EDL.L Regulatory News (EDL)

This announcement contains inside information for the purposes of Article 7 of Regulation (EU) 596/2014. Market soundings, as defined in MAR, were taken in respect of the Placing with the result that certain persons became aware of inside information, as permitted by MAR. That inside information is set out in this announcement and has been disclosed as soon as possible in accordance with paragraph 7 of article 17 of MAR. Therefore, those persons that received inside information in a market sounding are no longer in possession of inside information relating to the Company and its securities.

THIS ANNOUNCEMENT AND THE INFORMATION CONTAINED HEREIN ARE RESTRICTED AND ARE NOT FOR PUBLICATION, RELEASE OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN OR INTO OR FROM THE UNITED STATES, AUSTRALIA, CANADA, JAPAN, SOUTH AFRICA OR ANY JURISDICTION IN WHICH THE SAME WOULD BE UNLAWFUL.

29 April 2019

EDENVILLE ENERGY PLC

("Edenville" or the "Company" or the "Group")

Firm Placing and Conditional Placing to raise £510,000

Conditional Issue of Director Salary Shares

Notice of General Meeting

Appointment of Joint Broker

Edenville Energy Plc (AIM: EDL), the AIM quoted company developing a coal project in southwest Tanzania, today announces that it has raised a total of £100,000 (before expenses) by means of a Firm Placing of 500,000,000 new ordinary shares of 0.02 pence each in the capital of the Company ("Ordinary Shares") at 0.02 pence per Ordinary Share and has further conditionally raised a total of £410,000 (before expenses) by means of a Conditional Placing of 2,050,000,000 new Ordinary Shares at 0.02 pence per Ordinary Share (together the "Placing").

The net proceeds of the Placing will provide the Company with additional working capital and to specifically increase the available Run of Mine ("ROM") coal for processing through the opening up of the Company's northern pit area at the Rukwa Coal Project in Tanzania (the "Project").

The Placing has been undertaken by Brandon Hill Capital and Brandon Hill Capital has also been appointed as the Company's Joint Broker with immediate effect.

A Circular setting out full details of the Conditional Placing (the "Circular") will today be posted to Shareholders. The Circular contains a notice of General Meeting ("GM") of the Company to be held at the offices of Womble Bond Dickinson (UK) LLP, 4 More London Riverside, London, SE1 2AU at 11.00 am on 17 May 2019. The purpose of the GM is to grant the Board the authority to allot Ordinary Shares in order to proceed with the Conditional Placing and to issue and allot a total of 213,980,200 Ordinary Shares in lieu of unpaid salaries to certain Directors (the "Director Salary Shares").

A copy of the Circular will shortly be available from the Company's website at www.edenville-energy.com.

Dr Jeffrey Malaihollo, Non-Executive Chairman, commented:

"Following the low level of take up in the Open Offer to shareholders conducted in February 2019 at 0.12p per share, the Company was forced to place operations at its Rukwa coal project on a limited production profile to conserve capital.

"Edenville is pleased to confirm that it has now been able to recapitalise the Company through the proposed Placing, whilst also bringing on two cornerstone shareholders as part of this financing round. Accordingly, subject to shareholder approval of the Conditional Placing, the proposed financing of £510,000, coupled with the reduction of salaries by the Board and other cost-saving measures, the Company now expects to have sufficient capital to enable a return to full operations. Moreover, Edenville also expects to be able to benefit for the first time from the additional investment in plant and equipment that was made in H2 2018, whilst also opening up the new northern mining area at the Project, which should collectively lead to a further increase in production levels.

"During 2019, the Company has also continued its marketing efforts to identify new customers for both its washed coal and fine coal, as well as maintaining existing relationships. Accordingly, with this funding, the Directors expect the Company to be in a position to boost both production and subsequent sales, thereby placing the Project in a position where it is initially self-sustaining, before turning cashflow positive during the next twelve months.

