ordinary shares of
the Company which are allotted and credited as fully paid upon the following conditions:
(i) listing of the shares of the Company or other listing vehicle whose assets include some
or all of the assets of the Group on any international recognised stock exchange (other
than The Stock Exchange of Hong Kong Limited (the Stock Exchange)) as maybe
approved in writing by the majority bondholder, upon the issuance of the in-principle
approval to list or eligibility-to-list letter (or its equivalent) by any international
recognised stock exchange;
(ii) at the election of the majority bondholder at its discretion;
A-43
23. CONVERTIBLE BONDS (continued)
(iii) acquisition of Terratech Resources Pte. Ltd. by another entity pursuant to a trade sale
or buyout or similar event by means of any transaction or series of related transactions
to which Terratech Resources Pte. Ltd. is a party other than a transaction or series of
transactions in which the holders of the voting securities of Terratech Resources Pte.
Ltd. outstanding immediately before such transaction continue to retain at least 50% of
the total voting power represented by the voting securities of Terratech Resources Pte.
Ltd. or such surviving entity outstanding immediately after such transactions or series
of transactions; or
(iv) a sale, lease or other conveyance of all or substantially all of the assets of Terratech
Resources Pte. Ltd. pursuant to a trade sale or buyout or similar event, other than
pursuant to a restructuring, reorganisation, merger, amalgamation or consolidation
pursuant to or in connection with a listing of Terratech Resources Pte. Ltd. or as
approved in writing by the majority bondholder.
Upon the Company notifying all the bondholders in writing that the hearing of the listing
committee of the Stock Exchange in respect of the listing of the shares of the Company on
the Stock Exchange has taken place, it shall be mandatory for all the bondholders to convert
all of the outstanding convertible bonds into new ordinary shares of the Company at a
conversion price of 50% discount.
The convertible bonds are convertible into new ordinary shares of the Company at a
conversion price of 50% discount to the Initial Public Offering (the IPO) price upon
successful IPO on any international recognised stock exchange (other than the Stock
Exchange). In case of IPO failure, the convertible bonds are either convertible into ordinary
shares of Tritech Group Limited at a 10% discount from the average volume weighted closing
prices of Tritech Group Limiteds shares for the 10 or 30 consecutive market days or
redeemable at principal plus premium of 15% per annum from the issuance date to the
redemption date.
Any convertible bonds not converted will be redeemed on or prior to the maturity date and
upon the failure to list on the Stock Exchange at a price equivalent to the principal amount
plus a premium of 15% per annum from the date of issuance of the bonds to the date of
redemption. The bonds carry interest which is payable yearly in arrears on 23 November.
A-44
23. CONVERTIBLE BONDS (continued)
Based on the terms and conditions of the bonds, except for the deemed contribution relating
to the exchangeable right to Tritechs shares and the guarantee provided by Tritech as
described above, it is determined to be a hybrid instrument. This hybrid instrument is
separated into two components, being financial liability and embedded derivative. The fair
values of the liability component of the bonds determined as at 31 March 2013 and 31
December 2013 are as follows:
2011 2012 2013 2013
SGD SGD SGD SGD
Nominal value of convertible
bonds issued during the
year/period 15,000,000
Direct transaction costs
attributable to the liability
component (343,363)
Proceeds on issue of
convertible bonds 14,656,637
Derivative component
Balance at the date of issue/
31 March/31 December 3,464,747 4,335,637
Fair value loss 870,890 5,631,861
Balance as at 31 March/
31 December 4,335,637 9,967,498
Liability component
Balance at the date of issue/
31 March/31 December 11,102,059 12,538,470
Interest expense 1,436,411 1,193,129
Interest paid (600,000)
Balance at 31 March/
31 December 12,538,470 13,131,599
Less: current liability portion at
31 March/31 December (212,055) (128,219)
Non-current liability portion at
31 March/31 December 12,326,415 13,003,380
Equity component
Deemed contribution 89,831 89,831
A-45
24. FINANCE LEASE PAYABLES
The Group leases certain of its plant and machinery for its quarrying business. These leases
are classified as finance leases and have remaining lease terms ranging from one to three
years.
Total future minimum lease payments under finance leases and their present values were as
follows:
Minimum
lease
payments
Minimum
lease
payments
Minimum
lease
payments
Minimum
lease
payments
Present
value of
minimum
lease
payments
Present
value of
minimum
lease
payments
Present
value of
minimum
lease
payments
Present
value of
minimum
lease
payments
31 March
2011
31 March
2012
31 March
2013
31 December
2013
31 March
2011
31 March
2012
31 March
2013
31 December
2013
SGD SGD SGD SGD SGD SGD SGD SGD
Amounts
payable:
Within one year 507,555 705,657 797,823 446,871 652,236 755,047
In the second
year 507,555 539,691 296,118 474,108 522,748 281,759
In the third to
fifth years,
inclusive 350,052 76,027 229,170 342,213 75,003 222,583
Total minimum
finance lease
payments 1,365,162 1,321,375 1,323,111 1,263,192 1,249,987 1,259,389
Future finance
charges (101,970) (71,388) (63,722)
Total net
finance lease
payables 1,263,192 1,249,987 1,259,389
Portion
classified as
current
liabilities
(note 25) (446,871) (652,236) (755,047)
Non-current
portion
(note 25) 816,321 597,751 504,342
Notes:
(a) All of the Groups finance lease payables are secured by the pledge of the Groups time deposits amounted to nil,
SGD135,926, SGD190,635 and SGD190,866 as at 31 March 2011, 2012 and 2013 and 31 December 2013,
respectively, which are equivalent to 10% of the drawdown sum.
(b) The Groups immediate holding company, Tritech Group Limited, and fellow subsidiaries, Tritech Consultants Pte.
Ltd., Tritech Engineering & Testing (Singapore) Pte. Ltd., Presscrete Engineering Pte. Ltd., and Syseng (S) Pte. Ltd.,
have guaranteed the Groups finance lease payables up to nil, SGD2,717,508, SGD3,917,508 and SGD3,917,508
as at 31 March 2011, 2012 and 2013 and 31 December 2013, respectively.
A-46
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A-47
25. INTEREST-BEARING BANK AND OTHER BORROWINGS (continued)
2011 2012 2013 2013
SGD SGD SGD SGD
Analysed into:
Bank loans and overdrafts
repayable:
Within one year or on demand 1,029,959
In the second year
In the third to fifth years,
inclusive
Beyond five years
1,029,959
Other borrowings repayable:
Within one year 446,871 652,236 755,047
In the second year 474,108 522,748 13,285,139
In the third to fifth years,
inclusive 342,213 12,401,418 222,583
Beyond five years
1,263,192 13,576,402 14,262,769
1,263,192 13,576,402 15,292,728
Notes:
(a) The Group had overdraft facilities amounted to nil, nil, SGD1,500,000 and SGD1,500,000 as at 31 March
2011, 2012 and 2013 and 31 December 2013, of which nil, nil, nil and SGD1,029,959 had been utilised as at
31 March 2011, 2012 and 2013 and 31 December 2013, respectively.
(b) As at 31 March 2011, 2012 and 2013 and 31 December 2013, the Group had aggregate facilities in relation
to its finance leases amounted to approximately nil, SGD2,717,508, SGD3,917,508 and SGD3,917,508,
respectively, of which aggregate amounts of nil, SGD1,222,080, SGD1,221,319 and SGD1,259,389 were
utilised as at 31 March 2011, 2012 and 2013 and 31 December 2013, respectively.
(c) All of the Groups interest-bearing bank and other borrowings at 31 March 2012 and 2013 and 31 December
2013 were denominated in SGD.
A-48
26. SHARE CAPITAL
31 March 31 March 31 March 31 December 31 March 31 March 31 March 31 December
2011 2012 2013 2013 2011 2012 2013 2013
Number of ordinary shares SGD SGD SGD SGD
Issued and paid-up
Balance at the
beginning of the
year/period 4,301,075 4,301,075 4,301,075 4,301,076 430,108 430,108 430,108 430,108
Issue of shares of
the Company on
incorporation 1
Balance at the end
of the year/period 4,301,075 4,301,075 4,301,076 4,301,076 430,108 430,108 430,108 430,108
Fully paid ordinary shares carry one vote per share and carry a right to dividends as and
when declared by the Company.
The Company was incorporated in the Cayman Islands on 15 March 2013, with authorised
capital of HK$380,000 divided into 38,000,000 ordinary shares of HK$0.01 each. Save for
the Restructuring Exercise, the Company has not conducted any business since the date of
its incorporation.
As at 31 March 2013 and 31 December 2013, one ordinary share of the Company was issued
and fully paid by Tritech Group Limited with a par value of HK$0.01.
For the purpose of the preparation of the combined statements of financial position, issued
share capital as at 31 March 2011 and 2012 represent the issued share capital of Terratech
Resources Pte. Ltd. The issued share capital as at 31 March 2013 and 31 December 2013
represents the issued share capital of the Company and Terratech Resources Pte. Ltd.
A-49
27. OPERATING LEASE ARRANGEMENTS
The Group leases its quarry facilities and office premises under operating lease
arrangements. Leases for quarry facilities are negotiated for terms of 33 years, and the office
premises are for terms of 2 years to 10 years.
At 31 March 2011, 2012 and 2013 and 31 December 2013, the Group had total future
minimum lease payments under non-cancellable operating leases falling due as follows:
2011 2012 2013 2013
SGD SGD SGD SGD
Within one year 16,229 18,891 18,338 201,806
In the second to fifth years,
inclusive 64,917 74,311 69,271 367,621
After five years 459,336 435,245 407,022 726,827
540,482 528,447 494,631 1,296,254
The lease of the quarrying right also called for additional payments, which are based on
certain percentage of sales value or market value (whichever is higher) of the blocks or
products extracted or produced from the marble quarry, and a percentage of the profit for the
mining on the marble quarry pursuant to the terms and conditions as stipulated in the
agreement. As the future sales value/market value and profits could not be accurately
determined as at the end of each reporting period, the relevant contingent rentals have not
been included above.
28. COMMITMENTS
The Group had the following capital commitments at the end of each reporting period:
2011 2012 2013 2013
SGD SGD SGD SGD
Contracted, but not provided
for:
Land and buildings 365,649
Plant and machinery 264,734 576,267 76,862
264,734 941,916 76,862
A-50
29. RELATED PARTY TRANSACTIONS
(a) In addition to the transactions, arrangements and balances detailed elsewhere in this
report, the Group had the following transactions with related parties during the years
ended 31 March 2011, 2012 and 2013 and the nine months ended 31 December 2012
and 2013:
Nine months ended
31 December
Notes 2011 2012 2013 2012 2013
SGD SGD SGD SGD SGD
The immediate
holding company:
Management fee (i) 240,000 240,000 180,000 373,575
Reimbursement of
expenses (ii) 24,412
Fellow
subsidiaries:
Reimbursement of
expenses (ii) 47 853 54,401 19,056 16,298
Accounting fee (iii) 1,200 11,423 70,633
Sample sales (iv) 113,873 113,351
Handling fee (v) 238,916 433,392 338,435 748,304
A director:
Interest expense (vi) 80,000
Notes:
(i) The management fee was on terms agreed by the respective parties.
(ii) The reimbursement of expenses was on bases agreed by the respective parties.
(iii) The accounting fee was on terms agreed by the respective parties.
(iv) The sales of marble samples were on terms agreed by the respective parties.
(v) The handling fee was on terms agreed by the respective parties.
(vi) The interest expense was on terms agreed by the respective parties.
(b) Outstanding balances with related companies:
The outstanding balances with the ultimate holding company, the immediate holding
company, and fellow subsidiaries are disclosed on the face of the combined statements
of financial position, which are unsecured, interest-free and have no fixed terms of
repayment.
A-51
29. RELATED PARTY TRANSACTIONS (continued)
(c) Compensation of key management personnel of the Group:
Nine months ended
31 December
2011 2012 2013 2012 2013
SGD SGD SGD SGD SGD
Short-term employee
benefits 24,018 18,018 17,748
Post-employment
benefits
Total compensation
paid to key
management
personnel 24,018 18,018 17,748
(d) The convertible bond of SGD2,000,000 was held by a director of the Terratech
Resources Pte. Ltd., Kwan Chee Seng.
30. CONTINGENT LIABILITIES
As at 31 March 2011, 2012 and 2013 and 31 December 2013, the Group did not have any
significant contingent liabilities.
31. NOTES TO THE COMBINED STATEMENTS OF CASH FLOWS
Major non-cash transactions
(a) During the year ended 31 March 2012, the Group transferred exploration and evaluation
assets amounted to SGD270,749 to property, plant and equipment.
(b) During the year ended 31 March 2012, the capital element and interest element of
finance lease payables amounting to SGD27,482 and SGD4,666, respectively, were
accrued as other payables and accruals as at 31 March 2012.
(c) During the year ended 31 March 2012, the Group entered into finance lease
arrangements in respect of property, plant and equipment with a total capital value at
the inception of the leases of SGD1,408,487.
(d) During the nine months ended 31 December 2012, the Group entered into finance lease
the inception of the leases of SGD546,388.
A-52
31. NOTES TO THE COMBINED STATEMENTS OF CASH FLOWS (continued)
(e) During the year ended 31 March 2013, the capital element and interest element of
finance lease payables amounted to SGD29,429 and SGD2,719, respectively, were
accrued as other payables and accruals as at 31 March 2013.
(f) The interest of the convertible bonds for the year ended 31 March 2013 amounting to
SGD212,055 was accrued as other payables and accruals as at 31 March 2013.
(g) During the year ended 31 March 2013, the Group entered into finance lease
(h) The interest of the convertible bonds for the nine months ended 31 December 2013
amounting to SGD128,219 was accrued as other payables and accruals as at 31
December 2013.
(i) During the nine months ended 31 December 2013, the Group entered into finance lease
32. FINANCIAL INSTRUMENTS BY CATEGORY
The carrying amounts of each of the categories of financial instruments as at the end of the
respective reporting periods are as follows:
Financial assets loans and receivables
2011 2012 2013 2013
SGD SGD SGD SGD
Financial assets included in
prepayments, deposits and
other receivables 91,313 226,741 93,015
Due from a fellow subsidiary 113,862
Pledged deposits 135,926 190,635 190,866
Cash and cash equivalents 27,119 173,485 9,663,108 4,044,663
27,119 400,724 10,194,346 4,328,544
A-53
32. FINANCIAL INSTRUMENTS BY CATEGORY (continued)
Financial liabilities at amortised cost
2011 2012 2013 2013
SGD SGD SGD SGD
Trade payables 16,887 37,590 41,911
Financial liabilities included in
other payables and accruals 25,050 96,913 470,919 773,240
Convertible bonds 12,326,415 13,003,380
Interest-bearing bank and
other borrowings 1,263,192 1,249,987 2,289,348
Due to the ultimate holding
company 702,100 702,100
Due to the immediate holding
company 27,021 2,634,240 4,625,292 4,298,906
Due to fellow subsidiaries 1,331 738,181 205,295 881,822
755,502 5,451,513 18,915,498 21,288,607
Financial liabilities at fair value through profit or loss
2011 2012 2013 2013
SGD SGD SGD SGD
Designated as such upon
initial recognition:
Derivative financial
instruments 4,335,637 9,967,498
33. FAIR VALUE AND FAIR VALUE HIERARCHY OF FINANCIAL INSTRUMENTS
The fair value of the non-current portion of finance lease payables has been calculated by
discounting the expected future cash flows using rates currently available for instruments
with similar terms, credit risk and remaining maturities. The Groups own non-performance
risk for finance lease payables as at 31 March 2012 and 2013 and 31 December 2013 was
assessed to be insignificant. The fair value of the liability portion of the convertible bonds is
estimated by discounting the expected future cash flows using an equivalent market interest
rate for a similar convertible bond with consideration of the Groups own non-performance
risk.
A-54
33. FAIR VALUE AND FAIR VALUE HIERARCHY OF FINANCIAL INSTRUMENTS (continued)
Fair value hierarchy
The following tables illustrate the fair value measurement hierarchy of the Groups financial
instruments:
Liabilities measured at fair value:
Fair value measurement using
As at 31 March 2013
Quoted prices
in active
markets
(Level 1)
Significant
observable
inputs
(Level 2)
Significant
unobservable
inputs
(Level 3) Total
SGD SGD SGD SGD
instruments 4,335,637 4,335,637
Quoted prices
in active
markets
(Level 1)
Significant
observable
inputs
(Level 2)
Significant
unobservable
inputs
(Level 3) Total
SGD SGD SGD SGD
instruments 9,967,498 9,967,498
The Group did not have any financial liabilities measured at fair value as at 31 March 2011
and 2012.
During the years ended 31 March 2011, 2012 and 2013 and the nine months ended 31
December 2012 and 2013, there were no transfers of fair value measurements between
Level 1 and Level 2 and no transfers into or out of Level 3 for both financial assets and
financial liabilities.
A-55
33. FAIR VALUE AND FAIR VALUE HIERARCHY OF FINANCIAL INSTRUMENTS (continued)
Liabilities for which fair values are disclosed:
As at 31 March 2012
Quoted prices
in active
markets
(Level 1)
Significant
observable
inputs
(Level 2)
Significant
unobservable
inputs
(Level 3) Total
SGD SGD SGD SGD
Finance lease payables 1,263,192 1,263,192
As at 31 March 2013
Quoted prices
in active
markets
(Level 1)
Significant
observable
inputs
(Level 2)
Significant
unobservable
inputs
(Level 3) Total
SGD SGD SGD SGD
1,249,987 12,326,415 13,576,402
As at 31 December
2013
Quoted prices
in active
markets
(Level 1)
Significant
observable
inputs
(Level 2)
Significant
unobservable
inputs
(Level 3) Total
SGD SGD SGD SGD
Interest-bearing bank
and other borrowings 1,029,959 1,029,959
2,289,348 13,003,380 15,292,728
A-56
34. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
The Groups principal financial instruments, other than derivatives, comprise cash and cash
equivalents. The Group has various other financial assets and liabilities such as financial
assets included in prepayments, deposits and other receivables, trade payables, financial
liabilities included in other payables and accruals, finance leases and other interest-bearing
loans, which mainly arise directly from its operations.
The main risks arising from the Groups financial instruments are interest rate risk, foreign
currency risk, credit risk and liquidity risk. The board of directors reviews and agrees policies
for managing each of these risks and they are summarised below.
Interest rate risk
The Groups exposure to the risk of changes in market interest rates relates primarily to the
Groups interest-bearing bank and other borrowings with floating interest rates. The Group
mitigates the risk by monitoring closely the movements in interest rates regularly.
The following table demonstrates the sensitivity to a reasonably possible change in interest
rates, with all other variables held constant, of the Groups loss before tax through the impact
on the interest-bearing bank and other borrowings.
Increase/(decrease)
in basis points
Increase/(decrease)
in loss before tax
SGD
31 March 2011
SGD 50 (129)
(50) 129
Malaysian Ringgit (RM) 50 (7)
(50) 7
31 March 2012
SGD 50 (802)
(50) 802
RM 50 (4)
(50) 4
31 March 2013
SGD 50 (47,679)
(50) 47,679
RM 50 (567)
(50) 567
31 December 2013
SGD 50 (11,353)
(50) 11,353
RM 50 (583)
(50) 583
RMB 50 (3,022)
(50) 3,022
A-57
34. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)
Foreign currency risk
The Group has transactional currency exposures. Such exposures arise from costs of
construction by the Groups operating units denominated in RM. For the years ended 31
March 2011, 2012 and 2013 and the nine months ended 31 December 2013, approximately
0%, 100%, 100% and 100%, respectively, of the Groups costs of construction were
denominated in RM.
The Group has not entered into any hedging transactions to manage the potential fluctuation
in foreign currency. Management monitors the Groups foreign currency exposure and will
consider hedging significant foreign currency exposure when the needs arise.
The following table demonstrates the sensitivity at the end of the respective reporting periods
to a reasonably possible change in the RM and RMB exchange rates, with all other variables
held constant, of the Groups loss before tax (due to changes in the fair values of monetary
assets and liabilities).
Increase/(decrease)
in exchange rate
Increase/(decrease)
in loss before tax
% SGD
31 March 2011
If SGD weakens against RM 5 19,284
If SGD strengthens against RM (5) (19,284)
31 March 2012
31 March 2013
31 December 2013
If SGD weakens against RMB 5 38,457
If SGD strengthens against RMB (5) (38,457)
Credit risk
The credit risk of the Groups financial assets, which comprise amounts cash and cash
equivalents, an amount due from a fellow subsidiary, and financial assets included in
prepayments, deposits and other receivables, arises from default of the counterparty, with a
maximum exposure equal to the carrying amounts of these instruments.
Cash at banks are placed with reputable financial institutions.
A-58
Liquidity risk
The Groups objective is to maintain adequate funds to meet commitments associated with
its financial liabilities. Cash flows of the Group are closely monitored by senior management
on an on-going basis, considering the maturity of the Groups financial liabilities and financial
assets, and projected cash flows from operations.
The maturity profile of the Groups financial liabilities as at 31 March 2011, 2012 and 2013
and 31 December 2013, based on the contractual undiscounted payments, is as follows:
As at 31 March 2011
No fixed terms
of repayment/
on demand
Less than
3 months
3 to less than
12 months 1 to 5 years Total
SGD SGD SGD SGD SGD
included in other
payables and accruals 25,050 25,050
Due to the ultimate
holding company 702,100 702,100
Due to the immediate
Due to fellow
subsidiaries 1,331 1,331
730,452 25,050 755,502
As at 31 March 2012
No fixed terms
of repayment/
on demand
Less than
3 months
3 to less than
SGD SGD SGD SGD SGD
Trade payables 16,887 16,887
included in other
payables and accruals 41,325 55,588 96,913
Finance lease payables 126,890 380,665 857,607 1,365,162
Due to the ultimate
holding company 2,634,240 2,634,240
Due to fellow
4,115,846 199,365 380,665 857,607 5,553,483
A-59
Liquidity risk (continued)
As at 31 March 2013
No fixed terms
of repayment/
on demand
Less than
3 months
3 to less than
SGD SGD SGD SGD SGD
included in other
Convertible bonds 387,945 14,726,415 15,114,360
Due to fellow
instruments 4,335,637 4,335,637
9,277,459 573,688 917,188 15,342,133 26,110,468
No fixed terms
of repayment/
on demand
Less than
3 months
3 to less than
SGD SGD SGD SGD SGD
included in other
Convertible bonds 1,071,781 14,203,380 15,275,161
Bank overdrafts 1,029,959 1,029,959
Due to fellow
instruments 9,967,498 9,967,498
16,395,060 811,699 1,656,181 14,728,668 33,591,608
A-60
Capital management
The primary objectives of the Groups capital management are to safeguard the Groups
ability to continue as a going concern and to improve capital ratios in order to support its
business and maximise shareholders value.
The Group manages its capital structure and makes adjustments to it in light of changes in
economic conditions and the risk characteristics of the underlying assets. To maintain or
adjust the capital structure, the Group may issue new shares. The Group is not subject to any
externally imposed capital requirements. No changes were made in the objectives, policies
or processes for managing capital during each of the years ended 31 March 2011, 2012 and
2013 and the nine months ended 31 December 2012 and 2013.
The Groups capital structure consists of trade payables, other payables and accruals,
interest-bearing bank and other borrowings, and balances due to affiliates, less cash and
cash equivalents. Capital includes equity attributable to the equity holder of the Company.
The Group is currently in the process of establishing the measurement basis used to manage
capital.
35. EVENTS AFTER THE REPORTING PERIOD
Subsequent to 31 December 2013, on 15 July 2014, Luminor Capital Pte Ltd and Kwan Chee
Seng, the holders of the Groups convertible bonds, have converted the convertible bonds
with nominal value of SGD15,000,000 into new ordinary shares of the Company at a
conversion price SGD0.115.
36. SUBSEQUENT FINANCIAL STATEMENTS
No audited financial statements have been prepared by the Company or any of its
subsidiaries in respect of any period subsequent to 31 December 2013.
37. AUTHORISATION FOR ISSUE OF THE FINANCIAL STATEMENTS
The combined financial statements for the years ended 31 March 2011, 2012 and 2013 and
the nine months ended 31 December 2013 were authorised for issue in accordance with a
resolution of the directors on 21 July 2014.
A-61
The Company was incorporated in the Cayman Islands as an exempted company with limited
liability on 15 March 2013 under the Cayman Companies Law. Set out below is a summary of
certain provisions of Cayman Companies Law, although this does not purport to contain all
applicable qualifications and exceptions or to be a complete review of all matters of Cayman
Islands company law and taxation, which may differ from equivalent provisions in jurisdictions with
which interested parties may be more familiar:
(a) Operations
As an exempted company, the Companys operations must be conducted mainly outside the
Cayman Islands. The Company is required to file an annual return each year with the
Registrar of Companies of the Cayman Islands and pay a fee which is based on the amount
of its authorised share capital.
(b) Share Capital
The Cayman Companies Law provides that where a company issues shares at a premium,
whether for cash or otherwise, a sum equal to the aggregate amount of the value of the
premiums on those shares must be transferred to an account, to be called the share
premium account. At the option of a company, these provisions may not apply to premiums
on shares of that company allotted pursuant to any arrangement in consideration for the
acquisition or cancellation of shares in any other company and issued at a premium. The
Cayman Companies Law provides that the share premium account may be applied by the
company subject to the provisions, if any, of its memorandum and articles of association in
(a) paying distributions or dividends to members; (b) paying up unissued shares of the
company to be issued to members as fully paid bonus shares; (c) the redemption and
repurchase of shares (subject to the provisions of Section 37 of the Cayman Companies
Law); (d) writing-off the preliminary expenses of the company; and (e) writing-off the
expenses of, or the commission paid or discount allowed on, any issue of shares or
debentures of the company.
No distribution or dividend may be paid to members out of the share premium account unless
immediately following the date on which the distribution or dividend is proposed to be paid,
the company shall be able to pay its debts as they fall due in the ordinary course of business.
The Cayman Companies Law provides that, subject to confirmation by the court, a company
limited by shares or a company limited by guarantee and having a share capital may, if so
authorised by its articles of association, by special resolution reduce its share capital in any
way.
(c) Membership
Under the Cayman Companies Law, only those persons who agree to become members of
a Cayman Islands company and whose names are entered on the register of members of
such a company are considered members. A Cayman Islands company is also not bound to
see to the execution of any trust, whether express, implied or constructive, to which any of
its shares are subject and whether or not the company had notice of such trust. Accordingly,
persons holding shares through a trustee, nominee or depository will not be recognised as
members of a Cayman Islands company under Cayman Islands law and may only have the
benefit of rights attaching to the shares or remedies conferred by law on members through
or with the assistance of the trustee, nominee or depository.
APPENDIX B SUMMARY OF CERTAIN PROVISIONS OF
THE CAYMAN ISLANDS COMPANIES LAW
B-1
(d) Financial assistance to purchase shares of a company or its holding company
There is no statutory restriction in the Cayman Islands on the provision of financial
assistance by a company to another person for the purchase of, or subscription for, its own
or its holding companys shares. Accordingly, a company may provide financial assistance if
the directors of the company consider, in discharging their duties of care and acting in good
faith, for a proper purpose and in the interests of the company, that such assistance can
properly be given. Such assistance should be on an arms-length basis.
(e) Purchase of shares and warrants by a company and its subsidiaries
Subject to the provisions of the Cayman Companies Law, a company limited by shares or a
company limited by guarantee and having a share capital may, if so authorised by its articles
of association, issue shares which are to be redeemed or are liable to be redeemed at the
option of the company or a shareholder and the Cayman Companies Law expressly provides
that it shall be lawful for the rights attaching to any shares to be varied, subject to the
provisions of the companys articles of association, so as to provide that such shares are to
be or are liable to be so redeemed. In addition, such a company may, if authorised to do so
by its articles of association, purchase its own shares, including any redeemable shares.
However, if the articles of association do not authorise the manner and terms of purchase,
a company cannot purchase any of its own shares unless the manner and terms of purchase
have first been authorised by an ordinary resolution of the company. At no time may a
company redeem or purchase its shares unless they are fully paid. A company may not
redeem or purchase any of its shares if, as a result of the redemption or purchase, there
would no longer be any issued shares of the company other than shares held as treasury
shares. Shares may be redeemed or purchased out of profits of the company, out of the
share premium account or out of the proceeds of a fresh issue of shares made for the
purposes of the redemption or purchase, or (subject to Section 37 of the Cayman Companies
Law) out of capital. A payment out of capital by a company for the redemption or purchase
of its own shares is not lawful unless immediately following the date on which the payment
out of capital is proposed to be made, the company shall be able to pay its debts as they fall
due in the ordinary course of business.
Shares redeemed or purchased by a company shall be treated as cancelled on redemption
or purchase unless, subject to the memorandum and articles of association of the company,
the directors of the company resolve to hold such shares in the name of the company as
treasury shares prior to the redemption or purchase. Where shares of a company are held
as treasury shares, the company shall be entered in the register of members as holding those
shares; however, notwithstanding the foregoing, the company shall not be treated as a
member for any purpose and shall not exercise any right in respect of the treasury shares,
and any purported exercise of such a right shall be void, and a treasury share shall not be
voted, directly or indirectly, at any meeting of the company and shall not be counted in
determining the total number of issued shares at any given time, whether for the purposes
of the companys articles of association or the Cayman Companies Law. Further, no dividend
may be declared or paid, and no other distribution (whether in cash or otherwise) of the
companys assets (including any distribution of assets to members on a winding up) may be
made to the company, in respect of a treasury share.
B-2
A company is not prohibited from purchasing and may purchase its own warrants subject to
and in accordance with the terms and conditions of the relevant warrant instrument or
certificate. There is no requirement under Cayman Islands law that a companys
memorandum or articles of association contain a specific provision enabling such purchases
and the directors of a company may rely upon the general power contained in its
memorandum of association to buy and sell and deal in personal property of all kinds.
Under Cayman Islands law, a subsidiary may hold shares in its holding company and, in
certain circumstances, may acquire such shares.
(f) Dividends and distributions
With the exception of Section 34 of the Cayman Companies Law, there is no statutory
provision relating to the payment of dividends. Based upon English case law, which is
regarded as persuasive authority in the Cayman Islands, dividends may be paid only out of
profits. In addition, Section 34 of the Cayman Companies Law permits, subject to a solvency
test and the provisions, if any, of the companys memorandum and articles of association, the
payment of dividends and distributions out of the share premium account (see paragraph (b)
above for further details).
(g) Protection of minorities
The court would ordinarily be expected to follow English case law precedents which permit
a minority shareholder to commence a representative action against or derivative actions in
the name of the company to challenge (a) an act which is ultra vires the company or illegal;
(b) an act which constitutes a fraud against the minority and the wrongdoers are themselves
in control of the company; and (c) an irregularity in the passing of a resolution which requires
a qualified (or special) majority.
In the case of a company (not being a bank) having a share capital divided into shares, the
court may, on the application of members holding not less than one-fifth of the shares of the
company in issue, appoint one or more inspectors to examine into the affairs of the company
and to report thereon in such manner as the court shall direct. The inspectors must on the
completion of their investigation report to the court. Such report is not, unless the court so
directs, opened to public inspection. A company also may, by special resolution, appoint
inspectors for the purpose of examining into the affairs of the company. Inspectors so
appointed will have the same powers and perform the same duties as inspectors appointed
by the court, except that instead of making their report to the court they will report in such
manner and to such persons as the company by resolution of its members directs.
Any shareholder of a company who has held shares in a company for at least six (6) months
may petition the court which may make a winding up order if the court is of the opinion that
it is just and equitable that the company should be wound up.
Generally, claims against a company by its shareholders must be based on the general laws
of contract or tort applicable in the Cayman Islands or their individual rights as shareholders
as established by a companys memorandum and articles of association.
B-3
(h) Management
The Cayman Companies Law contains no specific restriction on the powers of directors to
dispose of assets of a company. However, as a matter of general law, every officer of a
company, which includes a director, managing director and secretary, in exercising his
powers and discharging his duties must act honestly and in good faith with a view to the best
interests of the company and exercise the care, diligence and skill that a reasonably prudent
person would exercise in comparable circumstances.
The Cayman Companies Law contains no specific provision in respect of the establishment
or composition of audit committees or similar committees of the board of directors of a
company.
