Correcting Announcement

RNS Number : 0448A

Chaarat Gold Holdings Ltd

06 September 2018

 

The following amendment(s) have been made to the 'Fundraise and Proposed Acquisition' announcement released on 28 August 2018 at 7.00am (UK time) under RNS No 9355Y.

The announcement stated that "Following the Fundraise, including the conversion of Existing Notes by other noteholders into Ordinary Shares, Labro will continue to hold 131,878,037 Ordinary Shares representing approximately 33.43% of the Company's share capital". This percentage should have read 33.34%.

The announcement stated that "Martin Wiwen-Nilsson has irrevocably committed for US$425,000 of 2021 Notes (by way of reinvesting US$375,000 of Existing Notes being redeemed, including interest of US$50,000).  Following the Fundraise, including the conversion of Existing Notes by other noteholders into Ordinary Shares, he will continue to hold 9,998,237 Ordinary Shares representing 2.53% of the Company's share capital and, in addition, US$425,000 of 2021 Notes (which are convertible into 897,380 Ordinary Shares in respect of principal on the 2021 Notes and up to around 296,135 Ordinary Shares in respect of interest on the 2021 Notes assuming interest is converted into Ordinary Shares and that the 2021 Notes are converted at the final maturity date of 31 October 2021)".  Instead, this should have read "Martin Wiwen-Nilsson has irrevocably committed for US$425,000 of 2021 Notes (by way of reinvesting US$375,000 of Existing Notes being redeemed, including interest of US$50,000).  Following the Fundraise, including the conversion of Existing Notes by other noteholders into Ordinary Shares, he will continue to hold 9,998,237 Ordinary Shares representing 2.53% of the Company's share capital and 200,000 options to subscribe for Ordinary Shares ("MWN Options") and, in addition, US$425,000 of 2021 Notes (which are convertible into 897,380 Ordinary Shares in respect of principal on the 2021 Notes and up to around 296,135 Ordinary Shares in respect of interest on the 2021 Notes assuming interest is converted into Ordinary Shares and that the 2021 Notes are converted at the final maturity date of 31 October 2021)."

The announcement stated that "If all Labro Warrants were exercised and all 2021 Notes issued to Labro and Martin Wiwen-Nilsson were converted (but no other warrants or options to subscribe for Ordinary Shares were exercised, no other 2021 Notes were converted and no other Ordinary Shares were issued), the Concert Party would hold 190,231,326  Ordinary Shares representing 45.52% of the resulting enlarged share capital (currently, prior to the Fundraise and conversion of Existing Notes but after exercise of the Labro Warrants and conversion of Existing Notes held by Labro and Martin Wiwen-Nilsson (which are being reinvested instead) and no other exercise or conversion of warrants or Existing Notes and no other issue of Ordinary Shares, the Concert Party would hold 190,231,326 Ordinary Shares representing around 48.16% of the resulting enlarged share capital)". The announcement should have read "If all Labro Warrants and MWN Options were exercised and all 2021 Notes issued to Labro and Martin Wiwen-Nilsson were converted (but no other warrants or options to subscribe for Ordinary Shares were exercised, no other 2021 Notes were converted and no other Ordinary Shares were issued), the Concert Party would hold 192,405,615 Ordinary Shares representing 45.68% of the resulting enlarged share capital (currently, prior to the Fundraise and conversion of Existing Notes but after exercise of the Labro Warrants and MWN Options and conversion of Existing Notes held by Labro and Martin Wiwen-Nilsson (which are being reinvested instead) and no other exercise or conversion of warrants or Existing Notes and no other issue of Ordinary Shares, the Concert Party would hold 190,718,577 Ordinary Shares representing around 48.22% of the resulting enlarged share capital)".

In addition, one reference to "$" should have read "US$".

All other details remain unchanged.

The full amended text is shown below.

6 September 2018

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014 ("MAR").

Not for release, publication or distribution to United States newswire services or for release, publication or dissemination in the United States and does not constitute an offer of the securities herein.

This press release does not constitute an offer to sell, or a solicitation of an offer to buy, securities in the United States or any other jurisdiction.  Any securities described in this press release have not been, and will not be, registered under the US Securities Act of 1933, as amended, and may not be offered or sold in the United States absent registration except in transactions exempt from, or not subject to, registration under the US Securities Act and applicable US state securities laws.  There is no public offering of the securities in the United States expected.  Any public offering of securities to be made in the United States will be made by means of a prospectus that may be obtained from Chaarat and that will contain detailed information about Chaarat and management, as well as financial statements.

