Goldstone Resources Regulatory News (GRL)

3 April 2017

GOLDSTONE RESOURCES LIMITED

("GoldStone" or the "Company")

£400,000 financing

Related Party Transaction

Board changes

GoldStone Resources Limited (AIM: GRL), the AIM quoted company focused on gold exploration in Central and West Africa, announces that it has entered into a loan agreement with Paracale Gold Limited ("Paracale Gold") (the "Loan Agreement"), pursuant to which Paracale Gold will provide a loan of up to £400,000 (the "Loan") which, subject to shareholder approval, will convert into new ordinary shares of 1 penny each in the capital of the Company ("Ordinary Shares")("Conversion").

The directors of the Company ("Directors" or "Board") are mindful of the need to progress the Company's Homase-Akrokerri project (the "Project"), which hosts an existing 602,000 oz gold JORC Code compliant resource at an average grade of 1.77g/t, and create shareholder value. Following completion of the placing and subscription in July 2016 and the subsequent work programme, the Company now needs to raise funds in the near term for general working capital purposes.

Summary terms of the Loan

· £400,000 Loan, with £200,000 to be drawn down immediately

· Subject to shareholder approval, a further £200,000 to be drawn down in full within 3 business days of the Company's 2017 annual general meeting ("AGM") which is to be held no later than 31 July 2017

· The Loan will be unsecured and will attract interest at a rate of 9.375 per cent per annum, compounded daily until it is repaid or converted

· Subject to shareholder approval at the AGM, the Loan and accrued interest will convert automatically into new Ordinary Shares at a price of 1 penny per share (the "Conversion Shares")

· Within 5 business days of issue of the Conversion Shares, Paracale Gold shall also receive warrants to subscribe for such number of new Ordinary Shares as equals the number of Conversion Shares issued, exercisable at a price of 2 pence per share at any time during the 2-year period following the grant date (the "Warrants")

· If shareholders do not approve the Conversion, the Loan, accrued interest and a default fee of 50% of the amount of the Loan then outstanding (including accrued interest) will become payable in full to Paracale Gold within six weeks of the AGM

· If shareholders do not approve the Conversion and the Loan is repaid, Paracale Gold shall receive Warrants to subscribe for 20,000,000 Ordinary Shares ("Repayment Warrants"), to be issued within 5 business days of the AGM. If the Company does not have sufficient authority to issue the Repayment Warrants at that time, it will be unable to issue any further Ordinary Shares (other than as a result of the exercise of any pre-existing subscription right) until such time as the Repayment Warrants have been issued to Paracale Gold

· The Loan will be used for essential corporate purposes, including renewal of licences and a review of existing data for all the projects, with the initial focus on the Homase-Akrokerri Project. Following review, further funding will be required to advance the Company's projects

· The Loan, together with the Company's existing cash resources, are expected to provide funds for 6-9 months, depending on the rate of spend

· Prior to Conversion or repayment, the Company will not be able to enter into any material agreement, settle any litigation or take on any additional debt without the prior consent of Paracale Gold

· Paracale Gold has the right to appoint a non-executive director following the initial draw down of £200,000 pursuant to the Loan. Following Conversion, for so long as Paracale Gold controls the exercise of not less than 20% of the voting rights of the Company, it shall be entitled to remove and replace such director, subject to consent of the Company's nominated adviser

· Paracale Gold has entered into a relationship agreement with the Company and Strand Hanson, the Company's nominated adviser, which will come into effect following Conversion and remain in effect for so long as Paracale Gold controls the exercise of not less than 20% of the voting rights of the Company.

Assuming the AGM is held on 31 July 2017 (being the latest possible date under the terms of the Loan Agreement), the number of Conversion Shares, and therefore also the number of Warrants, will be 40,620,658.

The Company also announces that Dr Bob Foster has decided to step down from the Board of the Company as a Non-executive Director to focus on other business interests with effect from 4 April 2017.