(i) Accounting and auditing requirements
A company must cause proper books of account to be kept including, where applicable,
material underlying documentation including contracts and invoices, with respect to (i) all
sums of money received and expended by the company and the matters in respect of which
the receipt and expenditure takes place; (ii) all sales and purchases of goods by the company
and (iii) the assets and liabilities of the company.
Proper books of account shall not be deemed to be kept if there are not kept such books as
are necessary to give a true and fair view of the state of the companys affairs and to explain
its transactions.
A company which keeps its books of accounts at any place other than at its registered office
or at any other place within the Cayman Islands shall, upon service of an order or notice by
the Tax Information Authority pursuant to the Tax Information Authority Law (Revised) of the
Cayman Islands, make available in electronic form or any other medium, at its registered
office copies of its books of account, or any part or parts thereof, as are specified in such
order or notice; and shall be liable to a penalty if the company fails to comply with the order
or notice without reasonable excuse.
(j) Exchange Control
There are no exchange control regulations or currency restrictions in the Cayman Islands.
(k) Taxation
Pursuant to Section 6 of the Tax Concessions Law (Revised) of the Cayman Islands, the
Company has obtained an undertaking from the Governor-in-Council:
(1) that no law which is enacted in the Cayman Islands imposing any tax to be levied on
profits or income or gains or appreciation shall apply to the Company or its operations;
and
(2) that the aforesaid tax or any tax in the nature of estate duty or inheritance tax shall not
be payable on the shares, debentures or other obligations of the Company.
The undertaking for the Company is for a period of twenty years from 23 April 2013.
B-4
The Cayman Islands currently levies no taxes on individuals or corporations based upon
profits, income, gains or appreciations and there is no taxation in the nature of inheritance
tax or estate duty. There are no other taxes likely to be material to the Company levied by
the Government of the Cayman Islands save for certain stamp duties which may be
applicable, from time to time, on certain instruments executed in or brought within the
jurisdiction of the Cayman Islands. The Cayman Islands is not a party to any double tax
treaties.
(l) Stamp Duty on Transfers
No stamp duty is payable in the Cayman Islands on transfers of shares of Cayman Islands
companies except those which hold interests in land in the Cayman Islands.
(m) Loans to Directors
There is no express provision in the Cayman Companies Law prohibiting the making of loans
by a company to any of its directors.
(n) Inspection of corporate records
Members of a company have no general right under the Cayman Companies Law to inspect
or obtain copies of the register of members or corporate records of a company. They will,
however, have such rights as may be set out in the companys articles of association.
An exempted company may maintain its principal register of members and any branch
registers at such locations, whether within or without the Cayman Islands, as the directors
may, from time to time, think fit. A branch register shall be kept in the same manner in which
a principal register is by the Cayman Companies Law required or permitted to be kept. The
company shall cause to be kept at the place where the companys principal register is kept
a duplicate of any branch register duly entered up from time to time. There is no requirement
under the Cayman Companies Law for an exempted company to make any returns of
members to the Registrar of Companies in the Cayman Islands. The names and addresses
of the members are, accordingly, not a matter of public record and are not available for public
inspection.
(o) Winding Up
A company may be wound up (a) compulsorily by order of the court, (b) voluntarily, or (c)
under the supervision of the court.
The court has authority to order winding up in a number of specified circumstances including
where the members of the company have passed a special resolution requiring the company
to be wound up by the court, or where the company is unable to pay its debts, or where it is,
in the opinion of the court, just and equitable to do so. Where a petition is presented by
members of the company as contributories on the ground that it is just and equitable that the
company should be wound up, the court has the jurisdiction to make certain other orders as
an alternative to a winding-up order, such as making an order regulating the conduct of the
companys affairs in the future, making an order authorising civil proceedings to be brought
in the name and on behalf of the company by the petitioner on such terms as the court may
direct, or making an order providing for the purchase of the shares of any of the members of
the company by other members or by the company itself.
B-5
A company may be wound up voluntarily when the company so resolves by special resolution
or when the company in general meeting resolves by ordinary resolution that it be wound up
voluntarily because it is unable to pay its debts as they fall due, or, in the case of a limited
duration company, when the period fixed for the duration of the company by its memorandum
or articles of association expires, or the event occurs on the occurrence of which the
memorandum or articles of association provide that the company is to be wound up. In the
case of a voluntary winding up, such company is obliged to cease to carry on its business
(except so far as it may be beneficial for its winding up) from the time of passing the
resolution for voluntary winding up or upon the expiry of the period or the occurrence of the
event referred to above.
For the purpose of conducting the proceedings in winding up a company and assisting the
court therein, there may be appointed an official liquidator or official liquidators; and the court
may appoint to such office such person, either provisionally or otherwise, as it thinks fit, and
if more persons than one are appointed to such office, the court must declare whether any
act required or authorised to be done by the official liquidator is to be done by all or any one
or more of such persons. The court may also determine whether any and what security is to
be given by an official liquidator on his appointment; if no official liquidator is appointed, or
during any vacancy in such office, all the property of the company shall be in the custody of
the court.
Within 28 days of the date upon which the winding up order is made, the official liquidator
must summon a meeting of the companys creditors (if the order was made on the grounds
that the company is insolvent) or contributories (if the winding up order was made on grounds
other than insolvency), for the purpose of resolving any other matters which the liquidator
puts before the meeting. In the case of a members voluntary winding up of a company, the
company in general meeting must appoint one or more liquidators for the purpose of winding
up the affairs of the company and distributing its assets.
Within 28 days of the commencement of a voluntary winding up, the liquidator or, in the
absence of any liquidator, the directors must, amongst others, file notice of the winding up,
the liquidators consent to act and the directors declaration of solvency with the Registrar of
Companies, and publish notice of the winding up in the Gazette. A director or liquidator who
fails to comply with these requirements commits an offence and is liable to a fine.
Where a company is being wound up voluntarily, its liquidator must apply to the court for an
order that the liquidation continue under the supervision of the court unless, within 28 days
of the commencement of the liquidation, the directors have signed the declaration of
solvency referred to above. The signing of the declaration of solvency in the prescribed form
means that a full enquiry into the companys affairs has been made and that to the best of
the directors knowledge and belief the company will be able to pay its debts in full together
with interest at the prescribed rate, within such period, not exceeding 12 months from the
commencement of the winding up, as may be specified in the declaration. A person who
knowingly makes a declaration without having reasonable grounds for the opinion that the
company will be able to pay its debts in full, together with interest at the prescribed rate,
within the period specified commits an offence and is liable on summary conviction to a fine
and to imprisonment.
B-6
When a resolution has been passed by a company to wind up voluntarily, the liquidator or any
contributory or creditor may apply to the court for an order for the continuation of the winding
up under the supervision of the court, notwithstanding that the declaration of solvency has
been made, on the grounds that the company is or is likely to become insolvent or the
supervision of the court will facilitate a more effective, economic or expeditious liquidation of
the company in the interests of the contributories and creditors. When making a supervision
order, the court will appoint one or more qualified insolvency practitioners and may, in
addition, appoint one or more foreign practitioners as liquidator or liquidators of the company.
Upon the appointment of a liquidator, the responsibility for the companys affairs rests
entirely in his hands and no future executive action may be carried out without his approval.
A liquidators duties are to collect and realise the assets of the company (including the
amount (if any) due from the contributories (shareholders)), settle the list of creditors and,
subject to the rights of preferred and secured creditors and to any subordination agreements
or contractual rights of set-off or netting of claims, discharge the companys liability to them
(pari passu if insufficient assets exist to discharge the liabilities in full), and to settle the list
of contributories (shareholders) and divide the surplus assets (if any) amongst them in
accordance with their rights and interests in the company. It is also the function of the
liquidator to report upon the affairs of the company and the manner in which it has been
wound up.
If a voluntary winding up continues for more than a year, the liquidator must summon a
general meeting of the company at the end of the first year and of each succeeding year from
the commencement of the winding up within three months of each anniversary of the
commencement of the liquidation, and must lay before such meeting a report and an account
of his acts and the conduct of the winding up during the preceding year. A liquidator who fails
to comply with these requirements commits an offence and is liable on conviction to a fine.
As soon as the affairs of the company are fully wound up, the liquidator must make a report
and an account of the winding up, showing how the winding up has been conducted and how
the property of the company has been disposed of, and thereupon call a general meeting of
the company for the purposes of laying before it the account and giving an explanation
thereof. This final general meeting must be called by at least 21 days notice to each
contributory in any manner authorised by the companys articles of association and
published in the Gazette.
(p) Reconstructions, mergers and consolidations
There are statutory provisions which facilitate reconstructions and arrangements approved
by a majority in number representing seventy-five per cent. (75%) in value of shareholders
(or class of shareholders) or creditors (or class of creditors), as the case may be, as are
present and voting either in person or by proxy at a meeting called for such purpose and
thereafter sanctioned by the court. Whilst a dissenting shareholder would have the right to
express to the court his view that the transaction for which approval is sought would not
provide the shareholders with a fair value for their shares, the court is unlikely to disapprove
the transaction on that ground alone in the absence of evidence of fraud or bad faith on
behalf of management.
B-7
In addition, the Cayman Companies Law provides a mechanism for mergers and
consolidations between Cayman Islands companies as well as between Cayman Islands
companies and foreign companies. A written plan of merger or consolidation has to be
authorised by each constituent company by way of a special resolution of the members of
each such constituent company and such other authorization, if any, as may be specified in
such constituent companys articles of association. The Cayman Companies Law provides
appraisal rights to the shareholders of a constituent company incorporated the Cayman
Companies Law in connection with a merger or consolidation.
(q) Compulsory acquisition
Where an offer is made by a company for the shares of another company and, within four
months of the offer, the holders of not less than ninety per cent. (90%) in value of the shares
which are the subject of the offer accept the offer, the offeror may at any time within two
months after the expiration of the said four months, by notice in the prescribed manner
require the dissenting shareholders to transfer their shares on the terms of the offer. A
dissenting shareholder may apply to the court within one month of the date of the notice
objecting to the transfer. The burden is on the dissenting shareholder to show that the court
should exercise its discretion, which it will be unlikely to do unless there is evidence of fraud
or bad faith or collusion as between the offeror and the holders of the shares who have
accepted the offer as a means of unfairly forcing out minority shareholders.
(r) Indemnification
Cayman Islands law does not limit the extent to which a companys articles of association
may provide for indemnification of officers and directors, except to the extent any such
provision may be held by the court to be contrary to public policy (e.g. for purporting to
provide indemnification against the consequences of committing a crime).
B-8
This appendix provides information about certain provisions of our Memorandum of Association
and Articles and certain aspects of Cayman Islands company law. The description below is only
a summary and is qualified in its entirety by reference to our Memorandum of Association and
Articles and the Cayman Companies Law.
1. Registration number and Memorandum of Association
The registration number with which the Company was incorporated is CT-276295.
Our Memorandum of Association states, inter alia, that the liability of members of our
Company is limited to the amount, if any, for the time being unpaid on the shares respectively
held by them and that our Company is an exempted company as defined in the Cayman
Companies Law. Paragraph 3 of our Memorandum of Association states that the objects for
which our Company is formed are unrestricted, including to act and to perform all the
functions of a holding company. The powers of our Company are set out in Paragraph 4 of
our Memorandum of Association, which provides that our Company shall have and be
capable of exercising all the functions of a natural person of full capacity irrespective of any
question of corporate benefit, as provided by Section 27(2) of the Cayman Companies Law.
2. Directors
(a) Ability of interested directors to vote (Articles 101 and 102)
A Director who to his knowledge is in any way, whether directly or indirectly, interested
in a contract or arrangement or proposed contract or arrangement with the Company
shall declare the nature of his interest at the meeting of the Board at which the question
of entering into the contract or arrangement is first considered, if he knows his interest
then exists, or in any other case at the first meeting of the Board after he knows that he
is or has become so interested.
A Director shall not vote on any resolution of the Board in respect of any contract or
arrangement or proposed contract or arrangement in which he has directly or indirectly
a personal material interest. However, the interested director need not be excluded from
being counted in the quorum for the meeting at which such contract or arrangement or
proposed contract or arrangement is considered. Certain matters in which a Director will
not be considered to have a personal material interest are set out in the Articles.
A Director, whose remuneration (including pension or other benefits) for himself is the
subject of a resolution tabled at a meeting of the Board, shall not be entitled to vote on
the resolution as he shall be taken have a personal material interest in the matter. Other
Directors of the Company will not be prohibited by the Articles from voting on that
resolution so long as they do not have any direct or indirect personal material interest
in the subject matter of the said resolution.
(b) Remuneration (Articles 90, 95, 97(1) and 98)
The ordinary remuneration of the Directors shall from time to time be determined by the
Company in general meeting, shall not be increased except pursuant to an ordinary
resolution passed at a general meeting where notice of the proposed increase shall
have been given in the notice convening the general meeting, and shall (unless
otherwise directed by the resolution by which it is voted) be divided amongst the Board
in such proportions and in such manner as the Board may agree or, failing agreement,
APPENDIX C SELECTED EXTRACTS OF OUR ARTICLES OF ASSOCIATION
C-1
equally, except that any Director who shall hold office for part only of the period in
respect of which such remuneration is payable shall be entitled only to rank in such
division for a proportion of remuneration related to the period during which he has held
office.
Any Director who, by request, goes or resides abroad for any purpose of the Company
or who performs services which in the opinion of the Board go beyond the ordinary
duties of a Director may be paid such extra remuneration (whether by way of salary,
commission, participation in profits or otherwise) as the Board may determine and such
extra remuneration shall be in addition to or in substitution for any ordinary
remuneration provided for by or pursuant to any other Article. A Director appointed to be
a managing director, joint managing director, deputy managing director or other
executive officer shall receive such remuneration (whether by way of salary,
commission, participation in profits or otherwise or by all or any of those modes) and
such other benefits (including pension and/or gratuity and/or other benefits on
retirement) and allowances as the Board may from time to time determine, and either
in addition to or in lieu of his remuneration as a Director, but he shall not in any
circumstances be remunerated by a commission on or a percentage of turnover.
Payments to any Director or past Director of any sum by way of compensation for loss
of office or as consideration for or in connection with his retirement from office (not
being a payment to which the Director is contractually entitled) must be approved by the
Company in general meeting.
(c) Borrowing powers (Article 109)
The Board may exercise all the powers of the Company to raise or borrow money and
to mortgage or charge all or any part of the undertaking, property and assets (present
and future) and uncalled capital of the Company and, subject to the Cayman
Companies Law, to issue debentures, bonds and other securities, whether outright or as
collateral security for any debt, liability or obligation of the Company or of any
third-party.
These powers conferred on the Board may be varied by amending the relevant Articles.
(d) Retirement age limit
There are no provisions relating to retirement of Directors upon reaching any age limit.
(e) Shareholding qualification (Article 85(3))
Neither a Director nor an alternate Director is required to hold any shares of the
Company by way of qualification.
C-2
3. Share rights and restrictions
The Company currently has only one class of shares, namely ordinary shares.
(a) Dividends and distribution (Articles 136, 137, 138, 140 and 143)
Subject to the Cayman Companies Law, the Company in general meeting may from time
to time declare dividends in any currency to be paid to the members but no dividend
shall be declared in excess of the amount recommended by the Board. Dividends may
be declared and paid out of the profits of the Company, realised or unrealised, or from
any reserve set aside from profits which the Directors determine is no longer needed.
With the sanction of an ordinary resolution, dividends may also be declared and paid
out of the share premium account or any other fund or account which may be authorised
for this purpose in accordance with the Cayman Companies Law, provided that no
distribution or dividend may be paid to Members out of the share premium account
unless, immediately following the date on which the distribution or dividend is proposed
to be paid, the Company shall be able to pay its debts as they fall due in the ordinary
course of business.
Except in so far as the rights attaching to, or the terms of issue of, any share otherwise
provide (i) all dividends shall be declared and paid according to the amounts paid up on
the shares in respect of which the dividend is paid, but no amount paid up on a share
in advance of calls shall be treated as paid up on the share; and (ii) all dividends shall
be apportioned and paid pro rata according to the amounts paid up on the shares during
any portion or portions of the period in respect of which the dividend is paid. The Board
may deduct from any dividend or other moneys payable to a member by the Company
on or in respect of any shares all sums of money (if any) presently payable by him to
the Company on account of calls or otherwise.
All dividends or bonuses unclaimed for one year after having been declared may be
invested or otherwise made use of by the Board for the benefit of the Company until
claimed. Any dividend or bonuses unclaimed after a period of six years from the date
of declaration shall be forfeited and shall revert to the Company.
(b) Voting rights (Articles 65 and 77(1))
Subject to any special rights or restrictions as to voting for the time being attached to
any shares by or in accordance with the Articles, at any general meeting (i) on a show
of hands every member present in person (or being a corporation, is present by a
representative duly authorised under Article 83) or by proxy shall have one vote and the
chairman of the meeting shall determine which proxy shall be entitled to vote where a
member (other than CDP) is represented by two proxies, and (ii) on a poll every member
present in person or by proxy or, in the case of a member being a corporation, by its duly
authorised representative shall have one vote for every fully paid share of which he is
the holder or which he represents and in respect of which all calls due to the Company
have been paid, but so that no amount paid up or credited as paid up on a share in
advance of calls or instalments is treated for the foregoing purposes as paid up on the
share. If the member is CDP, CDP may appoint more than two proxies to attend and
vote at the same general meeting and each proxy shall be entitled to exercise the same
powers on behalf of CDP as CDP could exercise, including the right to vote individually
on a show of hands.
C-3
The Articles do not provide for cumulative voting in relation to election or re-election of
Directors.
(c) Share in profits
Holders of shares shall be entitled to share in the Companys profits by way of dividends
declared or distribution approved by the Company in general meeting in accordance
with the Cayman Companies Law.
(d) Share in surplus upon liquidation (Article 163)
Shareholders are entitled to the surplus assets of the Company in the event that it is
wound up. If the Company shall be wound up (whether the liquidation is voluntary or by
the court) the liquidator may, with the authority of a special resolution and any other
sanction required by the Cayman Companies Law, divide among the members in specie
or kind the whole or any part of the assets of the Company and whether or not the
assets shall consist of properties of one kind or shall consist of properties to be divided
as aforesaid of different kinds, and may for such purpose set such value as he deems
fair upon any one or more class or classes of property and may determine how such
division shall be carried out as between the members or different classes of members.
The liquidator may, with the like authority, vest any part of the assets in trustees upon
such trusts for the benefit of the members as the liquidator with the like authority shall
think fit, and the liquidation of the Company may be closed and the Company dissolved,
but so that no contributory shall be compelled to accept any shares or other property in
respect of which there is a liability.
(e) Redemption provisions
The shares do not have redemption rights.
(f) Sinking fund
The Articles do not contain sinking fund provisions.
(g) Calls on shares (Articles 25, 26, 28 and 33)
Subject to the Articles and to the terms of allotment, the Board may from time to time
make calls upon the members in respect of any moneys unpaid on their shares (whether
on account of the nominal value of the shares or by way of premium). A call may be
made payable either in one lump sum or by instalments. If a sum called in respect of a
share is not paid before or on the day appointed for payment thereof, the person from
whom the sum is due shall pay interest on the amount unpaid from the day appointed
for payment thereof to the time of actual payment at such rate (not exceeding twenty per
cent. (20%) per annum) as the Board may determine, but the Board may in its absolute
discretion waive payment of such interest wholly or in part. The Board may, if it thinks
fit, receive from any member willing to advance the same, and either in money or
moneys worth, all or any part of the moneys uncalled and unpaid or instalments
payable upon any shares held by him and upon all or any of the moneys so advanced
(until the same would, but for such advance, become presently payable) pay interest at
such rate (if any) as the Board may decide.
C-4
The Memorandum of Association states that the liability of members of the Company is
limited to the amount, if any, for the time being unpaid on the shares respectively held
by them.
(h) Discriminatory provisions against substantial shareholder (Article 167)
The Articles do not contain any provision discriminating against any existing or
prospective holder of shares as a result of such shareholder owning a substantial
number of shares save that for so long as the shares of the Company are listed on the
Designated Stock Exchange (which includes the SGX-ST), substantial shareholders
(having the meaning ascribed to it in the Singapore Companies Act) have to disclose
particulars of their interest in the Company and of any change in the percentage level
of such interest. Such requirement to disclose does not apply to CDP.
(i) Transfer of shares (Articles 19 and 46 to 51)
A shareholder may transfer all or any of his shares by an instrument of transfer in the
form acceptable to the Board provided always that the Company shall accept for
registration an instrument of transfer in a form approved by the Designated Stock
Exchange (which includes the SGX-ST). The instrument of transfer of any share shall
be executed by or on behalf of both the transferor and the transferee and be witnessed,
except that an instrument of transfer in respect of which the transferee is CDP shall be
effective although not signed or witnessed by or on behalf of CDP, and provided further
that when a corporation executes an instrument of transfer under seal, the affixation
and attestation of the corporations seal may be accepted as compliance with the
requirements of the Articles.
Save as provided in the Articles, there shall be no restriction on the transfer of fully paid
up shares (except where required by law, or the rules or regulations of the Designated
Stock Exchange (which includes the SGX-ST)).
The Articles provide that no transfer shall be made to an infant or to a person of
unsound mind or under other legal disability. Further, under the Articles, the Board may
decline to recognise any instrument of transfer unless: (a) a fee of such sum (not
exceeding S$2.00 or such other maximum sum as the Designated Stock Exchange may
determine to be payable) as the Board may from time to time require is paid to the
Company in respect thereof; (b) the instrument of transfer is in respect of only one class
of shares; (c) the instrument of transfer is presented to the Company together with the
relevant share certificate(s) and such other evidence as the Board may reasonably
require to show the right of the transferor to make the transfer (and, if the instrument of
transfer is executed by some other person on his behalf, the authority of that person so
to do); and (d) if applicable, the instrument of transfer is duly and properly stamped.
If the Board refuses to register a transfer of any shares, it shall, within one (1) month
after the date on which the transfer was lodged with the Company, send to each of the
transferor and transferee notice of the refusal.
The registration of transfers of shares or of any class of shares may, after notice has
been given in accordance with the applicable requirements of the Designated Stock
Exchange, be suspended at such times and for such periods as the Board may
determine.
C-5
The Board in so far as permitted by any applicable law may, in its absolute discretion,
at any time and from time to time transfer any share upon the Register of Members of
the Company to any branch register or any share on any branch register to the Register
of Members of the Company or any other branch register. In the event of any such
transfer, the shareholder requesting such transfer shall bear the cost of effecting the
transfer unless the Board otherwise determines.
Unless the Board otherwise agrees (which agreement may be on such terms and
subject to such conditions as the Board in its absolute discretion may from time to time
determine, and which agreement the Board shall, without giving any reason therefor, be
entitled in its absolute discretion to give or withhold), no shares upon the Register of
Members of the Company shall be transferred to any branch register nor shall shares
on any branch register be transferred to the Register of Members of the Company or
any other branch register and all transfers and other documents of title shall be lodged
for registration, and registered, in the case of any shares on a branch register, at the
relevant registration office, and, in the case of any shares on the Register of Members
of the Company, at the registered office of the Company or such other place at which
the Register of Members is kept in accordance with the Cayman Companies Law.
Upon every transfer of shares the certificate held by the transferor shall be given up to
be cancelled, and a new certificate shall be issued to the transferee in respect of the
shares transferred to him. Where a shareholder transfers part only of the shares
comprised in a certificate, the old certificate or certificates shall be cancelled and a new
certificate or certificates for the balance of such shares issued in lieu thereof and such
Member shall pay all or any part of the stamp duty payable (if any) on each share
certificate prior to the delivery thereof which the Board in its absolute discretion may
require and such fee as is provided in the Articles.
4. Variation of rights of existing shares or classes of shares (Article 10)
The special rights attached to any class of shares may be varied or abrogated either with the
consent in writing of the holders of three-quarters in nominal value of the issued shares of
the class or with the sanction of a special resolution passed at a separate general meeting
of the holders of the shares of the class (but not otherwise) and may be so repaid, varied or
abrogated either whilst the Company is a going concern or during or in contemplation of a
winding-up. To every such separate general meeting and all adjournments thereof all the
provisions of the Articles relating to general meetings of the Company and to the proceedings
thereat shall mutatis mutandis apply, except that the necessary quorum (other than at an
adjourned meeting) shall be two persons at least holding or representing by proxy at least
one-third in nominal value of the issued shares of the class and at any adjourned meeting of
such holders, two holders present in person or by proxy (whatever the number of shares held
by them) shall be a quorum and that any holder of shares of the class present in person or
by proxy may demand a poll and that every such holder shall on a poll have one vote for
every share of the class held by him.
The Cayman Companies Law does not contain provisions determining the action necessary
to change the rights of holders of shares, and thus the Articles impose more significant
conditions than the Cayman Companies Law in this regard.
C-6
5. General meetings (Articles 2, 55, 56, 57, 58, 75 and 79)
Under the Cayman Companies Law, there is no distinction between annual general meetings
and other general meetings. Under the Articles, the Company may in each year hold a
general meeting as its annual general meeting and the Directors may, whenever they think
fit, convene an extraordinary general meeting.
Article 2 defines an ordinary resolution as one passed by a simple majority of votes cast by
members at general meetings, and a special resolution as a resolution requiring a 75 per
cent. (75%) majority vote of members at general meetings of which (pursuant to Article 58)
not less than 21 days notice shall be given.
All registered shareholders of the Company are entitled to attend general meetings of the
Company (provided that all calls or other sums presently payable by such shareholders in
respect of shares in the Company have been paid). The Cayman Companies Law does not
contain provisions as to any documentary evidence to be produced by proxies and corporate
representatives. However, such provisions may be contained in the Articles. Where, for
example, it is stated that the instrument of proxy must be deposited a specified number of
hours before the meeting (see Article 79), an instrument of proxy deposited after that time
cannot be accepted.
Corporate representatives are different from proxies and unless specifically required by the
Articles, a letter of appointment does not need to be lodged before the meeting. There are
currently no such provisions in the Articles.
6. No limitation on non-Caymanian shareholders
There are no limitations, either under Cayman Islands law or the Articles, on the rights of
owners of the Companys shares to hold or vote their shares solely by reason that they are
non-Caymanians.
7. Shareholding disclosure requirement (Article 167)
The Cayman Companies Law does not require disclosure of shareholder ownership beyond
a certain threshold. However, Article 167 contains provisions to the effect that for so long as
the shares of the Company are listed on the Designated Stock Exchange (which includes the
SGX-ST), Directors and substantial shareholders (having the meaning ascribed to it in the
Singapore Companies Act) of the Company will have to disclose particulars of their interest
in the Company and any change in the percentage level of such interest. Article 167 does not
apply to CDP.
8. Changes in capital (Articles 4 and 6)
Under the Cayman Companies Law, certain changes in the capital of a company such as an
increase, consolidation or sub-division are permitted if authorised by its articles of
association. Article 4 provides that an ordinary resolution is required for an increase to, or
consolidation or sub-division of, the Companys share capital. With regard to a reduction of
share capital, Article 6, following the requirement of the Cayman Companies Law, requires
a special resolution to be passed.
C-7
9. Applicability of the Singapore Take-over and Merger Laws and Regulations (Article
167(4))
For so long as the shares of the Company are listed on the Designated Stock Exchange
(which includes the SGX-ST), the provisions of Sections 138, 139 and 140 of the Singapore
Securities and Futures Act (Cap. 289) and the Singapore Code on Take-overs and Mergers
shall apply, mutatis mutandis, to all take-over offers for shares of the Company.
C-8
Date: 21 July 2014
2 Kaki Bukit Place
Eunos Techpark
Singapore 416180
Attn: Dr Jeffrey Wang/Dr Loh Chang Kaan/Aw Eng Hai
c.c. PrimePartners Corporate Finance Pte. Ltd.
20 Cecil Street
#21-02 Equity Plaza
Singapore 049705
Dear Sirs,
Re: Offer Document (the Offer Document) to be issued by Terratech Group Limited in
connection with the Proposed Listing of Terratech Group Limited on the Catalist of the
Singapore Exchange Securities Trading Limited through an Initial Public Offering (the
Proposed Listing)
1. Introduction
1.1 We are a law firm practising in Selangor, Malaysia. We have been appointed by Terratech
Group Limited to conduct a legal due diligence review on CEP Resources Entity Sdn Bhd
(CEP) and issue this opinion in relation to the Proposed Listing (the Opinion).
1.2 In such capacity, we have examined copies of approvals, licences, permits, certificates and
letters issued by government or other relevant authorities, as well as agreements,
correspondence, documents, corporate records, and other instruments provided to us by
CEP, its directors, officers and/or management which fall within the terms of reference and
scope of our legal due diligence exercise carried out on CEP. In such examination, we have
assumed the genuineness of all signatures and the authenticity of all documents submitted
to us as originals and the conformity to the originals of all documents submitted to us as
photocopies, and the signatures, chops and seals on all such documents which bear such
signatures, chops and seals are genuine.
1.3 In addition, CEP, through its director, quarry consultant and/or qualified representatives have
also confirmed and represented to us the disclosures made during the legal due diligence
exercise in written and unwritten forms.
1.4 This Opinion is confined to Malaysian law at the date hereof and is given on the basis that
it will be governed by and construed in accordance with the laws of Malaysia. We express no
opinion with regard to any system of laws other than the laws of Malaysia as currently applied
by the Malaysian courts. We have made no investigation of, and do not express or imply any
views on, the laws of any country other than Malaysia.
1.5 This Opinion is based on the findings from our legal due diligence review on CEP, and covers
matters considered by us from a legal perspective and is not intended to contain any advice
of an investment, financial or accounting nature.
APPENDIX D LEGAL OPINION FROM ROZLAN KHUEN
D-1
2. Assumptions
2.1 In issuing this Opinion, we have assumed:
(a) that documents and information relevant to CEP for purposes of this Opinion have been
furnished to us;
(b) that all documents submitted or made available to us as copies conform to the authentic
original documents which such copies purport to represent;
(c) that all the signatures of persons signing documents reviewed by us or in connection
with which this Opinion is rendered are genuine and that all such persons have been
properly and legally authorised to sign the said documents;
(d) that all the information contained in the documents made available to us are true,
correct, accurate, not misleading and represent a complete and up to date account of
the facts material to the affairs of CEP;
(e) that there are no facts material to our Opinion in respect of the affairs of CEP which
have not been disclosed to us and/or which do not appear from the face of the
documents examined by us;
(f) that all the records of CEP are true, correct, accurate, not misleading and are up to date
and have been correctly and properly kept and maintained by CEP;
(g) that all information contained in documents reviewed by us or in connection with this
Opinion is not subject to any non-disclosure confidentiality obligations on the part of
CEP (other than those that are specified in the documents which we have reviewed),
and in the event that there is such obligations, that CEP has obtained the necessary
waiver/consent for disclosure of those information to us without committing any breach
of such obligations;
(h) that there is no foreign law (as to which we have made no independent investigation)
which would render this Opinion untrue, incorrect or inaccurate; and
(i) this Opinion is limited to Malaysian law as enforced and applied by the courts of
Malaysia as of the date of this Opinion and is given on the basis that this Opinion herein
shall be governed by and construed in accordance with the laws of Malaysia.
3. Opinion
Upon the basis of the foregoing, we are of the opinion that:
3.1 Statutory Information
(a) CEP was duly incorporated under the Malaysian Companies Act 1965 and is validly
existing in Malaysia under the Malaysian Companies Act 1965, with the status of an
independent legal entity having full capacity, power and authority to enter into legally
binding and enforceable contacts and undertakings, with full power to sue or to be sued
in its own name.
D-2
(b) CEP has full power and authority to carry on the business currently carried on by it and
to own, use, lease and operate its properties and assets and to conduct the business
currently carried out by CEP which is also in line with its Memorandum and Articles of
Association and other constitutive documents, including but not limited to its certificate
of incorporation.
(c) The Memorandum and Articles of Association of CEP constitute a legal document
regulating the relationship between CEP and its shareholder(s) and among the
shareholder(s) inter se, and is valid and legally binding and enforceable between CEP
and its shareholder(s) and by the shareholder(s) against one other.
(d) To the best of our knowledge, there are no provisions or irregularities, inconsistencies
or other matters contained in the records of CEP which would adversely affect:
(i) the status of CEP as a duly incorporated or established independent legal entity;
(ii) the business of CEP as presently conducted and as set out in its Memorandum
and Articles of Association; and
(iii) CEPs power and authority to own, use, lease and operate its properties and other
assets.
(e) Based on our review, CEP has not complied with several provisions under the
Malaysian Companies Act 1965 in the past. However, these past non-compliance
issues were not material to the Groups business operations.
