17 Mar 2010 07:00
17 March 2010
Strategic Natural Resources PLC
("Strategic Natural Resources" or the "Company")
Business update and placing to raise £2.9 million (the "Placing")
Highlights
·; Strategic Natural Resources raises £2.9 million (before expenses) through a placing of new ordinary shares arranged by SP Angel Corporate Finance LLP ("SP Angel").
·; Net proceeds to be used to fund the development and commercialisation of the Company's mining assets in the Eastern Cape of the Republic of South Africa and to enable the Company to repay a short term debt facility.
Introduction
The Company is pleased to announce a conditional placing of 19,165,000 new ordinary shares (the "Placing Shares") at a price of 15 pence per Placing Share. The expected net proceeds of the Placing, amounting to approximately £2.7 million, will be used by the Company to fund the development and commercialisation of its mining assets in the Eastern Cape of the Republic of South Africa and to enable the Company to repay a short term facility incurred to repay a working capital loan to Elitheni Coal (Pty) Limited, the Company's 74% subsidiary ("Elitheni"). The Placing is conditional, inter alia, upon approval by the Company's shareholders.
Business update
During the financial year ended 28 February 2010 Elitheni commenced coal extraction and supplied coal to a small number of brickyards in the Eastern Cape of South Africa. This involved the test marketing of the Company's coal and some 4,000 tonnes were supplied commercially during the year. The primary purpose of this supply was to fund the initial mine development needed to commence preparation of underground mining. In January 2010, Elitheni personnel and a local engineering company oversaw the delivery and installation of the first burner capable of converting existing boilers to enable them to burn the Company's coal. The Company's directors (the "Directors") anticipate the expansion of sales of Elitheni coal to the local industrial market based on this low pressure boiler conversion project, which is currently undergoing commissioning.
Strategic Natural Resources remains committed to supplying IPSA Group PLC ("IPSA") with coal for Independent Power Producer ("IPP") generation in the Eastern Cape of South Africa and the Directors continue to believe in the viability of this strategy, especially in light of recent announcements in South Africa concerning the intention of the Government of South Africa to conclude IPP contracts in 2010. This is in conjunction with a 25% year on year approved price increase for national electricity provider, Eskom, which was announced by the South African electricity regulator in its multi-year price determination on 24 February 2010.
Given the time needed to obtain the necessary permissions and construct IPSA's power generation plant, the Directors have agreed to focus in the short and medium term on both the local steam market and the development of an export strategy.
Strategic Natural Resources will continue concentrating on the small to medium-sized industrial boiler market in order to generate short term coal sales. Boiler conversion provides a cost effective way for local industrial companies to lower their steam costs by using Elitheni coal. The Company is prepared to make small investments to enhance the existing burner technology in order to generate an income stream for the Company's mine in the short term.
Development of the Company's export strategy is based on the buoyancy of demand for coal to be supplied overseas. Exports will allow the mine the opportunity to significantly expand, on the basis of voluminous production, which will assist the mine in readiness to commence supply for power generation.
Use of proceeds of the Placing
The Company intends to apply the net proceeds of the Placing which, after commissions and expenses, amount to approximately £2.7 million, to:
·; develop mining activities at Elitheni to enable increased supply of coal to the local steam market in 2010;
·; invest in engineering to underpin the roll out of burner technology to local industrial customers in the Eastern and Western Cape of South Africa;
·; finalise costings related to logistics and materials handling and update the Competent Persons Report (prepared by Golder Associates Africa in September 2008) on the deposits in the western half of the Company's Phase 1&2 reserve, as part of the feasibility assessment for exports primarily through the Port of East London;
·; conduct a desktop assessment of the feasibility of exporting steam coal through the deep water Port of Coega;
·; commence exploratory geological work in the form of modelling and desktop mapping of the new phase 5 exploration area, comprising 119,334 ha of land, in order to plan for a drilling programme; and
·; repay the debt owed under the Short Term Loan Agreement as defined below.
The Short Term Loan Agreement
As disclosed in the Company's latest Annual Report and Interim Statements, on 17 June 2009 Elitheni entered into a loan agreement (the "Loan Agreement") with Ulitorque (Pty) Limited, a company incorporated in South Africa ("Ulitorque"). Pursuant to the Loan Agreement, Ulitorque advanced Elitheni ZAR4.5 million (approximately £402,300) for working capital purposes. Under the terms of the Loan Agreement, Ulitorque may convert the principal of the loan and accrued interest into a shareholding of 10% in Elitheni (a "Conversion") which could, through independent valuation, be converted into new shares in the Company. Ulitorque requested repayment of this loan, plus accrued interest, in September 2009 and Elitheni agreed to make this repayment in due course.
The Directors believe that it is in the best interests of the Company to repay the loan from Ulitorque before 17 March 2010, thus avoiding the requirement to issue new shares in Elitheni or the Company. In order to do so, the Company entered into a short term loan agreement with SP Angel, pursuant to which SP Angel loaned £300,000 to the Company on 15 March 2010 (the "Short Term Loan Agreement"). The Company has used this loan, together with its own existing cash resources, to effect repayment of both the principal and accrued interest of the Ulitorque loan, totalling approximately ZAR4.9 million (approximately £440,000), on 16 March 2010. If, for any reason, this repayment is not completed then Conversion may still occur. Part of the net proceeds of the Placing will be applied by the Company to repay SP Angel the amounts due under the terms of the Short Term Loan Agreement.
