TIDMSTI
RNS Number : 7391S
Stratex International PLC
04 October 2017
04 October 2017
Stratex International Plc
("Stratex" or the "Company")
Notice of General Meeting and Posting of Circular to
Shareholders
The Board's recommendation is to VOTE AGAINST all resolutions
made by the requisition party
Further to the announcements dated 8(th) , 15(th) and 19(th)
September 2017 in connection with the requisition of a General
Meeting of the Company (the "Requisition") from a group of
investors ("Requisitioning Shareholders"), Stratex, the AIM-quoted
gold exploration and development company, announces that a Circular
containing the notice of General Meeting is today being posted to
Shareholders, together with a detailed presentation covering the
key highlights of the Crusader Resources Limited ("Crusader")
acquisition (the "Acquisition"). The Circular and presentation are
available on the Company's website at
http://www.stratexinternational.com.
The purpose of the resolutions proposed by the Requisitioning
Shareholders is to consider the appointment of two new directors,
David Hall and Paul Foord, both of whom are members of the
Requisitioning Shareholders, in place of the current CEO and
Chairman, and for the proposed merger with Crusader to be
terminated. David Hall and Paul Foord are both former directors of
Stratex, who each resigned from the Board some time ago to pursue
other career opportunities.
Key sections from the Circular, including the letter from the
Chairman to shareholders detailing the response to, and rebuttal
of, the notice of requisition can be found below.
The Board unanimously recommends that shareholders VOTE AGAINST
all of the resolutions to be proposed at the general meeting (the
"Resolutions") for the following reasons:
-- The Acquisition will be a transformative deal for Stratex,
offering a clear path to production and cashflow from projects that
are further up the development curve than anything else in the
Stratex portfolio, or proposed by the Requisitioning Shareholders,
which your Board believes will ultimately provide significant value
to shareholders;
-- The Company's analysis indicates that the market currently
ascribes most value to later stage development and production
companies with a clear path to cash flow. The Crusader transaction
allows for this whilst also providing a platform to advance the
exploration portfolio assets of the post-merger company (the
"Combined Group"). This analysis indicates that exploration peers
currently trade at a median EV/Resource multiple of c.US$15/oz(1)
whereas production peers currently trade at a median EV/Resource
multiple of c.US$44/oz(2) ;
-- The Acquisition is firmly in line with the Company's clearly
stated strategy of acquiring high-quality, near or in-production
mining projects to become a substantial gold explorer and producer.
The Board expects that the transaction will deliver an immediate
value re-rating and further upside through the delivery of a
bankable feasibility study in respect of Borborema within 6 months
of closing the Acquisition;
-- The Acquisition adds three highly prospective yet undervalued
gold assets, Borborema, Juruena and Novo Astro, to the Stratex
portfolio, with the first being an advanced exploration asset that
is deemed by the Board to be low risk with considerable reserves
and resources;
-- The above valuation metrics indicate that the Acquisition
will generate significant value for shareholders, whilst the Board
believes that the premium being paid for Crusader is significantly
less than the inherent value in the assets;
-- The Board consider that the proposed resolutions, put forward
by two former directors, offer shareholders a regressive approach
to value accretion, focusing solely on funding high risk early
stage projects with no near-term production or cash flow prospects.
In the past, this approach has achieved a declining Stratex share
price and working capital constraints.
The Board, in making its recommendation to VOTE AGAINST the
resolutions proposed, also ask Shareholders to consider
following:
-- The Board believes the requisition is an opportunistic move
by David Hall and Paul Foord to obtain Stratex's net cash;
-- Stratex's new management team has had tremendous past success
in bringing companies in the small-mid cap mining sector up the
value curve and in building and operating gold mines. Current CEO,
Marcus Engelbrecht, has created substantial value uplift for
several multi-million dollar market cap gold-focussed mining and
exploration companies as CEO of Archipelago Resources and acting
CEO and CFO of OceanaGold. He also served as CFO of the Diamonds
& Speciality products group of BHP. He is proficient in
accessing capital markets and has shown the ability to attract,
build and motivate highly effective management teams.
