26 Apr 2018 07:00
This announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) No 596/2014 ("MAR"). 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. 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.
NEITHER THIS ANNOUNCEMENT NOR ANY PART OF IT CONSTITUTES AN OFFER TO SELL OR ISSUE OR THE SOLICITATION OF AN OFFER TO BUY, SUBSCRIBE OR ACQUIRE ANY SECURITIES IN ANY JURISDICTION IN WHICH ANY SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL AND THE INFORMATION CONTAINED HEREIN IS NOT FOR PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES, AUSTRALIA, NEW ZEALAND, CANADA, JAPAN, THE REPUBLIC OF SOUTH AFRICA OR ANY JURISDICTION IN WHICH SUCH PUBLICATION OR DISTRIBUTION WOULD BE IN BREACH OF ANY APPLICABLE LAW OR REGULATION.
HIGHLAND GOLD MINING LIMITED
26 April 2018
Agreement to Purchase Gold Assets in Chukotka
Highland Gold Mining Limited ("Highland Gold" or the "Company", AIM: HGM) today announces that the Company has signed a Subscription Agreement ("the Agreement") to acquire from Cyprus-registered Aristus Holdings Ltd. a 100% interest in three companies (the "Target Companies"), owning one operating gold mine and two significant licence areas in the Russian region of Chukotka (the "Acquisition").
The consideration payable pursuant to the Acquisition is US$91m, with approximately US$78.7m to be satisfied by the issue of 38,621,343 ordinary shares of £0.001 each, and the balance by the assumption of approximately US$12.3m of net debt.
The assets covered by the agreement include:
- Valunisty, an operating gold mine and processing plant with annual production of 31 koz (2017);
- The Kanchalano-Amguemskaya Square LLC ("KAS") licence, which covers territory surrounding Valunisty and hosts several satellite deposits including the operating Gorny open pit and Zhilny deposit; and
- Kayenmivaam ("Kayen"), an exploration licence with several promising target deposits, located 130 km to the southeast of Kinross Gold's Kupol mine
Total audited Ore Reserves and Mineral Resources, reported in accordance with JORC (2012), for Valunisty and KAS are:
· Proven and Probable Ore Reserves of 3.4 Mt at 5.1 g/t Au equivalent (4.6 g/t Au and 49.3 g/t Ag) (554 koz Au equivalent); and
· Indicated and Inferred Mineral Resources of 17.6 Mt at 3.0 g/t Au equivalent (2.4 g/t Au and 58.5 g/t Ag) (1.72 Moz Au equivalent), as at 1 January 2018.
Chukotka is one of Highland Gold's core operating regions and hosts the Company's premier development project, Kekura, as well as the Klen development project. The region is an established gold producer with such projects as Kinross's Kupol and Dvoinoye and Polymetal's Mayskoye mine.
Certain shareholders of HGM (the "Concert Party") who already hold a combined 37.4% of shares in Highland Gold, all indirectly hold shares in Aristus Holdings Limited, including Executive Chairman Eugene Shvidler and Non-Executive Director Valery Oyf, thereby classifying the deal as a related-party transaction under the AIM Rules for Companies. The Independent Directors of the Company, Mr Duncan Baxter, Mr Colin Belshaw and Mr Terry Robinson consider, having consulted with the Company's Nominated Adviser, that the terms of the Acquisition are fair and reasonable insofar as its shareholders are concerned.
The Acquisition will result in an increase in the total holding of the Concert Party and Aristus Holdings Limited to approximately 44% of the shares of Highland Gold, and the Acquisition has therefore been made conditional on the approval by a majority of Highland Gold shareholders unaffiliated with the Concert Party of a waiver of the obligation that would otherwise arise under Rule 9 of the Takeover Code to make an offer for those shares in the Company not already held by the Concert Party. This will be voted upon at an Extraordinary General Meeting (EGM) to be held on 24 May 2018. The transaction is also subject to approval by Russia's Federal Antimonopoly Service (FAS) and Foreign Investment Advisory Council (FIAC). Completion is expected by the end of 2018.
Commenting on the Agreement, Highland Gold CEO Denis Alexandrov said: "This acquisition adds a fourth operating mine, Valunisty, to our portfolio as well as positive upside potential in the surrounding KAS licence area, all in a familiar region with existing mining infrastructure. The transaction is structured in such a way as to be immediately value-accretive to the benefit of all our shareholders."
The Company has today published a presentation and summary Ore Reserves and Mineral Resources report for the Valunisty Project which are available on the Company's website at: http://www.highlandgold.com. The Company intends to post a Circular to Shareholders today containing further details of the proposed Acquisition outlined in this announcement which will be available on the Company's website shortly thereafter.
Gold equivalent calculations for Valunisty use Au price of US$ 1,250 /oz (95% recovery), Ag price of US$ 16 /oz (75% recovery) and coefficient of 0.01011.
Gold equivalent calculations for Gorny use Au price of US$ 1,250 /oz (93% recovery), Ag price of US$ 16 /oz (75% recovery) and coefficient of 0.01032.
Gold equivalent calculations for Zhilny use Au price of US$ 1,250 /oz (91% recovery), Ag price of US$ 16 /oz (85% recovery) and coefficient of 0.01196.
