Goldstone Resources Regulatory News (GRL)

28 December 2018

GOLDSTONE RESOURCES LIMITED

("GoldStone" or the "Company")

US$1.224 million Loan and issue of Warrants

GoldStone Resources Limited (AIM: GRL), announces that it has entered into a loan agreement with Paracale Gold Limited ("Paracale Gold"), the Company's major shareholder, (the "Loan Agreement"), pursuant to which Paracale Gold will provide the Company with a loan of up to US$1.224 million (the "Loan").

The Loan, which will accrue interest at 6.0% per annum, will provide the Company with working capital to fund the continued advancement of its Akrokeri-Homase project ("AKHM" or the "Project"), located in the highly prospective Ashanti region of south-western Ghana. The Project is centred around two previously producing assets, the high-grade Akrokeri underground mine and the Homase open pit mine, which are being simultaneously developed towards delivering gold production by mid-2020.

Summary terms of the Loan and Warrants

· Paracale Gold will provide the Company with a loan of up to US$1.224 million

- US$324,000 will be drawn down immediately

- Three further tranches are available to be drawn down in equal instalments of US$300,000 over the next nine months

· Loan plus accrued interest to be repaid in full on or before 2 June 2022

· The Loan will attract interest at a rate of 6.0 per cent per annum, compounded daily against the Loan's outstanding balance, until it is repaid

· The Loan will be used for the development and advancement of AKHM and to provide general working capital

· Paracale Gold to be issued with 40,352,377 new warrants to subscribe for such number of new ordinary shares of 1 pence each in the capital of the Company ("Ordinary Shares"), exercisable at a price of 1.2 pence per share at any time during the period through to 2 June 2022 (the "Warrants")

· The existing 40,352,377 warrants held by Paracale Gold have been cancelled

· Director fees to be reduced, with the balance to accrue for deferred payment

Emma Priestley, CEO of GoldStone, commented:

"Paracale Gold shares the Company's vision for the development of the Akrokeri-Homase Project in Ghana. In what remains a challenging market for the natural resource sector, we are pleased to have secured the necessary funding to continue the advancement of AKHM and we welcome and value the continued support of our major shareholder, Paracale Gold as we seek to bring AKHM into production by mid 2020."

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Further Information

The terms of the Loan and the Warrants

Pursuant to the terms of the Loan Agreement, Paracale Gold has agreed to provide the Company with an unsecured loan of up to US$1.224 million. The Loan will attract an interest at a rate of 6.0 per cent per annum, compounded daily against the Loan's outstanding balance and the Loan and accrued interest will be repayable in full on or before 2 June 2022. The Company may repay part or the whole of the Loan plus accrued interest early at its sole discretion and there will be no early repayment penalty chargeable. Whilst the Loan remains outstanding, Paracale Gold's consent (such consent not to be unreasonably withheld or delayed), will be required prior to securing any further debt funding.

Under the Loan, the Company will draw down US$324,000 immediately, with a further three tranches of US$300,000 available to be drawn down each successive 92 days thereafter. The loan will be used for the development and advancement of AKHM, which the Company is seeking to bring into production by mid 2020. The Loan will also provide general working capital and will, if required, be used to fund the payment of an award to the Company's former director, following the judgment of the South African Labour Court announced on 14 December 2018. The Company is still considering its options in respect of the judgement, but it is currently expected that the Company will lodge an appeal.

In addition, the Company will grant Paracale Gold the Warrants to subscribe for up to 40,352,377 new Ordinary Shares at an exercise price of 1.2 pence per share. The Warrants will expire on 2 June 2022 and include standard anti-dilution provisions and protections in the event of capital re-organisations.

Paracale Gold has also agreed to the cancellation of its existing 40,352,377 warrants which were issued on 7 June 2017 with an exercise price of 2 pence per share and which expire on 7 June 2019.

Related Party Transactions

Paracale Gold, which is currently interested in approximately 28.17% of the Company's issued share capital, is a substantial shareholder of the Company and therefore a related party of the Company as defined in the AIM Rules for Companies ("AIM Rules"). Accordingly, the Loan and Warrants are related party transactions for the purpose of Rule 13 of the AIM Rules and the Company's Directors, other than Bill Trew who is a director of and a shareholder in Paracale Gold, consider, having consulted with the Company's nominated adviser, Strand Hanson Limited, that the terms of the Loan and Warrants are fair and reasonable insofar as the Company's shareholders are concerned.

The Takeover Code

The exercise of the Warrants 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.

The Company believes that Paracale Gold is in concert with Bill Trew, as he is Paracale Gold's representative on the GoldStone Board and also a director of and a shareholder in Paracale Gold, as well as being the Company's Non-executive Chairman. Accordingly, this potential concert party (the "PCP") will have the potential to increase its aggregate interest in shares carrying voting rights in the Company up to a maximum of 114,704,754 Ordinary Shares (comprising 70,352,377 Ordinary Shares currently held by Paracale Gold, 4,000,000 Ordinary Shares currently held by Bill Trew and 40,352,377 new Ordinary Shares arising from the exercise of the Warrants) representing, assuming that no other new Ordinary Shares have been issued, approximately 39.55 per cent 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 the PCP and anyone in concert with them to make a Mandatory Offer under Rule 9 in certain circumstances.

Reduction in Directors' fees

The Directors continue to monitor and manage the Company's working capital very carefully and with this in mind, they have agreed to reduce the Board's aggregate fees from approximately US$206,400 per annum to US$114,000 per annum, with the difference to accrue for deferred payment.

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.

About GoldStone Resources Limited

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

The Company is focused on developing the Akrokeri-Homase Gold Project ("AKHM" or the "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, 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. GoldStone's existing resource is confined to a 4 km zone of the Homase Trend, including Homase North, Homase Pit and Homase South. The recent soils programme carried out in 2018 identified that the existing 4km zone is open along strike with a potential 8 km mineralised zone along the Homase Trend.

AKHM hosts two former mines, the underground mine at Akrokeri mined by Akrokeri Ashanti Mine Ltd, which produced 75,000 oz gold @ 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 @ 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.