17 Sep 2013 10:00
Alecto Minerals plc / EPIC: ALO / Market: AIM / Sector: Exploration & Development
17 September 2013
Alecto Minerals plc ('Alecto' or 'the Company')
Notice of General Meeting
The Board of Alecto announces a General Meeting of the Company to be held at the offices of Fox-Davies Capital Limited, 1 Tudor Street, London EC4Y 0AH at 1.00 p.m. on 2 October 2013 for the purpose of approving the acquisition of AME West Africa ("Acquisition") as announced on 22 August 2013.
The circular convening the General Meeting has been posted to shareholders today. Details of the Acquisition are set out in the circular and in Appendix I below. Certain conditions may have varied from the terms outlined in the binding agreement announced by the Company on 22 August 2013.
The circular is available at www.alectominerals.com
For further information, please visit www.alectominerals.com or contact:
Toby Howells | Alecto Minerals plc | Tel: 020 3137 8862 |
Jonathan Evans | Fox-Davies Capital Ltd | Tel: 020 3463 5000 |
Jon Belliss | Xcap Securities plc | Tel: 020 7101 7070 |
Elisabeth Cowell | St Brides Media & Finance Ltd | Tel: 020 7236 1177 |
Appendix I: Part I of the circular convening the General Meeting
DEFINITIONS
The following definitions apply throughout this document unless the context requires otherwise:
"Act" the Companies Act 2006 (as amended)
"Acquisition" the acquisition of AME West Africa from AME
"Acquisition Agreement" ‑a share purchase agreement between AME and the Company dated 21 August 2013
"Acting in Concert" has the meaning attributed to it by the Code
"AIM" AIM, a market operated by the London Stock Exchange
"AIM Rules" ‑the rules for companies whose securities are admitted to trading on AIM, as published by the London Stock Exchange
"AME" ‑African Mining & Exploration plc, a company incorporated and registered in England and Wales with registered number 7307107
"AME Convertible Loan Notes" ‑convertible loan notes for, in aggregate, £350,000 issued by the Company to AME as a condition of the Acquisition
"AME West Africa" ‑AME West Africa Limited, a company incorporated and registered in England and Wales with registered number 8090936
"Board" or "Directors" ‑the board of directors of the Company as at the date of this document
"Code" or "Takeover Code" The City Code on Takeover and Mergers
"Company" or "Alecto" ‑Alecto Minerals plc, a company incorporated and registered in England and Wales with registered number 5315922
"Consideration Shares" ‑108,695,652 New Ordinary Shares with a deemed value of £1.25 million issued to AME in respect of the Acquisition
"Convertible Loan Notes" ‑together the AME Convertible Loan Notes and the Tamimi Convertible Loan Notes
"Deferred Consideration" ‑an amount of £1.25 million payable by the company to Electrum on 1 February 2014 and possibly a further £1.25 million upon certain conditions. The consideration is payable through cash and/or shares or a combination of both
"Electrum" ‑the Electrum Group, a third party and recipients of Deferred Consideration
"Fahad Al-Tamimi" the Company's largest shareholder as at the date of this document
"Form of Proxy" ‑the form of proxy accompanying this document for use in connection with the General Meeting
"GM" or "General Meeting" the general meeting of the company convened for [] October 2013
"Independent Directors" Mr Toby Howell
"Kossanto" or a gold project located in South West Mali owned by AME West"Kossanto Gold Project" Africa
"New Ordinary Shares" new ordinary shares of £0.007 in the capital of the Company
"Proposal" ‑the proposal, set out in the Resolutions to be put to Shareholders at the GM, and if thought fit approved, that would grant the Directors authority to issue New Ordinary Shares up to an aggregate nominal amount of £5,000,000 free from pre-emptive rights
"Registrar" ‑Capita Registrars PXS, 34 Beckenham Road, Beckenham, Kent, BR3 4TU
"Resolutions" ‑the resolutions to be proposed at the General Meeting, as set out in the Notice of General Meeting
"Shareholders" a holder of Ordinary Shares of the Company
"Subscription" ‑the subscription by AME for the Subscription Shares at a subscription price of 1.15 pence (£0.0115) per New Ordinary Share
"Subscription Shares" 13,043,478 New Ordinary Shares in the capital of the Company
"Takeover Panel" The Panel on Takeover and Mergers
"Transactions" ‑together the Acquisition, the Placing, and the issue of the Convertible Loan Notes
"Tamimi Convertible Loan" ‑convertible loan notes for, in aggregate, £100,000 issued by the Company to Fahad Al‑Tamimi concurrent with the Acquisition
Notice of General Meeting
1. Introduction
On 22 August 2013, the Company announced that it had entered into a binding agreement with AME (the "Acquisition Agreement") to acquire AME's subsidiary AME West Africa for £1.25 million. Subject to satisfaction of the conditions precedent in the Acquisition Agreement, the £1.25 million consideration due to AME under the Acquisition Agreement is to be satisfied by the issue to AME of the Consideration Shares at an implied price of 1.15 pence (£0.0115) per share.
