Keras Res Regulatory News (KRS)

Keras Resources plc / Index: AIM / Epic: KRS / Sector: Mining

17 January 2020

Keras Resources plc ('Keras' or the 'Company')

Togo Update, Corporate Restructuring,

Issue of New Shares and Options to Management

Keras Resources plc, the AIM listed mineral resource company is pleased to provide an update on activities in Togo and the restructuring of its 85% interest in Société Générale de Mines SARL ('SGM') required to comply with the permitting process at the Nayega Manganese ('Mn') Project ('Nayega', or the 'Project') and in the drive to streamline the Keras corporate structure. In addition, the Company has updated its management incentive scheme.

Highlights

·; CEO Russell Lamming is currently in Togo meeting with government officials, interested and affected parties and the SGM management team to close the permitting process at Nayega and ensure that production commences in the first quarter of 2020 as previously announced;

o Corporate restructuring of SGM, which is a requirement of the draft Mining Convention agreed between SGM and the Republic of Togo ('RoT') and part of the documentation required in the permitting process

o Finalising contracts with third party service providers and securing key management in Togo - post the ramp-up phase a 100% Togolese workforce is planned

o As part of the drive to streamline the corporate structure and reduce overhead costs, Keras's interest in SGM to be directly held by Keras

o Relinquishing rights to the Kamina Cobalt & Nickel Project and wind down subsidiary, Kamnico SARL

·; Proposed 1 for 10 share consolidation of Keras to reduce the number of shares in issue and to attract institutional investors looking at cashflow positive mining companies

·; Cancellation of Share Appreciation Rights ('SAR') Scheme, the Introduction of an Enterprise Management Incentive ('EMI') option scheme and the issue of an additional 90,000,000 EMI share options to executive management

Russell Lamming, CEO of Keras Resources, commented, "The past six months have been transformational for Keras. With the notification in October 2019 of a decree authorised by the Togo Council of Ministers permitting SGM to undertake large scale mining at the Nayega, the successful demerger of the Company's interest in Calidus in November 2019 and the completion of the restructuring process, we are now positioned to transition into a manganese producer. 

"We remain on track to commence commercial production in the first quarter of 2020. The underlying fundamentals of the business remain strong as we have an excellent standalone asset, which has installed capacity to produce 6,500 tonnes per month without any further capital. Furthermore, the Project has the unusual status of already being proved up through what was essentially a trial mining, processing and logistics exercise in the first half of 2019.

"I look forward to providing shareholders a steady stream of news flow on key contracts and activities on the ground as we move towards commercial production later this quarter."

Togo Update

To finalise the documentation associated with the award of the Exploitation Permit at Nayega, SGM needs to be converted from a Private Limited company ('Société à responsabilité limitée', 'SARL') to a Public Limited company ('Société Anonyme', 'S.A'). A SA company has a higher degree of corporate governance and is a requirement of the draft Mining Convention agreed between SGM and the RoT last year that needs to be implemented before mining can commence. The conversion has involved detailed legal, accounting and auditor input to meet all regulatory requirements. Following the issue of the mining permit, the Republic of Togo will be entitled to a 10% carried interest in SGM. As a result, the Company's interest in SGM will be reduced to 76.5% on issue of the mining permit.

In addition to the ongoing interaction with the Togolese authorities, management is currently finalising contracts with third party service providers and securing key management in Togo as it transitions to a mining operation. The employment plan for Nayega includes, post the ramp-up phase, a 100% Togolese workforce.

Corporate Restructuring

In line with the restructuring process, which started with the demerger of the Company's interest in Calidus Resources Limited ('Calidus') ('the Demerger'), the following changes are being made to further streamline the corporate structure and reduce unnecessary overhead costs.

·; The Company's interest in SGM is being transferred from its 100% owned Guernsey incorporated subsidiary, Southern Iron Limited ('SIL') directly into Keras.

·; SGM is being converted from a Private Limited Company ('Société à responsabilité limitée', 'SARL') to a Public Limited Company ('Société Anonyme', 'S.A.').

·; In line with the strategic move to a focused cash flow generative company, the Keras is relinquishing its rights to the Kamina Cobalt & Nickel Project and winding down its 100% owned subsidiary, Kamnico SARL.

On the conclusion of the restructuring, Keras will have a direct interest in SGM with a balance sheet suited for a cashflow generative mining company.

Share Consolidation

As Keras transitions from developer to producer, the Company will, at the upcoming Annual General Meeting ('AGM') propose a 1 for 10 share consolidation to reduce the number of shares in issue and to attract institutional investors looking at cashflow positive mining companies. The AGM is expected to be held on the 19th March 2020 at the offices of Memery Crystal LLP, 165 Fleet Street, London EC4A 2DY. Notice of AGM is expected to be sent to shareholders on 25 February 2020, with the Annual Report for the year ended 30 September 2019.

SAR Scheme Cancellation, Adoption & Award of EMI Scheme

The Demerger resulted in a fundamental change to the business and its underlying value, which rendered awards under the Company's existing share appreciation scheme ("SAR Scheme") inappropriate. The Company will be cancelling the SAR Scheme and replacing it with an EMI option scheme, which has a more favourable tax treatment. The 30,000,000 unvested SAR's will be cancelled and reissued under the EMI option scheme, with the exercise price of such EMI options being reduced to a level that appropriately reflects the effect of the Demerger on the underlying value of the Company. Please see below for details of the basis used for calculating the option pricing applied to those EMI options that replace awards under the SAR Scheme.