David Hall by contrast is committed to management roles within
multiple companies (two of which are publicly quoted), opening up
the debate as to whether he would be able to devote necessary time
to manage Stratex successfully. Additionally, the share prices of
Horizonte Minerals Plc and Medgold Resources Corp., two companies
David Hall has been a director of since listing, are currently
trading significantly below their respective IPO prices. The
Stratex Board feel strongly that a return to an old management team
with an old strategy is unlikely to result in improved performance
for Stratex.
Peter Addison, Non-Executive Chairman of Stratex International,
said:
"The Board strongly recommends that shareholders vote against
all of the Resolutions put forward by the Requisitioning
Shareholders. When viewed against market valuation metrics, it is
clear to the Board that the Crusader acquisition would transform
Stratex's valuation and offer shareholders a portfolio containing
assets across the entire exploration and development value curve,
presenting a clear path to cash flow and a sustainable future.
The Board believes that the Requisition, led by David Hall and
Paul Foord, is a highly opportunistic bid to take control of the
Company to gain access to Stratex's cash for their own benefit.
Their strategy of pursuing pure greenfield exploration lacks
substance, detail or credibility in how value will be created for
shareholders in today's market.
We have a management team, led by our highly-experienced CEO,
Marcus Engelbrecht, that has years of practice in delivering
significant value to shareholders in the junior mining industry. We
urge you to vote with us in rejecting the Resolutions that
represent an outdated strategy from an outdated team, and in favour
of the exciting future that the proposed Crusader acquisition
offers under the current management team."
Details of the General Meeting
The General Meeting will be held at the offices Grant Thornton
UK LLP, 30 Finsbury Square, London EC2P 2YU at 9.30 a.m. on 1
November 2017.
Expected Timetable of Principal Events
Latest time and date 9.30 a.m. on 30
for receipt of Forms October 2017
of Proxy for the General
Meeting
Voting Record Time for 9.30 a.m. on 30
the General Meeting October 2017
Time and date of the 9.30 a.m. on 1
General Meeting November 2017
(1) Sources: Bloomberg, S&P Global Market Intelligence,
company filings. Exploration peers: West African Resources, Orezone
Gold Corporation, Thor Exploration, Ariana Resources, Goldstone
Resources, Sarama Resources, African Gold Group, Carbine Resources,
Azumah Resources. Resources are inclusive of reserves. Data
compiled as at 18 September 2017.
(2) Sources: Bloomberg, S&P Global Market Intelligence,
company filings. Producing peers: Resolute Mining, Highland Gold
Mining, Guyana Goldfields, Alacer Gold, Pan African Resources,
Petropavlovsk, Perseus Mining, Golden Star Resources, Teranga Gold,
Asanko Gold, Avesoro Resources. Resources are inclusive of
reserves. Data compiled as at 18 September 2017.
For further information please visit, @StratexPLC on Twitter,
email info@stratexplc.com, or contact:
Stratex International Plc Tel: +44 (0)20 7830 9650
Marcus Engelbrecht / Claire Bay
Grant Thornton UK LLP Tel: +44 (0)20 7383 5100
Samantha Harrison / Daniel Bush
Hannam & Partners Tel: +44 (0)20 7907 8500
Neil Passmore / Andrew
Chubb
Camarco Tel: +44 (0)20 3757 4980
Gordon Poole / Nick Hennis
/ Monique Perks
SHAREHOLDER NOTES
SHAREHOLDER HELPLINE
If you require assistance please contact the Company's
registrars, Share Registrars Limited, on 01252 821390 if calling
within the United Kingdom or +44 1252 821390 if calling from
outside the United Kingdom. Calls are charged at the standard
geographic rate and will vary by provider. Calls outside the United
Kingdom will be charged at the applicable international rate. The
helpline is open between 9.00 a.m. - 5.30 p.m., Monday to Friday
excluding public holidays in England and Wales from the date of
this document to the date of the General Meeting. Please note that
Share Registrars Limited cannot provide any financial, legal or tax
advice and calls may be recorded and monitored for security and
training purposes.
HOW TO VOTE
Your Board unanimously recommends that you VOTE AGAINST all of
the Resolutions at the General Meeting.
Please submit your proxy vote as soon as possible and, in any
event, so as to be received by no later than 9.30 a.m. on 30
October 2017, by one of the following methods:
-- Please complete, sign and date the physical form of proxy
enclosed with this document, and return it by hand, post, email or
fax, in accordance with the instructions printed on it. If you wish
to follow your Board's recommendation, mark "X" in the "Against"
box in respect of each of the Resolutions on the form of proxy.