Concurrent with (and as a condition of) the Acquisition, AME has agreed to subscribe for £350,000 of convertible loan notes issued by the Company and £150,000 of new shares in the Company at a price of 1.15 pence (£0.0115) per share. The AME Convertible Loan Notes, together with interest due thereon, can be converted into New Ordinary Shares of the Company at an implied price of 1.15 pence (£0.0115).
In addition, Fahad Al‑Tamimi has agreed to subscribe for Tamimi Convertible Loan Notes equal to £100,000 issued by the Company on the same terms as the AME Convertible Loan Notes. Fahad Al‑Tamimi is the Company's largest shareholder as at the date of this document.
Finally, as announced by the Company on 22 August 2013, subject to completion of the Acquisition, it is proposed Mark Jones be appointed as Chief Executive Officer of the Company.
Through the Resolutions to be proposed at the General Meeting, the Directors are seeking authority to renew powers pursuant to Section 551 of the Act to issue the Consideration Shares and the Subscription Shares on completion of the Acquisition, and to ensure the Company has sufficient authority to issue shares in the event of exercise of the conversion rights of the parties under the Convertible Loan Notes. Also, the proposed authority granted by the Resolutions will provide flexibility for any future issuance of ordinary shares. Further details of the General Meeting and Resolutions being proposed are set out in paragraph 14 of this Part I.
The purpose of this document is to give you further information regarding the Proposal, to explain why your Board considers that they are in the best interests of the Shareholders and to seek your approval of certain Resolutions at the General Meeting.
2. Background to and reasons for the Proposals
The Board strongly believes that the Transactions will significantly strengthen the Company's prospects and financial position with the addition of (i) a portfolio of proven exploration and development gold projects with an existing JORC compliant resource located in a proven world class gold province, (ii) additional financial resources provided through the issue of the Convertible Loan Notes and completion of the Placing (which are conditional on the Acquisition), (iii) acquisition of valuable drilling and peripheral equipment, (iv) integration of a highly experienced operational team, and (v) appointment of a highly experienced chief executive officer with strong credentials and experience managing successful projects in Africa.
In particular the Directors believe that the Kossanto Gold Project with a JORC Inferred resource of 107,000 oz gold provides a material advancement to the Company's existing exploration portfolio. Furthermore, the Board believe that there is the potential to increase this resource in a relatively short period of time before advancing the project further towards production. The Company aims to progress the Kossanto Gold Project in the Republic of Mali through further exploration drilling and by completing a feasibility study during the next two years. To date, AME has spent over £1 million on the Kossanto Gold Project. The Kossanto Gold Project and other target projects offer the possibility of significant exploration upside given their proximity to significant recent gold discoveries in the region. Please read Part II of this document for further information on the Kossanto Gold Project.