"Whilst we acknowledge existing shareholders' frustration at the operational performance to date, which has significantly damaged the share price, we do believe upon the closing of this financing the Company will finally be in a position to move towards profitability. I therefore strongly encourage our Shareholders to read the Circular and vote in favour of the Resolutions."

First Admission and Total Voting Rights

Application for the admission to trading on AIM of the Firm Placing Shares on AIM will be made to the London Stock Exchange ("First Admission") and First Admission is expected to become effective at 8am on or around 2 May 2019.

Following First Admission, the issued share capital of the Company will be 2,148,261,562 Ordinary Shares. The Firm Placing Shares will rank pari passu with the existing Ordinary Shares. In accordance with the Financial Conduct Authority's Disclosure and Transparency Rules, the Company hereby announces that, following First Admission, it has 2,148,261,562 Ordinary Shares, each share carrying the right to one vote. The Company does not hold any Ordinary Shares in treasury. The above figure of 2,148,261,562 Ordinary Shares may be used by shareholders in the Company as the denominator for the calculations 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.

Capitalised terms used but not otherwise defined in this announcement bear the meanings ascribed to them in the Circular.

EXPECTED TIMETABLE OF PRINCIPAL EVENTS

INTRODUCTION

Completion of the Conditional Placing and the other proposals are subject to shareholders approving certain Resolutions being put to the General Meeting. The Directors are seeking authority from Shareholders to allot the Conditional Placing Shares and Director Salary Shares on a non-pre-emptive basis.

Current Operations

The Company's key focus is on the ongoing development and expansion of the Project. On 1 April 2018 the Company announced that recent progress at the Project had been limited as a result of working capital constraints, further described below.

Coal Production and Sales

ROM Coal

As announced on 1 April 2019, between 1 January 2019 and 26 March 2019, the Company processed approximately 17,760 tonnes of Run of Mine ("ROM") coal, producing approximately 3,116 tonnes of washed coal to customer specifications and approximately 7,992 tonnes of fine coal. In Q1 2019, approximately 3,510 tonnes of coal were sold and shipped, the majority being washed coal. These production numbers are currently unaudited and may be subject to small variations upon plant and mine reconciliation.

Given the Company's current working capital constraints, whilst allowing some supply to continue to long term customers, from the start of April 2019 the operation has limited production to conserve consumables as much as possible. All mining operations have been scaled back whilst allowing the plant to continue operating. Access to the additional capital from the Firm Placing and the Conditional Placing will allow the Company to open up the new northern mining area at the Project and increase production levels.

Fine Coal

In addition to the ROM coal that is supplied to the plant, the Company has stockpiles of unprocessed ROM coal, part processed coal and fine coal.

Limited quantities of fine coal are currently being sold from the approximately 40,000 tonne fine coal stock pile the Company has at the Project site. The sale of fine coal will provide an additional income stream for the Company and several customers are taking regular shipments.

As announced on 1 April 2019, the Company recently received an order for 1,000 tonnes of fine coal and the Company will commence shipments to this customer upon receipt of payment for this order. The Board anticipate that successful completion of this order will be followed up with a continuing regular monthly order for between 5,000 and 10,000 tonnes per month. Discussions with this customer remain ongoing and detailed planning on logistics and transport have been completed. Although no assurances can be given, the Directors remain confident that an appropriate contract for this fine coal can be finalised in due course.

Plant Upgrades

The recent plant upgrades at the Project are all now operational. The Lamella water treatment plant has been operating since January 2019 and is providing clean recycled water for the main wash plant. The prescreen has been fully operational since the end of January 2019 and separates out fines and large size material prior to the coal reaching the main plant. These units are currently performing as planned.

Due to constrained working capital, the supply of consumables such as fuel and magnetite have been adversely affected, resulting in falling production rates over Q1 2019.

Annual Results for the year ended 31 December 2018

The Company intends to publish its annual financial results for the year ended 31 December 2018 in early June 2019.

