Goldstone Resources Regulatory News (GRL)

GOLDSTONE RESOURCES LIMITED

Proposed Share Consolidation

Subscription for 20,833,333 New Ordinary Shares at 6 pence per share and

Approval of waiver of obligations under Rule 9 of The City Code

Further to the announcements on 21 July 2014 and 25 September 2014, the directors of GoldStone are pleased to announce that the Company will today post a circular to Shareholders in relation to the proposed share consolidation, the proposed subscription by Stratex of £1.25 million and the approval of a waiver of Stratex's obligations under Rule 9 of the City Code in relation to the Subscription.

The Circular incorporates notice of an extraordinary general meeting of the Company to be held on 30 October 2014 at 9.30 a.m. (or such later time as the annual general meeting to be held at 9.00 a.m. on the same day concludes).

Background to the Proposals

Following an evaluation of available funding options, the Board was pleased to announce on 21 July 2014 a conditional subscription by Stratex to raise gross proceeds of £1.25 million in order to provide the Company with funding to continue its exploration in West Africa. Under current market conditions, the Board believes that this is an important step to secure GoldStone's future and to improve the Company's ability to retain its assets and enhance shareholder value.

The Subscription will occur after the proposed sub-division and 1 for 10 consolidation of the Company's issued Ordinary Shares into New Ordinary Shares and Deferred Shares and will be for 20,833,333 New Ordinary Shares at a price of 6 pence per share.

The Subscription is further conditional upon the approval by Independent Shareholders of a waiver of obligations under Rule 9 of the City Code, further details of which are set out below.

Subscription

Under the terms of the Subscription Agreement, Stratex agreed to subscribe for the Subscription Shares at the Subscription Price, conditional, inter alia, upon:

· Admission becoming effective on or before 30 September 2014 or such later date as the Company and Stratex may agree, being not later than the Long Stop Date;

· the issue of 20,833,333 warrants to subscribe for New Ordinary Shares at a price of 7 pence per share, exercisable at any time during the 18 months following Admission;

· the approval by Independent Shareholders at the General Meeting of the Resolutions, including the Whitewash Resolution;

· the appointment to the Board (which is to include no more than five directors in total) of three non-executive directors by Stratex, one of whom will serve as Chairman; and

· the approval by Stratex of the terms of employment and incentive arrangements of certain Directors and employees of the Company.

The Subscription Agreement provides that in the event that such conditions are not satisfied, or waived by Stratex where capable of waiver, or become incapable of fulfilment, before the Long Stop Date, the Subscription Agreement will terminate. The Subscription Agreement may be terminated by Stratex prior to completion in certain circumstances, including if the warranties given to Stratex by the Company in the Subscription Agreement were not true or accurate, or were misleading when given or are breached before Admission, or if prior to Admission there occurs an event or omission which materially and adversely affects the financial position and/or prospects of the Company or which, in the reasonable and proper opinion of Stratex, is or may be materially prejudicial to the Company or the Subscription.

On 29 August 2014 in the announcement of the final results for the year ended 28 February 2014, the Company announced that GoldStone and Stratex had agreed an amendment to the Subscription Agreement with the effect that Admission must occur by 8.00 a.m. on 31 October 2014.

Waiver of the obligation to make a mandatory offer under Rule 9 of the City Code

Under Rule 9 of the City Code, any person who acquires an interest (as such term is defined in the City Code) in shares which, taken together with the shares in which he and persons acting in concert with him are interested, carry 30% or more of the voting rights in a company which is subject to the City Code, is normally required to make a general offer to all of the remaining shareholders to acquire their shares. Similarly, when any person, together with persons acting in concert with him, is interested in shares which in aggregate carry not less than 30% of the voting rights but does not hold shares carrying more than 50% of the voting rights of such a company, a general offer will normally be required if any further interests in shares are acquired by any such person. These limits apply to the entire concert party as well as the total beneficial holdings of individual members. Such an offer would have to be made in cash at a price not less than the highest price paid by him, or by any member of the group of persons acting in concert with him, for any interest in shares in the company during the 12 months prior to the announcement of the offer. Under Rule 37 of the City Code, any increase in the percentage holding of a shareholder which results from a company buying back its own shares will also be treated as an acquisition for the purpose of Rule 9 of the City Code. A shareholder will, in such circumstances, incur an obligation to make a mandatory offer unless the consent of the Panel to a waiver of such an obligation is obtained.