EMI options over 90,000,000 new ordinary shares of the Company ("New Ordinary Shares") have been granted to executive management, in addition to the EMI options over 30,000,000 New Ordinary Shares (together the "EMI Options"), as follows:-

* 30-day volume weighted average price ('VWAP') close of business on 16 January 2020

** SARS converted to EMI Options

Prior to the Demerger, CEO Russell Lamming held 90,000,000 SAR's at an exercise price 0.36p of which 60,000,000 had vested. At the request of the Board, Mr Lamming did not exercise those SARs that had vested prior to the High Court hearings for the Demerger, as the exercise of these SARs would have significantly increased the number of ordinary shares of Keras that were in issue, which would in turn have significantly affected the ratio to be used for calculating the number of ordinary shares of Calidus to be issued to each shareholder of the Company pursuant to the Demerger process. The Company was advised that a significant change to the aforementioned ratio could have put Court approval of the Demerger at risk and could also potentially cause confusion. It was agreed in principle that Mr Lamming would be compensated in cash for agreeing not to exercise his SARs, as he suffered a loss of value as a consequence, further details of which are set out below:

·; The value of the 60,000,000 SARs that had vested at the close of trading on 19 November 2019, being the day prior to the Demerger becoming effective, was £69,000, after taking into account the strike price of the SARs. Had the SARs been exercised, Mr Lamming would have been issued with 14,526,316 New Ordinary Shares. Using the increased conversion ratio for the Demerger that would have resulted from the issue of 14,526,316 New Ordinary Shares (being: 3.472034 versus the actual conversion ratio: 3.451963), Mr Lamming would have been entitled to 4,183,805 ordinary shares of Calidus with a value of £50,828 (the Calidus share price was A$0.023 at the close of business on 19 November 2019 and the exchange rate was A$:GBP 1.8932). Mr Lamming's total loss from not exercising his SARs is therefore calculated to be £119,828, of which Keras shareholders benefitted directly by the transfer to them of the 4,181,064 Calidus shares which would otherwise have been received by Mr Lamming.

·; Mr Lamming has elected not to receive cash, but to convert the total compensation for his loss of £119,828 into 73,110,423 New Ordinary Shares at the 30-day value VWAP at the close of business on 16 January 2020.

·; The outstanding, unvested 30,000,000 SAR's will be converted to EMI Options, with the same vesting date (09/03/20) at an exercise price of £0.001639, the 30-day volume weighted average price ('VWAP') close of business on 16 January 2020.

The grant of EMI Options and the issue of 73,110,423 New Ordinary Shares to Russell Lamming are deemed to constitute related party transactions as defined by AIM Rule 13 of the AIM Rules for Companies. The directors of the Company, with the exception of Russell Lamming, consider, having consulted with the Company's Nominated Adviser, that the grant of the EMI Options and the issue of 73,110,423 New Ordinary Shares to Russell Lamming is fair and reasonable insofar as the shareholders of the Company are concerned.

Admission and Total Voting Rights

Application will be made for the of 73,110,423 New Ordinary Shares to be admitted to trading on the AIM market of the London Stock Exchange ('Admission'). Admission is expected to occur on or around 23 January 2020.

Following the Admission, the total issued share capital of the Company will consist of 2,571,468,862 ordinary shares of 0.01 pence each carrying the right to one vote. There are no shares currently held in treasury. The total number of voting rights in the Company will therefore be 2,571,468,862 ordinary shares of 0.01 pence each and this figure may be used by shareholders as the denominator for the calculations by which they determine if they are required to notify their interest in, or a change to their interest in, the Company under the Financial Conduct Authority's Disclosure Rules and Transparency Rules.

Director shareholding

Following Admission of the 73,110,423 New Ordinary Shares, the beneficial shareholding of Mr Lamming will be 142,267,884 ordinary shares of the Company representing 5.53% of the total issued share capital of the Company.

Background

Keras is focused on advancing its Nayega Manganese Project in Togo, West Africa, to commercial production. The Project hosts a current JORC Compliant Mineral Resource of 13.5Mt @ 11.1% Mn and an Ore Reserve of 8.48Mt @ 14.0% Mn with additional upside identified through exploration work. The known deposit at Nayega covers 2.2km by 500m and averages 3.3 metres in thickness. An internal Definitive Feasibility Study demonstrated the current life of mine ('LoM') of 15 years, however, with ongoing exploration on the Ogaro anomaly, located approximately 5.5km east of the Nayega Resource, the Company is confident that there is the potential for the life of mine to increase.

On 18 October 2019, the Council of Ministers of the Republic of Togo adopted a decree to grant a license for large-scale exploitation of the manganese deposit at Nayega to SGM. The Company expects to commence commercial production at Nayega in Q1 2020.

For the purposes of MAR and Article 2 of Commission Implementing Regulation (EU) 2016/1055, this announcement is being made on behalf of Russell Lamming, Chief Executive Officer. This announcement contains inside information for the purposes of Article 7 of Regulation (EU) 596/2014.

The information set out below is provided in accordance with the requirements of Article 19(3) of the EU Market Abuse Regulation No 596/2014.

**ENDS**

For further information please visit www.kerasplc.com, follow us on Twitter @kerasplc or contact the following: