22 Feb 2019 12:45
Agreement reached on funding proposal and proposed Board changes
Crusader Resources Limited (ASX: CAS, AIM: CAS) ("Company" or "Crusader") is pleased to announce the following updates in relation to the Company's funding position and proposed Board changes.
Rights Issue
As previously announced, the Company is intending to undertake a non-renounceable pro rata entitlement offer to eligible shareholders (Rights Issue). The Company has now finalised the terms of the proposed Rights Issue, pursuant to which it seeks to raise approximately $4.2 million (before costs). The funds raised will be used for the completion of the Borborema Gold Project Bankable Feasibility Study; continued development and maintenance of the Borborema and Juruena Gold Projects in Brazil; costs of the Rights Issue and general working capital purposes.
The Company intends on offering eligible shareholders the opportunity to subscribe for four new shares for every five shares held on the record date for the Rights Issue, at an issue price of $0.01 per share. Eligible shareholders will also be entitled to subscribe for shortfall shares in addition to their entitlement.
Subscribers in the Rights Issue will also be issued one free-attaching option for every three new shares subscribed for, exercisable at $0.02 each and expiring three years from the date of issue.
Partial Underwriting
The Company is pleased to announce that it has successfully concluded its discussions with its major shareholder, the Copulos Group, and executed a binding conditional underwriting agreement for a partial underwriting of the Rights Issue (Underwriting Agreement). The Copulos Group has agreed to underwrite $2.5 million of the Rights Issue pursuant to the terms of the Underwriting Agreement.
The Company has been exploring a range of capital-raising alternatives over a number of months and considers that the terms proposed by the Copulos Group under the Underwriting Agreement are superior to those offered by any other parties at this time. This conclusion has been reached in light of the terms of the Underwriting Agreement and the timing and quantum of the Company's funding requirements.
The Company is grateful for the ongoing support of the Copulos Group. The partial underwriting is in addition to the $1.5 million of interim funding the Copulos Group has provided to the Company over recent months by its subscription of convertible notes.
The material terms and conditions of the Underwriting Agreement are summarised in the schedule to this announcement. Importantly, the Company notes that the Underwriting Agreement is a related party transaction under the ASX and AIM rules and the Corporations Act, and is subject to shareholder approval. Further terms and conditions of the underwriting will be provided in the notice of meeting, which will include an independent expert's report.
Further details regarding the Rights Issue, including the timetable, will be announced in due course. It is intended to issue a Prospectus for the Rights Issue and a notice of meeting seeking the approvals required under the Underwriting Agreement as soon as possible following the receipt of the necessary independent expert's report.
Proposed Board Changes
With the terms of the Underwriting Agreement now being agreed between the Board and the Copulos Group, the Company's Chairman, Andrew Vickerman, and Managing Director, Marcus Engelbrecht, have agreed with the Copulos Group to step down from the Board with effect from the end of 28 February 2019. The resignations are subject to and conditional on Resolution 3, the approval of the cancellation of Crusader's shares from trading on AIM, being approved at the general meeting to be held on 28 February 2019.
It is intended that with effect from the resignation of Mr Vickerman and Mr Engelbrecht, Mr Stephen Copulos and Mr Andrew Richards will be appointed as Directors. Mr Copulos will be appointed as the Non-Executive Chairman of the Company. Mr Richards will be appointed as an Executive Director.
Biographies of Mr Copulos and Mr Richards are below.
Mr Stephen Copulos
Mr Copulos has over 35 years of experience in a variety of businesses and investments in a wide range of industries, including manufacturing, mining, fast food, property development and hospitality. He has been the Managing Director of the Copulos Group of companies, a private investment group, since 1997. Mr. Copulos is an active global investor who brings significant business acumen and greater diversity to the Board of Crusader. He has been a major shareholder of Crusader for many years and is aligned to improving shareholder returns. Mr Copulos has over 20 years' experience as a company director of both listed and unlisted public companies. He is currently the non-executive Chairman of Consolidated Zinc Limited and Restaurant Brands Limited in New Zealand and was a non-executive director of Black Rock Mining Limited until October 2017 and Collins Foods until October 2014.
Mr Copulos was on the Board of Crusader from March 2013 until April 2018, when he stepped down from the position following the Company's admission to AIM.
Mr Andrew Richards
Mr Richards is a geologist with over 30 years of experience in the international mining industry which included company management and project finance. He has worked at a senior level in both production and exploration over a wide variety of areas and commodities and also undertaken technical reviews, project audits and monitored project construction. He is a member of the AusIMM, AIG, SEG and the AICD. Mr Richards has worked extensively with gold, base metals, rare earths and industrial minerals in Australasia, Asia, Africa and South America. He is and has been on the boards of several listed companies on ASX and AIM and was previously Managing Director and CEO of two ASX listed companies operating in China.
Further details regarding Mr Copulos and Mr Richards will be provided in accordance with Schedule Two (g) of the AIM Rules on their appointment to the Board on 1 March 2019.
Requisitioned Shareholder Meeting
The Company refers to the general meeting scheduled for 22 March 2019, as requisitioned by Mr William Richard Brown, Vitor Pty Ltd, Chinetti Investments Pty Ltd and Parkwise Corporation Pty Ltd (together, Requisitioning Shareholders) pursuant to section 249D of the Corporations Act (Requisitioned Shareholder Meeting).
At the Requisitioned Shareholder Meeting, the Requisitioning Shareholders are seeking approval for the appointment of Mr Brett Clark, Mr David Sanders and Mr Carl Luttig (together, Nominee Directors) as Directors of the Company and the removal of Mr Marcus Engelbrecht and Mr Andrew Vickerman as Directors of the Company.