If the Subscription completes, Stratex will hold 33.45% of the voting rights of the Company. If Stratex exercises the Warrants, which will be exerciseable immediately on Admission, in full and assuming no other issues of New Ordinary Shares, Stratex would hold 50.1% of the voting rights of the Company. In those circumstances, Stratex would be permitted to make further purchases of New Ordinary Shares without incurring an obligation under Rule 9 to make a general offer to all holders of New Ordinary Shares.

The Panel has agreed, subject to the Whitewash Resolution being passed by Independent Shareholders, to waive the requirement under Rule 9 of the City Code for Stratex to make a mandatory offer for the entire issued ordinary share capital of the Company as would otherwise be required as a result of the Subscription and exercise of the Warrants.

The Whitewash Resolution is subject to the approval of Independent Shareholders on a poll and each Independent Shareholder will be entitled to one vote for each Ordinary Share held.

Unity, which holds 29.5% of the Company's issued share capital, has confirmed to the Board its irrevocable support for the Subscription and has indicated its intention to vote in favour of the Resolutions to be proposed at the General Meeting, including the Whitewash Resolution.

The Independent Directors believe that it is in the best interests of the Company that the Whitewash Resolution be passed.

About Stratex

Stratex is an AIM-quoted exploration and development company focused on gold and high-value base-metal deposits in Turkey, East and West Africa. To date, Stratex has discovered more than 2.2 million ounces of gold and 7.9 million ounces of silver, as well as 186,000 tonnes of copper at its projects in Turkey. Stratex has a record of forming joint-venture partnerships with private companies who operate in its countries of operation and with major international mining companies, including Antofagasta, Centerra and Teck in Turkey, and Thani Ashanti in East Africa. Stratex's share register includes AngloGold Ashanti, Teck, BlackRock Investment Management and Investment and Exploration Capital Partners 2012 Limited Partnership (a Sprott Asset Management fund) as significant shareholders.

Current trading and prospects of Stratex

As at 30 June 2014 Stratex had over £7.0 million in cash and as recently reported in its interim results, the real expectation of cash flow from its Altintepe project in 2015 and Öksüt in 2016, both of which are in Turkey. Stratex reported very encouraging results at its 85% owned Dalafin project in Senegal in July 2014 where it continues to work towards defining the scale of the discovery and ultimately a resource. Stratex has been on a drive to reduce ongoing overheads and it aims to continue to review its overheads and exploration costs. Stratex is currently seeking to strengthen its team with some additional senior management capability which will enable it to enter into the next phase of its development with consistent cash flow and assist in the search for further new opportunities.

The cash consideration for the Subscription will be funded entirely from Stratex's existing cash resources.

Intentions of Stratex

Stratex has confirmed that it intends that, following the issue of the Subscription Shares and both prior to and following the potential exercise of the Warrants, the business of the Company will be continued in the same manner as at present. As a result, there will be no effect on the location of GoldStone's places of business and no redeployment of GoldStone's fixed assets. Save for the proposed changes to the Board and the employment terms of certain Directors as set out under the heading "Management Remuneration" below and the proposed implementation of the Incentivisation Arrangements, Stratex does not intend to make any changes with regard to the continued employment of the employees or management of the Company and its subsidiaries, including any other material change in the conditions of employment of any such employees or management. Stratex has no intention to make any changes with regard to the maintenance of the existing trading facilities for the Ordinary Shares on AIM. GoldStone has no pension scheme for employees.

Following the Subscription, Stratex intends that its business will continue in substantially the same manner as at present. As a result, there will be no repercussions on employment or the location of Stratex's places of business and no redeployment of Stratex's fixed assets.

The Subscription will further Stratex's stated strategy of investing in quality opportunities arising in its sector in order to accelerate exploration progress. The combination of Goldstone's assets, particularly the advanced Homase-Akrokerri property in Ghana and the likely synergies in Senegal, with the financial and technical strengths of Stratex, should deliver significant benefits for both companies.

GoldStone's business and prospects

GoldStone is a gold exploration company with five projects in West Africa. The projects range from advanced exploration to early stage exploration and are located in Senegal, Ghana and Gabon. GoldStone's business is to explore, evaluate, develop and potentially produce from gold properties in West Africa. The acquisition, disposal or relinquishment of projects are within the ordinary course of GoldStone's business.

GoldStone's exploration activities have been constrained due to a lack of funding in the currently poor equity market conditions for junior mining companies. Emphasis has been placed on cash conservation, project retention and keeping the Company's licences in good standing. The Board believes each of the Company's licences is in good standing and expects renewal of those which are currently subject to applications.