Chaarat Gold Holdings Limited

("Chaarat" or the "Company")

Fundraise and proposed acquisition

Chaarat (AIM: CGH), the AIM-quoted exploration and development company with assets in the Kyrgyz Republic, is pleased to announce that it has completed the first phase of up to US$100 million of a convertible debt placement (the "Fundraise") with existing convertible investors, as well as select new investors.

In addition, Chaarat is pleased to announce that it has signed a non-binding term sheet for the acquisition of a medium-sized polymetallic asset (the "Acquisition") in the Commonwealth of Independent States (the "CIS"), which, for the year ended December 2017, produced approximately 50,000 ounces of gold equivalent and generated approximately US$19m* profit before tax with gross assets of approximately US$100m*.

The Fundraise

The Fundraise comprises the issue of secured convertible notes 2021 ("2021 Notes") with a conversion price of £0.37 / share and a 10% interest rate per year which increases to 12% per year for the last 18 months. A single interest payment is due on the final repayment date (31 October 2021) provided that no conversion has occurred. The notes can be repaid early in cash upon 10 business days' notice provided that the minimum accrued interest payable on early repayment is 5% of the nominal amount. The first round of fundraising is expected to close in approximately two weeks (or possibly sooner) and Chaarat is targeting a further closing in late September 2018.

The Company has received strong support from its long-term convertible investors holding the existing convertible notes maturing in 2018 and 2019 ("Existing Notes"), substantially all of whom have in this first round converted into new ordinary shares in the Company ("Ordinary Shares") at strike prices of £0.30/share or £0.33/share, and/or rolled their convertible proceeds and subscribed to the new instrument, providing incremental growth capital to the company. Both the Existing Notes will therefore be redeemed, and security released.

The first round of the Fundraise to refinance the existing bonds has resulted in irrevocable commitments totalling US$26m from holders of Existing Notes and a select few new investors. These orders have come either from investment in the new convertible bond (US$17m) or through the conversion of the principal and accrued interest of the Existing Notes into Ordinary Shares (US$9m).  The Company intends to raise additional growth capital in a second fundraising round and is targeting a further closing in late September 2018. The gross proceeds of up to US$100m from the Fundraise are anticipated to be used as follows:

·     Funding of the Acquisition: c.US$20m (including associated fees and expenses)

·     Tulkubash development: c.US$40m

·     General corporate purposes, future acquisitions, and reserves: c.US$26m

·     Refinance of Existing Notes: c.US$14m (c.US$20m of notional and c.US$3m of accrued interest; net c.US$9m converted to Ordinary Shares)

The Acquisition

The Acquisition represents an important milestone for Chaarat in executing on its previously announced consolidation strategy for the regional gold sector.

Acquisition Highlights:

·     Transforms the Company from a developer into a cash-flow generating producer with a significant growth profile

·     Enhances the Company's portfolio of assets and significantly improves its financial strength

·     Demonstrates the Company's ability to execute its consolidation strategy

·     Strengthens the Company's financial base for the development of Tulkubash

·     Highly accretive transaction metrics

The cash consideration agreed for the Acquisition asset under the term sheet is US$75m (subject to working capital and other adjustments) which is expected to be funded by a combination of debt and the Fundraising proceeds.

Chaarat is ideally placed to take advantage of the opportunities presented by this cash-generative asset, which is estimated to grow production by nearly 25% per annum in 2018 and 2019, following significant investment in the asset over the last two years.

The transaction remains subject to final and confirmatory due diligence. However, substantial diligence work has already taken place and the transaction is at an advanced stage, with the signature of definitive documents expected in late September 2018 and completion in early November 2018. 

The proposed Acquisition is categorised as a reverse takeover under the AIM Rules and will be subject to shareholder approval at a General Meeting, which is due to take place in early November 2018 ("Shareholder Approval"), following the publication of an AIM Admission Document. 

It is currently anticipated that the AIM Admission Document will be posted to shareholders in mid-October 2018.

