Finance Negotiations Completed for Black Angel
Mine
07/06/2007
Press Release:
US$30m Loan
Agreement to Take the Company From Exploration to Production
Angus & Ross plc ('Angus
& Ross' or the 'Company') (AGU),
the AIM listed mining exploration company with interests in Greenland,
Brazil and Australia, is pleased to announce that it has entered
into a conditional facilities agreement (the 'Facilities Agreement')
with Cyrus Capital Partners LP on behalf of discretionary
funds it manages ('Cyrus') under which it has agreed a debt financing
which will provide the Company with up to US$30 million
(the 'Facilities') to develop the Black Angel zinc and lead
mine in Greenland.
HIGHLIGHTS
- US$30
million loan facility agreed with proposed warrant issue;
- Upon the exercise
of Warrants, the Company would receive an additional amount of
approximately US$15m at today's exchange rates;
- The Facilities will enable reinstatement
of all the infrastructure to bring the Black Angel mine back to
operational status;
- Access to the financing should enable the re-opening
of the mine to take place considerably
earlier than anticipated;
- The
Company can now pursue both the mine reopening and additional development
work on the other prospects on the Black Angel property in parallel;
- Engineering
work to re-open the mine currently underway;
- Extensive summer exploration
programme commenced; and
- Initial production
and ore shipments from the mine expected to commence in 2008 with
full scale production in 2009.
Facilities Agreement and use of the Facilities
The Facilities Agreement contains a condition that the Company
issues to the lenders warrants to subscribe for up to 37,500,000
ordinary shares of 1p each ('Shares') at a price of 20p
per Share ('Warrants') and the Company has today entered into a
warrant instrument constituting the Warrants.
The Facilities will be used,
inter alia, to permit reinstatement of all the appropriate infrastructure
needed to bring the Black Angel mine back to operational status.
The Facilities will also enable the Company to utilise its existing
cash resources for further exploration in the area with the aim of
quantifying and increasing geological confidence in the prospects,
some of which were drilled last summer.
The drawdown of the Facilities
is conditional upon shareholders' approval of the Facilities Agreement
and the issue of the Warrants. The Company will convene an Extraordinary
General Meeting on 2 July 2007 ('EGM') at which these proposals will
be considered. The Company also wishes to seek approval to increase
its existing authorities to issue Shares so that it may, if appropriate,
issue Shares in the coming months to provide additional liquidity
and/or pursue other opportunities which may arise. Resolutions 2
and 3 to be proposed at the EGM therefore seek the approval of shareholders
to the grant of these additional authorities to the Directors.
Angus & Ross Chairman Robin Andrews said: 'The
Board believes this financing will allow Angus & Ross to make
an enormous leap forward and which will take the Company from exploration
to production. Access to this facility some six months ahead of
the bankable feasibility study means that the civil engineering
work can now proceed uninterrupted. This should enable the re-opening
of the mine to take place considerably earlier than originally
anticipated and, as a result, we now have a realistic opportunity
of getting first production from the Black Angel mine in 2008.'
Daniel Bordessa, London based Managing Director
at Cyrus said: 'We are excited to have
the opportunity to invest in Angus & Ross to allow the Company
sufficient capital to progress the recommencement of production at
Black Angel in politically stable Greenland. In addition, the current
high prices of both zinc and lead make the exploration prospects
identified last summer very interesting. This financing allows the
Company to pursue both the mine reopening and additional development
work on the other prospects on the Black Angel property in parallel.
We look forward to working with the Company to support it in its
goal of delivering profitable growth.'
For further
information contact:
Angus & Ross
Robin Andrews, Chairman Tel:
01751 430988
Paul Williams, Finance Director Tel: 01606 855022
Bishopsgate
Communications Ltd
Nick Rome, Fran Read Tel: 020 7562 3350
Background
to and reasons for the Facilities
After two years of exploration,
the Company is entering a stage of accelerated development of the
Black Angel zinc and lead project in Greenland. The estimated capital
expenditure required to bring the old Black Angel mine back into
production is US$39 million over the next two years.
Early production
in 2008 is possible, with full-scale production in 2009, but this
requires an accelerated development plan, which in turn requires
a significant financing. The Directors have looked at different sources
of finance to bring the mine back into production. In doing so they
have considered, in addition to the cost of such a financing, other
criteria, such as the timing of the financing, the flexibility of
the funding, the likely supportiveness of investors and their appetite
to provide additional capital as the Company continues to develop
and work towards bringing the additional areas of the Black Angel
property, which were drilled last summer, into production.