The funds raised through the Subscription will provide the Company with sufficient cash resources to conduct meaningful exploration at the Homase/Akrokerri project in Ghana, keep the most prospective projects in good standing for the foreseeable future and allow the Company to investigate other measures of funding, if practicable and expedient. Exploration at Homase/Akrokerri will be directed at potentially adding shallow oxide resources, metallurgy drilling (to define the metallurgical possibilities), mine studies to advance understanding of the optimum production capacity of the Homase resource and a number of boreholes to test the potential of the high grade shoots to depth.

Joint ventures will be considered for some of the projects, including Sangola in Senegal where there is now extensive data from the exploration activities undertaken by Randgold Resources Limited through the joint venture, as well as the projects in Gabon. If momentum is gained through the relationship with Stratex, there may also be some corporate activity around acquiring smaller deposits in and around Homase/Akrokerri to provide the project with critical mass or by acquiring or partnering on assets from funding-stressed companies in West Africa.

Proposed Board changes

As detailed above, the Subscription Agreement provided for certain changes to the Board to take place on Admission.

As a result, with effect from Admission, Christopher Hall, Bob Foster and Emma Priestley will be appointed to the Board with Mr. Hall serving as the Company's Chairman. Also with effect from Admission, Jonathan Best, Hendrik Schloemann and Benjamin Hill will resign from the Board. The Company would like to thank Jonathan, Hendrik and Ben for their valuable contributions.

Details of the Proposed Directors are set out below:

Christopher Hall BSc, MSc, MIMMM, CEng

Christopher has over 40 years of wide-ranging experience in the mining sector. He is currently an in-house mining adviser to Grant Thornton UK LLP and was previously CEO of European Mining Finance and has worked for Consolidated Goldfields, Behre Dolbear, Touche Remnant and Messel & Co. Christopher joined the board of Stratex in 2008 and was appointed as its Non-executive Chairman in January 2011.

Bob Foster BSC, Phd, FIMMM, CEng, FGS, CGeol

Bob co-founded Stratex in 2004 and is its CEO. He has particular experience in the genesis of and exploration for gold deposits. Bob has published numerous scientific and technical papers and has been a keynote speaker at many international conferences. He spent ten years in the mining industry in Zimbabwe before devoting 15 years lecturing at Southampton University, followed by six years as Minerals Manager for UK-based Exploration Consultants Ltd.

Emma Priestley BSc, Dip CSM, MIMMM, MRICS, CEng,

Emma is an engineer with a strong financial and commercial bias. She was appointed Executive Director of Lonrho Plc in 2006 having worked in investment banking following a career as a mining engineer. Her background includes working for consultants IMC Mackay & Schnellman, investment bank CSFB, advisors VSA Resources and Ambrian Partners, where she worked as corporate broker and advisor.

The information required by Schedule (g) of the AIM Rules for Companies in respect of the Proposed Directors will be announced in due course.

Management Remuneration

Under the terms of the Subscription Agreement, certain changes have been agreed to the terms of employment of the Management Team. From the date of Admission, the salaries of the Management Team, including the two executive Directors, will be reduced by up to 33% and it has been agreed that the Management Team will no longer receive shares in lieu of salary, as has previously been the case. No member of the Management Team may be terminated without cause in the first six months following Admission.

Incentivisation Arrangements

Following Admission it is intended that the members of the Management Team will be eligible for certain incentivisation arrangements in the form both of cash bonuses and share options. Details of the Incentivisation Arrangements will be finalised following Admission, however the current proposals are that:

(i) subject to the achievement of performance targets to be agreed and the Company having sufficient funds, the Remuneration Committee may award annual cash bonuses to members of the Management Team of up to 100% of annual salary; and

(ii) the Remuneration Committee may approve the grant to members of the Management Team options to acquire Ordinary Shares equivalent to up to 8%, in aggregate, of the issued share capital of the Company from time to time. The allocation of any options granted will be decided by the Remuneration Committee following Admission.

Under Rule 16 of the Code, except with the consent of the Panel, an offeror or persons acting in concert with it, may not make any arrangements with shareholders and may not deal or enter into arrangements to deal in shares of the offeree company, or enter into arrangements which involve acceptance of an offer, either during an offer period or when one is reasonably in contemplation, if there are favourable conditions attached which are not being extended to all shareholders. Pursuant to paragraph 1(b) and paragraph 4(f) of Appendix I of the Code, Rule 16.2 applies in the event of a whitewash, save that the term "offeror" shall be taken as a reference to the potential controller, in this case, Stratex and "offeree company" should be taken as reference to the company which is to issue the new securities, in this case, GoldStone.