3. Overview of the Principal terms of the Acquisition
Under the terms of the Acquisition, the Company has agreed to acquire AME West Africa for total consideration of £1.25 million, to be satisfied through the issue of 108,695,652 New Ordinary Shares (the "Consideration Shares") priced at 1.15 pence (£0.0115) per New Ordinary Share. Assuming the Resolutions are passed, the Company will apply to have the shares admitted to trading on AIM immediately following the General Meeting. The Consideration Shares will be subject to lock-in restrictions under the terms of the Acquisition Agreement, which restrict the right of AME to sell or otherwise dispose of the Consideration Shares. Further details of the lock-in restrictions are set out in paragraph 8 of Part I of this document.
4. Deferred Consideration
Following the Acquisition, the Company will be required to pay deferred consideration of £1.25 million to a third party, Electrum, a private mining investment company that originally sold the Kossanto Gold Project to AME in July 2012.
AME was obliged to pay deferred consideration of £1.25 million through either cash or shares or a combination of cash and shares. This obligation was due to be triggered no later than 1 February 2014. The Company has agreed to assume this obligation and Electrum has agreed to receive deferred consideration from the Company in the event that the Company elects to pay through the issue of shares.
Also, if any of the exploration licences held within the Kossanto Gold Project result in a gold reserve of greater than 500,000 oz. then the Company will be obliged to a pay further deferred consideration of £1.25 million to Electrum payable by cash or shares or a combination of cash and shares.
5. Share Subscription by AME
Under the terms of the Acquisition, AME has agreed to subscribe for 13,043,478 New Ordinary Shares (the "Subscription Shares") in the Company at a price of 1.15 pence (£0.0115) per New Ordinary Share raising proceeds of £150,000. Assuming the Resolutions are passed, the Company will apply to have the shares admitted to trading on AIM immediately following the General Meeting. The New Ordinary Shares will be subject to lock-in restrictions limiting the right of AME to dispose of the Subscription Shares. Further details of the lock-in restrictions are set out at paragraph 8 of Part I this document.
6. Convertible Loan Notes
On 21 August 2013 the Company entered into a 12 month £100,000 Convertible Loan Note with Fahad Al‑Tamimi, the largest shareholder in the Company. Under the terms of the Tamimi Convertible Loan Notes, on completion of the Acquisition, the outstanding principal sum due to Fahad Al‑Tamimi being £100,500 automatically converts into 8,695,652 New Ordinary Shares. The Tamimi Convertible Loan Notes bear interest at 5% per annum until conversion. The conversion price is 1.15 pence (£0.0115).
Concurrent with the Acquisition and the Placing, AME has agreed to subscribe for £350,000 AME Convertible Loan Notes, with funds advanced under the AME Convertible Loan Notes available for a period of 12 months and bear interest at 7% per annum until conversion. Under the terms of the AME Convertible Loan Notes, at the election of the Company or AME, the outstanding balance due under the notes (including interest) can be converted to New Ordinary Shares of the Company at a conversion price of 1.15 pence (£0.0115) per share, save that any conversion notice that would result in AME triggering a mandatory offer under Rule 9 of the Takeover Code shall only be submitted by AME with the written consent of the Company and, to the extent required by the Code or requested by the Panel, approval of shareholders. Any New Ordinary Shares issued following conversion of the AME Convertible Loan Notes will be subject to lock‑in restrictions agreed between the Company and AME, further details of which are set out at paragraph 8 of Part I of this document.
7. Appointment of Chief Executive Officer
Upon completion of the Acquisition, the Company will appoint Mark Jones as Chief Executive Officer of the Company.
Mark Jones, aged 53, is a graduate of the Camborne School of Mines and a qualified mining engineer with more than 30 year experience in mining production and associated businesses. Mark has mining experience across multiple mining projects globally with specific expertise in gold and base metals particularly in Africa, where he has spent more than 20 years. Mark holds both British and South African citizenship. Mark has an MBA and is currently a non-executive director of Aurum Mining plc, African Mining and Exploration plc, Tulpar Gold plc and Antracor Mining Ltd.
The Board believes that the appointment of Mark Jones will greatly strengthen the Company's management team and ensure that both the East and West African exploration and development projects are advanced.