3.2 Compliance with Laws, Approvals and Licences
(a) CEP is required to obtain, hold and/or comply with valid licences, permits and approvals
to carry on its marble quarrying operations at the Kelantan Marble Quarry. Most of these
licences, permits and approvals are issued subject to conditions to be complied with.
(b) In particular:
(1) To be able to secure the approval to extract marble from the Kelantan Marble
Quarry, CEP needs to submit, and secure the approvals of the Kelantan
Department of Environment for, an environment impact assessment report and
quarry scheme report, and to submit an environmental management plan
respectively, and to comply with the respective conditions imposed thereunder.
(2) To be able to remove and transport marble from the Kelantan Marble Quarry, CEP
needs to secure a permit (Form 4C) (through KSEDC, being the holder of the
lease) on each occasion when it actually transports the marble from the quarry site
from the Gua Musang local authority.
(3) To be able to occupy and use land outside of Lot 1781, inter alia, for the setting-up
of its aggregates processing facility as well as for storing equipment and marble,
CEP needs to secure a permit (Borang 4) (through KSEDC, being the holder of
the lease) from the Kelantan Forestry Department.
(4) To be able to use forest access roads to lead to the Kelantan Marble Quarry, CEP
needs to secure a permit (Borang 7) (through KSEDC, being the holder of the
lease) from the Kelantan Forestry Department.
D-3
To the best of our knowledge, all of the foregoing have been obtained or carried out or
complied with by CEP as at the date of this Opinion, and there are no circumstances to
indicate that any of the aforesaid approvals granted has been revoked, terminated or
withdrawn for any reason.
(c) As at the date of this Opinion, CEP has secured all necessary approvals and permits
required for the extraction and removal of marble from the Kelantan Marble Quarry as
well as for the operation of its business in the extraction, removal, transportation, sale
and export of marble, and we are not aware of any circumstances to indicate that CEPs
right to explore, develop, quarry, extract, remove, transport, sell and/or export marble
from the Kelantan Marble Quarry has been adversely affected or compromised.
3.3 Title to and Validity and Enforceability of the Rights to any Assets
(a) CEP has been granted exclusive rights by Kelantan State Economic Development
Corporation (KSEDC), the holder of the lease of Lot 1781 at the Kelantan Marble
Quarry, to explore, develop, quarry, extract, remove marble and/or other stones from
Lot 1781 the Kelantan Marble Quarry for commercial sale or consumption, for a
prescribed term up to 26 January 2044. Such right is a contractual right, and is subject
to termination on terms as contractually agreed.
(b) In addition, CEP has been granted a sub-lease (Sub-Lease), which has been duly
registered with the relevant authorities, in respect of Lot 1781 at the Kelantan Marble
Quarry for a prescribed term up to 26 January 2044. The Sub-Lease will automatically
terminate upon the termination of CEPs contractual right to conduct marble quarrying
operations at the Kelantan Marble Quarry.
The Sub-Lease serves as an additional security to CEP in respect of the contractual
rights granted to it to explore, develop, quarry, extract, remove and sell marble and/or
other stones in respect of the Kelantan Marble Quarry. The right to extract, remove and
transport marble and other rock materials from the Kelantan Marble Quarry, however,
is not constituted or granted under the Sub-Lease or the lease held by KSEDC, but is
subject to the compliance with the requirements and conditions as mentioned in
paragraph 3.2(b) above.
(c) CEP has a contractual right to acquire a leasehold interest in a piece of land located at
PN5329, Lot 5497, Bandar Gua Musang, Jajahan Gua Musang, Kelantan for an
aggregate consideration of approximately RM1,021,565 where although CEP has paid
the consideration in full as at the date of this Opinion, the transfer of the property to CEP
is subject to the approval of the relevant authority, to be sought after the completion of
the relevant construction thereon.
(d) Save as provided in paragraphs 3.3(b) and 3.3(c) above in this Opinion, we are not
aware of any matter that has caused us to believe that CEP does not possess title to
any assets (including licences and agreements) which are material to its operations or
that CEPs rights to any such assets are not valid and enforceable, except where such
lack of, or defect in, such title or rights is not material to the Groups business
operations.
D-4
3.4 Laws and Litigation
(a) CEP does not have any right of immunity, on the grounds of sovereignty or otherwise,
from any legal action, writ or proceeding, from the giving of relief in any legal action, suit
or proceeding, from set-off or counterclaim, from the jurisdiction of any competent court,
from service of process upon them or any agent, from attachment prior to judgment,
from attachment in aid of execution, or from execution or any other process for the
enforcement of any judgment or other legal process in Malaysia.
(b) There is currently no formal system in place in Malaysia for searching court records to
review the status of suits, unless the suit numbers are known. Informal physical
searches can sometimes be conducted at the courts. However given the number of
courts in each state in Malaysia (including East Malaysia), such searches are not
usually conducted. Instead, such investigation in Malaysia normally involves the
confirmation by the company and solicitors appointed by the said company.
(c) The results of the CTOS, a Malaysian Credit Reporting Agency under the ambit of the
Credit Reporting Agencies Act 2010 search conducted by us on CEP does not contain
any data of any summons, writs, foreclosures etc against CEP and we are not aware of
any circumstances to indicate that there is any litigation, prospective or pending,
proceedings involving CEP.
(d) We are not aware of any matter that has caused us to believe that CEP is not in
compliance with all the relevant laws, rules and regulations in Malaysia which are
material to its operations, including but not limited to, those relating to the proper
incorporation and good standing of CEP, except where such noncompliance is not
material to the Groups business operations.
4. Share Capital of CEP
As at the date of this Opinion, the authorised share capital of CEP, issued and paid-up share
capital of CEP and details of shareholding interests in CEP pursuant to the register of
shareholders of CEP are as follows:
Authorised share capital : RM500,000 divided into 500,000 ordinary
shares of RM1.00 each
Issued and paid-up share capital : RM500,000 divided into 500,000 ordinary
shares of RM1.00 each
Shareholding interests : Terratech Resources Pte Ltd is the legal and
beneficial owner of 100% of the issued and
paid-up share capital of CEP comprising
500,000 ordinary shares of RM1.00 each
All issues, allotments and transfers of shares in the capital of CEP and the present
authorised share capital of CEP are valid and have been effected in accordance with the
Memorandum and Articles of Association of CEP and the Malaysian Companies Act 1965.
D-5
5. Qualifications
This Opinion is qualified as follows:
(a) we express no opinion as to the correctness of any representation or warranty (express
or implied) under or by virtue of any of the documents save if and insofar as the matters
warranted are the subject matter of the specific opinions set out in this Opinion or
otherwise contained in the Offer Document;
(b) we have not made any investigation into or verified the accuracy of the facts, or the
reasonableness of any statements of opinion or expectation, contained in any
documents submitted to us or in the representations or information given to us (whether
in writing or otherwise) or that no material facts have been omitted from such
documents, representations and information and we do not assume responsibility and
shall not be held responsible in respect thereof;
(c) we express no opinion on tax matters affecting any of the documents or the parties
thereto or the transactions contemplated thereby;
(d) this Opinion merely covers matters considered by us from a legal perspective and is not
intended to contain any advice of a tax, financial, commercial or accounting nature. We
do not take responsibility for or make any representations with regard to any matters
relating to the Proposed Listing other than those set out in this Opinion or the Offer
Document in respect of Malaysia or as agreed pursuant to the terms of our appointment;
and
(e) we do not take responsibility for any breach by CEP of any of the confidentiality
obligations imposed on them under the documents forwarded to us, when disclosing
confidential information to us.
Yours faithfully
ROZLAN KHUEN
D-6
31st March 2014
2 Kaki Bukit Place #07-00
Tritech Building
Singapore 416180
Mark Liew
Managing Director, Corporate Finance,
Prime Partners Corporate Finance Pte. Ltd.
20 Cecil Street, #21-02
Equity Plaza
Singapore 049705
Dear Sirs
Independent Technical Review
Kelantan Marble Quarry, Gua Musang, Malaysia
Qualified Persons Report by Rockhound Limited
The Kelantan Marble Quarry (The Project) located near Gua Musang in Kelantan Province,
Malaysia is being operated by CEP Resources Entity Sdn. Bhd which is 100% owned by Terratech
Resources Pte Ltd and which is in turn wholly owned by Terratech Group Limited (Terratech or
the Company). Development at the Quarry started in early 2011 with commercial production of
marble dimension stone blocks commencing in March 2012.
Terratech has requested that Rockhound Limited (RH) carries out a technical due diligence
review of the project and prepares a Qualified Persons Report (QPR), consistent with the
requirements of the SGX-ST Listing Manual Section B: Rules of Catalist. RH were engaged by
Terratech in October 2012 and have reviewed and contributed to the Ground Investigation of the
Project including mapping, drilling and sampling and testing.
RH is a Hong Kong based minerals advisory group, set up in 2006 to provide advice to listed
companies, other local firms and institutions. It performs industry studies for mining and quarrying
companies, works with funds, financial institutions and natural resources firms. Studies include
mineral resource/ore reserve compilations and audits, technical valuations, due diligence,
independent expert reviews for acquisition and financing purposes, expert witness in litigation and
assistance in negotiating mineral agreements and market analysis. Projects are mostly within the
Asia Pacific Region including the PRC.
This QPR contains RHs assessment of the resources/reserves, production schedule, project
capital and operating expenses and an estimate of the mine life based on technical reviews of the
project data and discussions with technical personnel. It also includes statements of environment
and social impact and a risk assessment. RH has reviewed the relevant data to assess the
reasonableness of projections and forecasts but RH cannot be assured that factors, both within
and beyond the control of Terratech, could cause the actual results to be materially different from
RHs assessments and any projections contained in the QPR.
APPENDIX E INDEPENDENT QUALIFIED PERSONS REPORT
E-1
The QPR provides an independent assessment of the technical aspects of the Project and is
provided to the Directors of Terratech in relation to the proposed listing on the Catalist Board of
the SGX-ST; it should not be relied upon for any other purpose. The report does not constitute a
technical or legal audit. Neither the whole nor any part of this QPR nor any reference thereto may
be included in, or with, or attached to any document or used for any purpose without RHs written
consent to the form and context in which it appears.
Yours Faithfully
For Rockhound Ltd
Paul Fowler
Director

Gordon Anderson
Director
E-2
Kelantan Marble Quarry, Gua Musang, Kelantan, Malaysia
Qualified Persons Report
March 2014
Table of Contents
EXECUTIVE SUMMARY E-7
1.0 INTRODUCTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-9
1.1 Statement of Capability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-12
1.2 Statement of Independence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-15
1.3 Responsibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-15
2.0 PROPERTY DESCRIPTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-16
2.1 Location, Access and Infrastructure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-16
2.2 Climate and Geomorphology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-19
2.3 Sub-lease of the Land by KSEDC for Quarrying . . . . . . . . . . . . . . . . . . . . . . . . . E-20
2.4 Financial Obligations of the Sub-lease E-21
2.5 History of Site. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-21
3.0 GEOLOGICAL BACKGROUND AND GROUND INVESTIGATION . . . . . . . . . . . E-21
3.1 Regional Geology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-21
3.2 Geology of the Quarry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-23
3.3 Ground Investigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-24
3.3.1 Topographic Survey. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-25
3.3.2 Borehole Investigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-26
3.3.3 Geological Mapping and Sampling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-28
3.3.4 Laboratory Testing Contractors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-29
3.4 Results of Ground Investigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-29
3.4.1 Cavities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-30
3.5 Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-31
4.0 THE NATURE OF THE MARBLE RESOURCE . . . . . . . . . . . . . . . . . . . . . . . . . . E-31
4.1 Specification for Dimension Stone . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-32
4.2 Colour and Texture of the Marble Resource as Blocks for Slab Manufacture . . . E-32
4.3 Mineral and Chemical Composition of the Marble Resource for Carbonate
Powder Production . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-33
4.4 Physical Properties of the Marble . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-35
4.5 Radioactivity of the Marble. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-36
4.6 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-36
5.0 MARBLE RESOURCES AND RESERVE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-37
5.1 Marble Resource/Reserve Classification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-37
5.2 Procedure and Parameters for the Resource Estimation . . . . . . . . . . . . . . . . . . . E-38
5.3 Determination of Confidence Levels. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-41
5.4 Mineral Resource Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-41
E-3
5.5 Marble Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-42
5.5.1 Block Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-44
5.5.2 Reserve Statement for Marble Dimension Stone Blocks. . . . . . . . . . . . . . E-46
5.6 Quarry Life Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-46
5.7 Conclusions and Summary of Marble Reserves and Resources at 31 March 2014. E-46
6.0 QUARRY OPERATION AT THE KELANTAN MARBLE QUARRY. . . . . . . . . . . . E-47
6.1 Development. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-48
6.2 Extraction of the Marble . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-50
6.2.1 Excavation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-50
6.2.2 Cutting of Blocks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-51
6.3 Transportation and Storage of Marble Products. . . . . . . . . . . . . . . . . . . . . . . . . . E-53
6.4 Production Targets of Blocks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-54
6.5 Workforce . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-55
6.6 Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-56
7.0 MARBLE PRODUCTS FROM KELANTAN MARBLE PROJECT. . . . . . . . . . . . . E-56
7.1 Marble Blocks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-58
7.2 Marble Slabs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-59
7.3 Marble Aggregate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-61
7.4 Calcium carbonate powder production facility . . . . . . . . . . . . . . . . . . . . . . . . . . . E-62
7.5 Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-62
8.0 OPERATING COSTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-63
8.1 Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-64
9.0 CAPITAL COSTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-65
9.1 Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-67
10.0 FINANCIAL ANALYSIS OF THE OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . E-68
10.1 Sales and Marketing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-68
11.0 ENVIRONMENTAL and SOCIAL MANAGEMENT. . . . . . . . . . . . . . . . . . . . . . . . E-69
11.1 Environmental Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-69
11.2 Existing Environment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-69
11.3 Environment Impact . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-70
11.4 Mitigation Measures Implemented . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-70
11.5 Rehabilitation and Abandonment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-71
11.6 Social Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-72
11.7 Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-72
12.0 OCCUPATIONAL HEALTH and SAFETY (OH & S) . . . . . . . . . . . . . . . . . . . . . E-72
12.1 Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-73
13.0 RISK ANALYSIS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-73
14.0 GLOSSARY OF TERMS and ABBREVIATIONS . . . . . . . . . . . . . . . . . . . . . . . . E-80
E-4
Table of Figures
Figure 1-1: Site Entrance at the Kelantan Marble Project . . . . . . . . . . . . . . . . . . . . . . . . E-9
Figure 1-2: Quarry is located in Kelantan State, Peninsular Malaysia. . . . . . . . . . . . . . . E-10
Figure 2-1: Quarry has largest area of all Lots . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-17
Figure 2-2: Hill 2A looking to the south from site entrance note crushing plant in
foreground . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-18
Figure 3-1: Geological map of Peninsular Malaysia by Malaysian Geological Survey. . . E-22
Figure 3-2: Stalactites and small caves in vertical cliff feature at base of Hill 2A . . . . . . E-24
Figure 3-3: Ground model at Kelantan Marble Quarry . . . . . . . . . . . . . . . . . . . . . . . . . . . E-25
Figure 3-4: 3D model of quarry area looking from north (image reversed from Figure 3-3). E-26
Figure 3-5: A typical core box from Borehole 3-1 note RQD >90% . . . . . . . . . . . . . . . E-28
Figure 4-1: Colour and texture of the marble from Kelantan Marble Quarry . . . . . . . . . . E-33
Figure 5-1: Relationship between resources and reserves from JORC Code . . . . . . . . . E-38
Figure 5-2: Layout plan showing Section Lines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-39
Figure 5-3: Sections through Quarry (for locations see Figure 5-2). . . . . . . . . . . . . . . . . E-40
Figure 6-1: Karst surface in Hill 2B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-49
Figure 6-2: Extraction of blocks at Hill 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-51
Figure 6-3: Irregular shaped block with solution feature . . . . . . . . . . . . . . . . . . . . . . . . . E-52
Figure 6-4: Blocks are cleaned prior to dispatch (see B classified block in foreground) . E-53
Figure 7-1: Commissioning of Slab Processing Facility is taking place (Feb 14) . . . . . . E-60
E-5
Table of Tables
Table 1-1: Asset Details . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-10
Table 2-1: Monthly Rainfall 2006 to 2012 (mm) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-19
Table 2-2: Rainfall Days 2006 to 2012 (Nos) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-19
Table 2-3: 24 Hour Mean Temperature 2006 to 2012 (
o
C) . . . . . . . . . . . . . . . . . . . . . . . E-20
Table 3-1: RQD Percentage of Borehole Length Drilled in Marble . . . . . . . . . . . . . . . . E-27
Table 3-2: Borehole Details. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-27
Table 3-3: Summary of Rock Encountered in Boreholes . . . . . . . . . . . . . . . . . . . . . . . . E-30
Table 4-1: Database of Information used in this QPR . . . . . . . . . . . . . . . . . . . . . . . . . . E-31
Table 4-2: Specification for Marble according to American and PRC Standards . . . . . . E-32
Table 4-3: Chemical Analyses of 35 Samples from Boreholes (%). . . . . . . . . . . . . . . . . E-34
Table 4-4: Chemical Analyses of 18 Surface Samples taken by Rockhound (%) . . . . . . E-34
Table 4-5: Results of Mechanical Properties of the Marble from Surface Samples . . . . E-35
Table 5-1: Total Resources of the Marble Quarry Project . . . . . . . . . . . . . . . . . . . . . . . . E-40
Table 5-2: Resource Statement (million m
3
) at 31 March 2014 . . . . . . . . . . . . . . . . . . . E-42
Table 5-3: Excavation Quantities Sept 2012 to March 2014(m
3
) . . . . . . . . . . . . . . . . . E-45
Table 5-4: Marble Reserves at Kelantan Marble Quarry (million m
3
) . . . . . . . . . . . . . . . E-46
Table 5-5: Summary of Statements of Reserves and Resources at Kelantan Marble
Quarry (million m
3
) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-47
Table 6-1: Production Targets (m
3
) FY2014 to FY2018 . . . . . . . . . . . . . . . . . . . . . . . . E-48
Table 6-2: Total Marble Blocks (m
3
) FY2014 to 2018 onwards . . . . . . . . . . . . . . . . . . E-54
Table 6-3: Relative Percentage of Each Block Product (For Year) . . . . . . . . . . . . . . . . . E-55
Table 7-1: Estimated Production Mix of Marble Slabs (m
2
) FY2015 to FY2020 . . . . . . . E-60
Table 7-2: Estimated Production of Marble Aggregate (t) . . . . . . . . . . . . . . . . . . . . . . . . E-61
Table 7-3: Typical Specification of End Uses of Carbonate Rock (%) . . . . . . . . . . . . . . E-61
Table 8-1: Marble Blocks Production Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-63
Table 8-2: Marble Slabs Production Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-63
Table 8-3: Aggregate Production Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-64
Table 8-4: Powder Production Costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-64
Table 9-1: Actual and Forecast Capital Costs for Quarry Operation (S$000) FY2013 to
FY2016. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-65
Table 9-2: Actual and Forecast Capital Costs for Processing Facilities (S$000) FY2013
to FY2017. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-66
Table 13-1: Overall Risk Assessment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-74
Table 13-2: Risk Items Identified and Risk Rating . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-75
E-6
EXECUTIVE SUMMARY
Rockhound Limited (RH) was requested by Terratech Group Limited (Company) to submit a
Qualified Person Report (QPR) on the Kelantan Marble Quarry (or The Project) located near
Gua Musang in Kelantan Province, Malaysia. Development at the Quarry started in early 2011 with
commercial production of marble dimension stone blocks commencing in March 2012. The Quarry
is being operated by CEP Resources Entity Sdn. Bhd which is 100% owned by Terratech
Resources Pte Ltd which in turn is wholly owned by the Company.
The purpose of this QPR is to provide an independent technical assessment of The Project to be
included in the offer document for the Companys Initial Public Offering (IPO) on the Catalist
board of the Singapore Exchange Securities Trading Limited (SGX-ST). This QPR has been
prepared in accordance with the SGX-ST Listing Rules. The marble resources and reserves are
stated in accordance with the 2012 Edition of Australian Code for Reporting Exploration Results,
Mineral Resources and Ore Reserves (the JORC Code).
Prior to operations beginning on site authorized local consultants carried out a Technical Review
and Environment Impact Assessment of The Project. In addition a financial assessment by
independent consultants showed The Project to have merit. However to meet the standards
expected for an IPO, a more in depth assessment of the resource was required.
To this effect, RH was engaged in October 2012 to:
review the technical information available,
help plan any further investigation required,
continue to provide an independent view of the investigation,
carry out its own mapping and sampling to validate the findings and
assist in the preparation of other technical data needed for the IPO including a Resource
Statement reported in accordance with the JORC Code.
Since that time RH has visited The Project site on six occasions and had the opportunity to view
the investigation and review the sampling and testing of core samples. In addition there have been
many discussions with management and the site operations teams regarding the quarry
development and future planning. The RH team was led by Paul Fowler who has over 25 years
experience in the quarry business and is a Competent Person as defined by the JORC Code.
The marble at the Quarry is massive and homogenous over the whole Project area and is suitable
for both dimension stone and as a raw material in the carbonate powder business. The combined
Proved and Probable Reserves at the Quarry of marble that can be extracted as dimension stone
blocks is estimated at 11.02 million cubic metres (m
3
). These Reserves are included in the total
Resources which are estimated at 20.29 million m
3
.
A Block Rate of 70% is assumed on the basis of experience gained in the extraction of marble to
date. Resources are substantial and it is anticipated that once markets for the marble as a
carbonate powder are established then all remaining material (such as loose marble and other
marble fragments not sold as blocks or processed into slabs) can be converted into reserves. The
marble is almost a pure carbonate, mostly calcite with small amounts of dolomite.
E-7
Mineral Type Volume (million m
3
)
Reserves
Proved
WhiteMarble
10.53
Probable 0.49
Total 11.02
Resources
Measured
WhiteMarble
18.63
Indicated 0.90
Inferred 0.76
Total 20.29
The Project is located in karst terrain comprising four hills which protrude out of an adjacent plain
defined by near vertical cliffs in places over 100metres (m) high. There is virtually no soil cover
and fresh rock is widely exposed at surface. Development of the quarry is top down with working
platforms at 1.5m intervals. The final level will match with the surrounding Plain meaning that the
maximum amount of excavation in the area of the two hills at the north end of the site will be in
excess of 150m whereas at the southern end excavation will range from 30m to 70m below the
existing ground surface. A slope with an average angle of 60
o
will be present at the back of the
excavation.
Blocks with dimensions of 3m length by 1.5m high by 1.5m wide will be cut using disc saws and
diamond wire saws. A production target of 103,000m
3
has been set for FY2015 rising to
230,000m
3
by FY2018 with multiple working platforms. The intention is that the marble blocks of
good shape will be sold initially to buyers in the PRC and that these will be sold according to colour
and texture. There are three marble colour types at The Project site:
Kelantan Misty White
Kelantan Purplish White
Kelantan Black-Spotted White
The Black-Spotted White is the premium product and commands potentially the highest selling
price followed by the Purplish White and Misty White. The different prices are also reflected in the
selling price for slabs of each type.
Marble not suitable to be sold as blocks, such as broken blocks and loose fragments, will be
crushed into aggregate. Larger broken blocks will be kept on site for processing into standard
sized marble slabs.
RH has reviewed the capital costs and operating costs and has found them to be reasonable. Over
the next four years there will be significant capital expenditures to meet the production targets.
From an operational viewpoint meeting the production targets is achievable assuming that
development plans are implemented efficiently and effectively. Importantly the recruitment of
skilled operatives is a priority.
E-8
There are a number of risks associated with the business but the majority are considered to be
low or low to medium. Examples include the risks associated with variations in the chemical
properties of the resource and the target market for the marble as a raw material in the powder
business.
The effective date of this QPR is 31 March 2014 and the Company has advised RH that there have
been no material changes since the effective date. The sole purpose of this QPR is for use by the
directors of the Company and its sponsor and advisers in connection with the IPO. RH has
received a fee for its services in connection with The Project at its normal rates and normal
payment schedules. This fee is not dependent on the findings of the QPR.
1.0 INTRODUCTION
Terratech Group Limited (The Company) is seeking a listing on the Catalist board of the
Singapore Exchange Securities Trading Limited (SGX-ST). Its controlling shareholder is
Tritech Group Limited; a company listed on the SGX-ST. CEP Resources Entity Sdn. Bhd
(CEP) operates a marble quarry (Figure 1-1). CEP is 100% owned by Terratech
Resources Pte Ltd which in turn is owned by the Company. Its major product is dimension
stone blocks.
Figure 1-1: Site Entrance at the Kelantan Marble Project
CEP is incorporated in Malaysia and has the exclusive rights to explore, develop, quarry,
extract, remove and sell marble and/or other stones for commercial sale or consumption
from a quarry at Lot 1781 (Bukit Batu Bong) in the state land at Mukim Ulu Nenggiri, Jajahan
Gua Musang, Kelantan, Malaysia (Kelantan Marble Quarry or The Project). CEP was
given possession of the Quarry for a term of 33 years, effective 27 January 2011.
E-9
Table 1-1: Asset Details
Asset Name/
Country
Issuers
Interest
Development
Status
Licence
expiry
date
Licence
area
Type of
mineral,
oil & gas
deposit Remarks
Lot 1781/
Kelantan,
Malaysia
100% Commercial
Operation
26 Jan
44
25.94 ha Marble
Since development of the Quarry commenced in 2012 the Company has applied for an
additional 10.171 hectares (ha) of land adjacent to Lot 1781 as it was found that there are
technical constraints of operating within the original boundaries of the Lot (Figure 3-3 best
shows this additional area). Approval in principle has been given to operate in this area
which is now awaiting transfer of the legal title. The current asset details are shown in
Table 1-1
The Project is supported by the State Government and was reached through an Agreement
dated 9 September 2007 between CEP and Kelstone Sdn Bhd, which is a wholly owned
subsidiary of the Kelantan State Economic Development Corporation (KSEDC). The
location of The Project is shown in Figure 1-2.
Figure 1-2: Quarry is located in Kelantan State, Peninsula Malaysia
Marble is a metamorphosed limestone (a carbonate rich rock which is primarily composed
of Calcium Carbonate) or dolomite (a carbonate rich rock which contains a significant
percentage of Magnesium in addition to Calcium) where the original sedimentary and
biological structures of the rock have been obliterated during recrystallization. The
recrystallization is the result of intense heat, pressure and chemical solutions at some time
in the geological past which have caused the limestone to be reformed into an interlocking
crystal structure of Calcium Carbonate CaCO
3
(termed Calcite), aragonite and sometimes
dolomite (CaMgCO
3
). This structure leads to a greater strength to the rock than would have
existed in the original sedimentary limestone. Limestone can have either a freshwater or
marine origin and usually indicates a warm clear water environment at the time of its
formation.
E-10
In the dimension stone business, the commercial term marble has far wider coverage than
the formal geological definition. It includes other rock types, such as unmetamorphosed
limestone and dolomites, which are capable of being polished. The resources and reserves
discussed in this Qualified Persons Report (QPR) refer to what is commercially classified
as marble in the stone business.
The Project involves excavating marble by cutting it into dimension stone blocks and/or to
be used as a raw material in the carbonate powder business. The Project has been in
commercial operation since early 2012: large marble blocks have already been sent to
China and marble slabs have been cut from the blocks for marketing purposes. Over the
next four years the plans are to grow the quarry operations of The Project focusing on
increasing production of marble blocks to be sent to markets in the PRC and marble slabs
to be produced by the Company. By Financial Year (FY) 2018, total production of marble
to be mined out as dimension stone blocks is targeted at 230,000 cubic metres (m
3
) per
annum. The intention is to generate minimal waste other than what is generated during
processing.
The marble products will primarily be large marble blocks (approx. 6m
3
to 9m
3
) and
standard market size slabs (300mm by 300mm and 600mm by 600mm of 20mm standard
thickness) manufactured on site from smaller marble blocks and pieces. Raw material for
carbonate powder will also be produced. Initially the raw material will be sold as aggregate,
crushed down from other loose marble fragments and small blocks, but later the Company
intends to build its own powder plants: initially a small plant and then a bigger plant once
the product has achieved market acceptance.
The Project is using standard block cutting techniques, including diamond wire sawing and
disc saw cutting to produce marble blocks. There is very little soil cover and the weathering
profile in the marble is minimal and development for the most part only involves the
clearance of surface vegetation and then creation of working platforms using explosives.
By 31 March 2014 (the effective date), excavation rates of up to 6,000m
3
per month had
been achieved. The facility to process small slabs on site was at the commissioning stage
and a crushing and screening plant to produce aggregate was also essentially complete.
The slab processing facility will have a capacity to produce 600m
2
of slabs per day and the
aggregate plant 60,000 tonnes (t) per month. The Powder plants are planned for a 17ha
piece of industrial site that has already been acquired (but pending the transfer of legal title
to CEP) in Gua Musang for this purpose with full production of 100,000t per annum by
FY2018. At this stage no formal decisions have been made on the ultimate capacity but it
is planned to be comparable to the mid-size operations (production capacity of
approximately 100,000 tonnes to 200,000 tonnes per annum) found in Ipoh, which is the
centre of the calcium carbonate powder business in Malaysia.
The Company proposes to prepare an offer document to be issued in support of an initial
public offering (IPO) for a listing on the Catalist board of the SGX-ST to raise capital for
project development, expansion and acquisition.
The Board of Directors of the Company engaged Rockhound Limited (RH) as their
independent adviser to undertake a technical review of The Project and to prepare a
Qualified Persons Report (QPR) in connection with the Companys IPO. RH consents to
the inclusion of this QPR in the Companys offer document for the purpose of the IPO on
the SGX-ST.
E-11
The reporting standard adopted by this QPR is the Valmin Code and Guidelines for the
Technical Assessment and Valuation of Mineral Assets and Mineral Securities for
Independent Expert Reports, as adopted by the Australasian Institute of Mining and
Metallurgy (AusIMM) in 1995 and updated in 2005.
The marble resources and marble dimension stone reserves defined for The Project have
been reported in accordance with the Australasian Code for Reporting of Exploration
Results, Mineral Resources and Ore Reserves (JORC Code) prepared by the Joint Ore
Reserves Committee of the AusIMM, the Australasian Institute of Geoscientists, and the
Minerals Council of Australia in 1999 and revised in 2012.
This QPR contains forecasts and projections based on information provided by the
Company. RHs assessment of the projected schedules and capital and operating costs is
based on technical reviews of project data and project site visits.
The metric system is used throughout this QPR. The currency used is Singapore Dollars
(S$) with conversions to Chinese Yuan as appropriate. The exchange rate used in this
QPR is RMB5 for S$1, the average rate from a number financial sources on the Effective
Date of 31 March 2014.
1.1 Statement of Capability
RH is a Hong Kong based minerals advisory group, set up in 2006 to provide advice to listed
companies, other local firms and institutions. It performs industry studies for mining and
quarrying companies, works with funds, financial institutions and natural resources firms.
This includes mineral resource/ore reserve compilations and audits, property assessments
and technical valuations, due diligence, independent expert reviews for acquisition and
financing purposes, expert witness in litigation, project feasibility studies, assistance in
negotiating mineral agreements and market analysis. The firm has worked with a broad
spectrum of commodities. Projects are mostly within the PRC, Indonesia, Philippines and
Malaysia.
RH is a corporate member of the Canadian Institution of Mining, Metallurgy and Petroleum,
an organizational member of the AusIMM and has working agreements with a firm of
international mining consultants based in Canada and the United Kingdom. RH is also able
to call upon experts in environmental work, computer modeling and engineering to assist on
projects requiring such specific support.
RH has no equity in any mining or quarrying project to ensure its independence. This allows
conflict-free and objective recommendations on crucial judgment issues.
The principals of RH have occupied senior management roles in both public and private
companies and have worked in the Asia Pacific Region for over 30 years as consultants,
operators and clients. Since inception RH has completed nearly 50 projects involving
independent technical reports, resource and reserve estimations, project valuations and
due diligence studies, the majority being in the private sector. Our consultant partners in
Canada and the UK have completed many projects with stock exchange listings spanning
a period of 40 years.
E-12
The Project Manager and Qualified Person for this QPR is Paul Fowler. He is the principal
author of the QPR with the review and editing by Dr. Gordon Anderson. They have been
supported in-house and by outside specialists who have been involved in specific areas.
