23 Oct 2008 08:08
Carnegie
Minerals Plc
FOR IMMEDIATE RELEASE 23 OCTOBER 2008
CARNEGIE MINERALS PLC
("Carnegie" or the "Company" and its subsidiaries together "the Group")
Proposed Placing of 60,000,000 New Ordinary Shares at 0.25p each
Reorganisation of Share Capital
Proposed Disposal of West African Projects
Change of name to Beacon Hill Resources Plc
and
Notice of General Meeting
Carnegie Minerals Plc (AIM: CME), the AIM listed resource company, announces that it has today posted a circular to shareholders calling a notice of General Meeting with details of a proposed placing of 60,000,000 new Ordinary Shares at 0.25p each, a Reorganisation of Share Capital, the proposed disposal of its West African Projects and change of name to Beacon Hill Resources Plc.
Copies of the circular can be obtained from the Company's website, www.carnegiemins.com.
Introduction
On 22 September 2008 Carnegie announced in its interims to 30 June 2008 that the Group had been placed in a critical position following the Gambian Government's expropriation of its joint venture operations in The Gambia. These events, including the cancellation of the joint venture company's licence to mine heavy mineral sands at a time when the project was approaching full production and the detainment of British mining engineer, Charlie Northfield, have been seriously detrimental to the Group as a whole, financially and operationally. This, coupled with events across global markets, has put enormous pressure on the Company's working capital position.
As such, the Company has sought to raise further funds to enable it to advance its US Project, as well as providing some working capital with which to seek to identify new resource project opportunities.
The Company has also been in discussions with its joint venture partner, Astron, to reduce the Company's involvement in its residual West African in The Gambia and Senegal. Such discussions have lead to a memorandum of understanding between the Company and Astron pursuant to which it is proposed that, subject to the agreement of definitive documentation and the approval of Shareholders and any regulatory approvals, the Company will dispose of these projects to Astron for a consideration of A$50,000 in cash. This would leave the Company as an investing company, with a strategy that will allow it to progress its strategic co-operative research and development agreement with the US Geological Survey and to focus efforts on seeking to secure a new project, utilising the technical and corporate skills spread across the Company's board and management team. The Board is hopeful that, if the West African projects are no longer part of the Company and with the capacity to act on future opportunities, the Company can move forward and put the unfortunate events of the year behind it.
The Company is today announcing the proposed placing of 60,000,000 New Ordinary Shares at 0.25 pence per share to raise £150,000 (before expenses). The Placing Shares have (conditional only upon the passing of the Resolutions and Admission) been subscribed by Consolidated Resources and Blue Oar Securities. Consolidated Resources is a company incorporated in Singapore. It is part of the Consolidated Resources group of companies that owns and operates a manganese and iron ore mine in Postmasburg, in the Republic of South Africa.
It is intended that upon Admission, Rahul Singh will join the Board as Chairman to assist the Company with identification of suitable opportunities to acquire one or more new projects.
The nominal value of the Existing Ordinary Shares is 1p and they are currently trading at a discount to the nominal value. Therefore the issue of shares at the Placing Price can only take place following the Reorganisation. This will require Shareholder approval at the GM. In addition, Shareholder approval is required to increase the Company's authorised share capital, to authorise the Directors to allot New Ordinary Shares, to disapply pre-emption rights with regard to the allotment of the Placing Shares and the allotment of New Ordinary Shares in the future and to amend the Company's Articles.
To mark the Company's change of direction as it seeks new projects, the Directors propose to change its name to Beacon Hill Resources Plc.
In order to effect the Proposals, the Resolutions need to be passed.
Background to and reasons for the Proposals
As announced previously, the most significant event of the year has been the Gambian Government's expropriation of the Group's 50% free carried joint venture with Astron and wrongful cancellation of the joint venture company's mining licence which saw an end to operations in The Gambia during the period. At the point of cancellation, the project was approaching full production and a substantial stock of heavy mineral concentrate was ready for sale. The defence of the Company's position, and that of the project manager, Charlie Northfield, who was detained in The Gambia, has been a serious drain on the Company's financial and manpower resources. These events and the inability to move forward with these projects have lead the Company to seek to sell them to their joint venture partner, Astron. The consideration for the Disposal is A$50,000. Further details of the Disposal are set out in paragraph 3 below.