Current Past
AME West Africa Limited School Farm Court Management Company Limited
African Mining & Exploration plc
Aurum Mining plc
J Cubed Ventures Limited
Tulpar Gold Limited
Antracor Mining Limited
Under the terms of the service agreement, the Company will pay Mark Jones combined fees and salary of £120,000 per annum with an additional cash bonus based on certain performance criteria.
Mark Jones holds 750,000 ordinary shares in the Company and 4,516,667 ordinary shares in AME. Also, he holds 5,597,000 options in AME exercisable at 4.62p for up to a period of five years.
There is no other information to be disclosed under schedule 2(g) of the AIM Rules.
8. Lock in Agreement
Under the terms of the Acquisition Agreement, AME has agreed for a period of 12 months following completion of the Acquisition (the "Lock‑in Period"), that they shall not be permitted to transfer, or grant any option or encumbrance, over the Consideration Shares, Subscription Shares, or New Ordinary Shares they receive on conversion of the AME Convertible Loan Notes (together the "AME Transaction Shares"). In addition, AME has agreed that for a further period of 12 months following the Lock‑in Period, they will not dispose of any of the AME Transaction Shares in a manner that would be prejudicial to the Company maintaining an orderly market in the Company's shares.
The restrictions on AME under the Acquisition Agreement do not apply to any transfer or disposal approved by Alecto, or where the transaction is a result of a takeover offer or other scheme of arrangement or merger available to all members or approved by members at a general meeting (as the case may be).
9. Application of new funds
Following completion of the Acquisition and Transactions, the new funds received by the Company pursuant to the Subscription and issue of the Convertible Loan Notes will be used principally to continue the development of the Company's exploration and development projects in both East and West Africa with a specific focus on the Kossanto Gold Project in the Republic of Mali and the Asiyd Metekel project in Ethiopia.
The Board believes that further funding will be required in order to progress both these assets to a point of proven reserves and production and will continue to pursue the most effective routes of achieving these aims.
10. Effects of the Proposals on the Shareholders
Assuming no further exercise of options or issue of New Ordinary Shares by the Company prior to the date of the General Meeting, following completion of the Transactions the Company would have an enlarged share capital comprising of 488,918,775 ordinary shares.
In particular the Company will issue the Consideration Shares and the Subscription Shares, and a further 8,695,692 New Ordinary Shares pursuant to conversion of the Tamimi Convertible Loan Notes. Existing shareholders will suffer an immediate maximum dilution of 37% following the Acquisition, Subscription and conversion of the Tamimi Convertible Loan Notes.
Following completion of the Transactions, and conversion of the Tamimi Convertible Loan Notes, the following Shareholders will hold more than 3% interest in the Company.
Following the Acquisition, following Shareholders will hold more than 3 per cent. interest in the Company:
Shareholder Ordinary Shares %
AME 121,739,130 24.90
Fahad Al-Tamimi 108,746,652 22.24
Michael Johnson(1) 23,258,028 4.76
Wondimu Yohannes 19,272,749 3.94
(1) 8,444,322 Ordinary Shares are held by Helen Johnson, the wife of Michael Johnson.
11. City Code on Takeover and Mergers
The conversion of the AME Convertible Loan Notes and payment of the Deferred Consideration could give rise to certain considerations under the Takeover Code. Brief details of the aspects of the Takeover Code and the protections it affords to you as a Shareholder are described below:
The Code is issued and administered by the Takeover Panel. The Code governs, inter alia, transactions which may result in a change of control of a company to which the Code applies. The Company is a company to which the Code applies and its Shareholders are entitled to the protections afforded by its provisions.
Under Rule 9 of the Code ("Rule 9"), when a person acquires an 'interest' (as defined in the Code) in shares which, taken together with shares in which he is already interested and in which persons Acting in Concert with him are interested (as defined in the Code), carry 30 per cent. or more of the voting rights of a company that is subject to the Code, then that person together with persons Acting in Concert with him are normally required to make a general offer in cash to all the remaining shareholders to acquire their shares.