The backgrounds of the key members of the team are as follows:
Paul FOWLER MBA, MSc. CGeol, CEng, FGS, FIQ, FIMMM, MHKIE, RPE
Paul Fowler is Managing Director of RH and was Project Manager for this technical
review. He has over 25 years working experience in the Quarry Business.
A geologist with more than 30 years of experience in the areas of exploration,
operations, planning, resources and modeling he began his career in mineral
exploration in Southern Africa. Subsequently he worked as a geologist in East Africa
and then as a consultant with one of the worlds leading engineering consultancies in
the Middle East, Europe and Asia.
He then became General Manager in Hong Kong of one of the largest hard rock Quarry
operations in SE Asia and subsequently General Manager responsible for Planning
and Development in a Hong Kong Main Board Listed Company, a role which took him
to other parts of Asia-Pacific.
In 2005 he was a founder of a private junior exploring for gold and base metals in
Madagascar. With RH, of which he is also a founding partner, he has undertaken due
diligence and provided technical and geological support for listed and private
companies operating in Indonesia, the PRC and Philippines. Projects have ranged
from gold, base metals and iron ore to dimension stone, quarry products and industrial
minerals.
With regard to this QPR Paul Fowler fulfills the requirements of an Independent
Qualified Person as defined by Catalist Rule 442 of the SGX. Furthermore in terms of
the statement of reserves and resources Fowler also meets the requirements for a
Competent Person as defined in the JORC Code and is taking responsibility for this
statement.
Dominic KOT B.A.Sc. FGS
Kot is Project Geologist and holds a Bachelor of Applied Science degree in
Geological Engineering from the University of British Columbia. He has eight years
experience in the mining and exploration sector dealing with various mineral projects.
Starting out as a field operator conducting geophysical surveys in Canada, he
subsequently joined a Hong Kong private company and worked on an iron-titanium
mineral project in Inner Mongolia, PRC. This project was eventually sold to a Hong
Kong listed company. Subsequently Kot was involved in exploration and mining for
lateritic nickel and placer gold mineral projects in the Philippines.
He is currently a Technical Associate at RH and has responsibility as a team member
for a diverse range of projects across Asia and business development.
E-13
Gordon ANDERSON BSc., Ph.D, CGeol, CEng, FHKIE, FGS, MIMMM, RPE
Dr. Anderson has over 30 years geological, management, consultancy and
construction experience throughout Asia, the Middle East and Europe. He has been
involved with the quarry business throughout his career, specifically in the Middle East
and in Hong Kong. Dr. Anderson is responsible for the Peer Review. He is a former
Director of Taylor Woodrow PLC in Hong Kong and Maunsell Consultants Asia Ltd. He
has successfully run his own consultancy business since 2003.
As a Chartered Geologist and a Registered Professional Engineer, Dr. Anderson has
been Project Director on numerous geological investigations. He has undertaken due
diligence and provided technical and geological support for various Hong Kong listed
companies operating in Indonesia, the PRC and Mongolia.
Dr. Anderson holds a Ph.D in Geology and a degree in Applied Geology and is a
founding partner and director of RH. He was, with Paul Fowler, a founding partner and
former director of a private junior, exploring for gold and base metals in Madagascar.
Nor Mashita Binti Idris B Tech (Environmental) Hons
Miss Mashita was The Project Environmental, Social, Occupational Health and
Safety Specialist for this Technical Review. She is currently project engineer at EQM
Ventures Sdn. Bhd. (previously known as EQM Consultancy Services) based in Ipoh,
Malaysia.
Miss Mashita is a Qualified Environmental Scientist in Malaysia and Authorized Person
to sign off Environment Impact Assessments (EIAs) on behalf of EQM Ventures Sdn.
Bhd. Over the last 10 years since she graduated from Universiti Sains Malaysia she
has carried out more than 30 projects where in many she was the Responsible Person
signing off the Reports. Reports have not only covered Environmental Work but also
Quarry Design, Reserve Evaluation and Blast Design. She was the principal author
and responsible person for the Environment Impact Assessment (EIA) carried out for
the Kelantan Marble Quarry and she is currently engaged as an independent
consultant to monitor the environmental performance of the Company and to carry out
the annual review for the purposes of the Quarry Scheme Approval.
Mark Wallace BSc MSc CGeol FGS
Wallace was the specialist responsible for resource estimation and modeling. He is
based in Hong Kong and is Director of Infrastructure at Arup, an international firm of
Consulting Engineers. An Engineering Geologist by training he has been involved in
quarry studies for the last 15 years. As part of his current role he is responsible for
supervising teams developing 3D GIS terrain models and performing spatial analysis
to evaluate rock mass quantity using the latest GIS software and its extensions.
Paul Fowler and Kot have been to the Project, six times since October 2012 with the
last visit on 27 February 2014 and Miss Mashita many times since 2008 when the EIA
was carried out. During site visits RH:
held discussions with the operations team and management
reviewed the development and operational performance of The Project
E-14
participated in the geological investigation carried out to estimate and determine
the nature of the marble resource
investigated more fully the areas of the Project which until April 2013 had been
inaccessible due to dense vegetation and steep terrain and
reviewed with senior management budgets and forecasts for the period up to
2021 together with other longer-term development plans.
1.2 Statement of Independence
Paul Fowler and RH partners, directors, substantial shareholders and its associates (i) are
independent of the Company, its directors and substantial shareholders (ii) do not have any
interest, direct or indirect in the Company or its subsidiaries; and (iii) will not receive
benefits other than remuneration paid to RH in connection with this QPR.
1.3 Responsibility
RH has conducted an independent technical review of the Companys Kelantan Marble
Quarry. Several site visits have been made by the RH professionals involved.
RH has independently analyzed the Companys data and carried out its own sampling and
inspection to validate what was provided. RH representatives also reviewed the Ground
investigation performed and had access to all the rock cores and test data obtained. Other
technical and market data has been supplied on request.
For this QPR RH has involved specialists in environmental studies and terrain modeling and
volumetric investigation. RH professionals have worked with these specialists in the past
and closely on this QPR and are satisfied that their technical expertise meets the
requirements of this QPR. On this basis Paul Fowler has signed off this QPR as the
Qualified Person responsible and accountable for their contributions.
RH has reviewed the resource and reserves estimate and have tabulated in this report the
respective resources and reserves according to the comparable JORC Code
categorisation. RH has reviewed the data, reports and information provided and has used
consultants with appropriate experience and expertise relevant to the various technical
aspects of this report. Accordingly it believes that the resources and reserves reported and
tabulated are reasonable and are in compliance with the JORC Code. Paul Fowler, the
Managing Director of RH, fulfils the requirements of qualified person and accepts
responsibility for the QPR and the comparable JORC Code categorisation of the resource
and reserves estimates as tabulated in the form and context in which it appears in this
report.
RH has reviewed the information contained in the offer document issued by the Company
in relation to the proposed listing of the Company on the Catalist Board of the SGX-ST and
confirms that the information presented is accurate, balanced, complete and not
inconsistent with this QPR.
In preparing this QPR, RH has not undertaken an audit of the data but has taken into
account all relevant information supplied by the Company and as such has relied on the
data, reports and information provided. RH has nevertheless made such reasonable
E-15
enquiries and exercised its judgment on the reasonable use of such information and has
found no reason to doubt the accuracy or reliability of the data, reports and information
provided by the Company.
2.0 PROPERTY DESCRIPTION
2.1 Location, Access and Infrastructure
The Kelantan Marble Quarry is located in the middle of Kelantan State on the east side of
Peninsular Malaysia. It is 22km north of Gua Musang, a town of 100,000 people and 14km
south west of Kampung Bertram Bahru. The geographic location of the Project is:
Latitude; N05
o
0526 to 05
o
549 and Longitude; E101
0
5744 to 101
0
5813
Marble will be extracted from the quarry located in Lot 1781 which is within 2km of the
Highway linking Gua Musang (Figure 2-1). The Project also includes land outside Lot 1781
for marble processing plant facilities and for the storage of marble Blocks. These areas are
pending the transfer of legal title to CEP. In summary the facilities are:
Extraction area inc. area for Offices, Workshops, Workers Quarters (25.94 hectares)
Slab Processing Plant
Storage area for Blocks, Crushing and Screening Plant
Three separate Storage areas for Blocks
E-16
Figure 21: Quarry Extraction Area
The project area comprises four hills (termed Hills 1, 2A, 2B and 3 by the Company see
Figure 2-1) of typical karst landscape which rise abruptly out of the adjacent plain situated
at a level of 80m above mean sea level (MSL) to 90m above MSL. The hills are defined
by near vertical cliffs which have meant that in the past there has been no access to the
top of the hills other than by climbing. Hills 1 and 2A are the highest with Hill 1 extending
in excess of 150m above the plain at its highest point (245m above MSL) and Hill 2A (See
Figure 2-2) nearly 200m (highest point 275m above MSL) above the Plain. Prior to the
current quarry development Hills 2B and 3 were originally respectively 70m and 35m above
the Plain.
E-17
Figure 2-2: Hill 2A looking to the south from site entrance
note crushing plant in foreground
The project area is bounded by rubber plantations on the northeast side and the Berangkat
Forest Reserve a densely vegetated rain forest on the south side. Immediately to the
west the hillsides have been cleared of trees where logging has taken place in the past and
old logging tracks are present, one of which has been used to provide access from the
Kelantan State road network into the Project area.
The Lot boundary of the Quarry Extraction Area has been set out to follow the line of the
vertical cliffs but on the south side of Hill 1 the ground topography in the Forest Reserve
merges with the cliffs forming only small escarpments. Survey points installed in 2008 to
define the lot boundary have been consumed by the Forest.
The dimensions of the Extraction Area are approximately 1.2km by 0.4km but narrowing
significantly on the west side on Hill 1 to less than 100m. The southern boundary is marked
by the Nenggiri River, across which is the nearest village, Kampung Star. The river is fast
flowing, brown in colour being heavily laden with silt. It is also very shallow and dredging
of river sand is ongoing close to the site. On site there are no streams except during heavy
rain.
Access to the Project area is good. It is located 2km along an old logging road which has
been upgraded and covered with gravel. This access road connects to a paved twin
carriageway road which is part of the state road network connecting the town of Gua
Musang, about 35 minutes by car, with Kampung Bertram Bahru. Gua Musang is located on
the main railway line up the east side of the Peninsula and originally developed as a centre
to service the logging industry. From Gua Musang there is ready access to the nearest ports
and centers of industry along both the road and railway networks. At Gua Musang there are
rail freight storage facilities adjacent to the railway line.
There is no grid power at present and the Company has to rely on diesel generators.
However the State Grid has agreed to supply electrical power in two phases. The 1st phase
power to the south eastern end of the Quarry (approx.
1
/
3
of CEPs total power
E-18
requirements assuming annual marble extraction of 230,000m
3
and the 2nd phase
(supplying approx.
2
/
3
balance of total power requirements) power to the north western
end.
The electrical substation for the Project has already been constructed with grid supply by
June 2014. The laying of cables to the remainder of the site under the 2nd phase will be
completed by late FY2015. Until there is full supply any shortfall in power demand will be
met by the continued use of diesel generators. The supply from the Grid matches in with the
Quarry development plan which has full production in Hills 1 and 2A (at the northern end of
the project area) starting from the latter part of FY2015 and then throughout FY2016.
Water demand is very small and the site has a plentiful supply year round. There are no
competing demands for water in the immediate vicinity of the Quarry.
2.2 Climate and Geomorphology
The climate is tropical with ample sunshine, hot weather and a lot of rain (Tables 2-1 to 2-3).
In the seven years to 2012, as measured at Kuala Krai, the next district north of the Quarry,
temperatures have been over 25
o
C for most of the year with slightly more rainfall in
November to January. Humidity is consistently above 80%. A dimension stone operation is
not normally adversely impacted by climatic concerns except when there is heavy rain and
access is steep as this could result in the haulage of blocks and equipment being
suspended for safety reasons.
Table 2-1: Monthly Rainfall 2006 to 2012 (mm)
Year JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC ANNUAL
2006 156.8 468.6 45.0 69.0 204.4 182.0 275.6 237.4 163.4 182.2 199.4 313.8 2497.6
2007 324.2 16.6 166.0 81.0 238.7 104.6 188.8 198.8 162.6 258.4 194.2 1110.7 3044.6
2008 99.0 249.0 151.6 222.6 156.9 244.2 108.0 253.4 192.2 316.4 634.6 504.4 3132.3
2009 186.2 54.2 135.8 159.2 240.4 108.9 244.6 182.6 240.6 155.2 1062.2 536.6 3306.5
2010 192.2 13.2 55.8 74.2 64.4 233.4 192.8 99.6 138.8 363.6 425.0 503.6 2356.6
2011 524.4 50.4 284.0 73.0 113.2 258.0 201.4 166.4 153.2 363.8 676.2 402.2 3266.2
2012 275.4 71.4 116.0 137.0 206.0 56.6 138.4 135.2 258.8 148.0 88.0 824.0 2454.8
Table 2-2: Rainfall Days 2006 to 2012 (Nos)
2006 13 15 10 10 15 12 16 15 18 17 25 20 186
2007 22 4 14 14 18 12 16 16 20 23 18 22 199
2008 14 6 19 13 14 19 18 23 12 22 21 24 205
2009 13 6 13 16 18 8 15 20 17 14 24 18 182
2010 10 2 8 10 11 16 15 13 20 15 23 23 166
2011 18 6 19 8 16 17 17 16 17 27 23 26 210
2012 21 12 15 12 14 6 18 13 18 20 19 25 193
E-19
Table 2-3: 24 Hour Mean Temperature 2006 to 2012 (
o
C)
2006 25.0 25.4 26.6 27.1 26.5 26.6 26.8 26.4 25.9 26.0 25.5 25.2 26.1
2007 24.8 25.9 26.6 26.8 27.2 26.9 26.5 26.3 26.0 25.7 25.7 24.7 26.1
2008 25.2 25.1 25.9 26.7 26.8 26.4 26.2 26.1 26.1 26.0 25.3 24.2 25.8
2009 23.8 26.1 26.5 27.0 26.4 27.2 26.5 26.4 26.3 25.9 25.0 25.0 26.0
2010 25.3 26.8 27.2 27.7 28.4 26.9 26.6 26.7 26.2 26.6 25.5 24.5 26.5
2011 24.3 25.2 25.5 26.7 27.0 26.9 26.9 26.5 26.3 25.6 25.3 24.8 25.9
2012 25.0 26.0 26.3 27.0 27.7 27.8 27.3 27.4 26.9 26.3 26.5 25.4 26.6
Outside the outcrop of the karst landscape the soil cover is thick and the tropical climate
has resulted in deep weathering which has supported the lush vegetation present in the
area. The Plain is at an elevation of between 80m above MSL and 90m above MSL whilst
in the forest reserve at the southern side of the Quarry the ground is more undulating with
ground levels between 150m above MSL and 200m above MSL. The rain forest is dense
and thickly vegetated with very tall trees and thick ground vegetation.
The surrounding area supports subsistence farming. There is very little industry and the
area is underprivileged. Development of The Project is promoted and supported by the local
Government as well as local residents because of tax revenue, employment opportunities
and stimulation to the local economy.
2.3 Sub-lease of the Land by KSEDC for Quarrying
All land in Malaysia is owned by the State and the beneficial owner of the land in which the
Project is found is the KSEDC. The State Authority has arranged for KSEDC to grant a
sub-lease to the Company with possession for a term of 33 years. The term ends on 26th
January 2044.
However on an annual basis the Company is required to renew its Quarry Scheme Approval
not later than two weeks before the expiry of its Permit. With the renewal application the
Company is also required to report on operating performance including Environmental
Matters and Health and Safety Issues. Since commencement EQM Ventures Sdn Bhd.
(previously known as EQM Consultancy Services) has been the consultant appointed to
make the application on behalf of the Company. RH has been able to review their reports
including a draft of their current report which covers the Year from June 2014.
The Company is also obliged to monitor any potential environment impact and if breaches
occur, to rectify them in accordance with the approved Environmental Management Plan.
Monitoring is carried out several times annually as discussed further in Chapter 11 of this
QPR. The Scheme Approval sets no limits on production but if there are deviations from any
conditions set on Approval these are to be brought to the attention of the Quarry Inspector
of the issuing authority (Department of Minerals and Geoscience of Kelantan) in order to be
endorsed. In total there are 16 conditions set out and each shall be fulfilled by the Company.
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RH has not undertaken a legal due diligence review of the Quarry Scheme Approval
agreement other than it has seen copies of the documents and management has made
reference to them in discussions. RH understands that the due diligence review of the
operating license has been undertaken by the Companys Malaysian legal advisors, Rozlan
Khuen, Advocates and Solicitors of Petaling Jaya, Selangor, Malaysia.
2.4 Financial Obligations of the Sub-lease
There are a number of financial obligations on the Company during the term of the
sub-lease including:
A Tribute of 8% on the sales or market value of the blocks extracted paid monthly.
Each sale requires (i) the sales receipt by the Purchaser (ii) the current market price
on each and every sale and (iii) sales on a commercial and arms length basis.
A 5% Royalty of the gross proceeds of sales value of the marble produced paid
monthly. This is paid simultaneously with the Tribute. The Royalty is the rate
prescribed in the Minerals Regulations (2002) or any amendment thereof. The
production report is sent to the State Authority on a monthly basis.
A profit sharing of 15% of its realized profit to Kelstone paid on a yearly basis.
2.5 History of Site
There is no history of quarrying in the area of The Project. In 1981, an Industrial Mineral
Assessment was carried out on behalf of the State Corporation the primary purpose of
which was to locate areas of magnesium rich limestone in the karst hills around Gua
Musang. However The Project area does not appear to have been investigated at that time.
In 1996 an investigation comprising 8 shallow boreholes was undertaken by M/S Unique
Marble and Granite Sdn. Bhd. within The Project area. The location of these boreholes
could not be validated. Nevertheless there was no subsequent quarrying despite the
conclusion from the ivestigation that the marble showed potential for dimension stone
production.
3.0 GEOLOGICAL BACKGROUND AND GROUND INVESTIGATION
3.1 Regional Geology
The geology of Kelantan is dominated by limestone and in the Gua Musang area the rock
is exposed in majestic, precipitous cliffs which rise abruptly above gently undulating
foothills and plains. The morphology of the hills is that of typical karst landscape. Stalactites
and Stalagmites are common and cave systems are present in some of the larger hills.
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Figure 3-1: Geological map of Peninsular Malaysia by Malaysian Geological Survey
E-22
The limestone at Gua Musang area is of Permian (280 million years to 225 million years
before present) to Triassic (225 million years to 195 million years before present) age and
part of a predominantly north south trending sequence of carbonate rocks (in blue in Figure
3-1) with interbedded non-carbonate sediments (green in Figure 3-1). At some time in the
geological past the limestones were recrystallized into a marble resulting in a largely white
to pale grey fine-grained massive rock. At that time the original structure of the limestone
would have been removed.
The structural geology of the region is unclear and the thick vegetation cover of the area
makes interpretation difficult. Some of the hills show steep bedding and thus some major
structural movements may have taken place over geological time. However the area is not
known to be tectonically active and there have been no earthquakes recorded.
The term limestone is applied to any sedimentary rock consisting essentially of carbonates,
with the most important constituents being Calcite (CaCO
3
) and Dolomite (CaMgCO
3
). The
limestones in the Gua Musang area are almost pure carbonate with very little other
constituents. In 1981 a major industrial mineral assessment analyzed the chemical
constituents of the rock in order to identify some beneficial uses. Because of its massive
nature the potential of the rock as a dimension stone was quickly recognized. It was
subsequently identified to be a possible raw material source for lime in cement production,
quicklime, agricultural lime, refractory material as well as calcium carbonate powder.
3.2 Geology of the Quarry
The marble which is present in The Project area is massive forming near-vertical cliffs in a
typical karst landscape. In places the cliffs are over 100m high. Stalagmites and stalactites
are common especially where the cliffs are overhanging (Figure 3-2). In places there are
small cave structures.
The rock is massive with no indication of any bedding structure and therefore it is not clear
what is the predominant dip direction or dip angle of the geological formation. Visually the
rock looks to be homogenous throughout the four hills forming The Project area and the
marble exposed during the current excavation of Hills 2B and 3 shows the rock to be
consistent in colour, strength, texture and appearance.
The surface geology is dominated by the exposure of marble. Outside the line of the hills
metamorphosed sandstone was seen to be present, albeit with only occasional exposure.
A metasiltstone was seen in the access tracks behind Hill 2A and from a localized exposure
within Hill 2A near to these tracks it appears that there may be an unconformity. Also,
behind Hill 1 a very weathered rock, possibly of igneous origin, can be seen in some of the
slopes cut to create an access track. Here the depth of weathering compared to the marble
areas is reflected by the different vegetation cover and this has helped in making an
interpretation of the geological contacts in this area.
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Figure 3-2: Stalactites and small caves in vertical cliff feature at base of Hill 2A
The marble outcrop is characterized by virtually no soil cover and there is hardly any
weathering profile. Vegetation is confined to growth from soil which is contained in solution
features and crevices in the rock. Trees are mostly of low height because of the limited soil
cover. The surface of the marble in which the vegetation is present comprises fresh rock.
3.3 Ground Investigation
At the time that RH first visited the site in October 2012 there was no borehole information
available and no satisfactory topographic survey. Results from the earlier ground
investigation carried out in 1996 could not be validated as there were no co-ordinates for
the boreholes nor any maps to show their location. A ground survey had been carried out
in and around the rubber plantations but there was no access to the top of the hills nor in
the forest reserve where the vegetation was too dense to permit a detailed survey. A
preliminary geological assessment had been carried out in late 2007/early 2008 as part of
the Quarry Scheme Approval process and quantities of the marble resource estimated.
However these were very provisional and the nature of the marble at depth and laterally
across the site was unknown.
As a result data relating to the generation of the geological model which forms the basis of
this QPR resource assessment (i.e. the geology with depth as well as the physical and
chemical properties of the marble) has only been established during RHs involvement.
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3.3.1 Topographic Survey
With no access to the majority of the site, the development of a topographic survey had to
rely on existing airborne survey information purchased by the Company. Interferometric
Synthetic Aperture Radar (IFSAR) data were obtained from Intermap Technologies. This is
an airborne radar system that captures reflections from the ground and near surface ground
features.
The IFSAR dataset includes a grid of interpreted ground surface data points that cover the
hillsides and nearby terrain. The IFSAR airborne acquisition system captured elevations at
5m intervals with a survey direction towards the North. The radar employs pairs of high
resolution SAR images to accurately measure the coherent radiation travel path and the
terrain elevation on a dense grid of sample points using phase interferometry methods.
However some adjustments had to be made to get the real ground profile as the data
obtained had already been processed to form smooth contours for the ground surface. In
simple terms because the marble cliffs were not well represented in the IFSAR data
adjustments were made to better approximate the real ground profile.
The topographic model produced by IFSAR was cross referenced with datasets obtained by
the ground survey carried out by Idaman Ukur Consultants, surveyors based in Gua
Musang, who are engaged by the Company to carry out the annual survey of the site
required for the Quarry Scheme Approval renewal application. The two sets of survey plans
identify the location and elevation of the survey points on the access roads that run roughly
along the boundary on the north side of the site and these two sets were compared.
Figure 3-3: Ground model at Kelantan Marble Quarry
The resultant ground model (Figure 3-3) gives a slightly more rounded landform (Figure
3-4) than exists in reality because the height differences in the near vertical cliffs which are
at least 50m high, but in many places over 100m high, had been smoothed out in the
processed datasets. The line of the cliffs (the green line on Figure 3-3) was picked up from
shadows in the IFSAR images.
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Figure 3-4: 3D model of quarry area looking from north (image reversed from Figure 3-3)
RH is satisfied that the topographic plan produced is sufficient for estimating the resource
and is representative of the ground shape.
3.3.2 Borehole Investigation
The purpose of the investigation was to understand the geology of the quarry area, to
assess the quality of the marble and from this to estimate the marble resources that could
be stated in accordance with the JORC Code.
The major constraint at the time of the borehole investigation was the lack of access to the
top and to the south side of Hills 1 and 2A, where the vegetation in the Berangkat Forest
Reserve was too dense and the hillsides too steeply inclined to gain access. Therefore it
was decided to investigate using long boreholes drilled and inclined downwards to depths
which would be as close as technically possible to what was estimated to be the back of the
final line of excavation. In contrast working platforms were already operational in Hills 2B
and 3 and thus vertical drill holes were possible to investigate the marble resource at depth
in these hills.
The locations of the boreholes are shown in Figure 3-3 in red. Ideally boreholes should have
been drilled in a grid pattern to facilitate interpretation but this was not practically possible
and actual positions were dictated more by access considerations. As there are no
guidelines on borehole spacing to determine the grade of a resource for an industrial
application it becomes the responsibility of the Qualified Person to decide the necessary
density of boreholes required to establish a reliable geological understanding and thus
resource classification. In this case the spacing was deemed adequate given the excellent
exposure throughout the site and the nature of the deposit.
The borehole investigation was carried out in November and December 2012 by Malaysian
drilling contractors, M/S Sealand Drillers (M) SDN BHD (5 Nos. boreholes Hills 1 and 2A)
and Strata Drill SDN BHD (3 Nos boreholes Hills 2B and 3). The investigation was
supervised by James Guo, a qualified geologist from the Company, with visits by RH to
review progress. It was emphasized by RH to the aforementioned Contractors at a site
meeting prior to appointment that high drilling standards were expected given the need to
measure Total Core Recovery (TCR) and Rock Quality Designation (RQD). RQDs greater
than 90%, which indicates massive rock with few or no fractures, were seen in 72% of the
core recovery which RH considered to be an acceptable standard (Table 3-1).
E-26
Table 3-1: RQD Percentage of Borehole Length Drilled in Marble
Borehole Hill
RQD =
100%
RQD
(90-99%) RQD >90%
1-1 1 48.0% 39.8% 87.8%
1-2 1 20.6% 35.3% 55.9%
2A-1 2A 56.3% 20.8% 77.1%
2A-2 2A 31.0% 43.0% 74.0%
2A-3 2A 2.9% 52.9% 55.8%
2B-1 2B 56.8% 16.0% 72.8%
2B-2 2B 66.3% 7.0% 73.3%
3-1 3 56.2% 34.8% 81.0%
Note: RQD >90% means 90% of the borehole
length drilled has an RQD of >90%. RQD measures
aggregate length of sticks of core >100 mm.
Average 72.2%
Boreholes were drilled using an NMLC (triple tube) diamond annular bit to cut 54mm
diameter cores. In vertical boreholes rotary coring was used up to 60m depth, beyond which
wireline diamond coring was used. Details of the boreholes are shown in Table 3-2.
Table 3-2: Borehole Details
Borehole Hill Angle Direction Depth
Northing
(m)
Easting
(m)
1-1 1 45
o
down 255
o
N 150m 563665 441583
1-2 1 Vertical N/A 50m 563730 441480
2A-1 2A 5
o
down 270
o
N 150m 563334 441976
2A-2 2A 5
o
down 180
o
N 150m 563609 441799
2A-3 2A Vertical N/A 50m 563469 441950
2B-1 2B Vertical N/A 200m 563105 442024
2B-2 2B Vertical N/A 170m 563179 442027
3-1 3 Vertical N/A 120m 563978 442082
Total 1040m
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The vertical holes were drilled to depths below the final formation level of the quarry (90m
above MSL in Hills 2B and 3; 80m above MSL in Hills 1 and 2A). The cores (Figure 3-5) were
logged, recorded and photographed according to British Standard BS 5930:1981, stored in
a secure container on site and survey marks were left at the borehole positions with all
necessary details for future reference. Boreholes positions were properly surveyed by a
qualified surveyor Idaman Ukur Consultants, surveyors based in Gua Musang. Samples
were properly referenced before sending to laboratories for testing.
Given the consistency in strength and appearance, representative core samples reviewed
and agreed by RH with the Company geologist (James Guo) were wrapped and sent to
laboratories for testing to determine physical and chemical properties. RH also
independently selected core samples for testing. In total 35 samples were selected with
stick lengths ranging up to 1m.
Figure 3-5: A typical core box from Borehole 3-1 note RQD >90%
RH is satisfied that the investigation has been carried out to the standards acceptable to
satisfy this QPR.
3.3.3 Geological Mapping and Sampling
As part of its own assessment of the marble resource RH also carried out its own mapping.
In April 2013 access was cut through the forest on the south side of Hills 1 and 2A. This was
done to supplement the Ground Investigation and to establish the nature of the marble
samples were taken from accessible points on the cliffs for testing. The samples were taken
for chemical and petrographic analysis. In total 18 samples were taken and tested (see
Table 4-4).
E-28
3.3.4 Laboratory Testing Contractors
Tests on marble were carried out in the following laboratories:
Soils & Material Laboratory (M) SDN BHD, located in Kuala Lumpur specialists
in soils, concrete and asphaltic concrete testing; density and uniaxial compressive
strength tests on core samples
Ceramic Research Company SDN BHD, located in Selangor chemical tests
including brightness and whiteness on core samples
Jabatan Mineral Dan Geosains Malaysia, Ministry of Natural Resources and
Environment, located in Johor Bahru petrographic thin section analysis on core
samples and surface samples; chemical tests including whiteness and brightness on
surface samples
National Stone Quality Supervision and Inspection Centre, Chengdu, PRC.
physical tests
Setsco Services Pte Ltd. Singapore physical tests
RH visited the Malaysian laboratories to inspect the manner in which samples were stored
and moved around the laboratory. The laboratories followed well organized internal
procedures. All laboratories including Setsco and the Chengdu Centre hold necessary local
accreditation and tests are carried out according to recognized standards. RH is satisfied
that all the laboratories are acceptable for this QPR.
3.4 Results of Ground Investigation
The marble comprising the four hills of the Project area appears to be homogenous and
consistent across the site. The colour varies from grey to banded grey to dark grey but is
mostly whitish grey and light grey. It is mostly a fine to medium grained, very strong,
massive marble with interlocking calcite minerals.
The rock also showed no obvious bedding or any other structural feature which would
indicate a complex geological profile and make interpretation difficult. There were some
minor variations in chemical composition as discussed in more detail in the next chapter.
Metamorphosed sandstones were present at depth in four of the boreholes. In the case of
those boreholes in Hills 2B and 3 these were encountered at 30m above MSL and 25m
above MSL respectively, well below the level of the plain (80m above MSL). As the intention
of the Quarry Scheme is that the final line of excavation does not extend below the level of
the Plain these sandstones will not be encountered during the Quarry operation.
E-29
Table 3-3: Summary of Rock Encountered in Boreholes
Borehole Hill Angle Details
1-1 1 45
o
down Marble then Metasandstone at 147m depth
1-2 1 Vertical Marble to full 50m (30m above MSL)
depth of borehole
2A-1 2A 5
o
down Marble then Metasandstone at 144m depth
2A-2 2A 5
o
down Marble to full 150m depth of borehole
2A-3 2A Vertical Marble to full 50m (30m above MSL)
2B-1 2B Vertical Marble to 120m (40m above MSL)
then Breccia & Sandstone
2B-2 2B Vertical Marble to 130m (30m above MSL)
then Sandstone
3-1 3 Vertical Banded grey marble from 100m (25m above MSL)
In borehole 1-1 at Hill 1 (at a depth into of 147m) and borehole 2A-1 at Hill 2A (at a depth
of 144m) the interface is more difficult to interpret as both these boreholes were inclined.
Taking into account the depths of marble on the north side of the site (present to levels of
30m above MSL boreholes 1-2, 2A-3) RH believes that the sandstone in these boreholes
maybe part of a sequence under the marble formation with a geological contact steeply
dipping to the north. The surface expression of this contact along the south side of the hills
as interpreted by RH is along the orange line in Figure 5-2.
A summary of the findings from the boreholes is shown in Table 3-3.
3.4.1 Cavities
Within the rock exposed in Hills 2B and 3, small cavities are present but most are small, and
localized. In four of the eight drill holes completed as part of the borehole investigation a
total of nine cavities were encountered ranging in height from 0.8m to 3.57m. In one
borehole (2B-1) a cavity (filled with a breccia) was present at a depth of 132m below
ground. The lateral extent of these could not be ascertained but from exposures in the
working platforms of Hills 3 and 2B, they are typically seen to be narrow solution features
rather than major laterally extensive cave features.