Information contained in this release has been taken from the Ore Reserves & Mineral Resources summary report for the Valunisty Project, prepared in compliance to JORC (2012) by CSA Global
FOR FURTHER INFORMATION PLEASE CONTACT:
Highland Gold Mining Ltd.
| John Mann, Head of Communications + 7 495 424 95 21 Duncan Baxter, Non-Executive Director + 44 (0) 1534 814 202 |
Numis Securities Limited (Financial Adviser, Nominated Adviser and Joint Broker) | John Prior, James Black, Paul Gillam +44 (0) 207 260 1000
|
BMO Capital Markets (Joint Broker) |
Jeffrey Couch, Neil Haycock, Pascal Lussier Duquette +44 (0) 207 236 1010 |
Peat & Co (Joint Broker) | Charlie Peat +44 (0) 207 104 2334 |
Acquisition of Valunisty Mine LLC, Kanchalano-Amguemskaya Square LLC and Nord-East Mining and Geological Company LLC,
Allotment of 38,621,343 Consideration Shares,
Approval of a Waiver under Rule 9 of the City Code on Takeovers and Mergers
and
Notice of Extraordinary General Meeting
Note that defined terms may be found at the end of this announcement.
Introduction
The Company today announced the acquisition of the entire issued share capital of each of the Target Companies from the Vendor. The Target Companies comprise a gold project with production, development and exploration assets in the Chukotka region of Far East Russia. The consideration payable pursuant to the Acquisition is US$91m, with approximately US$78.7m to be satisfied by the issue of 38,621,343 Consideration Shares, and the balance by the assumption of US$12.3m of net debt.
Completion of the Acquisition is conditional, inter alia, upon the Rule 9 Panel Waiver, the approval of the Independent Shareholders, Russian Governmental approval and Federal Antimonopoly Service ("FAS") approval, which latter two approvals may take up to the end of the year to obtain.
Application will be made to the London Stock Exchange for the Consideration Shares to be admitted to trading on AIM. It is expected that Admission will occur shortly after the Registration Date, following the approvals above being obtained.
Following completion of the Acquisition, the Vendor, which is considered to be acting in concert with the Concert Party (details of which are set out below) will receive the Consideration Shares. When the Consideration Shares received by the Vendor are aggregated with the Concert Party's existing 37.41 per cent. shareholding, the Enlarged Concert Party will hold 44.05 per cent. of the Enlarged Issued Share Capital (assuming no other changes to the Company's issued share capital in the meantime). Under Rule 9 of the Takeover Code, the issue of the Consideration Shares to the Vendor and the resultant combined percentage holding of Ordinary Shares of the Vendor and the Concert Party would normally result in the Enlarged Concert Party being obliged to make an offer to all Shareholders to acquire their shares. The Takeover Panel has agreed to waive this obligation subject to the approval of the Independent Shareholders on a poll at the General Meeting. Your attention is drawn to the explanatory section on the Takeover Code contained below.
Shareholder approval will also be sought at the Extraordinary General Meeting to grant the Directors the authority to allot and issue the Consideration Shares pursuant to the Acquisition. The Extraordinary General Meeting has been convened for 11.30 a.m. on 24 May 2018, at the registered offices of the Company.
Background to and reasons for the Acquisition
Highland Gold is an established gold producer with a Russian asset base of producing, development and exploration projects, whose operations are located around three main hubs in the Khabarovsk, Zabaikalsky and Chukotka regions of Russia.
One of the Company's objectives is to focus its development in the regions in which it currently has a presence both by development of its existing assets and through the acquisition of assets that meet its investment criteria.
The Board believes that the Acquisition, which is located in the Chukotka region, should be accretive to adjusted earnings and NAV per share, and represents an opportunity for the Company to expand its Russian asset base and is consistent with the Company's strategic objectives.
The Board also expects that the Acquisition should increase the Company's production by 11% to approximately 300 Koz per annum (Highland Gold's production of 272 Koz of gold and gold equivalents plus approximately 31 Koz for Valunisty in 2017), as well as increasing the Company's Ore Reserve and Mineral Resource base by approximately 3.4 Mt at 5.1 g/t of gold and gold equivalents (554Koz), and 17.6 Mt at 3.0 g/t of gold and gold equivalents (1.7 Moz), respectively (Reserves and Resources of gold and gold equivalents in accordance with JORC (2012), as at 1 January 2018 (CSA Global)).
Target Company Asset Overview
The Target Companies' assets are located in the Chukotka region of Russia, where the Company has its Kekura and Klen assets, and comprise of the following:
Valunisty mine
Valunisty is an established producing open-pit mine located approximately 250 km from the port of Egvekinot. It has Reserves of approximately 520 Koz of gold and gold equivalents and Resources of 1,152 Koz of gold and gold equivalents (Reserves and Resources of gold and gold equivalents in accordance with JORC (2012), as at 1 January 2018 (CSA Global)). It has been in production since 1999. The asset has a mine life of a further 11 years.
