Proposed Subscription, Proposed Issue of Warrants and Issue of Equity

Proposed Subscription, Proposed Issue of Warrants and Issue of Equity

ECR Minerals plc

AIM: ECR

US OTC: MTGDY

ECR MINERALS plc
(“ECR Minerals”, “ECR” or the “Company”)

PROPOSED SUBSCRIPTION BY CHINESE INVESTOR TO RAISE £0.55 MILLION
PROPOSED ISSUE OF WARRANTS AND ISSUE OF EQUITY

LONDON: 27 FEBRUARY 2017 - The directors of ECR Minerals plc (the “Directors”) are pleased to announce that the Company has conditionally raised gross proceeds of £553,564 (“Gross Proceeds”) pursuant to a subscription by the Shenyang Xinliaoan Machinery Co Ltd (“Shenyang” or the “Investor”) based in the People’s Republic of China, for 55,356,391 new ordinary shares of the Company (“Subscription Shares”) at a price of 1 pence per Subscription Share (“Subscription Price”) (the “Subscription”). Conditional on completion of the Subscription, the Investor will also be issued warrants over 83,034,586 new ordinary shares in total (the “Investor Warrants”). Of the Investor Warrants, 55,356,391 are exercisable at a price of 2 pence per share and 27,678,195 have an exercise price of 5 pence per share.

HIGHLIGHTS

• Shenyang Xinliaoan Machinery Co Ltd has conditionally agreed to subscribe for a 29.9% shareholding in ECR
• Shenyang Subscription Shares to be subject to 12-month lock-up
• £100,000 non-refundable deposit receivable from the Investor, to be converted into ordinary shares at a price of 2p per share in the event the conditions of the Subscription are not satisfied by 31 March 2017
• Proceeds to be used for drilling programmes in Australia and Argentina and working capital including review of potential new projects and business areas
• Upon completion of the Subscription, Shenyang are able to recommend up to two directors who may be appointed as members of the ECR board
• Issue of shares to directors, consultants and suppliers who have opted to take ECR shares in lieu of fees owed

Craig Brown, CEO of ECR, commented:

“We are delighted to welcome Shenyang Xinliaoan Machinery Co Ltd as an investor in ECR. One of the principal challenges faced by companies such as ECR is in securing investors who are prepared to take a longer term view. We believe the fact that the Investor has agreed to a 12-month lock up with respect to the Subscription Shares speaks volumes in this regard, and is a real vote of confidence in ECR and its strategy. We look forward to using part of the net proceeds of the Subscription to press ahead with the planned drilling programmes at the Avoca and Bailieston projects in Australia and the SLM gold project in Argentina in due course.”

Issue of shares in lieu of fees

In addition to the Subscription, the directors of ECR announce that the Company has issued 6,673,021 new ordinary shares of 0.001 pence in the Company (“Ordinary Shares”) at a price of 1 pence per Ordinary Share (being the same price as the Subscription Price) in lieu of salary and fees owed to certain directors, consultants and suppliers to the Company (the “Fee Shares”). In relation to this, 2,623,750 Fee Shares have been issued to suppliers and consultants, of which 343,750 Fee Shares have been issued to former director Stephen Clayson in lieu of fees owed for ad hoc consultative and administrative services. The remaining 4,049,271 Fee Shares have been issued to directors as follows:

Director		Fee Shares issued		Total holding following issue of the Fee Shares		Percentage Shareholding following issue of the Fee Shares
William Howell		1,500,000		1,500,000		1.10%
Ivor Jones		1,000,000		1,000,000		0.74%
Craig Brown		1,549,271		1,549,271		1.14%

The issue of Fee Shares to Craig Brown, Ivor Jones, Bill Howell and Stephen Clayson constitutes related party transactions under the AIM Rules for Companies, by virtue of the parties all being or having been directors of ECR within the preceding twelve months. Christian Dennis, non-executive director, who is independent of the related party transactions considers, having consulted with Cairn Financial Advisers LLP, the Company’s nominated adviser, that the terms of these related party transactions are fair and reasonable insofar as ECR shareholders are concerned.

