SNRP.L Regulatory News (SNRP)

Strategic Natural Resources Plc ("SNR" or the "Company")

£1.5 million investment in the Company, additional funding arrangements, update on creditor position, appointment of a new broker and board changes

Highlights

· £1.5 million of investment into SNR at 4p per share

· £1 million subscription by Target Alliance London Limited to be made in two tranches

· £0.5 million underwriting by Beaufort Securities Limited

· Further funding options under discussion

· Land Consultants Limited loan extended to 31 March 2015

· Discussions with Thelo Rolling Stock Leasing and other creditors ongoing

· Settlement with London Commodity Brokers agreed

· SNR board to be strengthened by appointment of new executive management team

· Further SNR board changes

· Beaufort Securities to be appointed broker to SNR

Gabriel Ruhan, current CEO of SNR, today said: "I welcome Target Alliance and Beaufort as new investors in SNR and also Target Alliance's representatives to the SNR and Elitheni boards who we believe will bring both mining expertise and also experience in raising new capital for the business."

£1.5 million investment in the Company

Target Alliance Subscription

The board of SNR, the AIM quoted natural resources developer operating in South Africa, which indirectly owns 74% of Elitheni Coal (Pty) Limited ("Elitheni"), announces that it has entered into a £1.0 million subscription agreement with Target Alliance London Limited ("Target Alliance"), a company incorporated in England and Wales. Target Alliance is a wholly owned subsidiary of Ivory Mint Holdings Corp, which is wholly owned by Mr. Irving Aronson, a South African businessman.

Under the terms of the subscription agreement, Target Alliance has agreed to subscribe for 25 million new ordinary shares of 1p each in the Company ("Ordinary Shares") (the "Subscription Shares") at a subscription price of 4p per share (the "Subscription Price") (the "Target Alliance Subscription"). The Subscription Price represents a discount of approximately 27.3 per cent. to the closing mid market price of an Ordinary Share on 12 May 2014, being the business day immediately prior to the release of this announcement.

The issue of the Subscription Shares will be in two tranches. Under the terms of the subscription agreement, Target Alliance will initially subscribe for 15 million new Ordinary Shares (the "Initial Subscription Shares") at 4p per share (the "Initial Subscription"). Target Alliance has also undertaken to subscribe for a further 10 million new Ordinary Shares (the "Further Subscription Shares") also at 4p per share within 28 days of completion of the Initial Subscription (the "Further Subscription").

The Initial Subscription and the Further Subscription are conditional on, inter alia, the Initial Subscription Shares and Further Subscription Shares being admitted to trading on AIM ("Initial Admission" and "Further Admission" respectively). Application has been made for admission of the Initial Subscription Shares to trading on AIM and it is expected that Initial Admission will occur on or around 14 May 2014. Application will be made for the Further Subscription Shares to be admitted to AIM at the appropriate time, but it is expected that Further Admission will become effective on or prior to 9 June 2014.

Target Alliance is financing the Initial Subscription by way of a £0.6 million loan from Emesis Management Limited ("Emesis"), a Bahamas based investment company (the "Initial Subscription Loan"). The Initial Subscription Loan is repayable on 30 December 2014. Target Alliance has entered into a separate option agreement with Emesis, pursuant to which Target Alliance has granted the right to Emesis to require Target Alliance to transfer all the Initial Subscription Shares to Emesis. Completion of the transfer of the Initial Subscription Shares by Target Alliance to Emesis pursuant to the option agreement shall constitute the repayment by Target Alliance of the Initial Subscription Loan to Emesis in full.

Beaufort Underwriting

In addition to the Target Alliance Subscription, the Company has also entered into a £0.5 million underwriting agreement with Beaufort Securities Limited ("Beaufort"), under which Beaufort has agreed to underwrite the placing of 12.5 million new Ordinary Shares at 4p per share (the "Beaufort Placing Shares") (the "Beaufort Underwriting"). Under the terms of this underwriting agreement, Beaufort is to receive: (i) a cash commission of £75,000; and (ii) 1.875 million new Ordinary Shares (the "Beaufort Commission Shares") which, at 4p per share, equates to £75,000. Target Alliance has undertaken to transfer the Beaufort Commission Shares to Beaufort out of the Target Alliance Subscription Shares.