The Board
believes that it is important to put in place now a financing that
in its size substantially covers the capital expenditure requirements
of the Black Angel project in order to establish credibility with
potential customers, equipment suppliers and other stakeholders.
Funding will also be an important consideration in the Company's
application to convert its current exploration licence to a mining
licence. The Company has worked with its financial advisers, Swedbank
AB and First Securities ASA, to identify and put in place the most
appropriate type of financing that meets the criteria outlined above.
In addition to the Facilities mentioned above, the Board also considered
traditional bank financing, high yield bonds and the issue of additional
equity. Whilst each of these had their attractions, they did not
offer the all round solution that these Facilities provide.
In view
of the time constraints involved and the amount of finance required,
raising the appropriate amount by way of an offer of shares to all
shareholders would be too costly and cause undue delay as it would
require the issue of a prospectus. Furthermore a share issue in the
amount of US$30 million by way of a private placing would be too
dilutive to current shareholders. Due to the nature of the Black
Angel project, traditional bank financing will not be available until
early 2008, after both a Bankable Feasibility Study and Environmental
Impact Assessment Study have been completed. Therefore, in order
to provide funding for the proposed work programme at the Black Angel
mine, the Directors have agreed with Cyrus to enter into the Facilities
Agreement and to issue the Warrants and Cyrus has agreed to provide
the Facilities to the Company.
The Facilities, if fully utilised,
will provide approximately US$28 million of funds to the Company
after deducting fees and expenses associated with their implementation.
Further, upon exercise of the Warrants, the Company would receive
an additional amount of approximately US$15 million at today's exchange
rates. The two Facilities combined with the potential proceeds from
the exercise of the Warrants will therefore provide some US$43
million.
The Directors expect that the Company will be able to raise further
funds as it continues to make progress on the development of the
Black Angel mine. The Directors believe that given the Company's
requirement for additional financing, the acceptance of the Facilities
Agreement and the issue of the Warrants are in the best interests
of shareholders. If approval is not granted at the EGM, the Company
will be required to seek alternative sources of finance, which may
or may not be forthcoming, for the Black Angel mine. Seeking alternative
finance will delay the development of the Black Angel mine and may
result in the project becoming uneconomic if the price of zinc and
lead were to fall.
Particulars of the terms and conditions of the
Facilities Agreement
The Facilities Agreement contains provisions,
inter alia, to the following effect:
1. Drawdown
The Facilities Agreement
will consist of two facilities as follows:
- Facility A - comprising
a facility of US$12.5 million, will be available
for drawdown in the period of 10 Business Days from the date of the
EGM (assuming resolution 1 is passed);
- Facility B - comprising a facility
of
US$17.5 million, will be available for drawdown
to and
escrow account
in the name of the Company at any time within 15 months of the drawdown
of Facility A, subject to the fulfilment of the conditions set out
below.
The Company will be entitled to withdraw Facility B from the
escrow account to meet payments due under the capital expenditure
programme in accordance with the mining application plan for the
Black Angel mine and the terms of the Facilities Agreement.
2. Facility
B drawdown conditions:
In order for Facility B to be drawn down the
Company must, inter alia, provide to Cyrus as agent the following:
(a) A financing and operational feasibility study to be completed
by Wardell Armstrong International ('WAI') in a form reasonably satisfactory
to Cyrus concluding that proven reserves of the phase 1 development
of the Black Angel mine are higher than 50% of the resource calculated
in the pre-feasibility study carried out by WAI in 2006;
(b) written
evidence that phase 1 of the Black Angel project is profitable enough
to prepay the Facilities prior to the third anniversary of the date
of drawdown of Facility A through, inter alia, excess cash flow;
(c) the mining application plan for the Black Angel mine being
completed to the reasonable satisfaction of Cyrus;
(d) evidence that the hedging
of the zinc and lead production is complete and in compliance with
the terms agreed between the Company and Cyrus; and
(e) evidence that
the Company can demonstrate to the reasonable satisfaction of Cyrus
that the remaining funding requirement (if any) for the development
of phase 1 of the Black Angel mine will be available.
3. Security
The Facilities will be secured by a priority first charge over
Facility B when drawn down to the escrow account and by a first charge
over the assets of Black Angel Mining Limited, the Company and certain
subsidiaries of Black Angel Mining Limited from time to time.