Valunisty has established infrastructure in place including a 110 kV grid electricity connection to site and access is via road from Egvekinot port. It is anticipated that Valunisty's production costs will be reduced significantly following the ramp up of its processing plant and the commencement of underground mining in 2020 (currently open pit). The mine is also expected to receive significant tax benefit to support cash generation from its underground operations.
KAS license area
Gorny mine
Gorny is an open-pit mine with Reserves of 35 Koz of gold and gold equivalents and Resources of approximately 309 Koz of gold and gold equivalents. Pilot mining is currently underway with full-scale mining expected to commence in 2019. It is strategically located near to the Valunisty mill (approximately 18km distance). The asset is also expected to receive a significant tax benefit.
Zhilny deposit
Zhilny is a greenfield project at which mining is expected to commence once Valunisty and Gorny are depleted. Zhilny has a Resources base of approximately 262 Koz of gold and gold equivalents. Metallurgical test works are expected to be completed in 2018. The asset is expected to benefit from significant silver credits.
Shakh exploration area
Shakh is a greenfield project at which mining is expected to commence once Valunisty and Gorny are depleted. 27 quartz veins have been identified at the site which is in close proximity to Zhilny. 9km of drilling has been completed to date with further drilling planned.
Kayenmivaam ("Kayen") exploration area
Kayen is a 1,214 km2 exploration area located approximately 130 km from Kupol, the second largest gold mine in Russia (based on production for 2016) consisting of 5 exploration targets. Approximately 23km of drilling has been completed to date. The historical cost of the site has been approximately US$15m.
Reasons for the Acquisition
The Directors believe that the Acquisition is in the best interest of Shareholders for the following reasons:
(i) Diversified portfolio of high-quality assets with solid growth project pipeline
The Target Companies' assets include the Valunisty project, a well-established long-life operation (for an additional 11 years) with additional significant underground potential; the KAS project, which consists of a number of satellite deposits and exploration targets close by to the Valunisty processing plant including the Gorny open-pit mine and the Kayen exploration project.
(ii) Corporate and operating synergies
The Acquisition will strengthen the Company's footprint in the core region of Chukotka. Cost synergies are expected via the sharing of logistics (e.g. the joint use of Vladivostok logistics center).
The assets being acquired by the Company were previously under the management of Denis Alexandrov, the Company's CEO between 2015 and 2016, who was responsible for operational improvements and the Board expect to leverage this experience in relation to optimising operations across all acquired assets.
(iii) High-grade resource and reserve base
The Target Companies have, in aggregate, Reserves of approximately 554 Koz of gold and gold equivalents at 5.1 g/t (JORC (2012)) and Resources of 1,723 Koz of gold and gold equivalents at 3.0 g/t (JORC (2012) as at 1 January 2018 (CSA Global)). There are substantial opportunities for Resource-to-Reserve conversion.
(iv) Attractively valued and cash flow enhancing
The Acquisition is expected to be accretive on several key financial and operational metrics on a pro forma basis including adjusted earnings and NAV per share, cash return to shareholders and gold production. It will also bolster the Company's position as a peer-leading dividend payer.
Details of the Acquisition
The consideration payable pursuant to the Acquisition is US$91m, with approximately US$78.7m to be satisfied by the issue of 38,621,343 Consideration Shares, and the balance by the assumption of approximately US$12.3m of net debt.
The Acquisition is conditional upon, inter alia, the following conditions being satisfied, or where possible, waived:
(i) there having been no material adverse change to the Target Companies between signing of the Subscription Agreement and the Registration Date;
(ii) the Rule 9 Panel Waiver having been granted;
(iii) Shareholders passing the Resolutions at the Extraordinary General Meeting;
(iv) clearance from the Federal Antimonopoly Service of the Russian Federation being received in relation to the Acquisition; and
(v) foreign investment approval being obtained from the Russian Government given the strategic importance of certain of the Target Companies' assets.
Condition (i), is capable of being waived by the Company. If any of the conditions have not been fulfilled on or prior to 27 December 2018, the Subscription Agreement shall terminate unless the parties agree otherwise.
The amount payable to the Vendor has been based upon the financial statements of the Target Companies as at 30 September 2017 and the net debt as at 20 April 2018. No adjustments are expected to the consideration on the basis the Vendor has not, and has agreed not to up to the Registration Date, extract any economic value from the Target Companies.
The Subscription Agreement contains customary warranties, representations and indemnities given by the Vendor to the Company in an agreement of this nature. The Company is also giving limited warranties to the Vendor in respect of its authority to allot and issue the Consideration Shares.
Information on the Vendor
The Vendor is a limited liability company incorporated in Cyprus. The Concert Party is considered to be acting in concert with the Vendor in relation to the Acquisition as the members of the Concert Party are also shareholders in the Vendor.
Further information on Aristus can be found in Part II of the circular to be published by the Company today.
Takeover Code
The Acquisition gives rise to certain considerations under the Takeover Code. Brief details of the Takeover Code and the protections it affords are set out below.
The Takeover Code is issued and administered by the Takeover Panel. The Takeover Code applies to all takeover and merger transactions, however effected, where the offeree company is, amongst other things, a listed or unlisted public company resident in the United Kingdom, the Channel Islands or the Isle of Man (and to certain categories of private limited companies). The Company is a public company incorporated in Jersey whose Existing Ordinary Shares are admitted to trading on AIM, and its Shareholders are therefore entitled to the protections afforded by the Takeover Code.