The Directors continue to monitor and manage the Company's working capital position very carefully and have, in order to preserve cash and subject to the required authorities being granted by shareholders at the AGM, agreed to convert accrued and future salaries and fees through to the end of September 2017 for all directors (including Paracale Gold's nominee), into new Ordinary Shares ("Fee Shares"). The number of Fee Shares to be issued shall be calculated by reference to (i) the average closing daily volume weighted average share price for the period of 30 days prior to the AGM in the case of salaries and fees accrued since 1 January 2017 and (ii) the average closing daily volume weighted average share price for the period of 30 days prior to the due date for payment of salaries and fees payable monthly to 30 September 2017, provided that no Ordinary Share shall be issued at a price less than its nominal value of 1 penny.

Neil Gardyne, Chairman of GoldStone, commented:

"Paracale Gold shares our vision for the development of the Homase-Akrokerri Project in Ghana. In what remains a challenging market for the natural resource sector, we welcome and value the support and credentials of Paracale Gold, who we believe will be a long-term strategic investor in the Company.

"On behalf of the Board, we would like to sincerely thank Bob Foster for his time and many contributions to Goldstone. Bob has had a significant impact while at Goldstone, especially in understanding the potential for the Homase and Akrokerri Project in Ghana, and we are sorry to see him go. We wish him the very best in his future endeavours."

For further information, please contact:

Further Information

GoldStone's Operations

The Company has made significant progress since completing the £1.0 million placing and subscription in July 2016, having undertaken and completed a drilling programme consisting of two auger drilling programmes for over 3,300 metres, some 1,500 metres of reverse circulation drilling and approximately 800 metres of diamond drilling on the Company's Homase-Akrokerri Project in Ghana.

The results of the drilling programmes, which were announced on 11 November 2016, 26 January 2017 and 3 February 2017, produced encouraging results and culminated in the start of the process for targeting 'information gaps' within the existing JORC Code compliant resource for the Homase-Akrokerri Project of 602,000 oz gold. These results provide important insights into the controls on the mineralisation as well as confirming the continuity of the mineralised zone at a depth of 250 metres. Whilst there is little doubt that the ore within the Homase pit is open at depth, our focus will be on identifying resources within the Homase pit at depths that can be exploited in the foreseeable future. Importantly, the results of the drilling programme have enabled us to identify the further drilling required to seek to add to, and at the same time improve confidence levels in the categorisation of, the existing resource for the Project.

Litigation

As announced on 13 October 2016, there is an outstanding claim by a former director, which exceeds the Company's current cash resources. Whilst the Board believes there is no merit in the case, discussions with the claimant are ongoing in order to resolve the situation.

Financial Position

It should be noted that currently the Company does not have sufficient cash resources to support its minimum spend requirements and general overheads for the next 12 months. The Company only has sufficient cash resources to meet its requirements to the end of May 2017, not taking into account the impending claim by the former director.

The Board has given due consideration to potential funding options for the Company. In light of the timing implications for seeking the additional shareholder authorities required to conduct an equity fund raise, and taking into account the chances of success of such an equity fund raise, the Directors believe that the Loan is in the best interests of the Company and shareholders as a whole.

The terms of the Loan Agreement and the Warrants

Pursuant to the terms of the Loan Agreement, Paracale Gold has agreed to provide the Company with up to £400,000, of which £200,000 will be drawn immediately. Subject to shareholder approval, the remaining £200,000 will be drawn down in full within 3 business days of the AGM.

The Loan will be used for essential corporate purposes, including renewal of licences and a review of existing data for all the projects, with the initial focus on the Homase-Akrokerri Project.

The Loan will be unsecured and will carry interest at a rate of 9.375 per cent per annum, compounded daily until it is repaid or converted. Prior to Conversion, the Company will not be able to enter into any material agreement, settle any litigation or take on any additional debt, without the prior written consent of Paracale Gold.