-- If you hold your Ordinary Shares in CREST, by using the CREST
electronic proxy appointment service, in accordance with the
procedures set out in the CREST Manual. If you wish to follow your
Board's recommendation, you should instruct your proxy to vote
against each of the Resolutions.
Submission of a proxy vote will not preclude you from attending
the General Meeting and voting in person should you so wish.
Proxies for the General Meeting can be lodged in any one of the
following ways:
-- By completing the physical form of proxy enclosed with this
document in accordance with the instructions printed on it and
returning it to the Company's registrars, Share Registrars Limited
by:
- hand or by post, addressed to: Share Registrars Limited, The
Courtyard, 17 West Street, Farnham, Surrey GU9 7DR; or
- email, addressed to: proxies@shareregistrars.uk.com; or
- fax, addressed to: 01252 719232.
Completed forms of proxy should be returned to the Company's
registrars so as to be received by no later than 9.30 a.m. on 30
October 2017. The completion and return of a form of proxy will not
preclude you from attending the General Meeting and voting in
person should you so wish.
CHAIRMAN'S LETTER
(EXTRACTED FROM PAGES 4 TO 9 OF THE CIRCULAR)
LETTER FROM THE CHAIRMAN OF
STRATEX INTERNATIONAL PLC
(Incorporated and registered in England and Wales with
registered number 05601091)
Directors: Registered Office:
Peter Addison (Non-Executive 180 Piccadilly
Chairman) London
Marcus Engelbrecht (Chief W1J 9HF
Executive Officer)
Perry Ashwood (Chief Financial
Officer)
Emma Priestley (Non-Executive
Director)
Chris Worcester (Non-Executive
Director)
4 October 2017
Dear Shareholder,
THE STRATEX BOARD URGES YOU TO VOTE AGAINST ALL OF THE
RESOLUTIONS
1. Introduction
On 15 September 2017, the board of directors of Stratex (the
"Board") announced that it had received a notice (the
"Requisition") from a group of shareholders requiring the Company
to convene a general meeting (the "General Meeting") at which
ordinary resolutions would be proposed for the appointment of two
new directors (David Hall and Paul Foord, both of whom are members
of the Requisitioning Shareholders), in place of the current CEO,
Marcus Engelbrecht, and Non-Executive Chairman, Peter Addison, and
for the proposed merger with Crusader to be terminated.
On 19 September 2017, your Board made a further announcement
setting out its response to the Requisition and its intention to
recommend that shareholder's vote against all of the Resolutions at
the Company's general meeting.
The purpose of this document is to convene the General Meeting
and to explain in more detail why your Board unanimously recommends
that you vote against all of the Resolutions. Accompanying this
document is a presentation which sets out further details on the
rationale for the Acquisition and the proposed development and
exploration programme for the combined entity.
2. Background to the Requisition
David Hall and Paul Foord are both former directors of Stratex,
who each resigned from the Board of the Company some time ago to
pursue other career opportunities.
David Hall is the CEO, and Paul Foord is the CFO, of Thani
Stratex Resources Limited ("TSRL"), in which Stratex holds
approximately 30% of the issued share capital. The Company's joint
venture partner in TSRL is Thani Emirates Resources Holdings
Limited, which is also one of the Requisitioning Shareholders.
The "Requisitioning Shareholders" comprise David Hall, Paul
Foord, Thani Emirates Resources Holdings Limited, Teck Resources
Limited, AngloGold Ashanti Holdings plc and Anthony Hutchison (an
employee of TSRL, and a former employee of Stratex).
The Board strongly recommends that shareholders vote against all
of the Resolutions put forward by the Requisitioning Shareholders.
The Requisition is a highly opportunistic bid to take control of
the Company and deploy the balance of Stratex's cash into high
risk, early stage projects with no near-term production or cash
flow prospects. Your Board believes that this approach would not be
beneficial for Stratex shareholders.