The issue of the Fee Shares uses the Company’s existing share authorities to allot Ordinary Shares, accordingly, application will be made for admission of the Fee Shares to trading on AIM, which is expected to occur on 6 March 2017 (“Admission”). Following Admission of the Fee Shares, ECR’s issued ordinary share capital will comprise 135,899,461 Ordinary Shares. This number represents the total voting rights in the Company and following Admission may be used by shareholders as the denominator for the calculation by which they can 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. The new Ordinary Shares will rank pari passu in all respects with the Ordinary Shares of the Company currently traded on AIM.

Subscription Agreement and Deposit

Pursuant to a subscription agreement entered into with the Investor (“Subscription Agreement”), the Investor has conditionally subscribed for 55,356,391 new ordinary shares in the Company at a price of 1 pence per Subscription Share.

Completion of the Subscription is conditional upon, amongst other things:

a) the Investor receiving government approval and permission to remit the Gross Proceeds to the Company;

b) receipt of the Gross Proceeds (less the Deposit amount, as described below, where applicable) by the Company by 31 March 2017 (“Receipt Date”);

c) the passing of certain resolutions at a general meeting of shareholders (“Resolutions”) (“General Meeting”) to provide the Company with sufficient shareholder authorities to issue the Subscription Shares;

d) admission of the Subscription Shares to trading on AIM (“Subscription Shares Admission”);

e) the entry by the Company into the warrant instrument which is described further below.

As noted above, receipt of the Gross Proceeds is conditional on, amongst other things, approval from the Chinese government to remit the Gross Proceeds to the Company. Accordingly, it has been agreed that a non-refundable deposit of £100,000 in aggregate be paid to the Company by 4 March 2017 on behalf of the Investor (“Deposit”).

In the event that condition b) above is met by 31 March 2017 (and the remaining Subscription conditions are met), the Deposit amount will be treated as a payment on account and will be deducted from the Gross Proceeds to be received by the Company. In the event that condition b) is not met by 31 March 2017, the amount of the Deposit received will be converted into ordinary shares in the Company at a price of 2 pence per share (to be issued to the Investor (the “Deposit Shares”) and ECR, at its election, may either terminate the Subscription Agreement or extend the Receipt Date (“Extension”).

In the event of an Extension, the Investor will be required to transmit the full amount of the Gross Proceeds to the Company in order to complete the Subscription however, the total number of Subscription Shares to be issued to the Investor shall be capped at such number of ordinary shares which equates to 29.9 per cent of the Company’s issued share capital at the date of Subscription Shares Admission. Where the initial number of Subscription Shares to be issued is less than 55,356,391 due to this restriction, the Company will retain any balance of the Gross Proceeds and apply it to the issue of further Subscription Shares to the Investor at the Subscription Price as and when the Company is able to allot and issue such Subscription Shares without increasing the Investor’s holding above 29.9 per cent of the Company’s issued share capital.

Subject to the issue of the Subscription Shares, (but excluding the Deposit Shares), the total number of Ordinary Shares in issue will be 184,582,831 and the Investor will hold 29.9 per cent of the enlarged share capital of the Company.

The Company will update the market in due course, in particular with respect to the receipt of funds pursuant to the Subscription; the notice of general meeting; and applications for admission to trading on AIM of the Subscription Shares issued pursuant to the Subscription.

Lock-up arrangements

The Subscription Shares will be subject to a lock-up for a period of 12 months following the date of Subscription Shares Admission. The lock-up arrangements will be subject to standard carve outs in relation to, inter alia, transfer of the Subscription Shares to a nominee account; and accepting (or making an irrevocable commitment in connection with) a general offer made to all shareholders under the City Code on Takeovers and Mergers.

Director appointment rights and pre-emption rights

Pursuant to completion of the Subscription, the Investor is able to recommend up to two directors to be appointed to the board of the Company. The Company will make further announcements in due course as and when any board appointments are made.

The Investor will, from Subscription Shares Admission, be granted certain pre-emption rights for so long as the Investor holds over 20 per cent of the issued share capital of the Company.

Warrant instrument

Conditional on completion of the Subscription Agreement, the Company has agreed to enter into a warrant instrument, pursuant to which the Investor will be issued, conditional on completion of the Subscription, the Investor Warrants.

