8 Feb 2016 07:00
The following announcement replaces the announcement "Conditional Subscription, Board Changes & Update" with RNS number 2289O released at 10.35 on 5 February 2016. The reference in the text of that previous announcement to "Mr Reynolds is also non-executive Chairman of New World Oil & Gas Plc and a non-executive director of Orogen Gold Plc" was incorrect and has been replaced with "Mr Reynolds is also a non-executive director of New World Oil & Gas Plc and non-executive Chairman of Orogen Gold Plc". All other text remains the same.
For immediate release
8 February 2016
Frontier Resources International Plc
("Frontier" or the "Company")
Conditional Subscription
Board changes
Bonus Warrant issue
Corporate update
The Board of Frontier (AIM Ticker: FRI) announces that the Company has today conditionally issued, though a direct subscription, 4,750,000,000 new ordinary shares of 0.01p each (the "Subscription Shares") with existing and new investors at a placing price of 0.03p per Subscription Share (the "Subscription Price") to raise £1,425,000 before expenses (the "Subscription"), conditional on admission of the Subscription Shares to trading on AIM ("Admission").
The proceeds of the Subscription will be used to provide working capital for the Company and to support the investment in new projects. The Board does not intend to provide any further capital to the Company's existing oil exploration projects, the future of which the Board intends to consider following completion of the Subscription.
To support a new strategic direction for the Company, there are a number of proposed changes to the Board. On completion, Adam Reynolds will be appointed to the Board as Chairman of the Company and Jack Keyes and John O'Donovan will both cease to be directors with immediate effect.
Background
Over the last six months, the Company has had an urgent need to arrange additional funding for its immediate working capital requirements over and above the potential commitments in respect of its exploration projects.
Volatility in global financial markets and the steep decline in oil prices have created very challenging conditions for oil companies at all stages of development, and not just junior exploration companies like Frontier. This market background has made it exceptionally difficult for the Company to progress any of its farm-out discussions, as potential partners have deferred their own plans to acquire exploration acreage with upside potential. Accordingly, the Board has been unable to secure any farm-out partner on credible terms for any of the Company's oil exploration projects, despite continued efforts over the last year. Furthermore, there has been no current investor support for an equity issue to provide further sufficient funding for the Company's oil exploration projects.
The Board does not believe that there is any immediate prospect of a material improvement in market conditions in the oil sector or investor sentiment and has therefore concluded that it should now pursue alternative options for the future funding and development of the Group, including the disposal of the Group's existing oil exploration projects and the investment in new projects outside of the oil sector. Against this background, the Board has therefore today agreed the terms of the Subscription (as defined below) with existing and new investors to support the future development of the Group in a new sector. The funds raised from the Subscription will not be used to support the Group's existing oil exploration projects, an update on which is provided below.
To support a new strategic direction for the Company, there are a number of proposed changes to the Board. On completion of the Subscription, Adam Reynolds will be appointed as a director of the Company with immediate effect as Chairman. Mr Reynolds has a track record of implementing change strategies for companies and the Board believe that his appointment will enable the Company to develop in a new strategic direction to re-build shareholder value.
Mr Reynolds is currently a director of several AIM-traded companies: He is a non-executive director of EKF Diagnostics Holdings plc (a point-of-care, central laboratory, and molecular diagnostics company), Premaitha Health Plc (a company involved in the development of prenatal screening devices) and Optibiotix Health Plc (a life sciences business developing compounds to tackle obesity, high cholesterol and diabetes). Mr Reynolds is also a non-executive director of New World Oil & Gas Plc and non-executive Chairman of Orogen Gold Plc. He is Chairman of Autoclenz Group Limited and Reyco Limited. Further information on Mr Reynolds as required by the AIM Rules is set out in Appendix I below.
On completion of the Subscription, Jack Keyes and John O'Donovan will both cease to be directors of Frontier with immediate effect, and the Board would like to thank them both for their tireless efforts to develop the oil exploration projects of the Company in such challenging markets.
Subscription
The Company has today conditionally issued, though a direct subscription, 4,750,000,000 new ordinary shares of 0.01p each (the "Subscription Shares") with existing and new investors at a placing price of 0.03p per Subscription Share (the "Subscription Price") to raise £1,425,000 before expenses (the "Subscription"), conditional on admission of the Subscription Shares to trading on AIM ("Admission").