3. Reasons for the Board's unanimous recommendation to vote against the Resolutions
(a) The Resolutions offer shareholders a regressive approach to
value accretion, focusing solely on funding early stage
projects
David Hall and Paul Foord have proposed a "New Start for
Stratex" but their strategy of seizing control of the business, and
using the Company's cash balance to fund early stage projects is a
regressive step that will negatively impact how Stratex is valued
by the market. Whilst they claim that the most significant uplift
in economic value is achieved through early stage resource
identification and proving, the success risk and significant time
and funding required to realise this uplift means that there are
greater economic and technical risks attributed to these assets
than more advanced assets. In the past, the approach being proposed
by the Requisitioning Shareholders has achieved a declining Stratex
share price and working capital constraints.
Whilst the Board is positive about the long-term prospects of
the early stage assets in the portfolio, they require a fundamental
economic base from which to grow. There is no immediate prospect of
production from any of the assets in the current Stratex portfolio.
The merger with Crusader provides an advanced stage gold
exploration project that offers a clear path to production and
positive cash flow, with a construction decision expected in the 12
months following completion of the Acquisition. In contrast, the
strategy set out by the Requisitioning Shareholders to "maximise
Stratex's current cash situation", through "a review of assets and
a reduction in costs", is noticeably lacking in any detail and
vague in its approach to achieving shareholder value. It also fails
to highlight the inevitable (and likely multiple) fundraising
round(s) that would be required, which are likely to be at a lower
valuation, and so higher dilution rate, per share for an
exploration-only company (if funds can be raised at all). In
contrast, the Crusader acquisition is expected by the Board to
deliver an immediate value re-rating, and further upside through
the delivery of a bankable feasibility study in respect of
Borborema ("BFS") within 6 months of the closure of the
Acquisition, to be funded from an initial fundraising following the
completion of the Acquisition.
It is the Board's expectation that the BFS and value re-rating
would enable the Company to access institutional funding in the
short term to advance not only Borborema to decision to mine but
also enable further advancement of the Stratex exploration
portfolio, including:
-- Potential down dip and along strike resource expansion at Borborema;
-- Proposed 35,000m of drilling and other exploration work at Juruena to attempt to define a significantly larger resource;
-- Proposed drilling to attempt to define a maiden resource at
Dalafin across two prospects and advance farm-in discussions;
-- Proposed drilling at TSRL assets for maiden resource definition at Pandora and Anbat; and
-- Continued support of Goldstone Resources Ltd as it defines its project in Ghana,
thereby achieving a greater uplift in shareholder value than the
strategy put forward by the Requisitioning Shareholders. Further
details of the proposed development and exploration programme for
the combined entity are set out in Part 2 of the Company's
presentation enclosed with this document.
(b) There is a clear premium in the market when comparing
production and exploration companies. The Board expects that the
Acquisition will allow Stratex to be re-rated on a higher
multiple
It is the Board's strong belief that the greatest growth in
market value is exhibited by companies turning an exploration asset
into a development and then producing asset, the strategy that
Stratex is adopting by the Crusader Acquisition. This is
particularly true in the current market where very little value is
being attributed to early stage pre-development projects and
exploration focused companies, which explains why Stratex today is
trading at a negative enterprise value ("EV") (no value attributed
to its exploration assets).
The Requisitioning Shareholders believe that greatest value
accretion in the development cycle is at the point of early stage
resource identification and proving. The current market is
attributing very little value to companies which are
exploration-focused on early stage projects only, particularly with
the extremely low number of true economic discoveries over the past
several years. Having lost significant capital during the last bear
market, investors are focusing on cash flow and tangible growth. It
is this recognition that drives the Board's focus on delivering
value to all shareholders by adopting the strategy of seeking a
highly accretive transaction that brings with it quality later
stage exploration development projects and exciting upside. The
Crusader acquisition is exactly that.
The Company expects to take advantage of the premium at which
peers currently trade when compared to the combined
Stratex/Crusader. Borborema and Juruena, two of the gold projects
that will be added to the Stratex portfolio through the
acquisition, are notably further up the development curve than
anything else within the Stratex portfolio. These assets jointly
provide 2.7 Moz JORC compliant resources, including 1.6 Moz of JORC
compliant reserves, at a cost of c.US$16/oz gold(1) , with Juruena
having a resource which includes over 200koz of its 260koz total
resource graded at 14.7 g/t Au; an extremely high-grade(2) . The
potential to prove up this asset and deliver an uplift in value is,
in your Board's view, significant and should not be underestimated.
