TIDMCAF
RNS Number : 7003P
China Africa Resources PLC
21 November 2016
Not for release, publication or distribution, directly or
indirectly, in whole or in part, in or into the United States of
America, Canada, Australia, The Republic of South Africa, Japan,
New Zealand or Russia.
China Africa Resources plc
("CAF" or the "Company")
Business Restructuring Update, Fundraise and General Meeting
China Africa Resources plc (LON:CAF) the AIM quoted natural
resource exploration and development company is pleased to announce
a business update including details of a proposed Company
restructuring, GBP1million fundraise and transition into a Rule 15
Cash Shell seeking a reverse takeover transaction primarily focused
on the energy metals and minerals sector (together the
"Proposals").
The Proposals will be put to shareholders for their formal
approval at a general meeting convened for 11.00am on Wednesday 14
December 2016 (the "General Meeting") as outlined below.
Highlights
-- The Company's current sole interest, the Berg Aukas Project,
held through its wholly owned subsidiary, China Africa Resources
Namibia (Pty) Ltd ("CAR Namibia"), is to be distributed to all
current shareholders via a special dividend valued at 1.75p per
share;
-- Board restructuring to be undertaken with the restructured
Board comprising Rod Webster (Non-Executive Chairman), Paul Johnson
(Chief Executive Officer), John Bryant (Non-Executive Director) and
Nick O'Reilly (Non-Executive Director);
-- Immediately upon disposal the Company will become a Rule 15
Cash Shell under the AIM Rules for Companies (the "AIM Rules") with
six months to complete a qualifying reverse takeover transaction
under AIM Rules;
-- Any reverse takeover transaction will be in line with an
Investing Policy (to be proposed at the General Meeting) focused on
the energy metals and minerals sector, and specifically uranium,
lithium, cobalt, copper and/or coal opportunities;
-- The Company has secured commitments in a placing and
subscription (together the "Fundraise") of 46,082,948 New Ordinary
Shares at a price of 2.17p (the "Fundraise Price") raising
GBP1,000,000 to support the pursuit of a suitable reverse takeover
transaction. The Fundraise Price was agreed at 2.17p to reflect a
value for the Company, as effectively a cash shell, pre-financing
of GBP500,000 and an issued share capital comprising 23,076,924
Ordinary Shares;
-- Each New Ordinary Share issued as part of the Fundraise will
have a warrant attached to acquire an additional Ordinary Share at
an exercise price of 4.34p (a 100% premium to the Fundraise Price)
with an exercise life of two years from the admission of the New
Ordinary Shares to AIM;
-- Proposed Chief Executive Officer Paul Johnson to personally
invest GBP50,000 in the proposed Fundraise and in addition the
proposed new Board to accept 50% of proposed remuneration in shares
at the Fundraise Price.
Cungen Ding, Non-Executive Chairman of China Africa Resources
commented: "I am pleased to bring forward the proposals outlined in
this announcement. Existing shareholders of the Company will, if
the Proposals are approved, benefit from the special dividend of
the shares in CAR Namibia, whilst also having access to potential
further upside that may be secured through any reverse takeover
subsequently completed by the Company.
I would like to thank the proposed retiring directors Li Ming,
James Richards, Wuming Wang and Frank Lewis for their service to
the Company during what has been a particularly difficult time for
the natural resource sector.
I will also be stepping down from the Board as part of the
Proposals. I would like to thank existing shareholders for their
support of the Company and look forward to the potential value
generated through both CAR Namibia and the Company going
forward."
Circular and General Meeting
A Circular (the "Circular") will be dispatched to shareholders
shortly outlining the full terms of the Proposals and a copy will
be available on the Company's website on publication.
The Circular contains full details of the proposed timetable and
notice of a General Meeting and should be reviewed carefully by all
shareholders at the earliest opportunity.
The General Meeting to approve the necessary resolutions to
implement the Proposals is scheduled for 11.00am on Wednesday 14
December 2016 to be held at the offices of Cooley (UK) LLP,
Dashwood, 69 Old Broad Street, London, EC2M 1QS. Shareholders are
encouraged to attend and vote at this General Meeting and any
questions related thereto should be addressed to the Company,
contact details being available on the Company's website at
www.chinaafricares.com.
Irrevocable undertakings to vote in favour of all the
resolutions at the General Meeting have been received in respect of
shareholders holding 90.0% of issued share capital. This includes
Hong Kong East China Non-Ferrous Mineral Resources Co. Limited
("ECE") which currently holds 15,000,000 shares or 65.0% of current
issued share capital and Weatherly International plc ("WTI") which
currently holds 5,769,232 shares of 25% of current issued share
capital.
