LONDON (Alliance News) - Rambler Metals & Mining PLC Thursday outlined a proposal to raise up to GBP20.5 million through a deal with a mining investment fund which could give away control of the business and lead to the majority of its board being replaced.
Rambler has conditionally agreed to issue 261.4 million new shares in the company at a subscription price of 4.0 pence each to raise a total of GBP10.5 million, and to issue warrants over a further 200.0 million shares in the company that would, if exercised at 5.0 pence each, raise a further GBP10.0 million.
Rambler shares were trading down 3.0% to 4.0 pence per share on Thursday morning, giving it a market capitalisation of GBP6.8 million.
The shares and warrants would be issued to CEII Roma, a wholly-owned subsidiary of CEII GP, which would be undertaking the deal on behalf of mining investment fund CE II.
Rambler has been looking for a financing partner to assist the company with its Ming mine in Canada, and President and Chief Executive Norman Williams said the investment offer made by CE II was the "best financing solution" for shareholders "both now and into the future".
"The financing strategy proposed by CEII is twofold. The first placement of GBP10.5 million will allow the operation to expand, as per the pre-feasibility study, with production anticipated to increase to a minimum of 1,250 metric tonnes per day over the next few years," said Williams
"Secondly, during the initial construction phase further engineering and assessment work will be completed on re-establishing the shaft for hoisting with the integration of dense media separation," he added. "Should this expanded case be robust enough, CEII will have the option to invest further through the exercise of the warrants to execute this plan."
Importantly, CE II will hold a 63.1% stake in the enlarged issued share capital of Rambler once the subscription shares have been issued, but that would rise to 75.1% if the warrants were exercised. CE II could exercise those warrants within a two year period, and potentially exercise them immediately once issued.
Usually, a person or entity that acquires more than a 30% stake in a London-listed firm is obligated to make an offer for the rest of the company, but this has been waived for the meanwhile.
However, if CE II pushed its stake over that 75% threshold by exercising its warrants, then it would be in a position to pass special resolutions without the need for support from other shareholders, giving it free reign to appoint directors, sell the company, offload assets or make other major decisions that Rambler or its other shareholders would be unable to prevent.
Even before exercising the warrants, CE II would still hold a substantial stake, meaning it will no doubt be very influential if the deal goes ahead.
Notably, Rambler is also putting forward a proposition to shareholders that would prevent CE II from delisting its shares from trading in London.
"CEII Roma intends to conduct the business of the company in the same manner as it is currently conducted and there are no plans to introduce any material change to the business of the company," said Rambler.
"In the event that the proposals are approved at the general meeting, CEII Roma will not be restricted from making an offer for the company," Rambler added.
Although Rambler said CE II has no plans to change the management at Rambler, approval of the deal would lead to a substantial restructuring of the board.
If approved, Rambler would appoint Bradford Mills, Mark Sander, Belinda Labatte and Terrell Ackerman as non-executive directors.
More importantly, they would be replacing Rambler's current Chairman George Ogilvie, Director John Thompson and the two existing Non-Executives Tat Sze Chan and Leslie Goodman.
That would leave current President and Chief Executive Norman Williams and two Non-Executive Directors Glenn Poulter and Eason Cong Chen on the board to sit alongside the new four non-executives.
Rambler shareholders will vote on the significant proposition on May 27, but the company is well on its way to securing approval as it has irrevocable undertakings from holders with a combined 52% stake in the company as of Thursday. Those shares are held by the current Rambler directors, who have also unanimously recommended the deal.
The deal is not just about progressing the Ming mine in a tough environment, but to also address the company's financial position which is highly leveraged to copper prices at a time when prices remain subdued.
Rambler said it only has CAD1.0 million in cash and CAD1.1 in receivables, but trade and other payables of CAD5.2 million - meaning it would need to raise short-term capital just to keep ticking over regardless of the deal unveiled Thursday.
The miner said there would be "material uncertainty over the financial condition of the company and its ability to deliver" if the deal is rejected by shareholders.
Exacerbating its current financial woes, Rambler moved into the red in the second quarter of 2016 as it reported a CAD1.5 million post-tax loss. That has moved from a CAD364,000 profit in the previous quarter.
The loss came as revenue fell quarter-on-quarter to CAD8.3 million from CAD11.2 million whilst cashflows generated from operations fell to CAD1.8 million from CAD2.2 million.
The cause was lower sales of only 3,770 dry metric tonnes of concentrate in the quarter compared to 4,879 tonnes in the previous three months whilst prices also fell to CAD2.89 per pound from CAD3.10. That was not helped by higher net direct cash costs of CAD2.46 per pound from CAD1.99.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
Copyright 2016 Alliance News Limited. All Rights Reserved.