Sula Iron & Gold PLC Equity subscription to raise £900,000 (4733O)

TIDMSULA

RNS Number : 4733O

Sula Iron & Gold PLC

21 August 2017

SULA IRON & GOLD PLC

("Sula" or the "Company" or the "Group")

21 August 2017

Equity subscription to raise GBP900,000

Highlights

-- Subscription to raise GBP900,000 (gross) at a price of 0.146p per Ordinary Shares by investors secured by Riverfort Global Capital Ltd;

-- On admission of the subscription shares the Company will enter into an 'equity sharing' agreement with the Investors for an investment of GBP500,000;

-- As part of the financing and to maximise funds available for exploration, the Board has agreed to a 50 per cent. reduction in its salaries until December 2017;

-- Net proceeds of the subscription are expected to fully fund the Company's exploration activities well into 2018;

-- Final batch of assays from the recently completed 5,184m Phase III drill programme and regional surface sample programme have left Sierra Leone bound for ALS Laboratories;

-- Potential for a maiden resource at Sanama Hill, dependent on assay results from Phase III drill programme; and

-- Once the dry season returns to West Africa, the Company's exploration activities will be focused on continued regional surface sampling to ground-truth targets identified from the Tect structural survey and thereby identify future drill targets.

Sula (AIM: SULA), the gold exploration company focused on Sierra Leone, is pleased to announce that it has secured subscriptions from D-Beta One EQ Ltd and Cuart Investments PCC Ltd (the "Investors") via Riverfort Global Capital Ltd ("Riverfort") for an aggregate of GBP900,000 through the issue of 616,438,356 new ordinary shares 0.1p of the Company ("Ordinary Shares") at a price of 0.146p per Ordinary Share ("Subscription Price") ("Subscription"). The Board of Sula has concluded that the Subscription is in the best interest of the Company and its shareholders as the net proceeds are expected to fund the Group's day-to-day operational costs well into 2018.

Of the gross proceeds of the Subscription, GBP0.4 million will be retained by the Company for general working capital and the balance of GBP0.5 million will, subject to admission of the subscription shares to trading on AIM, be paid by the Company to the Investors pursuant to an 'equity sharing' agreement ("Sharing Agreement"), which entitles the Company to receive back the payment of GBP0.5 million on a pro-rata monthly basis until September 2018, subject to adjustment upwards or downwards each month depending on the Company's share price at the time as against a benchmark price of 0.161 pence per Ordinary Share ('Settlement Formula'). The Sharing Agreement provides the opportunity for the Company to benefit from positive future share price performances and will come into effect upon admission of the Subscription shares to trading on AIM.

Roger Murphy, CEO of Sula, stated;

"We welcome the support of our new investors and the confidence that they have in us to deliver significant shareholder returns. The Subscription is intended to cover the Group's activities well into 2018, enabling us to continue our planned development of the project. I strongly believe that this deal secures good capital at a tough time for junior explorers. Sula is facing a busy period with the large final batch of results from our recently completed 5,184m drill programme on Ferensola due in mid-September 2017. At the same time the results from our regional surface sample programme that was designed to assess some of the other targets for gold mineralisation will become available. Our next drilling campaign will be driven by these results"

Operational Outlook

Samples from the final 11 drill holes completed as part of the recent Phase III drill campaign, along with samples collected as part of the regional soil sample programme, have left Sierra Leone and are en route to the ALS Laboratories in Ireland. Results from the first three holes from this programme were announced on 3 August 2017 and the results from the remaining 11 drill holes will be released as soon as they become available, which is expected to be around mid to late September 2017.

Once this information is available, and during the rainy season when field work is difficult, a period of technical review and geological interpretation will commence followed by a peer review by technical specialists in the field of structural geology and Archaean Greenstone rocks like those at the Ferensola Gold Project.

If the data allows, Sula will seek to calculate a maiden resource on the Sanama Hill asset. Shareholders should be aware that this would be maiden resource and not a global resource and would only reflect a portion of the potential of our overall Ferensola licence area where evidence for multiple gold bearing occurrences are evident.

Sula will also use this period of interpretation and review to assess the most cost-effective means to expand the Company's understanding of the geology and gold endowment of the Ferensola licence area, once field work becomes possible again. The Company remains convinced that this endowment is very significant. Based on the success of the recently completed programme, an extension of the recent surface sample programme will be considered, to investigate some of the structural and other potential gold anomalies identified by Sula's prior work. This programme will generate targets for future drilling campaigns.

The Subscription

Pursuant to the Subscription, 616,438,356 new Ordinary Shares will be issued to the Investors secured by Riverfort at the Subscription Price for an aggregate amount of GBP900,000 (before expenses). GBP400,000 (gross) of the proceeds of the Subscription (being 44 per cent. of the Subscription) will be retained by the Company and GBP500,000 will be paid to the Investors pursuant to the Sharing Agreement, under which the Investors will then make, subject to the terms and conditions of the Sharing Agreement, monthly settlements (subject to the Settlement Formula) to the Company until September 2018 (the "End Date"), as detailed below.

