Goldstone Resources Regulatory News (GRL)

16 March 2020

GOLDSTONE RESOURCES LIMITED

("GoldStone" or the "Company")

Funding of up to US$4.3 million to commence production

GoldStone Resources Limited (AIM: GRL), the West and Central Africa focused gold exploration and development company quoted on AIM, is pleased to announce that it has raised, in aggregate, up to US$4.3 million (c.£3.4 million) of funding from certain new and existing investors (the "Fundraise") to finance the advancement of its Akrokeri-Homase Gold Project ("AKHM") into production.

Summary

· Fundraise of up to US$4.3 million

- Issue of twenty six 14% unsecured bond notes of US$50,000 each to certain existing and new investors, to raise, in aggregate, US$1.3 million (c.£1.0 million) (the "Bonds") before expenses

§ Paracale Gold Limited ("Paracale Gold") and BCM Investments Limited ("BCM") have each subscribed for Bonds with a value of US$0.3 million respectively

§ 52 million warrants, exercisable at 3 pence per ordinary share of 1 penny each in the Company ("Ordinary Share") (the "Exercise Price"), to be issued to the Bond subscribers

§ Commission of 3% payable to Bond holders

- Subject to formal loan documentation being agreed and security being granted, issue of 14% secured gold loan of up to 2,000 troy ounces of gold at a price of US$1,500 per troy ounce, equating to a value of US$3.0 million (c.£2.4 million) before expenses to Asian Investment Management Services Ltd ("AIMS") (the "Gold Loan")

§ 200 troy ounces (US$300,000) available to be drawn immediately

§ Further 1,800 troy ounces (US$2.7 million) to be made available, subject to entering into formal loan documentation and security being granted over the assets of the Company

§ 120 million warrants, exercisable at the Exercise Price to be issued to AIMS

· The Fundraise will enable the Company to start mining the Homase South Pit and construct the heap leach plant

- Mining operations will start immediately the environmental permit is issued using contract mining for the open pit

- Application for the environmental permit has been submitted and expected to be approved within the next three months

- Low cost cyanide heap leach processing facility to produce, in the first instance, loaded carbon for onward treatment

- Mining lease for the Homase South Pit and land for the plant and process operation awarded, as announced on 14 February 2020 ("Mining Lease")

· Agreement reached with Cherry Hill Mining Limited ("Cherry Hill"), pursuant to which Cherry Hill has relinquished its remaining 10% interest in the Homase licence in exchange for a 2% royalty of gold sales generated, less all costs and taxes and duties in accordance with the joint venture agreement.

Emma Priestley, CEO of GoldStone, commented: "I am very pleased to announce this US$4.3 million funding package and welcome AIMS as a co-investor alongside Paracale Gold and BCM, who have continued to support this project. Supporting the existing shareholders, AIMS have recognised the growth opportunity that the development of the AKHM project will bring to the Company and the Board thanks them for their support. I look forward to updating shareholders in due course as we progress the development of AKHM and move into production and achieve cashflows during 2020."

Further information

The Fundraise

The net proceeds of the Fundraise will enable GoldStone to now move forward rapidly with the development of the Homase South Pit and the construction of a low cost cyanide heap leach facility, with the aim of achieving production during H2 2020.

Following the granting of the Mining Lease, as set out in Definitive Economic Plan ("DEP"), announced on 27 June 2019, the Company will be targeting the shallow, free dig mining of the oxide/weathered ore zones at the Homase South Pit. The Company will now begin work on advancing the project, including selecting a mining contractor and appointing a preferred engineering, procurement, construction, management ("EPCM") provider so that the Company is ready to move forward with the construction of the low cost cyanide heap leach facility following the drawdown of the Gold Loan in full and grant of the environmental permit.

Initially, the Company will seek to produce loaded carbon, which the Company may then elect to toll treat at an existing third-party facility within Ghana. Subject to further funding, the Company may consider expanding its processing facility to include an elution plant and gold room, meaning that it would be able to produce gold dore.

In addition, the Company has now submitted the application for the requisite environmental permit in respect of AKHM to the Minerals Commission and Environmental Protection Authority in Ghana and the board of GoldStone (the "Board") expects that the environmental permit will be awarded within the next three months.

The Board believes that the Fundraise is an extremely positive step for the Company and its shareholders as it enables the Company to go into production and achieve cashflows during 2020. The Board also believes that the Fundraise demonstrates the confidence that both AIMS, as a new investor, and the Company's main shareholders, Paracale Gold and BCM, have in the Company, the AKHM project and its development strategy and the Board looks forward to keeping shareholders updated as the Company moves forward.

