Notice of EGM

RNS Number : 7007T

Eurasia Mining PLC

10 June 2009

 



Eurasia Mining plc

(the 'Company' or 'Eurasia')

Conditional Deed of Variation

Proposed Restructuring

Circular and Notice of General Meeting

The Company announces its intention to convene a General Meeting of the Company at The East India Club, 16 St. James's Square, London, SW1Y 4LH on 29 June 2009 at 2.30 p.m. to seek shareholder approval for a number of proposals to restructure the share capital of the Company, including the approval of a number of conditional agreements which are detailed below.

In particular, the Company has today executed (i) a conditional deed of variation with Deloan Investments Limited ('Deloan') (the 'Deed of Variation') in respect of a subscription agreement made between the Company and Deloan, dated 27 May 2008 (the 'Subscription Agreement') and, as a consequence of the Deed of Variation, (ii) a conditional Warrant Instrument issuing 200,000,000 warrants to Deloan over new ordinary shares in the Company (as defined below) in substitution for Deloan's existing rights over 40,000,000 warrants (the 'New Warrants') (the 'Proposals'). These agreements require shareholder approval because of the proportion of ordinary shares that Deloan could acquire in Eurasia if the agreements were completed.

It is also proposed by the Company that the following steps be implemented as part of the restructuring process:

• each existing ordinary share of 5p each in the Company be sub-divided and re-designated by the creation by one new ordinary share with a nominal value of 0.1p (a 'New Ordinary Share') plus one deferred share with a nominal value of 4.9p;

• the Company will make available to each shareholder one warrant (the 'Shareholder Warrants') to subscribe for one New Ordinary Share exercisable at 1p within a period of nine months for each three existing ordinary shares of 5p each in the capital of the Company (the 'Existing Ordinary Shares') held on the Warrant Record Date (as defined in the circular detailed below); and

• the terms of the Series A Warrants and the Series A Loan Notes be varied so that they are exercisable into New Ordinary Shares at a price of 1p each on terms similar to those proposed in the Deed of Variation. The Series A Warrants and the Series A Loan Notes are held by, amongst other people, Christian Schaffalitzky, Gary Fitzgerald (directors of the Company) and Mrs J Martineau, the wife of Michael Martineau (a director of the Company). 

(the 'Additional Proposals')

Reasons for the Transaction

The purpose of the Subscription Agreement was to provide longer term financing for the Company and to introduce a new partner to help with project development in Russia. Since the Subscription Agreement was executed, the price of the Company's Ordinary Shares has fallen below the nominal value of 5p. The warrants issued to Deloan as part of the Subscription Agreement are exercisable at 5p and the Board considers that there is a substantial risk that if no action is taken Deloan will be placed in a position where it would no longer make commercial sense to exercise them.

The Board has been working closely with Dmitry Suschov, a director of the Company, who wholly owns and controls Deloan, for over a year and have developed plans to expand the Company's gold exploration activities in Russia and to use the current market conditions to secure investment opportunities in the minerals industry together. The Directors see considerable opportunities and the Company has an experienced team in place to build upon them if secured. 

The Board believes that if the Company is to continue and flourish, it is essential that new structures are put in place which will give the Board flexibility in fundraising.

The Additional Proposals therefore posit that, subject to Shareholder approval, each Existing Ordinary Share be sub-divided and re-designated into one New Ordinary Share and one Deferred Share (as defined in the Circular). However, in recognition of the disruption that such a change can cause and to give Shareholders the benefit of any upside potential should markets improve in the future, and any potential gain through the association with Deloan, the Company will offer to Shareholders one Shareholder Warrant for every 3 Existing Ordinary Shares held. More details of which are set out below.

In addition, to maximise the probability of exercise and/or conversion of the outstanding convertible instruments in the Company, it is proposed that the terms of the Series A Warrants, the Series A Loan Notes, the Warrants and the Loan Notes, all of which are defined below, be varied so that they are exercisable into New Ordinary Shares such that the number of New Ordinary Shares to be issued as a result of the conversion of these instruments is five times greater than the number of Existing Ordinary Shares that would have been issued under the current arrangements.

As set out above, the Proposals and the Additional Proposals are subject to approval of Shareholders at a General Meeting of the Company. A circular, setting out full details of the Proposals and the Additional Proposals (the 'Circular') which includes a notice of General Meeting will be dispatched to Shareholders on or around 12 June 2009.  A copy of the Circular will also be available from 12 June 2009 on the Company's website www.eurasiamining.co.uk.

