GCM Resources PLC Power Plant & Mine Consulting Agreement (3308F)

TIDMGCM

RNS Number : 3308F

GCM Resources PLC

26 October 2018

26(th) October 2018

GCM Resources plc

("GCM" or the "Company")

(LON:GCM)

Power Plant & Mine Consulting Agreement

Further to the announcement on 2 July 2018, GCM Resources plc (LON:GCM), an AIM quoted mining and energy company, is pleased to announce that it has entered into a new consulting agreement ("Agreement") with Dyani Corporation Limited ( ) ("Consultant"). The consultancy is in relation to securing prospective Chinese strategic partners for the Phulbari Power and Coal Project in line with GCM's strategy, as well as advancing the existing relationship with China Gezhouba Group International Engineering Co. Ltd ("CGGC").

Company Strategy

GCM's mission is to be the cheapest electricity supplier in Bangladesh, providing up to 6,000MW of power, by developing the Company's mine proposal along with three groups of mine mouth power plants of up to 2,000MW each. The Company believes that the combined mine mouth and power plants, known as the Phulbari Coal and Power Project ("the Project"), would not only be the single largest provider of electricity in the country, greatly contributing to Bangladesh's much needed energy requirements, but also be a catalyst for regional economic growth and social development in North West Bangladesh.

In order to realise this aim, the Company's strategy is to present the combined mine mouth and power plants alongside large, internationally renowned Chinese State-owned enterprises ("SOE's"), as a holistic power solution which meets the needs and objectives of the Government of Bangladesh. Securing such strategic partners strongly enhances the credibility of the proposal, and in the opinion of the Board of Directors, greatly enhances the prospects of achieving the necessary approvals from the Government of Bangladesh for developing the Project.

In this context obtaining access to, and securing the interest of, Chinese SOE's as strategic partners is critical to achieving the Company's goals. Noting the Consultant's success in securing the partnership with CGGC for GCM, and the recent interest of Sinohydro Corporation Limited, a subsidiary of Power Construction Corporation of China Ltd, the Company is delighted to finalise the Agreement with the Consultant today.

The Consulting Agreement

Under the terms of the Agreement which expires on 30 June 2020, the Consultant shall provide services to assist the Company in:

-- Securing the interest of Chinese SOE's acceptable to the Company to joint venture, cooperate or invest in each of the three proposed groups of power plants of up to 2,000MW (up to 6,000MW in total); and

-- Securing the interest of a Chinese SOE acceptable to the Company to joint venture, cooperate or invest in the proposed mine.

For each of the prospective strategic partners in relation to the three groups of power plants, the Consultant will be required to deliver the following key milestones: a memorandum of understanding ("MOU"); a legally binding framework agreement in relation to a joint venture, cooperation or investment; a legally binding definitive agreement in respect to a joint venture, cooperation or investment; and a legally binding agreement for the engineering, procurement and construction of the power plant.

In obtaining a strategic partner for the mine, the Consultant will be required to deliver the following key milestones: a memorandum of understanding ("MOU"); a legally binding framework agreement in relation to a joint venture, cooperation or investment; and a legally binding definitive agreement in respect to a joint venture, cooperation or investment.

In return for their services, the Consultant shall receive share-based success fees on achieving milestones as well as a monthly retainer fee. The retainer fee is GBP25,000 per month from 1 July 2018, and shall be paid quarterly in arrears by the issuance of new ordinary shares in the Company at 14p per share.

The share-based success fees will be paid in lieu of any cash payment, and will be paid only upon achieving the key milestone in question, as evidenced by the signing of documents in forms agreeable to the Company. The fees will be satisfied by the issue of new shares, equal to a percentage of the issued capital of the Company at the date of the Agreement as follows:

 
 Acceptable Strategic        MOU    Framework Agreement   All Definitive 
  Partner for:                                              Agreements 
 
 Mine                        2%             3%                 4%* 
                           ------  --------------------  --------------- 
 Power plant group 1 (up 
  to 2,000MW)               Nil**          Nil**                5% 
                           ------  --------------------  --------------- 
 Power plant group 2 (up 
  to 2,000MW)                2%             3%                 4%* 
                           ------  --------------------  --------------- 
 Power plant group 2 (up 
  to 2,000MW)                2%             3%                 4%* 
                           ------  --------------------  --------------- 
 

