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DJ Equatorial Mining & Exploration PLC Signed SPA, Proposed Fundraise, convening of GM

TIDMEM.P

RNS Number : 9434A

Equatorial Mining & Exploration PLC

03 June 2019

03 June 2019

Equatorial Mining & Exploration Plc

("EME" or the "Company")

Signing of Share Purchase Agreement, Proposed Fundraising, Convening of General Meeting, Posting of Circular and Resignation of Director

The Directors of EME are pleased to announce that on 31 May 2019 the Company entered into an agreement to acquire the issued and outstanding shares of Eastinco Limited ("Eastinco"), along with its wholly owned subsidiary Musasa Mining Limited (the "SPA"). Eastinco is a Rwandan mining, trading and exploration company.

The acquisition of Eastinco (the "Acquisition") will provide the Company with the opportunity to improve productivity and mechanisation of mining operations in the Rwandan market with professional mining and mineral trading services and activities. Eastinco has exclusive contractual relationships providing the mining and subsequent off-take of coltan ore with local Rwandan mining co-operatives. Thanks to these joint-venture agreements, EME will provide the knowledge and capital to artisanal and small-scale mining operations while receiving a share in the net operating profits and with rights to purchase 100% of the coltan produced at local market prices. EME will participate in Eastinco's growth strategy by also giving Eastinco access to resources and contacts throughout Africa. The Acquisition will enable the Company to expand local joint-ventures and separately pursue Rwandan and central and East African mining opportunities.

In addition, the Company intends to complete a fundraising targeting an amount of GBP1.2 million.

Acquisition - SPA Terms

The purchase price for Eastinco under the SPA is:

(i) initial consideration of GBP900,000 which will be settled at completion of the SPA by the issue of up to 6,000,000,000 ordinary shares of GBP0.0001 ("Ordinary Shares") in the capital of the Company (the "Initial Consideration Shares"), credited as fully paid, and loan notes (the "Consideration Loan Notes") with an aggregate value of GBP300,000; and

(ii) deferred consideration of up to GBP8.1 million ("Deferred Consideration"). The amount of Deferred Consideration payable (if any) will depend on the financial performance of Eastinco during the period commencing on 1 October 2019 and ending on 30 September 2020. The Deferred Consideration will be settled by the issue of additional Consideration Loan Notes and / or new Ordinary Shares (at the Company's election). The Company will only elect to settle some or all of the Deferred Consideration by the issue of new Ordinary Shares if it is able to do so without triggering a mandatory offer obligation on the part of the vendors of Eastinco or any of their concert parties under the UK City Code on Takeovers and Mergers.

The interest payable by the Company in respect of the Consideration Loan Notes may be paid in cash or in kind (by the issue of additional Consideration Loan Notes) at the election of the Company.

Completion of the Acquisition is conditional upon:

(i) the passing of resolutions at a general meeting of the Company to (a) grant the Board authority to allot the Initial Consideration Shares on a non pre-emptive basis; and (b) approve the transaction with a director, Charles Bray, for the purposes of section 190 of the Companies Act 2006 (as set out in more detail below);

(ii) no material adverse change having occurred in the period from signing the SPA on 31 May 2019 until completion of the SPA pursuant to its terms; and

(iii) the artisanal mining license in relation to the artisanal mines located at Giseke, Musasa Sector, Rutsiro District, Rwanda having been transferred to a wholly owned subsidiary of Eastinco (in a form satisfactory to the Company).

The SPA contains warranties and indemnities in a customary form for a transaction of this nature as well as rights to terminate the agreement in certain circumstances prior to Completion, including for a breach of material obligations which is not remedied by the date falling two business days before the scheduled date for completion of the SPA.

It is proposed that on completion of the SPA, the Company will also offer an 18-month loan of at least $500,000 to Eastinco for use as working capital for the joint venture mining and trading operations.

Michael Staten

The Company currently has an outstanding debt of GBP82,500 due to Michael Staten, a director of the Company. Michael Staten also holds 579,879,612 warrants issued by the Company. It is proposed that the debt will be converted to 825,000,000 Ordinary Shares (the "MS Conversion Shares") and the warrants held by MS will be cancelled and he will be issued 1,300,000,000 new conditional warrants on the same terms as the conditional warrants issued pursuant to the Fundraising (the "MS Warrants"). The Directors do not currently have sufficient authority to allot and issue the MS Conversion Shares or any Ordinary Shares pursuant to the exercise of the MS Warrants and, as set out below, are seeking approval from Shareholders to allot such shares free of statutory pre-emption rights.

Related Party Transactions

Charles G Bray, a director of the Company, is connected to a shareholder of Eastinco. As a result, the proposed acquisition is a related party transaction under the NEX Exchange Growth Market - Rules for Issuers and, as noted above, is conditional on shareholder approval under Section 190 of the Companies Act 2006.

The issue of the MS Conversion Shares, upon conversion of the outstanding debt of GBP82,500 due to Michael Staten, and the issue of the MS Warrants, upon cancellation of Michael Staten's existing warrants, is a related party transaction under the NEX Exchange Growth Market - Rules for Issuers.

Proposed Fundraising

The Company intends to seek additional capital to fund the Acquisition and for working capital purposes (the "Fundraising"). The Company intends to raise approximately GBP1,200,000 by the issue of up to GBP400,000 new Ordinary Shares and approximately GBP800,000 loan notes in EME (the "Fundraising Loan Notes"). In addition, the Company will also issue warrants to participants in the Fundraising (the "Conditional Warrants"). The conversion of the Fundraising Loan Notes and exercise of the Conditional Warrants are conditional on upon the necessary authorities being granted at the General Meeting.

Convening of a General Meeting

The Directors do not currently have sufficient authority to allot and issue the Initial Consideration Shares, the Ordinary Shares to be issued on the mandatory conversion of the Fundraising Loan Notes or upon the exercise of any of the Conditional Warrants, the MS Conversion Shares or the MS Warrants.

Accordingly, a General Meeting will be convened for the purpose of considering the resolutions which will give the Directors the necessary authorities to (i) complete the Acquisition; (ii) issue the Initial Consideration Shares; (iii) issue new Ordinary Shares in respect of the mandatory conversion of the Fundraising Loan Notes and upon the exercise of the Conditional Warrants: and (iv) issue the MS Conversion Shares and new Ordinary Shares upon exercise of the MS Warrants. The Directors will also seek authority to issue further Ordinary Shares, options or warrants relating to Ordinary Shares in order to raise funds for the development of the Company or for working capital purposes.

Posting of Circular

The Company will shortly be publishing a circular containing details of the Acquisition and a notice of general meeting. The circular will be sent to shareholders, together with a proxy form. A copy of the circular will be available on the Company's website www.equatorialmining.com.

Resignation of Director

The Company announces that as of 30 May 2019, Nicholas Nelson has agreed with the Board to step down with immediate effect. The Company would like to thank Mr Nelson for his contributions to the Company.

The Directors of the Company take responsibility for this announcement.

Enquiries:

 
 Equatorial Mining & Exploration 
  Plc:                                    charles.bray@eme-plc.com 
  Charles Bray, Executive Chairman 
 NEX EXCHANGE Adviser and Broker 
  Alexander David Securities 
  David Scott - Corporate Finance 
  James Dewhurst - Corporate Broking      +44 (0) 207 448 9820 
                                       --------------------------- 
 

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June 03, 2019 06:24 ET (10:24 GMT)