Artem Volynets, Chief Executive Officer of Chaarat, said: "This first round of fundraising is a clear expression of confidence in Chaarat's management and growth strategy. We are grateful that nearly all of Chaarat's long-term investors have taken their opportunity to increase their exposure to our Company's bright future, and we thank them for their ongoing support.

"The first asset we are acquiring will be an excellent addition to Chaarat's portfolio and accelerates our strategic aim of building a leading emerging markets gold company. It turns the Company cashflow-generative in a single step, and demonstrates Chaarat Gold's ability to execute deals quickly, diligently and on accretive terms. M&A is a vital component of our growth strategy and we are delighted to be in the process of securing this asset at what management believe is a very attractive price for Chaarat and its shareholders."

Update on Kumtor and Other M&A

Chaarat explored and carefully considered three other acquisition opportunities before deciding to pursue the Acquisition.  In addition, the Company continues to make progress on other M&A opportunities in its deal pipeline and intends to update markets accordingly on the milestones reached. As well as the Acquisition asset, Chaarat has developed a pipeline of highly attractive acquisition targets in Central Asia, Russia and the Caucasus region.

As stated in Chaarat's announcements dated 24 April 2018 and 1 May 2018, the Company has also made a proposal in relation to the potential acquisition of the Kumtor mine from Centerra Gold Inc. ("Centerra"). Chaarat has sought a productive dialogue with Centerra's management but has yet to receive any engagement from Centerra's board and management team with respect to its proposal. The Company is awaiting decisions regarding the future of Kumtor from the Government of the Kyrgyz Republic.

Chaarat remains committed to completing the Kumtor deal, and financing partners have expressed continued interest and commitments in supporting the transaction. Management strongly believes that its Kumtor proposal is attractive to all stakeholders - including the people and government of the Kyrgyz Republic, and Centerra and its shareholders.

*Based on unaudited financials 

Enquiries

Chaarat Gold Holdings Limited      

Martin Andersson (Chairman)	[phone]
Artem Volynets (CEO)	[e-mail]
Numis Securities Limited
John Prior, Paul Gillam (NOMAD)	[phone]
James Black (Corporate Broking)
BMO Capital Markets Limited
Jeffrey Couch, Thomas Rider (Joint Broker)	[phone]
Powerscourt
Conal Walsh	[phone]
Matthew Attwood	[e-mail]
Isabelle Saber

About Chaarat Gold

Chaarat Gold is an exploration and development company operating in the Kyrgyz Republic with a large, high grade resource - the Chaarat Gold Project. The Company's key objective is to become a low-cost gold producer generating significant production from the development of the Chaarat Gold Project. Chaarat is engaged in an active community engagement programme to optimise the value of the Chaarat investment proposition.

Chaarat aims to create value for its shareholders, employees and communities from its high-quality gold and mineral deposits in the Kyrgyz Republic by building relationships based on trust and operating to the best environmental, social and employment standards.

Further information is available at www.chaarat.com 

Potential value accretive acquisition nearing execution

Overview of Acquisition asset

The Acquisition is an underground mine in the CIS, producing gold, copper, zinc, and silver. Its reserve life is forecast to end in 2023 but resource conversion and further exploration success is likely to materially extend its life.

The Acquisition asset has undergone significant investment in recent years, with throughput increased from mechanised mine operations and increased mill capacity.

Subscription for 2021 Notes by Labro and a Director and concert party arrangements

Labro Investments Limited ("Labro") has irrevocably committed for US$1,000,000 of 2021 Notes (by way of reinvesting US$375,000 of Existing Notes being redeemed, including interest of US$50,000, plus an additional US$575,000).  As announced previously, Martin Andersson is indirectly beneficially interested in the majority of the shares in Labro.  Following the Fundraise, including the conversion of Existing Notes by other noteholders into Ordinary Shares, Labro will continue to hold 131,878,037 Ordinary Shares representing approximately 33.34% of the Company's share capital and 21,367,521 warrants to subscribe for Ordinary Shares ("Labro Warrants") and, in addition, US$1,000,000 of 2021 Notes (which are convertible into 2,111,484 Ordinary Shares in respect of principal on the 2021 Notes and up to around 696,789 Ordinary Shares in respect of interest on the 2021 Notes assuming interest is converted into Ordinary Shares and that the 2021 Notes are converted at the final maturity date of 31 October 2021).