As announced on 22 September 2008, the Company had cash resources as at 30 June 2008 of £339,000. Owing to additional costs associated with the above actions this has reduced significantly to the point where the Company requires the proceeds from the Placing for essential near term working capital.
The Placing will raise approximately £140,000, net of expenses, for the Company. As detailed above, this will contribute to available working capital to allow the Company to continue to search for new opportunities. Consolidated Resources is part of a group of companies that owns and operates a manganese and iron ore mine in Postmasburg, in the Republic of South Africa.
In addition, Rahul Singh is joining the Board to assist with the identification of new opportunities. Such opportunities may include the acquisition of one or more new projects, the raising of additional further funds and seeking strategic partners (both financial and operational) for any new venture. It should be noted that the net proceeds of the Placing only provide essential near term working capital and the ongoing future of the Company will be dependent on the identification of a suitable project and further fundraisings.
The Disposal
The Company and Astron have signed a memorandum of understanding in relation to the Disposal. This memorandum of understanding provides that, subject (inter alia) to the agreement of definitive binding documentation, Shareholder and regulatory approvals.
the Company will sell the entire issued share capital of its wholly-owned subsidiary, Coast Resources Limited, to Astron for A$50,000, to be satisfied in cash on completion of the Disposal. Coast Resources Limited acts as the holding company for the West African Projects;
the Company will provide only limited warranties to Astron in relation to the title to its shares in Coast Resources Limited and the financial statements of Coast Resources Limited and Carnegie Minerals (Gambia) Limited; and
the Company will provide all reasonable assistance to Astron in relation to any future arbitration with the Government of The Gambia in the form of access to relevant personnel and documents.
Shareholders should note that binding documentation in relation to the Disposal has not been agreed between the Company and Astron and there is no guarantee that such documentation will be agreed and that the Disposal will complete.
The effect on the Company of the completion of the Disposal would be that the Company would no longer have any interest in the West African Projects or exposure to any future expenditure commitments associated with the projects and its sole activities will be pursuing the US Project and seeking to identify other resource project opportunities. Owing to wrongful cancellation of the joint venture company's mining licence which saw an end to operations in The Gambia the Directors have put a minimal value on these assets, believing that realising any future value will be extremely difficult. The Senegal project, whilst still operating, would require further expenditure for which the Company does not currently have the funds to determine its economic viability. This, coupled with its very close proximity to The Gambia, means any future value of the Senegal project for the Company is uncertain. As such, the Directors believe the value of A$50,000 for the West African Projects is fair value in the circumstances. No profits were attributable to these assets as at 30 June 2008.
Completion of the Disposal would constitute a disposal resulting in a fundamental change of business for the purposes of the AIM Rules and the Disposal must therefore be approved by the Shareholders. Accordingly, at the General Meeting the Company will seek Shareholder approval for the Disposal on the terms set out above. If the terms of the Disposal change in any material respect, the Company will be required to seek further Shareholder approval of such new terms.
The cash consideration for the Disposal would be applied by the Company as general working capital.
Investing Strategy
Following the completion of the Disposal, the Company will be treated as an investing company as defined by the AIM Rules. The Company's investing strategy will be to identify resource project opportunities around the world using the Directors' and Proposed Director's experience and contacts. The Directors and Proposed Director believe they have sufficient expertise and experience in identifying and evaluating resource opportunities and projects around the world. Such opportunities will not be limited to any particular commodity or geographic location. The Company will also seek to advance its US Project. Shareholders will be asked to approve this investing strategy at the General Meeting.
The Directors and Proposed Director believe that when an investment opportunity has been identified and approved by the Board, the Company will need to raise additional equity funds to complete the transaction. Such an investment may constitute a reverse takeover of the Company under the AIM Rules, which would then require shareholders' approval and re-admission of the Company as enlarged by such acquisition to AIM.