Background to and Reasons for the Placing

On 15 February 2019 the Company announced that it had raised gross proceeds of £62,418 from an open offer to existing shareholders priced at 0.12p per Ordinary Share (the "Open Offer"), coupled with a further £15,000 that was raised following a subscription for Ordinary Shares by Jeffrey Malaihollo, the Company's Chairman.

The Open Offer sought to raise gross proceeds of up to £619,099 to strengthen the Company's balance sheet and to progress the Company's operations at the Project, one task being to increase the available ROM coal for processing through the opening up of the Company's northern pit area.

Given the low level of take up from the Open Offer, progress at the Project has been limited in recent weeks and the Company's operations have been constrained due to cost cutting measures implemented by the Directors to preserve working capital. As a result, and despite having the requisite approvals, the Company has as yet been unable to expand its operations or increase mining capacity by opening up the northern mining area.

Following on from the Open Offer, the Group has undertaken the Placing to fund the Company's ongoing operations at the Project and to cover other general working capital needs during the course of 2019.

Use of Proceeds

The net proceeds of the Placing, which are estimated to be £454,200, will be used as follows:

· to expand the existing mining operations at the Company's Rukwa Project, specifically the opening up of the northern mining area; and

· to provide additional working capital primarily to allow the Project to increase plant throughput and generate additional sales of washed coal.

Current Prospects and Outlook

The most important near-term milestone for the Group will be to open the northern mining area at the Project and increase the production of washed coal. Edenville also expects to be able to benefit for the first time from the additional investment in plant and equipment that was made in H2 2018.

During 2019, the Company has continued its marketing efforts to identify new customers for both its washed coal and fine coal, as well as maintaining existing relationships. Accordingly, following completion of the Placing, the Directors expect the Company to be in a position to boost both production and subsequent sales, thereby placing the Project in a position where it is initially self-sustaining, before turning cashflow positive during the next twelve months.

In addition, as a result of the Company's previously anticipated coal to power generation plans being on hold, the Company is also looking at ways to upgrade the fine coal to a product that will have more commercial value and appeal. Further beneficiation and / or briquetting are two options that are being considered.

Details of the Placing

The Company has raised £100,000 before expenses, by way of the Firm Placing through Brandon Hill Capital to new and existing investors of 500,000,000 Firm Placing Shares. Application has been made for the Firm Placing Shares to be admitted to trading on AIM, with First Admission expected to take place on 2 May 2019.

The Company has also conditionally raised £410,000 before expenses, by way of the Conditional Placing to new and existing investors of 2,050,000,000 Placing Shares through Brandon Hill Capital. The Placing Price represents a discount of 21.6 per cent. to the Company's closing mid-price on 26 April 2019.

The Directors do not currently have the authority to allot and issue the Conditional Placing Shares, so completion of the Conditional Placing will be subject to the Company's shareholders approving Resolutions 1 and 4 to increase the Directors' authority to allot new Ordinary Shares, and to disapply statutory pre-emption rights in respect of the allotment of such new Ordinary Shares, at the General Meeting.

Assuming that Resolutions 1 and 4 are passed at the General Meeting, it is expected that the Second Admission of the 2,050,000,000 Conditional Placing Shares will take place on 20 May 2019 following the General Meeting.

Assuming the issue of all of the Placing Shares, the Placing Shares will represent approximately 57.8 per cent. of the Enlarged Share Capital.

The Placing Shares will, rank in full for all dividends and distributions declared, made or paid in respect of the issued Ordinary Share capital of the Company and otherwise rank pari passu in all other respects with the Existing Ordinary Shares.

The Placing Shares are not being made available to the public and none of the Placing Shares are being offered or sold in any jurisdiction where it would be unlawful to do so, including Australia, Canada, Japan, the Republic of Ireland, the Republic of South Africa or the United States. As noted above, the Placing Shares have not been, and will not be, registered under the Securities Act or under the securities laws of any state of the United States or qualify for distribution under any of the relevant securities laws of Australia, Canada, Japan, the Republic of Ireland or the Republic of South Africa.