The karst cave percentage for individual boreholes ranges from 0.3% to 4.27% with an
average of 1.80%. For resource estimation purposes (See Section 5.5 of this QPR) the
karst cave volume was deducted from the total volume.
Four boreholes encountered no cavities but as these were located on working platforms
where cavities were seen the average percentage of 1.80% was deemed to be
representative of the marble in these boreholes and thus throughout the Quarry area.
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3.5 Conclusions
The geology of The Project has been investigated in detail by a desk top study and from a
Ground Investigation comprising boreholes, on site mapping, sampling and testing of both
rock core and fragments taken from the outcrop. The rock in The Project area is a massive
white to light grey marble. It is almost a pure carbonate rock with less than 3% other
constituents comprising mainly calcite (CaCO
3
) with some dolomite (CaMgCO
3
).
Sandstones and other rock types appear also to be present but outside the line of the Hills
or at depths which will be below or outside the line of final excavation of the Quarry. Cavities
are also present in the marble, as is typical of a karst landscape, but these are seen to be
mostly narrow solution features rather than laterally extensive cave features.
4.0 THE NATURE OF THE MARBLE RESOURCE
The geological database on the marble and reviewed in this QPR, is based on the results
of core samples taken from boreholes as well as surface samples taken by RH from the cliff
features and other exposures. Table 4-1 summarizes the geological database:
Table 4-1: Database of Information used in this QPR
Item Quantities
Numbers of Boreholes 8 Nos
Total Length of Drilling 1040m
Core Samples from 8 Boreholes Nos of Tests
Chemical Analysis 35 Nos
Petrographic Analysis 13 Nos
Unconfined Compressive Strength 35 Nos
Bulk Density 35 Nos
Brightness & Whiteness 17 Nos
Surface Samples Nos of Tests
Mechanical Properties 5 Nos
Radioactivity Measurements 5 Nos
Chemical Analysis 18 Nos
Brightness & Whiteness 18 Nos
Petrographic Analysis 7 Nos
Nos Numbers; m metres
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4.1 Specification for Dimension Stone
There are a number of institutions worldwide which set standards for Dimension Stone in
the Engineering and Construction sector. Of these the American and the European
standards are the most well-known internationally. The PRC also has its own standards.
There are different standards for different end uses and different stone types. American
standard ASTM C-503 sets out the material specifications for Marble Dimension Stone. In
the PRC the standard for Natural Marble for Building Slabs is JC/T 79-2001. Table 4-2 lists
the specification requirements for marble dimension stone:
Table 4-2: Specification for Marble according to American and PRC Standards
Mechanical Property ASTM C-503 JC/T 79-2001
Density, >2590 Kg/m
3
>2300 Kg/m
3
Absorption by weight, <0.20% <0.50%
Compressive Strength, >52MPa >50Mpa
Modulus of rupture, >6.89MPa
Abrasion resistance, >10 hardness
Flexural strength, >6.8MPa >7.0MPa
Note: MPa Megapascal: Unit of pressure
The individual tests to establish these properties are described by other ASTM Standards
(eg Abrasion Resistance is ASTM C-241). ASTM also has standards for other types of
Dimension Stone; for example the specification for Granite is ASTM C-615.
Architects and Engineers may also have requirements on properties specific to a project
and therefore Table 4-2 may be considered a basic reference in terms of ultimate end use.
Typically dimension stone is cut into slabs and tiles for use on floors and on walls. It may
also be used as a sculptured or cut stone for specific purposes. Marble furniture is popular.
4.2 Colour and Texture of the Marble Resource as Blocks for Slab Manufacture
Colour and texture are the two most important parameters for evaluating the aesthetic
quality of a rock for dimension stone production. The primary and basic colour of the marble
from the Kelantan Marble Quarry is white with secondary light grey. In places there is a
purplish/light grey hue particularly from Hills 2A and 2B. In Hill 3, the rock frequently has
irregular greyish streaks whilst on Hill 1 they contain spots. The Company refers to these
three types by their marketing names (Figure 4-1) which are:
Kelantan Black-Spotted White Hill 1
Kelantan Purplish White Hills 2A and 2B
Kelantan Misty White Hill 3
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Misty White Purplish White
Black-Spotted White
Figure 4-1: Colour and texture of the marble from Kelantan Marble Quarry
It is quite likely that colour variations exist within the marble from each of the Hills and
therefore it is too early to be precise on what percentage of each will come from which hill
or even if there may be a new colour and texture. However from observations so far during
excavation the Misty White appears to be consistently present in Hill 3. With regard Purplish
White commercial production from Hill 2B is just starting and thus the consistency of the
colour and texture has not yet been established. The Black Spotted White has been taken
from one or two locations and likewise it is too early to establish its consistency.
Based on the resource estimates (Chapter 5 of this QPR) and on the assumption that each
hill has its own colour and texture it is estimated over 70% of the products will be Purplish
White, just under 15% Black Spotted White and the remainder Misty White. This breakdown
is detailed in Table 6-3.
4.3 Mineral and Chemical Composition of the Marble Resource for Carbonate Powder
Production
On the basis of 53 chemical tests (35 from core samples and 18 from surface samples) the
average mineralogical composition of the marble ranges from an average 49.02% to
53.88% CaO and 1.30% to 6.40% MgO. There are less than 3% other minerals. The results
were obtained using an in-house XRF (X-Ray Fluorescence) method based on ASTM C
E-33
1271-99 (Reapproved) with samples ground to 100 mesh (in size this is 0.15mm or
150microns). Below (Tables 4-3 and 4-4) are the results from the chemical analysis of the
marble.
Table 4-3: Chemical Analyses of 35 Samples from Boreholes (%)
Hill Samples CaO Range CaO Ave MgO Range MgO Ave
Brightness
Range
Brightness
Ave
1 6 50.93-55.04 53.20 0.41-3.44 1.97 92.7-95.6 94.8
2A 12 50.40-54.99 53.88 0.44-3.54 1.30 93.5 96.1 94.5
2B 12 46.75-54.51 51.00 0.80-7.65 3.95 91.7 94.5 92.6
3 5 44.85-51.40 49.02 3.27-8.85 6.40 89.9 92.4 91.3
Note: Pure calcite contains 56%CaO and dolomite contains 30.4% CaO and 21.9% MgO
Table 4-4: Chemical Analyses of 18 Surface Samples taken by Rockhound (%)
Hill Samples CaO Range CaO Ave MgO Range MgO Ave
Brightness
Range
Brightness
Ave
1 7 51.10-54.8 53.20 0.94-3.87 2.20 85.10-95.40 91.02
2A 9 49.90-54.80 52.90 1.00-5.17 2.50 85.90-94.20 91.60
2B 2 47.80-53.90 50.80 1.79-6.71 4.25 91.40-93.30 92.30
Note: Pure calcite contains 56% CaO and dolomite contains 30.4% CaO and 21.9% MgO
The chemical properties of the marble determine the appropriate market for its use as a raw
material in the carbonate powder business. Marble which is predominantly made up of
calcium carbonate is a high premium raw material in the Ground Calcium Carbonate (GCC)
business. Percentages of Mg0 >2.50% are generally considered unacceptable for such high
end uses.
From the analysis MgO contents range from 0.41% to 8.85% and within an individual hill
there is still a variation of Mg versus Ca where it would seem that Hills 2B and 3 generally
have slightly more Mg than Hills 1 and 2A. The greyish colouration may be a function of the
Mg content the higher the Mg content the more grey streaks are present.
The Brightness (a measure of the reflectance how dull/bright is the powder) and
whiteness (a measure of how white is the powder compared to a standard) of a powder are
also important in determining the appropriate market. In this context the surface samples
taken by RH showed lower brightness and whiteness compared to those from the
boreholes. This could be explained by the fact that near surface rock has undergone some
superficial discolouration not unexpectedly. Given this effect it is considered that the
borehole samples, coming from fresh rock, are more likely to be representative of the rock
mass as a whole. For high end uses in the GCC business brightness >93% is preferred.
Based on some initial in-house testing the Company had thought to use the marble from
Hills 1 and 2A as a raw material for the GCC business, because of the lower Mg contents,
and as a consequence take a lower percentage of marble blocks. Conversely the initial
planning has been to use Hills 2B and 3 mainly for blocks and less so for powder. The
results from the chemical analysis would tend to support these plans.
E-34
For GCC there are no standard specifications; each manufacturer tends to have their own
depending on the particular product they are manufacturing. For high end uses there are
very tight specifications on brightness and whiteness and this will mean that ongoing testing
of the marble as a raw material in the powder business will be necessary during excavation
to monitor consistency and variations.
4.4 Physical Properties of the Marble
Based on measurements from 35 core samples all the test samples meet the minimum
requirements of both the ASTM and the JC/T standards (Table 4-2) as follows:
Bulk density ranged from 2.702t/m
3
to 2.779t/m
3
. The average was 2.733t/m
3
. The
measurements meet the minimum requirement for both ASTM (>2.59t/m
3
) and the
JC/T Code (>2.30kg/m
3
).
Unconfined Compressive Strength ranged from 59.9Mpa to 150Mpa with an average
of 106.9Mpa. These values meet both the ASTM and JC/T code minimum
requirements.
Water Absorption was 0.088% to 0.15% well within the ASTM specification
requirement of <0.20% and the JC/T Code requirement of <0.50%.
These samples were tested in Malaysia. However as the ultimate market for blocks is the
PRC five samples were also tested at the National Stone Quality Supervision and
Inspection Centre, Chengdu, PRC. Large pieces of marble were collected and prepared for
testing by being cut into standard simple slabs (for Flexural Strength) and cubes (for
Compressive Strength). The results are set out in Table 4-5.
Table 4-5: Results of Mechanical Properties of the Marble from Surface Samples
Test
Standard Sample
GB/T
19766-2005 Hill 3 Hill 3 Hill 2B Hill 2A Hill 1
Compressive
Strength
>50Mpa 80 133.60 118.4 114.4 115.80
Flexural Strength
Dry
>7Mpa 10 13.9 12.7 15.1 14.4
Flexural Strength
Wet
>7Mpa 14.4 14.5 12.2 19.3 10.8
The marble was tested for Abrasion Resistance at Setsco Services Pte Ltd in Singapore. A
result of 138.6 hardness was obtained when the specification standard is >10 hardness.
There appeared to be no difference in physical properties between the four hills all of the
marble meets the requirements under ASTM C-503 and JC/T-2001 for marble dimension
stone.
E-35
4.5 Radioactivity of the Marble
Dimension stone is tested for radioactivity to ensure there are no health issues related to
production, sale and ultimately for when it is in place in its particular end use.
Granite is best used to illustrate the reasons for testing for radioactivity as it contains
Uranium and Thorium isotopes and at high concentrations give off radon gas. Consequently
highly radioactive stone cannot be placed indoors. In the PRC, the National Standard for
Construction Material of the PRC (GB6566-2001) classifies construction materials into
Classes A, B or C.
The same five samples tested for mechanical properties (Table 4-5) were tested for
radioactivity at the National Stone Quality Supervision and Inspection Centre in Chengdu
one sample each from Hills 1, 2A and 2B and two from Hill 3. The results for:
Internal Exposure Index (IRa) of the specific radioactivity of natural radioactive
nuclides Ra-226, Th-232 and K-40 was found to range from 0.02 to 0.04 whilst the
External exposure index (I
r
) ranged from 0.01 to 0.03.
Construction material with I
Ra
< 1.0 and I
r
< 1.3 is classified as Class A.
The marble satisfies the radioactivity requirements of a Class A construction material which
means there is no restriction for its production, sale and utilization. Only Class A stone can
be used indoors. These radioactivity levels also fall within the European Unions acceptable
limit range based on the European Commission Radiation Protection Report 112. The
results are unsurprising as the marble is virtually a pure carbonate with no radioactive
isotopes.
4.6 Conclusion
The marble satisfies the minimum requirements for all tests based on American and PRC
standards as a natural marble construction material for use as a dimension stone to be cut
into stone products. It can have unrestricted usage. The marketing effort for the marble
blocks has been underway for nearly eighteen months and various sales contracts have
been signed on the basis of unrestricted usage.
In terms of a raw material to be used in the GCC business the material is high in CaO and
has applications in the powder business. Marble with relatively high MgO levels (>2.50%)
will have a different market segment not including GCC. Monitoring of the chemical
composition will need to be ongoing given the variation of Magnesium levels within the rock.
It is suggested that marble with more visible grey streaks may be those which contain
higher magnesium.
E-36
5.0 MARBLE RESOURCES AND RESERVE
5.1 Marble Resource/Reserve Classification
The JORC Code is a professional code of practice that sets minimum standards for Public
Reporting of Exploration Results, Mineral Resources and Ore Reserves. The JORC Code
is produced by the Australasian Joint Ore Reserves Committee (ie JORC), which is also
responsible for its development and ongoing update. The JORC Code was first published
in 1989 with the latest version dated December 2012.
The JORC Code provides a mandatory system for the classification of Exploration Results,
Mineral Resources and Ore Reserves according to the levels of confidence in geological
knowledge and technical and economic considerations in Public Reports. In Singapore, the
JORC Code is one of the standards recognized by the Stock Exchange when public
companies report statements on their mineral resources or ore reserves.
It covers not only ores which contain metal but also all solid minerals including industrial
minerals (also coal, diamonds, other gemstones) for which Public Reporting of Exploration
results, resources and reserves is required by a Stock Exchange.
A mineral resource is a concentration or occurrence of solid material of economic interest
in or on the Earths crust in such form, grade (or quality), and quantity that there are
reasonable prospects for eventual economic extraction. Under the JORC Code Mineral
Resources are sub-divided in order of increasing geological confidence into Measured,
Indicated or Inferred categories. A full definition of Mineral Resource and each of the three
sub-divisions is presented in Chapter 14 of this QPR. These are summarized as follows:
Measured Resource is one which has been intersected and tested by drill holes or
other sampling procedures at locations which are close enough to confirm continuity
and where geoscientific data are reliably known
Indicated Resource is one which has been sampled by drill holes or other sampling
procedures at locations too widely spaced to ensure continuity, but close enough to
give a reasonable indication of continuity and where geoscientific data are known with
a reasonable level of reliability
Inferred Resource is one where geoscientific evidence from drill holes or other
sampling procedures is such that continuity cannot be predicted with confidence and
where geoscientific data may not be known with a reasonable level of reliability.
An Ore Reserve is defined in the JORC Code as the economically mineable part of a
Measured and/or Indicated Resource. The definition of Ore Reserve taken from the JORC
Code is also presented in Chapter 14.
Ore reserve figures incorporate mining dilution and allow for mining losses, and are based
on an appropriate level of mine planning, mine design and scheduling and the application
of other Modifying Factors. Proved and Probable Reserves are based on Measured and
indicated Resources respectively. Under the JORC Code Inferred Mineral Resources are
deemed to be too poorly delineated to be transferred in to the ore reserve category.
The general relationship between exploration results, mineral resources and ore reserves
under the JORC Code is summarized below in Figure 5-1.
E-37
Figure 5-1: Relationship between resources and reserves from JORC Code
Generally the resources quoted are inclusive of those resources converted to reserves and
this is the protocol that RH follows. Furthermore in the case of dimension stone quarries
resources (and reserves) are reported as volume in units of cubic meters (m
3
).
5.2 Procedure and Parameters for the Resource Estimation
As the marble appears to be homogenous and massive over the Quarry area (i.e. it forms
the entire mass of material that will be excavated from the landform) the resource
estimation is a matter of comparing the final landform with the existing landform and
reducing the total volume to take into account cavities. The key parameters are:
Final Ground Level at Hills 1 and 2A 80m above MSL
Final Ground Level at Hills 2B and 3 90m above MSL
Average angle along the back slope of the Quarry 60
o
Cavities (Section 3.4.1 of this QPR) 1.8% of total volume
The final ground levels are based on the general agreement with the local Government that
the hills are to be reduced to the existing level of the Plain to the ground levels at the foot
of the vertical cliffs on the north side of the Project site. However as the ground levels are
higher in the Forest Reserve (i.e. on the south side) this will result in a final landform with
a slope from the line of excavation at the back of the Hills (ie on the south side) down to the
Plain.
Figure 5-2 shows a larger land area than was allocated as part of the Agreement under Lot
1781. This is located primarily behind Hill 1 where the expanded or additional area is
9.055ha. This came about because the site is too narrow and quarry extraction is very
difficult along such a narrow line when the differences in elevation between the Plain (at
80m MSL) and the hill (245m MSL at its highest point) are so large. The Company has been
given approval in principle by the JV partner in writing to quarry these expanded areas, but
E-38
formal legal agreement is pending. As the Company advise that getting such an agreement
is a matter of awaiting normal bureaucratic procedures, for the purposes of the resource
statement the marble in the expanded area has been included in the resource assessment.
In making this assessment the back slope of the final excavation is assumed to be 60
o
on
average, benched and vegetated to create a visually acceptable final landform which would
also meet environmental objectives. The final landform slope will range in height from 25m
behind Hill 3 to around 150m behind Hill 1. Sections through the final landform can be seen
in Figure 5-3.
Figure 5-2: Layout plan showing Section Lines
The current ground profile of the Quarry is shown in Figure 3-3. In discussion in Section
3.3.1 it was concluded that the Topographic Plan developed showed that the Hills which
formed the Marble Quarry were more rounded (by IFSAR topography smoothing) when in
fact there are steep cliffs. This results in a lower overall volume estimate than the actual
case (considered to be 5-10%). However for this QPR, the model produced by IFSAR (ie
with the lower volume) is considered appropriately conservative in terms of resource
estimation.
E-39
Section-1
1:6000
Section-2
1:6000
Legend
Measured_Indicatied Marble Boundary
Indicated_Inferred_Marble_Boundary
Marble_Sandstone Contact/ Site Formation Boundary
Original Topography
Legend
Measured_Indicatied Marble Boundary
Indicated_Inferred_Marble_Boundary
Marble_Sandstone Contact/ Site Formation Boundary
Original Topography
Figure 5-3: Sections through Quarry (for locations see Figure 5-2)
The volume estimate was carried out in ESRI ArcGIS using the 3D Analyst extension. The
IFSAR DTM was converted into ArcGIS TIN format and merged with the cliff topography
defined by the site survey topographic data to form a combined ground surface model which
is used as the existing ground profile. The proposed site formation TIN surface was based
upon the quarry final site formation profile.
The volume between the two TIN surfaces was calculated using the Surface Difference
function in ArcGIS 3D Analyst extension. Surface Difference calculates the volumetric
difference between the two TIN surfaces. It compares all the nodes from the first surface to
the second surface in order to calculate their height difference. The output polygon gives
the area and volume of the overlapping extent from the two surfaces, grouped into zones
that are above or below the first surface.
The total resources estimated in each of the four hills after taking into account cavities (ie
where no rock is present) and the final back slope is given in Table 5-1.
Table 5-1: Total Resources of the Marble Quarry Project
Hill Resource (million m
3
)
1 4.87
2A 13.39
2B 1.89
3 0.14
Total 20.29
E-40
5.3 Determination of Confidence Levels
The JORC Code requires that the Resource is classified according to the confidence in the
quality of geological and geostatistical data. Boreholes drilled in a grid down to the final
formation level would be the ideal solution to simplify this process but in the case of the
Kelantan Marble Quarry this was not possible because of difficulties with access.
To help define the confidence levels in its assessment, RH took into account:
that the marble is dramatically exposed as high cliffs above the plain and above the
forest reserve (ie it is visibly exposed to heights of 100m plus) and
the results from boreholes, sampling and testing show the rock to be very consistent
at surface and at depth throughout the Quarry.
Therefore RH is of the view that the total resource can be considered Measured or Indicated
with the exception of one area behind Hill 1 (ie on the Forest Reserve side). Here the cliff
features, whilst present, are not as prominent and high as elsewhere and to explain this RH
is of the view that there is a geological contact close by. Exposures in the slopes of the
temporary access road behind Hill 1 indicate a different rock type and there is also
sandstone at depth in Borehole 1-1 (at 147m). Based on geological judgment the
marble/sandstone contact will be very close to the final 60
o
line of excavation line
(Figure 5-3).
A narrow zone of up to 25m wide in front of the assumed line of the marble/sandstone is
therefore considered to be an inferred resource estimated at 0.76 million m
3
. In due
course when access is improved and a borehole investigation can be carried out this
resource can be upgraded. The Company has agreed to carry this out when the agreement
to the expanded site area is formalized.
5.4 Mineral Resource Statement
For Hills 2B and 3, marble is exposed in working platforms and with vertical boreholes
drilled in marble to the final level of the Quarry there is sufficient geological data to justify
the volumes in both to be a Measured Resource.
In Hills 1 and 2A, there was no opportunity to drill boreholes on the south side because of
access challenges at the time of the Ground Investigation. Whilst the surface samples
provide some geostatistical data the quality of the marble at depth could not be ascertained
and therefore the level of confidence at these locations was less. Here the division between
Measured and Indicated has been made on the basis of where the inclined boreholes were
terminated inside the hills, exposure, mapping and general geological interpretation (see
Figures 5-2 and 5-3). The boundary is assumed to be an inclined line (the red line shown
in Figure 5-3) down from surface to the base of the excavation.
RH believes that the geological interpretation it has made is reasonable and reliable for the
resource and reserve statement. The mineral resource estimate under the JORC Code
(excluding the inferred resource) as at the effective date of 31 March 2014 is summarized
in Table 5-2.
E-41
Table 5-2: Resource Statement (million m
3
) at 31 March 2014
Hill Measured Indicated Total
1 4.33 0.28 4.61
2A 12.27 0.62 12.89
2B 1.89 1.89
3 0.14 0.14
Total 18.63 0.90 19.53
It should be noted that this resource statement is a measure of the total volume but not all
of this will be recovered. It should also be noted that the surveys from which the volumes
were estimated were carried out when the quarry was being opened up and since then an
up to an estimated 50,000m
3
has been excavated. This is very small compared to the total
resource levels and with rounding to the nearest significant number to estimate the
resource it is considered that the Resource statement is still valid as estimated.
5.5 Marble Reserves
The Kelantan Marble Quarry deposit is suitable for both Dimension Stone and as a raw
material to be ground into carbonate powder for industrial applications. The intention of the
Company is to supply both markets. This is feasible since the marble has the required
physical and chemical parameters and is consistent and homogenous over the Quarry area.
However it is only the economic portion of the Measured and Indicated marble resources
that can accordingly be used to estimate the Proved and Probable marble reserves. As
noted earlier (Section 5.1) not all of the resource will be recovered. There will be waste that
is generated in the clearance process and also material lost during normal cutting
operations. These losses in volume are taken into account when estimating reserves.
Waste from Clearance: Normally in any quarry operation overburden will need to be
removed and from this the stripping ratio and overburden volume estimated and the
resource reduced accordingly. At the Project site the amount of overburden and the
weathering profile are negligible. The marble at surface is very strong and can be
considered as part of the resource. Therefore no discount due to overburden and
weathered material is necessary.
However all quarry operations will generate some waste. In excavating Hills 2B and 3 the
procedure has been to form large platforms by blasting in order to start of cutting using disc
saws. This has meant that to date there has been considerable excavation down from the
original surface generating a large amount of waste. Given the high quality of the rock at
surface the Company considers that the amount of marble waste has been too high.
In order to reduce this waste and thus maximize recovery and minimize waste the Company
has made it clear that for the opening up of Hills 1 and 2A, the working procedure will be
to form small platforms by cutting with wire saws to form blocks. This process, locally called
skinning, will maximize recovery. By skinning the only waste generated will be from the
removal of pinnacles of karst cut down to a level platform of meaningful size.
E-42
Discussions with site staff and observations on site suggest that an average 3m depth for
the calculation of clearance waste is reasonable. Therefore taking the plan area of Hills 1
and 2A and multiplying by 3m gives the amount of marble that can be considered waste and
this is summarized as follows:
Hill 1 Waste Hill 1 Plan Area is 59,250m
2
* 3m depth = 177,750m
3
Hill 2A Waste Hill 2A Plan Area is 121,500m
2
*3m depth = 364,500m
3
Ordinary operational waste is minimal. During cutting operations there is minimal
marble lost as slurry whilst fragmented rock can be crushed and sold as aggregate.
Ordinary operational waste is assumed by the Company to be 3% of the volume.
In making a Reserve Statement other than calculating waste and other quarry related
issues, it is also necessary to consider the Modifying Factors in Figure 5-1. To define a
reserve requires as a minimum that a Pre-Feasibility Study is conducted to assess the
technical viability of extracting the resource as well as social, legal, environmental,
transport, marketing and Governmental issues. Some financial analysis should also have
been presented.
For the Kelantan Marble Quarry the technical feasibility was carried out by Ipoh based
Quarry consultants EQM as documented in their Quarry Scheme Report dated February
2008. This was used as a basis for a financial review in January 2011 by Malaysian
Consultants Hartamas who prepared a valuation on behalf of the company based on the
Market Value approach including a financial forecast in accordance with Malaysian
Valuation Standards.
Their report assumed sales from blocks, slabs and aggregate as a raw material for the GCC
business the model which the Company is now following. EQM reported that the Project
had sufficient reserves and sufficient merit to be a viable long term supplier of high quality
marble dimension stone. The EQM report also covered in detail the Modifying Factors to
support the quarrying permit and these had to be addressed before the permit was granted.
As such the EQM and Hartamas reports together meet the requirements of the SGX-ST in
terms of Pre-Feasibility Study. Furthermore the Project has been in commercial operation
for nearly two years and whilst sales have been limited to date all of the other Modifying
Factors have been suitably addressed such that a Reserve Statement can be made.
However RH considers that the Modifying Factors in terms of the use of marble as a raw
material in powder have not yet been totally fulfilled because whilst some initial marketing
and processing issues have been addressed these are not yet far enough advanced to
allow all of the resource to be considered a reserve. Furthermore until the expanded or
additional area behind Hill 1 is formally included into the Project (refer Section 5.2) the
resources in this area do not meet the Modifying Factors on legal matters and therefore this
volume of the resource can also not be considered a reserve. The inferred resources also
cannot also be considered.
This leaves the production of dimension stone blocks. Here RH is of the opinion that the
marble resource which is being excavated as dimension stone blocks can be considered a
reserve as all the necessary Modifying Factors have been met. However in order to
establish the reserve a block rate needs to be determined.
E-43
5.5.1 Block Rate
The block rate is defined as the percentage of the marble resource that can be mined out
as marble dimension stone blocks. Determining block rate is difficult unless there is a trial
excavation and therefore when such projects are being planned operators normally rely on
a combination of borehole information, trial excavation and general knowhow of the stone
under consideration to establish this rate.
In the technical feasibility study carried out by EQM, they concluded that 70% of the rock
could be mined as blocks whilst the RQD from the Ground Investigation carried out in late
2012 resulted in 70% of the core recovered in marble having an RQD in excess of 90%. In
engineering practice rock with such RQD would be considered to be of very good quality
because of its massive nature. The excellent exposure of massive marble also provides a
major reference on how much of the resource could be excavated in blocks.
Table 5-3 presents the results of records of production over the period September 2012 to
March 2014 and it shows that the block rates have been ranging from 65% to 83% and
generally around 70%. The rock is also seen to be massive enough to cut blocks of 1.5m
by 1.5m by 3m which is the minimum size that the buyers in the PRC have requested.
From what RH observed on site block rates of approximately 70% seem reasonable as
almost the whole plan area of the platforms at Hill 3 were being cut into blocks. To maximize
the production of blocks only narrow bands along the outer edges of the platform adjacent
to the slopes marking the edge-were being left for excavation by rock breakers.
E-44
Table 5-3: Excavation Quantities Sept 2012 to March 2014 (m
3
)
Month
(A) Total
(m
3
)
(B) Blocks
(m
3
)
(B/A) Block Rate
(%)
Financial Year 2013
September 6,000 4,100 68
October No Production
November 6,000 4,600 77
December 2,000 1,300 65
January 13 2,000 1,350 67
February No Production (Chinese New Year)
March 2,000 1,300 65
Financial Year 2014
April 2,000 1,350 67
May 3,000 2,050 68
June Move operation to Hill 2B
July 3,000 2,000 67
August 2,000 1,400 70
September 3,000 2,120 71
October 3,000 2,350 78
November 3,000 2,500 83
December 2,000 1,430 71
January 14 3,000 2,120 71
February No Production (Chinese New Year)
March 3,000 2,180 73
Total 27,000 19,500 72
RH therefore considers that for planning purposes a 70% block rate could be used to
estimate how much of the resource can be mined out as marble dimension stone blocks.
This also matches what EQM originally reported in their assessment of the Quarry Scheme
and also what was deduced from the borehole investigation. The massive nature of the
marble exposed in Hills 1, 2A and 2B would also support a 70% block rate.
Normally it would be expected that these rates would increase with depth reflecting more
competent fresher, less weathered rock. At The Project site, the rock at surface is already
fresh and therefore it is not expected that the rate would materially change with depth.
E-45
5.5.2 Reserve Statement for Marble Dimension Stone Blocks
After taking into account the issues of waste and a 70% Block rate the Measured and
Indicated marble resources can be converted to Reserves which include both Proved and
Probable Reserves. The statement as at the effective date of 31 March 2014 is shown in
Table 5-4.
Table 5-4: Marble Reserves at Kelantan Marble Quarry (million m
3
)
Hill Proved Probable Total
1 1.07 0.07 1.14
2A 8.09 0.42 8.51
2B 1.28 1.28
3 0.09 0.09
Total 10.53 0.49 11.02
The Reserves of Dimension Stone Blocks are estimated at 11.02 million m
3
. There is an
additional 1.87 million m
3
in the expanded area behind Hill 1 which can be converted to
reserves once the legal title to this area is formalized.
5.6 Quarry Life Analysis
The reserve statement as of the 31 March 2014 is estimated at 11.02Mm
3
and with a
targeted production rate of dimension stone marble blocks of 230,000m
3
per annum (as
discussed in Chapter 6) from FY2018, the Quarry life is close to 50 years and will be in
excess of this once CEP obtains approval for the right to extract marble from the expanded
additional area behind Hill 1. Given that the Quarry license is for 33 years there is clearly
a reserve beyond the end of the license period.
The life of the Quarry could change in the future for a number of reasons including changes
in production rate and the balance between blocks and raw material for powder. However
this is a normal consideration for a quarry business.
5.7 Conclusions and Summary of Marble Reserves and Resources at 31 March 2014
The Resource statement has been built on the basis of proper modelling and assessment
of the ground topography and the nature of the geological profile down to the line of final
excavation.
E-46
Table 5-5: Summary of Statements of Reserves and Resources
at Kelantan Marble Quarry (million m
3
)
Mineral Type
Gross Volume
Attributable to
License
Net Volume
Attributable to
Company
Reserves
Proved
WhiteMarble
10.53 10.53
Probable 0.49 0.49
Total 11.02 11.02
Resources
Measured
WhiteMarble
18.63 18.63
Indicated 0.90 0.90
Inferred 0.76 0.76
Total 20.29 20.29
Based on the results of excavation to date approximately 70% of the Resource can be
excavated as blocks and with the continuity and massiveness of the marble with depth it is
anticipated that this Block rate of 70% can be used for ongoing planning. The Resources
(including the estimated Inferred resource) and Reserves are summarized in Table 5-5.
6.0 QUARRY OPERATION AT THE KELANTAN MARBLE QUARRY
The Kelantan Marble Quarry is a Project which plans to extract more than 230,000m
3
per
annum of marble dimension stone blocks once it is in full production by FY2018 (note: FY
is Financial year and year end is 31 March). The blocks will be processed further into
marble slabs and other stone products whilst any loose rock generated will be used as a raw
material in the carbonate powder business.
The marble is present in four adjacent hills (termed 1, 2A, 2B and 3) which rise out of the
adjacent plain and are defined by near vertical white cliffs. Quarry development
commenced in early 2011 with commercial production starting in March 2012. Production
commenced with Hill 3 with extraction of marble at surface by sawing, but the focus has now
switched to the part of Hill 2B adjacent to Hill 3 (termed 2B-B). The remaining part of Hill
2B (termed 2B-A) will be ready for production later in FY2015.
Access in and around the Quarry has already been provided and haul roads are being
developed to areas not yet opened up. A crushing and screening facility has been
constructed whilst offices, living quarters and a marble slab processing facility have also
been constructed at the east end of the Project area. On land behind this facility there is
adequate room to expand to support other processing facilities as the Quarry develops and
production increases. There are four designated areas for storing blocks (Figure 2-1).