Martin Wiwen-Nilsson has irrevocably committed for US$425,000 of 2021 Notes (by way of reinvesting US$375,000 of Existing Notes being redeemed, including interest of US$50,000).  Following the Fundraise, including the conversion of Existing Notes by other noteholders into Ordinary Shares, he will continue to hold 9,998,237 Ordinary Shares representing 2.53% of the Company's share capital and 200,000 options to subscribe for Ordinary Shares ("MWN Options") and, in addition, US$425,000 of 2021 Notes (which are convertible into 897,380 Ordinary Shares in respect of principal on the 2021 Notes and up to around 296,135 Ordinary Shares in respect of interest on the 2021 Notes assuming interest is converted into Ordinary Shares and that the 2021 Notes are converted at the final maturity date of 31 October 2021).

Labro and Martin Wiwen-Nilsson are members of the Concert Party (as referred to and defined in the Company's announcement on 27 October 2017) (the "Concert Party").  The Board (excluding Martin Andersson and Martin Wiwen-Nilsson) has therefore agreed that their participation in the issue of 2021 Notes will not trigger a requirement to make a mandatory offer under the Articles (see "Further information relating to the Issue" below).  If all Labro Warrants and MWN Options were exercised and all 2021 Notes issued to Labro and Martin Wiwen-Nilsson were converted (but no other warrants or options to subscribe for Ordinary Shares were exercised, no other 2021 Notes were converted and no other Ordinary Shares were issued), the Concert Party would hold 192,405,615 Ordinary Shares representing 45.68% of the resulting enlarged share capital (currently, prior to the Fundraise and conversion of Existing Notes but after exercise of the Labro Warrants and MWN Options and conversion of Existing Notes held by Labro and Martin Wiwen-Nilsson (which are being reinvested instead) and no other exercise or conversion of warrants or Existing Notes and no other issue of Ordinary Shares, the Concert Party would hold 190,718,577 Ordinary Shares representing around 48.22% of the resulting enlarged share capital).

Further information relating to the Fundraise

Following the Fundraise, the Company's existing issued share capital will increase to 395,594,906 Ordinary Shares and the total number of voting rights, on the basis of one vote per Ordinary Share, will be 395,594,906 (the "Total Voting Rights").  The Total Voting Rights figure may be used by shareholders as the denominator for any calculation by which they will determine whether or not they are required to notify their interests in, or a change to their interest in, the issued share capital of the Company.

Chaarat is a company incorporated in the British Virgin Islands and is therefore not subject to the UK City Code on Takeovers and Mergers. The Articles contain a regulation which provides that where any person (i) acquires interests in shares which (taken together with interests in shares held or acquired by persons acting in concert with him) carry 20% or more of the voting rights of the Company; or (ii) holds (together with persons acting in concert with him) interests in shares representing not less than 20% but not more than 50% of the voting rights and such person (or any person acting in concert with him) acquires an interest in additional shares which increases his percentage of voting rights, the Board shall be entitled, but not obliged, to require that person to extend a mandatory offer to all of the Company's shareholders to acquire their Ordinary Shares.

The Board has exercised its discretion under the Articles so as not to require a mandatory offer to be made in connection with the Issue by Labro, Martin Andersson, Martin Wiwen-Nilsson or any other member of the Concert Party  in respect of either the issue of the 2021 Notes or the conversion thereof, or as a result of any redemption or purchase by the Company of its own voting shares at any time in the future, but not in respect of any other purchase of Ordinary Shares or any interest therein by any member of the Concert Party or any other person acting in concert with them.

China Nonferrous Metals International Mining Co Ltd ("CNMIM")

Chaarat is required to give notice to CNMIM if it intends to issue any Ordinary Shares for cash or non-cash consideration. CNMIM may, within 15 business days of receipt of such notice being issued in connection with any conversion of Notes into Ordinary Shares, give written notice to require Chaarat to issue such number of Ordinary Shares to CNMIM, on the same terms as the issue of such Ordinary Shares, as is necessary to maintain the percentage shareholding of CNMIM in the Company prior to conversion. Once the Existing Notes are converted, and if and when any 2021 Notes are converted, the required notice in respect of the issue of Ordinary Shares on conversion will be sent to CNMIM and a further announcement made, if appropriate.  CNMIM currently holds 22,469,289 Ordinary Shares representing 6.05% of the issued share capital of Chaarat.

 

END

 

 

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