Similarly where any person who, together with any person or persons Acting in Concert with him, is interested in shares which in aggregate carry not less than 30 per cent. of the voting rights of such a company, but does not hold shares carrying more than 50 per cent. of such voting rights, a general offer will normally be required if any further interest in shares is acquired by him or by any person Acting in Concert with him.
An offer under Rule 9 must be made at the highest price by the person required to make the offer, or any persons Acting in Concert with him, for any interest in shares in the company during the 12 months prior to the announcement of the offer for the remaining equity share capital of the company.
In the event that AME converts such number of AME Convertible Loan Notes that results in, when aggregated with other shares held (and any persons Acting in Concert with them) in AME controlling 30 per cent. or more of the voting rights of the Company, the provisions of Rule 9 as referred to above will, prima facie, apply to the AME.
AME has undertaken not to convert the AME Convertible Loan Notes to the extent that conversion will trigger an offer under Rule 9 of the Code.
In the event that the Company elects to pay Electrum the Deferred Consideration through the issue of shares only that results in Electrum 30 per cent. Or more of the voting rights of the Company, the provisions of Rule 9 as referred to above will, prima facie, apply to Electrum.
The Company and Electrum have undertaken not to issue shares to the extent that will trigger an offer under Rule 9 of the Code.
The Concert Party
Holding upon | ||||
completion of | ||||
Current | the Acquisition | |||
Shareholder | holding | % | and Subscription | % |
AME | Nil | Nil | 121,739,130 | 24.90 |
Michael Johnson(1) | 23,258,028 | 6.49 | 23,258,028 | 4.76 |
Mark Jones | 750,000 | 0.21 | 750,000 | 0.15 |
Total | 24,008,028 | 6.70 | 145,747,158 | 29.81 |
Michael Johnson is the Chairman of both Alecto and AME.
Mark Jones is to be appointed Chief Executive Officer of Alecto upon Acquisition and was formerly Chief Executive Officer at AME.
(1) 8,444,322 Ordinary Shares are held by Helen Johnson, the wife of Michael Johnson.
Electrum and the Deferred Consideration
Holding upon | ||||||
Holding upon | receipt of first | |||||
receipt of first | and second | |||||
tranche of Deferred | tranche of Deferred | |||||
Consideration | Consideration | |||||
Current | through shares | through shares | ||||
Shareholder | holding | holding % | only(1) | holding % | only(1) | holding % |
Electrum | Nil | Nil | 108,695,652 | 18.1 | 217,391,304 | 30.78 |
(1) ‑Deferred Consideration is payable through a combination of shares and cash or both. The first tranche of £1.25 million is payable on 1 February 2014 and the second tranche of £1.25 million is payable only if a gold reserve of greater than 500,000oz is reported with the Kossanto Gold Project.
Electrum is an investment company based in the USA and beneficially owned by Thomas Kaplan
12. Current Financial Position and Pro Forma Financial Position on Completion
Set out below is an unaudited Pro forma Statement of Net Assets of Alecto which has been prepared for illustrative purposes only to show the effect of the acquisition of AME West Africa on the Company and its Subsidiaries (together "the Group"). The Pro forma Statement of Net Assets has been prepared for illustrative purposes only, and because of its nature, it may not give a true reflection of the Group's financial position or results.