Details of the Placing
The Company is proposing to raise, in aggregate, £2.9 million (before commissions and expenses) by means of the Placing. The Placing Shares will rank in full for all dividends and otherwise pari passu with the Company's existing ordinary shares of 1 pence each ("Ordinary Shares") from the date of admission of the Placing Shares to trading on AIM ("Admission").
SP Angel has been appointed to arrange the Placing. SP Angel is an authorised representative of Helvetia Asset Management Limited, which will act as settlement agent for the Placing. Pursuant to a placing agreement dated 16 March 2010 (the "Placing Agreement") SP Angel has agreed, subject to the satisfaction of certain conditions, to use its reasonable endeavours to procure placees for Placing Shares at a price of 15p per Placing Share. The Placing Agreement contains warranties from the Company and the Directors, and an indemnity from the Company, in favour of SP Angel.
It is expected that the Placing Shares will be admitted to trading on AIM at 8.00a.m. on 12 April 2010. The Placing is conditional, inter alia, upon:
·; Shareholder approval of the resolutions to be proposed at a general meeting of the Company, convened for 10.00a.m. on 9 April 2010 (the "General Meeting");
·; the Placing Agreement becoming unconditional in all respects and not having been terminated in accordance with its terms; and
·; Admission,
in each case by no later than 8.00a.m. on 12 April 2010 (or such time and date as the Company and SP Angel may agree, being not later than 30 April 2010).
Irrevocable undertakings
The Company has procured irrevocable undertakings from certain Strategic Natural Resources shareholders holding, in aggregate, 48.2% of the existing issued share capital of the Company to vote in favor of the resolutions to be proposed at the General Meeting. These shareholders include all the Directors, who together hold both directly and indirectly 33.2% of the existing issued share capital of the Company.
Related party transaction
Coal of Africa Limited ("Coal of Africa") currently holds approximately 15.0% of the Ordinary Shares in the Company and has undertaken to subscribe for 6,665,000 Placing Shares as part of the Placing. As a consequence Coal of Africa will, following the Placing, have an interest in 17,925,000 Ordinary Shares, representing 19.0% of the Company's issued Ordinary Shares. Consequently its participation in the Placing is classified as a related party transaction pursuant to the AIM Rules. The Directors of the Company, having consulted with the Company's nominated adviser, Allenby Capital Limited, consider that the terms of Coal of Africa's participation in the Placing are fair and reasonable insofar as the Company's shareholders are concerned.
Admission and dealings
The Placing is conditional upon certain conditions, including shareholder approval of certain resolutions, to be tabled at a general meeting of the Company, to be convened at 10.00 a.m. on 9 April 2010 at the Company's office at 5th Floor, Prince Consort House, 27-29 Albert Embankment, London, SE1 7TJ. The business of the General Meeting will be to grant the Directors authority to allot Ordinary Shares and to disapply pre-emption rights in connection with the issue of the Placing Shares, both of which require the requisite approval of the Company's shareholders.
Application will be made for the Placing Shares (which when issued and fully paid will rank pari passu in all respects with the Ordinary Shares) to be admitted to trading on AIM. Admission is expected to be effective on 12 April 2010. Following Admission of the Placing Shares, the Company will have 94,103,333 Ordinary Shares in issue. This figure may be used by shareholders as the denominator for the calculations by which they will determine if they are required to notify their interest in, or a change to their interest in, the share capital of the Company under the Disclosure and Transparency Rules.
The notice of General Meeting will be posted to shareholders today and will be available, in electronic form, for download on the Company's website www.snrplc.co.uk.
David Nel, CEO of Strategic Natural Resources commented: "I am delighted with the support that we have received in this placing from existing as well as new shareholders. The proceeds will enable us to accelerate the development of our mining activities in South Africa. The Board believes we now have sufficient funding to pursue our strategy in the short term."
For further information, please contact:
|
Strategic Natural Resources plc |
|
|
|
| David Nel, Chief Executive Officer | +44 (0) 20 7793 5616 |
|
|
| Jeremy Metcalfe, Communications Director
| +44 (0)7785 346 718 |
|
|
| Nominated Adviser |
|
|
|
| Allenby Capital Limited |
|
|
|
| Nick Naylor / Jamie Boyd
| +44 (0) 20 3328 5661 |
|
|
| Broker |
|
|
|
| SP Angel Corporate Finance Limited |
|
|
|
| Emin Eyi / Tercel Moore | +44 (0) 207 647 9646
|
|
|
| Financial PR/IR |
|
|
|
|
|
|
|
|
| Blythe Weigh Communications | +44 (0) 207 138 3204 |
|
|
| Ana Ribeiro / Tim Blythe |
|
|
|
For further information about Strategic Natural Resources please visit www.snrplc.co.uk