Chaarat Gold (LSE:CGH)
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Chaarat Gold Holdings Ltd

27 September 2016

Chaarat Gold Holdings Limited

("Chaarat" or "the Company")

Placing to raise GBP4.1 million

Road Town, Tortola, British Virgin Islands (27 September 2016).

Chaarat (AIM:CGH), the AIM quoted exploration and development company with assets in the Kyrgyz Republic, is pleased to announce that it has raised approximately GBP4.1 million through the issue of 78,840,443 new ordinary shares (the "Ordinary Shares" or "Shares") of USD 0.01 each in the capital of the Company (the "Placing Shares") at a price of 5.25p per share (the "Placing Price") (the "Placing"). The Placing was oversubscribed and, accordingly, certain investor applications were scaled back to limit dilution at this time.

Highlights

   --     Placing completed to raise GBP4.1 million 
   --     Dilution to existing shareholders minimised by scaling back applications 

-- Proceeds to be used to complete the Bankable Feasibility Study for the Tulkubash Heap Leach Project (the "Tulkubash Project")

-- Majority of the Board participated in the Placing including the current Chairman and non-executives as well as the incoming Chairman and non-executive director

The Company's announcement on 20(th) September set out its plans to pursue the development of the Tulkubash Heap Leach Project (the "Tulkubash Project"). The proceeds of the Placing should enable the Company to complete a Bankable Feasibility Study ("BFS") on the Tulkubash Project during the second quarter of 2017 and the local approval process for the Tulkubash Project, which is expected to be substantially concluded during the third quarter of 2017.

When in production, the Tulkubash Project is expected to process approximately 8,000 tonnes of ore per day to produce approximately 60-70,000 ounces of gold per annum. The estimated total capital requirement to bring the Tulkubash Project into production is expected to be approximately USD 80 to 100 million.

Director appointments and related matters

Further to the announcement on the 20(th) September the Company is pleased to announce that the appointment of Martin Andersson as Non-Executive Chairman and Martin Wiwen-Nilsson as Non-Executive Director, will become effective on the day following Admission.

Amongst the new shareholders on the register of the Company are associates of the incoming Chairman. Whilst acting independently, solely in their own interests and having no direct involvement with the Company, associates of the incoming Chairman have invested in this Placing. The incoming Chairman, taking a conservative view, deemed it appropriate that those parties should be considered as forming a concert party with Labro and that, subject to the waiver mentioned below, additional share purchases by them will have to be approved by the

independent Directors.   Further information is set out below. 

Subscription for shares by Labro and the Directors

Labro Investments Limited ("Labro"), which currently holds 25.6% of the Company's issued share capital, has committed to subscribe for 41,758,250 Placing Shares (the "Subscription"). As announced previously, Martin Andersson is indirectly beneficially interested in the majority of the shares in Labro. Following admission of the Placing Shares to trading on the AIM market of the London Stock Exchange plc ("Admission"), Labro will hold 111,583,314 Ordinary Shares representing 31.7% of the Company's share capital as enlarged by the Placing (the "Enlarged Share Capital") and 21,367,521 warrants to subscribe for Ordinary Shares (the "Labro Warrants").

Martin Wiwen-Nilsson has committed to subscribe for 7,326,010 Placing Shares, following which he will hold 7,326,010 Ordinary Shares representing 2.1% of the Company's Enlarged Share Capital.

Christopher Palmer Tomkinson (who has subscribed for 1,000,000 Placing Shares following which he will hold 7,275,000 Ordinary Shares representing 2.1% of the Company's Enlarged Share Capital) will also retire from the Board on the day following Admission. The Board would like to thank Christopher for his contribution to the Company over his time as Chairman.

In addition to the subscription of the incoming Directors and the current Chairman, the following Directors have participated in the Placing:

 
                                      Number of 
                        Placing        Ordinary 
                   subscription       Shares to       Percentage 
                       (Placing         be held      of Enlarged 
                        Shares)    on Admission    Share Capital 
---------------  --------------  --------------  --------------- 
 Dekel Golan            200,000      14,275,691             4.1% 
 Linda Naylor*          200,000       1,200,000             0.3% 
 Richard Rae            200,000         400,000             0.1% 
 

*Includes 114,000 Placing Shares subscribed for by Linda Naylor's husband, Mr David Tipple.

