Chesterfield Resources plc is pleased to announce that, further to the announcement of 2 November 2017, it has today entered into a conditional share purchase agreement (“Acquisition Agreement”) pursuant to which it has agreed to acquire the entire issued share capital of HKP Exploration Ltd (“HKP”) (“Acquisition”).
The Company has today also entered into a conditional placing agreement (“Placing Agreement”) in relation to a placing of 10,766,667 new ordinary shares of 0.1p each in the capital of the Company (“Ordinary Shares”) (“Placing Shares”) at 7.5p per share to raise £807,500 (before expenses) (“Placing”) and has conditional subscription agreements (“Subscription Agreements”) in relation to a subscription of 15,900,000 new Ordinary Shares (“Subscription Shares”) at 7.5p per share to raise £1,192,500 (before expenses) (“Subscription”). In addition, one Ordinary Share subscription warrant (“Series C Warrant”), exercisable for two years at a subscription price of 15p per Ordinary Share, will be issued to participants in the Placing (“Placees”) and the Subscription (“Subscribers”) for every two Placing Shares or Subscription Shares subscribed.
The Acquisition, the Placing and the Subscription are all conditional upon admission of the entire issued and to be issued Ordinary Shares to the Standard Listed segment of the Official List of the UK Listing Authority and to trading on the Main Market of the London Stock Exchange (“Admission”). It is expected that Admission will become effective and dealings in the enlarged issued ordinary share capital of the Company will commence at 8:00am on 3 July 2018.
HKP and the HKP Portfolio
HKP was incorporated in the Republic of Cyprus under the Cyprus Companies Law Cap.113, as amended, on 1 July 2014 with company number HE 333726. The founder of HKP is Michael Green and the majority shareholders of HKP are Michael Green, David Hall and Jeremy Martin (“Principal HKP Sellers”). Conditional on Admission, David Hall (“Proposed Director”) will join the Board as a Non-Executive Director and Michael Green will be engaged as Country Manager and Head of Exploration, Cyprus.
The principal activity of HKP is the exploration for natural resources in Cyprus. Cyprus is a member of the European Union and has a rich heritage in mining for copper and gold.
Between February and April 2017, HKP made applications to the Mines Service of the Ministry of Agriculture, Rural Development and Environment of the Republic of Cyprus (“Mines Service”) for seven prospecting permits to search for minerals over the area of land specified in and on the terms and conditions of such prospecting permit (“Prospecting Permit”). Those seven Prospecting Permits (“HKP’s Granted Prospecting Permits”) were approved by the Mines Service between 10 January 2018 and 7 March 2018. Between January and March 2018, HKP made applications to the Mines Service for a further six Prospecting Permits. The applications for those six Prospecting Permits (“HKP’s Prospecting Permit Applications”) had not yet been approved by the Mines Service at the date of this announcement.
HKP’s Granted Prospecting Permits and HKP’s Prospecting Permit Applications (“HKP Portfolio”) consists of three project areas as follows:
- HKP’s Granted Prospecting Permits comprise a near contiguous block of seven Prospecting Permits on the western side of the Troodos Mountains forming the Troodos West Project, covering an area of 3,211 hectares (32.11 km2);
- five of HKP’s Prospecting Permit Applications, covering an area of 2,299 hectares (22.99 km2), form the Troodos North Project on the northern side of the Troodos Mountains; and
- the remaining one of HKP’s Prospecting Permit Applications, covering an area of 480 hectares (4.8 km2), forms the Troodos East Project on the eastern side of the Troodos Mountains.
HKP has a 100 per cent. interest in each of HKP’s Granted Prospecting Permits and HKP’s Prospecting Permit Applications, with no encumbrances or dilutive interests.
Each of HKP’s Granted Prospecting Permits are valid for a period of five years from grant, subject to annual renewal upon the payment of annual fees, and may be extended for a further period of five years. If the holder of a Prospecting Permit fails to comply with the conditions attached to such Prospecting Permit, the Prospecting Permit will be withdrawn.