This potential is unrivalled by anything within the Company's
current portfolio. Early-stage exploration of a third,
intrusion-related gold project, Novo Astro, is in the same
geological belt as Juruena and has returned rock-chip samples of up
to 264 g/t Au. The belt is also attracting the interest of major
mining companies, including AngloAmerican, having recently staked
over 2.1 MHa. In contrast, were the Resolutions to be passed, the
Board believes that the cash deployed would be focused primarily on
the early stage projects within TSRL with no clearly defined path
to development. The significant disparity in attributed value
between pure exploration companies and those with production can be
seen in the Company's internal valuation metrics analysis
summarised below:
-- Exploration peers(3) currently trade at a median EV/Resource
multiple of c.US$15/oz and typically at depressed P/NAV multiples
of 0.3x. Stratex trades at a negative EV (no value attributed to
its exploration assets), a discount to the exploration peer
group.
-- Crusader trades at a P/NAV of 0.35x, while production
peers(4) currently trade at a median EV/Resource multiple of
c.US$44/oz and a median P/NAV multiple of 0.6x, which demonstrates
the Board's view that each company is highly undervalued. With
Borborema in the portfolio, the Board would expect to trade at
levels similar to the production peers within 2 years when the
Company could be producing gold and generating cash flow.
The Requisitioning Shareholders believe the Crusader deal is
overpriced and Stratex undervalued. The Board agrees Stratex is
undervalued currently but also believes it will remain undervalued
as an early stage exploration company, which is the strategy put
forward by the Requisitioning Shareholders. The fundamental
advantage, and the real value uplift potential from acquiring
Crusader, is the under-valued asset base which the Board believe
can be materially optimised and funded to production and positive
cash flow. The underperformance today of Stratex is, in the view of
the Board, a direct result of the focus the market is placing on
cash flow and development projects, not the quality of the assets,
nor the management of these, as stated by the Requisitioning
Shareholders.
(c) The Acquisition will be a transformative deal for Stratex,
offering a clear path to production and cashflow
The acquisition of Crusader will be a transformative deal for
Stratex that will differentiate the Company from other junior
mining stocks on AIM. The Borborema and Juruena assets are two
highly exciting gold projects that are notably further up the
development curve than anything else in the Stratex portfolio. Once
the assets are fully incorporated into the portfolio, Stratex will
be a significant gold junior with a range of assets, from early
exploration to advanced stage development, and with a
JORC-compliant resource base of 3.2 Moz, including a 1.61 Moz
proven and probable economic reserve(2) .
The Borborema asset is a low-risk, large, open-pittable gold
project in North Eastern Brazil that offers significant near-term
upside for the Company. As part of its due diligence exercise, the
Company has carried out considerable investigation into the
Borborema asset and based on that investigation, the Board believes
that the BFS and full licensing of the mine should be completed
within 6 months, and 18 months, respectively after completion of
the Acquisition, offering a clear path of 24 to 30 months to
production. As well as excellent regional and support
infrastructure, including a regional highway up to the planned mine
gate and power lines which traverse the licence, all major
exploration expenses and drilling are complete. In addition to the
Borborema mine, we are very excited about the exploration project
at Juruena, where there is already a JORC-compliant resource of
260koz resources at 6.3g/t(2) . This is a high-grade exploration
prospect on which Crusader has spent US$25 million and completed
over 44,000 m of drilling, ensuring that it is already further up
the development curve than any other Stratex asset.
A third gold project, Novo Astro, within the same geological
belt as Juruena, is also highly prospective with 13 rock samples
showing grades of more than 10 g/t with one delivering 264 g/t.
This system is gold-rich and has delivered significant gold
discoveries for over 40 years.
The merger with Crusader, and the addition of the Borborema
development stage project and the Juruena and Novo Astro
exploration projects, not only adds the prospect of relatively
near-term production and cash flow, but will also provide the
Company with a solid financial base from which to fund its existing
earlier stage exploration assets.
The Requisitioning Shareholders argue that these assets are
questionable on economic grounds. The assets have had over US$100
million(5) invested to date and Borborema is advanced in terms of a
completed and economically attractive pre-feasibilty study with the
majority of the BFS completed. The Board believe that there is
significant optimisation to be achieved at Borborema and that they,
together with the Crusader directors to join the Board upon
completion of the Acquisition, collectively have the skills and
experience to deliver on this.
