Proposed Sale of Colombian Interests

RNS Number : 9099G

Red Rock Resources plc

13 May 2014

 



Red Rock Resources Plc

("Red Rock" or the "Company")

Proposed Sale of Colombian Interests

13 May 2014

Red Rock Resources plc, the mining and exploration company with gold interests in Colombia, Kenya, and Ivory Coast, announces that it has executed a binding Letter of Intent ("LOI")  to sell its Colombian interests for up to USD 5,000,000.

On 12 May 2014 Red Rock executed the LOI with Nicaragua Milling Company Limited ("NMC"), a private company registered in Belize, represented by James Randall Martin. Mr Martin is an experienced mining executive who was the CEO of Colombia Goldfields Ltd and is the founder and Chairman of Nicaraguan gold producer Hemco. Under the LOI, the Company will sell (a) its 100% interest in American Gold Mines Limited ("AGM"), which owns a 50.002% interest in Four Points Mining SAS ("FPM"), the owner of the El Limon mine, and (b) its loans to FPM, for a total consideration of USD 5,000,000.

The El Limon mine is situated in Antioquia province in Colombia, and has been in operation for periods of the last sixty years. Red Rock provided under a Funding and Co-Operation Agreement announced on 10 June 2010 the funding to re-open the mine, which recommenced operations on 21 December 2010. On 8 March 2011 Red Rock announced the exercise of an option to buy 50.002% of Four Points Mining SAS and became through its 100% owned subsidiary American Gold Mines Limited the majority owner of the mine.  

NMC has agreed to pay USD 50,000, which is non - refundable, for an exclusivity period of 60 days in order for it to carry out due diligence, and has the option to pay a further USD 50,000 to extend this exclusivity period by an additional 30 days in the event it needs extra time to conduct due diligence on the El Limon mine.

Payment of consideration will occur in three tranches. The first tranche of USD 2,500,000 will be payable upon the completion of satisfactory due diligence on the mine and subsequent closing of the transaction, which is expected to be 11 August 2014, should the exclusivity period not be extended.

A second tranche of USD 1,500,000 will be satisfied by the issuance by NMC to Red Rock of a non-interest bearing promissory note (the "PN") due and payable on or before the date that is one year from the closing. Security for the PN will be held in the form of a charge over 100% of the shares in AGM.

The third tranche of up to USD 1,000,000 will be paid in the form of a 3% royalty on annual net gold sales. In the event that gold production at any stage ceases at El Limon, the total paid under the third tranche may fall short of this amount.  

A 7% commission is payable to Ariel Partners on the transaction. Ariel Partners is a corporate advisory firm that provides bespoke business development and other services to companies in the natural resources sector.

Company Chairman Andrew Bell comments:

"We are pleased to announce the proposed sale of Red Rock's holding in American Gold Mines Limited.  Under Red Rock's operational control, the El Limon mine has become profitable. We now look to realise the value of our Colombian assets, that have proved resilient in the downturn. We believe this is an attractive transaction for Red Rock as, should it go ahead, the proceeds will enable Red Rock to continue its strategy of asset development and disposal, and reduce the need for fundraising via share issuance."

For further information contact:

Andrew Bell 0207 747 9990 or 0776 647 4849                   Chairman Red Rock Resources plc

Colin Aaronson / David Hignell 0207 383 5100              NOMAD Grant Thornton UK LLP

Nick Emerson 01483 413500                                            Broker SI Capital Ltd.

Saif Janjua 0207 382 8416                                               Joint Broker Beaufort Securities Ltd

Rupert Trefgarne 0203 128 8817                                      Media Relations MHP Communications

 

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