All of the project areas within the HKP Portfolio are considered by the directors of the Company (“Directors”) and the Proposed Director to be highly prospective for copper and/or gold.
Terms of the Acquisition
The Company and the Principal HKP Sellers have today entered into the Acquisition Agreement, pursuant to which the Company has agreed, subject to certain conditions, to purchase the entire issued share capital of HKP, comprising 1,000 ordinary shares of €1.00 each, for £500,000, to be satisfied by the issue of 6,666,667 new Ordinary Shares to the HKP sellers at a price of 7.5p per Ordinary Share.
The Acquisition Agreement is conditional on, among other things, the Placing Agreement and the Subscription Agreements becoming or being declared unconditional in all respects, save for Admission, and Admission.
Under the Acquisition Agreement, the Principal HKP Sellers have given certain limited warranties to the Company in relation to the business and assets of HKP.
The Opportunity and the Objectives and Strategy of the New Group
The Directors believe that the Acquisition represents an attractive opportunity for the Company which meets the principal acquisition search criteria of the Company:
- the HKP Portfolio is considered by the Directors to be highly prospective, primarily for copper and gold, two of the most actively traded Exchange Traded Non-Ferrous Metals;
- HKP’s Granted Prospecting Permits include previously operating copper + pyrite mines at Limni, Kinousa, Uncle Charles, and Evloimeni. HKP’s Prospecting Permit Applications include previously operating copper + pyrite mines at Memi and Agrokipia. Exploitation at the mines was mainly by way of open-pit operations;
- the HKP Portfolio is located in the Republic of Cyprus, which is a member of the European Union;
- the Company will acquire the entire issued share capital of HKP which, in turn, has a 100% interest in the HKP Portfolio;
- the early stage of development of HKP provides the scope, through a focussed exploration work programme, to generate value for the Company’s shareholders; and
- the Principal HKP Sellers are highly experienced in the mineral exploration sector and will all contribute to the management of the Company and HKP (“New Group”) following completion of the Acquisition.
The market in which the New Group operates is global with participants in the market ranging from multi-national giants through to small private exploration businesses. The Directors and the Proposed Director believe that the New Group should be well placed to compete against other market participants on the basis of the following competitive advantages:
- Cyprus has a rich heritage in mining dating back to the earliest Bronze Age, in particular of mining copper from which the name of the island is derived, and the style of mineralisation is relatively well understood;
- HKP has a 100 per cent. interest in the HKP Portfolio;
- Cyprus is an EU member with close ties to the UK and, despite the ongoing partition of the island following the Turkish invasion in 1974, is well-ranked both in terms of ease of doing business and corruption perception, representing relatively low country risk;
- the climate in Cyprus allows for year-round exploration and mining operations;
- Cyprus has good infrastructure, such as road networks, mobile phone coverage, electricity and water supply, international airports and sea ports;
- copper and gold are both widely traded by participants in the metals markets, with the price of copper often seen as a barometer of global economic growth, representing relatively low commodity risk; and
- the Directors and the Proposed Director have wide-ranging experience working for and/or advising businesses operating within the natural resources sector and Michael Green provides local knowledge and community engagement in Cyprus.
The primary objective of the Company is to generate value for Shareholders, which the Company will seek to achieve through the definition of a Mineral Resource estimate from multiple prospects within the HKP Portfolio and, potentially, through further acquisitions.
The Proposed Work Programme
The New Group proposes a phased exploration work programme for the HKP Portfolio (“Proposed Work Programme”), the exploration target of which is a Mineral Resource of 1,000,000 to 5,000,000 tonnes from multiple prospects, at two per cent. copper plus more than one gram per tonne gold and silver/zinc credits. The Proposed Work Programme comprises three phases:
Phase 1 – Data collection and analysis
The aim of Phase 1 is to identify the most prospective areas within the HKP Portfolio and prioritise field work. This will be achieved by acquiring and collating into digital form all relevant available existing data from the Cyprus Geological Survey, academic studies and historical commercial activity. Spatial data will be captured into a GIS. All datasets will then be interrogated to identify areas and prospects where exploration will be prioritised.