The Requisitioning Shareholders argue that Brazil is not aligned
with where the Company traditionally operates, but Brazil, as a
jurisdiction, is mining friendly and has, over the last few years,
seen the implementation of labour legislation which has
significantly improved the ability for flexible labour contracts.
There has been also been a move towards a much more flexible,
modern, open-market economy that is attracting considerable
investor interest.
(d) Stratex has a clear strategy and an experienced management
team with a track record of delivering shareholder value
Stratex has a clear strategy of creating a diversified gold
explorer and near-term producer, with the acquisition of Crusader
enabling the Company to take a large step towards this goal. CEO,
Marcus Engelbrecht, has been working tirelessly since being
appointed last year to ensure that the Company adapts to market
demands of mining stocks, especially with regard to the valuation
difference between exploration and production companies. The
Board's vision for Stratex and focus on delivering shareholder
value has ultimately led to this proposed acquisition of three
highly prospective gold assets with the potential for future cash
flow, to integrate into an already exciting portfolio.
Marcus Engelbrecht has extensive experience in delivering value
to shareholders, having been the CEO of Archipelago Resources plc.
Whilst there he took the Indonesian Toka Tindung mine into
production and delivered several exploration successes, which
increased Archipelago's mineral resources by c.73% to over
3Moz.
David Hall and Paul Foord question Stratex management's record
in operating mines, specifically Stratex's move into Turkey and
"their failure due to a lack of mine management expertise". This
assertion is fundamentally incorrect for two reasons. The first is
that Marcus Engelbrecht was not involved in the original decision
to invest in the Altintepe mine in Turkey. Secondly, under the
joint venture arrangement, Stratex were the minority shareholders
and had no involvement in running and operating the mine. In
addition, the Board considers that the resultant sale of Altintepe
was, both strategically and financially, an important and
well-timed exit, when considering the increasingly difficult
geopolitical and operating environment. It should not be overlooked
that David Hall, when he was a director of Stratex, was an
instrumental part of Stratex's management team at the time it made
the decision to invest in Turkey and the Altintepe mine.
Indeed, when comparing the management and operating record of
Marcus Engelbrecht and David Hall, the candidate proposed as the
CEO of the "New Stratex", it is clear who delivers value to
shareholders. Marcus Engelbrecht was instrumental in the sale of
Archipelago Resources for GBP338 million and returned significant
value to shareholders. By contrast, David Hall has been a director
of Horizonte Minerals and Medgold Resources since their respective
IPOs, which companies are currently trading below IPO price.
Paul Foord has little, if any, experience in chairing a public
company. By contrast, Peter Addison is an experienced company
chairman, having been chairman of three public companies over the
last 14 years.
4. General Meeting
The General Meeting is to be held at the offices of Grant
Thornton UK LLP, 30 Finsbury Square, London EC2P 2YU on 1 November
2017 at 9.30 a.m, for the purpose of considering the Resolutions
put forward by the Requisitioning Shareholders. Notice of the
General Meeting is set out at the end of this document.
The full text of the statement from the Requisitioning
Shareholders set out in the Requisition and which is required to be
distributed to shareholders pursuant to section 314 of the
Companies Act 2006, is set out in the Appendix to this
document.
5. Action to be taken
A form of proxy for use at the General Meeting is enclosed.
Whether or not you intend to attend the General Meeting in person,
you are requested to lodge a proxy in respect of your holding of
Ordinary Shares.
Proxies for the General Meeting can be lodged in any one of the
following ways:
-- By completing the physical form of proxy enclosed with this
document in accordance with the instructions printed on it and
returning it to the Company's registrars, Share Registrars Limited
by:
- hand or by post, addressed to: Share Registrars Limited, The
Courtyard, 17 West Street, Farnham, Surrey GU9 7DR; or
- email, addressed to: proxies@shareregistrars.uk.com; or
- fax, addressed to: 01252 719232.
Completed forms of proxy should be returned to the Company's
registrars so as to be received by no later than 9.30 a.m. on 30
October 2017. The completion and return of a form of proxy will not
preclude you from attending the General Meeting and voting in
person should you so wish.
-- If you hold your Ordinary Shares in CREST, by using the CREST
electronic proxy appointment service, in accordance with the
procedures set out in the CREST Manual.