One major advantage of this quarry site is that there is virtually no overburden and therefore
stripping is insignificant. Another advantage is that there is no significant seepage from the
marble cliffs and water is not expected to be a problem. Furthermore much of the marble
E-47
is protruding above the adjacent plain is massive with no obvious bedding or other
geological structure. Therefore geotechnical concerns related to the design of slopes,
stability and water, typical of quarries excavated into hillsides, are likely to be minimal.
Table 6-1: Production Targets (m
3
) FY2014 to FY2018
2014
Actual
2015
Forecast
2016
Forecast
2017
Forecast
2018
Onwards
19,500 103,000 160,000 208,000 230,000
These advantages will facilitate a growth in production to greater than 230,000m
3
per
annum of dimension stone blocks which the Company is planning to implement over the
next 4 years (Table 6-1). With reserves in excess of 11 million m
3
the quarry operation could
be maintained close to 50 years at full production.
The quarry will be developed by reducing the height of the hills to the level of the adjacent
ground before excavation into the existing ground. Ultimately this will leave a back slope
which will range in height from 25m (Hill 3) to around 150m (behind Hill 1). The back slope
will be benched to an average angle of 60
o
. RH considers this to be a conservative final
slope angle for this Quarry given the massive nature of the marble.
Once quarry development is completed, haul roads finalized, new equipment installed and
the work force trained, RH believes that the company should be able to meet its production
targets. In full production the quarry will have a work force of nearly 140 workers.
The quarrying process that the Company is following to meet these targets is
uncomplicated and typical of many other companies operating in this sector. Simply put,
this process can be described in three phases:
1. Development: Clearance, construction of haul roads and opening up of production
platforms
2. Extraction: Excavation of and cutting of marble blocks and other marble from
production platforms by block mining techniques
3. Transportation and Storage of Marble Products: Removal of blocks to storage areas
ready for disposal off site to markets and the disposal downslope of other loose marble
fragments and irregular shaped blocks for further processing.
Quarry operations assume 10 months of actual of extraction each year (where two months
takes into account holidays, weather downtime and equipment maintenance).
6.1 Development
The surface profile of the marble is a typical karst landscape. It is irregular with tall
pinnacles of karst up to 3m high, and has solution hollows, small cavities and rock surfaces
which are smooth and rounded. In order to create production platforms the vegetation is
first removed and then explosives are used to excavate the rock, typically up to 3m.
E-48
Figure 6-1: Karst surface in Hill 2B
Trees form a dense canopy over the hills but these are mostly low level with roots
developed in solution hollows and crevices between the pinnacles where soil has blown in
over time. Marble is widely exposed as there is virtually no weathering profile and minimal
soil cover. Vegetation which has been stripped off has been disposed into the adjacent
forest for later use. A typical surface landform can be seen in Figure 6-1.
Explosives have been used as a means of excavation to create access to the hill tops and
to develop the production platforms. However in a dimension stone operation the use of
explosives is generally discouraged because the blasting forces create micro-fractures
which are not good for the integrity of blocks. Hence in this Project, the use of explosives
has been minimized and controlled blasting techniques implemented.
Because of the irregular surface profile normal vertical blast holes have not been possible
and the Company has adopted horizontal-hole or fan-cut blasting. The results of these
types of blasting are normally difficult to predict and secondary blasting has been inevitable.
Explosive charges for secondary blasting are much lower than development blasting as the
objective is to crack the boulders rather than fragment them into small pieces.
To maintain safety the blasting work has been contracted out to a licensed shot firer with the
blast design prepared by a quarry consultant. The consultant engaged is EQM Ventures
Sdn. Bhd. who also supervise the blasting on site to ensure that the works are safe and
efficient. To date there have been no incidents of excessive ground vibration, noise or
fly-rock.
Because of the irregular shape of the original surface profile of Hills 2B and 3 (and the
sloping sides) a large amount of rock was excavated in order to form production platforms
of meaningful size for disc sawing. This meant a large amount of waste rock was generated.
For Hills 1 and 2A, which have a much larger plan area, to reduce rock waste and maximize
block excavation the Company intends to create a number of smaller production platforms
which can be excavated using wire saws only. The Company terms this skinning and in this
way the demand for explosives will also be minimized in the future.
The haul road to the top of Hills 2B and 3 is used for equipment and supplies and for moving
blocks to the allocated storage areas north of the quarry. Access roads are currently being
constructed to open up Hills 2A and 1. More permanent long term roads are planned with
better gradients, proper side drains to carry rainwater and pavement construction using
graded rock materials. The loose rock which is produced on site can also be used as a
pavement material.
E-49
6.2 Extraction of the Marble
6.2.1 Excavation
The marble being quarried protrudes from the adjacent plain and Berangkat Forest
Reserve. Development will initially be a simple top down arrangement by standard block
mining techniques developed by descending benches with the hills reduced in height until
they reach the level of the adjacent ground. In the case of Hills 2B and 3, this will result in
respectively over 40m and 25m of excavation leaving a flat surface at the level of the Plain
and a small slope on the south side.
In the case of Hills 1 and 2A the levels on the south side (i.e. the side of the Forest Reserve)
range from approximately 115m above MSL to 225m above MSL meaning that below these
levels the excavation will be open with a back slope. To facilitate vegetation growth to
rehabilitate the landscape, and also to maximize the production of large blocks, the back
slope will be benched instead of forming a steep continuous slope up to 120m high.
The design of the back slope in terms of bench width and spacing will be carried out in due
course, after planting trials and discussion with the Local Government, in accordance with
the environmental obligations under the Quarry Scheme Approval. However the Company
has proposed that the average slope angle will be about 60
o
which is conservative given
that the rock is massive and in its natural state can stand safely at 90
o
. RH concurs with this
proposal.
The quarry is designed to be operated in a descending multi-bench form. The critical
element to achieving the annual production targets is the proper development and efficient
operation of several concurrent independent quarry working platforms/faces. At present the
team (6-7 operatives per bench) has been achieving 5,000m
3
of excavation each month at
Hill 3 working a 50m by 70m bench (3,500m
2
) to a depth of 1.5m. To achieve the full
production target (23,000m
3
per month or 230,000m
3
per annum over 10 months) the
company is planning to have 6 such benches in operation as follows:
Hill 3 (Plan area 4,500m
2
) one operating team per bench (Existing)
Hill 2B (Plan area 40,000m
2
) one operating bench, which will be the extension of the
existing bench on Hill2B-B onto Hill 2B-A.
Hill 2A (Plan area 135,000m
2
) Planning to have two operating benches
Hill 1(Plan area 59,000m
2
) Planning to have two operating benches
Based on the fact that the plan areas of these hills (ie the surface area in plan) are
significantly in excess of the current area coverage of 4,500m
2
at Hill 3, achieving a monthly
target production of 23,000m
3
is realistic from 6 teams each producing up to 5,000m
3
per
month. Production is assumed to take place over 8 working hours and 10 months per year.
A second 8 hour shift also exists but this is to cover maintenance and the movement and
setting up of equipment ready for the next day.
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6.2.2 Cutting of Blocks
The formation of access to the tops of Hills 1 and 2A is at an early stage and there is still
a considerable amount of clearance to be carried out. Access to Hill 2A is from the south
adjacent to Hill 2B, whilst access to Hill 1 has been already created at the junction with Hill
2A and from the south side from the Forest Reserve area.
For these two hills small platforms will be created initially with extraction of blocks using
diamond wire saws. This is to maximize the resource yield rather than trying to develop
large production platforms to suit a disc saw operation. Specialist teams of workers from the
PRC have been recruited for this operation termed skinning. As excavation takes place
and platforms extend into the hill below the existing karst surface, the working platforms will
ultimately increase in area and be suitable for disc saw operations.
The block mining equipment needed to guarantee a production volume of 5,000m
3
per
month per team include:
1 disc saw cutting machine
3 diamond wire saw cutting machines
1 Coring Machine
1 electric generator
1 air compressor
Front End Loader
Excavator with fork attachment
Truck
Additional units may be required as spares and to complete development and support
tasks. RH understands that most of this equipment will be sourced from China.
Figure 6-2: Extraction of blocks at Hill 3
E-51
As the benches are developed they will be cut into slices (Figure 6-2). The target
dimensions of the blocks are 3m long by 1.5m wide and 1.5m high (total 6.75m
3
) and thus
the bench thicknesses will be 1.5m. In due course the Company intends to increase the
block widths to 2m with a resulting volume of 9m
3
. In very massive and competent marble
3m high cuts are also envisaged.
The main vertical cuts will be by means of a disc saw machine with two disc saws set 1.5m
apart (2m in the future) and cutting to 1.5m in depth. These disc saws will be set on rails
cutting a length of at least 30m. The blocks will be 3m long and the horizontal cut to achieve
the 1.5m depth this will be made by diamond wire saw, as will the back face guided by
vertical core holes.
Prior to removal, the blocks will be referenced to include the hill number, bench number and
a number which identifies the block within the bench. When the blocks are ready to be
moved they are carefully dislodged by an excavator with a modified fork lift attachment.
This is to minimize damage to the blocks edges. In future the Company is considering using
air or water bags to force the blocks forward to further reduce the damage potential.
Once separated the blocks will then be moved and lifted by an excavator onto a truck and
taken to the storage area, whilst any loose rock and broken blocks are side-cast down slope
into big stockpiles close to the foot of the cliffs. This rock and broken blocks are currently
stockpiled as the priority until now has been the production of blocks. In due course this
discarded material will either be turned into aggregate or processed into slabs at the facility
present on site.
The marble so far exposed in Hills 3 and 2B is massive and fresh with occasional small
narrow solution features which show no particular orientation. This results in irregularly
shaped blocks (Figure 6-3). Furthermore obtaining a perfect cuboid shape for a block each
time is not realistic. Apart from the effects of solution features, breakages as a result of
cracks and zones of weakness in the rock and operational damage will have an impact. The
Company estimates only about 15% of blocks will have a (near) perfect shape. This is
discussed further in Section 6.3.
Figure 6-3: Irregular shaped block with solution feature
E-52
6.3 Transportation and Storage of Marble Products
There are currently four large storage areas (Figure 2-1) which are present on the access
road from the site entrance to the paved road leading to Gua Musang. These have been
allocated by the Forest Department. The storage areas have been located conveniently
near to the main road so that container trucks taking the blocks to the market can have easy
access. Prior to dispatch the blocks will be cleaned (see upper level blocks in Figure 6-4).
Within the storage area the blocks will be further referenced according to size and shape.
The ideal shape is a perfect rectangular cuboid (6 surfaces) with sharp edges but as
discussed in the last paragraph in Section 6.2.2 the perfect shape may not be achieved and
thus the Company classifies the blocks as follows:
A regular rectangular shape and no fractures (est 15% of all blocks)
B regular rectangular shape and small fractures (est 20% of all blocks)
C irregular rectangular shape (at least 4 surfaces) and small fractures (est 25% of all
blocks)
D irregular rectangular shape (at least 4 surfaces) and more fractures (est 30% of all
blocks)
The division of blocks accordingly is common in the industry and the percentages estimated
by the Company considered reasonable by RH. Better shapes can command higher prices
as more of the block volume can be used for end product. A block classified as B shape can
be seen in the foreground of Figure 6-4. In taking these percentages another 10% (making
100%) of blocks produced are assumed to be damaged or lost in transportation or handling.
The current plan is that blocks classified as A and B will be transported to the PRC whilst
C and D will be processed into slabs in Malaysia (Page 51 of this QPR contains more
discussion on the Block classification).
Figure 6-4: Blocks are cleaned prior to dispatch (see B classified block in foreground)
E-53
When the slab processing facilities on site are fully operational, larger fragments and
broken blocks of the discarded material will also be selected to be taken to the processing
facility to be turned in to standard size slabs of 600mm by 600mm or 300mm by 300mm of
20mm thickness. Smaller fragments will be taken to the crushing facility and stockpiled prior
to processing into aggregate before being sold.
To date much of the loose rock generated on site has been crushed in a small primary
crusher to produce crushed stone for haul road construction and hard core for the crushing
and screening facility, the slab processing plant and administrative areas. To avoid double
handling, rock used for aggregate production will only be taken from the stockpiles when
there is a particular demand.
6.4 Production Targets of Blocks
According to the reserve statement there will be 11.02 million m
3
of marble. However as
explained in the previous Section it is unrealistic to expect that all of the production volume
that will be excavated as blocks can be recovered to be sold as dimension stone. There will
be volume losses and it is important to realize this in order to estimate a realistic production
forecasts of marble blocks and ultimately marble slabs. In recognition of this the Company
has classified the blocks as A,B,C or D depending on their final shape.
For each of these block types assumptions are made as to how much of the ideal volume
will be lost and how much therefore will be retained and used as a block to be further
processed into stone products. In this way the Company can estimate sales forecasts. The
Company assumes the following:
Block A 100% of volume as block
Block B 50% of volume as block and 50% retained on site for aggregate use
Block C 25% of volume as block and 75% retained on site for aggregate use
Block D 10% of volume as block and 90% retained on site for aggregate use
RH considers this to be an appropriate way to classify the blocks and to take into account
the volume discounts. Retained on site means that the rock breaks away from the block
and is recovered as discarded material for other use.
Table 6-2: Total Marble Blocks (m
3
) FY2014 to 2018 onwards
2014
Actual 2015 2016 2017
2018
Onwards
Production 19,500 103,000 160,000 208,000 230,000
Marble Blocks 2,100 24,000 39,000 46,000 57,000
This means that when in full production by FY2018 only 57,000m
3
out of the 230,000m
3
production will be turned into marble blocks of good shape (ie Blocks of A & B classification)
(Table 6-2). Poorer quality blocks (ie of C&D classification) will also be produced with the
plan to process them into slabs in Malaysia (see Table 7.1). The balance of the material not
turned into blocks that is the rock that is retained on site will be stockpiled and crushed
and sold as a raw material for the production of calcium carbonate powder.
E-54
Over the last 18 months commercial production has ranged from 3,000m
3
per month to
6,000m
3
per month. With platforms now being worked in both Hills 2B and 3 and the
opening up of Hills 2A and 1 the Company is ready to increase production to the FY2015
target of 103,000m
3
or an average of 10,000m
3
over 10 months. However, and until market
acceptance of the product is firmly established, in the earlier years more blocks will be
produced than used for further processing. In its forecasts the Company estimates that this
will take five years up to FY2019 when the balance between supply and demand becomes
the same. Until that time excess blocks will be kept as inventory to be disposed as market
demand dictates.
The management of the blocks inventory will be a challenge. If all blocks which are
produced are sold promptly then storage space will not be compromised. By the time of full
production in FY2018 an estimated 29 blocks/day of marble blocks (ie of of A and B
classification) will be produced (assuming a 3m by 1.5m by 1.5m block) and be ready for
dispatch to the PRC. Even with stacking in the storage areas 29 blocks/day will quickly use
up space. However this throughput of blocks is achievable with good management, but
good sales are critical to ensure regular dispatch of blocks to create space for newly
excavated blocks.
Another factor in this is the percentage of each product type (Table 6-3) there are three
types. The assumption has been made that each hill is consistent in terms of the marble
type, colour and texture and because Hills 2A and 2B comprise the largest resource then
the main product from the Quarry will be Purplish White. Marketing will need to be sensitive
to this and to the times when the product types are available to market.
This is a reasonable assumption at this stage for marketing and availability purposes but
the Company is aware that geology is not so precise and that variations are inevitable.
Table 6-3: Relative Percentage Estimate of Each Block Product (For Year)
2015 2016 2017
2018
Onwards
Block (m
3
) 35,000 57,000 68,000 83,000
% of Various Products
Misty White (Hill 3) 28 17 14 12
Purplish White (Hill 2A & 2B) 67 72 73 74
Black Spotted White (Hill 1) 5 11 13 14
RHs independent review of the site operations made during several site visits and meetings
with company representatives (management and site operatives), is that production
assumptions are reasonable and achievable. This opinion is contingent on the quarry plan
being fully implemented including adequate staffing and recruitment of operatives with the
right skill sets to ensure a smooth and efficient operation.
6.5 Workforce
At March 2014 the number of site staff amounted to 59 and comprised:
32 Production Team
E-55
7 Development of access and working platforms to Hill 1,2A and 2B
6 Slab Processing Facility
7 Screening and Crushing Facility and Load and Haul
7 Workshop and Site Administration/Management
When in full production from FY2018 it is anticipated that there will be a requirement to have
7 production teams (six plus a spare team of operatives as cover) each of say 6 people (two
shifts) altogether say 42 people plus additional operators for equipment. It is anticipated
that a total of 39 will be required for the slab processing facility and another 15 to 20 at the
crushing plant. At the Powder Plant off site in Gua Musang 11 operatives are estimated.
A further 40 staff will be required to cover general works, mechanics, maintenance staff and
administration taking the total staffing levels on site and at the Gua Musang Powder Plant
to approaching 140. The Company has stated that most will be direct employees rather than
sub-contractors.
6.6 Conclusions
The Kelantan Marble Quarry will follow standard procedures of development, excavation
and management of blocks and other loose material extracted. It is a sizable operation with
an estimated 140 workforce when in full production by FY2018 when production of
dimension stone blocks is targeted at 230,000m
3
. Over the next four years production will
increase gradually with 103,000m
3
targeted in FY 2015.
However on excavation not all of the volume of the block will be retained and therefore the
blocks which will go for further processing will have less volume than would be expected if
each block had a perfect shape. The more complete blocks (Classified as A and B) will be
dispatched to the PRC for processing whilst those less complete blocks (Classified as C
and D) will be retained in Malaysia for further processing. The majority of these blocks will
comprise the Purplish White colour and texture which will account for an estimated 74% of
the blocks produced. Black Spotted White and Misty White are each just below 15% of the
total.
7.0 MARBLE PRODUCTS FROM KELANTAN MARBLE PROJECT
The marble products from the Project will be
(i) blocks of marble with target size typically 3m length by 1.5m width by 1.5m height in
rectangular cuboid form a volume 6.75m
3
. In due course the Company hopes to be
able to increase the block size to 9m
3
for some of its production.
(ii) 20mm thick marble slabs cut on site in the Companys processing facility
(iii) marble aggregate generated from the Companys crushing and screening facility on
site, used as a raw material to be ground down by the buyers into carbonate powder
for use in industrial applications and
E-56
(iv) carbonate powder depending on the market acceptance of the aggregate in the
powder business ((iii) above) the Company also intend to be a producer of high value
Ground Calcium Carbonate (ie GCC) and a supplier to markets for other carbonate
powders, such as those which accept carbonate with a higher magnesium content.
The intention is that virtually the whole volume of the marble deposit will be sold and that
waste will be minimised.
The marble blocks and the marble slabs are the primary products commanding the highest
selling price. The Company will dispatch Blocks as follows:
Blocks of A classification: to be sold to buyers in the PRC.
Blocks of B classification: outsourced to designated factories in the PRC who will then
cut them into slabs and other marble products to be sold in the PRC by the Company
or their designated agents
Blocks of C classification: initially to be processed on site to produce small tiles but from
later in FY2016 to a company owned factory or designated factory in Malaysia to be
turned into slabs or marble products to be sold in Malaysia and Singapore by the
Company or their designated agents
Blocks of D classification: to be processed on site to produce small tiles to be sold in
Malaysia and Singapore by the Company or their designated agents
The texture and colour of the marble will determine the selling price. There are three types
of colour and texture (Figure 4-1) that have been identified so far:
Kelantan Misty White (Marble from Hill 3)
Kelantan Purplish White (Marble from Hills 2A and 2B)
Kelantan Black Spotted White-(Marble from Hill 1)
As discussed in Section 6.4 and as part of the production process loose stone and broken
blocks will be generated as dimension stone blocks are extracted. The loose stone and
broken rock will be used as aggregate but for larger pieces these could also be used in the
production of tiles on site. Off cuts from the processing of the blocks in the factory on site
will also be used where appropriate in aggregate production.
E-57
7.1 Marble Blocks
The blocks will be cut in cuboid form with the typical size 3m long by 1.5m wide by 1.5m high
(6.75m
3
). In due course the intention is to increase the width to 2m (with block volume 9m
3
),
and also customise block size depending on customer requirements in the PRC. Size is
important from a commercial viewpoint as the larger the blocks the higher selling price. In
the PRC Blocks are classified in to 3 classes:
I (>3m
3
),
II (>1m
3
to 3m
3
) and
III (>0.5m
3
to 1m
3
).
There is also a requirement that the length of the block side is between 0.5m and 3m. The
Company is therefore targeting Class I as this will allow it to command the highest prices.
Depending on the number of complete surfaces the blocks are classified accordingly (either
A, B, C or D see Section 6.4) and the reduced volumes from the optimum shape will be
reflected in the selling price. Buyers are aware of this as it is common practice especially
in blocks coming from a limestone or marble rock mass which contains cavities. In total the
Company estimates that only 15% of all blocks will be of Class A, the highest grade, where
the cuboid form is (predominantly) free of fractures.
However the selling price will not only be related to volumes but also texture and colour. To
date Misty White and Purplish White Blocks have been produced and sent to the PRC for
marketing. Black Spotted white, samples have been taken from Hill 1 and slabs produced
to test the market for these products. At the present time the Company has signed
agreements with agents in the PRC to sell stone products and have stands at major stone
fairs. Some sales have been achieved. The approach to Sales and Marketing is discussed
further in Section 10.1
Based on the Industry Report (summarised elsewhere in the Offer Document to this IPO)
the products from the Quarry are considered to compare favourably with international
brands such as Picasso from France and other premium imported brands from Europe,
Turkey and Iran. Thus the Company is confident that as product awareness increases and
more agents are engaged, higher selling prices will be achieved.
The estimated selling price of the blocks have initially been set in the range of S$1,000/m
3
to S$2,000/m
3
with the Misty White at the lower end and the Black Spotted White at the
higher end of the range. Black Spotted White is considered the premium product but most
of the sales thrust will be on the Purplish White which will comprise over 70% of total
production (Table 6-3). Production of Black Spotted White is expected to start later in
FY2015.
The marble blocks are washed prior to leaving site and then loaded in containers for
delivery to the markets. The containers are either sent by rail freight or by truck to Pasir
Gudang or Kuantan Ports for shipping to the PRC where they are stocked and loaded onto
ships. The normal procedure is that buyers will come to the Quarry and select the blocks
they require. When the order has been placed arrangements will be made for delivery. In
future the port of Port Klang may also be used.
E-58
The forecast income streams from the sale of blocks and marble slabs are highly dependent
on the sale of Purplish White. Such forecasts are not unreasonable at this stage, but as the
true extent of the colour and texture will not become apparent until Hills 2A and 2B are fully
opened up there has to be some caution in accepting this percentage and these income
streams. However this is a risk which is well understood. Based on production to date in the
areas of Hill 2B opened up the Purplish White shows consistency in colour and texture.
7.2 Marble Slabs
Approximately 70% by volume of the Blocks produced will go to the PRC (Blocks classified
as A and B) and then processed into slabs and for other end uses in the PRC. The
remainder (Blocks classified as C and D) will be kept and processed in Malaysia. The
intention is that by later in FY2016 there will be two facilities producing slabs in Malaysia
the facility on site and another, either acquired or built by the Company. The new facility
will take Blocks of C classification and the facility on site Blocks of D classification. A
decision on the new facility will be made after consideration of demand from within
Malaysia, and be situated close to the market centres.

Saw Cutting
Repairing, Masking
Drying, Adhibiting
Polishing
With circular saws, sand saws or general
saws approx. 7hrs/block

material is precisely removed from a
workpiece (or specimen) to produce a
surface finish. approx. 30secs/slab
Marble Blocks
Re-sizing according to
customer requirements
or market demand

For cracked stones, stones with holes or
stones which are easily broken, gluing or
masking to increase their abrasion
resistance. approx. 5.5hrs/slab
The facility on site has a current capacity of 600m
2
per day or 198,00m
2
per annum over
330 days and will produce standard 600mm by 600mm and 300mm by 300mm, 20mm thick
slabs. These are typically used as floor and wall tiles. By FY2018 this capacity will be
exceeded and by FY2019 in full production the expected production of slabs is targeted at
337,000m
2
per annum. The Plant has been designed with this in mind and space has
already been allocated to double or triple the output as required. Staff sourced locally will
operate the Plant using supervisors from the PRC.
The facility off site will have more flexibility in terms of production. It will still have the ability
to produce small tiles but the intention is to have a more varied product range from larger
800mm tiles, custom made sizes, marble furniture and other decorative end uses.
E-59
Figure 7-1: Commissioning of Slab Processing Facility is taking place (Feb 14)
At the processing facility on site the marble blocks are saw-cut into slabs. The slab
production processes include saw cutting, drying, adhibiting, repairing or masking, curing,
polishing and warehousing. The Plant is currently at the commissioning stage and thus
there has been no track record to gauge performance. It is expected to be in a position to
commence production within the next three months (ie by June 2014) when full grid power
is supplied to the site.
Table 7-1: Estimated Production Mix of Marble Slabs (m
2
) FY2015 to FY2020
Product FY2015 FY2016 FY2017 FY2018 FY2019 FY2020
Misty White 19,920 49,800 99,600 139,440 199,200 199,200
Purplish White 68,530 282,494 695,613 1,161,545 1,659,350 1,659,350
Black Spotted White 2,772 28,875 86,250 161,700 231,000 231,000
Total 91,222 361,169 881,463 1,462,685 2,089,550 2,089,550
Processed Malaysia 44,000 175,000 443,000 708,000 1,011,000 1,011,000
Processed China 47,222 186,189 438,463 754,685 1,078,550 1,078,550
Note: China supply uses B classified blocks and Malaysia supply uses C and D classified blocks,
The unit rates for the slabs are a reflection on the colour and texture. Based on market
feedback and sales to date, the current selling price of Misty White has been set at S$45/m
2
with Purplish White at S$55/m
2
. This matches favourably with the selling price of the
Picasso brand from France which is reported in the Industry Overview to be RMB400/m
2
(S$80/m
2
). The estimated supply of each product type is shown in Table 7-1.
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7.3 Marble Aggregate
Aggregate will be produced from loose marble fragments and damaged blocks which
cannot be processed into marble slabs. These are the volumes of material which have been
discounted from Blocks classified as B,C and D. From B, 50% of the volume is assumed for
use as aggregate, C 75% and D 90%. The estimated production is shown in Table 7-2.
Table 7-2: Estimated Production of Marble Aggregate (t)
Product FY2015 FY2016 FY2017 FY2018 FY2019
Aggregate 7,200 54,000 90,000 180,000 720,000
The primary rock feed will be put through the crushing and screening facility on site which
has already been constructed. This has the capacity of producing 60,000t per month of
aggregate. The closed side setting of the jaw crusher is 230mm.
After crushing, the aggregate will pass across a vibrating triple deck screen that separates
five product sizes: (i) <10mm; (ii) 10 40mm; (iii) 40mm 60mm; (iv) 60mm to 150mm and
(v) 150mm 230mm. The products will be stored in enclosed open bunkers with hard core
bases to avoid contamination from below. Of these products the sizes most commonly
sought by end users for powder are 10-40mm; 40-60mm and 150-230mm.
As the chemical properties of the marble are critical to what its industrial application will be,
the production of aggregate will need to be carefully managed to make sure it meets the
specification of the end user at all times. Based on chemical analysis carried out as part of
the Ground Investigation (Section 4.3 of this QPR) marble from Hills 1 and 2A will meet
GCC specifications sourced to date from potential buyers. However the marble from Hills
2B and 3 (which comprises about 10% of the total resources) may not meet the GCC
specification requirements because of the higher percentage of MgO and as a result the
Company intend to supply other carbonate powder markets.
Table 7-3: Typical Specification of End Uses of Carbonate Rock (%)
End Use CaO MgO SiO
2
Al
2
O
3
Fe
2
O
3
Cement >48.0 <2.50 <4.0 <1.0 <1.0
Glass >55.2 <0.8 <2.0 <1.0 <0.30
Ceramic >53.8 <1.0 <0.50 <2.0 <0.3
Paint >55.6 <3.0 Low Low Low
Paper >52.1 <4.0 <2.0 <2.0 <0.01
Sugar >55.2 <4.0 <1.0 <1.5 <1.5
Rubber >55.2 <2.0 <1.0 Low Low
A strictly regulated selection process will need to be in place on site to ensure that the
supply of aggregate will always meet customer demands. This means that there is ongoing
monitoring of chemical properties and that there is no mixing of MgO rich marble with higher
quality CaO rich marble on site at the crushing plant. Typical end uses with typical
specification requirement are shown in Table 7-3.
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For general delivery to buyers the aggregate will be loaded onto trucks while greater
distances will use rail transport from Gua Musang town. The Company has also been
exploring delivery by 1000t barges on the Nenggiri River down to Kota Bahru. This means
of transportation is at an early stage of discussion with the local authorities.
RH has inspected the crushing facility on site but not its actual operation. Storage bunkers
are currently being constructed. The layout of the facility is good and there is ample storage
capacity. The unit selling prices of S$18/t quoted by the Company are within expectations.
7.4 Calcium carbonate powder production facility
In due course, the Company intends to be a producer of carbonate powder. However this
facility will not be at the Quarry but on land in Gua Musang where 17.2ha of industrial land
has already been acquired. The plan at present is for a small scale facility to be ready for
operation in early FY2017 and this will essentially be to test the market. These plans are
conditional on market response and assuming this is positive, a larger facility with a
capacity of 100,000t per annum will commence operation in FY2018.
There are clear synergies for the Company to enter into the powder business. However it
is capital intensive and the products require grinding to powders of typically Mesh 200 (75
microns) down to Mesh 2000 (8 microns). Consistency in chemical properties of the raw
material is also critical because of the tight specifications set by end users for powders in
paints, paper and rubber amongst others. Closeness to the markets is also important to
keep transportation costs to a minimum.
RH is of the opinion that it is not unreasonable for the Company to view the powder
business as a potential future business stream. Within management there is expertise in
this field and at Ipoh most of the marble industry is also in this sector. Therefore the
business is understood and the markets already exist.
SE Asia is a major producer and end user of carbonate powder and there is a big demand.
Being close to the market and the powder raw material is a key to being successful in this
sector. End users in the carbonate business have already expressed interest in the marble
from the Kelantan Marble Quarry and samples have already been taken with positive
feedback. Further decisions will be made once the quarry opens up further and the variation
in chemical properties and brightness across the marble outcrop is established in more
detail. Until that time the nature of the future powder facility will have to wait.
7.5 Conclusions
The Kelantan Marble Quarry will be a producer of marble blocks, marble slabs, aggregate
and carbonate powder. Dimension stone blocks which have a better retained shape after
extraction (termed A and B) will be dispatched to the PRC as marble blocks whilst those of
lesser shape (termed C and D), and thus less volume, will be retained in Malaysia and
processed into slabs either at the processing facility at the Quarry or in due course at a
Company owned facility elsewhere and closer to the markets.
The processing facility on site is a standard processing facility which will be in production
in June 2014. An aggregate crushing facility has already been constructed and this is
expected to be in operation towards the end of FY2015.
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Marketing of the products has already started and initial feedback has been that it would be
considered a premium product in the PRC comparing favourably with other international
brands. It is too early to define the markets for aggregate and powder but initial feedback
has been good. However because of the presence of magnesium in the marble the
appropriate markets need to be established as the high end uses, such as GCC, demand
higher calcium carbonate purity. On site the aggregates will need to be tested on an
ongoing basis to ensure that higher quality calcium rich marble is not mixed with marble
containing more magnesium.
8.0 OPERATING COSTS
The Company has provided RH with the forecast unit costs for the production of blocks,
slabs, aggregate and calcium carbonate for the period FY2015 to FY2020 (Tables 8-1 to
8-4). In the case of blocks the actual production costs for FY2014 are summarized for
comparison.
