19 Oct 2018 16:31
The information contained within this announcement is deemed by the Company to constitute inside information stipulated under the Market Abuse Regulation (EU) No. 596/2014. Upon the publication of this announcement via the Regulatory Information Service, this inside information is now considered to be in the public domain.
Kemin Resources plc
("Kemin" or "the Company")
Company update following resignation of Nominated Adviser
Further to the announcement on 28 September 2018, the Board of Directors of Kemin Resources Plc (AIM: KEM), a molybdenum and tungsten exploration and development company with substantial interests in Kazakhstan, wishes to provide the following statement by way of an update following the resignation of Strand Hanson Limited as the Company's nominated adviser ("Nominated Adviser"), the suspension of trading its shares, and the next steps being taken by the Board.
Resignation and suspension of trading in the shares:
The Board understands that immediate notice to terminate was given to the Company by the Nominated Adviser principally on account of the Company's failure to discuss with it, and further to announce, a related party transaction, in contravention of AIM Rule 13. Further details are set out below.
In June 2018 Mr A T Bulanbayev, a director of the Joint Venture Kazakh-Russian Mining Company LLP (KRMC), in which the Company holds a 90% interest, made an unsecured short term working capital loan to the Company of approximately £26,000 (12m Kazakh Tenge), repayable on demand (the “Transaction”).
The purpose of the Transaction was to fund urgent payments required to be made in Kazakhstan in order to meet the Group's obligations under the approved work programmes agreed with the Ministry of Industry and Development in Kazakhstan, and to meet other smaller payments in order to progress the Drozhilovskoye project. In compliance with Kazakh company law, the loan was provided interest free.
The loan was principally for the following purposes:
geological exploration (drilling and extraction of core samples); creation of an electronic database, and analysis and interpretation of ore bodies; analytical laboratory works on drilled ores; and transportation costs of ore delivery to China for technological testing (see below).Payments in relation to the above amounted to 9,789,132 Kazakh Tenge.
The Company intends to use the remaining funds to pay a company based in China to undertake an assessment in relation to the processing technology required to maximise the yields from the ore.
Full disclosure was made of the Transaction on 28 September 2018 in the interim statement of the Company released on that date, an extract of which is set out below:
"During the period the Company received financial support from Amrita (as disclosed in note 1) a Company connected with the major shareholder and also from a Director of the subsidiary Company as disclosed in note 7 of the Interim Statements. The loan from the Director of approximately £26,000 under Kazakhstan Company Law is charged with no interest, the loan was to fund short term working capital and the Directors are of the opinion the terms of the transaction are fair and reasonable.….
Note 7 Related Party Transactions
A T Bulanbayev a Director of the subsidiary KRMC made a loan to the Company of 12m Kazakh Tenge, (£26,600), in accordance with Kazakhstan Company law no interest is charged on this loan amount."
In accordance with AIM Rule 13, the Transaction constituted a related party transaction being in excess of the relevant class test based on 5% of the turnover of the Company, and as such should have been disclosed to the market at the time it was entered into, which was in June 2018.
The total of £26,000 was advanced by a local director of Kemin's Kazakh subsidiary company, KRMC, on 30 June 2018 to make payments for operational purposes. These payments required prompt settlement in local currency at a time that Kemin did not have funds available in its local account. Local management agreed the short term loan on an interest free basis and with no benefit to the lender. Local management did not immediately report the loan and the transaction was detected through a routine internal review prior to the preparation of the interim financial statements. Once reviewed by the Chief Financial Officer, Chief Executive Officer and the Nomad it became apparent this was a reportable event.
Owing to the internal administrative error, no disclosure was made at that time, and the Board omitted to review the Transaction with its Nominated Adviser to ensure that it was fair and reasonable, as was required by the rules at the time of the transaction. The transaction was disclosed in the interims as noted above and agreed as being fair and reasonable as far as shareholders are concerned.
Although the Board understands that there had been deficiencies in their communication with the Nominated Adviser, they were disappointed by the immediate resignation and regret the circumstances arising. The Company is putting procedural safeguards in place to ensure that this will not reoccur. The steps taken will involve more regular checks and reporting between head office, KMRC and the Board. The training needs of the employees involved will also be reviewed and updates given to staff as appropriate.
The Company is not aware of any other matters that are required to be disclosed to the market.
Next steps
Given the unanticipated resignation and strict timeframe to appoint a new nominated adviser pursuant to the AIM Rules, the Company believes that it will not be in a position to formally appoint a new advisor within the required timeframe. For that reason, the Board has no option but to prepare for the cancellation of the Company's shares to trading on AIM.
The Board believes that the cancellation of the Company’s shares from trading on AIM in no way reflects on the future prospects and viability of the Company.
As detailed in Note 1 to the Interim announcement of 28 November 2018, the Company has a previously approved facility available, which will enable it to continue to develop and provide the necessary level of working capital. The facility amounts to approximately £4.4m, available from Amrita Investments Limited.
The next steps for the Company are outlined below, and the Board are committed to taking the Company forward for the benefit of all shareholders.
Despite the cancellation, the Company intends to:
provide continued liquidity for shareholders by setting up a matched bargain facility, further details of which will be announced shortly; continue with the work programmes for 2018 to 2021, to include : geological and exploration works; drilling of 43 boreholes, 6030 running metres; sampling and analysis; and technological research.In accordance with work programme for 2018, the total investment for the two deposits will be approximately £750,000 (352m Kazakh Tenge).
The Board will continue to explore various corporate opportunities as they arise. Contact will be maintained with shareholders via the Company's website www.keminresourcesplc.com with updates as appropriate.In the meantime, the Board confirms that it will continue to manage the Company according to quoted company principles and in particular, prior to entry into any significant acquisition, whilst not required to, the Board will nevertheless seek shareholder approval for any such transaction. Further, in the event such a transaction is a related party transaction, the Company will engage an independent financial adviser to give a fair and reasonable opinion in the manner required under the AIM Rule 13.
Sanzhar Assaubayev, CEO of Kemin Resources said:
“Given the tight timelines in appointing another Nominated Adviser, the Company has had to review its options. The Board believes that the Company has a strong future and will ensure that the Company continues to develop for the benefit of all shareholders.”
For further information please visit www.keminresources.com or contact:
Kemin Resources plc:
Rajinder Basra (Chief Financial Officer)
+44 (0) 207 932 2430
Information on the Company
Kemin Resources plc (AIM: KEM) was formed into its present structure in April 2013 by the reverse take-over of GMA Resources plc by the ‘Joint Venture Kazakh-Russian Mining Company LLP’ (KRMC).
The Company is focused on developing its mineral resources including molybdenum, tungsten and lithium deposits Drozhilovskoye and Smirnovskoye. Each of the deposits is assessed to have significant value.
Kemin’s 90% owned Kazakh entity, KRMC, is the developer and future operator of the two subsoil licences that allow exploration and mining at each deposit.
Both deposits are located in northern Kazakhstan.
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