AMBR.L Regulatory News (AMBR)

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FOR IMMEDIATE RELEASE

 30 September 2015

Ambrian plc

("Ambrian" or the "Company")

Proposed Issue of Convertible Loan Notes and Warrants

Ambrian announces a conditional fundraising to raise approximately £2,567,000 (before expenses) through the issue of convertible loan notes and warrants to certain existing shareholders (including Kestrel Partners LLP, on behalf of its discretionary clients, and Charles Davies), certain Directors and senior managers of the Company (the "Fundraising").

The Fundraising is conditional on, amongst other things, the passing of a special resolution (the "Resolution") by Ambrian's shareholders ("Shareholders"). Shareholders should note that the Fundraising is not being underwritten and that neither the convertible loan notes nor the warrants will themselves be admitted to trading on AIM or any stock exchange. However, application will be made in due course for the admission to trading on AIM of Ambrian's ordinary shares ("Ordinary Shares") resulting from any exercise of conversion rights under the Convertible Loan Notes and any exercise of subscription rights under the Warrants. Details of the convertible loan notes and the warrants are set out below.

Reasons for the Fundraising and Use of Proceeds

The Company today announced its interim results for the six month period ended 30 June 2015 in which it reported turnover of US$0.92 billion (1H 2014: turnover of US$1.53 billion) and a loss before tax of US$6.35 million (1H 2014: profit before tax of US$1.17 million) including a provision of US$2.23 million to reflect the impact of possible continuing adverse conditions in the trading of semi-finished products. Net asset value as at 30 June 2015 was reported as US$44.22 million (31 December 2014: US$29.21 million), equivalent to US 18.0 cents per share (31 December 2014: US 29.0 cents).

Trading and Logistics

As Ambrian reported in May this year, the first half of 2015 trading conditions in most industrial metals and minerals continued to be subdued following on from similar conditions in the last quarter of 2014. Softer economic conditions in the first half of 2015, inventory drawdowns by customers and tighter credit availability in China resulted in trading volumes down by approximately 40 per cent. when compared with the same period in 2014. Continued focus on operating costs and improving the mix of our business lines to those commanding higher margins have, to some extent, mitigated the challenges we have faced, in particular, the sharp reduction in physical premiums affecting semi-finished products.

The principal issues faced by the business over the period have been (i) little or no opportunities to arbitrage metal premiums, (ii) copper backwardation combined with a build-up in inventories resulting in increased finance and warehousing costs and (iii) alleged frauds in two ports in China which unsettled trade finance banks and resulted in some banks re-assessing their level of exposure in commodity financing thus affecting market volumes.

The Company has implemented a number of actions to address these challenging trading conditions.

These include (i) the reduction in inventories where practical and commercial to do so, (ii) marketing

semi-finished products in markets other than the markets in which the Company and its subsidiaries (the "Group") has traditionally been active, (iii) increasing tolling of concentrates into metal thus improving margins and (iv) entering into exclusive agency agreements with producers to represent their metal brands in certain markets thus reducing the risks associated with acting as a principal.

Cement operations

On 30 July 2015, Ambrian announced the mechanical completion of the cement plant in Beira. A further significant milestone has since been achieved with the completion of the electricity substation and its connection to the national grid.

To mitigate the impact of delay to commercial production of the cement plant, the Company has taken certain steps such as (i) the negotiation of payment terms on open account with suppliers of raw materials, (ii) negotiation of additional working capital facilities with local banks, (iii) rescheduling debt service under the long term loans granted by Industrial Development Corporation of South Africa Limited ("IDC"), (iv) scheduling longer payment terms with the suppliers of equipment and services in Mozambique and (v) negotiating with the IDC its pro rata participation in the funding of the cost overruns that have been supported by the Group to date.

Current trading and future prospects

Trading and Logistics

Since 30 June 2015, the Company has taken steps to reduce its exposure to business lines that it believes are unlikely to show a positive contribution in the next twelve months and are adjusting the

Group's mix of services and products towards higher margin businesses.

Market conditions appear to be gradually improving and the Group expects to increase trading volumes and firming physical premiums for the products it trades. Trading since 30 June 2015 has made a positive contribution to gross profits.

Cement operations

The market for cement in central Mozambique remains strong and the Directors expect it to grow in line with the country's GDP growth. Prices have firmed since the beginning of the year as a result of local demand and the collective appetite of cement producers not to oversupply the market. However, this is mitigated to some extent by the weakening of the local currency against the US dollar. To ensure that early production is achieved on the best possible commercial terms, we have recruited a commercial director who is familiar with the cement market in central Mozambique and who has assumed this role prior to commercial production.