The Subscription Price is a 57.1 per cent. discount to the closing mid-market price on 3 February 2016 of 0.07p per existing ordinary share of 0.01p each ("Ordinary Shares") and values the existing ordinary share capital at approximately £108,600. This discount reflects the Company's current financial position, the failure to secure a farm-in partner for the Company's oil exploration projects and the poor prospects for raising alternative funding. The Board believes that in the absence of the Subscription there is a very high likelihood that the Company would be unable to continue trading by virtue of its financial position. The Subscription, together with the proposed changes to the Board and development of a new strategy, provides an opportunity to recover some value for the Company existing shareholders.
The Board has considered whether it would be practicable or cost effective to enable existing shareholders in the Company to participate in the proposed equity issue on a pre-emptive basis. The Board is acutely aware of the impact of dilution of the Subscription on shareholders as the Subscription Shares will represent approximately 7.1 per cent. of the issued share capital of the Company as enlarged by the Subscription (the "Enlarged Ordinary Share Capital"). However, the Board believes that the costs and requirements of an open offer or rights issue are such that it is not practicable or cost effective and cannot be achieved in the timeframe required.
In order to provide existing shareholders with some ability to subscribe should they so choose on similar terms to the Subscription, the Board proposes that, subject to the certain regulatory considerations relating to marketing securities in certain jurisdictions, to issue new warrants ("Warrants") to existing shareholders on the record date ("Qualifying Shareholders") on a pro rata basis of one Warrant for every one Ordinary Share ("Qualifying Shares") held (the "Warrant Bonus Issue"). The Board believes that the Warrant Bonus Issue should partially alleviate the impact of dilution on Qualifying Shareholders. Further terms of the proposed Warrant Bonus Issue are set out below. Should the Warrant Bonus Issue not proceed, the Board would have to re-consider following completion of the Subscription whether a subsequent pre-emptive offering is then practicable or feasible.
The proceeds of the Subscription will be used to provide working capital for the Company and to support the investment in new projects. The Board does not intend to provide any further capital to the Company's existing oil exploration projects, an update of which is provided below.
Director Subscription participation
Neil Herbert, a director of the Company, has subscribed £100,000 for 333,333,333 Subscription Shares at the Subscription Price. The subscription by Neil Herbert is a Related Party transaction for the purposes of Rule 13 of the AIM Rules. The independent directors, comprising the Board other than Neil Herbert (the "Independent Directors"), having consulted with the Company's nominated adviser, consider that the subscription by Neil Herbert is fair and reasonable insofar as the Company's shareholders are concerned. The Independent Directors have taken into account in particular that Neil Herbert is subscribing on the same terms and conditions as the other subscribers for the Subscription Shares procured by the Company from unconnected parties.
Directors' interests
Following the issue of the Subscription Shares and the Warrants, the Directors' interests and proposed Director's interests in the Company will be as follows:
Director / Proposed Director | Number of Ordinary Shares | % interests in the Enlarged Ordinary Share Capital | Number of Warrants (Note 3) |
Adam Reynolds (Note 1) | 173,333,333 | 3.39% | Nil |
Neil Herbert | 358,007,904 | 7.0% | 24,674,571 |
Barbara Spurrier (Note 2) | 5,756,118 | 0.11% | 5,756,118 |
Notes:
1. Adam Reynolds is a proposed director of the Company with effect from admission of the proposed Subscription Shares.
2. 4,285,714 Ordinary Shares are held and 4,285,714 Warrants will be held by CFPro Limited, a company beneficially owned by Barbara Spurrier. A further 7,000 Ordinary Shares included in Barbara Spurrier's interest notified on 22 July 2015 are held by her adult sons.
3. Assumes Bonus Warrant Issue proceeds.
Admission
The Subscription Shares will, on issue, rank pari passu with the existing Ordinary Shares in issue and application will be made for the Subscription Shares to be admitted to trading on AIM. Admission and trading in the Subscription Shares on AIM is expected to commence on or around 17 February 2016 ("Admission").
Further details of the proposed Warrant Bonus Issue
The record date for the Warrant Bonus Issue is 4.30pm on 15 February 2016. Accordingly, the Board proposes that the Warrants will only be issued to the existing shareholders of the Company.
Provided that the Warrant Bonus Issue proceeds, one Warrant would be issued for every one Qualifying Share held by eligible Shareholders on the record date of the Bonus Issue (subject to certain regulatory restrictions referred to below). Based on the current issued share capital of 361,999,056 Ordinary Shares, the Company would therefore issue 361,999,056 Warrants. The Warrants would represent approximately 7.1 per cent. of the Enlarged Issued Share Capital prior to exercise.