4.
Interest
The Facilities will bear interest at 11.00% per annum payable
quarterly in arrears on drawn amounts. A commitment fee will also
be payable in respect of Facility B. The amount of the commitment
fee will be equal to 3.5% of the US$17,500,000 available under it
and will be payable no later than the date of the drawdown of Facility
B.
5. Repayment of the Facilities
The principal amount of the Facilities
must be repaid in full by the Company by 6 June 2010. It is a term
of the Facilities Agreement that amounts outstanding thereunder are
to be repaid using 75% of the Company's positive cash flow from the
Black Angel mine after deduction of tax. Such repayments will be
made on a quarterly basis at par. The Company may also repay the
loan through cash from disposals or insurance claims but a refinancing
of the Facilities (through debt or an equity issue) will incur certain
repayment penalties of between 4% and 5% of the amounts repaid.
6.
Dividends
Until the Facilities are repaid, the Company may not pay
or declare any dividend or make any reduction of share capital without
the prior written consent of Cyrus.
7. Restrictions
Whilst the Facilities
are outstanding or available, the Company's and Black Angel Mining
Limited's activities will be subject to the usual restrictions for
facilities of this type.
These will include restrictions on:
(a) the
ability of the Company or Black Angel Mining Limited to make acquisitions
or enter into joint ventures;
(b) the ability of the Company or Black
Angel Mining Limited to incur debt, grant loans or financial assistance
to other members of their group or third parties; and
(c) the ability
of the Company or Black Angel Mining limited to make certain disposals.
This will not affect the ability of the Company to dispose of its other
operations in Greenland (other than the Black Angel mine), Brazil
or Australia.
8. Structuring
It is possible that for structuring
purposes, the Facilities will be provided by Cyrus through a sub
participation arrangement with Swedbank AB acting as the lender of
record or that the debt will be listed on the Alternative Bond Market
in Norway.
Particulars of the terms and conditions of the Warrants
1. Issue
The Company is required to issue the Warrants as a condition
of the Facilities Agreement. The Company entered into a warrant instrument
on 6 June 2007 and will (subject to shareholders' approval) issue
Warrants in registered form to subscribe for up to 37,500,000 Shares.
2. Status
The exercise price for each Share to be allotted upon
exercise of a Warrant is 20p per Share. The Warrants may be exercised
in whole or in part at any time between the drawdown of Facility
A and the third anniversary of the passing of resolution 1 at the
EGM and if not exercised by such date will lapse. The Warrants are
transferable in whole but not in part.
3. Forced conversion
The Company
may force the holders of Warrants to exercise the Warrants at any
time after the drawdown of Facility B in the following amounts:
(a) As
to one third if the closing mid price of the Company's shares has
exceeded 27.5 pence for 12 business days within a period of 27 business
days; and
(b) As to one third if the closing mid price of the Company's
shares has exceeded 30 pence for at least 12 business days within
a period of 27 business days; and
(c) As to the balance if the closing
mid price of the Company's shares has exceeded 32.5 pence for at
least 12 business days within a period of 27 business days and
provided that the Facilities have been repaid in full.
If the Company requires
the Warrantholders to exercise the Warrants on the above basis, the
Warrantholders may elect not to exercise the Warrants in which case
the Warrants must, if the Company so requests, be surrendered and
cancelled.
4. Variation
The number of Shares to be issued to Warrantholders
and/or the exercise price will be adjusted in the event, inter alia,
of a takeover, subdivision, consolidation, capitalisation, reduction
of capital, merger or amalgamation of the Company.
Future funding
The Company will have additional requirements for further funding
of its projects in the short term. The Directors believe that the
Company may have the opportunity to raise funds through the issue
of shares by way of private placings, and accordingly, the Company
is seeking approval from shareholders to grant to the Directors additional
authority under section 80 of the Companies Act 1985 ('Act') and
to disapply the statutory pre-emption rights under section 89 of
the Act, to give them the flexibility to make such share issues if
doing so is considered to be in the best interests of the Company.
Extraordinary General Meeting
The Company is seeking Shareholder
approval for the Facilities Agreement and the issue of the Warrants
(including the necessary authority under section 80 and 89 of the
Act) and will be convening an EGM to be held at The Royal York Hotel,
Station Road, York, North Yorkshire, YO24 1AA on 2 July 2007 at 11.30
am. Notice of the EGM will be posted to shareholders on or around
8 June 2007.
-ENDS-
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