Issue of | ||||
Subscription | Unaudited | |||
Alecto Minerals plc | Shares and | pro forma | ||
net assets as at | Convertible | Acquisition of | adjusted net | |
31 August 2013 | Loan Notes | AME West Africa | assets of Group | |
(Note 1) | (Notes 2) | (Note 3) | on completion | |
£ | £ | £ | £ | |
Assets | ||||
Non-current assets | ||||
Intangible assets | 3,478,379 | - | 2,228,360 | 5,706,739 |
Available for sale financial assets | 21,000 | - | - | 21,000 |
Restricted assets | 38,785 | - | - | 38,785 |
Property, plant and equipment | 43,747 | - | 167,084 | 210,831 |
3,581,911 | - | 2,395,444 | 5,977,355 | |
Current assets | ||||
Other receivables | 47,474 | - | 6,387 | 53,861 |
Cash and cash equivalents | 126,793 | 500,000 | 4,147 | 630,940 |
174,267 | 500,000 | 10,534 | 684,801 | |
Total assets | 3,756,178 | 500,000 | 2,405,978 | 6,662,156 |
Liabilities | ||||
Current liabilities | ||||
Other payables | 17,310 | - | 19,380 | 36,690 |
Borrowings | 100,000 | 250,000 | - | 350,000 |
117,310 | 250,000 | 19,380 | 386,690 | |
Non-current liabilities | ||||
Deferred tax liabilities | 614,780 | - | - | 614,780 |
614,780 | - | - | 614,780 | |
Total liabilities | 732,090 | 250,000 | 19,380 | 1,001,470 |
Total assets less total liabilities | 3,024,088 | 250,000 | 2,386,598 | 5,660,686 |
Notes
The Pro forma Statement of Net Assets has been prepared on the following basis:
1. ‑The net assets of the Group as at 31 August 2013 have been extracted from the management accounts and are unaudited.
2. ‑An adjustment has been made to reflect the proceeds of the Placing of 13,043,478 Ordinary Shares of the Company at an issue price of 1.15 pence per Share and to show the issue of the £350,000 convertible loan note. Also includes adjustment for conversion of £100,000 Fahad Convertible Loan Note on completion.
3. ‑An adjustment has been made to reflect the acquisition of AME West Africa from the AME for consideration of £1,250,000 satisfied by the allotment of 108,695,652 Ordinary Shares. This is based on the 30 June 2013 management accounts for AME West Africa.
4. ‑No other adjustments have been made to reflect the trading or other transactions of the Company since 31 August 2013.
5. The Pro-forma Statement of Net Assets does not constitute financial statements.
13. Irrevocable undertaking
Fahad Al-Tamimi has provided and irrevocable undertaking to vote 100,051,000 ordinary shares directly or indirectly under his control in favour of the Resolutions at the General Meeting.
14. General Meeting
A notice convening a General Meeting of the Company to be held at the offices of Fox-Davies Capital Limited, 1 Tudor Street, London EC4Y 0AH at1.00pm on 2 October 2013.
Resolution 1 - Section 551 authority
This is an Ordinary Resolution authorising the Directors to allot relevant securities up to an aggregate nominal amount of £5,000,000 being 714,285,714 ordinary shares of 0.7p each. This authority will expire at the conclusion of the next Annual General Meeting to be held in 2014.
Resolution 2 - Section 570 authority and dis-application of Section 561(1)
This is a Special Resolution authorising the Directors to issue equity securities wholly for cash on a non‑pre-emptive basis pursuant to the authority conferred by resolution number 1 above. This will allow the Board to allot shares without recourse to the shareholders so that it can move quickly from time to time as it deems appropriate. This authority is limited to 714,285,714 ordinary shares of 0.7p each and will expire at the conclusion of the next Annual General Meeting to be held in 2014.
15. Action to be taken in respect of the General Meeting
Shareholders will find enclosed a Form of Proxy for use at the General Meeting is enclosed. The Form of Proxy should be completed returned in accordance with the instructions printed thereon so as to arrive at the Company's Registrars, Capita Registrars, PXS, 34 Beckenham Road, Beckenham, Kent BR3 4TU as soon as possible and in any event not later than 48 hours (excluding non-business days) before the time fixed for the Meeting.
If the Form of Proxy is not returned by 1.00 pm on 30 September 2013, your vote will not count.
16. Recommendation
For the purposes of the Resolutions Mr Michael Johnson, the chairman of the Company, is not considered to be Independent.
The Independent Non-Executive Director, Toby Howell, considers that the Resolutions are in the best interests of the Company and its shareholders as a whole and it unanimously recommend to the shareholders that they should vote in favour of each of them as the Board intend to do so in respect of the 23,685,528 Ordinary Shares held by them (representing 6.61 per cent. of the Company's issued share capital).