ENM Energem

    Energem-proposed disposal of remaining 30% interest in Nigerian tank farm and
proposed acquisition of an aircraft

    TSX/AIM: ENM

    VANCOUVER, Oct. 2 /CNW/ - Energem Resources Inc. (the "Company" or
"Energem") is pleased to announce the proposed disposal of its remaining
interest in the refined fuel product tank farm and distribution facility at
Apapa Port, Lagos, Nigeria (the "Facility") and the proposed acquisition of a
commercial aircraft to further develop and manage business opportunities in
Africa.

    PROPOSED DISPOSAL OF THE NIGERIAN FACILITY

    Energem has agreed, subject to shareholder approval and satisfaction of
the condition precedent set out below, to sell the remaining 30% interest in
the joint venture in respect of the Facility owned by its wholly owned
subsidiary, Energem Petroleum Corporation Limited ("EPC"), to one of its joint
venture partners, Yinka Folawiyo and Sons Limited ("Yinka"), for a gross cash
consideration of US$42.7 million (the "Proposed Disposal"). The net proceeds
of the Proposed Disposal will reflect a deduction of circa 3% of the gross
proceeds in settlement of transaction expenses, and a deduction of 8.2% in
respect of fees payable under the Yinka Loan (as detailed below).

    Background and contributions of the Facility to consolidated profits

    The Facility, which has been operational since 2006, provides large-scale
storage facilities for refined oil products imported into Nigeria and
comprises a ship jetty, offloading pipes, tank storage and a road loading and
distribution centre. It is the sole privately-owned facility in the region
capable of handling multiple refined oil products direct from oil tankers and
the only privately-owned on-shore oil storage facility in the port of Lagos
which is able to accommodate vessels with a draft of up to 11 metres.
    Investment in the Facility by Energem consisted of a US$21.7 million loan
advanced to the Facility in 2005/6 (the "Shareholder Loan") of which
US$6.6 million remains repayable to Energem from the Facility's future
revenues. Based on current throughput at the Facility, Energem anticipates
that the remaining US$6.6 million will be repaid within six months of this
announcement. Subject to receipt of this final repayment, Energem will have
realised US$75.3 million for its original 50% interest in the Facility within
a four year timeframe, such realization being determined following the full
recovery of the US$21.7 million capital originally invested.
    Through EPC, Energem currently holds a 30% interest in the Facility,
having previously sold a 20% interest to Glencore Finance (Bermuda) Limited
("Glencore") in May 2008, for an aggregate consideration of US$32.3 million.
    The net contribution of the Facility to Energem's consolidated earnings
for the year ended 31 December 2007 amounted to US$5.6 million and in the half
year ended 30 June 2008 amounted to US$4.6 million. The carrying value of the
Company's investment in the Facility as at 30 June 2008 (accounted for on an
equity basis) amounted to US$6.1 million, excluding the outstanding loan of
US$6.6 million referred to above. There has been no material change to this
investment carrying value since 30 June 2008.

    Effect of the Proposed Disposal on Energem

    Following completion of the Proposed Disposal, Energem will no longer
have any equity participation in the Facility and consequently no profits or
losses of the same will be accounted for in the Company's consolidated
accounts.
    Energem will record a substantial capital gain of approximately
US$31.4 million (net of costs noted above) when compared with the carrying
value of the investment in the Facility stated at 30 June 2008 of US$6.1m. The
investment carrying value will be cancelled out against proceeds receivable on
completion of the Proposed Disposal, thereby increasing cash balances in the
Company's accounts by circa US$37.5 million.