Phase 2 – Confirmatory field studies
The aim of Phase 2 is to rank prospects and to define drill targets. Field studies will include geological and structural mapping, rock chip and trench sampling and ground geophysics and will start at areas and prospects prioritised during Phase 1. All new data will be integrated into an evolving exploration model.
Phase 3 – Drilling
The aim of Phase 3 is to drill targets defined in Phase 2 and define Mineral Resources. The style and quantum of drilling will be constrained by local conditions.
Each project area and each prospect within each project area, will move through the proposed exploration phases at different rates. For example, data collection and analysis are already quite advanced for the Troodos West Project and a number of prospects within it, whereas data are still being gathered for the Troodos North and Troodos East Projects. The primary focus of the Proposed Work Programme is the Troodos West Project, comprising HKP’s Granted Prospecting Permits. Less than 10 per cent. of the budget of the Proposed Work Programme is projected to be spent on the Troodos North and Troodos East Projects, comprising HKP’s Prospecting Permit Applications. The Troodos North and Troodos East Projects are expected to provide a pipeline of further exploration prospects for the New Group beyond the Proposed Work Programme, subject to the approval of HKP’s Prospecting Permit Applications.
The Directors and the Proposed Director expect the Proposed Work Programme to be completed within 12 months at a cost of approximately £1,100,000.
In addition to pursuing the exploration of the HKP Portfolio, the Company will continue to seek acquisition opportunities in the sector. Particularly attractive acquisition opportunities will continue to include companies, businesses or assets where an identified mineral resource can be optimised or increased or where value can be unlocked.
The Placing and the Subscription and Use of Proceeds
The Company has raised gross proceeds of £2,000,000 through the Placing and the Subscription, conditional on Admission.
Under the Placing and the Subscription, the 10,766,667 Placing Shares and the 15,900,000 Subscription Shares have been conditionally subscribed for by the Placees and the Subscribers, respectively, at 7.5p per Ordinary Share. A total of 13,333,322 Series C Warrants will be issued to the Placees and the Subscribers.
In accordance with Listing Rule 14.3, on Admission at least 25 per cent. of the Ordinary Shares will be in public hands (as defined in the Listing Rules).
The Placing and the Subscription are conditional on, inter alia, Admission. If Admission does not occur, neither the Placing nor the Subscription will proceed and all monies paid will be refunded to the applicants.
Completion of the Placing and the Subscription will be announced via a regulatory news service on Admission, which is expected to take place at 8.00 a.m. on 3 July 2018.
At the issue price of 7.5p per Ordinary Share, the enlarged issued ordinary share capital of the Company will have a market capitalisation of £4,645,000 on Admission.
The Placing is subject to the satisfaction of conditions contained in the Placing Agreement, including Admission occurring on or before 3 July 2018 or such later date as may be agreed by the Company and Shard Capital Partners LLP (being not later than 15 July 2018).
The Subscription is subject to the satisfaction of conditions contained in the Subscription Agreements, including Admission occurring on or before 3 July 2018 or such later date as may be determined by the Company (being not later than 15 July 2018).
Admission is expected to take place and dealings in the enlarged issued ordinary share capital of the Company are expected to commence on the London Stock Exchange at 8.00 a.m. on 3 July 2018.
After deduction of the estimated expenses of the Acquisition, the Placing, the Subscription and Admission, amounting to approximately £500,000, the net proceeds of the Placing and the Subscription (“Net Proceeds”) are estimated to be approximately £1,500,000.
The Company’s intention is to use the Net Proceeds as follows:
- the Proposed Work Programme for the HKP Portfolio – approximately £1,100,000, which is expected to be broken down as follows:
o Phase 1 – data collection and analysis – approximately £90,000;
o Phase 2 – confirmatory field studies – approximately £130,000; and
o Phase 3 – drilling – approximately £880,000; and
- additional general working capital to be applied towards ongoing corporate costs and expenses (including directors’ and key personnel’s remuneration and consultancy fees and other internal costs of sourcing, reviewing and pursuing any further acquisitions) – approximately £400,000.