As part of the Beaufort Underwriting, Beaufort has agreed to fully pay up the Beaufort Placing Shares in two tranches with 6.25 million new Ordinary Shares (the "Initial Beaufort Placing Shares") being settled on the tenth business day following the date of this announcement and a further 6.25 million new Ordinary Shares (the "Further Beaufort Placing Shares") being settled twenty business days after the date of this announcement. Application will be made separately for admission of the Initial Beaufort Placing Shares and the Further Beaufort Placing Shares to trading on AIM. It is expected that Admission of the Initial Beaufort Placing Shares will occur on or around 22 May 2014 and that Admission of the Further Beaufort Placing Shares will occur on or around 6 June 2014.

Use of proceeds and working capital

The net proceeds of the Target Alliance Subscription and the Beaufort Underwriting, which are expected to amount to approximately £1.3 million (net of Beaufort's cash commission and other professional fees), will be used by SNR to settle certain creditors of SNR and Elitheni who are not connected with members of the SNR board, as described in more detail below.

Whilst the net proceeds of the Subscription are not sufficient for the Company to repay all of its creditors or to recommence operations at the Elitheni mine, the Directors and proposed directors of SNR (details of whom are set out below) are progressing further funding options, details of which are set out below.

Additional funding arrangements

The SNR Board has been in discussions with providers of capital in addition to Target Alliance and Beaufort. It is intended that, following completion of the Subscription, the SNR Board will continue such discussions with a view to injecting further capital into the Company in the near future. However, there can be no certainty on the form or nature of such funding arrangements or that they will be entered into.

Update on creditor position

In addition to the conclusion of the arbitration process in South Africa with certain creditors of Elitheni, announced on 25 April 2014, the Company is pleased to announce that, conditional on completion of the Target Alliance Subscription, Land Consultants Limited ("LCL") has, on 7 May 2014, agreed to further extend repayment of its circa £6.0 million loan (excluding accrued interest) to SNR from 30 June 2014 to 31 March 2015 (the "LCL Agreement"). Under the terms of the LCL Agreement, LCL will receive a fee of £100,000 and has the right to convert all or any part of the outstanding interest on the principal amount of the loan up to an amount of £2 million into new Ordinary Shares at 4p per share (the "LCL Interest Conversion Option").

On 5 March 2014, the Company announced that Elitheni had advised the SNR board that their rolling stock container provider, Thelo Rolling Stock Leasing (Pty) Limited ("Thelo") had commenced legal proceedings to repossess the containers that Elitheni currently leases from Thelo. On 27 March 2014 a court order seeking to freeze the Company's interest in Elitheni was made by The High Court of South Africa following an application for such order by Thelo. The SNR board understands that Thelo has applied to the Arbitration Foundation South Africa (AFSA) to instigate arbitration proceedings against Elitheni. The Company confirms that Elitheni is in advanced discussions with Thelo about settling the amounts it owes to Thelo and is hopeful of resolving this satisfactorily in the near future.

Further to the announcement on 12 May 2014, in which the Company announced that it had has been in discussions with London Commodity Brokers ("LCB") pursuant to which LCB were claiming an amount of circa US$1.15 million, the Company confirms that it has entered into a settlement agreement with LCB, pursuant to which the Company has agreed to pay LCB a cash settlement in two instalments, the first from the proceeds of the Initial subscription and the second by 6 June 2014 and to allot LCB 1,666,666 new Ordinary Shares conditional on the winding up petition being discharged. LCB have agreed to apply for the winding up petition to be discharged following payment of the cash due under the settlement agreement in full.

Separately, the Company has agreed to issue 10 million new Ordinary Shares at 4p per share to Niall Mellon, Chairman of Elitheni, and entities associated with him (the "Mellon Shares") in partial settlement of amounts owed to him. Application has been made for admission of the Mellon Shares to trading on AIM and it is expected that such admission will occur on or around 14 May 2014.

The Company is also in discussions with a number of its other creditors with a view to those creditors receiving new Ordinary Shares in order to settle the outstanding amounts owed to them, wholly or in part, with a view to reducing the on-going cash requirement of the Company. In view of these discussions and the LCL Interest Conversion Option referred to above, the SNR Board has undertaken to LCL to convene, within 28 days of the date of the LCL Agreement, a General Meeting to seek the approval of SNR shareholders to grant the SNR Board new authorities to allot and issue new Ordinary Shares. Further announcements on this subject will be made as and when appropriate.

Related Party Transaction

The issue of the Mellon Shares to Niall Mellon (as described above) is deemed to be a related party transaction under Rule 13 of The AIM Rules for Companies by virtue of Niall Mellon's position as Chairman of Elitheni. Accordingly, the Directors are required to consult with the Company's nominated adviser and state that they believe that the terms of such related party transaction are fair and reasonable insofar as the Company's shareholders are concerned. The Directors, having duly consulted with Allenby Capital, the Company's nominated adviser, believe the issue of the Mellon Shares to Niall Mellon to be fair and reasonable insofar as the Company's shareholders are concerned.