In addition, the Proposals are subject to approval from the Panel on Takeovers and Mergers as, if Deloan was to exercise its new rights pursuant to the Deed of Variation and the New Warrants it could hold up to 300,000,000 New Ordinary shares in the Company, representing a maximum of 58.53% of the then issued share capital of the Company. 

Subscription Agreement

As announced on 28 May 2008, pursuant to the Subscription Agreement, Deloan agreed to subscribe for 4 convertible loan notes, each of a nominal value of £250,000, on 30 May 2008, 29 August 2008, 28 November 2008 and 27 February 2009 (each a 'Loan Note'). Pursuant to the Subscription Agreement, each Loan Note is convertible into 5,000,000 ordinary shares of 5 pence each in the capital of the Company ('Ordinary Shares') at a price of 5p per Ordinary Share. In addition, pursuant to the Subscription Agreement, Deloan would, subject to subscribing for all of the Loan Notes, be issued with warrants to subscribe for up to 40,000,000 Ordinary Shares, in four tranches, at a price of 5p per Ordinary Share (the 'Warrants'). As announced on 28 May 2008, Deloan's total shareholding pursuant to these arrangements could have increased to up to 60,000,000 Ordinary Shares, representing 29.8% of the issued share capital of the Company.

Deed of Variation

Pursuant to the Deed of Variation, it is agreed that, subject to the conditions set out below, each Loan Note will convert into 25,000,000 New Ordinary Shares instead of 5,000,000 Existing Ordinary Shares at a price of 5p each. In addition, each Warrant would be amended by a separate Warrant Instrument to the effect that it constitutes one warrant to subscribe for up to 200,000,000 New Ordinary Shares at a price of 1p per New Ordinary Share. The change in the par value of the Ordinary Shares from 5p to 0.1p requires shareholder approval before it can be implemented.

Dmitry Suschov, Deloan and Related Party considerations

Dmitry Suschov, a director of the Company, is the sole shareholder and director of Deloan and as such is deemed to be a related party for the purposes of the AIM Rules for Companies.  Deloan and Dmitry Suschov (together the 'Primary Lender') are currently interested in 60,000,000 Ordinary Shares carrying 29.8% of the voting rights of the Company.

If the Proposals are approved by Shareholders, the Primary Lender could hold 300,000,000 New Ordinary Shares, a maximum holding of 58.53% of the then issued share capital of the Company. 

Given the interest in New Ordinary Shares that Dmitry Suschov and Deloan would hold, they would be required by Rule 9 of the City Code ('Rule 9') to make a general offer to Shareholders to acquire all of the issued New Ordinary Shares of the Company if Deloan was to convert its interests in the Loan Notes and the New Warrants into New Ordinary Shares. Under Rule 9, any person who acquires an interest (as defined in the City Code) in shares which, taken together with shares in which he is already interested and in which persons acting in concert are interested, carry 30 per cent. or more of the voting rights of a company which is subject to the City Code is normally required by the Panel on Takeovers and Mergers (the 'Panel') to make a general offer to all the remaining shareholders to acquire their shares.  

Dmitry Suschov and Deloan each wish, for the benefit of all Shareholders, to preserve the AIM quotation of the Company rather than make an offer for the remaining New Ordinary Shares in issue. The Company is, therefore proposing to seek a waiver of the obligations that would otherwise be placed on the Primary Lender, pursuant to Rule 9 of the Code, at the General Meeting of the Company (the 'Waiver').  

Shareholders should be aware that, if the Waiver was approved by Shareholders, the Deed of Variation was completed, the New Warrant was issued in its amended form and the convertible rights associated with the instruments were exercised, the members of the Primary Lender could, between them, hold more than 50% of the voting rights attaching to the Company's issued share capital. Accordingly, Dmitry Suschov and Deloan may be able to increase their aggregate interest in shares without incurring any further obligation under Rule 9 of the Code to make a general offer. However, neither Dmitry Suschov nor Deloan will be able to increase their percentage shareholding through a Rule 9 threshold without Panel consent.