The Board recommends that shareholders should take no action
requested of them by the Requisitioning Shareholders and should not
sign any document that is sent to them by the Requisitioning
Shareholders.
6. Recommendation
Your Board unanimously recommends that you VOTE AGAINST
all of the Resolutions at the General Meeting.
The Board strongly believes the proposed resolutions are
short-sighted, and would deprive Stratex of the combined expertise
and assets that it requires to transform the Company into a truly
unique, London-quoted gold explorer and future producer, as well as
remove the potential value uplift from the acquisition of
Crusader.
As such, and for the reasons set out in this letter, the Board
intends to proceed with the Acquisition and considers that the
Resolutions are not in the best interests of the Company and its
shareholders as a whole.
Accordingly, your Board unanimously recommends that you vote
against all of the Resolutions, as they intend to do (or procure)
in respect of their own beneficial holdings.
Yours sincerely,
Peter Addison
Chairman
(1) On the basis of the value of the consideration shares under
the Acquisition of US$43 million (applying the deemed offer price
of A$0.18 and an exchange rate of US$1:A$1.26) and resources
(including reserves) of 2.7 Moz.
(2) Refer to Crusader's announcements of an updated JORC
compliant mineral resource and reserve estimate for Borborema on 24
July 2007 and its JORC compliant maiden resource estimate for
Juruena on 29 September 2015.
(3) Sources: Bloomberg, S&P Global Market Intelligence,
company filings. Exploration peers: West African Resources, Orezone
Gold Corporation, Thor Exploration, Ariana Resources, Goldstone
Resources, Sarama Resources, African Gold Group, Carbine Resources,
Azumah Resources. Resources are inclusive of reserves. Data
compiled as at 18 September 2017
(4) Sources: Bloomberg, S&P Global Market Intelligence,
company filings. Producing peers: Resolute Mining, Highland Gold
Mining, Guyana Goldfields, Alacer Gold, Pan African Resources,
Petropavlovsk, Perseus Mining, Golden Star Resources, Teranga Gold,
Asanko Gold, Avesoro Resources. Resources are inclusive of
reserves. Data compiled as at 18 September 2017
(5) Figure provided by Crusader management
STATEMENT FROM THE REQUISITIONING SHAREHOLDERS
(EXTRACTED FROM PAGES 9 TO 10 OF THE CIRCULAR)
Statement from the Requisitioning Shareholders
The Company is required under section 314 of the Companies Act
2006 to distribute the following statement by the Requisitioning
Shareholders to Shareholders.
The following statement does not represent the views of your
Board.
"Dear Stratex International plc (STI) Shareholder,
Proposed reverse takeover of Crusader Resources Limited (CAS) by
STI
We together hold 24% of STI's shares and have long been its
supporters. David Hall and Paul Foord were founders of the
business. STI has always focussed on early stage gold discoveries.
It is deeply concerning to us that management has decided to stray
into an area where, we believe, they lack sufficient expertise and
will be unable to deliver an acceptable deal for shareholders.
We have stated our objections in letters to the Chairman from
AngloGold Ashanti, Teck Resources and David Hall, amongst others.
Unfortunately, the directors have ignored these objections and
proceeded with this expensive and value destroying deal.
Accordingly, as holders of over 5% of the shares in STI, we have
required the directors to circulate this statement to STI
shareholders and convene a GM to vote to:
a. terminate the transaction;
b. remove Peter Addison and Marcus Engelbrecht as directors; and
c. appoint David Hall and Paul Foord respectively as directors.
Rationale for terminating the reverse takeover
This transaction is highly risky and value destroying for STI
shareholders for the following reasons:
-- Strategic Focus. It represents a completely different focus
for the business, which is naïve, significantly riskier (due to the
lack of mining experience) and value destroying:
o STI has ten years of exploration and development experience in
Turkey & West and East Africa. A move into operating a mine (in
Brazil) represents a significant diversification.
o STI tried a move into mining in Turkey by partnering with a
recognized mining contractor but unfortunately, it failed due to a
lack of mine management expertise. A salutary lesson that mining
requires a completely different set of managerial skills and years
of experience.
o STI/CAS will need to raise significant funding (circa $100m)
in order to develop either project into a mine.
o The most significant uplift in economic value is achieved
through early stage resource identification and proving thereof.