Pursuant to Rule 16.2(a) of the Code, W H Ireland considers that the terms of the Incentivisation Arrangements are fair and reasonable insofar as the Independent Shareholders are concerned.

Share Consolidation

Under the Share Consolidation it is proposed that each Ordinary Share be sub-divided into one deferred share of 0.9 pence and one new ordinary share of 0.1 pence, and every ten such ordinary shares be immediately consolidated into one New Ordinary Share. Accordingly, the proportion of Ordinary Shares held by each Shareholder immediately before the Share Consolidation will, save for fractional entitlements (which are discussed further below), be the same as the proportion of New Ordinary Shares held by each Shareholder immediately after the Share Consolidation.

The new class of Deferred Shares shall have no voting rights, no rights to dividends and negligible rights on a return of capital. The Deferred Shares will not be admitted to trading on AIM and will have no economic value.

The New Ordinary Shares will carry equivalent rights to the Ordinary Shares, including having the same nominal value.

Resolution 2 approving the Share Consolidation also provides for the Company to adopt a new memorandum and articles of association amended to reflect the creation of the Deferred Shares.

In the event that the number of existing Ordinary Shares held by a Shareholder is not exactly divisible by ten, the Share Consolidation will generate an entitlement to a fraction of a New Ordinary Share. Any New Ordinary Shares in respect of which there are such fractional entitlements will be aggregated and sold in the market for the best price reasonably obtainable. Given the small economic value of such fractional entitlements, the Board is of the view that the distribution of the sale proceeds to the relevant Shareholders would result in a disproportionate cost to the Company. Based on a price per Ordinary Share of 0.2997p (being the volume weighted average price traded during the five trading days preceding the date of this document), the maximum value of the fractional entitlement applicable to any individual shareholding would be 2.70p.

Any Shareholder holding fewer than ten Ordinary Shares at the Record Date will cease to be a Shareholder.

The Board believes that the Share Consolidation will result in a more appropriate number of shares in issue for a company of GoldStone's size in the UK market. The Share Consolidation may also help to make the Company's shares more attractive to investors and may result in a narrowing of the bid/offer spread, thereby improving liquidity.

The issued share capital of the Company immediately following the Share Consolidation and the Subscription (but prior to any exercise of the Warrants) is expected to comprise 62,286,363 New Ordinary Shares and 414,530,302 Deferred Shares.

The entitlements to Ordinary Shares of holders of share options or other instruments convertible into Ordinary Shares will be adjusted in accordance with their terms to reflect the Share Consolidation.

Trading of the New Ordinary Shares

Application will be made for the simultaneous cancellation of the existing Ordinary Shares from CREST and admission of the New Ordinary Shares to CREST and their admission to trading on AIM. The New Ordinary Shares may thereafter be held and transferred by means of CREST. It is expected that New Ordinary Shares which are held in uncertificated form will be credited to the relevant CREST accounts on 31 October 2014 and admitted to trading on AIM on the same day.

Definitive share certificates in respect of those New Ordinary Shares which will be held by Shareholders who currently hold their Ordinary Shares in certificated form are expected to be dispatched to relevant Shareholders on or around 3 November 2014. Share certificates in respect of existing Ordinary Shares will cease to be valid on 31 October 2014 and, pending delivery of share certificates in respect of New Ordinary Shares, transfers will be certified against the register.

Following the Share Consolidation the Company's new ISIN code will be JE00BRJ8YF63.

Recommendation

As a result of the Incentivisation Arrangements, Jurie Wessels and Hendrik Schloemann are deemed to have a conflict of interest in respect of the Proposals.

Accordingly, the Independent Directors, who have been so advised by WH Ireland, consider that the Waiver, the issue of the Subscription Shares, the Warrants and the New Ordinary Shares to be issued on the exercise of the Warrants and the Share Consolidation are fair and reasonable and are in the best interests of the Company and Shareholders as a whole. In advising the Directors, WH Ireland has taken into account the Directors' commercial assessments.

Accordingly, the Independent Directors unanimously recommend that Independent Shareholders vote in favour of the Whitewash Resolution and the other Resolutions to be proposed at the General Meeting.

Expected Timetable of Principal Events and Key Statistics

Enquiries

Definitions