In addition irrevocable undertakings to vote in favour of all
the resolutions at the General Meeting (save for Resolution 7 where
the Directors are excluded from voting) have been received in
respect of all current director shareholdings totalling 119,675
shares (0.52% of current issued share capital).
Transaction Summary
A summary of the Proposals is set out below.
(i) The Special Dividend
Your Board has been informed by the new investors that they have
no interest in pursuing the Berg Aukas Project as an asset of the
Company. The Board have accordingly reviewed the situation and,
having consulted with the two major shareholders, recommend that
the shares of CAR Namibia be distributed to all Shareholders in the
Company.
This will be achieved by the in specie distribution of the
shares in CAR Namibia (which holds the Berg Aukas Project) to all
Shareholders, as the Directors believe that all current
shareholders should share in any future potential.
The proposed disposal effected by the Special Dividend,
constitutes a "disposal resulting in a fundamental change of
business" under Rule 15 of the AIM Rules. Accordingly, the Special
Dividend is conditional upon, inter alia, on approval by
Shareholders at the General Meeting.
The Special Dividend is valued at 1.75p per share.
(ii) AIM Rule 15 application
On completion of the Special Dividend, under Rule 15 of the AIM
Rules for Companies, the Company will be regarded as an AIM Rule 15
Cash Shell.
Under Rule 15 of the AIM Rules, within six months of the
transfer out of CAR Namibia (scheduled to occur in late December
2016 if approved by shareholders), the Company must make an
acquisition or enter into commercial arrangements which constitute
a reverse takeover under Rule 14 of the AIM Rules ("Reverse
Takeover").
Should the Company not complete a Reverse Takeover within the
stated six month period the admission of the Company's shares on
AIM would be cancelled under the provisions of Rule 41 of the AIM
Rules.
(iii) Investing Policy
The proposed new Board is seeking to undertake a Reverse
Takeover as outlined above.
The new Board proposes to invest in and/or acquire companies
and/or projects within the natural resource sector but with a
particular interest in opportunities in the energy metal and
minerals sector and with a key focus on opportunities in respect of
uranium, lithium, cobalt, copper and coal. Each commodity has a
specific relevance to the Energy space in terms of power
generation, storage and distribution.
The new Board considers that, as evidenced by the financial
support provided by the new investors for the proposals outlined
there is a strong demand for energy metal and mineral opportunities
on London's AIM.
The new Board will not be limited to a specific geographic
focus. In selecting investment opportunities, the new Board will
focus on businesses, assets and/or projects that are available at
attractive valuations and hold opportunities to unlock embedded
value or where, through efficient and focused work, there is the
prospect of adding considerable value to each project, for the
benefit of shareholders.
Where appropriate, the new Board may seek to invest in
businesses where it may influence the business at a board level,
add their expertise to the management of the business, and utilise
their industry relationships and access to finance.
The Company's interests in a proposed investment and/or
acquisition may range from a minority position to full ownership
and may comprise one investment or multiple investments. The
proposed investments may be in quoted or unquoted companies; be
made by direct acquisitions or farm-ins; and may be in companies,
partnerships, earn-in joint ventures, debt or other loan
structures, joint ventures or direct or indirect interests in
assets or projects. The new Board may focus on investments where
intrinsic value can be achieved from the restructuring of
investments or merger of complementary businesses.
The new Board expects that investments will typically be held
for the medium to long term, although short term disposal of assets
cannot be ruled out if there is an opportunity to generate an
attractive return for Shareholders. The new Board will place no
minimum or maximum limit on the length of time that any investment
may be held.
The new Board will conduct initial due diligence appraisals of
potential businesses or projects and, where they believe further
investigation is warranted, intend to appoint appropriately
qualified persons to assist.
The new Board believes it has a broad range of contacts through
which it is likely to identify various opportunities which may
prove suitable. The new Board believes its expertise will enable it
to determine quickly which opportunities could be viable and so
progress quickly to formal due diligence.
The Company will not have a separate investment manager. The new
Board proposes to carry out a comprehensive and thorough project
review process in which all material aspects of a potential project
or business will be subject to rigorous due diligence, as
appropriate. Due to the nature of the sector in which the Company
is focused the Company expects a focus on capital returns over the
medium to long term. Should opportunities arise for an early cash
return to investors, this will be considered by the Board.
It is emphasised that there is no certainty that the Company
will be able to secure an acquisition or Reverse Takeover as set
out above.