Investment process
The Directors and Proposed Director will seek to generate investment proposals from a range of sources, including financial advisers and other professionals, via direct introductions and from personal contacts of the Directors and Proposed Director.
Once a target business or project has been identified, the Directors intend to commission a due diligence process on its operations and its organisation. This process, which will be tailored to the particular individual situation, will include, where appropriate, the appointment of professional advisers and the production of:
a legal due diligence report addressing corporate, licence, contractual and regulatory issues as well as broader legal information, such as past or pending litigation, the status of intellectual property and relevant transactions in the target business's or project's past;
a financial due diligence report setting out an analysis of the target business or project, the key points of the business's financial reports, if appropriate, for the preceding three years and any issues that have arisen from audits;
a working capital report to establish whether the funds available to the target business or project, both in terms of cash resources and borrowing facilities, are sufficient for its current stage of development, or whether further funding is required to facilitate achievement of the target company's or project's business plan; and
a Competent Person's Report or other specialist report setting out details on the project identified, its geology and stage of development.
Winding Up
If the Company has not made an investment within twelve months from Admission, the Directors will convene a general meeting at which proposals will be put to Shareholders to liquidate the assets of the Company and distribute the proceeds, including any cash balances, after payment of its liabilities, to shareholders.
The Reorganisation
The Reorganisation will result in the sub-division of each Existing Ordinary Share of 1p each into one New Ordinary Share of 0.01p and one Deferred Share of 0.99p. The number of New Ordinary Shares in issue following the Reorganisation (but prior to the issue of the Placing Shares) will equal the number of Existing Ordinary Shares currently in issue. Details of the Company's existing share capital and as it will be after the Reorganisation and the Placing, are set out below:
Share capital
As at the date of this announcement, the authorised and issued share capital of the Company, of which all of the issued shares are fully paid up, is as follows:
| Authorised | Issued and fully paid | |||
| Number | Amount (£) | Existing | Number | Amount (£) |
| 180,000,000 | 1,800,000 | Ordinary Shares | 83,000,000 | 830,000 |
The authorised and issued share capital of the Company as it is expected to be immediately following the Reorganisation and the issue of the Placing Shares is as follows:
| Authorised | Issued and fully paid | |||
| Number | Amount (£) | Number | Amount (£) | |
| 500,000,000 | 50,000 | New Ordinary Shares | 143,000,000 | 14,300 |
| 180,000,000 | 1,782,000 | Deferred Shares | 83,000,000 | 821,700 |
After the implementation of the Reorganisation the nominal value of each New Ordinary Share will be one hundredth of that of each Existing Ordinary Share but subject to that, each New Ordinary Share will have the same rights (including voting and dividend rights and rights on a return of capital) as each Existing Ordinary Share has at present.
The rights attaching to the Deferred Shares, which are set out below and for which no application for admission to trading on AIM will be made, will be minimal, thereby rendering them effectively valueless. No certificates will be issued in respect of the Deferred Shares. The rights attaching to the Deferred Shares can be summarised as follows:
they will not entitle holders to receive any dividend or other distribution or to receive notice of, attend, speak at or vote at general meetings of the Company;
on a return of assets on a winding up, they will only entitle the holder to the amounts paid up on such shares after the repayment of £10 million per New Ordinary Share;
they will authorise the Company to appoint any person to execute on behalf of the holders of the Deferred Shares a transfer of such shares to the Company, or such person as the Company may nominate as custodian, without any payment therefore and without the sanction of the holders of the Deferred Shares; and
the creation and issue of further shares which rank equally or in priority to the Deferred Shares or the passing of a resolution of the Company to cancel the Deferred Shares or to effect a reduction in capital shall not constitute a modification or abrogation of their rights.
Amendment to the Articles
As part of the Reorganisation, the Company's Articles will need to be amended to include the rights of the Deferred Shares as described above.
Save in respect of the Deferred Shares and consequential amendments to reflect the Reorganisation and the change of the Company's name, no further amendments to the Company's Articles will be undertaken.
