Struggling engineering contractor VDM Group has outlined plans to diversify into procurement and mining, after an independent expert ticked off a capital raising that will transfer day-to-day control of the company.
Former CITIC Pacific Mining chairman Dongyi Hua is looking to acquire a 42 per cent stake in VDM, after agreeing to inject $15 million of new capital through his company H&H Holdings.
The capital raising is pitched at 2.5 cents per share, a significant premium to the price at which VDM had been trading prior to the deal's announcement.
Independent expert BDO has concluded the deal is fair and reasonable for existing shareholders, after putting a valuation on VDM of 1.6 cents per share.
VDM stock closed at 1.4 cents today, up 0.2 cents.
If the deal is approved, Dr Hua will be appointed VDM's managing director and two further nominees from his company H&H Holdings will join the seven-person board.
In a notice sent to shareholders today, VDM said Dr Hua planned to accelerate VDM's existing strategy, which is designed to focus the business on a 'design and construct' model with an emphasis on resources and civil infrastructure projects.
"H&H believes that with some additional capital and H&H's strong relationships in engineering and construction, in particular those that are Chinese related, they can accelerate the growth and sustainability of its project pipeline," VDM said.
"In particular, H&H sees the opportunity to leverage VDM's magnetite experience and track record to win new work from Chinese magnetite developers in the future."
VDM was a contractor on CITIC Pacific's giant Sino Iron magnetite project in the Pilbara, which has been adversely affected by major cost blow-outs and commissioning delays.
The only other magnetite development in WA, Gindalbie's Karara project, was also hit by cost increases and delays, but to a much lesser extent.
VDM added that H&H was proposing that "in time" VDM consider establishing two new divisions.
One proposal was for the establishment of a procurement centre in Shanghai to supply equipment and materials.
The second was for VDM to expand into mining by applying for mining rights and investing directly into mining projects.
VDM's notice of meeting also disclosed that Dr Hua is negotiating a salary package substantially the same as current managing director Andrew Broad.
This includes a base salary of $625,000 including superannuation, a short-term cash bonus worth up to 75 per cent of the base salary, and a long-term share-based incentive also worth up to 75 per cent of base salary.
H&H intends for Mr Broad to stay with the company, but his role has not been defined.