(iv) Board Restructuring
Subject to the approval of the resolutions at the General
Meeting, the Company will implement a Board restructuring as
follows:
- Cungen Ding (current Non-Executive Chairman), Li Ming (current
Non-Executive Director), James Richards (current Senior Independent
Non-Executive Director), Wuming Wang (current Non-Executive
Director) and Frank Lewis (current Independent Non-Executive
Director) will resign as Directors;
- Rod Webster (current Chief Executive Officer) will become Non-Executive Chairman;
- John Bryant will remain as Non-Executive Director;
- Paul Johnson will be appointed as Chief Executive Officer, and;
- Nickolas John O'Reilly will be appointed as a Non-Executive Director.
It is proposed the new Board will each receive fees of GBP24,000
each per annum, with each director taking 50% of fees in New
Ordinary Shares at the Fundraise Price of 2.17p.
In addition the new Board members will each receive 1,500,000
options (6,000,000 options in total) at twice the Fundraise Price
(or 4.34p) with a three year exercise life. The options will vest
immediately upon grant.
Paul Johnson - Proposed Chief Executive Officer
Paul Johnson (aged 47) is a Chartered Accountant, Associate of
the Institute of Chartered Loss Adjusters and of the Chartered
Insurance Institute. Paul holds a BSc (Hons) in Management Science
from the University of Manchester Institute of Science and
Technology.
Paul has held various board roles on AIM including most recently
Chief Executive Officer of Metal Tiger plc and he is currently a
Non-Executive Director of Thor Mining (LON:THR). He is also
Non-Executive Director of Metal NRG (ISDX:MNRG) quoted on the ISDX
trading platform.
In accordance with Schedule 2 paragraph (g) of the AIM Rules,
Paul Johnson is, or has been, a director or partner of the
following companies or partnerships during the previous five
years:
Current directorships: Thor Mining plc, Metal NRG plc, Value
Generation Limited, Tomas Capital Limited and Value at Risk
Limited.
Past directorships: Metal Tiger plc, Metal Capital Limited,
Greatland Gold plc, Catalyst Strategies Limited, Open 2 Barter
Limited, Commercial Assure Limited, The Vitiligo Society, Catalyst
Information Services Limited and Strathmore Accountants
Limited.
There are no other disclosures required in relation to Rule 17
or paragraph (g) of Schedule 2 of the AIM Rules.
Nicholas John O'Reilly - Proposed Non-Executive Director
Nicholas John O'Reilly (aged 41) is a geologist with over 14
years' experience in exploration programme valuation, audit, due
diligence, design and project management, ranging from grassroots
stage through feasibility study to production across all major
commodities. With a specialism in the Uranium sector Nicholas has
helped take uranium projects from an early conceptual stage,
through exploration, and resource definition, to a successful sale,
and has worked extensively in Africa and central Asia.
He is a Member of the Australasian Institute of Mining and
Metallurgy, a Fellow of the Geological Society of London and
currently sits on the Committee of the Association of Mining
Analysts.
Nicholas holds an MSc degree in Mineral Project Appraisal from
Imperial College London (Royal School of Mines) and a BSc. in
Applied Geology from Leicester University.
In accordance with Schedule 2 paragraph (g) of the AIM Rules,
Nick O'Reilly is, or has been, a director or partner of the
following companies or partnerships during the previous five
years:
Current directorships: Mining Analyst Consulting Limited and
Singularity ONE (UK) Limited.
Past directorships: None.
There are no other disclosures required in relation to Rule 17
or paragraph (g) of Schedule 2 of the AIM Rules.
(v) Fundraise and Fee Shares Overview
The Company has, conditional only on Admission, raised
approximately GBP1,000,000 by the proposed issue of 46,082,948 new
Ordinary Shares (the "Fundraise Shares") at a price of 2.17 pence
per share.
The Fundraise Price was based on an agreed GBP500,000 valuation
for the China Africa Resource plc vehicle, post distribution of CAR
Namibia and assuming minimal assets and liabilities at that time,
and thus before the injection of the GBP1,000,000 pursuant to the
Fundraise. This equates, on a pro forma basis, to 2.17p per share
based on the 23,076,924 Ordinary Shares currently in issue.
All Fundraise Shares will be issued together with a warrant to
subscribe for one new Ordinary Share at a price of 4.34 pence per
new Ordinary Share with an exercise life of two years from the date
of Admission of the Fundraise Shares. In addition 500,000 warrants
to subscribe for new Ordinary Shares at 4.34p, with an exercise
life of two years, will be issued to each of SI Capital Limited and
Beaufort Securities Limited as part consideration for their
services.
Following the Fundraise, the net cash resources available to the
Company will be approximately GBP1,000,000. The Company estimates
that this should provide operating cash for at least 18 months from
today's date on the basis of its plans outlined above and on a
reduced overhead basis as previously announced.
