LONDON (Alliance News) - Strategic Natural Resources PLC Monday said it has agreed to cancel its agreement to buy a 6% shareholding US natural gas firm Millennium Energy Corp.
The natural resources development company, which is currently struggling to make payments to creditors, was to buy the stake from Ivory Mint Holdings Corp in a GBP2.4 million deal announced on July 1, but now has agreed with Ivory Mint to cancel the agreement.
As a result, Ivory Mint Holding Corp will repay to Strategic Natural GBP660,000 in cash already paid, within the next 90 days.
Strategic Natural had planned to buy the stake for GBP400,000 in cash and GBP2 million in shares, issued at 5 pence per share. An amended agreement, later rescinded, subsequently had increased the cash component to GBP660,000.
At the time, Strategic Natural said it had made two deposit payments totalling GBP660,000 as part of the deal.
The company noted on July 1 that it should have announced the investment in Millenium Energy in May under AIM rules for companies, but it failed to do so because it believed that the deal should not be announced until certain conditions had been met.
Strategic Natural said its nominated adviser Allenby Capital Ltd had resigned from its role due to the failed announcement.
The company, which owns 74% of the Elitheni Coal Ltd operations in South Africa, earlier this year got into financial difficulty and started to receive demands from creditors for payments it couldn't afford to make. Elitheni faced being put into liquidation because of the cash problems.
In May, Strategic Natural said it had secured an investment of GBP1.5 million in the company, which it would use to pay off at least one creditor,
On July 1, Strategic Natural said it had provided GBP230,000 to Elitheni since May 14, which has been used to pay ZAR2.3 million to creditors and to pay salaries and operating expenses at the company.
The company said the GBP1.5 million payment did not allow it to clear all of its creditors, but it did pay back the most critical creditor payments, including London Commodity Brokers, which had filed a winding-up petition for the company based on the disputes. London Commodity Brokers has since withdrawn the petition.
Strategic Natural also had said that due partly to its decision to invest in Millennium Energy, it had received a further subscription offer from Target Alliance Ltd to invest GBP1.2 million at 3 pence per share into Strategic Natural.
The company had said the offer was conditional upon its share trading suspension being lifted and on shareholder approval, which it expected to receive once a new nominated adviser was appointed.
The firm said the proceeds of the subscription would be used to further pay creditors and meet its working capital needs.
It is unclear Monday how Target Alliance's investment will be affected by Strategic Natural's decision to pull out of its planned investment in Millennium Energy Corp.
Strategic Natural shares remain suspended at 2.88 pence on Monday.
By Tom McIvor; tommcivor@alliancenews.com; @TomMcIvor1
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