The Fundraise comprises the issue of Bonds with a value of, in aggregate, US$1.3 million before expenses and, subject to, inter alia, further documentation and the grant of security to AIMS over the assets of the Company, the issue of the Gold Loan for up to 2,000 troy ounces at a price of US$1,500 per troy ounce, equating to a value of US$3.0 million before expenses.

The Gold Loan is conditional on, inter alia, agreement of the terms of a formal loan agreement and the provision of security, in the form of a first ranking general security deed to be granted by the Company to AIMS over all of its assets (fixed and floating), undertakings, and a pledge over the shares in GoldStone Akrokeri Limited and GoldStone Homase Limited (which hold the Akrokeri and Homase licences respectively),to be completed by no later than 30 April 2020, or such later date as may be agreed to by AIMS. In accordance with the terms of the conditional term sheet entered into between AIMS and the Company (the "Term Sheet"), the Company will immediately be able to drawdown 200 troy ounces, equating to US$300,000, of the principal amount of the Gold Loan (the "Advance"). It is the Company's intention to drawdown the Advance immediately in full. In the event that the conditions to the Gold Loan are not satisfied, the Advance will be repayable immediately, plus any accrued interest.

The Company will grant a total of 172,000,000 warrants pursuant to the Bond and Gold Loan, all of which will be exercisable at 3 pence per Ordinary Share.

Summary terms of the Bonds

· The Company has issued 26 Bonds with a value of, in aggregate, US$1.3 million before expenses to new and existing investors, with each Bond having a face value of US$50,000.

· The interest payable on the Bonds is 14% per annum, which is payable annually in advance in cash.

· The Company will pay a commission of 3% in cash to each Bond holder.

· The Company will also grant a total of 52 million warrants to the Bond holders to subscribe for Ordinary Shares, which will be exercisable at the Exercise Price and will be valid until 2 June 2022 (the "Bond Warrants"). The Bond Warrants will not be listed or quoted on AIM.

· The initial term of the Bonds is 12 months (the "First Period").

· At the end of the First Period, GoldStone may elect to either repay the Bonds or extend the Bonds for a further 12 months on the same interest terms (the "Second Period").

· If the Company elects to extend all or any of the Bonds into the Second Period, an additional 1,000,000 warrants per Bond will be awarded to Bond holders, with such warrants being exercisable at the Exercise Price and valid until 2 June 2022 (the "Additional Bond Warrants").

· The Bond holder may elect to receive repayment of the Bonds in gold, at a fixed price of US$1,450 per troy ounce, or in cash, or in Ordinary Shares, with the number of Ordinary Shares to be issued based on the volume weighted average price of an Ordinary Share for the 15 business days prior to the end of the applicable period.

· Paracale Gold and BCM, who are currently interested in approximately 28.1% and 20.0% of the Company's issued share capital respectively, have each subscribed for 6 Bonds with a value of, in aggregate, US$300,000 respectively and accordingly, Paracale Gold and BCM will each receive 12 million Bond Warrants. If these Bonds are extended, they will each receive an additional 6 million Additional Bond Warrants.

· The Bonds and the associated warrants are non-transferrable, without the consent of the Company.

As at the date of the announcement:

· Paracale Gold is interested in 70,352,377 Ordinary Shares, representing approximately 28.1% of the Company's issued share capital, 40,352,377 warrants with an exercise price of 1.2 pence, which are valid until 2 June 2022, 12 million Bond Warrants, 6 Bonds, which have a value of, in aggregate, US$0.3 million, and a loan to the Company of US$1.224 million, as announced on 28 December 2018.

· BCM is interested in 50,000,000 Ordinary Shares, representing approximately 20.0% of the Company's issued share capital, 12 million Bond Warrants and 6 Bonds, which have a value of, in aggregate, US$0.3 million.

Summary terms of the Gold Loan

· The Company and AIMS, a fund management and advisory business based in Malaysia, have entered into the Term Sheet in respect of the Gold Loan.

· The principal amount of the Gold Loan will be 2,000 troy ounces of gold, which at a fixed price of US$1,500 per troy ounce equates to US$3.0 million before expenses.

- The principal amount drawn under the Gold Loan will be repayable in such number of troy ounces as has been drawn under the Gold Loan or in cash, at the election of AIMS, 15 months from the date of the first drawdown following execution of the loan agreement (or earlier in the case of an event of default by the Company).

· The Company will immediately be able to drawdown the Advance, being 200 troy ounces, equating to US$300,000, of the principal amount of the Gold Loan.

- The Company's intends to immediately drawdown the Advance in full.

- In the event that the conditions to the Gold Loan, as set out below, are not satisfied, the Advance will be repayable immediately, plus any accrued interest.