As part of the Proposals 6,679,724 new Ordinary Shares will be
issued in lieu of services related to the transaction and in
respect of outstanding fees.
Included within this total are:
- 276,498 new Ordinary Shares to be issued to Frank Lewis
(current Non-Executive Director) in respect of accrued but not paid
Director's compensation:
- 552,996 new Ordinary Shares to be issued to Rod Webster
(proposed Non-Executive Chairman) in lieu of cash remuneration;
- 552,995 new Ordinary Shares to be issued to Paul Johnson
(proposed Chief Executive Director) in lieu of cash
remuneration;
- 552,996 new Ordinary Shares to be issued to John Bryant
(proposed Non-Executive Director) in lieu of cash remuneration;
- 552,995 new Ordinary Shares to be issued to Nick O'Reilly
(proposed Non-Executive Director) in lieu of cash remuneration;
- 3,500,000 new Ordinary Shares to be issued to Value Generation
Limited, a wholly owned personal service company of Paul Johnson
(proposed Chief Executive Officer) in lieu of fees and
expenses.
(vi) Proposed Admission and Total Voting Rights
Subject to the passing of the resolutions to implement the
Proposals, at the General Meeting, application will be made to the
London Stock Exchange Plc for the Fundraise Shares and the Fee
Shares to be admitted to trading on AIM ("Admission"). The
Fundraise Shares and the Fee Shares are expected to commence
trading at 8.00 a.m. on 15 December 2016 and will rank pari passu
in all respects with the existing Ordinary Shares save that they
will have no entitlement to receive the Special Dividend.
Subsequent to the issuance of the Fundraise Shares and Fee
Shares, the Company will have 75,839,596 Ordinary Shares in issue.
The Company does not hold any shares in treasury. Accordingly,
following admission of the Fundraise Shares, and the Fee Shares the
total number of Ordinary Shares and voting rights in the Company is
75,839,596 shares. This figure may be used by shareholders as the
denominator for the calculations by which they will determine if
they are required to notify their interest in, or a change to their
interest in, the share capital of the Company under the Disclosure
and Transparency Rules of the UK Financial Conduct Authority.
(vii) Major Shareholder Lock-in Provisions
Irrevocable undertakings with regarding to shareholdings post
General Meeting have been received in respect of shareholders
holding 90.0% of issued share capital, namely, ECE which currently
holds 15,000,000 Ordinary Shares or 65.0% of current issued share
capital and WTI, which currently holds 5,769,232 Ordinary Shares or
25% of current issued share capital.
Both Shareholders have agreed to not dispose of any shares in
the Company for six months following Admission and for a further
six months thereafter should they wish to dispose of any of the
Ordinary Shares held by them, to do so under orderly market
provisions.
(viii) Related Party
The Company has been advised that, if the Special Dividend was
made otherwise than in accordance with the Companies Act (the
"Act"), it may have claims against past and present shareholders
who were recipients of the Special Dividend and against persons who
were directors of the Company at the time of payment of the Special
Dividend.
It is therefore proposed that the Company enter into the
Shareholders' Deed of Release and the Directors' Deed of Release.
The consequence of the entry into these deeds by the Company is
that the Company will be unable to make any claims against:
(a) past and present shareholders of the Company who were
recipients of the Special Dividend, and;
(b) the Directors and Former Directors.
In each case in respect of the payment of the Special Dividend
otherwise than in accordance with the Act. The entry by the Company
into the Shareholders' Deed of Release and the Directors' Deed of
Release constitute related party transactions (as defined in the
AIM Rules).
Given that all members of the Board are interested in the
Directors' Deed of Release and some are also interested in the
Shareholders Deed of Release, no recommendation on the issue will
be made by the Directors, however the Company's nominated adviser,
RFC Ambrian Limited, has reviewed the terms on which the releases
are to be given are fair and reasonable insofar as the Company's
Shareholders are concerned.
(ix) Changes to advisers
Conditional upon Admission it is intended that: (a) RFC Ambrian
Limited will resign as nominated adviser and to appoint SPARK
Advisory Partners Limited as the Company's nominated advisers
(subject to SPARK Advisory Partners Limited completing its required
diligence and take-on procedures); and (b) SI Capital Limited and
Beaufort Securities Limited will be appointed as joint brokers to
the Company.
Enquiries:
China Africa Resources
Plc +44 (0) 1707 800774
Rod Webster, Chief Executive
Officer
Kevin Ellis, Company
Secretary
RFC Ambrian Limited
(Nominated Adviser &
Broker)
Stephen Allen / Kim
Eckhof +44 (0) 20 3440 6800
Further information is available on the Company's website:
www.chinaafricares.com
This information is provided by RNS
The company news service from the London Stock Exchange
END
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