The exercise price of the Warrants will be 0.03p per new Ordinary Share, being the same as the Subscription Price.
The Warrants, which will be unlisted, will be exercisable on the following three dates: 7 April 2016; 7 July 2016; and 7 October 2016 (the "Final Exercise Date"). If any of the Warrants remain unexercised on the Final Exercise Date, they will expire.
The instrument constituting the Warrants is expected to contain other provisions typically found in such instruments, including those relating to the adjustment of the terms of the Warrants, protections for holders of Warrants and the procedures for the modification of the rights of the Warrants.
The Warrants will be subject to eligibility requirements on issue. Such requirements are resultant from pre-existing securities law restrictions applicable to certain jurisdictions such as the United States of America. The Warrant Bonus Issue will not be extended to, and the Warrants will not be issued to and may not subsequently be exercisable by, Shareholders in a restricted jurisdiction. Notwithstanding the above, the Company will reserve the right to permit any Shareholder to take up Warrants under the Warrant Bonus Issue if the Company, in its sole and absolute discretion, is satisfied that the transaction in question is exempt from, or not subject to, the applicable restrictive legislation or regulations.
Qualifying Shareholders who are in any doubt about the implications of the Bonus Issue on their personal tax position should consult their professional adviser.
A further announcement will be made in due course with further details.
Projects update
Namibia
The Minister of Mines and Energy in Namibia (the "Namibian Ministry") had granted the Company a two year extension to its exploration licence covering onshore Blocks 1717 and 1718 in the Owambo Basin until 20 January 2016. As announced on 21 January 2016, the Company intended to consult, in the context of current market and oil sector conditions, with the Namibian Ministry if and on what basis the licence might be extended or re-issued, as may be applicable, for any further period. The Board now expects that subject to completion of the Subscription, it will not seek to request any extension or reissue by the Namibian Ministry of this licence.
Zambia
As announced on 7 January 2016, the Company had been informed by the Zambian Ministry of Mines, Energy and Water Development (the "Zambian Ministry") that the Block 34 exploration licence (located in the Kafue Trough in southwestern Zambia, which covers an area of approximately 6,427 square kilometres) had been renewed for a further three years with the condition that the Company conducted an environmental project brief on or before 14 March 2016 and paid any outstanding statutory fees due with immediate effect. The Company intended to seek further clarification from the Zambian Ministry on the requirements of an environmental project brief and the fees payable prior to submission of the licence certificate to the Zambian Ministry for renewal endorsement. The Board now expects that subject to completion of the Subscription, it will not pursue the renewal of this licence any further.
Oman
Frontier's request to extend the initial term of the Group's 100%-owned Block 38 located in the Rub Al Khali Basin in the southwest of the Sultanate of Oman ("Block 38 EPSA") for 24 months (until 25 November 2017) was granted, subject to Frontier providing a bank guarantee for the amount required to conduct the amended work programme by no later than 4 February 2016 ("Funding Deadline").
While the potential farm-out process of in respect of Block 38 EPSA has been ongoing for some time, and the Company retained the services of a Dallas-based adviser to assist and provide general transaction advice on this process, the Board has been unable to secure any farm-out partner on credible terms. Furthermore, there has been no investor support for an equity issue to provide further funding for the Company's interest in Block 38 EPSA.
Accordingly, the Company has been unable to raise sufficient funding and/or provide a bank guarantee for Block 38 EPSA before the Funding Deadline. The Company is seeking clarification from the relevant Oman authorities and unless any extension of the Funding Deadline is granted, the Block 38 EPSA will have terminated.
AIM status
Should the Block 38 EPSA terminate, then in accordance with AIM Rule 15, the effect would be that the Company will cease to own, control or conduct all, or substantially all, of its existing trading business, activities or assets and would therefore become an AIM Rule 15 cash shell, pursuant to which it must make an acquisition or acquisitions which constitutes a reverse takeover under AIM Rule 14 within six months, failing which the Exchange will suspend trading in the Company's shares pursuant to AIM Rule 40.
A further announcement will be made in due course.
Total voting rights
Following the issue of the Subscription Shares, the Company's issued share capital will consist of 5,111,999,056 Ordinary Shares, with voting rights. This figure may be used by shareholders in the Company as the denominator for the calculation by which they will determine if they are required to notify their interest in, or a change to their interest in, the share capital of the Company under the Financial Conduct Authority's Disclosure and Transparency Rules.