· Drawdown of the balance of the Gold Loan, being 1,800 troy ounces (US$2.7million), is conditional on, inter alia, the finalisation of the loan agreement and the granting of security to AIMS. All conditions to the Gold Loan are to be satisfied on or before 30 April 2020, unless extended at the sole discretion of AIMS.

· The Gold Loan will accrue interest at 14% per annum, which is payable quarterly in arrears. Interest on the Gold Loan may be paid in gold, such amount based on the then current prevailing gold price, or in cash at the election of AIMS.

· On entering into the loan agreement, the Company will grant 120 million warrants to AIMS to subscribe for such number of Ordinary Shares, which will be exercisable at the Exercise Price and which will be valid until 2 June 2022 (the "Loan Warrants"). The Loan Warrants will not be listed or quoted on AIM and will be non-transferrable without the consent of the Company.

· The Gold Loan will be secured over the Company's assets and undertakings, including a pledge over the Company's equity in GoldStone Akrokeri Limited and GoldStone Homase Limited, which hold the Akrokeri and Homase licences respectively.

· The Gold Loan is non-transferrable, without the consent of the Company.

· The Company will pay the reasonable costs of AIMS, including legal costs, incurred in relation to the Gold Loan, including in respect of the loan agreement and security documentation.

Licence Update

With the award of the Mining Lease, announced on 14 February 2020, GoldStone is now deemed to have advanced from an exploration to a development company under the terms of the joint venture agreement with Cherry Hill announced on 4 June 2015 (the "JV Agreement") in respect of the Homase licence. Cherry Hill is the current holder of the Homase licence through which GoldStone holds its 90% economic interest, with Cherry Hill holding the balancing 10% economic interest and being the registered holder of the Homase licence. In accordance with the terms of the JV Agreement, the Company is pleased to announce that agreement has now been reached with Cherry Hill, pursuant to which Cherry Hill has relinquished its remaining 10% interest in exchange for a 2% royalty of gold sales generated, less all costs and taxes and duties in respect of the Homase licence.

As a result, GoldStone now holds a 100% economic interest in both the Akrokeri and Homase licences, pursuant to which GoldStone will provide the government of Ghana with a 10% free carried interest and a 5% gross gold royalty as required by the fiscal regime in Ghana.

Related Party Transaction

Paracale Gold and BCM, who are currently interested in approximately 28.1% and 20.0% of the Company's issued share capital respectively, are each a substantial shareholder of the Company and are therefore each a related party of the Company as defined in the AIM Rules for Companies ("AIM Rules").

Accordingly, the issue of the Bonds and the Bond Warrants to each of Paracale Gold and BCM, as detailed above, is deemed to be a related party transaction pursuant to Rule 13 of the AIM Rules and the independent directors, being Emma Priestley, Richard Wilkins and Orrie Fenn, consider, having consulted with the Company's nominated adviser, Strand Hanson Limited, that the terms and conditions of the Bonds and associated warrants are fair and reasonable insofar as the shareholders of the Company are concerned.

The Takeover Code

The exercise of the warrants to be issued pursuant to the Fundraise may give rise to certain considerations under the Takeover Code ("Code"). Brief details of the Panel on Takeovers and Mergers (the "Panel"), the Code and the protections they afford are described below.

The Code is issued and administered by the Panel. The Code applies to all takeover and merger transactions, however effected, where the offeree company has its registered office in the United Kingdom, the Channel Islands or the Isle of Man and, inter alia, whose securities are admitted to trading on a multilateral trading facility in the United Kingdom (such as AIM). The Company is therefore subject to the Code.

Rule 9 of the Code requires that any person who acquires, whether by a series of transactions over a period of time or not, an interest (as defined in the Code) in shares which, taken together with shares in which persons acting in concert with him are interested, carry 30% or more of the voting rights of a company which is subject to the Code, will normally be required to make a general offer to all of the remaining shareholders to acquire their shares (a "Mandatory Offer").

Similarly, when any person, together with any persons acting in concert with him, is interested in shares which, in aggregate, carry not less than 30% of the voting rights of such a company but not more than 50% of such voting rights, a Mandatory Offer will normally be required if any further interests in shares are acquired by any such person, or any person acting in concert with him. A Mandatory Offer under Rule 9 of the Code must be made in cash and at the highest price paid by the person required to make the offer, or any person acting in concert with him, for any interest in shares in the company during the 12 months prior to the announcement of the offer.

Rule 9 of the Code further provides, inter alia, that where any person who, together with persons acting in concert with him, holds over 50% of the voting rights of a company and acquires an interest in shares which carry additional voting rights, then they will not normally be required to make a Mandatory Offer to the other shareholders to acquire their shares. However, the Panel may deem an obligation to make an offer to have arisen on the acquisition by a single member of a concert party of an interest in shares sufficient to increase his individual interest to 30% or more of a company's voting rights, or, if he already holds more than 30% but less than 50%, an acquisition which increases his interest in shares carrying voting rights in that company.