To date, approximately 43,000 tonnes of raw materials have been purchased which is sufficient for approximately two months of forecast production. Commercial production is expected to commence

immediately after the successful completion of the hot commissioning of the mill and the sequence testing of all sections of the plant. We expect the cement plant to be contributing positively to the Group's results from next month onwards.

The Company has assumed that after an initial ramp up phase average annual cement sales will reach approximately 30 per cent. of the plant's rated capacity with cash margins ranging between 20 per cent. and 30 per cent.

Fundraising

To cover the US$3 million for both immediate cost overruns at Cimentos de Beira Limitada ("CdB") (an 87.5 per cent. subsidiary of Ambrian) and for general working capital purposes, Ambrian has conditionally agreed to raise £2,567,000 through the issue of 10 per cent. p.a. convertible unsecured loan notes (the "Convertible Loan Notes") and warrants to subscribe for Ordinary Shares (the "Warrants"). The net proceeds of the Fundraising, after satisfying the cost overruns at CdB, will provide the Group with additional headroom of approximately US$2 million, which the Directors consider to be sufficient for Ambrian's foreseeable working capital requirements.

In reviewing the Group's working capital requirements, the Directors have made the following assumptions about future trading:-

· Normalised cement sales volumes are expected to reach 30 per cent. of the plant's rated capacity or one third of the total regional market (50 per cent. of the regional market is concentrated in Beira).

· As the plant is located in Beira, CdB's share of the local market is likely to be more than one third.

· Current average cement prices are expected to range between US$110 - 120 per tonne with cash margins ranging between 20 per cent. and 30 per cent. assuming constant raw material intake costs.

· Ambrian Metals Limited's net premium on average ranges between US$17 - 37 per tonne.

· On a normalised basis, Ambrian Metals Limited trades approximately 400 - 450ktpa of metal equivalent excluding any new business lines to be added.

On 30 July 2015, Ambrian announced that during the first six months of 2015, Jean Pierre Conrad, Ambrian's CEO, made an advance of €300,000 (to the Company, but with funds remitted at the direction of the Company to CGM (UAE) FZE, a wholly-owned subsidiary of the Company), and two advances (to the Company, but with funds remitted at the direction of the Company to Ambrian Resources AG) totalling CHF 200,000. These advances, which it has been agreed will be the equivalent of £354,816 in aggregate, are unsecured, interest-free and repayable before 31 December 2015. Subject to the passing of the Resolution, and in lieu of repayment of these facilities, Mr Conrad has agreed to receive Convertible Loan Notes (with Warrants attached) in the same aggregate amount. As noted below, Mr Conrad is one of the Directors who has also agreed to provide a further short term loan (in Mr Conrad's case in an amount of £45,184, bringing the total amount of loans from Mr Conrad to the Company to £400,000).

Taking into the account the conversion of Mr Conrad's advances, as described above, into Convertible Loan Notes (with Warrants attached), the net cash received by the Company pursuant to

the Fundraising will be approximately £2.4 million.

In addition, and as part of the Fundraising, Ambrian today announced that certain Directors - being Jean-Pierre Conrad, Robert Adair (via a family trust of which he is a life tenant) and Nicolas Rouveyre

- and certain senior managers of the Company have entered into loan agreements in terms of which

they have agreed to make available to the Company short term loans totalling £542,184 (the "Short Term Loans") by no later than the close of business on 30 September 2015, in order to provide the Company with working capital ahead of completion of the Fundraising. The Directors consider that the Short Term Loans are important as there are several immediate expenses at CdB which, if paid at once, are expected to ensure there are no further delays to the commencement of commercial production at the plant. Subject to the passing of the Resolution and to not less than £1,600,000 being raised in the Fundraising (other than from the Directors and senior managers), the Short Term Loans (together with the other prior advances of £354,816 from Mr Conrad, described above) will mandatorily convert into Convertible Loan Notes (with Warrants attached) at the Placing Price. The Short Term Loans will be unsecured and, if not so converted, will be repayable by no later than 31 December 2015. Interest will be payable on the Short Term Loans at a rate of 6 per cent. per annum, which will rise to 12 per cent. if the Short Term Loans have not been so converted or else repaid by 30 October 2015.

Principal terms of the Fundraising

As described above, the Company proposes to raise approximately £2,567,000 (before expenses) in aggregate by way of the Fundraising.