* In the event that a framework agreement was not signed prior to the completion of definitive agreements, the fee shall be 6% of issued capital

** The MOU and framework agreements have already been achieved in respect to Power plant group 1, where the strategic partner is CGGC

Other principal terms under the Agreement are as follows:

-- Any share issue to the Consultant is conditional upon the Consultants' interest, together with the interest of any parties with which it is in concert, remaining below 30% of the Company's issued capital

-- With the exception of the monthly retainer, the Consultant is restricted from disposing of any shares received under the consulting agreement for a period of six months from issue.

-- Notwithstanding the milestones as set out above, the total shares issued under the Agreement as well as the previous agreement (announcements dated 18 May 2017 and 2 July 2018) will be capped to 45% of the enlarged issued share capital of the Company. In the event that this occurs, the Consultant shall remain obliged to continue the services, even though no further shares will be issued.

-- The number of shares to be issued upon reaching each milestone will be adjusted proportionately in the event that the issued capital of the Company increases or decreases following the date of the Agreement in order to maintain the percentages as set out above.

   --      The Consultant is contracted on a non-exclusive basis. 

-- The Company has entered into a separate relationship agreement to safeguard shareholder interests and Board independence, which takes effect only upon the Consultant being interested in 25% or more of the issued share capital.

-- The entry into any of the agreements with strategic partners is at the discretion of the Company.

Board assessment

As highlighted above, the Board believes that securing the interest of Chinese SOE's as strategic partners is critical to achieving the Company's goals. The Consultant has been instrumental in enabling GCM's progress to-date in line with its strategy and the Company believes the new Agreement will provide the framework to make significant strides towards its objectives.

The Chairman has sought to negotiate the best possible terms on behalf of the Company and has not found any other alternative party who can deliver the services in as effective a manner as the Consultant, whilst being willing to be paid entirely in shares and with no other reimbursable expenditure, unless approved by the Company. It is noteworthy that in this Agreement, the fees per milestone are less than in the previous agreement with the Consultant (announced 18 May 2017). In view of the Company's present circumstances, the Company believes that an agreement with the Consultant is the only realistic option for the Company to achieve its strategy.

As the Consultant is currently a substantial shareholder with a notified holding of 19.3% entering into the Agreement is deemed to be a related party transaction for the purposes of Rule 13 of the AIM Rules. The directors consider, having consulted with its nominated adviser, Northland Capital Partners Ltd, that the terms of the transaction are fair and reasonable insofar as its shareholders are concerned.

The Executive Chairman, Datuk Michael Tang PJN, stated: "I am delighted to re-engage the services of Dyani and look forward to working with them to drive significant progress towards our goals over the coming months. Completing this agreement is a considerable breakthrough for the Company and I am confident that it will unlock significant value for our shareholders in time to come."

This announcement contains inside information as defined in Article 7 of the EU Market Abuse Regulation No 596/2014 and has been announced in accordance with the Company's obligations under Article 17 of that Regulation.

For further information:

 
 
   GCM Resources plc              Northland Capital Partners Ltd 
   James Hobson                   Nominated Adviser and Broker 
   Finance Director               Tom Price 
   [phone]           Jamie Spotswood 
                                  [phone] 
 
 GCM Resources plc 
 Tel: [phone] 
 [e-mail]; www.gcmplc.com 
 
 

About GCM Resources

GCM Resources plc (LON:GCM), the AIM listed mining and energy company, has identified a high quality coal resource of 572 million tonnes (JORC 2004 compliant) at the Phulbari Coal and Power Project (the Project) in north-west Bangladesh.

Utilising the latest highly energy efficient power generating technology the Phulbari coal mine is capable of supporting power plants of up to 6,000MW. GCM is awaiting approval from the Government of Bangladesh to develop the Project. The Company has a strategy of combining the Company's mine proposal with up to 6,000MW of power generation, together with credible, internationally recognised strategic partners. GCM aims to deliver a practical power solution to provide the cheapest electricity in the country, in a manner amenable to the Government of Bangladesh.

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact [e-mail] or visit www.rns.com.

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October 26, 2018 05:37 ET (09:37 GMT)