(Alliance News) - Australian minerals firm Aura Energy Ltd on Wednesday said it rejected a convertible loan note proposal from a shareholder which has previously called for sweeping changes of the company's board.
ASEAN Deep Value Fund and Non-Executive Director John Bennett between them called for six new directors to be added to Aura's board, the Victoria, Australia-based firm had said in February.
ASEAN, which owns roughly an 18% stake in Aura, backed replacing an existing financing agreement with a convertible loan note worth between AUD3 million and AUD4 million, about GBP1.6 million to GBP2.1 million. It would carry an interest rate of 15% per year.
ASEAN, due to it arranging the note, also called for majority board representation and a royalty agreement which would see it paid USD1 per pound of production at Aura's Tiris uranium project in Mauritania. Aura noted this would be equivalent to USD17 million over the current life-of-mine.
Aura said: "The Aura board rejected the offer on these terms which it considered to be unacceptable and well in excess of terms for comparable transactions. In particular the USD17 million royalty to be granted was disproportionate to the AUD3 to AUD4 million funding being provided from the convertible note. This royalty would force the overall cost of the ASEAN convertible note to be several orders of magnitude more expensive than the existing convertible note.
"Additionally, ASEAN would not reveal the counterparties behind the funding to be provided for the proposed convertible note and the board considered this to be vital information for a proper assessment of the offer. Accordingly, Aura did not believe the overall terms of the convertible note proposed by ASEAN were in the best interests of the company or its shareholders. Negotiations on the note were then suspended."
Aura noted that while its existing loan note agreement has "supplied critical funds" it is open to replacing it, but "only on reasonable financial terms".
The existing note contains a condition which would see it be defaulted should the company change more than 50% of its directors. The lender would then be entitled to demand payment for the outstanding amount, which is currently at about AUD2 million.
Aura added: "The potential appointment of six new directors to the Aura board is not structurally, or financially, sustainable and as such its future shape and composition is very unclear.
"The holders of the existing convertible have expressed concern that they have no knowledge regarding the proposed board members by John Bennett."
In February, Asean requested a meeting to consider the elections of Raymond Gin, David O'Neill and David Roes as directors.
The second requisition was from Non-Executive Bennett, proposed the election of Florian Bauer, Florian Hoertlehner and Hendrik Delen as directors in the company.
Aura shares were 11% lower at 0.20 pence each in London on Wednesday afternoon.
By Eric Cunha; ericcunha@alliancenews.com
Copyright 2020 Alliance News Limited. All Rights Reserved.
Aura Egy (AURA)