The Subscription Shares will, when issued, represent approximately 19.77 per cent. of the Company's issued share capital as enlarged by the Subscription Shares ("Enlarged Share Capital").

Subject to confirmation by the Investors' solicitors to the Company being received later today of their receipt of the subscription funds from the Investors and the entering into by them and the Company's solicitors of necessary undertakings in connection with the performance of the Investors' payment obligations at Admission, in addition to the Subscription, the Company will enter into the Sharing Agreement, pursuant to which the Company will pay GBP0.5 million (being 56 per cent. of the gross proceeds of the Subscription) to the Investors. The Sharing Agreement will enable the Company to share in any appreciation in the Company's share price over a Benchmark Price (being 0.161p pence per Ordinary Share).

The Sharing Agreement provides that the Company will receive monthly settlement amounts adjusted by a quantity calculated by comparing the share price at that time to the Benchmark Price. The monthly settlement amounts for the Sharing Agreement is structured to commence around one month following Admission of the Subscription Shares.

The Sharing Agreement provides for a monthly payment to be made by the Investors to the Company, being GBP41,666(except for the first period which will be a partial month and adjusted accordingly) (the "Monthly Payment"). This payment may be adjusted up or down depending on whether the "Market Price", (calculated as the average of the lowest ten daily volume weighted average prices of the Ordinary Shares during the relevant month), is above or below the Benchmark Price. If the Market Price is above the Benchmark Price, then the Monthly Payment is increased based on the following formula:

Settlement Formula

GBP41,666 - (51,369,863 Ordinary Shares x 0.75 x (Market Price - Benchmark Price))

If the Market Price is below the Benchmark Price then the Monthly Payment is reduced based on the following formula:

GBP41,666 - (51,369,863 Ordinary Shares x (Benchmark Price - Market Price))

Assuming the Market Price equals the Benchmark Price on the date of each and every settlement, the Company would have received aggregate proceeds of GBP900,000 (before expenses) from the Subscription and Sharing Agreement, made up of the GBP400,000 of the Subscription initially retained by the Company and monthly settlements totalling GBP500,000.

Under no circumstances will fluctuations in the Company's share price result in any increase in the number of the Subscription Shares issued by the Company or received by the Investors. The Directors believe that a decline in the Company's share price would not result in any advantage accruing to the Investors and the Sharing Agreement allows both the Investors and the Company to benefit from future share price appreciation. The Investors have agreed to a lock up over the Subscription Shares until 13 September 2017 and have undertaken that neither they, nor any of their investors or affiliates will hold any short position in the Company's issued share capital.

Accordingly, application has been made for the Subscription Shares to be admitted to trading on AIM ("Admission") and it is expected that Admission will become effective and that dealings in the Subscription Shares will commence at 8.00 a.m. on 22 August 2017. The Subscription Shares will rank pari passu in all respects with the Company's existing Ordinary Shares and will be issued fully paid.

Following Admission, the Company's Enlarged Share Capital will comprise 3,118,769,065 Ordinary Shares. This figure may be used by shareholders as the denominator for the calculations by which they may determine if they are required to notify their interest in, or a change to their interest in, the Company under the Financial Conduct Authority's Disclosure and Transparency Rules.

For further information, please contact:

 
 Sula Iron & Gold plc 
 Roger Murphy (CEO)                 [phone] 
 WH Ireland Limited (Nominated 
  Adviser and Broker) 
  Paul Shackleton / James 
  Bavister                            [phone] 
 VSA Capital Limited (Broker) 
 Andrew Raca 
  Blytheweigh (Public Relations)    [phone] 
  Camilla Horsfall/ Nick Elwes       [phone] 
 Ongeza Mining (Financial 
  and Technical Adviser) 
 Iain Macpherson / Ilja Graulich    [phone] 
 

Prior to publication, certain information contained within this announcement was deemed to constitute inside information for the purposes of Article 7 of EU Regulation 596/2014 ("MAR"). In addition, market soundings (as defined in MAR) were taken in respect of the Subscription with the result that certain persons became aware of inside information (as defined in MAR), as permitted by MAR. Due to the publication of this announcement, those persons that received inside information in a market sounding are no longer in possession of such inside information relating to the Company and its securities.

About Riverfort Global Capital

Riverfort Global Capital Ltd is authorised and regulated by the FCA (Reference number 766760) and provides comprehensive and innovative growth funding solutions spanning a range of alternative funding sources from their network of specialist funds and family offices.

The strategy of Riverfort is to develop and structure long term capital & investment solutions for companies where the Riverfort team believe in the investment thesis. The Riverfort approach is flexible and combines both proprietary and co-investor capital to solve the collective action problem ensuring companies can achieve their capital funding objectives with less risk.

This information is provided by RNS

The company news service from the London Stock Exchange

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August 21, 2017 02:00 ET (06:00 GMT)