The Placing and the Placing Agreement

In connection with the Placing, on 28 April 2019 the Company entered into the Placing Agreement pursuant to which Brandon Hill Capital has agreed to act as agent for the Company and use its reasonable endeavours to place the Placing Shares with certain new and existing institutional investors. The Conditional Placing is conditional, among other things, upon: (i) the passing of the Resolutions; (ii) First Admission of the Firm Placing Shares occurring not later than 3 May 2019; and (iii) Second Admission of the Conditional Placing Shares occurring as soon as practicable following the General Meeting or by such later time and/or date as Brandon Hill and the Company may agree but not later than 8.00 am on the Long Stop Date.

The Placing Agreement contains customary warranties from the Company in favour of Brandon Hill in relation to (amongst other things) the accuracy of the information in this Document and other matters relating to the Company and its business. In addition, the Company has agreed to indemnify Brandon Hill in relation to certain liabilities it may incur in undertaking the Placing. Brandon Hill has the right to terminate the Placing Agreement in certain circumstances prior to Second Admission. In particular, Brandon Hill may terminate in the event that there has been a breach of any of the warranties, the conditions of the agreement have become incapable of fulfilment or for force majeure. The Placing will not be underwritten.

Directors' Interests and Salary Reductions

As announced on 1 April 2019, the Directors have implemented cost cutting measures which included the Directors only taking part of their salary entitlements during 2018 and no salaries to date in 2019.

Specifically, during 2018 the Directors took 50 per cent. of their salary entitlements in seven of the twelve months of the year. As a result, a total of £68,585 has been accrued in the Company's management accounts for the year ended 31 December 2018 and a further £78,383 has been accrued in the Company's management accounts for the current financial year in relation to unpaid Directors' salaries including employer's national insurance contributions (NIC's) for January to April 2019 (inclusive), being £146,968 in total.

At the date of this Circular the following amounts are owed to the Directors in unpaid salary entitlements:

In order to assist the Company, the Directors have agreed to the following arrangements which include Rufus Short and Jeffrey Malaihollo taking their unpaid salaries partially and fully respectively in Ordinary Shares which are to be issued at a price of 0.02p per share (the "Director Salary Shares"):

Notes:

1. Equivalent to gross salary of £28,000 - the PAYE and NI of £13,329 will be paid by the Company

2. Inclusive of PAYE and NI of £13,329

The Directors do not currently have the authority to issue the 213,980,200 Director Salary Shares, so the issue of the Director Salary Shares will be subject to the Company's shareholders approving Resolutions 2 and 5 to increase the Directors' authority to allot all the Director Salary Shares, and to disapply statutory pre-emption rights, at the General Meeting.

Assuming that Resolutions 2 and 5 are passed at the General Meeting, it is expected that the Admission of the Director Salary Shares will take place as part of the Second Admission on 20 May 2019 following the General Meeting.

Director Salary Reductions

In addition to the proposed issue of Director Salary Shares, as part of the ongoing cost cutting measures, Rufus Short has agreed to a 25 per cent. reduction in his salary from £130,000* (to £97,500), Jeff Malaihollo to a 20 per cent. reduction in his salary from £45,000 (to £36,000) and Arun Srivastava to a 31 per cent. reduction in his salary from £36,000 (to £24,840), all with immediate effect. The Directors expect these reduced salaries to remain in place until at least the end of 2019 and will make further announcements regarding their remuneration as appropriate.

*Please note that the figure of £140,000 that was reported as Rufus Short's remuneration in the Company's 2017 Annual Report included a bonus payment of £10,000. The 25 per cent. reduction in Rufus Short's salary has been applied to his current basic salary of £130,000 per annum.