Under the Code, a concert party arises where persons acting together pursuant to an agreement or understanding (whether formal or informal) co-operate to obtain or consolidate control of, or to frustrate the successful outcome of an offer for a company, subject to the Code. Control means an interest, or interests, in shares carrying, in aggregate, 30% or more of the voting rights of a company, irrespective of whether such interest or interests give de facto control.

The Company considers that Paracale Gold is in concert with Bill Trew, as he is Paracale Gold's representative on the GoldStone Board and is also a director of and a shareholder in Paracale Gold, as well as being the Company's Non-executive Chairman.

Pursuant to the issue of the Bonds, this potential concert party (the "PCP") will have the ability to increase its aggregate interest in the Ordinary Shares to more than 30% of the Company's enlarged share capital. The PCP currently holds 74,352,377 Ordinary Shares and 40,352,377 warrants over Ordinary Shares. Pursuant to the issue of the Bond Warrants and assuming the Bonds are repaid in cash or gold, the PCP has the potential to increase its aggregate interest in Ordinary Shares up to a maximum of 126,704,754 Ordinary Shares, through the exercise of the existing warrants and Bond Warrants held by the PCP, representing, assuming that no other new Ordinary Shares have been issued, approximately 41.9% of the voting rights in the then enlarged issued share capital of the Company which, without a waiver of the obligations under Rule 9 of the Code, would oblige the PCP and anyone in concert with it to make a Mandatory Offer under Rule 9 of the Code in certain circumstances. If the Additional Bond Warrants are issues to the PCP, it would have the potential to increase its aggregate interest in Ordinary Shares up to a maximum of 132,704,754 Ordinary Shares, representing, assuming that no other new Ordinary Shares have been issued, approximately 43.0% of the voting rights in the then enlarged issued share capital of the Company. If the Bond Warrants and Additional Bond Warrants are issued and the Bond is converted into Ordinary Shares, the PCP's potential holding would, depend upon the prevailing share price at the time of conversion, assuming that no other new Ordinary Shares have been issued, increase yet further.

Pursuant to the issue of the Bonds, BCM will have the potential to increase its aggregate interest in the Ordinary Shares to more than 30% of the Company's share capital. BCM currently holds 50,000,000 Ordinary Shares. Pursuant to the issue of the Bond Warrants and Additional Bond Warrants and assuming the Bonds are repaid in cash or gold, BCM has the potential to increase its aggregate interest in Ordinary Shares up to a maximum of 68,000,000 Ordinary Shares, representing, assuming that no other new Ordinary Shares have been issued, approximately 25.4% of the voting rights in the then enlarged issued share capital of the Company. If the Bond Warrants, Additional Bond Warrants are issued and the Bond is converted into Ordinary Shares, BCM's potential holding would, assuming that no other new Ordinary Shares have been issued, increase yet further and depending on the Prevailing Share Price at the time of conversion, could exceed 30.0% of the voting rights in the then enlarged issued share capital of the Company which, without a waiver of the obligations under Rule 9 of the Code, would oblige BCM and anyone in concert with it to make a Mandatory Offer under Rule 9 of the Code in certain circumstances.

In addition, AIMS will, pursuant to the Loan Warrants, have the potential to increase its aggregate interest in shares carrying voting rights in the Company up to a maximum of 120,000,000 Ordinary Shares representing, assuming that no other new Ordinary Shares have been issued, approximately 32.4% of the voting rights in the then enlarged issued share capital of the Company which, without a waiver of the obligations under Rule 9, would oblige AIMS and anyone in concert with it to make a Mandatory Offer under Rule 9 in certain circumstances.

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014.

- ENDS-

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About GoldStone Resources Limited

GoldStone Resources Limited (AIM: GRL) is an AIM quoted exploration and development company with projects in Ghana and Senegal that range from grassroots exploration to development.

The Company is focused on developing the Akrokeri-Homase project in south-western Ghana, which hosts a JORC Code compliant 602,000 oz gold resource at an average grade of 1.77 g/t. The existing resource is confined to a 4km zone of the Homase Trend, including Homase North, Homase Pit and Homase South.

The project hosts two former mines, the Akrokerri Ashanti Mine Ltd, which produced 75,000 oz gold at 24 g/t recovered grade in the early 1900s, and the Homase Pit which AngloGold Ashanti developed in 2002/03 producing 52,000 oz gold at 2.5 g/t recovered. It is the Company's intention to build a portfolio of high-quality gold projects in Ghana, with a particular focus on the highly prospective Ashanti Gold Belt.