The shareholder approval necessary for the Fundraising will be sought at a general meeting to be held at 11.00 a.m. on 16 October 2015 (the "General Meeting"), the full details of which are set out in a shareholder circular to be posted today.

The Fundraising is conditional on, amongst other things, the passing of the Resolution and the Placing Agreement (as referred to below) becoming unconditional. Completion is anticipated to take place on the day of, and immediately following, the General Meeting.

Convertible Loan Notes

The principal terms of the Convertible Loan Notes are as follows:-

a) the Convertible Loan Notes will be repayable at their full nominal value on 16 October 2019, unless the Company elects to repay the Convertible Loan Notes at their full nominal value (but in multiples of £100 nominal) at any earlier time that is not within a 'close period' (as defined in the AIM Rules for Companies (the "AIM Rules")) or when it is not prevented from doing so under the Listing Rules, by giving not less than 20 days' notice thereof to the holders of the Convertible Loan Notes (the "Noteholders") or such notice period as the Company and the relevant holder may agree;

b) the Convertible Loan Notes will become repayable immediately (together with interest accrued thereon) upon certain events of default occurring in relation to the Company (including for this purpose, a takeover offer for the Company becoming or being declared wholly unconditional);

c) interest will be payable on the Convertible Loan Notes at the rate of 10 per cent. per annum payable in arrears on 30 June and 31 December following the issue of the Convertible Loan Notes, but with the first interest not becoming payable until 30 June 2016;

d) a Noteholder will have the right at any time upon written notice to the Company, to convert the principal amount of the Convertible Loan Notes held by him into new Ordinary Shares at £0.08 per share (with such conversion then becoming effective 2 business days after service of the conversion notice on the Company);

e) a Noteholder will also have the right at any time upon not less than 5 business days' written notice to the Company prior to any half-yearly interest payment date, to convert the interest payable on that interest payment date in respect of the Convertible Loan Notes held by him into new Ordinary Shares at £0.08 per Ordinary Share (with such conversion then becoming effective on that interest payment date);

f) the conversion rights under the Convertible Loan Notes will be subject to adjustment as the auditors of the Company, the Company's nominated adviser (or such other person authorised to act as both a nominated adviser under the AIM Rules and as a sponsor under the Listing Rules as appointed by the Board) thinks fit in the event of specific corporate actions affecting the share capital of the Company;

g) the Convertible Loan Notes registered in a Noteholder's name will be evidenced by a Convertible Loan Note certificate issued by the Company (and will not be issued in uncertificated form);

h) the Convertible Loan Notes will be freely transferable (in multiples of £100);

i) the Convertible Loan Notes will not be listed on AIM or any other stock exchange;

j) Ordinary Shares issued on the exercise of conversion rights in respect of the principal of, or interest on, the Convertible Loan Notes will be issued in certificated form or uncertificated form (at the election of the Noteholder in the notice exercising the relevant conversion rights);

k) following conversion of any Convertible Loan Notes the Company shall, within 3 business days after the relevant conversion, allot and issue the new Ordinary Shares to be issued upon such exercise and, provided the Ordinary Shares are traded on AIM (or any other stock exchange), make an application for the new Ordinary Shares to be admitted to trading on AIM (or that other stock exchange); and

l) upon the passing of a resolution (or issue of an order) to wind up the Company, a Noteholder may, on written notice to the Company within 3 months of the date of the passing of such resolution or order, elect to be treated as if he had been entitled to and had elected to convert his Convertible Loan Notes before such date.

The Company has the right (exercisable in its absolute discretion) to transfer existing Ordinary Shares held by the Company or any company in the Ambrian Group (whether or not such Ordinary Shares are held as 'treasury shares') to any Noteholder in satisfaction of Ordinary Shares to which such Noteholder would otherwise become entitled on exercise of any conversion rights under the Convertible Loan Notes.

