LONDON (Alliance News) - Strategic Natural Resources saw its shares fall Tuesday after the company said it had secured an investment of GBP1.5 million in the company, secured a deal to pay off at least one creditor, and said it will appoint several new executives to run the company.
The money will not be enough to pay off all the money it owes its current creditors, but the company said it was continuing talks about other funding options.
The company, which owns 74% of the Elitheni Coal Ltd operations in South Africa, 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 issues.
In March, Strategic Natural received notice from London Commodity Brokers asking for it to be wound up amid disputes and claims which had led to two separate legal battles. London Commodity Brokers was seeking USD1.15 million, although a winding-up hearing that was set for Monday was suspended for a week, and a settlement deal has now been signed.
Strategic Natural has been trying to find funding that would allow it to pay off its creditors and stay in business.
In its statement Tuesday, it said a vehicle of South African businessman Irving Aronson had agreed to subscribe for GBP1.0 million of its shares. It'll buy 25 million new shares at 4 pence each, a 17% discount from Strategic Natural's closing share price on May 12. The deal will be done in two tranches, the first for 15 million new shares and then a second for 10 million shares.
Aronson's vehicle, Target Alliance London Ltd, is funding the subscription by way of a GBP0.6 million loan from Emesis Management Ltd, a Bahamas based investment company, Strategic Natural said.
Strategic Natural said it has also entered a GBP0.5 million underwriting agreement with Beaufort Securities Ltd, under which Beaufort has agreed to underwrite the placing of 12.5 million new shares at 4p a share. Beaufort will get GBP75,000 in cash and GBP75,000 worth of shares as commission, and has also been appointed as Strategic Natural's broker. Current broker Allenby Capital will act as the company's nominated adviser.
"The net proceeds of the Target Alliance subscription and the Beaufort underwriting, which are expected to amount to approximately GBP1.3 million, net of Beaufort's cash commission and other professional fees, will be used by SNR to settle certain creditors of SNR and Elitheni," the company said in a statement.
"Whilst the net proceeds of the subscription are not sufficient for the company to repay all of its creditors or to recommence operations at the Elitheni mine, the directors and proposed directors of SNR are progressing further funding options," it said.
Strategic Natural said three new directors proposed by Target Alliance will join its board as long as the subscription goes ahead. Alexander MacDonald, aged 66, will be appointed as chairman and chief executive, Michael Drozd, 57, will be appointed chief operating officer, and Michael Shore, 62, who will be appointed Finance Director.
It said that Gabriel Ruhan will step down as interim CEO, but remain on the board as a non-executive director. Don Nicolson will remain executive vice chairman, while Andrew Brennan will step down as chairman but remain on the board as a non-executive director. Current non-executive directors Randal MacDonnell and Richard Latham.
Strategic Natural needs the funds. It said that Land Consultants Ltd has agreed to further extend repayment of its circa GBP6.0 million loan, excluding accrued interest, to March 31, 2015, from the end of June this year, as long as the subscription goes through.
Under this deal, Land Consultants will receive a fee of GBP100,000 and has the right to convert all or any part of the outstanding interest on the principal amount of the loan up to an amount of GBP2 million into new Strategic Natural shares at 4p per share.
It added that Elitheni is hoping to settle the amounts it owes Thelo Rolling Stock Leasing (Pty) Ltd in the near future. Thelo had commenced legal proceedings to repossess the containers that Elitheni currently leases from Thelo, and as part of those proceedings, Strategic Natural had its interest in Elitheni frozen.
Meanwhile, Strategic Natural said it had now signed a settlement deal with London Commodity Brokers. It will pay a cash settlement in two installments, the first from the proceeds of the initial subscription and the second by June 6. It will also allot London Commodity Brokers nearly 1.7 million new shares as long as the winding up petition is discharged.
"LCB have agreed to apply for the winding up petition to be discharged following payment of the cash due under the settlement agreement in full," Strategic Natural said.
Separately, Strategic Natural said it has agreed to issue 10 million new shares of 4p each to Niall Mellon, chairman of Elitheni, and entities associated with him, in partial settlement of amounts owed to him.
"The company is also in discussions with a number of its other creditors with a view to those creditors receiving new ordinary shares in order to settle the outstanding amounts owed to them, wholly or in part, with a view to reducing the on-going cash requirement of the company," it added.
It said it will ask shareholders for permission to allot and issue new shares at a general meeting.
Strategic Natural Resources shares were down 14.6% at 4.70 pence Tuesday morning as the 4 pence deal set a new benchmark price. That slide made it one of the biggest decliners on the AIM All-Share index Tuesday.
By Steve McGrath; stevemcgrath@alliancenews.com; @stevemcgrath1
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