The Board and key personnel
The Directors and the Proposed Director
The Directors have been the only directors of the Company since its incorporation and have led the Company through its development to date. The Directors are:
Christopher Hall, Non-Executive Chairman, aged 68
Christopher is an experienced mining finance and investment specialist and corporate manager with a career spanning more than 40 years and encompassing exploration and mine geology, mining share analysis, specialist fund management, M&A, general management and wide-ranging consultancy. Between 1998 and 2003, Christopher was with international mining consultants, Behre Dolbear International Limited, initially as a consultant and then from 2000 as President, managing the UK office covering Europe, the Middle East, Russia, the Former Soviet Union, India and parts of Asia. He acted as an in-house mining adviser/resources specialist for international accountant and AIM Nominated Adviser Grant Thornton LLP, UK from 2005 until 2015, advising capital markets and audit functions. Christopher is a Director of Rift Resources Limited, a private exploration company operating in East Africa and the Middle East, and, until 2016, was Non-Executive Chairman of AIM-traded companies Stratex International plc, a gold producer and explorer active in Turkey and Senegal with strategic interests in East Africa and Ghana, and Goldstone Resources plc, an exploration company operating principally in Ghana. Christopher holds a BSc degree in Geology from the University of Reading, an MSc degree in Exploration and Mining Geology from the University of Leicester and is a Chartered Engineer, Member of the Institute of Materials, Minerals and Mining.
David Cliff, Non-Executive Director, aged 72
David is an experienced geologist who spent 26 years working in a management capacity for the Rio Tinto Exploration group until 2006, including the last five years as Exploration Manager Europe. During his time with Rio Tinto Exploration, he headed exploration teams in the wider European area, including the discovery and evaluation of the Çöpler gold mine in Turkey, now owned and operated by Alacer Gold Corporation. David commenced his career in 1968 with the Union Corporation group, spending seven years in South Africa (including work on the discovery and evaluation of the Beatrix Gold Mine complex, as well as the development of the Unisel mine and production-related geology at St Helena Gold Mine). Prior to that he spent four years in the United Kingdom, mainly involved in development and production at two Cornish tin mines. More recently, he was a Director and Chief Executive Officer of Columbus Copper Corporation (formerly Empire Mining Corp.), a Toronto Venture Exchange listed exploration company exploring copper and gold assets in western Turkey and chromite in Albania, until its merger with Energulf Resources Inc. in 2015. David holds a BSc honours degree in Geology from University College London and is a Chartered Engineer, Member of the Institute of Materials, Minerals and Mining.
Derek Crowhurst, Non-Executive Director, aged 56
Derek has spent more than 30 years working in the City of London, having commenced his career with R. Nivison & Co. (ultimately absorbed into Smith & Williamson Investments) as a fixed-interest analyst before progressing to the eurobond sales/trading desk, where he became involved in the issuance of eurodollar convertible bonds. He became increasingly focused on providing corporate financial advice, culminating in him joining Keith, Bayley Rogers & Co. in 1993, where he worked on numerous IPOs (on both the Official List and AIM), secondary fund raisings and M&A transactions. After spending more than 15 years with Keith, Bayley, Rogers & Co., the last two years of which as Managing Director of the business, Derek left to join Religare Capital Markets Limited in 2009 and moved to natural resources specialists VSA Capital Limited in 2012. Since January 2014, he has been a Director – Corporate Finance with corporate financial advisory boutique, Argento Capital Markets Limited. Derek holds a BSocSc honours degree in Mathematics, Economics and Statistics from the University of Birmingham and is a Fellow of the Chartered Institute for Securities and Investment and an FCA Approved Person.
