Last checked at 21 Nov 2014 11:15
Red Rock Resources Plc
("Red Rock" or the "Company")
Update - Colombian Asset Sale
21st November 2014
Red Rock Resources plc, the mining and exploration company with gold interests in Colombia, Kenya, and Ivory Coast, is pleased to announce an update on the sale of its Colombian asset.
As announced on 13 May 2014, on 12 May 2014 Red Rock executed a LOI with Nicaragua Milling Company Limited ("NMC"), a private company registered in Belize, represented by James Randall Martin. Mr Martin is an experienced mining executive who was the CEO of Colombia Goldfields Ltd and is the founder and Chairman of Nicaraguan gold producer Hemco. Under the LOI, the Company agreed to sell, and NMC to buy, subject to normal conditions of due diligence and closing, (a) a 100% interest in American Gold Mines Limited ("AGM"), which owns a 50.002% interest in Four Points Mining SAS ("FPM"), the owner of the El Limon mine, and (b) its loans to FPM, for a total consideration of USD 5,000,000.
Payment of the unchanged consideration of USD5,000,000 will now occur in four tranches. The first tranche of USD1,050,000 will be payable upon the closing of the transaction, which is expected to be on or before 15 December 2014.
The second tranche of USD1,075,000 will be satisfied by the issuance by NMC to Red Rock of a non-interest-bearing promissory note (the "First PN") due and payable on or before the date that is six months from the closing. The third tranche of USD1,125,000 will be satisfied by the issuance by NMC to Red Rock of a non-interest-bearing promissory note (the "Second PN") due and payable on or before the date that is one year from the closing
Security for the PNs will be held in the form of a charge over 100% of the shares in AGM.
The fourth tranche of up to USD1,750,000 will be paid in the form of a 3% royalty on annual net gold sales, commencing 1 January 2016. In the event that gold production at any stage ceases at El Limon, the total paid under the fourth tranche may fall short of this amount.
The LOI of 12 May 2014 had contemplated three tranches, with a payment of USD2,500,000 on closing, with USD1,500,000 twelve months later, and with a royalty on similar terms but commencing immediately.
Company Chairman Andrew Bell comments:
"The parties have orally agreed, and Red Rock has confirmed in writing, some changes to the timing of the payments. This reflects the buyer's intention to invest in an immediate upgrading programme at the mine, which will require significant capital investment, and is also in our interests as royalty holder. The reduction in the first payment, and bringing forward to six rather than twelve months the second payment, represents a reasonable outcome for all parties.
We are confident of the financial and technical capacity of the buyer, and that its areas of specialism make it the right owner for this asset, which we were not. We will however be able to participate in the benefits of the improvements that are planned through the royalty.
This is an agreement that is good for everyone. Execution by the buyer depends on it signing off on its arrangements with the other FPM shareholders, which will occur concurrently with the finalisation of our deal documentation,"
For further information, please contact:
Andrew Bell0207 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