Concert party arrangements

Our shareholders may recall that there is a provision in the Company's Articles of Association (the "Articles") which states that the Board has the right to require any holder of more than 20% of the Company's Shares to make a mandatory offer to all the Company's shareholders to acquire their Shares if they acquire an additional interest in any Shares. The Board has previously exercised its discretion to waive the requirement for a mandatory offer when Labro (and the previous holder Fasanara Capital) acquired Shares in excess of a 20% holding.

Whilst acting independently, solely in their own interests and having no direct involvement with the Company, certain of the new shareholders subscribing in the Placing who are associates of the incoming Chairman have been considered to form a concert party with Labro. This will mean that, subject to the waiver detailed below, any purchase of shares by any member of the concert party must be notified to the Board so that the Independent Directors can decide whether to exercise their discretion to waive the requirement to make a mandatory offer to all shareholders. The Board believes this is best practice for corporate governance purposes so that there is no perception that Shares are being accumulated with the objective of acquiring the Company at a potentially depressed valuation.

Accordingly, Martin Wiwen-Nilsson, Dominik Dolenec, Abingdon Trust, Willem De Geer and Sarastro Group Limited (or in each case his or its nominee), who are together subscribing for 25,274,720 Placing Shares, are being treated as concert parties of Labro (together with Labro the "Concert Party") (the "Concert Party Subscription") for the purposes of the Articles. Following completion of the Placing, the Concert Party will hold 136,858,034 Ordinary Shares representing 38.9% of the Enlarged Share Capital.

As the Placing was oversubscribed and Placing applications by members of the Concert Party were scaled back, it has been agreed as part of the Placing that members of the Concert Party may acquire up to a further 21,611,714 Ordinary Shares (excluding Ordinary Shares issued on exercise of Labro Warrants) within a period of six months following Admission without triggering a requirement to make a mandatory offer under the Articles (see "Further information relating to the Placing" below). If all such Ordinary Shares were acquired within such period by way of the acquisition of existing Ordinary Shares, the Concert Party would hold 158,469,748 Ordinary Shares representing 45.0%% of the Enlarged Share Capital and, if all Labro Warrants were exercised (but no other warrants or options to subscribe for Ordinary Shares were exercised and no other Ordinary Shares were issued), the Concert Party would hold 179,837,269 Ordinary Shares representing 48.2% of the resulting enlarged share capital.

As a result of the shareholding of Labro prior to the Placing, the Concert Party Subscription will, for the purposes of AIM Rule 13, constitute a "Related Party Transaction". The Company's directors consider, having consulted with its Nominated Adviser, that the terms of the Concert Party Subscription are fair and reasonable insofar as the Company's shareholders are concerned.

Relationship Agreement

The Company also announces that it has entered into a relationship agreement (the "Relationship Agreement") with Labro, which will come into effect on Admission. The Relationship Agreement provides that, for so long as Labro beneficially owns or is interested in 20% or more of the issued share capital of the Company carrying voting rights, Labro shall have the right to nominate one director to the Board, and to remove any such nominated director and appoint a replacement director in his/her place. Labro has also agreed to certain other relationship obligations under the Relationship Agreement.

The Relationship Agreement will terminate on the date that Labro ceases to beneficially own or be interested in at least 20% of the issued share capital of the Company carrying voting rights or if the Ordinary Shares were to cease to be admitted to trading on AIM. Further information regarding the Relationship Agreement is set out in the appendix of this announcement.

Amendment to warrant instruments

In conjunction with the Company's GBP163,500 placing in December 2014, three year warrants (the "Warrants") were issued to placees to subscribe for one Ordinary Share per placing share at the placing price of 15p per share (the "Warrant Exercise Price").

