Red Rock Resources Regulatory News (RRR)

Red Rock Resources plc

("Red Rock" or the "Company")

Resource Star Ltd conditionally agrees to acquire 60% interest in Sugar Dragon Ltd and gains exposure to exclusive license for Candy Crush confectionery sales in Greater China

23 April 2015

Red Rock Resources plc, the mining and exploration company with interests in gold in Africa and investments in other mineral assets, announces that its Australian associate, Resource Star Limited (ASX:RSL)("RSL"), has entered into a conditional agreement to acquire a controlling interest in Okmno Asia Ltd ("Okmno Asia"), holder of an exclusive license to produce and distribute Candy Crush branded confectionery in Greater China.

RSL announced the transaction to the Australian Stock Exchange ("ASX") today. A summary of the RSL announcement follows:

"Highlights

· RSL has conditionally agreed to acquire a 60% interest in a holding company, Sugar Dragon Limited which owns a 72.5% interest in Okmno Asia, a leading manufacturing and distribution company with operations in Greater China.

· Okmno Asia Limited holds an exclusive four-year license to produce and distribute Candy Crush branded confectionery in the Greater China region.

· Candy Crush is a global mobile gaming brand with over 120 million daily active users globally and over 48 million subscribers in the China following its recent launch in August 2014.

· Investment in Okmno Asia Limited will strategically position RSL in the Asian market, with the confectionery market in the Greater China region having grown to an estimated US$13.9 billion by 2013.

· Leverages the existing partnerships which Okmno Asia Limited holds with King.com, Tencent (via King), Trolli, HaiTao, LF Asia and Miti Corporation, all leading manufacturers, importers and distributors in Greater China.

· Sales from Candy Crush confectionery products are expected to bring material revenue stream to the RSL business, with 18 tonnes of product stated to be sold to date, and generate significant profit.

Background

RSL today announced in Australia the intended acquisition of a 60% interest in Sugar Dragon Limited ("Sugar Dragon"), subject to due diligence to be completed within 7 days of execution and shareholder approvals and regulatory compliance.

The investment will fund the growth of Okmno Asia, a company in which Sugar Dragon owns a majority stake of 72.5%.

Transaction Overview

RSL intends to subscribe for Sugar Dragon shares to obtain a 60% shareholding interest in Sugar Dragon.

The consideration payable for the subscription in Sugar Dragon is:

· An AUD300,000 refundable deposit within 2 days of execution ("Deposit").

· An AUD200,000 convertible loan within 21 days of execution ("Loan"). The Loan will be unsecured and interest free. The Loan will convert at settlement.

· An AUD3,625,000 payment at settlement ("Settlement").

The Deposit is refundable in the event the transaction does not proceed due to the due diligence condition not being satisfied (or should the ASX Listing Rules or applicable laws not permit conversion into Sugar Dragon shares) and payment to RSL is due within 60 days after such an event subject to Sugar Dragon having financial capacity and otherwise at such later date Sugar Dragon has financial capacity. The Loan is repayable in the event the ASX Listing Rules or other applicable laws do not permit conversion into Sugar Dragon Shares and repayment to RSL is due at the same time as for repayment of the Deposit.

Otherwise the Deposit and Loan are convertible into 4,615,384 Sugar Dragon shares and 3,076,923 Sugar Dragon shares respectively (representing 15% of the undiluted share capital of Sugar Dragon post conversion of those two amounts) at Settlement or, subject to the ASX Listing Rules or other applicable laws permitting conversion, where Settlement does not occur other than due to the due diligence condition not being satisfied in respect of the deposit, with the conversion to occur at Settlement or, where Settlement does not occur, within 2 days of written notice from RSL of the occurrence of an event resulting in Settlement not being able to occur.