The Investor Warrants are to be issued in two tranches, both of which are exerciseable for a five year period from the date of Subscription Shares Admission of the Subscription Shares:

• warrants over 55,356,391 ordinary shares, exercisable at a price of 2 pence per new ordinary share;
• warrants over 27,678,195 ordinary shares, exercisable at a price of 5 pence per new ordinary share.

Investor Relationship Agreement

In the event of completion of the Subscription, the Investor will become a 29.9 per cent shareholder in the Company. Accordingly, the Company, the Investor and its connected parties and Cairn Financial Advisers LLP, have agreed to enter into a relationship agreement on completion of the Subscription, pursuant to which the Investor, in its capacity as a substantial shareholder, will give various undertakings to the Company to ensure the relationship and any arrangements between the Investor, its associates and the Company remain on an arm’s length basis and are transacted on normal commercial terms. The Relationship Agreement will remain in force for so long as the Investor holds a direct or indirect interest in at least 20 per cent of the Company's issued ordinary share capital.

Use of Proceeds of the Subscription

The net proceeds of the Subscription, being approximately £525,886, are expected to be used as follows:

• to progress the Avoca and Bailieston gold projects in Victoria, Australia;
• to progress the SLM gold project in Argentina; and
• for general working capital purposes to support the other activities of the Company, including the review of potential new projects and business areas.

Takeover Code implications

Under Rule 9 of the Takeover Code, where any person acquires, whether by a single transaction or a series of transactions over a period of time, interests in securities which (taken together with securities in which he is already interested and in which persons acting in concert with him are interested) carry 30 per cent or more of the voting rights of a company which is subject to the Takeover Code, that person is normally required by the Takeover Panel to make a general offer to all the remaining shareholders of that company to acquire their shares. A waiver of Rule 9 of the Takeover Code is not being sought in respect of the proposed Investor Warrants which may be issued, therefore, Shareholders should note that exercise of the Investor Warrants would be dependent on the Investor’s percentage holding in the ordinary share capital of the Company reducing or, the Investor being required to make an offer for the Company’s entire issued share capital pursuant to Rule 9 of the Takeover Code.

ABOUT ECR

ECR is a mineral exploration and development company. ECR’s wholly owned Australian subsidiary Mercator Gold Australia has acquired 100% ownership of the Avoca and Bailieston gold projects in Victoria, Australia. ECR has earned a 25% interest in the Danglay epithermal gold project, an advanced exploration project located in a prolific gold and copper mining district in the north of the Philippines. An NI43-101 technical report was completed in respect of the Danglay project in December 2015, and is available for download from ECR’s website.

ECR’s wholly owned subsidiary Ochre Mining has a 100% interest in the SLM gold project in La Rioja, Argentina. Exploration at SLM has focused on identifying small tonnage mesothermal gold deposits which may be suitable for relatively near term production.

Market Abuse Regulations (EU) No. 596/2014

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014 (MAR). Upon the publication of this announcement via Regulatory Information Service (RIS), this inside information is now considered to be in the public domain.

FOR FURTHER INFORMATION, PLEASE CONTACT:

ECR Minerals plc		Tel: [phone]
William (Bill) Howell, Non-Executive Chairman
Craig Brown, Director & CEO Ivor Jones, Director & COO
Email: [e-mail]
Website: www.ecrminerals.com
Cairn Financial Advisers LLP		Tel: [phone]
Nominated Adviser
Emma Earl / Jo Turner
Optiva Securities Ltd		Tel: [phone]
Joint Broker
Graeme Dickson
FlowComms		Tel: [phone]
Investor Relations
Sasha Sethi
Blytheweigh		Tel: [phone]
Public Relations
Tim Blythe / Camilla Horsfall / Nick Elwes

FORWARD LOOKING STATEMENTS

This announcement may include forward looking statements. Such statements may be subject to numerous known and unknown risks, uncertainties and other factors that could cause actual results or events to differ materially from current expectations. There can be no assurance that such statements will prove to be accurate and therefore actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward looking statements. Any forward-looking statements contained herein speak only as of the date hereof (unless stated otherwise) and, except as may be required by applicable laws or regulations (including the AIM Rules for Companies), the Company disclaims any obligation to update or modify such forward-looking statements because of new information, future events or for any other reason.

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