As noted above, Mr Engelbrecht and Mr Vickerman are proposing to step down as Directors with effect from 28 February 2019. Accordingly, it is intended that Resolutions 4 and 5 will be withdrawn prior to the Requisitioned Shareholder Meeting, when these resignations take effect. A further update will be provided in due course.
The Company notes that the conditions to the Underwriting Agreement will not be satisfied if the Nominee Directors are appointed.
Neither the Requisitioning Shareholders, nor the Nominee Directors, have advised the Company of any proposal to provide sufficient funding to the Company to enable it to continue as a going concern, and ultimately be reinstated to quotation on ASX. Accordingly, the Board considers that approving the resolutions at the Requisitioned Shareholder Meeting seriously risks the Company's solvency. The current Board considers that the partially underwritten Rights Issue is the most realistic strategy for raising the funds required to put the Company in a position where it can adequately address ASX's queries with a view to being reinstated to trading. The Board also does not intend on raising any funds over and above what it considers to be reasonably necessary to maintain is solvency and ultimately be reinstated to quotation on ASX.
Accordingly, the Board reiterates its recommendation that shareholders vote AGAINST the resolutions that the Requisitioned Shareholder Meeting.
AIM related party
Stephen Copulos is a related party of the Company under the AIM Rules as he is both a former director within the last 12 months and a substantial shareholder, and the Underwriting Agreement is a related party transaction under the AIM Rules. The Directors of the Company consider that the terms of the Underwriting Agreement are fair and reasonable insofar as the Company's shareholders are concerned. In forming this view, the Directors have taken into account the current financial position of the Company and that the partially underwritten Rights Issue is the most realistic strategy for raising the funds required to put the Company in a position where it can adequately address ASX's queries with a view to being reinstated to trading. Furthermore, the proposed Rights Issue is subject to the approval of independent shareholders and the issue of a fair and reasonable third-party report in accordance with the rules of ASIC and ASX.
Schedule - Material terms of Underwriting Agreement
Rights Issue | Pro rata non-renounceable pro-rata offer to all eligible shareholders on the basis of 4 new shares for every 5 shares held at the record date. The subscription price for the new shares will be $0.01 each. Subscribers for new shares will be issued one free-attaching option, exercisable at $0.02 each and expiring 3 years after the date of issue (Options), for every three new shares subscribed for. |
Underwriter | Eyeon Investments Pty Ltd (Underwriter) |
Underwritten amount | $2.5 million |
Conditions | · (AIM delisting) the cancellation of the admission of the shares from trading on AIM having taken effect; · (ASX Re-Listing) the Company engaging with the ASX and having obtained in writing the requirements to have its shares reinstated to quotation on ASX; · (Shareholder approvals) the members of the Company in general meeting providing the shareholder approvals required for the Underwriting Agreement by the necessary majorities; · (Prospectus) the Company lodging the Prospectus with the ASIC and the Rights Issue not being withdrawn by the Company; · (Costs) the Company reimbursing the Underwriter for its legal costs incurred in preparation of the Underwriting Agreement, and related documents as agreed between the Parties, up to a maximum of $50,000; · (Director changes): the Board comprising John Evans, Andrew Richards and Stephen Copulos; and · (Event of Insolvency) no event of insolvency has occurred in respect of the Company, (together, Conditions). The Conditions are to be satisfied or waived by no later than four months after the date of the Underwriting Agreement, or such other date as agreed by the parties in writing (Cut-Off Date). |
Underwriting fees | · A cash payment equal to 6% of the underwritten amount (that is, $150,000); and · 30 million Options (for which shareholder approval will be sought, in accordance with item 7 of section 611 of the Corporations Act). |
Termination events | Either Party may terminate the Underwriting Agreement if: · the Conditions are not satisfied or waived by the Cut Off Date; or · the Conditions become incapable of satisfaction or the parties agree that any of the Conditions cannot be satisfied. In addition, the Company may terminate the Underwriting Agreement following receipt of a competing proposal which: · is bona fide and is made by or on behalf of a person that the Board reasonably consider is of sufficient commercial standing to implement the competing proposal; and · the Board, acting in good faith and after having obtained advice from its external legal and financial advisers, has determined; o is a superior proposal; or o completing the Underwriting Agreement would be likely to constitute a breach of the fiduciary duties or statutory obligations of any member of the Board. |
Director appointment right | On and from the date of completion of the Underwriting Agreement, the Underwriter will be entitled to appoint a representative to the Board (Nominated Director). The initial Nominated Director will be Stephen Copulos. The right to appoint the Nominated Director will cease to apply if the relevant interest of the Underwriter and its associates in the Company's shares falls below 10% on an undiluted basis for more than thirty (30) consecutive days on which the ASX is open for trading. |
Additional provisions | Additional provisions customary for agreements of this nature, including representations and warranties, indemnities, completion mechanics and general provisions have been included. |
For further information, please contact:
Investor Relations | Camarco |
Office (Aus): +61 8 9320 7500 | Financial PR |
Email: admin@crusaderresources.com | Gordon Poole / Nick Hennis / Thayson Pinedo |
| +44(0)20 3757 4997 / +44(0)20 3781 8330 |
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Andrew Beigel | Pinnacle Corporate Finance |
Company Secretary | Office: +61 8 6141 6306 |
Office (Aus): +61 8 9320 7500 | Email: ejonsson@pinnaclecf.com.au |
Email: andrew.beigel@crusaderresources.com | Ref: Crusader Resources Limited |
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