Warrants

The principal terms of the Warrants are as follows:-

a) a holder of Warrants (a "Warrantholder") will have the right at any time prior to 16 October 2025 upon written notice to the Company, to subscribe for new Ordinary Shares (on the basis of one new Ordinary Share for each Warrant held, subject to adjustment) at £0.01 per Ordinary Share;

b) the Warrants will be freely transferable;

c) the Warrants will initially be granted in conjunction with the Convertible Loan Notes (on the basis of 25 Warrants for each £2 nominal of Convertible Loan Notes subscribed for) but will not be 'stapled' to such Convertible Loan Notes (so that they will be transferable separately from the Convertible Loan Notes);

d) the subscription rights under the Warrants will be subject to adjustment as the auditors of the Company, the Company's nominated adviser (or such other person authorised to act as both a nominated adviser under the AIM Rules and as a sponsor under the Listing Rules as appointed by the Board) thinks fit in the event of various corporate actions affecting the share capital of the Company;

e) the Warrants registered in a Warrantholder's name will be evidenced by a Warrant certificate issued by the Company (and will not be issued in uncertificated form);

f) the Warrants will not be listed on AIM or any other stock exchange;

g) Ordinary Shares issued on the exercise of subscription rights under the Warrants will be issued in certificated form or uncertificated form (at the election of the Warrantholder in the notice exercising the subscription rights; and

h) for as long as the Ordinary Shares are traded on AIM (or any other stock exchange), it is the intention of the Company to apply for the Ordinary Shares alloted to be admitted to trading on AIM (or any other stock exchange).

Kestrel Partners LLP & Charles Davies

Kestrel Partners LLP ("Kestrel"), on behalf of its discretionary clients, and Charles Davies have conditionally agreed to subscribe for £800,000 nominal of Convertible Loan Notes (with 10,000,000 Warrants attached) and £800,000 nominal of Convertible Loan Notes (with 10,000,000 Warrants attached) respectively. They are both existing shareholders of the Company - owning 29,585,397 Ordinary Shares and 27,018,854 Ordinary Shares respectively - and are considered by the Directors to be 'acting in concert' in relation to the Company and its Ordinary Shares for the purposes of the City Code on Takeovers and Mergers (the "Takeover Code").

Under Rule 9 of the Takeover Code, when (i) a person acquires an interest in shares which, taken together with shares in which he and persons acting in concert with him are interested in, carry 30 per cent. or more of the voting rights of a company subject to the Takeover Code, or (ii) any person who, together with 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 a company, but does not hold shares carrying more than 50 per cent. of the voting rights of the company subject to the Takeover Code, and such person, or any persons acting in concert with him, acquires an interest in any other shares which increases the percentage of the shares carrying voting rights in which he is interested, then in either case, that person together with the persons acting in concert with him, is normally required to make a general offer in cash, at the highest price paid by him, or any persons acting in concert with him, for shares in that company or an interest in shares in that company within the preceding 12 months, for all the remaining equity share capital of that company.

If, following Completion, Kestrel, on behalf of its discretionary clients, and Charles Davies were to exercise in full (and to the maximum extent possible) their conversion rights under the Convertible Loan Notes to be issued to them (including in respect of interest thereon) and their subscription rights under the Warrants to be issued to them, this would result in them holding 53,585,397 Ordinary Shares and 51,018,854 Ordinary Shares respectively. If every other person to whom Convertible Loan Notes or Warrants are to be issued were to exercise their conversion or subscription rights in the same manner, the shareholdings of Kestrel and Charles Davies would represent 16.74 per cent. and 15.94 per cent. respectively of the voting rights attached to the enlarged issued share capital of the Company (assuming no other issues of shares by the Company).

Kestrel and Charles Davies have confirmed to the Board that neither of them has any intention of exercising their conversion or subscription rights under the Convertible Loan Notes and/or Warrants to be issued to them so as to result in them together owning in aggregate 30 per cent. or more of the voting rights attaching to shares in the Company.

Placing Agreement

The Company has entered into a placing agreement with Cenkos Securities plc ("Cenkos") in relation to the Fundraising under which Cenkos, as agent for the Company, has agreed to use its reasonable endeavours to procure subscribers for an aggregate of £2,567,000 nominal of Convertible Loan Notes (with an aggregate of 32,087,500 Warrants attached) at the Placing Price. Whilst the Fundraising is not being underwritten, Cenkos has conditionally placed that aggregate nominal amount of Convertible Loan Notes (with such number of Warrants attached) at the Placing Price with certain existing shareholders (including Kestrel and Charles Davies), certain Directors and senior managers of the Group.

The Placing Agreement contains customary warranties given by the Company to Cenkos with respect

to the Group's business and customary indemnities given by the Company to Cenkos in respect of liabilities arising out of or in connection with the Fundraising. Cenkos is entitled to terminate the Placing Agreement in certain circumstances prior to Completion, including circumstances where any of the warranties are found not to be true or accurate or were misleading and which in any such case is material.