Under Rule 9 of the Takeover Code, any person who acquires an interest (as defined in the Takeover Code) in shares which, taken together with shares in which he is already interested and 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 Takeover Code, is normally required to make a general offer to all 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 per cent. of the voting rights of such a company but does not hold shares carrying more than 50 per cent. of such voting rights, a general offer will normally be required if any further interest in shares is acquired by any such person or persons acting in concert with him which increases the percentage of shares carrying voting rights held by such persons.
An offer under Rule 9 must be in cash (or include a cash alternative) and be made 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 of the company during the 12 months prior to the announcement of the general offer.
The Concert Party
Under the Takeover 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 frustrate the successful outcome of an offer for, a company subject to the Takeover Code. Control means an interest or interests in shares carrying, in aggregate, 30 per cent. or more of the voting rights of the company, irrespective of whether the holding or holdings give de facto control.
Eugene Shvidler, Denalot Worldwide Limited, Roman Abramovich, Erlinad Holdings Limited, Irina Panchenko, New Evolution Trading Limited and Matteson Overseas Limited (all of whom are Shareholders and together, the "Concert Party") constitute a concert party for the purposes of the Takeover Code and are the Concert Party for the purposes of this announcement. The Concert Party currently holds 121,665,253 Ordinary Shares, representing approximately 37.41 per cent. of the Existing Ordinary Shares.
As described in the Introduction above, it is the Company's intention, subject, inter alia, to the Rule 9 Panel Waiver and the approval of the Whitewash Resolution, to satisfy the majority of the consideration payable in relation to the Acquisition by the issue of the Consideration Shares to the Vendor. The Rule 9 Panel Waiver and Whitewash Resolution are required as the Vendor is receiving Consideration Shares which increase the percentage shareholding of the total Ordinary Shares of the Company controlled by the Concert Party.
On completion of the Acquisition, the Enlarged Concert Party will be interested in 160,286,596 Ordinary Shares, representing approximately 44.05 per cent. of the Enlarged Issued Share Capital. A table showing the expected individual interests in Ordinary Shares of the members of the Enlarged Concert Party as on completion of the Acquisition and Admission is set out below.
As at the date of this document | On completion of the Acquisition and Admission | ||||||
Name | Number of Ordinary Shares | Percentage of Ordinary Shares | Number of Ordinary Shares(direct) | Percentage of Enlarged Issued Share Capital(direct) | Number of Ordinary Shares(including indirect2) | Percentage of Enlarged Issued Share Capital(including indirect2) | |
Eugene Shvidler | 40,853,660 | 12.6 | 40,853,660 | 11.2 | 44,714,829 | 12.3 | |
Denalot Worldwide Limited | 17,318,930 | 5.3 | 17,318,930 | 4.8 | 26,974,264 | 7.4 | |
Roman Abramovich | 26,025,310 | 8.0 | 26,025,310 | 7.2 | 35,390,020 | 9.7 | |
Erlinad Holdings Limited | 9,639,278 | 3.0 | 9,639,278 | 2.6 | 13,790,107 | 3.8 | |
Irina Panchenko | 6,505,000 | 2.0 | 6,505,000 | 1.8 | 8,437,033 | 2.3 | |
New Evolution Trading Limited | 6,815,622 | 2.1 | 6,815,622 | 1.9 | 8,747,655 | 2.4 | |
Matteson Overseas Limited1 | 14,507,453 | 4.5 | 14,507,453 | 4.0 | 16,439,486 | 4.5 | |
Efim Malkin | - | - | - | - | 1,932,033 | 0.5 | |
Andrey Gorodilov | - | - | - | - | 3,861,169 | 1.1 | |
Aristus Holdings Limited | - | - | 38,621,343 | 10.6 | - | - | |
TOTAL | 121,665,253 | 37.4 | 160,286,596 | 44.1 | 160,286,596 | 44.1 | |
(1) Valery Oyf, a Director of the Company, is the beneficial owner of Matteson Overseas Limited
(2) Direct holdings plus Indirect holdings of the members of the Concert Party to be held via Aristus Holdings Limited
Whitewash Resolution
The Company has applied to the Panel for a waiver of the obligations under Rule 9 of the Takeover Code in order to permit the Acquisition, and in particular the issuance of the Consideration Shares to the Vendor, to proceed without triggering an obligation on the part of the Enlarged Concert Party to make a general offer to Shareholders. Under Note 1 of the Notes on the Dispensations from Rule 9 of the Takeover Code, the Takeover Panel will normally waive the requirement for a general offer to be made in accordance with Rule 9 of the Takeover Code if, amongst other things, the shareholders of the company who are independent of the person who would otherwise be required to make an offer, and any person acting in concert with him, pass an ordinary resolution approving such a waiver on a poll at a general meeting.