About Okmno Asia

Okmno Asia is a licensing and distribution confectionery company with operations in Greater China, founded in 2007 and with experience in brand licensing and launching well known western brands into the Chinese market. Okmno Asia has worked with major brands over the years, including Brandon (a Puma company), MIO, Renault, Lamborghini, Sara Lee, Red Bull and ASOS.

Okmno Asia holds an exclusive four-year licensing agreement with King.com, the maker and publisher of the highly successful Candy Crush Saga and Candy Crush Soda mobile games, and a first right of refusal to extent the exclusive licensing agreement. The agreement with King.com allows Okmno Asia to manufacture and distribute Candy Crush branded confectionery in China, Taiwan, Hong Kong and Macau.

Under the terms of the agreement with King.com, Okmno Asia has to pay an upfront fee of AUD500,000 as a royalty payment to King.com. This payment has already been paid by Okmno Asia. Revenues from sale of Candy Crush branded confectionery products will go directly to Okmno Asia.

Management of Okmno Asia

Okmno Asia is led by Jade Zhang, with over 10 years of experience in the Fast Moving Consumer Goods (FMCG) industry, and extensive experience in project management, finance and marketing including driving the launch of global online fashion brand ASOS into China. She is joined by Sigrid Tan as Sales and Marketing Director for Okmno Asia. Sigrid has 15 years of experience in the Greater China food retail market and has successfully launched various licensed products for Trolli in China, namely Marvel (Disney) and Hello Kitty, and previously worked as the head of field marketing for Pepsi and Maverick.

Transaction Rationale

Expansion into Greater China

The investment into Okmno Asia strategically positions RSL in the Asian market with outstanding business partners and brings material revenue to RSL.

The confectionery market in the Greater China region (China, Hong Kong, Taiwan and Macau) is sizeable and estimated to be US$13.9 billion by 2013, having grown from US$7.2 billion in 2006 (Source: Euromonitor).

Significant market opportunity

The Candy Crush brand and mobile gaming phenomenon is proven around the world with a network of 120 million daily active users and offers more than 180 games in over 200 countries. Candy Crush branded confectionery has immense potential in the Chinese market, following the recent launch of the mobile game Candy Crush Saga in China in August 2014.

The mobile game was recently launched in China through partnerships with Tencent, the largest social network in the world, and Wechat (the Facebook social media equivalent, owned by Tencent). To date, the Candy Crush game has achieved 48 million registered users in China alone, 13.6 million in Hong Kong and 27.3 million in Taiwan in the short space of 8 months and was voted Best Social Game at the International Gaming Awards in 2013.

Exclusive Candy Crush confectionery license and first mover advantage

Okmno Asia, through its exclusive license with King.com, will be the first to manufacture and sell Candy Crush branded confectionery into the Greater China region.

Leverages strong and long standing partnerships with leading marketing and distribution companies

Okmno Asia has in place strong and established partnerships with King.com, TenCent (via King), Trolli, HuiTao, LF Asia and Miti Corporation, all leading manufacturers, importers and distributors in Greater China.

King.com

King is a leading interactive entertainment company in the mobile gaming market, with more than 195 games published in over 200 countries. Whilst the current license with Okmno Asia is for the Candy Crush brand there is potential to expand into licensing King's other brands.

Trolli

Trolli is a leading German manufacturer and distributor with a 20,000 strong distribution network and products sold in over 80 countries. Trolli has factories in Germany, China, Czech Republic and Spain and manufactures the Candy Crush confectionery products at its factory in Germany. 

Tencent

Tencent is the world's largest social network and the owner of WeChat, a comparable application to Facebook available in China. Through King's relationship with Tencent the Candy Crush Saga game will be promoted through the WeChat platform, which has over 500 million monthly users in China.

In addition, Okmno Asia is working with HuiTao Corporation in China, Miti Corporationin Taiwan and LF Asia in Hong Kong. HaiTao distributes products to over 3,000 outlets across 130 cities across China and LF Asia covers 30,000 retail outlets in 300 cities throughout all of Asia.