    Conditions Precedent

    Conditions precedent to the Proposed Disposal are the approval of
Energem's shareholders to the transaction, and completion of a separate
reorganisation transaction between Yinka and Glencore (the "Yinka Glencore
Transaction"). Under the terms of the Yinka Glenore Transaction, it is
proposed that Yinka will transfer 30% of its 50% interest in the Facility to
Glencore, such that with effect from completion of both the Yinka Glencore
Transaction and the Proposed Disposal, the Facility will be owned in equal
proportions by each of Yinka and Glencore. Save in respect of the Shareholder
Loan (detailed below), following completion of the Yinka Glencore Transaction
and the Proposed Disposal, the Company's interest in the Facility will cease.
    Concurrent with the execution of the agreement between the Company and
Yinka in respect of the Proposed Disposal, the Company and Yinka entered into
a secured loan facility arrangement ("Yinka Loan") whereby Yinka has agreed to
advance the sum of US$42.7 million to the Company, such monies being secured
over the Company's 30% interest in the Facility, pending shareholder approval
of the Proposed Transaction and satisfaction of the conditions precedent
thereto. The amount of the Yinka Loan will be satisfied by set-off against the
consideration monies payable to the Company by Yinka upon completion of the
Proposed Disposal. Should the Proposed Transaction not proceed or shareholder
approval not be obtained, the Yinka Loan will bear interest at 0.5% per
calendar month, and automatically becomes repayable to Yinka on demand. A
drawdown fee of 8.2% of the amount of the Yinka Loan is payable by Energem to
Wincroft Enterprises Limited, an associate of Yinka, upon drawdown of the
Yinka Loan.

    Rationale for the Proposed Disposal, Yinka Loan and Use of Proceeds

    The Proposed Disposal forms an integral part of Energem's publicly stated
refocus on renewable energy and other development activities in Africa which
commenced early in 2007 with the divestment of certain other non-core assets.
    The net proceeds of the Proposed Disposal will significantly strengthen
Energem's balance sheet, leaving the Group with a pro-forma net cash position
well in excess of its current market capitalisation level. Energem intends to
use the proceeds for general working capital requirements and to facilitate
the Company's strategic objectives, including investing a proportion of the
proceeds to further develop the Company's bio-fuel assets (notably its
jatropha based bio-diesel agricultural development operations in Mozambique
and Malawi and its ethanol producing plant in Kenya). In the short term,
Energem is seeking a number of opportunities to acquire assets in its focus
area. Having the cash from the Loan and the Proposed Disposal in its balance
sheet is expected to greatly improve Energem's ability to explore potential
transactions in its focus area.

    Regulatory Matters

    The Proposed Disposal is subject to the requirements of the London Stock
Exchange's AIM Rules for Companies (the "AIM Rules") requiring approval of the
Proposed Disposal by shareholders in a general meeting of the Company. A
special general meeting of shareholders is to be convened on 6 November 2008
to seek the necessary consent to the Proposed Disposal.

    Further Information

    An information circular setting out full details of the transaction will
be dispatched to shareholders, on or before 8 October 2008, together with a
formal notice of meeting and form of proxy.

    PROPOSED ACQUISITION OF AIRCRAFT FOR US$ 8 MILLION

    Energem proposes to acquire a used aircraft, a Gulfstream III (the
"Aircraft"), from a private company Diamond Air Charters Limited ("DAC") for a
cash consideration of US$8 million (the "Proposed Acquisition"). DAC is a
company controlled as to 80% by Mr. Antonio Teixeira, the Deputy Executive
Chairman of Energem. Mr. Teixeira also controls approximately 27.5% of the
shares of Energem. Both Mr. Teixeira and Mr. Brian Menell, the Chairman of
Energem, are directors of DAC.

    Regulatory Matters

    Mr. Teixeira is also a "Control Person" of Energem as that term is
defined under Canadian securities legislation in that he has direction and
control over more than 20% of the outstanding common shares of Energem. The
Proposed Acquisition is a related party transaction under MI61-101 adopted by
the Ontario Securities Commission and under Toronto Stock Exchange policies.
The Proposed Acquisition is accordingly subject to related party transaction
rules which require majority approval of disinterested shareholders of Energem
and preparation and submission of an independent valuation of the Aircraft.
    The Proposed Acquisition is also classed as a related party transaction
for the purposes of Rule 13 of the AIM Rules, which requires directors
independent of the proposed transaction to consider the terms of the proposed
arrangements, consult with the Company's nominated adviser on the proposals,
and determine whether the arrangements are fair and reasonable so far as the
Company's shareholders are concerned.

    Background and rationale for acquisition

    The Aircraft was originally purchased by DAC in November 2002 for use by
the Company and the Aircraft has been used regularly (on arms' length
commercial terms) by the Company and its management team since its purchase.
When not being used by the Company, the Aircraft has been regularly chartered
out to third parties by DAC. The Company has borne the net Aircraft costs
after third party charter income of DAC in relation to the Aircraft. The
Company has, for a fee charged to DAC, managed all aspects of the Aircraft's
activities, as well as the full administration of DAC, including the keeping
of its records. In short, the Company would have acquired the Aircraft
directly itself in 2002 if it were financially able to do so at the time and
has essentially borne all the net costs of ownership of the Aircraft since
that date and, in turn, has had the use of the Aircraft as its own.
    The Aircraft is considered by the independent members of the Energem
board to be a valuable and key strategic asset to the Company's current and
future activities in Africa by facilitating direct, safe and quick access to
remote areas and areas otherwise not regularly served by scheduled commercial
aircraft. It is the opinion of the Company's independent directors that use of
the Aircraft has enabled deployment of key personnel to any location in Africa
on short notice has been critical to its recent successes both in managing and
developing existing assets and in the acquisition of major projects in Africa.
As previously done, when not required by the Company, the Aircraft will be
chartered out to third parties.
    An independent valuation of the Aircraft has been obtained from Mecrep
International of Johannesburg, South Africa, valuing the Aircraft at
US$8.469 million, over $450,000 in excess of the consideration payable for the
Proposed Acquisition under the terms thereof.
    The directors independent of the Proposed Acquisition consider, having
consulted with the Company's Nominated Adviser, Canaccord Adams Limited, that
the terms of the Proposed Acquisition are fair and reasonable insofar as
Energem's shareholders are concerned.

    Financing the Proposed Acquisition

    To finance the Proposed Acquisition, the Company has arranged a financing
facility (denominated in South African Rands) of US$8 million with a South
African bank, such financing being conditional only upon the Energem
shareholders approving the Proposed Acquisition.
    The financing facility, which will be secured over the Aircraft, is
repayable over 60 months in quarterly installments of US$400,000 and shall
bear interest at 15.5% per annum (fluctuating with the South African prime
lending rate).

    Further Information

    Full details of the terms of the Proposed Acquisition, together with
copies of the independent valuation reports for the Aircraft, will be included
in the information circular and proxy materials distributed to shareholders in
respect of the upcoming special general meeting of the Company to be held on 6
November 2008.

    This news release contains forward-looking statements which address
future events and conditions which are subject to various risks and
uncertainties. The actual results could differ materially from those
anticipated in such forward-looking statements as a result of numerous
factors, some of which may be beyond the Company's control. These factors
include: the availability of funds; the costs and availability of product;
fluctuations in fuel product sale prices; currency fluctuations; changes in
production costs; fluctuation in shipping costs; availability of shipping;
general market and industry conditions; political and regulatory instability
and risks associated with rights to title and ownership of assets.
    Forward-looking statements are based on the expectations and opinions of
the Company's management on the date the statements are made. The assumptions
used in the preparation of such statements, although considered reasonable at
the time of preparation, may prove to be imprecise and, as such, undue
reliance should not be placed on forward-looking statements.

    Energem Resources Inc. (TSX/AIM:ENM) is an Africa focused company listed
on the Toronto Stock Exchange and on the London Stock Exchange's AIM market
and the holding company of a group of companies engaged in, mainly, several
African countries in the bio-fuels, oil and related sectors including
logistics and supply to the mining industry in South and Central Africa and
development of an up-stream oil exploration asset. The Company has offices
and/or logistics and support infrastructure in Johannesburg, London and a
number of African countries.


For further information: Energem - Rob Rainey in Johannesburg at telephone
+27 11 372-3300, Fax +27 11 454-1673 or email: info(at)energem.com; Refer to
our website: www.energem.com; Canaccord Adams Limited - Robert Finlay/Andrew
Chubb, +44 207 050 6500; Smithfield - Reg Hoare/George Hudson/Will Henderson,
+44 207 360 4900
(ENM)

 



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