The Takeover Panel has agreed to waive the obligation to make a general offer that would otherwise arise as a result of the issue of the Consideration Shares to the Vendor, subject to the approval, on a poll, of the Independent Shareholders. Accordingly, the Whitewash Resolution is being proposed at the Extraordinary General Meeting, and will be taken on a poll. To be passed, the Whitewash Resolution will require a simple majority of the votes cast on a poll by the Independent Shareholders. For the purposes of the Takeover Code, any votes by a member of the Concert Party on the Whitewash Resolution will not be valid, and as such for the purposes of the Takeover Code the members of the Concert Party may not vote on the Whitewash Resolution, and only the votes of the Independent Shareholders will be counted.
Following completion of the Acquisition, the Enlarged Concert Party will be interested in shares carrying more than 30 per cent. of the Company's voting share capital but will not hold shares carrying more than 50 per cent. of such voting rights and (for so long as they continue to be treated as acting in concert) any further increase in that aggregate interest in voting shares in the Company (other than the issue of the Consideration Shares) will be subject to the provisions of Rule 9.
Relationship Agreement
The Company and all members of the Concert Party entered into the Relationship Agreement to ensure, inter alia, that they and their connected persons (which includes all other members of the Concert Party):
(i) shall conduct all transactions and relationships with any member of the Group on arm's length terms and on a normal commercial basis;
(ii) shall exercise the voting rights attached to the Ordinary Shares held by them in such a manner so as to procure (to the extent that they are able to do so by the exercise of such voting rights) that each member of the Group is capable of carrying on its business independently of the Concert Party;
(iii) shall not do anything the effect of which would be to frustrate the Company's compliance with the AIM Rules;
(iv) shall ensure no variations are made to the Company's articles of association which would be contrary to the maintenance of the ability of the Company to carry on its business independently of the Concert Party; and
(v) shall exercise the voting rights attached to the Ordinary Shared held by them so as to procure (to the extent they are able to do so by the exercise of such voting rights) that the Company shall not delist all or any of its Ordinary Shares from AIM.
The Relationship Agreement will terminate (save for accrued rights) if the members of the Concert Party bound by it and their connected persons hold less than 15 per cent., or more than 75 per cent., of the voting share capital of the Company.
Pursuant to the terms of the Acquisition, the Vendor has executed a deed of adherence, conditional on completion of the Acquisition and Admission, whereby it agrees to be bound, and to procure that its connected persons are bound, to the terms and obligations of the Relationship Agreement on the same basis as the current parties to the Relationship Agreement.
Lock-in Agreement
Under the terms of the Subscription Agreement, the Vendor has agreed to enter into a lock-in agreement with the Company pursuant to which it agrees that it will not offer, sell, contract to sell, pledge or otherwise dispose of any of the Consideration Shares (except to any of its Associates, its ultimate beneficial owner or the ultimate beneficial owner of its Associates) for a period of six months following Admission.
The restrictions on the Vendor to transfer its Consideration Shares, are subject to certain usual and customary exceptions including: the acceptance of a general offer made to all Shareholders on equal terms and transfers as required by an order made by a court with competent jurisdiction.
Extraordinary General Meeting
The Extraordinary General Meeting of the Company, notice of which is set out at the end of this the circular to be published by the Company today, is to be held at 11.30 a.m. on 24 May 2018, at the Company's registered office. The Extraordinary General Meeting is being held for the purpose of considering and, if thought fit, passing the Resolutions in order to grant the Directors authority to allot the Consideration Shares for the purposes of the Acquisition and to approve the Rule 9 Panel Waiver granted by the Takeover Panel.
A summary and explanation of the Resolutions is set out below. Please note that this is not the full text of the Resolutions and you should read this section in conjunction with the Resolutions contained in the Notice of Extraordinary General Meeting in Part V of circular to be published by the Company today.
Resolution 1: Authority to allot shares
This special resolution, which requires the approval of a two thirds majority of Shareholders voting in person or by proxy, will grant the Directors authority to allot the Consideration Shares for the purposes of the Acquisition. The authority given by this Resolution will expire 365 days after the date of the passing of the Resolution. This authority will be in addition to the authority given to the Directors at the annual general meeting held on 17 May 2017.
If Resolution 1 is not passed but Resolution 2 is, then the Company proposes to rely upon the authority given to the Directors at the annual general meeting held on 17 May 2017 to allot and issue the Consideration Shares.
Resolution 2: Approval of Rule 9 Panel Waiver
This ordinary resolution, which for the purposes of The Takeover Code requires the approval of a majority of Independent Shareholders voting in person or by proxy, will approve the waiver granted by the Takeover Panel of the obligation that would otherwise arise on the Vendor or any member of the Concert Party to make a general offer to Shareholders pursuant to Rule 9 of the Takeover Code as a result of the Acquisition, and in particular, the issue of the Consideration Shares.
For the purposes of The Takeover Code, any votes by members of the Concert Party on Resolution 2 shall not be valid, and as such for the purposes of The Takeover Code, the members of the Concert Party may not vote on Resolution 2 and only the votes of the Independent Shareholders will be counted.
It should be noted that Resolution 1 is conditional on Resolution 2.
Undertakings
The Company has received an irrevocable undertaking to vote in favour of the Resolutions from the only Independent Director who holds Ordinary Shares, Duncan Baxter, who holds 20,000 Ordinary Shares, representing 0.01 per cent. of the Existing Ordinary Shares.