Directors Interests in Ordinary Shares

As at today's date and immediately following Second Admission, the interests (all of which are beneficial), of the Directors and their families (within the meaning set out in the AIM Rules) in the issued share capital of the Company are as follows:

Arun Srivastava, the Company's Non-Executive Director, does not currently hold any Ordinary Shares.

Related Party Transaction

The issue of Director Salary Shares to Rufus Short and Jeff Malaihollo constitutes a related party transaction in accordance with AIM Rule 13. Dr Arun Srivastava who is not receiving Director Salary Shares and is therefore independent for this purpose, considers after consultation with the Company's Nominated Adviser, that the terms of the issue of the Director Salary Shares to Rufus Short and Jeff Malaihollo are fair and reasonable, in so far as the Company's shareholders are concerned.

Funding Agreement with Lind Partners LLC

On 6 November 2018, the Company announced that it had entered into a Funding Agreement with an entity managed by The Lind Partners, LLC under which up to US$2,750,000 had been conditionally made available to the Company for working capital and expansion purposes.

Under the terms of the Funding Agreement the Company received an initial advance of US$900,000 (US$750,000 net of drawdown fees) (the "Initial Advance") in November 2018, which it subsequently deployed. The Company may receive a further advance of up to US$2,000,000 to be drawn with mutual agreement between the Company and Lind (the "Further Advance") prior to 6 January 2021, subject to the Company having repaid to Lind an amount equal to 75 per cent. of the Initial Advance.

Monthly re-payment of the Initial Advance is at the Company's election whether in cash or shares and it is the Company's current intention to repay the Initial Advance from its operational cashflow. 

The face value of the Initial Advance was US$900,000 and between 16 February 2019 and the date of this Circular, the Company has made one repayment in cash to Lind pursuant to the terms of the Funding Agreement. At present, US$855,000 remains outstanding to Lind.

Any balance of the Initial Advance may be converted by Lind into Ordinary Shares at a conversion price of 0.29p per Ordinary Share.

Variation to the Terms of the Funding Agreement

As a result of the Company's recent working capital constraints, the Company and Lind entered into an agreement on 28 April 2019 to vary certain terms of the Funding Agreement to assist the Company in the short term ("Variation Agreement").

Under the terms of the Variation Agreement Lind has agreed to extend the First Convertible Security Repayment Holiday from 16 February 2019 to 1 September 2019, in return for which the Company has agreed to:

· increase the amount outstanding of the First Convertible Security, which is currently US$855,000, by 15 per cent. to US$983,250 with effect from the date of the Variation Agreement;

· convene a general meeting of the shareholders of the Company, prior to 30 September 2019, at which a resolution will be proposed to approve the consolidation of the Ordinary Shares on a 100:1 basis (that is, such that each 100 ordinary shares of £0.0002 are consolidated into one ordinary share of £0.02) ("Consolidation");

· convene a general meeting of the shareholders of the Company at which a resolution will be proposed to approve the allotment of 2,000,000,000 new Ordinary Shares (to be proportionally adjusted to reflect any Consolidation) which are due to be issued to Lind under the Funding Agreement (and in the event the resolution is not passed by 30 May 2019, the amount outstanding of the First Convertible Security will increase by 10 per cent. with effect from 30 May 2019);

· amend the exercise price of the Second Closing Options to 130 per cent. of the Placing Price (proportionally adjusted to reflect any Consolidation) provided that the Company raises a minimum of £250,000; and

· grant to Lind or its nominee a further 100,000,000 options (proportionally adjusted to reflect any Consolidation), each having the same terms as the Second Closing Options.

Significant Shareholders

As at 26 April 2019 and immediately following Second Admission, the Directors are aware of the following persons who, directly or indirectly, are interested in three per cent. or more of the Company's existing Ordinary Share Capital before Second Admission and their resultant holdings after Second Admission:

Please note that Neal Griffith and Oliver Stansfield are both Directors of Brandon Hill Capital and the combined interest of the three parties will be 1,037,500,000 following the Second Admission, which will represent 23.5 per cent. of the Company's Enlarged Share Capital. 