Pursuant to the Loan Agreement, the Loan and accrued interest will, subject to shareholder approval to increase the Company's authorised share capital and permit allotment of the Conversion Shares and Warrants at the Company's 2017 AGM (which must be held before 31 July 2017), convert automatically into the Conversion Shares at a price of 1 penny per share. If the necessary shareholder approvals are not obtained, the Loan, accrued interest thereon and a default fee, being equal to 50 per cent of the drawn down amount of the Loan (including accrued interest) (the "Default Fee"), must be paid in full to Paracale Gold within six weeks of the AGM.

If the necessary shareholder approvals at the AGM are obtained, the second tranche of £200,000 will be drawn down within 3 business days of the AGM and Conversion will result in the 40,000,000 Conversion Shares being issued to Paracale Gold in respect of the conversion of the £400,000 principal loan amount. In addition, assuming the AGM is held on 31 July 2017 (being the latest possible date under the terms of the Loan), the accrued interest would be £6,206.59, which would convert into a further 620,658 Conversion Shares. Accordingly, the maximum number of Conversion Shares will be 40,620,658.

In addition, subject to the necessary shareholder approvals being obtained at the AGM, the Company will grant Paracale Gold Warrants to subscribe for up to 40,620,658 new Ordinary Shares (being the same number as the number of Conversion Shares) at 2 pence per share within two years from the date of grant. The Warrants are subject to standard anti-dilution provisions and protections in the event of capital re-organisations.

If the necessary shareholder approvals are not obtained at the AGM, and the Loan is repaid rather than converted, Paracale Gold shall receive Warrants to subscribe for 20,000,000 Ordinary Shares ("Repayment Warrants"), to be issued within 5 business days of the AGM. If the Company does not have sufficient authority to issue the Repayment Warrants at that time, it will be unable to issue any further Ordinary Shares (other than as a result of the exercise of any pre-existing subscription right, for example under an option or warrant) until such time as the Repayment Warrants have been issued to Paracale Gold.

In the event that the AGM is not held before the 31 July 2017 and/or shareholders do not approve the requisite resolutions, then the full amount drawn down under the Loan and the accrued interest, together with the Default Fee will become payable in full by no later than 11 September 2017, being six weeks from 31 July 2017. In addition, Paracale Gold will receive the Repayment Warrants.

The Takeover Code

The exercise of conversion rights pursuant to the Loan Agreement may give rise to certain considerations under the Code. Brief details of 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 per cent. 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 per cent. of the voting rights of such a company but not more than 50 per cent. 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. An 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 per cent. 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 per cent. or more of a company's voting rights, or, if he already holds more than 30 per cent. but less than 50 per cent., 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 per cent. or more of the voting rights of a company, irrespective of whether such interest or interests give de facto control.

In the event that the Resolutions are approved, Paracale Gold will have the potential to increase its interest in shares carrying voting rights in the Company up to a maximum of 81,241,316 Ordinary Shares (comprising 40,620,658 Conversion Shares and 40,620,658 new Ordinary Shares arising from the exercise of the Warrants) representing 44.27 per cent of the voting rights in the issued share capital which, without a waiver of the obligations under Rule 9, would oblige Paracale Gold to make a Mandatory Offer under Rule 9 in certain circumstances.

In the event that the Resolutions are not passed and Paracale Gold receives only the Default Warrants, it will the potential to increase its interest in shares carrying voting rights in the Company up to a maximum of 20,000,000 Ordinary Shares representing 16.36 per cent of the voting rights in the issued share capital which would not oblige Paracale Gold to make a Mandatory Offer under Rule 9.

Board representation

The Loan Agreement also provides that Paracale Gold is entitled to nominate one non-executive director to the Board on draw down of the initial £200,000. Subject to completion of the requisite due diligence pursuant to the AIM Rules, the Paracale Gold nominee is expected to be appointed shortly.

Relationship Agreement

The Company, Paracale Gold and Strand Hanson have also entered into a relationship agreement, to provide certain safeguards to, inter alia, ensure that for so long as Paracale Gold and its associates together are entitled to exercise or control the exercise of 20 per cent. or more of the Company, GoldStone is capable of carrying on its business independently of Paracale Gold as a substantial shareholder. In addition, for as long as the relationship agreement remains in place, Paracale Gold will be able to nominate one director to the Goldstone Board.

