Ironveld PLC Strategic Partnership and Conditional Fundraising (0163I)

TIDMIRON

RNS Number : 0163I

Ironveld PLC

30 March 2020

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION AS DEFINED IN ARTICLE 7 OF THE MARKET ABUSE REGULATION NO. 596/2014 ("MAR"). UPON THE PUBLICATION OF THIS ANNOUNCEMENT, THIS INSIDE INFORMATION IS NOW CONSIDERED TO BE IN THE PUBLIC DOMAIN.

30 March 2020

Ironveld Plc

("Ironveld" or the "Company")

Strategic Partnership and Conditional Fundraising to raise US$3.2 million

Ironveld is pleased to announce a new strategic partnership with Inclusive Investment Group ("IIG") as part of which the Company has entered into arrangements to raise potential total gross proceeds of approximately GBP 2.7 million (US$3.2 million) (the "Fundraising").

The Fundraising comprises:

-- an option agreement between the Company and IIG (the "Option Agreement") pursuant to which, on grant of the Option (which is conditional), IIG can subscribe (the "Subscription") for 440,176,070 new ordinary shares in the capital of the Company (the "Subscription Shares") at a price of 0.42 pence per Subscription Share (the "Issue Price") (the "Option"); and

-- a term loan from IIG of US$1,000,000 (approximately GBP 840,000 ) (the "Loan Facility") to be entered into on completion of the Subscription. The Loan Facility will be capable of conversion at the Issue Price.

The grant of the Option and the Fundraising in general are wholly conditional on shareholder approval being granted at a general meeting of the Company (the "General Meeting") and to the Takeover Panel granting a Rule 9 Waiver*. The Company will publish a circular together with a notice to convene the General Meeting in due course. Under the terms of the Option Agreement, exercise of the Option must occur on or prior to 17 June 2020. Should these conditions not be met, then the Fundraising will not proceed.

Highlights

-- Total fundraising package agreed of US$3.2 million (approximately GBP 2.7 million) consisting of US$2.2 million (approximately GBP 1.85 million) equity and US$1.0 million (approximately GBP 840,000 ) loan from IIG;

-- IIG is an investment vehicle associated with Mcebisi Jonas and Monwabisi Twantwa in South Africa and is at the forefront of securing development for South Africa's coming wave of battery and strategic metals projects;

-- Following completion of the Subscription and the issue of the Salary Shares (as detailed below) IIG will own approximately 36.0 per cent. of the Company's issued ordinary share capital to become Ironveld's largest shareholder and will provide expertise and utilise its extensive African connections to secure the larger scale funding required by Ironveld to develop its near term high purity iron, vanadium and titanium project;

-- IIG has agreed to pay Ironveld an option fee of US$250,000 (approximately GBP 210,000), (payable within 3 days of the date of the Option Agreement) with such funds to be deductible from the eventual Subscription proceeds. This fee is non-refundable unless the Rule 9 Waiver is not granted or the resolutions are not approved at the General Meeting, in which case the fee would be repayable in full;

-- The Issue Price of 0.42 pence per new ordinary share of 0.1 pence represents a discount of 17.9 per cent. compared to the 20 day VWAP of 0.5113 pence and a premium of 5.0 per cent. to the mid market price of 0.40 pence on 27 March 2020, being the last trading day prior to this announcement;

-- IIG has agreed to extend a loan of US$1,000,000 (approximately GBP840,000) to Ironveld on completion of the Subscription. The Loan Facility will attract interest at a rate of 8 per cent. per annum, will be repayable 24 months from the date of drawdown and convertible at the option of IIG at the Issue Price. Should IIG choose to convert the loan and all accrued interest at the end of the loan term (and also assuming no further shares are issued by the Company other than those included in this announcement and constant exchange rates), they will be issued with a further 233,373,349 shares, taking its holding to 46.8 per cent. of the Company's issued share capital;