Please note that David Thomas, Alexander Fullard and William Orgee are all Directors of Pitchcroft Capital and the combined interest of the four parties will be 1,053,959,224 following the Second Admission, which will represent 23.9 per cent. of the Company's Enlarged Share Capital. 

The Company also intends to grant Brandon Hill Capital the Broker Warrants over 127,500,000 Ordinary Shares following the completion of the General Meeting.

General Meeting

As the Directors do not currently have the authority to issue all of the Placing Shares, the Placing will be in two tranches as summarised above. The Conditional Placing is subject to the Company's shareholders approving resolutions to increase the Directors' authority to allot the Placing Shares and to disapply statutory pre-emption rights, at the General Meeting. Application will be made for the Firm Placing Shares to be admitted to trading on AIM on 2 May 2019 and, subject to the Resolutions being passed, for the Conditional Placing Shares and the Director Salary Shares to be admitted to trading on AIM on 20 May following the General Meeting.

A notice is set out at the end of this document convening the General Meeting to be held at 11.00 a.m. on 17 May 2019 at the offices of Womble Bond Dickinson (UK) LLP, 4 More London Riverside, London SE1 2AU at which the following Resolutions will be proposed:

(A) Resolution 1, which will be proposed as an ordinary resolution, is to authorise the Directors to allot up to: (i) 2,050,000,000 Ordinary Shares (being an aggregate nominal value of £410,000) in connection with the Conditional Placing; and (ii) 220,612,088 Ordinary Shares (being an aggregate nominal value of £44,122 and 5 per cent. of the Enlarged Share Capital) otherwise than in connection with the Placing;

(B) Resolution 2, which will be proposed as an ordinary resolution, is to authorise the Directors to allot up to 213,980,200 Ordinary Shares (being an aggregate nominal value of £42,796 in connection with the Director Salary Shares;

(C) Resolution 3, which will be proposed as an ordinary resolution, is to authorise the Directors to allot up to: (i) 2,000,000,000 relevant securities (being an aggregate nominal value of £400,000) in connection with the Funding Agreement;

(D) Resolutions 4, 5 and 6, which will be proposed as special resolutions to disapply statutory pre-emption rights in respect of the allotments of Ordinary Shares and relevant securities authorised under Resolutions 1, 2 and 3.

Action to be Taken

The GM is being convened for Shareholders to consider and, if thought fit, approve the Resolutions, which, if approved, will result in the Directors having the authority to issue the 2,050,000,000 Conditional Placing Shares, the 213,980,200 Director Salary Shares and 2,000,000,000 relevant securities in connection with the Funding Agreement.

A paper proxy form is not enclosed with this document. Shareholders are able to vote online by logging on to www.signalshares.com and following the instructions provided or, in the case of CREST members, by using the CREST electronic proxy appointment service set out in note 4 to the Notice of General Meeting.

A hard copy proxy form can be requested from the Registrars, further details of which are set out in note 9 to Notice of General Meeting.

Recommendation

If the Resolutions are not approved, it is likely that the Project will have to be placed on care and maintenance and the Company will be responsible for securing additional finance in the immediate short term to mitigate the risks to business continuity. Such finance may not be readily available or may only be available on terms that are unfavourable to the Company.

The Directors consider that the Resolutions are in the best interests of the Company and its Shareholders as a whole. The Directors are of the opinion that if the Resolutions are not passed the Company is unlikely to be in a position to meet its future operational commitments in Tanzania or its corporate obligations and may not be able to continue trading. Accordingly, the Directors strongly recommend the Shareholders to vote in favour of the Resolutions at the General Meeting.

The Directors unanimously recommend that Shareholders vote in favour of the Resolutions to be proposed at the General Meeting as they intend to do in respect of their own beneficial holdings amounting, in aggregate, to 24,166,761 Existing Ordinary Shares, representing approximately 1.14 per cent. of the Existing Ordinary Shares.

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