Table 8-1: Marble Blocks Production Costs
Actual and Forecast Marble Block Operating/Production Costs for the Quarry, FY2014 FY2020
Item
Actual Forecast
FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 FY2020
Quarry Cost
(S$/m
3
) A 5246.07 283.09 275.64 186.26 137.61 118.83 126.70
G&A & Other
Costs (S$/m
3
) B 2043.08 488.07 464.49 457.72 449.20 446.03 447.81
Total Operating
Cash Cost
(S$/m
3
)
A+B 7289.15 771.16 740.13 643.98 586.81 564.86 574.51
Total Production
Cost (S$/m
3
) inc
Depreciation 7445.05 780.52 748.15 649.09 590.37 567.74 577.40
Table 8-2: Marble Slabs Production Costs
Actual and Forecast Marble Slab Operating/Production Costs for the Quarry, FY2014 FY2020
Item
Forecast
FY2015 FY2016 FY2017 FY2018 FY2019 FY2020
Slab Production (m
2
) 44,582 175,419 442,963 708,085 1,011,550 1,011,550
Slab Processing Cost
(S$/m
2
)
A 27.00 22.74 18.92 16.98 16.31 16.57
G&A & Other Cost (S$/m
2
) B 11.37 5.34 3.91 3.85 3.39 3.48
Total Operating Cash Cost
(S$/m
2
) A+B 38.37 28.08 22.83 20.83 19.70 20.05
Total Production Cost (S$/m
2
)
inc Depreciation 41.47 29.79 23.51 21.26 19.99 20.35
Note: No production in FY2014 & slabs are those which are produced from C and D Classified Blocks
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Table 8-3: Aggregate Production Costs
Actual and Forecast Aggregate Operating/Production Costs for the Quarry, FY2014 FY2020
Item
Forecast
FY2015 FY2016 FY2017 FY2018 FY2019 FY2020
Aggregate Production
(tonnes = t) 7,200 54,000 90,000 180,000 720,000 720,000
Processing Cost (S$/t) A 17.66 5.98 5.29 4.32 1.30 1.43
G&A & Other Cost (S$/t) B 6.23 2.10 2.35 2.29 0.85 0.86
Total Operating Cash Cost
(S$/t) A+B 23.89 8.08 7.64 6.61 2.15 2.29
Total Production Cost (S$/t)
inc depreciation 31.80 9.58 8.54 7.06 2.26 2.40
Note: No production in FY2014
Table 8-4: Powder Production Costs
Actual and Forecast Powder Operating/Production Costs for the Quarry, FY2014 FY2020
Item
Forecast
FY2016 FY2017 FY2018 FY2019 FY2020
Powder Production (tonnes = t) 50,000 100,000 100,000 150,000
Powder Processing Cost (S$/t) A 13.88 10.40 10.76 10.31
G&A & Other Cost (S$/t) B 5.53 4.29 4.61 4.20
Total Operating Cash Cost (S$/t) A+B 19.41 14.69 15.37 14.51
Total Production Cost (S$/t) inc
depreciation 19.69 14.83 15.51 14.64
Notes for All Tables
1. Cost build up assumes a small inflation figure
2. Quarry Cost includes Workforce, Consumables, Fuel, Electricity, Water, Maintenance and Product
Transport
3. G&A & Other Cost includes Administration, Taxes, Govt Charges, Environmental Costs, Product Marketing
& Miscellaneous Costs
4. Aggregate is produced on site and sold ex-works. Therefore there is no transportation element in costs
The operating costs have been divided into two parts, firstly production costs and secondly
Government and Administration Costs (G&A). The production costs are the on-site costs
whilst the G&A includes Government taxes and charges, costs of environmental protection
and monitoring, on and off site administration and finally marketing and transportation of the
goods to the market. The combined Production and G&A costs are the total operating cash
costs. With depreciation from capital items added to the cash costs the total production
costs is then established. There are four production centers (i) blocks, (ii) slabs, (iii)
aggregate and (iv) powder.
8.1 Conclusions
All of the actual and forecast costs show a standard pattern of being front loaded during
development and earlier stages of production with a gradual decline to a steady state
situation by FY2018. The Company advises that the costs for the slab processing operation
(Table 8-2), Aggregate production (Table 8-3) and Powder production (Table 8-4) are based
on discussions with existing practitioners known to the Company both in the PRC and
Malaysia. The predicted costs for the marble block operation are based on actual operating
performance and experience gained from other industry practitioners.
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RH has examined the buildup of individual costs and compared them with other similar
dimension stone operations- using data from recent IPO listing in Hong Kong and thus
publically available. The unit costs have also been itemized in a way which is consistent
with other similar operations and as such has allowed comparison to be relatively easy.
A big element of the unit cost of the marble blocks (Table 8-1) is marketing and
transportation which account for almost 70% of all costs. This is not surprising as the blocks
are transported to markets in the PRC. This leads to a unit cost which is higher than
comparable operations in the PRC meaning margins are tighter where sales are in the
PRC. This apart, RH has found the data projections to be generally reasonable and
achievable.
9.0 CAPITAL COSTS
To the end of March 2014 (ie FY2014) the Company incurred Capital Costs amounting to
S$7.265 million. These related to opening and developing the Quarry ready for commercial
production and initial works for the processing facilities. The bulk of the expenditure (Table
9-1) was associated with quarry development and opening up the first working Platforms on
Hill 3. S$1.989 million has been spent in the construction and installation of equipment for
the Slab processing facility and in the construction of the crushing and screening plant to
be used to produce marble aggregate (Table 9-2).
As the Quarry develops during the next three years and the operation grows to meet
production targets significant expenditure will be incurred.
Table 9-1: Actual and Forecast Capital Costs for Quarry Operation (S$000)
FY2013 to FY2016
Item
Actual Actual Forecast
Total 2013 2014 2015 2016
Quarry Development 1,058 494 1,500 3,052
Production Equipment 2,485 1,033 1,500 1,500 6,518
Site Infrastructure 163 43 500 1,000 1,706
Total 3,706 1,570 3,500 2,500 11,276
Note:
1. Quarry Development; costs associated with clearance, haul road development, drilling machines, blasting,
trucks, rock breakers, excavators, labour, materials
2. Production Equipment; Disc saws, wire saws, generators, air compressors, coring machines, rails for disc
saws, Derrick cranes (in due course), trucks to carry blocks
3. Site Infrastructure; Workshops, workers quarters, stores, offices, electrical substation and cabling to various
parts of site, Upgrade and expansion as more operatives are recruited to ramp up production; site vehicles
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Table 9-2: Actual and Forecast Capital Costs for Processing Facilities (S$000)
FY2013 to FY2017
Item
Actual Actual Forecast
Total 2013 2014 2015 2016 2017
Slab Plant
Construction 165 274 1,000 1,200 2,639
Slab Plant
Equipment 269 256 1,500 2,800 4,825
Sub Total 434 530 2,500 4,000 7,464
Crushing Plant
Construction 395 200 300 895
Crushing Plant
Equipment 630 200 300 1,130
Sub Total 1,025 400 600 2,025
Powder Plant 4,000 3,000 7,000
Total 1,459 530 2,900 8,600 3,000 16,489
Notes:
1. Slab Manufacturing Plant: Includes foundation work, equipment purchase and installation, building works all
for Plant on site. In FY2015 new equipment for increased production at site facility. Also in FY2015 to FY2016
also provision for another Plant to be built outside the site close to the local market or acquired depending
on commercial considerations at the time. Costs are estimated on the basis of discussions with existing Plant
Operators in Malaysia known to the Company
2. Crushing and Screening Facility: Includes foundation work, equipment purchase and installation, building
works for Plant on site, covered aggregate bunkers, additional conveyors to bins. Also includes laying HT
cable from main substation and provision of a new substation at Facility.
3. Powder Plant: Costs are provisional based on discussions with equipment suppliers in Ipoh who install these
Plants. Costs will be incurred at the Industrial site in Gua Musang
All the capital spending proposals will take place over the next three years to match
increased production as facilities are built and/or extended and equipment is delivered and
installed. It is assumed that all existing equipment will not be replaced until FY2021: i.e
there will be no major expenditure in the FY2018 to FY2020 period.
In summary the Project Development Schedule activities are:
Quarry Operations (Table 9-1): The Company has 3 disc saw machines at present and 5
wire saws. In total another 4 disc saws and 16 wire saws are proposed with one disk saw
and two wire saws per working team. It is in the process of purchasing another 1 disc saw
and 2 wire saws and associated mobile Plant for the ongoing growth in operation on Hill 2B
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The proposed schedule is as follows:
FY2015 Be working 4 Platforms and continue with localized cutting of marble in Hills
2A and Hill 1. Purchase 2 Disc saws and 9 wire saws and associated mobile Plant
FY2016 Be working 6 Platforms and continue with localized cutting of marble in Hills
2A and Hill 1. Purchase 2 Disc saws and 7 wire saws and associated mobile Plant
Over these two years mobile plant will be needed for production and with the creation of
access. It is assumed that each team has one set of mobile production plant excavators,
trucks, loaders, gensets. Quarry Development and full access to the Hills should be
complete by FY2016 to match in with growth to full production starting FY2018. As the site
operation ramps up more operatives will arrive on site requiring additional accommodation
and associated facilities. With more mobile Plant a bigger workshop will be necessary.
Processing Facilities (Table 9-2): The Company has incurred expenditure in building the
crushing and screening plant and in constructing the slab processing facility on site.
New Tiling Plant: Depending on the outcome of the market acceptance of the marble
slabs the Company would consider the construction of a new and much larger facility off
site and closer to the local market to manufacture not just small slabs but a more varied
selection of slabs, marble furniture and other building materials. A decision on the
off-site facility would be made later in FY2015.
Expenditure on the existing facility on site will continue in FY2015 and FY2016 by
expanding the existing facility to increase capacity. The larger facility will be ready for
the expected ramp up in production and/or for the production of products other than
standard tiles. The site for the extension of the existing facility was levelled in FY2014
and is located immediately adjacent to the existing facility.
Aggregate Plant: The Plant has been constructed but when in full production it will need
concrete bunkers to be built and enclosures to suppress dust. At present a genset
supplies power to the Plant but in due course a permanent supply will be installed. At
that time an HT cable will be laid from the main substation close to the site offices to a
substation constructed by the Plant. The timing of this will match with increased
production when there will be a lot of loose marble rock generated. New cables are
expected to be laid later in FY2015 after full grid power has been supplied to the site
by June 2014.
Powder Plant: at present the plan is to construct a Plant on land already acquired in Gua
Musang starting in FY2016 with production commencing in mid FY2017. Depending on
market acceptance of the marble as a raw material for the carbonate powder business
a small pilot plant may be constructed earlier. However if there is general acceptance
of the marble by buyers of aggregate then the provision of the large Plant may be
advanced.
9.1 Conclusions
RH has reviewed the detailed capital cost estimates and found them to be reasonable with
adequate contingencies for unexpected issues. The detailed equipment list, the timing of
the expenditures taking into account the time taken to deploy and construct these assets
is reasonable.
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10.0 FINANCIAL ANALYSIS OF THE OPERATIONS
The Companys operations are straight forward with essentially one business operation
ie the Kelantan Marble Quarry. Save for interest-bearing bank borrowings of approximately
S$2.29 million as at 31 December 2013, the Company does not have any significant
interest-bearing liabilities or debts. However Sales and Marketing represents a major
obligation in order to raise awareness to the products and to establish a foothold in the
market.
The tax obligations and Malaysian Government charges are also significant. All land in
Malaysia is owned by the State and as is common in all jurisdictions the benefits gained
from the extraction of natural resources are to be shared with the State and not only the
Company (ie the miner) carrying out the extraction. In the case of the Company the charges
include a Tribute of 8% based on sales of Blocks, a Royalty of 5% based on the Gross
Proceeds and finally profit sharing of 15% paid to the JV partner, Kelstone. These are also
discussed in Section 2.4 of this QPR
The Company does not have any significant tax obligations save for provisions of
withholding tax payable and withholding tax penalties of S$0.23 million payable by the
Company at 31 December 2013. These arise from the secondment of PRC workers to CEP
in the past.
10.1 Sales and Marketing
The current sales strategy for marble blocks and marble slab products is to target
customers primarily in the PRC, where the demand for premium high-quality marble is
increasing. The intention is to sell these products primarily to end-user customers such as
developers and construction companies whose demand is mainly in marble slabs.
Separately, the Company may enter into distribution agreements with marble distributors
and wholesalers for them to distribute the marble blocks and marble slabs. These are
selected based on their track record, customer base and sales and marketing network.
The Company also intends to increase customer and market exposure of products by
attending industry forums, trade fairs and exhibitions. The latest attended has been the 14th
China Xiamen International Stone Fair, an internationally renowned industry event attended
by many stone industry participants, held in March 2014. There was a favourable response
from industry participants attending the fair to the Company products.
At the same time, the Company is communicating and engaging with marble industry
participants, property developers, contractors, professionals such as architects and
designers and others who have significant influence over customer preferences and
purchasing decisions to create greater awareness of our products and branding.
For aggregates, the current sales strategy has been to directly market and sell to end-users
in Malaysia, such as contractors in the construction industry as well as producers of calcium
carbonate. The intention is also to sell aggregates to other markets such as Indonesia and
India in due course.
All sales in the PRC are currently carried out through Qingdao Terratech. As at the Effective
Date (ie 31 March 2014), Qingdao Terratech has established sales offices in Beijing,
Chengdu, Qingdao and Xiamen in the PRC. The sales function in Malaysia is carried out
through CEP.
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11.0 ENVIRONMENTAL AND SOCIAL MANAGEMENT
11.1 Environmental Requirements
In Malaysia environmental regulatory requirements for the Kelantan Marble Quarry require
compliance with the Environmental Quality Act 1974 as amended by the Environmental
Quality (Amendment) Act 1985. Section 34(A) states that any person intending to carry out
any of the prescribed activities shall need to submit an Environment Impact Assessment
(EIA) report to the Director General of the Department of the Environment and get it
endorsed before any approval for carrying out such activity shall be granted by the relevant
approving authority.
As there are human settlements within 3km the Kelantan Marble Quarry qualified as a
Prescribed Activity and accordingly an EIA was prepared in January 2008 by EQM
Consultancy Services (now trading as EQM Ventures Sdn. Bhd.), specialist environmental
and quarrying consultants based in Ipoh. A supplemental report dated 10 June 2009 was
also submitted and on 23 June 2009, the Kelantan Department of Environment issued a
letter (the EIA Approval Letter) confirming that the supplemental to the EIA Report
complies with the Environmental Quality Act 1974 as amended by the Environmental
Quality (Amendment) Act 1985, subject to compliance with certain conditions (the Approval
Conditions).
The Approval Conditions include but are not limited to the requirements for the prior
consent in writing from the Kelantan Department of Environment to be secured for the
construction of sewage treatment systems and for the approval or consent in writing from
the Director of Department of Environmental to be secured for the construction of any
factory or placing of any combustion equipment prior to the commencement of the
construction works. The only combustion equipment on site is one generator set and
approval has already been granted by the Department of the Environment. However no
sewage treatment system has been installed up to this point and thus no application made.
Each year when the Quarry Permit is renewed it is a requirement that the environmental
performance is reported as part of the Permit application. The renewal application is made
with the report prepared by independent consultants EQM Ventures Sdn Bhd. The current
Quarry Scheme Approval was renewed on 12 June 2013 and is valid until 11 June 2014 and
to date the environmental performance has met the requirements of the EIA.
The inspection necessary to renew the Permit for the year to June 2015 was carried out in
late March 2014. The renewal report will be submitted in late April and RH has been able
to review the draft. The conclusion is that the works on site have been carried out in
accordance with the license requirements with a recommendation that the SKSK (ie the
Malaysian language term for the license) for CEP is renewed for one (1) more year.
11.2 Existing Environment
The Kelantan Marble Quarry is a karst limestone hill which protrudes out of the surrounding
plain. Near vertical cliffs define the hill and are over 100m high. The hill comprises four
individual hills totaling a site area of approximately 1200m in length by 400m in width.
Rubber plantations are present on the northern and eastern side of the Quarry area. The
access to the Quarry area is through these plantations along a track which was originally
constructed for logging. The Berangkat Forest Reserve is present on the western and
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southern side and in the past extensive logging has taken place close to the quarry site. On
the site there is no existing farmland and no habitation, although there are four small
Kampung (i.e. villages) within 3km of the quarry.
The climate is equatorial which is characterized by warm and humid weather all year round
with a mean daily temperature of 26.5
o
C and yearly rainfall in excess of 2300mm (Table
2-1). There are four small natural ditches and two small streams flowing just outside the site
boundary. There are some seepage points in the marble cliff faces with small flows of water.
Air and water quality in the area surrounding the Quarry are within recommended guidelines
and ambient noise is much lower than World Health Organization Guidelines. The quarry
area contains no unique flora and fauna.
11.3 Environment Impact
The effects on the environment from quarrying arise during:
Development: clearance of vegetation, any overburden removal, construction of
access, any blasting to form production platforms, building and infrastructure
construction such as offices, workshops, living quarters and processing facilities.
Environmental effects arise from air pollution, surface run-off, generation of waste as
well as issues related to workers occupational health and safety (OH&S Refer
Chapter 12 of this QPR).
Operations: cutting of marble blocks and haulage, removal of loose marble fragments
and broken blocks downslope, dust, vibration and noise from these activities. Ongoing
modification of surface run-off features. Noise and air quality impacts from the operation
of the marble slab processing facility and the crushing and screening facility. General
site activities such as movement of site vehicles, activities related to storage and
loading of blocks to be sent to markets.
The sensitive receiver used as the reference point is a school approximately 300m from the
Quarry in a village (Kampung Star) immediately across the Nenggiri River. As the Quarry is
being worked from south to north, over time the main working areas will be moving away
from the village and thus the impact should be further reduced.
11.4 Mitigation Measures Implemented
Dust Mitigation: measures comprise use of water with drilling, cutting and sawing
activities; and water trucks to spray access roads and stockpile areas during dry
periods. Workers wear masks as personal protection from dust.
Noise Control: methods of control include silencers, use of absorbing materials,
Containing noisy activities behind topographic or vegetation barriers to create a buffer.
Workers wear ear muffs or ear plugs for noise affected activities.
Control of Surface Water Run-Off: construction of silt traps at two locations where
water discharge from the site is taking place. Construction of sumps as necessary to
collect rainwater with use of water for operational activities and recycling where
possible.
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Minimizing Use of Explosives: used only in the development stage and at low charges
to minimize damage to the marble. As the surface karst features provide attractive
features for gardens and as natural sculptures the Company intends to preserve these
where possible for sale. As such, the use of explosives will be less than what would
normally be expected.
Environmental Management: regular noise, water and air quality monitoring with
reporting by independent consultants as follows:
monthly in respect of environmental compliance;
monthly in respect of water quality;
quarterly in respect of air quality; and
quarterly in respect of environmental audit.
Ongoing Review of Measures in Place: as The Project operations at the Quarry have
only been in operation since early 2011 the environmental measures in place are being
modified and improved as the Quarry is opened up and site specific issues identified.
11.5 Rehabilitation and Abandonment
In Malaysia requirements for restoration, reclamation and rehabilitation are not clearly
defined either legally or administratively. This is because most quarries have a long
anticipated life, which makes it difficult to determine a precise after use. There is no specific
provision in the National Land Code. However it is also recognized that the appearance of
an abandoned quarry does much harm to the Environment and thus it is understood by
operators that legal provisions may be imposed if the necessity for rehabilitation is ignored.
The Company has undertaken to rehabilitate the Quarry on an ongoing basis. As there has
been no discussion on an after use, and until such times that an after use is decided,
rehabilitation will focus on returning the land to a landform with the quarry floor suitable for
development and any slopes to be stable and able to be vegetated.
The marble cliffs which are currently present will be removed as part of the quarry operation
and the landscape will be fundamentally different. A slope will be created from the back of
the current Hills 1 and 2A and these will be cut to a geotechnically safe angle of 60
o
and
vegetated. Elements of reclamation and restoration process will be carried out concurrently
with the quarrying operation.
Areas quarried out will be backfilled with waste materials and soil to restore the natural
landforms where possible. A drainage system will be installed such that the landform would
retain sufficient water for plant growth, reduce the risk of erosion and prevent unwanted
waterlogging. The rehabilitation plan will be carried out in accordance with the terms set out
in the EIA Report, the Environmental Management Plan and the Quarry Scheme Approval
conditions.
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11.6 Social Management
The company has stated that whilst it will engage skilled workers from outside Kelantan the
policy is also to ensure that the Quarry operation provides social and economic benefits to
the local communities. To this effect local people have already been engaged and trained
for specific tasks. In addition they will be employed on an as-need basis and trained as the
quarry operation develops.
11.7 Conclusions
Any quarry operation will have an impact on the environment and the Kelantan Marble
Quarry is a big operation. The approved EIA identified no unique flora and fauna and there
is no habitation or farmland in the quarry area.
There are therefore no major impacts associated with the operation other than to ensure
that the works are carried out in a properly managed way. The Company has undertaken to
do this and implemented proper mitigation measures and working procedures. A proper
management plan monitored by independent consultants is in place and ongoing. To date
the performance has been good.
In the long term the quarry will significantly change the landscape and it is important that
the land is not sterilized for future use. The rehabilitation plan for when the quarry is closed,
which will be developed in due course, will be to leave the land suitable for future
development with adjacent slopes and landforms stable and properly vegetated to suit the
surrounding environment.
The local community is benefiting from the Kelantan Marble Quarry. They are providing
resources to work in the Quarry and there are local businesses such as transport
contractors that benefit from the business. It is a mutually beneficial relationship as the local
community also provides knowledge of local practices, customs and the environment.
12.0 OCCUPATIONAL HEALTH and SAFETY (OH & S)
CEP implements a safety policy which incorporates national safety standards and the
Company takes its commitments to OH & S very seriously. It is another key performance
criterion which is reviewed by outside consultants when the application is made for the
annual renewal of the Quarry Permit.
The Company has written Emergency and Contingency Procedures in place. The Company
keeps first aid items on site and has a room always available for treatment. For more
serious injuries Gua Musang General Hospital is about 35 minutes drive from the Quarry.
As the work force increases with the growth in production over the next four years as well
as with the commencement of the operation of the slab plant, crushing and screening plant
and in due course the powder plant the Company will engage a full time safety officer. Tool
box talks, onsite training and other activities are being implemented to emphasize safety
awareness. Through Tritech Group Limited, its parent company in Singapore, the Company
has plenty of experience of implementing safety programmes and proactively managing
safety standards on construction sites.
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On-site staff and workers are required to wear hard hats on working platforms where marble
blocks are being cut. In noisy environments ear plugs are worn and in dusty environments
masks are required. Site safety boots are required for all staff working on site.
To date, the Company has maintained a good safety record with only the occasional minor
injury which has been dealt with on site.
12.1 Conclusions
Proper and proactive management of OH & S is a fundamental obligation of any responsible
contractor. The Company through its parent in Singapore has a strong tradition in OH & S.
However OH &S is only as good as the people on site.
Through measures implemented on site staff and workers are continually made aware of
the need to be responsible to themselves and their fellow workers. To date performance has
been good.
13.0 RISK ANALYSIS
When compared with many industrial and commercial operations, quarrying is a relatively
high risk business. However a dimension stone quarry probably carries the least risk of all
quarry operations as there are few potentially dangerous elements to the operation and in
particular very limited use of explosives.
Operational risk is also mitigated at the Kelantan Marble Quarry because the hills within the
Quarry stand near vertically above a surrounding plain and thus there are no concerns of
destabilizing adjacent hillsides, blocking natural drainage or impacting any existing
farmland or villages. Until now the hills have been inaccessible and what is now the Quarry
area was included within a forest reserve.
The percentage of the marble that can be quarried as a premium dimension stone is more
difficult to determine. Fortunately the excellent visible exposure of massive rock with little
or no discontinuities in near vertical cliffs provides confidence that block rates will be high
throughout the two hills (Hills 1 and 2A) which contain most of the reserves and which have
yet to be opened up. Furthermore commercial production has commenced in Hill 3 and 2B
and some blocks have been sold. Block rates are currently around 70%. There has also
been considerable interest in the rock to be used as a raw material in the ground calcium
carbonate (GCC) powder business.
Estimations of project capital and operating costs are rarely more accurate than 10% and
will be at least 15% for projects in the development stage. Project revenues are subject to
variations in marble block and slab prices and exchange rates, though some of this
uncertainty can be removed with long term contracts. Demand from architects, interior
designers, developers and other end users may also vary over time as fashions change in
texture and colour. However white marble has always been a popular stone and recognized
and well established sources are experiencing depletion in their resources.
In the GCC Business, predictions are that for industrial applications such as in paints,
rubber, paper and for other specialist end uses, demand is likely to remain strong. One
significant risk is likely to be the variation in chemical properties of the marble which would
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mean identifying and choosing several market segments to suit such variation. Needless to
say the Project is still at a relatively early stage and with markets not yet fully established,
this also does bring additional risks.
In reviewing the Kelantan Marble Quarry, RH has considered areas where there is
perceived technical risk to the operation, particularly where the risk component could
materially impact the projected production and resulting cash flows. The assessment is
necessarily subjective and qualitative. The consequence of Risk has been classified as
minor, moderate or major based on the following definitions:
Major: the factor poses an immediate danger of a failure, which if uncorrected, could
have a material impact (>15%) on project cash flow and performance and could lead to
project failure
Moderate: the factor if uncorrected, could have a significant impact (>10%) on project
cash flow and performance, unless mitigated by some corrective action
Minor: the factor if uncorrected, could have little or no effect on project cash flow and
performance
The likelihood of risk is also considered within a 7 year time frame as follows:
Likely: will probably occur
Possible: may occur
Unlikely: unlikely to occur
The consequence of a risk and its likelihood are combined into an overall risk assessment
as shown in Table 13-1.
Table 13-1: Overall Risk Assessment
Likelihood
within 7 yrs
Consequence
Minor Moderate Major
Likely Medium High High
Possible Low Medium High
Unlikely Low Low Medium
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The overall assessment is summarized in Table 13-2 below with the consequences and
likelihood for each identified risk item shown:
Table 13-2: Risk Items Identified and Risk Rating
Item Assessment and Mitigation Risk Rating
Reduction in
Marble
Resources
The Marble in the Quarry is well exposed with little
vegetation and virtually no weathering profile. It is
massive and has good geological continuity. The
borehole investigation also validated this at depth.
RH therefore considers the resource estimate to be
reasonable and acceptable.
The potential impact is considered to be minimal as
there are sufficient resources for well beyond the 33
year lease period.
Consequence:
Moderate
Likelihood:
Unlikely
Overall:
Low Risk
Disruption in
Cutting of
Dimension
Stone Blocks
The Company is using standard and well tested
equipment to cut the blocks. The workforce
operating this equipment has been recruited from
similar operations in the PRC and as production
increases over time more recruitment of skilled
operatives will take place. To date the quality of the
shape and size of the cut blocks satisfies
expectations.
Equipment for cutting is readily available and any
potential disruption can be covered by an inventory
of Blocks to cover demand when no blocks are
being produced. In terms of workforce over time the
Company will replace the Chinese workers with
locally trained staff.
Consequence:
Major
Likelihood:
Unlikely
Overall:
Medium Risk
Disruption in
Production of
Standard
Market Size
Slabs on site
A marble processing plant has already been
constructed and is pending approval from relevant
authorities to commence operations. Skilled
operatives have been recruited and the type of
equipment and machinery being used is well
understood with spare parts for maintenance
readily available. Revenue from the sale of these
slabs will be relatively small compared to blocks.
The Company currently produces slabs in the PRC
by outsourcing this to designated factories.
Accordingly there are other options available to the
Company in the event the operation of the Plant on
site is disrupted or approval is not obtained.
Consequence:
Moderate
Likelihood:
Unlikely
Overall:
Low Risk
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Table 13-2: Risk Items Identified and Risk Rating (continued)
Disruption in
Production of
Aggregate to
be sold for
CaCO
3
Powder
The crushing and screening Plant has already been
constructed and is pending approval from the
relevant authorities to commence operations. The
type of operation is relatively simple with the only
issue being quality control. With good maintenance
and management to ensure screens are cleaned
and storage bunkers do not become overloaded or
contaminated, the risks of producing poor quality
aggregate is very small.
The revenue generated from aggregate is minimal
compared to that generated from the sale of Blocks
and Slabs. The type of Plant on site is common and
readily available in Malaysia. In the event that
approval is not obtained from the relevant
authorities the Company has the option to
outsource the production of aggregates to other
outside plants. In the event of disruption, feed
material can be stockpiled until the Plant is again
operational. Keeping a sufficient inventory of
aggregate is the way to mitigate this risk.
Consequence:
Moderate
Likelihood:
Unlikely
Overall:
Low Risk
Disruption of
Infrastructure
Access within the Quarry, and to and from the major
transport links, is good. Water supply is readily
available. Power is presently from diesel
generators but Grid supply will be available to part
of the site by mid FY2015 and available to the
whole site by later in FY2015.
A new access can easily by cut as the land around
is relatively flat whilst power can be supplied by
generators if grid power is disrupted.
Consequence:
Moderate
Likelihood:
Unlikely
Overall:
Low Risk
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Reduced
Market
Demand for
Marble
Dimension
Stone
There is always good demand for high quality white
marble and in the target markets in the PRC it is
sold for high end developments. Whilst there has
been good market acceptance to date when the
Company increases production over the four years
to FY2018 they will be producing more than 29
blocks/day, and there is no guarantee that market
demand will be sustainable.
The impacts of a reduced demand with an
increasing targeted production will be balanced by
more awareness of the marble products from
increased presence at Trade shows and more
marketing staff and outlets, thereby increasing the
geographical awareness and the potential market
size. Furthermore there are three marble products
and marketing these individually will mitigate the
impact of reduced demand of one type.
Furthermore there are three marble products and
marketing these individually will mitigate the impact
of reduced demand of one type.
Consequence:
Major
Likelihood:
Unlikely to
Possible
Overall:
Medium to
High Risk
Reduced
Market
Demand for
Powder
All indications are that there will be ongoing
demand for high quality carbonate powder for
paper, paint, rubber and in other specialist
applications. Malaysia is a world leader in this and
there are many buyers of the type of high quality
marble aggregate that is present at the Kelantan
Marble Quarry. The major issue is not demand but
ensuring that the cost of transporting the aggregate
to the buyers is commercially viable.
The Company is also considering markets in
Indonesia and India where there is shortage of
marble suitable for the carbonate powder business.
This will mitigate the impact of any reduced demand
from Malaysia.
Consequence:
Moderate
Likelihood:
Unlikely
Overall:
Low Risk
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Variation in
chemical
properties of
Marble
The strength characteristics of the marble
consistently exceeds the requirements for
dimension stone blocks. The only concern is the
variation in chemical properties. The marble is a
high quality rock with very little impurities. CaCO
3
percentages are consistently above 90% but locally
higher contents of MgCO
3
exist which mean that the
marble may not be suited for high end CaCO
3
uses.
The impact of any such variations will be relatively
small as the revenue streams from the sales of
carbonate powder are also small compared to sales
of dimension stone products. This likelihood has
been recognized and management will develop a
variety of markets to suit all chemical compositions.
However this will have an impact on revenue
streams as each market will have different selling
prices.
Consequence:
Moderate
Likelihood:
Possible
Overall:
Medium Risk
Achieving
Production
Targets
The quarry production targets are achievable if the
quarry is properly managed, organized, staffed and
well equipped. There will be multiple teams of
skilled operatives working different hills and
working different platforms. The fact that the quarry
is working downwards from hilltops which are
protruding above the adjacent plain will mean that
there are minimal topographical constraints to
works. However additional stockpile areas may
need to be obtained to store inventory.
Consequence:
Moderate
Likelihood:
Unlikely to
Possible
Overall:
Low to
Medium Risk
Higher
Operating
Costs
The Company has been operating commercially for
over two years. It thus has a good understanding of
costs. New equipment to be purchased will be
similar to existing equipment and therefore future
operating costs after the ramp up in production
should remain unchanged.
As with any quarry operation any unplanned higher
operating costs that impacts on lower profits has to
be accommodated by costs savings elsewhere
and/or justifying a higher sales price. The biggest
cost is in transport to the markets. The Company is
looking to transport Blocks by Barge along the
Nenggeri River as one way to reduce costs.
Consequence:
Moderate
Likelihood:
Unlikely
Overall:
Low Risk
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Higher Capital
Costs and
availability of
Equipment
Budgeted capital costs appear to be reasonable but
delays could occur if additional saws are
unavailable. The type of equipment used in a
dimension stone operation is common in
construction and therefore equipment delivery
should not be an issue. The type of equipment
needed for the quarry operation is not uncommon.
Consequence:
Moderate
Likelihood:
Unlikely
Overall:
Low Risk
Compliance of
Environmental
and Social
Issues
The Company has put in measures to mitigate
these issues. An environmental management
system is in place and there is regular monitoring of
environmental performance by outside consultants.
The Company also employs members of nearby
villages and trains them for specific tasks on site.
Being proactive in environmental performance is
important to ensure compliance with the Quarry
Scheme Approval.