Peter Damouni, Non-Executive Director, aged 40
Peter has over 17 years of experience in investment banking and capital markets, with expertise in mining and oil and gas. During his career, Peter has worked on and led equity and debt financings valued at more than $5 billion. He has comprehensive experience in equity financing, restructuring, corporate valuations and advisory assignments. Peter is a Non-Executive Director of Georgian Mining Corporation, an AIM traded copper and gold development and exploration company and of Kerr Mines, Inc., a Toronto Stock Exchange listed North American gold development and exploration company based in Toronto, Canada. He holds a double major BA honours degree in Economics, Finance and Political Science from McGill University, Montreal, Canada.
With effect from Admission, the Proposed Director will join the Company as a Non-Executive Director. The Proposed Director is:
David Hall, Proposed Non-Executive Director, aged 59
David has nearly 30 years of experience in the exploration sector and has worked on and assessed exploration projects and mines in more than 50 countries and is one of the Principal HKP Sellers. From 1992, he was Chief Geologist for Minorco SA, responsible for Central and Eastern Europe, Central Asia and the Middle East. He moved to South America in 1997 as a consultant geologist for Minorco South America and subsequently became exploration manager for AngloGold South America in 1999, where he was responsible for exploration around the Cerro Vanguardia gold mine in Argentina, around the Morro Velho and Crixas mines in Brazil and establishing the exploration programme that resulted in the discovery of the La Rescantada gold deposit in Peru as well as certain joint ventures in Ecuador and Colombia. David was a founder and executive director of Stratex International Plc, an AIM traded company with exploration assets in Turkey, and was also a founder of Erris Resources plc, an AIM traded company with exploration assets in Ireland and Sweden, where he remains a technical adviser. He is also currently CEO of Thani-Stratex Resources Ltd, a private gold exploration and development company focused on North and East Africa and the Middle East, and Non-Executive Chairman of Horizonte Minerals Plc, an AIM traded and Toronto Stock Exchange listed company with development stage nickel assets in Brazil. David holds a BA honours degree in geology from Trinity College Dublin and an MSc in Mineral Exploration from Queens University, Kingston, Ontario and is a Fellow of the Society of Economic Geologists, a Member of the Institute of Geologists of Ireland, a EuroGeol and P. Geo.
The management team of the New Group will comprise the Directors and the Proposed Director and the following key personnel.
Dr Michael Green, Proposed Country Manager and Head of Exploration, Cyprus, aged 48
Michael is a geologist with more than 20 years of mineral exploration experience, including managing all aspects of exploration programmes targeting a broad range of commodities but particularly gold, copper and nickel. He is the founder, a director and company secretary of HKP and one of the Principal HKP Sellers and has built the HKP Portfolio. Michael has operated as an independent geological consultant and has worked with numerous publicly traded and private companies. He was Chief Operating Officer of BMG Resources Limited, an Australian Stock Exchange listed company, where he managed its exploration portfolio in Cyprus. Michael holds a BSc honours degree in geology from the University of Western Australia and gained his PhD in geology from the University of Sydney, Australia. He is a Member of the Australian Institute of Geoscientists.
Christopher Hall, Non-Executive Chairman, said “I am delighted we are able to announce today the acquisition of HKP, which holds an exciting package of exploration licences and applications in Cyprus. Your board believes they are highly prospective for the discovery and development of copper-gold resources. The fund raising, together with our existing cash balances, provides the funding for our highly focussed programme of evaluation and exploration.
This transaction has achieved the initial objective of the company when it was listed in August last year. We look forward to working with David Hall, who will be joining the board, and Michael Green, who will be our country manager in Cyprus, and to updating shareholders on the progress of our exploration programme in the coming months.”
For further information please visit http://www.chesterfieldresourcesplc.com or contact:
|Chesterfield Resources plc:|
|Christopher Hall, Non-Executive Chairman||Tel: +44(0)7773 427726|
|Peter Damouni, Non-Executive Director||Tel: +44(0)7771 787788|
Shard Capital (Broker):
|Damon Heath||Tel: +44(0)20 7186 9952|
|Erik Woolgar||Tel: +44(0)20 7186 9964|
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