Enlarged issued share capital

Pursuant to the Target Alliance Subscription, the Beaufort Underwriting and the issue of the Mellon Shares, a total of 47.5 million new Ordinary Shares (the "New Shares") are to be issued, representing, in aggregate, approximately 21.7 per cent. of the enlarged issued share capital of the Company. Assuming that the full amount of New Shares are subscribed for and issued, the Company will have 218,561,583 Ordinary Shares in issue and therefore the total number of Ordinary Shares with voting rights will be 218,561,583.

The above figure may be used by SNR's 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 Rules and Transparency Rules of the UK Financial Conduct Authority.

Appointment of Beaufort as broker to the Company

Pursuant to the Beaufort Underwriting, the Company has agreed to the appointment of Beaufort as SNR's broker, with effect from admission to AIM of the Beaufort Placing Shares. Following this appointment Allenby Capital will no longer act as the Company's broker but will act as the Company's Nominated Adviser.

Board changes

Conditional on Initial Admission, three new directors, who have been proposed by Target Alliance, will join the board of SNR (the "Board"). In addition, two of SNR's existing five directors, being Richard Latham and Randal MacDonnell, have agreed to step down from the Board with effect from Initial Admission.

Further details on these Board changes, which are conditional upon Initial Admission, are as follows:

A New directors (proposed by Target Alliance):

· Alexander Allan Baillie MacDonald, aged 66, who will be appointed as Chairman and Chief Executive Officer

· Michael Otto Drozd, aged 57, who will be appointed as Chief Operating Officer

· Michael Howard Shore, aged 62, who will be appointed as Finance Director

B Existing Directors remaining on the SNR Board:

· Gabriel Ruhan, who will step down as interim Chief Executive Officer, remains on the Board as a Non-Executive Director

· Don Nicolson, who remains as Executive Vice Chairman

· Andrew Brennan, who will step down as Chairman, remains on the Board as a Non-Executive Director

C Existing Directors leaving the SNR Board:

· Randal MacDonnell will step down from the Board as a Non-Executive Director

· Richard Latham will step down from the Board as a Non-Executive Director

Biographies of new directors

Alexander MacDonald, Chairman and Chief Executive Officer

Alex MacDonald, has 30 years' City and business experience in Investment Banking and Corporate Finance, having focussed on the engineering and oil & gas sectors. He is currently head of Whitman-Howard's Oil & Gas team, a position he has held since July 2013. He has international business experience having worked in the United States, Africa, the Middle East and China. His early career was spent in the oil and gas exploration industry, including working with some of the oil majors. He has considerable operational, logistics and planning experience, often in difficult environments and with limited support and resources. 

Between 1975 and 1985 he worked for a number of companies in the oil and gas sector including Brown & Root, Otis Engineering, Algosabi Marine, Atlantic Drilling, Conoco and Chevron. Since 1985 he has been mainly engaged in business, investment banking and corporate finance. In 1995, as part of the post privatisation of the British coal industry, he and three other partners acquired the entire engineering facilities from British Coal, which he ran for three years, when it was successfully sold to Lloyds Development Capital. 

Since 1998 he has been involved, primarily in private equity investments and has held a number of non-executive directorships. Currently, he is a director of Northdown Petroleum plc and Northdown Energy Limited. He is also a Director of Triton International, a company specialising in risk management, security and logistics to the oil and gas sector.

Michael Drozd, Chief Operating Officer

Michael Drozd has over thirty years of experience in the investment banking sector. He began with Barclays Bank specialising in project finance for the oil and gas industry. However, the bulk of his career was spent in the stockbroking divisions of various international investment banks. Initially working as an equity research analyst focusing on the UK and European oil and gas sector he moved on to become Head of Equity Research and Equities for several investment banks including UBS and Landsbanki (Teather & Greenwood). Over the last few years, Michael has concentrated on raising capital for emerging oil and gas companies. Working initially at Libertas Capital Corporate Finance Ltd. and most currently with Whitman-Howard Ltd., he has established an extensive list of institutional and private investors in the oil and gas space.