Consequence:
Moderate
Likelihood:
Unlikely
Overall:
Low Risk
Compliance of
Occupational
and Health
and Safety
Matters
The Company has maintained a good safety record
and is proactive in ensuring that workers use
masks, ear plugs, site boots and hard hats to
mitigate the risks. They also will engage a safety
officer in due course. As with Environmental and
Social Issues the renewal of the Quarry Scheme
Approval on a yearly basis is also contingent on
maintaining a good health and safety record.
Consequence:
Moderate
Likelihood:
Unlikely
Overall:
Low Risk
License
Renewal
The State Government of Kelantan and the local
authorities in the District are keen to develop
industry to grow the economy and to provide jobs.
The joint venture partner Kelstone is a wholly
owned subsidiary of the KSEDC and the Kelantan
Marble Quarry is one of their projects. As a
consequence there is very little likelihood that the
Company or the Project will be stopped unless
there are serious and hitherto unexpected breaches
of the license conditions.
Consequence:
Major
Likelihood:
Unlikely
Overall:
Medium Risk
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Inability to get
formal legal
approval to
extract in the
expanded area
The Company has written approval in principle from
the JV partner who is part of the KSEDC (ie the
Government). The holdup in getting legal approval
is the time it takes for normal bureaucratic
procedures. In the event of legal title being denied
access to the land can be obtained for operation.
The reserves present are sufficient for several
years beyond the end of the lease period and whilst
a failure to get legal approval would have an impact
on development in Hill 1 there are sufficient
resources in Hills 2A, 2B and 3 to maintain a high
production operation.
Consequence:
Major
Likelihood:
Unlikely
Overall:
Medium Risk
Disruption
caused by
Inclement
Weather
Rainfall is common over most of the year but in the
November to January period it is particularly heavy.
It can be disruptive but rarely does it stop
production completely. The Company has
considered this in its production targets.
There will also be sufficient inventory and storage
areas located close to the adjacent paved road and
therefore delivery to customers should not be
compromised.
Consequence:
Minor
Likelihood:
Likely
Overall:
Medium Risk
14.0 GLOSSARY OF TERMS and ABBREVIATIONS
Block rate percentage of marble resources that can be mined out as marble dimension
stone blocks.
Brightness a measure of how much light is reflected by a material under specified
conditions and is usually reported as a percentage of how much light is reflected.
Calcite the most stable crystalline form of calcium carbonate (CaCO
3
).
Dimension Stone Natural stone that has been trimmed, cut, drilled or ground to specific
sizes or shapes.
Dimension Stone Blocks stone which is cut from untrimmed quarry stone into a cuboid
shape. Company terminology considers these to be Blocks of A,B,C and D classification
and as such any shape ranging from a near or complete shape (ie Blocks classed as A) to
those of poor shape (ie Blocks classed as D)
Dolomite mineral composed of calcium magnesium carbonate CaMg(CO
3
)
2
. Pure
dolomite contains 30.4% CaO and 21.9% MgO. Dolomite also refers to the name of a
sedimentary carbonate rock.
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Feasibility Study a comprehensive technical and economic study of the selected
development option for a mineral project that includes appropriately detailed assessments
of applicable Modifying Factors together with other relevant operational factors and detailed
financial analysis that are necessary, to demonstrate at the time of reporting that extraction
is reasonably justified (economically mineable). The results of the study may reasonably
serve as the basis for a final decision by a proponent or financial institution to proceed with,
or finance, the development of the project. The confidence level of the study will be higher
than that of a Pre-Feasibility Study.
Hectare (Ha) a unit of land area where one hectare is equivalent to 10,000m
2
Indicated Mineral Resource that part of a Mineral Resource for which quantity, grade (or
quality), densities, shape and physical characteristics are estimated with sufficient
confidence to allow the application of Modifying Factors in sufficient detail to support mine
planning and evaluation of the economic viability of the deposit.
Geological evidence is derived from adequately detailed and reliable exploration, sampling
and testing gathered through appropriate techniques from locations such as outcrops,
trenches, pits, workings and drill holes, and is sufficient to assume geological and grade (or
quality). continuity between points of observation where data and samples are gathered.
An Indicated Mineral Resource has a lower level of confidence than that applying to a
Measured Mineral Resource and may only be converted to a Probable Ore Reserve.
Inferred Mineral Resource that part of a Mineral Resource for which quantity and grade
(or quality) are estimated on the basis of limited geological evidence and sampling.
Geological evidence is sufficient to imply but not verify, geological and grade (or quality)
continuity. It is based on exploration, sampling and testing information gathered through
appropriate techniques from locations such as outcrops, trenches, pits, workings and drill
holes.
An Inferred Mineral Resource has a lower level of confidence than that applying to an
Indicated Mineral Resource and must not be converted to an Ore Reserve. It is reasonably
expected that the majority of Inferred Mineral Resources could be upgraded to Indicated
Mineral Resources with continued exploration.
JORC Code the Australasian Code for Reporting of Exploration Results, Mineral
Resources and Ore Reserves (2012 edition), as published by the Joint Ore Reserves
Committee.
Karst Landscape landscape formed from the dissolution of soluble rocks including
limestone, dolomite and gypsum.
Limestone sedimentary rock composed largely of calcium carbonate (CaCO
3
).
Marble non-foliated metamorphic rock that is produced from the metamorphism of
limestone or dolomite. It is thoroughly recrystallized and much, if not all, of the sedimentary
and biological textures are obliterated.
Marble block The Company uses this term to describe Dimension Stone Blocks cut from
marble belonging to the A and B classification (ie those where blocks are of good shape)
Marble slabs marble stones that are processed from dimension stone blocks. Depending
on the market, slabs are typically 20mm or 25mm thick.
E-81
Measured Mineral Resource that part of a Mineral Resource for which quantity, grade (or
quality), densities, shape and physical characteristics are estimated with confidence
sufficient to allow the application of Modifying Factors to support detailed mine planning and
final evaluation of the economic viability of the deposit.
Geological evidence is derived from detailed and reliable exploration, sampling and testing
gathered through appropriate techniques from locations such as outcrops, trenches, pits,
workings and drill holes, and is sufficient to confirm geological and grade (or quality)
continuity between points of observation where data and samples are gathered.
A Measured Mineral Resource has a higher level of confidence than that applying to either
an Indicated Mineral Resource or an Inferred Mineral Resource. It may be converted to a
Proved Ore Reserve or under certain circumstances to a Probable Ore Reserve.
Mineral Resource a concentration or occurrence of solid material of economic interest in
or on the Earths crust in such form, grade (or quality), and quantity that there are
reasonable prospects for eventual economic extraction. The location, quantity, grade (or
quality), continuity and other geological characteristics of a Mineral Resource are known,
estimated or interpreted from specific geological evidence and knowledge, including
sampling. Mineral Resources are sub-divided, in order of increasing geological confidence,
into Inferred, Indicated and Measured categories.
MSL Mean Sea Level ground elevation is represented as metres above MSL
m
2
Square Metres
m
3
Cubic Metres.
NI 43-101 also referred to as National Instrument 43-101, the (Canadian) Standards of
Disclosure for Mineral Projects, including Companion Policy 43-101 as amended from time
to time.
Ore Reserves the economically mineable part of a Measured and/or Indicated Mineral
Resource. It includes diluting materials and allowances for losses, which may occur when
the material is mined or extracted and is defined by studies at Pre-Feasibility or Feasibility
level as appropriate that include the application of Modifying Factors. Such studies
demonstrate that, at the time of reporting, extraction could reasonably be justified. Ore
Reserves are sub-divided in order of increasing confidence into Probable Ore Reserves and
Proved Ore Reserves.
PRC Peoples Republic of China
Pre-Feasibility Study a comprehensive study of a range of options for the technical and
economic viability of a mineral project that has advanced to a stage where a preferred
mining method, in the case of underground mining, or the pit configuration, in the case of
an open pit, is established and an effective method of mineral processing is determined. It
includes a financial analysis based on reasonable assumptions on the Modifying Factors
and the evaluation of any other relevant factors which are sufficient for a Competent
Person, acting reasonably, to determine if all or part of the Mineral Resource may be
converted to an Ore Reserve at the time of reporting. A Pre-Feasibility Study is at a lower
confidence level than a Feasibility Study.
Probable Reserves the economically mineable part of an Indicated, and in some
circumstances, a Measured Resource.
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Proved Reserves the economically mineable part of a Measured Resource.
Qualified Person a person that satisfies Rule 442 of the Catalist Manual of the Singapore
Stock Exchange SGX-ST. The term Qualified Person is considered a similar term to
Competent Person as defined in the JORC Code.
Qualified Persons Report (QPR) the public report prepared by a Qualified Person on
Resources and/or Reserves, in compliance with Rule 441 and Practice Note 4C of the
Catalist Listing Manual of the SGX-ST.
t tonnes metric unit of weight which is equivalent to 1000 kilograms
VALMIN Code the Code for the Technical Assessment and Valuation of Mineral and
Petroleum Assets and Securities for Independent Expert Reports (2005 edition), as
prepared by the VALMIN Committee, a joint committee of The Australasian Institute of
Mining and Metallurgy, the Australian Institute of Geoscientists and the Mineral Industry
Consultants Association as amended from time to time
Whiteness is a measure of how white a material should be compared to a standard. The
colour white is distinguished by its high lightness with a low saturation, where a bluish cast
is felt to be more attractive than a yellowish cast.
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APPENDIX F INDEPENDENT VALUATION REPORT
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You are invited to apply and subscribe or purchase for the Placement Shares at the Placement
Price for each Placement Share subject to the following terms and conditions:
1. YOUR APPLICATION MUST BE MADE IN LOTS OF 1,000 PLACEMENT SHARES OR
INTEGRAL MULTIPLES THEREOF. YOUR APPLICATION FOR ANY OTHER NUMBER OF
SHARES WILL BE REJECTED.
2. Your application for the Placement Shares may only be made by way of the printed
Application Form.
3. YOU MAY NOT USE CPF FUNDS TO APPLY FOR THE PLACEMENT SHARES.
4. You are allowed to submit only one application in your own name for the Placement
Shares.
If you, being other than an approved nominee company, have submitted an application
for Placement Shares in your own name, you should not submit any other application
for Placement Shares for any other person. Such separate applications shall be
deemed to be multiple applications and may be rejected at the discretion of our
Company, the Vendors, the Sponsor and Issue Manager or the Joint Placement Agents.
Joint and multiple applications for the Placement Shares shall be rejected. If you
submit or procure submissions of multiple share applications for Placement Shares,
you may be deemed to have committed an offence under the Penal Code (Chapter 224)
of Singapore and the SFA, and your applications may be referred to the relevant
authorities for investigation. Multiple applications or those appearing to be or
suspected of being multiple applications may be rejected at the discretion of our
Company, the Vendors, the Sponsor and Issue Manager and the Joint Placement
Agents.
5. We will not accept applications from any person under the age of 18 years, undischarged
bankrupts, sole proprietorships, partnerships, chops or non-corporate bodies, joint
Securities Account holders of CDP and from applicants whose addresses (as furnished in
their Application Form) bear post office box numbers. No person acting or purporting to act
on behalf of a deceased person is allowed to apply under the Securities Account with CDP
in the deceased persons name at the time of application.
6. We will not recognise the existence of a trust. Any application by a trustee or trustees must
be made in his/her/their own name(s) and without qualification or, where the application is
made by way of an Application Form by a nominee, in the name(s) of an approved nominee
company or companies after complying with paragraph 7 below.
7. WE WILL NOT ACCEPT APPLICATIONS FROM NOMINEES EXCEPT THOSE MADE BY
APPROVED NOMINEE COMPANIES. Approved nominee companies are defined as banks,
merchant banks, finance companies, insurance companies, licensed securities dealers in
Singapore and nominee companies controlled by them. Applications made by persons acting
as nominees other than approved nominee companies shall be rejected.
APPENDIX G TERMS, CONDITIONS AND PROCEDURES
FOR APPLICATION AND ACCEPTANCE
G-1
8. IF YOU ARE NOT AN APPROVED NOMINEE COMPANY, YOU MUST MAINTAIN A
SECURITIES ACCOUNT WITH CDP IN YOUR OWN NAME AT THE TIME OF YOUR
APPLICATION. If you do not have an existing Securities Account with CDP in your own name
at the time of your application, your application will be rejected. If you have an existing
Securities Account with CDP but fail to provide your Securities Account number or provide an
incorrect Securities Account number in Section B of the Application Form, your application is
liable to be rejected. Subject to paragraph 11 below, your application shall be rejected if your
particulars such as name, NRIC/passport number, nationality and permanent residence
status provided in your Application Form differ from those particulars in your Securities
Account as maintained with CDP. If you possess more than one (1) individual direct
Securities Account with CDP, your application shall be rejected.
9. If your address as stated in the Application Form is different from the address
registered with CDP, you must inform CDP of your updated address promptly, failing
which the notification letter on successful allotment and/or allocation and other
correspondence from CDP will be sent to your address last registered with CDP.
10. Our Company, the Vendors, the Sponsor and Issue Manager and the Joint Placement
Agents reserve the right to reject any application which does not conform strictly to
the instructions set out in the Application Form and in this Offer Document or with the
terms and conditions of this Offer Document or, in the case of an application by way
of an Application Form, which is illegible, incomplete, incorrectly completed or which
is accompanied by an improperly drawn remittance or improper form of remittance or
remittances which are not honoured upon the first presentation.
11. Our Company, the Vendors, the Sponsor and Issue Manager and the Joint Placement
Agents further reserve the right to treat as valid any applications not completed or
submitted or effected in all respects in accordance with the instructions set out in the
Application Form or the terms and conditions of this Offer Document, and also to
present for payment or other processes all remittances at any time after receipt and to
have full access to all information relating to, or deriving from, such remittances or the
processing thereof.
12. Our Company, the Vendors, the Sponsor and Issue Manager and the Joint Placement Agents
reserve the right to reject or to accept, in whole or in part, or to scale down any application,
without assigning any reason therefor, and no enquiry and/or correspondence on the
decision with regards hereto will be entertained. In deciding the basis of allotment and/or
allocation which shall be at the discretion of our Company, due consideration will be given
to the desirability of allotting the Placement Shares to a reasonable number of applicants
with a view to establishing an adequate market for our Shares.
13. Share certificates will be registered in the name of CDP or its nominee and will be forwarded
only to CDP. It is expected that CDP will send to you, at your own risk, within 15 Market Days
after the close of the Application List, a statement of account stating that your Securities
Account has been credited with the number of Placement Shares allotted and/or allocated to
you, if your application is successful. This will be the only acknowledgement of application
monies received and is not an acknowledgement by our Company, the Vendors, the Sponsor
and Issue Manager and the Joint Placement Agents. You irrevocably authorise CDP to
G-2
complete and sign on your behalf, as transferee or renouncee, any instrument of transfer
and/or other documents required for the issue or purchase of the Placement Shares allotted
or allocated to you.
14. In the event that our Company lodges a supplementary or replacement offer document (the
Relevant Document) pursuant to the SFA or any applicable legislation in force from time
to time prior to the close of the Placement, and the Placement Shares have not been issued
and/or transferred, we will (as required by law), and subject to the SFA, at our and the
Vendors sole and absolute discretion, either:
(a) within two (2) days (excluding any Saturday, Sunday or public holiday) from the date of
lodgement of the Relevant Document, give the applicants notice in writing of how to
obtain, or arrange to receive, a copy of the Relevant Document, and provide the
applicants with an option to withdraw their applications and take all reasonable steps to
make available within a reasonable period the Relevant Document to the applicants
who have indicated that they wish to obtain, or have arranged to receive, a copy of the
Relevant Document;
(b) within seven (7) days from the date of lodgement of the Relevant Document, give the
applicants the Relevant Document, as the case may be, and provide the applicants with
an option to withdraw their applications; or
(c) treat the applications as withdrawn and cancelled, in which case the applications shall
be deemed to have been withdrawn and cancelled, and within seven (7) days from the
date of lodgement of the Relevant Document, our Company (and on behalf of the
Vendors) shall return all monies paid in respect of any application, without interest or
any share of revenue or other benefit arising therefrom and at the applicants own risk.
Where you have notified us within 14 days from the date of lodgement of the Relevant
Document of your wish to exercise your option under paragraph (a) and (b) above to
withdraw your application, we (and on behalf of the Vendors) shall pay to you all monies paid
by you on account of your application for the Placement Shares without interest or any share
or revenue or other benefit arising therefrom and at your own risk, within seven (7) days from
the receipt of such notification and you shall not have any claim against our Company, the
Vendors, the Sponsor and Issue Manager and the Joint Placement Agents.
In the event that at any time of the lodgement of the Relevant Document, the Placement
Shares have already been issued and/or transferred but trading has not commenced, we will
(as required by law), and subject to the SFA:
lodgement of the Relevant Document, give the applicants notice in writing of how to
obtain, or arrange to receive, a copy of the Relevant Document, and provide the
applicants with an option to return to our Company and/or the Vendors the Placement
Shares which they do not wish to retain title in, and take all reasonable steps to make
available within a reasonable period the Relevant Document to the applicants who have
indicated that they wish to obtain, or have arranged to receive, a copy of the Relevant
Document; or
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(ii) within seven (7) days from the date of lodgement of the Relevant Document, give the
applicants the Relevant Document, as the case may be, and provide the applicants with
an option to return to our Company the Placement Shares, which they do not wish to
retain title in.
Any applicant who wishes to exercise his option under the paragraph (i) and (ii) to return the
Placement Shares issued and/or transferred to him shall, within 14 days from the date of
lodgement of the Relevant Document, notify us of this and return all documents, if any,
purporting to be evidence of title of those Placement Shares, and agree for us (and on behalf
of the Vendors) to purchase his Placement Shares at the Placement Price, whereupon we
(and on behalf of the Vendors) shall, within seven (7) days from the receipt of such
notification and documents, subject to compliance with the Cayman Companies Law,
purchase the applicants Placement Shares at the Placement Price, and pay to him all
monies paid by him for the Placement Shares without interest or any share of revenue or
other benefit arising therefrom and at his own risk.
Additional terms and instructions applicable upon the lodgement of the Relevant Document,
including instructions on how you can exercise the option to withdraw, may be found in such
Relevant Document.
15. You irrevocably authorise CDP to disclose the outcome of your application, including the
number of Placement Shares allotted to you pursuant to your application, to us, the Vendors,
the Sponsor and Issue Manager, the Joint Placement Agents and any other parties so
authorised by the foregoing persons.
16. Any reference to you or the applicant in this section shall include an individual, a
corporation, an approved nominee company and trustee applying for the Placement Shares
through the Joint Placement Agents or its designated sub-placement agent.
17. By completing and delivering an Application Form in accordance with the provisions of this
Offer Document, you:
(i) irrevocably offer, agree and undertake to subscribe for and/or purchase the number of
Placement Shares specified in your application (or such smaller number for which the
application is accepted) at the Placement Price for each Placement Share and agree
that you will accept such Placement Shares as may be allotted and/or allocated to you,
in each case, and subject to the terms and conditions set out in this Offer Document and
the Memorandum of Association and Articles;
(ii) agree that the aggregate Placement Price for the Placement Shares applied for is due
and payable to the Company or the Vendors upon application;
(iii) warrant the truth and accuracy of the information contained, and representations and
declarations made, in your application, and acknowledge and agree that such
information, representations and declarations will be relied on by our Company and the
Vendors in determining whether to accept your application and/or whether to allot
and/or allocate any Placement Shares to you; and
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(iv) agree and warrant that, if the laws of any jurisdictions outside Singapore are applicable
to your application, you have complied with all such laws and none of our Company, the
Vendors, the Sponsor and Issue Manager and/or the Joint Placement Agents will
infringe any such laws as a result of the acceptance of your application.
18. Our acceptance of applications will be conditional upon, inter alia, our Company, the
Vendors, the Sponsor and Issue Manager and the Joint Placement Agents being satisfied
that:
(i) permission has been granted by the SGX-ST to deal in and for quotation for all our
existing Shares and the New Shares on Catalist;
(ii) the Management Agreement and the Placement Agreement referred to in the section
entitled Management and Placement Arrangements of this Offer Document have
become unconditional and have not been terminated or cancelled prior to such date as
our Company may determine; and
(iii) the SGX-ST, acting as agent on behalf of the Authority, has not served a stop order (the
Stop Order) which directs that no or no further shares to which this Offer Document
relates be allotted and/or allocated.
19. In the event that a Stop Order in respect of the Placement Shares is served by the SGX-ST,
acting as an agent on behalf of the Authority or other competent authority, and
(i) in the case where the Placement Shares have not been issued and/or transferred, we
will (as required by law), and subject to the SFA, deem all applications withdrawn and
cancelled and our Company (and on behalf of the Vendors) shall refund (at your own
risk) all monies paid on account of your application for the Placement Shares (without
interest or any share of revenue or other benefit arising therefrom) to you within 14 days
of the date of the Stop Order; or
(ii) in the case where the Placement Shares have already been issued and/or transferred
but trading has not commenced and the issue and/or transfer of the Placement Shares
is required by law to be deemed to be void, you irrevocably agree that your Placement
Shares shall (as required by law) be deemed to be void and our Company (and on
behalf of the Vendors) shall, within 14 days from the date of the Stop Order, subject to
compliance with the Cayman Companies Law, purchase the applicants Placement
Shares at the Placement Price, and pay to the applicants all monies paid on account of
his application for the Placement Shares (without interest or any share of revenue or
other benefit arising therefrom), and
you shall not have any claims against our Company, the Vendors, the Sponsor and Issue
Manager and/or the Joint Placement Agents.
This shall not apply where only an interim Stop Order has been served.
20. In the event that an interim Stop Order in respect of the Placement Shares is served by the
SGX-ST, acting as an agent on behalf of the Authority or other competent authority, no
Placement Shares shall be issued and/or transferred during the time when the interim Stop
Order is in force.
G-5
21. The Authority or the SGX-ST (acting as agent on behalf of the Authority) is not able to serve
a Stop Order in respect of the Placement Shares if the Placement Shares have been issued
and/or transferred and listed for quotation on a securities exchange and trading in the
Placement Shares has commenced.
22. In the event of any changes in the closure of the Application List or the time period during
which the Placement is open, we will publicly announce the same through a SGXNET
announcement to be posted on the Internet at the SGX-ST website http://www.sgx.com and
through a paid advertisement in a generally circulating daily press.
23. We will not hold any application in reserve.
24. We will not allot and/or allocate Shares on the basis of this Offer Document later than six (6)
months after the date of registration of this Offer Document by the SGX-ST.
25. Additional terms and conditions for applications by way of Application Form are set out in
pages G-6 to G-9 of this Offer Document.
ADDITIONAL TERMS AND CONDITIONS FOR APPLICATIONS USING APPLICATION FORM
Applications by way of an Application Form shall be made on, and subject to, the terms and
conditions of this Offer Document including but not limited to the terms and conditions appearing
below as well as those set out in the section entitled Terms, Conditions and Procedures for
Application and Acceptance of this Offer Document and the Memorandum of Association and our
Articles.
1. Your application for the Placement Shares must be made using the BLUE Application Form,
accompanying and forming part of this Offer Document. ONLY ONE (1) APPLICATION
should be enclosed in each envelope.
We draw your attention to the detailed instructions contained in the Application Form and this
Offer Document for the completion of the Application Form which must be carefully followed.
Our Company, the Vendors, the Sponsor and Issue Manager and the Joint Placement
Agents reserve the right to reject applications which do not conform strictly to the
instructions set out in the Application Form and this Offer Document or to the terms
and conditions of this Offer Document or Application Form which are illegible,
incomplete, incorrectly completed or which are accompanied by improperly drawn
remittances or improper form of remittances which are not honoured upon their first
presentation.
2. Your Application Form must be completed in English. Please type or write clearly in ink using
BLOCK LETTERS.
3. All spaces in the Application Form, except those under the heading FOR OFFICIAL USE
ONLY, must be completed and the words NOT APPLICABLE or N.A. should be written
in any space that is not applicable.
4. Individuals, corporations, approved nominee companies and trustees must give their names
in full. If you are an individual, you must make your application using your full names as they
appear in your identity card (if you have such identification document) or in your passport
and, in the case of a corporation, in the full name of the corporation as registered with a
competent authority. If you are not an individual, you must complete the Application Form
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under the hand of an official who must state the name and capacity in which he signs the
Application Form. If you are a corporation completing the Application Form, you are required
to affix your common seal (if any) in accordance with your memorandum and articles of
association or equivalent constitutive documents of the corporation. If you are a corporate
applicant and your application is successful, a copy of your memorandum and articles of
association or equivalent constitutive documents must be lodged with our Companys Share
Registrar. Our Company reserves the right to require you to produce documentary proof of
identification for verification purposes.
5. (a) You must complete Sections A and B and sign on page 1 of the Application Form.
(b) You are required to delete either paragraph 7(a) or 7(b) on page 1 of the Application
Form. Where paragraph 7(a) is deleted, you must also complete Section C of the
Application Form with particulars of the beneficial owner(s).
(c) If you fail to make the required declaration in paragraph 7(a) or 7(b), as the case may
be, on page 1 of the Application Form, your application is liable to be rejected.
6. You (whether you are an individual or corporate applicant, whether incorporated or
unincorporated and wherever incorporated or constituted) will be required to declare whether
you are a citizen or permanent resident of Singapore or a corporation in respect of which
citizens or permanent residents of Singapore or any body corporate constituted under any
statute of Singapore have an interest in the aggregate of more than 50 per cent. of the issued
share capital of or interests in such corporation. If you are an approved nominee company,
you are required to declare whether the beneficial owner of the Placement Shares is a citizen
or permanent resident of Singapore or a corporation, whether incorporated or unincorporated
and wherever incorporated or constituted, in which citizens or permanent residents of
Singapore or any body corporate whether incorporated or unincorporated and wherever
incorporated or constituted under any statute of Singapore have an interest in the aggregate
of more than 50 per cent. of the issued share capital of or interests in such corporation.
7. The completed and signed BLUE Application Form and the correct remittance in full in
respect of the number of Placement Shares applied for (in accordance with the terms and
conditions of this Offer Document) with your name and address written clearly on the reverse
side, must be enclosed and sealed in an envelope. You must affix adequate postage (if
despatching by ordinary post) and thereafter the sealed envelope must be DESPATCHED
BY ORDINARY POST OR DELIVERED BY HAND at your own risk to Boardroom Corporate
& Advisory Services Pte. Ltd., 50 Raffles Place, #32-01 Singapore Land Tower,
Singapore 048623, to arrive by 12.00 noon on 25 July 2014 or such other time as we and
the Vendors may, in consultation with the Sponsor and Issue Manager and the Joint
Placement Agents, decide. Local Urgent Mail or Registered Post must NOT be used.
ONLY ONE (1) APPLICATION should be enclosed in each envelope. No acknowledgment or
receipt will be issued for any application or remittance received.
8. Your application must be accompanied by a remittance in Singapore currency for the full
amount payable, in respect of the number of Placement Shares applied for, in the form of a
BANKERS DRAFT or CASHIERS ORDER drawn on a bank in Singapore, made out in
favour of TERRATECH GROUP SHARE ISSUE ACCOUNT crossed A/C PAYEE ONLY,
with your name, CDP Securities Account Number and address written clearly on the reverse
side. APPLICATIONS NOT ACCOMPANIED BY ANY PAYMENT OR ACCOMPANIED BY
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ANY OTHER FORM OF PAYMENT WILL NOT BE ACCEPTED. We will reject remittances
bearing NOT TRANSFERABLE or NON TRANSFERABLE crossings. No
acknowledgement or receipt will be issued by our Company, the Vendors or the Sponsor,
Issue Manager and Placement Agent for applications and application monies received.
9. Where your application is rejected or accepted in part only, the full amount or the balance of
the application monies, as the case may be, will be refunded (without interest or any share
of revenue or other benefit arising therefrom) to you by ordinary post at your own risk within
14 Market Days after the close of the Application List, provided that the remittance
accompanying such application which has been presented for payment or other processes
has been honoured and application monies have been received in the designated share
issue account. In the event that the Placement is cancelled by us following the termination
of the Management Agreement and/or the Placement Agreement or the Placement does not
proceed for any reason, the application monies received will be refunded (without interest or
any share of revenue or any other benefit arising therefrom) to you by ordinary post at your
own risk within five (5) Market Days from the termination of the Placement. In the event that
the Placement is cancelled by us following the issuance of a Stop Order by the SGX-ST,
acting as an agent on behalf of the Authority, the application monies received will be
refunded (without interest or any share of revenue or other benefit arising therefrom) to you
by ordinary post at your own risk within 14 Market Days from the date of the Stop Order.
10. Capitalised terms used in the Application Form and defined in this Offer Document shall bear
the meanings assigned to them in this Offer Document.
11. You irrevocably agree and acknowledge that your application is subject to risks of fires, acts
of God and other events beyond the control of our Company, the Vendors, our Directors, the
Sponsor and Issue Manager, the Joint Placement Agents and/or any other party involved in
the Placement, and if, in any such event, our Company, the Vendors, the Sponsor and Issue
Manager and/or the Joint Placement Agents do not receive your Application Form, you shall
have no claim whatsoever against our Company, the Vendors, the Sponsor and Issue
Manager, the Joint Placement Agents and/or any other party involved in the Placement for
the Placement Shares applied for or for any compensation, loss or damage.
12. By completing and delivering the Application Form, you agree that:
(a) in consideration of our Company and the Vendors having distributed the Application
Form to you and agreeing to close the Application List at 12.00 noon on 25 July 2014
or such other time or date as our Directors and the Vendors may, in consultation with
the Sponsor and Issue Manager and the Joint Placement Agents, decide and by
completing and delivering the Application Form, you agree that:
(i) your application is irrevocable; and
(ii) your remittance will be honoured on first presentation and that any application
monies returnable may be held pending clearance of your payment without interest
or any share of revenue or other benefit arising therefrom;
(b) neither our Company, the Vendors, the Sponsor and Issue Manager and the Joint
Placement Agents nor any other party involved in the Placement shall be liable for any
delays, failures or inaccuracies in the recording, storage or in the transmission or
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delivery of data relating to your application to us, the Vendors or CDP due to
breakdowns or failure of transmission, delivery or communication facilities or any risks
referred to in paragraph 11 above or to any cause beyond their respective controls;
(c) all applications, acceptances and contracts resulting therefrom under the Placement
shall be governed by and construed in accordance with the laws of Singapore and that
you irrevocably submit to the non-exclusive jurisdiction of the Singapore courts;
(d) in respect of the Placement Shares for which your application has been received and
not rejected, acceptance of your application shall be constituted by written notification
and not otherwise, notwithstanding any remittance being presented for payment by or
on behalf of our Company or the Vendors;
(e) you will not be entitled to exercise any remedy of rescission for misrepresentation at
any time after acceptance of your application;
(f) in making your application, reliance is placed solely on the information contained in this
Offer Document and that none of our Company, the Vendors, the Sponsor and Issue
Manager, the Joint Placement Agents or other authorised operators involved in the
Placement shall have any liability for any information not so contained;
(g) you consent to the disclosure of your name, NRIC/passport number, address,
nationality, permanent resident status, CDP Securities Account number, and share
application amount to our Share Registrar, CDP, SCCS, SGX-ST, our Company, the
Vendors, the Sponsor and Issue Manager, the Joint Placement Agents or other
authorised operators; and
(h) you irrevocably agree and undertake to subscribe for or purchase the number of
Placement Shares applied for as stated in the Application Form or any smaller number
of such Placement Shares that may be allotted and/or allocated to you in respect of your
application. In the event that our Company or the Vendors decide to allot and/or allocate
any smaller number of Placement Shares or not to allot any Placement Shares to you,
you agree to accept such decision as final.
G-9
Singapore 416180
Tel: (65) 6848 2567 | Fax: (65) 6848 2568
BEEN COMPLIED WITH.

WHO WE ARE
WHAT WE DO
2013 respectively
Quarry
marble products
HILL 1
HILL 1
HILL 2A
HILL 2A
HILL 2B
HILL 2B
HILL 3
HILL 3
PROPERTIES OF
OUR MARBLE
MARKET VALUATION
OF QUARRY
Kelantan
Purplish White
Kelantan
Black-Spotted
White
Kelantan
Misty White
100 0 200 300 400 500
(S$million)

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Crescent 24,601,000 N.A.

New public investors 108,700,000 S$25,001,000 S$0.23

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