-- Ironveld and IIG have agreed that IIG will nominate two non-executive Directors to Ironveld's Board following completion of the Fundraising. Ironveld and IIG's relationship will be governed by a relationship agreement between the two on normal commercial terms limiting the ability of IIG to dictate Ironveld's strategy and board composition;

-- In addition, certain Ironveld Board Directors have agreed in principle, conditional on completion of the Fundraising, to capitalise substantially all of their historic deferred salaries and fees (totalling approximately GBP543,000) for 129,195,548 new ordinary shares in the capital of Ironveld (the "Salary Shares") at the same Issue Price of 0.42 pence;

-- The 440,176,070 Subscription Shares and 129,195,548 Salary Shares (together "New Ordinary Shares") will represent approximately 46.6 per cent. of the Company's enlarged issued ordinary share capital.

Martin Eales, Chief Executive Officer of Ironveld, said:

"This fundraising and strategic partnership mark a significant milestone for the Company which we believe will allow us to commence unlocking value from our Project.

"We are delighted to be working alongside IIG as our strategic partner and have no doubt that together we can capitalise on Ironveld's huge potential. We look forward to keeping the market updated on our progress."

Giles Clarke, Chairman of Ironveld, said:

"This agreement is the culmination of a great deal of hard work by Martin Eales, Peter Cox and the team. I am very grateful to them.

"We are delighted to welcome IIG as a shareholder and most importantly Mcebisi Jonas and his colleagues who are immensely well equipped to transform Ironveld's fortunes and lead the development of the project."

Reasons for the Fundraising and use of proceeds

The Company has not yet been revenue earning and therefore requires a certain level of funding to cover essential running costs and overheads, which the Fundraising proceeds should provide for until cashflows can be successfully derived from Phase 1 of the Company's development project. The substantial investment in Ironveld by IIG represents an exciting opportunity for Ironveld to bring on board a credible and serious partner to help drive its strategy, with relationships at the highest levels of South Africa's funding institutions.

The Company will look to utilise IIG's expertise in order to secure the broader financing required to bring the Company's project into development.

Information on IIG

IIG is a South Africa based investment group focussed on Africa. The group has interests in multiple sectors and has a particular focus on strategic metals and minerals within the region. The company has identified Ironveld as a near-production vehicle that it believes can accelerate into a leading strategic / battery metals player in the region. IIG was founded by Mcebisi Jonas, the current Chairperson of multinational mobile telecommunications group MTN, and Monwabisi Twantwa.

Current trading and Prospects

Ironveld expects to release its interim Financial Statements to 31 December 2019 following this announcement. There was no trading in the six months to 31 December 2019 and a normal level of operating overheads was incurred.

Details of the Option Agreement

Ironveld and IIG have entered into the Option Agreement which has the following key terms:

-- IIG has agreed to pay Ironveld an option fee of US$250,000 (approximately GBP 210,000), (payable within 3 days of the date of the Option Agreement) with such funds to be deductible from the eventual Subscription proceeds. This fee is non-refundable unless the resolutions are not approved at the General Meeting and / or the Takeover Panel does not grant a Rule 9 Waiver in respect of the Fundraising, in which case the fee would be repayable in full; IIG will, subject to the satisfaction of certain conditions, be granted a call option pursuant to which it can compel the Company to issue the Subscription Shares. The grant of this option is conditional upon the passing of the resolutions to be proposed at the General Meeting and the Takeover Panel granting a Rule 9 Waiver in respect of the Fundraising. IIG must exercise this option on or prior to 17 June 2020; and

-- The grant of the option to IIG is conditional on the Takeover Panel granting a Rule 9 Waiver and on resolutions being passed by the Company's shareholders at the Company's General Meeting regarding this Rule 9 Waiver and to enable the Subscription Shares to be issued at the Issue Price, given that this is less than the nominal value of the Company's existing ordinary shares of 1 pence each.

