On 2nd March 2012 Cove announced that it was seeking clarity on a possible tax charge to be levied by the Government of Mozambique (the “Government”) in relation to the indirect transfer of the Company’s 8.5 per cent participating interest in Rovuma Offshore Area 1 and its 10.0 per cent participating interest in Rovuma Onshore block (together the “Mozambique Assets”) which would arise on the takeover of the Company (the “Transaction”).
Following discussions with various representative bodies of the Government, Cove has received written clarification in relation to the basis for, and method of calculation of, the proposed tax charge.
Pursuant to the terms of this written clarification, the Company is able to announce that the Mozambique authorities have indicated the following:
• the Company will be subject to Mozambique corporate income tax on the imputed capital gain arising on its Mozambique Assets as a result of the Transaction (the “Taxable Gain”); and
• the effective tax rate to be applied to the Taxable Gain will be 12.8% (after applying available tapering relief to such gain). The tax return must be submitted within 30 days of completion of the Transaction; and
• the formal sale process, including the dispensations granted by the Panel on Takeovers and Mergers in connection therewith (as detailed in the announcement by Cove on 5th January 2012), continues.
Discussions with possible offerors are ongoing. However, there can be no certainty that any offer will be made for the Company, nor as to the level of any proposal or offer that may be made. The Board reserves the right to reject any approach or terminate discussions with any interested party or possible offeror at any time.
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