The Placing
60,000,000 New Ordinary Shares have been conditionally issued and allotted to the Placees at the Placing Price to raise £140,000 (net of expenses). The Placing Shares will, on Admission, be credited as fully paid and will have the same rights in all respects as the New Ordinary Shares arising from the Reorganisation, including the right to receive all dividends and other distributions declared, made or paid on the New Ordinary Shares by reference to any record date following Admission.
The Placing is conditional, inter alia, upon:
the approval of the Resolutions at the GM; and
Admission.
Application will be made to the London Stock Exchange for the New Ordinary Shares in issue arising from the Reorganisation and the Placing Shares to be admitted to trading on AIM. It is expected that Admission will become effective and dealings in the New Ordinary Shares in issue arising from the Reorganisation and the Placing Shares will commence on 14 November 2008. No application has been or is being made for the New Ordinary Shares to be admitted to any other investment exchange. No application has been or is being made for the Deferred Shares to be admitted to AIM or any other investment exchange.
Following completion of the Placing, £35,000 of the Company's cash resources will be applied in repayment of the outstanding balance of a loan made by Alan Hopkins to the Company.
Board
Following the Placing, Consolidated Resources will be interested in 40.6 per cent of the issued share capital of the Company. It is intended that upon Admission Rahul Singh will join the board as non-executive chairman to assist in setting the strategic direction for the Company, in particular, the identification of new projects for the Company. Accordingly, upon Admission Tim Jones will step down as chairman of the Company but will remain as a non-executive director.
Rahul Vendra Singh, aged 52, is founder and Chairman of the Dhunn-Carr group of companies, a private investment group with investments in technology and resources companies in the United States, India and Australia. He is currently Chairman of Tasmanian Magnesite NL, the owner of a magnesite project in Australia and founder and Chairman of the World Environment Exchange Limited. He is also a director of Between the Tiger and Crocodile Limited and Design Oriented Technology Limited.
Rahul is a graduate of Melbourne University, and was admitted as a Barrister and Solicitor of the Supreme Court of Victoria, Australia. He was formerly corporate counsel to CRA/Comalco, general counsel to Mercantile Mutual Limited (which became part of the ING Group), before joining McKinsey & Co. In 1990s he was a Senior Vice President of the Wall Street brokerage firm, Gerrard Klauer Mattison which he left to form Dhunn-Carr.
Rahul Singh has entered into a letter of appointment, conditional upon Admission, pursuant to which he will act as non-executive Chairman to the Company. Such appointment may be terminated by 1 month's notice from either party and provides for no fee or benefits.
There are no further disclosures to be made in accordance with paragraph (g) of Schedule 2 of the AIM Rules for Companies.
In addition, the board intend to appoint a further non-executive director to the Board following the General Meeting. The Company has agreed with Consolidated Resources that, conditional upon Admission, and for so long as it retains its Placing Shares, Consolidated Resources may appoint an additional non-executive director to the Company. Such appointment may be terminated by 1 month's notice from either party and provides for no fee or benefits.
Boris Matveev will step down from the board and cease to be a Director but will continue as the Technical Director of the Company. In connection with the termination of his employment with the Company's subsidiary, Carnegie Services Australia Pty Limited, Mr. Matveev will receive compensation of A$29,113.95 in lieu of his accrued but untaken long service leave entitlement and accrued but untaken and unpaid holiday entitlement.
In light of the Company's financial position and change in strategy, all the current Directors have agreed to terminate their existing employment and consultancy agreements and waive their termination entitlements save the compensation payment to Boris Matveev referred to above. In addition, the Directors have agreed to vary the terms of their letters of appointment with the Company with immediate effect by agreeing that the fee payable to each director be reduced to A$50,000 per annum and that the notice period be reduced from 12 months to 1 month.
Name Change
To mark the company's change of direction as it seeks new projects, the Directors propose subject to passing Resolutions, to change its name to Beacon Hill Resources Plc.
Existing share certificates will remain valid following the Reorganisation and the change of name.
Working capital
It should be noted that the net proceeds of the Placing only provide essential near term working capital and the ongoing future of the Company will be dependent on further fundraisings.
General Meeting
A notice convening the General Meeting to be held at 44 Southampton Buildings, London WC2A 1AP at 9.00 a.m. on 11 November 2008 is set out in the circular being sent to shareholders today and available on the Company's website, www.carnegiemins.com.
For further information please contact:
Carnegie Minerals enquiries@carnegiemins.com
Alan G. Hopkins (Managing Director) +61 (0) 8 9486 9999
Blue Oar Securities
Justin Lewis +61 (0) 3 8637 1540
Olly Cairns +61 (0) 8 6430 1631
DEFINITIONS
The following definitions apply throughout this announcement, unless the context requires otherwise.
| "Act" | the Companies Act 1985 (as amended) |
| "Admission" | admission of the issued New Ordinary Shares and the Placing Shares to trading on AIM |
| "AIM" | the AIM market operated by the London Stock Exchange |
| "AIM Rules" | the AIM Rules for Companies or the AIM rules for Nominated Advisers as the context may require, issued by the London Stock Exchange and governing the operation of AIM |
| "Articles" "Astron" | the articles of association of the Company for the time being Astron Limited, joint venture partner to the Group in relation to its West African projects |
| "Blue Oar Securities" | Blue Oar Securities Plc, nominated adviser and broker to the Company |
| "Board" or "Directors" | the directors of the Company |
| "Capital Raising" | the issue of the Placing Shares to the Placees |
| "Company" or "Carnegie" | Carnegie Minerals Plc |
| "Consolidated Resources" | Consolidated Resources Pte Limited |
| "Deferred Share" "Disposal" | a deferred share of 0.99p in the capital of the Company, arising pursuant to the Reorganisation the proposed disposal by the Company to Astron of the entire issued share capital of Coast Resources Limited, which acts as the holding company for the Group's West African Projects |
| "Existing Ordinary Shares" or "Existing Shares" | the existing issued and unissued ordinary shares of 1p each in the capital of the Company |
| "Form of Proxy" | the form of proxy for use in relation to the GM which accompanies this document |
| "General Meeting" or "GM" | the general meeting of the Company to be held on 11 November 2008 pursuant to the notice set out at the end of this document (and any adjournment thereof) |
| "GM Notice" | the notice convening the GM which is set out at the end of this document |
| "Group" | the Company and its subsidiary undertakings |
| "London Stock Exchange" | London Stock Exchange Plc |
| "New Ordinary Shares" | new issued and unissued ordinary shares of 0.01 p each in the capital of the Company, arising pursuant to the Reorganisation |
| "Panel" | the Panel on Takeovers and Mergers |
| "Placees" | parties subscribing for the Placing Shares pursuant to the Placing, being Consolidated Resources and Blue Oar Securities |
| "Placing" | the placing of the Placing Shares |
| "Placing Price" | 0.25p per Placing Share |
| "Placing Shares" | the 60,000,000 New Ordinary Shares to be issued pursuant to the Placing |
| "Proposals" | the Reorganisation, the Placing, the Disposal and the name change as described in this document |
| "Proposed Director" | Rahul Singh |
| "Registrars" | Computershare Investor Services Plc |
| "Reorganisation" | the proposed reorganisation of the share capital of the Company as described in Part I of this document and Resolution 1 in the GM Notice |
| "Resolutions" | the resolutions to be proposed at the GM as set out in the GM Notice |
| "Shareholder" | a holder of Existing Ordinary Shares and following the Reorganisation, a holder of New Ordinary Shares and/or Deferred Shares |
| "Takeover Code" | the City Code on Takeovers and Mergers |
| "US Project" | the project being undertaken by the Company pursuant to the cooperative research and development agreement between the Company and US Geological Survey dated 11 March 2008 |
| "West African Projects" | the Group's West African mineral sands exploration and mining projects in The Gambia and Senegal |
A reference to "A$" means Australian Dollars.