Okmno Asia will leverage these relationships and partnerships to accelerate the marketing and distribution of the Candy Crush confectionery products in China other regions.

Material revenue stream and potential for significant profit

The Okmno Asia business has already launched two product ranges in the market, reportedly selling 18 tonnes to its distribution partners in China and Taiwan.

RSL's planned investment in Sugar Dragon is expected to generate material revenues and profit to RSL.

The business model is highly scalable, with low capital required for further product growth and the opportunity to license further well known brands through strong partnerships in the region.

Recompliance with Chapters 1 and 2 of the ASX Listing Rules

As the investment in Sugar Dragon will constitute a significant change in the nature and scale of RSL's activities, RSL will be required to re-comply with the requirements in Chapters 1 and 2 of the ASX Listing Rules (including preparing a full form prospectus, conducting a capital raising and potentially a consolidation of capital) as a condition to completing the investment.

Effect on capital structure and financial position

As part of the process for recomplying with Chapters 1 and 2 of the ASX Listing Rules, RSL will be required to conduct a capital raising. The quantum of the raising and the offer price per share are yet to be determined but a minimum of AUD4,000,000 will be required and the offer price will be not less than AUD0.02 per share (subject to the grant of a waiver from ASX). In addition, RSL may be required to complete a consolidation of capital. RSL will update the market when this information is known and further details will be included in the notice of meeting seeking shareholder approval for the investment.

An unaudited pro-forma balance sheet showing the impact of the transaction will be included in the notice of meeting seeking RSL shareholder approval for the investment.

Indicative timetable of investment

The above table is an indication only and is subject to change. RSL Shareholders should also note that RSL's securities will be suspended from trading on the day of the RSL general meeting seeking shareholder approval for the transaction and if such approval is obtained will remain suspended until such time as RSL has satisfied Chapters 1 and 2 of the ASX Listing Rules.

Proposed Interim Capital Raising

To provide working capital to RSL between now and completion of the transaction RSL proposes to place 100 million new RSL Options at a placement price of $0.002 per Option to professional and sophisticated investors to raise AUD200,000 before the cost of the offer. The RSL Options will have the same terms as the existing unlisted RSL Options of an exercise price of $0.008 on or before 31 December 2017. It is the intention of RSL to seek to have these RSL Options quoted."

The full RSL announcement may be found at http://www.asx.com.au/asx/research/company.do#!/rsl

Notes: 1. RSL will carry out due diligence on, inter alia, Okmno Asia, and while Red Rock has independently checked the information in this announcement to the extent verifiable from publicly available sources, the information on the transaction and counterparty cited above is derived from the RSL announcement.

2. There can be no assurance that the transaction described will pass due diligence or will complete.

Holding of Red Rock in RSL

The Company currently holds 65,335,134 shares in RSL (amounting to 12.18% of the issued share capital), as well as 5,213,290 options exercisable up to 31st March 2016 at a price of AUD0.004 per RSL share. These interests are carried in the Company's books at zero value. As at close of business on 22nd April 2015 the market value of the RSL shares and options owned was AUD825,728.

Andrew Bell, Red Rock Chairman, comments:

"Some time ago it was decided that new investors and new business directions should be sought for Resource Star, and step by step the RSL board has followed this path. We believe this transaction is a significant milestone for RSL. There exists an established appetite among Asian consumers for brand extensions of the kind Okmno Asia are pursuing, and as it has knowledge of the confectionery market this entry point is a favourable one, and an opportunity to back a good team."

For further information, please contact:

Andrew Bell 0207 747 9990 or 0776 647 4849 Chairman Red Rock Resources Plc

Roland Cornish/ Rosalind Hill Abrahams 0207 628 3396 NOMAD Beaumont Cornish Limited

Jason Robertson 0129 351 7744 Broker Dowgate Capital Stockbrokers Ltd

Christian Pickel 0203 128 8208 Media Relations MHP Communications