It has also received irrevocable undertakings from each of Eugene Shvidler and Valery Oyf to vote in favour of Resolution 1 (as they are not permitted to vote on the Whitewash Resolution). In aggregate they hold 55,361,113 Ordinary Shares, representing 17.02 percent of the Existing Ordinary Shares.
Additional Information
Additional information is set out at Parts II, III and IV in the circular to be published by the Company today.
Related Party Transaction
The Acquisition is considered a Related Party Transaction under the AIM Rules for companies due to the ownership of Aristus Holdings Limited. The profit before tax of the Target Companies for the year ended 31st December 2016 was approximately US$9m. The gross assets acquired are approximately US$75m. The Independent Directors of the Company, Mr Duncan Baxter, Mr Colin Belshaw and Mr Terry Robinson consider, having consulted with the Company's Nominated Adviser, that the terms of the transaction are fair and reasonable insofar as its shareholders are concerned.
Expected Timetable Of Principal Events
2018 | |
Publication and posting of the circular and Form of Proxy | 26 April |
Latest time and date for receipt of completed Forms of Proxy and transmission of CREST Proxy instructions | 11.30 a.m. on 23 May |
Extraordinary General Meeting | 11.30 a.m. on 24 May |
Announcement of results of the Extraordinary General Meeting | 24 May |
Registration Date | Before 27 December |
Expected date of Admission and commencement of dealings in Consideration Shares | Shortly after the Registration Date |
Notes:
Each of the times and dates set out in the above timetable and mentioned in this document is subject to change by the Company, in which event details of the new times and dates will be notified to the London Stock Exchange and the Company will make an appropriate announcement to a Regulatory Information Service.
In particular, closing of the Acquisition is dependent on the fulfilment or waiver of certain conditions, including Government Consents, as set out in paragraph 3 of Part I of this document, the date for which cannot be predicted with certainty but the long stop date for which, unless the Vendor and the Company agrees otherwise, is 27 December 2018. References to times in this document are to London times unless otherwise stated.
Acquisition Statistics
Number of Existing Ordinary Shares | 325,222,098 |
Issue Price per Consideration Share | Approximately 146.11p |
Number of Consideration Shares to be issued by the Company | 38,621,343 |
Number of Ordinary Shares in issue following Acquisition and Admission | 363,843,441* |
Number of Consideration Shares as a percentage of the Enlarged Issued Share Capital immediately following the Acquisition and Admission | Approximately 10.61%* |
*Assuming no other issuances of Ordinary Shares occur prior to Admission
Documents Available For Inspection
Copies of the following documents are available for inspection on request by a Shareholder, person with information rights, or other person to whom the Circular is sent, at the Company's registered office at 26 New Street, St Helier, Jersey, Channel Islands JE2 3RA during normal business hours on any weekday (Saturdays, Sundays and public holidays in the UK excepted) from the date of this announcement until the conclusion of the Extraordinary General Meeting:
(i) the irrevocable undertakings received from the Directors, referred to in this announcement above;
(ii) the Company's articles of association;
(iii) the consent referred to in the Circular;
(iv) the Circular; and
(v) the Subscription Agreement.
These documents are also available on the Company's website at the following address: http://www.highlandgold.com.
DEFINITIONS
The following definitions apply throughout this announcement unless the context otherwise requires:
"Acquisition" | the acquisition by the Company of the entire issued share capital of the Target Companies from the Vendor;
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"acting in concert" | has the meaning ascribed to it in the Takeover Code;
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"Admission" | admission of the Consideration Shares to trading on AIM and such admission becoming effective in accordance with Rule 6 of the AIM Rules;
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"AIM" | the AIM market operated by the London Stock Exchange;
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"AIM Rules" | the AIM Rules for Companies and/or the AIM Rules for Nominated Advisers (as the context may require);
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"AIM Rules for Companies" | the rules of AIM as set out in the publication entitled 'AIM Rules for Companies' published by the London Stock Exchange from time to time;
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"AIM Rules for Nominated Advisers" | the rules of AIM as set out in the publication entitled 'AIM Rules for Nominated Advisers' published by the London Stock Exchange from time to time;
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"Aristus" or the "Vendor" | Aristus Holdings Limited, a company incorporated in the Republic of Cyprus with company registration number HE 194952 and registered office at Chrysanthou Mylona, 3, 3030, Limassol, Cyprus;
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"Associate" | in relation to any person: (i) any subsidiary undertaking or parent undertaking of that person and each and any subsidiary undertaking of a parent undertaking of that person; (ii) any person that Controls, is Controlled by or is under common Control with that person; and (iii) any person acting in concert (as defined in the Takeover Code) with such person; |
"Board or Directors" | the board of directors of the Company for the time being; |
"Business Days" | a day on which banks are open for business in the UK (excluding Saturdays, Sundays and public holidays);
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"Company " or "Highland Gold" | Highland Gold Mining Limited, a company incorporated in Jersey with registered number 83208 and having its registered office at 26 New Street, St. Helier, Jersey, Channel Islands JE2 3RA;
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"Companies Act" | the UK Companies Act 2006 as amended;
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"Companies Law" | the Companies (Jersey) Law 1991 as amended;
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"Concert Party" | the concert party for the purposes of the Takeover Code, consisting of certain Shareholders at the date of the circular to be published by the Company today, and as more particularly described in paragraph 6 of Part I of the circular;
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"Consideration Shares" | the 38,621,343 new Ordinary Shares, issued at a price of approximately 146.11p per Consideration Share;
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"Control" | with respect to any person, the direct or indirect power to: (i) direct or cause the direction of management or policies (whether through ownership of securities or partnership or other ownership interests, by contract or otherwise) of such person; (ii) elect a majority of the directors, partners or other persons exercising similar authority in respect of such person; or (iii) direct or cause the direction of a voting interest of more than 30 per cent., and "Controls", "Controlling", "Controlled by" and "under common Control with" shall be construed accordingly; |
"CREST" | the relevant system (as defined in the CREST Regulations) in respect of which Euroclear is the Operator (as defined in the CREST Regulations);
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"CREST Manual" | the compendium of documents entitled "CREST Manual" issued by Euroclear from time to time and comprising the CREST Reference Manual, the CREST Central Counterparty Service Manual, the CREST International Manual, the CREST Rules, the CCSS Operations Manual and the CREST Glossary of Terms;
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"CREST Proxy Instruction" | the appropriate CREST message made to appoint a proxy, properly authenticated in accordance with Euroclear's specifications;
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"CREST Regulations" | the Companies (Uncertificated Securities) (Jersey) Order 1999 (as amended);
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"Enlarged Concert Party" | the concert party for the purposes of the Takeover Code as enlarged by the Acquisition, consisting of the Concert Party and the Vendor, and each of Andrey Gorodilov and Efim Malkin, being indirect Shareholders via the Vendor together with the Concert Party;
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"Enlarged Issued Share Capital" | the issued share capital of the Company immediately following Admission;
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"EU" | the European Union;
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"Euroclear" | Euroclear UK & Ireland Limited;
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"Existing Ordinary Shares" | means the 325,222,098 Ordinary Shares in issue at the date of this announcement;
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"Extraordinary General Meeting or EGM" | the extraordinary general meeting of the Company, notice of which is set out at page 35 of the circular to be published by the Company today, and including any adjournment(s) thereof;
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"FCA" | the UK Financial Conduct Authority;
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"Form of Proxy" | the form of proxy accompanying the circular to be published by the Company today relating to the Extraordinary General Meeting;
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"FSMA" | the UK Financial Services and Markets Act 2000 (as amended);
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"Group" | the Company and/or each subsidiary of the Company at the date of this announcement (as defined in article 2 of the Companies Law);
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"Independent Directors" | Terry Robinson, Colin Belshaw and Duncan Baxter;
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"Independent Shareholders" | all of the Shareholders with the exception of the members of the Concert Party;
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"KAS" | Kanchalano-Amguemskaya Square LLC;
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"Link Asset Services or Registrar" | a trading name of Link Market Services Limited, a company incorporated in England and Wales with registered number 02605568 and having its registered office at The Registry, Beckenham, Kent BR3 4ZF; |
"London Stock Exchange" | London Stock Exchange plc;
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"NAV" | net asset value;
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"Notice of Extraordinary General Meeting" | the notice convening the Extraordinary General Meeting appearing at the end of the circular to be published by the Company today;
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"Numis" | Numis Securities Limited, a private limited company incorporated in England and Wales under registered number 02285918 and having its registered office at 10 Paternoster Square, London EC4M 7LT, the Company's nominated adviser and sole broker;
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"Ordinary Shares" | ordinary shares of £0.001 each in the capital of the Company; |
"person" | a natural person, corporate or unincorporated body (whether or not having separate legal personality) and that person's personal representatives and successors;
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"Registration Date" | the date on which the registration of amendments to the USRLE reflecting the transfer of the shares in the Target Companies to the Company is complete;
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"Regulatory Information Service" | has the meaning given in the AIM Rules for Companies;
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"Relationship Agreement" | an agreement dated 4 December 2007 (as amended by deeds of adherence dated 12 May 2008, 8 November 2016, 30 November 2016 and 29 December 2017) and currently between the Company and Eugene Shvidler, Irina Panchenko, New Evolution Trading Limited, Matteson Overseas Limited, Erlinad Holdings Limited, Denalot Worldwide Limited and Roman Abramovich;
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"Resolutions" | the resolutions to be proposed at the Extraordinary General Meeting which are set out in full in the Notice of Extraordinary General Meeting; references to numbered Resolutions are those as numbered in the Notice of Extraordinary General Meeting;
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"Rule 9" | Rule 9 of the Takeover Code;
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"Rule 9 Panel Waiver" | the consent of the Takeover Panel to waive any obligations on members of the Enlarged Concert Party to make a mandatory offer to Shareholders for the Ordinary Shares not owned by members of the Enlarged Concert Party upon completion of the Acquisition which would otherwise arise under Rule 9 as a result of the issue of Consideration Shares to the Vendor in connection with the Acquisition;
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"Shareholders" | holders of Ordinary Shares from time to time;
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"Subscription Agreement" | an agreement dated 25 April 2018 between the Company and the Vendor in respect of the Acquisition;
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"Takeover Code" | the City Code on Takeovers and Mergers;
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"Takeover Panel" | the Panel on Takeovers and Mergers;
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"Target Companies" | Valunisty Mine LLC, Kanchalano-Amguemskaya Square LLC and Nord-East Mining and Geological Company LLC;
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"UK Listing Authority or UKLA" | the UK Listing Authority, being the FCA acting as competent authority for the purposes of Part VI of FSMA; and |
"USRLE" | the Uniform State Register of Legal Entities maintained under Russian law;
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"Whitewash Resolution" | Resolution 2 in the Notice of Extraordinary General Meeting. |
GLOSSARY
g/t | grams per tonne
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Indicated Mineral Resource | that part of a Mineral Resource for which quantity, grade or quality, densities, shape and physical characteristics can be estimated with a level of confidence sufficient to allow the appropriate application of technical and economic parameters, to support mine planning and evaluation of the economic viability of the deposit. The estimate is based on detailed and reliable exploration and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes that are spaced closely enough for geological and grade continuity to be reasonably assumed
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Inferred Mineral Resource | that part of a Mineral Resource for which quantity and grade or quality can be estimated on the basis of geological evidence and limited sampling and reasonably assumed, but not verified, geological and grade continuity. The estimate is based on limited information and sampling gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes
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IRR | Internal Rate of Return
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JORC (2012) | JORC 2012 code of practice and guidelines effective from 20 December 2012
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Koz | thousands of ounces
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ktpa | thousands of tons per annum
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Measured Mineral Resource | that part of a Mineral Resource for which quantity, grade or quality, densities, shape, and physical characteristics are so well established that they can be estimated with confidence sufficient to allow the appropriate application of technical and economic parameters, to support production planning and evaluation of the economic viability of the deposit. The estimate is based on detailed and reliable exploration, sampling and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes that are spaced closely enough to confirm both geological and grade continuity
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Mineral Resource | concentration or occurrence of solid material of economic interest in or on the Earth's crust in such form, grade or quality and quantity that there are reasonable prospects for eventual economic extraction. The location, quantity, grade or quality, continuity and other geological characteristics of a Mineral Resource are known, estimated or interpreted from specific geological evidence and knowledge, including sampling
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Resources | Combined Measured, Indicated and Inferred Resource in accordance with JORC (2012)
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Moz | millions of ounces
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MT | millions of tons
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NPV | Net Present Value
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Reserves | Combined Probable and Proven Reserves in accordance with JORC (2012)
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Ore Reserve | the economically mineable part of a Measured or Indicated Mineral Resource demonstrated by at least a Preliminary Feasibility Study. This Study must include adequate information on mining, processing, metallurgical, economic and other relevant factors that demonstrate, at the time of reporting, that economic extraction can be justified. A Mineral Reserve includes diluting materials and allowances for losses that may occur when the material is mined
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Probable Ore Reserve | the economically mineable part of an Indicated and, in some circumstances, a Measured Mineral Resource demonstrated by at least a Preliminary Feasibility Study. This Study must include adequate information on mining, processing, metallurgical, economic, and other relevant factors that demonstrate, at the time of reporting, that economic extraction can be justified
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Proven Ore Reserve | is the economically mineable part of a Measured Mineral Resource demonstrated by at least a Preliminary Feasibility Study. This Study must include adequate information on mining, processing, metallurgical, economic, and other relevant factors that demonstrate, at the time of reporting, that economic extraction is justified |
Competent Person Statement
Karl van Olden, an independent consultant and full-time employee of CSA Global, has reviewed and verified the information contained in this release with respect to Ore Reserves for Valunisty and Gorny. He is a qualified Mining Engineer and Fellow of the Australasian Institute of Mining and Metallurgy with sufficient experience relevant to the style of mineralisation and type of deposit under consideration to qualify as a Competent Person as defined in JORC (2012).
Dmitry Pertel, an independent consultant and full-time employee of CSA Global, has reviewed and verified the information contained in this release with respect to Mineral Resources for Valunisty and Zhilny. He is a qualified Geologist and Member of the Australasian Institute of Geoscientists with sufficient experience relevant to the style of mineralisation and type of deposit under consideration to qualify as a Competent Person as defined in JORC (2012).
Serikjan Urbisinov, an independent consultant and full-time employee of CSA Global, has reviewed and verified the information contained in this release with respect to Mineral Resources for Gorny. He is a qualified Geologist and Member of the Australasian Institute of Geoscientists with sufficient experience relevant to the style of mineralisation and type of deposit under consideration to qualify as a Competent Person as defined in JORC (2012).
Mr. Andrey Sevryugin, Senior Specialist in the Geology and Subsoil Use Department at Highland Gold, has reviewed and verified the information contained in this release with respect to the Kaeynmivaam exploration area. Mr Sevryugin is an Expert of the Russian Society of Subsoil Use Experts (OERN) and has sufficient experience relevant to the style of mineralisation and type of deposit under consideration to qualify as a Competent Person as defined in JORC (2012).
Appendix 1: JORC Table 1
http://www.rns-pdf.londonstockexchange.com/rns/1930M_-2018-4-26.pdf