The terms of the Warrants allowed for an exercise price adjustment should the Company raise funds at a price which represented a discount of more than 10% to the prevailing share price. The Company will shortly following Admission make an offer to all holders of the Warrants (the "Warrant Holders") to amend the terms of such Warrants in order to: (i) extend the expiry date of the Warrants from 23 December 2017 to 23 December 2019, in exchange for such Warrant Holders waiving the right, on account of the Placing, to adjust the Warrant Exercise Price; and (ii) provide for Warrant Holders to be able to exercise their Warrants on a net issuance basis. If such offer is not accepted within a period of 14 days from Admission, the Warrant Exercise Price will be adjusted to 14.43p per share.

In conjunction with the Company's US$5m placing in December 2014, Labro was issued 21,367,521 Labro Warrants. Labro and the Company have entered into a deed of amendment dated 26 September 2016, in order to amend the terms of the Labro Warrants by: (i) extending the expiry date of the Labro Warrants from 17 December 2017 to 17 December 2019 in exchange for Labro agreeing to waive its right, pursuant to the term of the Labro Warrants, and on account of to the Placing, to adjust the exercise price of the Labro Warrants (which adjustment would have resulted in a new Labro Warrant exercise price of 14.43p); and (ii) providing for Labro to be able to exercise the Labro Warrants on a net issuance basis (the "Labro Warrant Amendment"). Given the current shareholding of Labro, the Labro Warrant Amendment will, for the purposes of AIM Rule 13, constitute a "Related Party Transaction". The Company's directors consider, having consulted with its Nominated Adviser, that the Labro Warrant Amendment is fair and reasonable insofar as its shareholders are concerned.

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 the Placing give written notice to require Chaarat to issue such number of Ordinary Shares to CNMIM on the same terms as the Placing Shares, as is necessary to maintain the percentage shareholding of CNMIM in the Company prior to completion of the Placing. The required notice in respect of the issue of the Placing Shares will be sent to CNMIM and a further announcement made, if appropriate. Prior to issue and allotment of the Placing Shares, CNMIM held 22,469,289 Ordinary Shares representing 8.23% of the issued share capital of Chaarat.

The information contained within this announcement is deemed to constitute inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) No. 596/2014. Upon the publication of this announcement, this inside information is now considered to be in the public domain.

Dekel Golan, CEO of Chaarat, comments: "The Company set out to raise a modest amount of money in order to minimise dilution to shareholders. We were pleased with the interest and support of our existing and new shareholders and the directors. On account of the interest shown, the Placing was oversubscribed and orders were scaled back. We appreciate the trust and support placed in us and will continue to do our best to justify it."

Enquiries:

 
 Chaarat Gold Holdings 
  Limited                     + 44 23 800 11747 
 c/o Central Asia Services    info@chaarat.com 
  Limited 
 Dekel Golan CEO 
 Linda Naylor FD 
 Numis Securities Limited     +44 (0) 20 7260 1000 
 John Prior, Paul Gillam 
  (NOMAD) 
 James Black (Broker) 
 

Further information relating to the Placing

The completion of the Placing is conditional, inter alia, upon Admission. The Company has applied for Admission and it is expected that Admission will take place on or around 30 September 2016. The Placing Price represents a discount of 15.3% to the closing price of 6.2p per share on 26 September 2016.

The Placing Shares have been issued and allotted as fully paid and will rank pari passu with the existing Ordinary Shares.

Following Admission, the Company's existing issued share capital will increase from 272,935,389 Ordinary Shares to 351,775,832 Ordinary Shares. As such the total number of voting rights which will be attached to the Enlarged Share Capital, on the basis of one vote per Ordinary Share, will be 351,775,832 (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 Placing by any member of the Concert Party in respect of either the issue and allotment of the Placing Shares, or as a result of any redemption or purchase by the Company of its own voting shares at any time in the future, or the acquisition of up to further 21,611,714 Ordinary Shares (excluding Ordinary Shares issued on exercise of Labro Warrants) within the period of six months following Admission (or, in due course if relevant and as previously announced, the issuance of Ordinary Shares upon exercise of the Labro Warrants), 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.