Michael Shore, Finance Director

Michael Shore qualified as a Chartered Accountant in South Africa in 1978 and then joined Commonwealth International Shippers (UK) Limited. In 1980, Michael left there to join and help set up The Grosvenor Group of Companies of which he was an Executive Director. In 1985, Michael established his own consultancy business as well as acting as a Non-Executive Director for a number of client companies,. In 2000, Michael became the Financial Director of The Hybeck Group of Companies, which had a property division, a book publishing division both in the UK and India as well as a corporate consultancy company.

From April 2004 to the end of 2011, Michael was the Financial Director of Intrust Limited and from October 2008 until 31st December 2011, he was also the Group Money Laundering Reporting Officer of The Intrust Group of Companies, an international company which specialises in the provision of taxation, trusts, accounting and advisory services to professionals worldwide, as well as family offices services. On 1st January 2012, Michael became the Managing Director of Alyco Advisory Asia Limited in Hong Kong. On 1st March 2013, Michael re-joined The Intrust Group to run their Irish operations and he also acts as the Money Laundering Reporting Officer for the UK Company. Michael is a Member of The Institute of Chartered Accountants of South Africa.

Intended appointments to the Board of Elitheni

Further, the newly constituted SNR board intends to make the following appointments to the Board of Elitheni:

Zoli Macanda-Simbodyal 

Zoli Macanda-Simbodyal has agreed to join the Board of Elitheni as Chairman and Finance Director.

Zoli Macanda-Simbodyal is a Chartered Accountant, CA (SA), ACA ,Msc Finance (University of Wales) and Bcom Honors from the University of Cape Town, and a member of the Institute of Chartered Accountants England and Wales, and South African Institute of Chartered Accountants. Zoli holds directorship portfolio in other corporates in South Africa. She gained her financial advisory, and project management experience from working with PricewaterhouseCoopers in South Africa, and NM Rothschild Investment Bank in London. She joined NM Rothschild Investment Bank from PricewaterhouseCoopers where she was involved in a number of corporate finance advisory including privatizations, initial public offerings, mergers and acquisition, divestitures including management buy-out and project management transactions. She was the former finance director at MTN Group, a telecommunications company, assisting the MTN Group in advancing their African operation projects in telecommunications. Zoli also worked as a senior manager Group Finance Investment Management Absa Bank and as former Finance Director at Graftech International Limited. Zoli held position of Board Director and a Chairperson of the Audit Committee of Ubank Bank Limited (formerly Teba Bank Limited) and Ubank Controlling Company representing the South African Chamber of Mines. 

Bruce Walsham

Bruce Walsham has agreed to join the Board of Elitheni as a Director.

Bruce is a qualified geologist and has highly varied experience in over 50 commodities in 103 countries. His early career comprised geological work in deep underground and open pit mines and numerous geo-technical investigations in exploration and pre-development programmes throughout the world including with Union Corporation (now BHP Billiton) for 14 years. He has held executive positions (commencing with Freeport McMoran Inc. for 17 years) and has been involved with all aspects of company business, including flotations of companies, supervising 600 staff and contractors with 3 mines. More recently has been involved in advising boards on mineral matters, running aggressive programmes seeking new mineral deposits, marketing diamonds and graphite and assisting in mergers, takeovers and corporate strategies.

It is expected that further additions to the Elitheni Board and Management Team to strengthen Elitheni's mining capability will be announced in due course.

Andy Brennan, Chairman of SNR, today commented: "I would like to take this opportunity to thank Randal MacDonnell and Richard Latham for their significant and diligent contribution to SNR since the Company's incorporation. We wish them both well in their future endeavours."

For further information, please visit www.snrplc.co.uk and/or contact:

Regulatory disclosures

Alex MacDonald, Michael Drozd and Michael Shore are or have been a director or partner of the following companies/partnerships in the past 5 years:

New Moon Interiors Limited was placed into compulsory liquidation on 14 January 1997, whilst Alex MacDonald was still a director.

Michael Howard Shore was a director within 12 months of Intrust Limited being placed in administration on 26 June 2012.

Michael Howard Shore was a director within 12 months of Petrocosm UK Limited entering into a creditors voluntary liquidation on 12 July 2001.

Michael Howard Shore was a director at the time Hybeck Limited entered into a creditors voluntary liquidation 8 August 2002.

Michael Howard Shore was a director at the time Minerva Press Limited entered into a creditors voluntary liquidation on 23 July 2002.

In relation to the proposed appointment of Messrs. MacDonald, Drozd and Shore to the Board of SNR, the Company confirms that there is nothing further to disclose in relation to their appointments under Schedule Two, paragraph (g) of the AIM Rules for Companies.