This is the reason the current shareholder base invested in
STI.
o The 20:1 roll-back is likely to result in further loss of
value and greater dilution when raising new funds.
-- Economic Grounds. The deal places a premium of 63% over
Crusader's current share price. STI's valuation is based on cash at
bank ($7.75m), effectively treating the company as a cash shell and
takes no account of STI's assets in Turkey, Africa, Egypt or
Djibouti ($7m):
o STI's value should be $14.75m rather than $9.4m - a discount
of 36%.
o CAS's share price is A$0.11 equating to a value of $24.6m,
rather than $40m - a 63% uplift
o STI shareholders could invest in Crusader at A$0.11 - there is
no reason for STI to do this on our behalf at a higher price, with
no synergies.
-- Control/Dilution Grounds. CAS shareholders will own 81% of
STI. STI shareholders will be diluted and lose control.
-- Resource Grounds. The undeveloped assets in Brazil have been
around for some time for a reason:
o The two potential gold resources are questionable on economic
grounds.
o Numerous other companies have considered acquiring the
concessions and have not proceeded
o STI doesn't have the insight nor expertise to prove
otherwise.
-- Operational Grounds. There are no operational synergies
between potential gold mines in Brazil and STI's current
exploration operations and technical staff in Europe and
Africa.
-- Managerial/Expertise. There are no synergies nor savings
possible as the STI management and technical team is not
experienced in developing and building gold mines
-- Contracts and Expenses. The combined business (including all
of the existing CAS and STI senior management teams) is going to be
top heavy and very expensive:
o The CAS structure includes senior management in both Brazil
and Australia. Combining this with STI's management in London, the
combined business will boast senior management teams on three
continents.
o The CAS directors (three) have two-year terms and salaries of
A$350k each or $260k each plus the Australian and Brazilian
overheads. Significantly increasing current overheads.
Rationale for removal of the Chairman and CEO
The current Chairman and CEO have pursued this transaction at
great expense even though it is not in the best interests of STI
shareholders and regardless of objections by major
shareholders.
We believe that STI management have lost their way and lack a
sensible strategic focus.
Proposed appointments for Chairman and CEO
David Hall (as CEO) and Paul Foord (as Chairman) provide wide
experience in the industry and are motivated to see "a new Stratex"
succeed by maximising current assets and expertise in exploration,
discovery and development.
Proposed strategy for "New Stratex"
The new strategy would be to maximise funding on projects that
have the best chance of increasing value.
The market is short of good early stage gold exploration
companies. The most significant uplift in economic value is
achieved through early resource definition and proving thereof.
This approach is supported by two mining companies who are major
shareholders - AngloGold Ashanti and Teck Resources.
All STI's assets will be reviewed. Focus will be on projects
that appeal best to strategic partners and shareholders and costs
will be reduced on underperforming assets.
The strategy must be to maximise STI's current cash situation
and not to dilute shareholders until value has been increased.
Summary
We would like you to join us and vote:
-- "NO" to the STI/Crusader deal
-- "YES" to the removal of Peter Addison as Chairman
-- "YES" to the removal of Marcus Engelbrecht as CEO
-- "YES" to the appointment of Paul Foord as Chairman
-- "YES" to the appointment of David Hall as CEO
We look forward to seeing you at the GM."
Notes to Editors:
Since listing in 2006, Stratex has discovered more than 2.2
million ounces of gold and 7.09 million ounces of silver, as well
as 186,000 tonnes of copper. The Company owns 15% of a copper-gold
project at feasibility stage and an exciting exploration project in
Senegal. The Company also has significant interests in Goldstone
Resources Ltd, Thani Stratex Resources Ltd and Tembo Gold Corp. for
their exploration projects in Ghana, Djibouti and Egypt, and
Tanzania respectively.
The information contained within this announcement is deemed to
constitute inside information as stipulated under the Market Abuse
Regulations (EU) No. 596/2014. Upon the publication of this
announcement, this inside information is now considered to be in
the public domain.
This information is provided by RNS
The company news service from the London Stock Exchange
END
NOGQZLFBDBFFFBF
(END) Dow Jones Newswires
October 04, 2017 12:14 ET (16:14 GMT)
Stratex (LSE:STI)
Historical Stock Chart
From Apr 2024 to May 2024
Stratex (LSE:STI)
Historical Stock Chart
From May 2023 to May 2024