Related Party Transactions

Certain of the arrangements for, and in connection with, the Fundraising are classified as 'related party' transactions under the AIM Rules:-

i. Certain of the existing shareholders (being Kestrel and Charles Davies) who have conditionally subscribed for the Convertible Loan Notes (with Warrants attached), hold in excess of 10 per cent. of the Company's Existing Issued Ordinary Shares which have voting rights. Accordingly, the participation of those shareholders (being Kestrel and Charles Davies) in the Fundraising is classified as a 'related party' transaction under the AIM Rules. John Coles, the independent Director (the "Independent Director") considers, having consulted with Cenkos in its capacity as the Company's nominated adviser, that the terms of those transactions are fair and reasonable insofar as shareholders of the Company are concerned.

ii. Entering into the Short Term Loans with certain Directors (or, in the case of Robert Adair, the trustees of a family trust of which he is a life tenant) are each a 'related party' transaction under the AIM Rules. Accordingly, the Independent Director considers, having consulted with Cenkos in its capacity as the Company's nominated adviser, that the terms of those transactions are fair and reasonable insofar as shareholders of the Company are concerned.

iii. Furthermore, the conversion of Mr Conrad's loans facilities and the conversion of the Short Term Loans in exchange for Convertible Loan Notes and Warrants, as described in paragraph 3 above, are each a 'related party' transaction under the AIM Rules. Accordingly, the Independent Director considers, having consulted with Cenkos in its capacity as the Company's nominated adviser, that the terms of those transactions are fair and reasonable insofar as shareholders of the Company are concerned.

Irrevocable Voting Undertakings of Directors and Shareholders

The Directors have irrevocably undertaken to vote in favour of the Resolution in respect of their aggregate beneficial holdings of 56,491,950 Ordinary Shares (representing approximately 23.2 per cent. of the Existing Issued Ordinary Shares which have voting rights).

In addition, certain other Shareholders (including Kestrel and Charles Davies) have irrevocably undertaken to vote in favour of the Resolution at the General Meeting in respect of their aggregate beneficial holdings of 57,040,918 Ordinary Shares (representing approximately 23.5 per cent. of the Existing Issued Ordinary Shares which have voting rights).

For further information, please contact:

The shareholder circular, containing further information about the Fundraising and notice of the General Meeting, together with a form of proxy, will be posted to Shareholders today and will shortly be available on Ambrian's website at www.ambrian.com. The contents of Ambrian's website are not incorporated into and do not form part of this announcement.

This announcement does not constitute an offer to sell, or a solicitation of an offer to buy, Ordinary Shares in any jurisdiction in which such offer or solicitation is unlawful. The availability of the Ordinary Shares in, and the release, publication or distribution of this announcement in or into, jurisdictions other than the United Kingdom may be restricted by law and therefore persons into whose possession this announcement comes who are not resident in the United Kingdom should inform themselves about, and observe, any applicable restrictions. Shareholders who are in any doubt regarding such matters should consult an appropriate independent adviser in the relevant jurisdiction without delay. Any failure to comply with such restrictions may constitute a violation of the securities laws of any such jurisdiction.

Cenkos is authorised and regulated in the United Kingdom by the FCA and is advising the Company and no one else in connection with the arrangements set out in this announcement (whether or not a recipient of this announcement), and is acting exclusively for the Company as nominated adviser and broker for the purpose of the AIM Rules. Cenkos shall not be responsible to any person other than the Company for providing the protections afforded to its customers, nor for providing advice in relation to the Fundraising or the contents of this announcement. In particular, the information contained in this announcement has been prepared solely for the purposes of the arrangements set out in this announcement and is not intended to inform or be relied upon by any subsequent purchasers of Ordinary Shares (whether on or off exchange) and, accordingly, no duty of care is accepted in relation to them. Without limiting the statutory rights of any person, no representation or warranty, express or implied, is made by Cenkos as to the contents of this announcement. No liability whatsoever is accepted by Cenkos for the accuracy of any information or opinions contained in this announcement or for the omission of any information from this announcement for which it is not responsible.

FORWARD-LOOKING STATEMENTS

This announcement contains forward looking statements relating to the Company's future prospects, developments and strategies, which have been made after due and careful enquiry and are based on the Directors' current expectations and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. Forward-looking statements are identified by their use of terms and phrases such as 'believe', 'could', 'envisage', 'estimate', 'intend', 'may', 'plan', 'will' or the negative of those, variations or comparable expressions, including references to assumptions. The Directors believe that the expectations reflected in these statements are reasonable, but may be affected by a number of variables which could cause actual results or trends to differ materially. Each forward-looking statement speaks only as of the date of the particular statement.