Importance of the shareholder vote

Shareholders should note that should they not approve the relevant resolutions at the AGM to enable the Conversion of the Loan, the Company would not have sufficient funds to be able to repay the amount then due pursuant to the Loan Agreement, including the Default Fee equal to 50 per cent of the amount drawn (including accrued interest), which would need to be repaid in full within six weeks of the AGM. In such circumstances, the Company would need to immediately consider alternative sources of financing to repay the Loan and to provide general working capital to the Company and there can be no certainty that such financing would be available or that the terms of such financing would be on terms as favourable to the Company and its shareholders.

The Company currently has minimal available cash resources, which the Board estimates are sufficient, prior to the claim by a former director, for the Company's requirements for approximately two months. Accordingly, if Shareholders do not approve the resolutions and the Company is unable to secure the necessary funding in the short term to repay the Loan, it is highly likely that the Company will not be able to meet its liabilities as they fall due and may therefore be forced into insolvency proceedings (be that administration or liquidation) and in such a case it is highly unlikely that there would be any value attributable to Shareholders.

Paracale Gold Limited

Paracale Gold Limited is a mining investment company focused on mineral exploration and mine development opportunities.

It is currently assessing and investing in natural resources projects where it believes it can add value through supporting their geological exploration works, production development opportunities and corporate activities. Paracale aims to assemble a portfolio of investments, at various stages of the mineral development cycle through to and including production, by leveraging its existing resources and background.

Paracale is a privately held company incorporated in the British Virgin Islands. The directors, William (Bill) Trew and Alasdair Stuart and its management team have had a long association within the international project engineering, mine development and mineral processing sectors.

Board changes

The Company also announces that Dr Bob Foster has decided to step down from the Board of the Company as a Non-executive Director to focus on other business interests with effect from 4 April 2017.

As set out above, pursuant to the Loan Agreement, Paracale Gold is entitled to nominate one non-executive director to the Board.

Proposed issue of Fee Shares to certain Directors

The Directors continue to monitor and manage the Company's working capital very carefully. In order to preserve cash, and subject to the required authorities being granted by shareholders at the AGM, the Company intends to convert a total of, in aggregate, £36,204 in accrued fees and salaries due to certain Directors, being Emma Priestley, Neil Gardyne and Richard Lloyd up to 30 March 2017 into Fee Shares. The number of Fee Shares to be issued in respect of such fees and salaries shall be calculated by reference to the average closing daily volume weighted average price of Ordinary Shares for the period of 30 days prior to the AGM, provided that no Ordinary Share shall be issued at a price less than its nominal value of 1 penny.

In addition, subject to the required authorities being granted by shareholders at the AGM, the Company has agreed to issue Fee Shares in lieu of fees and salaries due to Directors for each month through to the end of September 2017, with such number of Fee Shares to be issued each month to be determined based on the average closing daily volume weighted average price of Ordinary Shares for the period of 30 days prior to the monthly due date for payment of such salaries and fees, provided that no Ordinary Share shall be issued at a price less than its nominal value.

The issue of the Fee Shares to certain Directors is treated as a related party transaction under the AIM Rules for Companies. The independent director (being Bob Foster, as the only director not receiving Fee Shares), having consulted with the Company's nominated adviser, Strand Hanson Limited, considers that the terms of the proposed issue of the Fee Shares are fair and reasonable insofar as the Company's Shareholders are concerned.

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

About GoldStone Resources Limited

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

The Company is focused on developing the Homase-Akrokerri project in south-western Ghana, which hosts an existing 602,000 oz gold JORC Code compliant resource at an average grade of 1.77g/t, along strike from the Obuasi Gold Mine, one of the World's major gold mines with a total historical and current resource in excess of 70 million ounces of gold. 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.