Enquiries:
Frontier Resources International Plc Neil Herbert, Chairman |
Tel: +44 (0) 020 3475 8108 |
Beaumont Cornish (Nomad) Michael Cornish Roland Cornish Emily Staples |
Tel: +44 (0)20 7628 3396 |
Beaufort Securities Limited (Broker) John Belliss
|
Tel: +44 (0)20 7382 8300 |
A copy of this announcement is available from the Company's website www.friplc.com
APPENDIX I
Illustrative timetable of key events
Event | Expected date / time |
Warrant Bonus Issue Record Date
| Monday, 15 February 2016 at 4.30pm |
Warrant Bonus Issue Ex-Date and time
| Tuesday, 16 February 2016 at 8.00am |
Warrants issued to Existing Shareholders
| Tuesday, 16 February 2016 |
Subscription Shares commence trading on AIM | Wednesday, 17 February 2016 at 8.00am |
Note:
References to times in this announcement are to London time unless otherwise stated. The dates set out in the outline timetable above and mentioned throughout this announcement may be adjusted by the Company, in which event the details will be notified to the London Stock Exchange and, where appropriate, to Shareholders.
APPENDIX II
Market Statistics
Subscription Price
| 0.03 pence |
Number of Existing Ordinary Shares
| 361,999,056 |
Number of Subscription Shares
| 4,750,000,000 |
Enlarged Ordinary Share Capital | 5,111,999,056
|
Subscription Shares as a percentage of the Enlarged Ordinary Share Capital
| 92.9% |
Number of Warrants
| 361,999,056 |
Warrants as a percentage of the Enlarged Ordinary Share Capital
| 7.1% |
Proceeds of the Subscription (before expenses)
| £1,425,000 |
APPENDIX III
The following information is disclosed pursuant to paragraph (g) of Schedule Two of the AIM Rules for Companies:
As at the date of this announcement, other than his proposed interest in the Subscription Shares, Adam Reynolds does not hold any Ordinary Shares.
Adam Reynolds, aged 53, has held the following directorships and / or partnerships in the past 5 years:
Current: | Past: |
Ocutec Eyecare Limited | Bcomp 415 Limited |
Premaitha Health plc | Biolustre UK Ltd |
Optibiotix Health plc | Wallgate Group plc |
Autoclenz Group Limited | Wilton International Marketing Limited |
Hubco Investments plc | Alan Bailey (Studios) Limited |
Reyco Limited | Hansard Corporate Limited |
Medavinci Gold Limited | Chalton Consulting Limited |
Emotion Fitness Limited | React Group plc |
Orogen Gold plc | Hub Capital Partners Limited |
Boldwood Limited | Velvet Consultancy Ltd |
EKF Diagnostics Holdings plc | Porta Communications Plc |
Autoclenz Holdings Limited | Diablo Consulting Limited |
New World Oil & Gas Limited | Bcomp 429 Limited |
RNR Holdings Limited | Venn Life Sciences Holdings plc |
Bcomp 416 Limited | |
Autoclenz Group Limited |
Wallgate Group plc
Mr Reynolds was appointed as a director of Wallgate Group plc on 3 July 2008 and resigned on 28 November 2008. Wallgate Group plc was put into administration on 12 December 2008 and became subject to creditors' voluntary liquidation on 15 December 2009. The liquidator's statement of receipts of payments to 25 February 2011 showed a creditor shortfall of £419,782.12. Wallgate Group plc was subsequently dissolved on 1 June 2011.
Greenhills plc
Mr Reynolds was appointed as a director of Greenhills plc on 22 December 1994. He resigned on 24 January 1996. Greenhills plc was put into receivership on 8 August 1996, and an order to wind the company up was made on 19 February 1997. The receiver's abstract of receipts and payments to 6 July 1998 showed a creditor shortfall of £216,877.32. Greenhills plc was subsequently dissolved on 2 January 2001.
Wilton International Marketing Limited
Mr Reynolds was appointed as a director of Wilton International Marketing Limited on 10 June 2005. Wilton International Marketing Limited was put into voluntary liquidation on 14 October 2013 and was subsequently dissolved on 1 August 2014 with no shortfall to creditors.
There is no further information to be disclosed in relation to Mr Reynolds pursuant to paragraph (g) of Schedule Two of the AIM Rules for Companies.
ENDS