Conditions

Completion of the Deed of Variation and the New Warrants is conditional on, inter alia, the Company convening a General Meeting at which Shareholders approve:

• the subdivision of the share capital of the Company from one new ordinary share of 5p into one ordinary share of 0.1p and one deferred share of 4.9p; 

• the waiver, agreed with the Panel for the purposes of Rule 9 of the Code, by independent shareholders voting on a poll, of the obligations that would otherwise arise as a result of the Deed of Variation and the New Warrants; and

• the Deed of Variation and the New Warrants.

Completion of the Deed of Variation and the New Warrants is also conditional on the Panel granting the Waiver.

Related Party

With the exception of Dmitry Suschov, who is the sole director and shareholder of Deloan, the independent directors of the Company, having consulted with WH Ireland Limited, the Company's Nominated Adviser, consider that the Proposals, as part of the re-organisation of the Company, are fair and reasonable insofar as the Shareholders are concerned.

Re-designation

The market price of each of the Company's Existing Ordinary Shares is currently below its nominal value. As the Company is prohibited by the Companies Act 1985 from issuing shares at a discount to their nominal value, the Company is presently unable to raise additional finance by way of a share subscription. The Board therefore proposes that each of the Existing Ordinary Shares be sub-divided and re-designated into one New Ordinary Share and one Deferred Share (as defined in the Circular). The rights attaching to the New Ordinary Shares will be the same as the rights attaching at the present time to the Ordinary Shares. The proposed Deferred Shares will generally give the holders of the Deferred Shares (i) no right to vote, attend or speak at general meetings of the Company; (ii) no right to receive any dividend or other distribution and (iii) will have only limited rights to participate in any return of capital on a winding up or liquidation of the Company.

Series A Loan Notes and Series A Warrants

On 31 March 2006 (and, as amended on 19 March 2008) the Company issued £700,000 of convertible Series A Loan Notes to the Series A Loan note holders which included, amongst others, Gary Fitzgerald and Christian Schaffalitzky (being Directors of the Company) and Mrs J Martineau (the wife of Michael Martineau, a director of the Company) (the 'Series A Loan Notes') (the 'Series A Loan Note Holders') of which £470,000 is outstanding. The Series A Loan Notes are convertible into Existing Ordinary Shares and there is no provision in the Loan Notes dealing what would happen in the event that there was a change in the authorised share capital of the Company (as proposed as part of the Additional Proposals). 

In addition, the Company has issued 9,400,000 Series A Warrants to subscribe for Existing Ordinary Shares to the Series A Loan Note Holders. The proposed deed of variation to the Series A Loan Notes proposes that, conditional upon Shareholder approval at the General Meeting, the terms of the Series A Loan Notes, the related interest and the Series A Warrants be varied so that all of the ordinary shares issued on conversion of the Series A Loan Notes and exercise of the Series A Warrants are New Ordinary Shares and not Existing Ordinary Shares. 

The Company has received undertakings from all the Series A Loan Note Holders to convert their entire holdings, as well as the accrued interest, into New Ordinary Share within 14 days of the General Meeting, conditional on the Shareholders approving the Proposals and the Additional Proposals.

Warrants

It is proposed that subject to the approval of the Proposals and the Additional Proposals, the Company will grant Shareholder Warrants to all Shareholders on the basis of one Shareholder Warrant for every three Existing Ordinary Shares held on the warrant record date (being 29 June 2009). The Shareholder Warrants will only be issued to those Existing Shareholder who have lodged their application forms with Capita Registrars Limited by 2.30pm on 27 June 2009. 

Existing Shareholders will be able to apply for a greater number of Shareholder Warrants up to the maximum number of Shareholder Warrants available, in pro rata to each Shareholders original entitlement to the Warrants.

The Shareholder Warrants are exercisable at a price of 1p within a period of 9 months from the date of issue.

Timetable of Events

Warrant Record Date	2.30pm on 29 June 2009
Latest time and date for receipt of Forms of Proxy	2.30pm on 27 June 2009
Latest time and date for the return of the Shareholder Warrant application form:	2.30pm on 26 June 2009
General Meeting	2.30pm on 29 June 2009
Sub-division Record Date	5.00pm on 29 June 2009
Latest date for the dispatch of the Shareholder Warrant certificates	13 July 2009

Subject to approval of the Proposals and the Additional Proposals at the General Meeting it is anticipated that the New Ordinary Shares will be commence trading on AIM on 30 June 2009.

For further information, please contact:

Eurasia Mining
Christian Schaffalitzky / Michael de Villiers	Tel: [phone]
WH Ireland Ltd
Katy Mitchell	Tel: [phone]

 

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