Details of the Loan Facility

Ironveld and IIG have the terms of a Loan Facility which is to be entered into at completion:

-- Unsecured loan of US$1,000,000 (approximately GBP 840,000) to be made by IIG to Ironveld to be drawn down in one tranche following completion of the Subscription;

-- The loan amount attracts interest at a rate of 8 per cent per annum and will be repayable 24 months from drawdown, extendable by mutual consent;

   --      The Company may elect to repay some or all of the Loan early without penalty; 

-- The loan amount will be convertible at IIG's option at the Issue Price of 0.42 pence, should IIG choose to convert the loan and accrued interest at the end of the term (assuming constant exchange rates), they would be issued with a total of 233,373,349 new ordinary shares; and

-- The Company will give standard representations and warranties to IIG pursuant to the Loan Facility.

General Meeting and Shareholder Approval

Shareholder approval will be required for the Option to come into effect and to allow any New Ordinary Shares to be issued pursuant to the Fundraising.

Resolutions required at the General Meeting will include:

   a)   a Rule 9 Waiver Resolution, in accordance with the provisions of the Takeover Code; 

b) by way of ordinary resolution to give the Directors authority to subdivide each existing ordinary share of 1 pence each into one ordinary share of 0.1 pence each and nine deferred shares of 0.1 pence each, with the deferred shares having the same rights and restrictions as the Company's existing deferred shares of 1 pence each;

c) by way of ordinary resolution to give the Directors authority to allot the New Ordinary Shares;

   d)   by way of special resolution to dis-apply statutory pre-emption rights in respect thereof; and 

e) by way of special resolution to amend Ironveld's current articles of association to include reference to the new ordinary shares, in particular detailing the rights attaching to the new ordinary shares.

The Directors (representing 4.41 per cent. of the issued ordinary share capital) and Tracarta Limited (representing 12.27 per cent. of the issued share capital) have all indicated that they will support the resolutions to be put forward at the General Meeting.

Settlement of Directors' Deferred fees and Salaries

In view of Ironveld's constrained financial position in recent years various members of the Board have deferred a proportion of their contractual salaries and fees. In settlement of these balances certain of the Directors (other than Martin Eales who for this purpose will assume the role of Independent Director) have agreed in principle to capitalise substantially all of the outstanding balances (totalling approximately GBP543,000) for new ordinary shares of 0.1 pence each in the Company at the Issue Price of 0.42 pence on completion of the Fundraising. The issue of the Salary Shares to the Directors will be deemed to be related party transactions under Rule 13 of the AIM Rules and be approved in due course in accordance with the AIM Rules upon exercise of the Option.

The following exchange rates have been assumed throughout this announcement, as determined by www.bankofengland.co.uk on 25 March 2020:

GBP1.00 : US$1.19

GBP1.00 : ZAR 20.50

US$1.00 : ZAR 17.40

For further information, please contact:

 
Ironveld plc                              c/o Blytheweigh 
 Giles Clarke, Chairman                    [phone] 
 Martin Eales, Chief Executive Officer 
finnCap (Nomad and Broker) 
 Christopher Raggett / Hannah Boros       [phone] 
Blytheweigh 
 Tim Blythe / Megan Ray                   [phone] 
 

*Rule 9 Waiver means the waiver, conditional on its approval by the Independent Shareholders** taken by a poll, by the Takeover Panel Executive (the "Panel") of the obligation that, following the issue of the shares pursuant to the exercise of the Option Agreement, would otherwise arise on IIG to make a general offer to all shareholders of the Company pursuant to Rule 9 of the Takeover Code as a result of the allotment and issue of shares pursuant to exercise of the Option Agreement by IIG.

**Independent Shareholders means the shareholders of the Company, excluding (i) IIG and any person acting in concert with them who holds Ordinary Shares and (ii) the directors of the Company, with the exception of the Independent Director.

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March 30, 2020 05:00 ET (09:00 GMT)