The Company was notified on 25 September 2016 that Labro purchased in aggregate 1,050,000 Ordinary Shares during May/June 2015 following receipt of a waiver from the Board on 12 May 2015, lasting for one month, from the requirement to make a mandatory offer for the Ordinary Shares held by the Company's other Shareholders.

Further information relating to the Director appointments

Martin Axel Christer Andersson (aged 49) has confirmed that other than his current and previous directorships and the information disclosed below there are no matters to be disclosed under Rule 17 and paragraph (g) of Schedule 2 of the AIM Rules.

Current directorships:

Brunswick Rail Limited

Cabo Delgado Investments Limited

Central Atlantic Investment Holding LLC

Brunswick Real Estate S.A.R.L

Directorships resigned in last five years:

Siberian Generating Company LLC

Oao Suek

Technosila Holdings

Martin Wiwen-Nilsson (aged 45) has confirmed that other than his current and previous directorships and the information disclosed below there are no matters to be disclosed under Rule 17 and paragraph (g) of Schedule 2 of the AIM Rules.

Current directorships:

Brunswick Real Estate S.A.R.L

Further information relating to the Relationship Agreement

The principal terms of the Relationship Agreement are as follows:

-- Labro has agreed that it shall (and, to the extent that it is able, shall procure that its associates/any nominee shall) permit the Company to carry on its business independently of Labro and its associates, including so that: (a) a majority of the revenue generated by the Company's business is not attributable to business conducted directly or indirectly with Labro or its associates; (b) Labro and its associates are not able to influence the operations of the Company outside of its legal governance structure; and (c) save with the requisite approval of the Company's shareholders in accordance with the AIM Rules and/or applicable company law, Labro and its associates do not hold or acquire a material shareholding in one or more significant subsidiaries of the Company. For these purposes "Associates" shall have the meaning given to that term in the Listing Rules.

-- Labro has undertaken to the Company that it shall not (and, to the extent that it is able, shall procure that none of its associates/nominees shall) exercise any rights which any of them have from time to time as shareholders of the Company to: (a) enter into any transactions and/or relationships between any member of the Company's group and Labro or its associates, other than at arm's length and on normal commercial terms and in accordance with the related party transaction rules set out in the AIM Rules and/or applicable provisions of applicable company law; and (b) propose any resolution or take any action which is intended to circumvent the proper application of the AIM Rules.

-- For so long as the Relationship Agreement remains in force, Labro shall not (and, to the extent that it is able, shall procure that none of its associates/nominees shall) take any action (or omit to take any action) that may: (a) prejudice the suitability of the Ordinary Shares for admission to trading on AIM; or (b) have the effect of preventing the Company from complying with its obligations under the AIM Rules or applicable company law.

-- For so long as Labro (together with its associates) beneficially owns or is interested in 20% or more of the issued share capital of the Company carrying voting rights, Labro shall have the right to nominate one director to the board of directors of the Company, and to remove any such nominated director and appoint a replacement director in his/her place.

-- The Relationship Agreement will automatically terminate and cease to have effect on the earlier of: (a) Labro and any of its associates in aggregate ceasing to beneficially own or be interested in at least 20% of the issued share capital of the Company carrying voting rights; or (b) the Ordinary Shares ceasing to be admitted to trading on AIM.

-- The Company and Labro have agreed that nothing in the Relationship Agreement shall prevent: (a) Labro or any of its associates from exercising any of their voting rights as they, in their discretion, see fit except where to do so would result in a breach of the Relationship Agreement; or (b) Labro or any of its associates from acquiring or disposing of securities of the Company (save to the extent otherwise required by law or regulation and subject always to the Company's Articles, including (without limitation) regulation 19 thereof); or (c) the payment of any fees and/or expenses to any nominee director in respect of his or her services as a director in accordance with his/her appointment agreement as such.

NOTES TO EDITORS:

About Chaarat

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

This information is provided by RNS

The company news service from the London Stock Exchange

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September 27, 2016 02:27 ET (06:27 GMT)