Shard Facility Update

Zanaga Iron Ore Company Ltd

28 June 2024

 

28 June 2024 

Shard Facility Update and New Shard Facility

Zanaga Iron Ore Company ("ZIOC" or the "Company") (AIM:ZIOC) is pleased to provide an update to shareholders on its existing funding structures in place with Shard Merchant Capital Ltd ("SMC"), including both the intention to issue the final share tranche relating to the Company's existing equity subscription agreement with SMC ("Existing ESA") as well as the intention to enter into a new equity subscription agreement ("2024 ESA").

Existing ESA

Further to the announcements dated 3 July 2023 and 14 December 2023 in relation to the Existing ESA, ZIOC is pleased to report that the second tranche of 12 million ordinary shares of no par value in the Company ("Ordinary Shares") issued pursuant to the Existing ESA has successfully been placed by SMC.

ZIOC received net proceeds of approximately £890,466 in aggregate in relation to the placing by SMC of the second tranche of 12 million Ordinary Shares under the Existing ESA, resulting in total combined proceeds of £1,667,755 from Tranche 1 and Tranche 2.

As provided for in the Existing ESA, the Company intends to give notice to, and SMC shall then subscribe for, the third tranche of 12 million Ordinary Shares ("Existing ESA Tranche 3"), conditional, amongst other things on admission of those shares to trading on AIM.

New ESA

In order to provide the Company with increased ability to raise additional working capital the Company and SMC intend to enter into the 2024 ESA. This follows the successful implementation of equity subscription agreements on similar terms in 2020 and 2023.

Under the 2024 ESA the Company would issue, and SMC would subscribe for, up to 36 million ordinary shares of no par value in the Company ("Subscription Shares") in up to three tranches of up to 12 million shares each (as described below).

In the event the maximum number of Subscription Shares are issued by ZIOC and subscribed for by SMC, including the issuance of the Existing ESA Tranche 3 mentioned above, the share capital of ZIOC would be increased by c.7.4% on a fully diluted basis, based on the 644,644,989,909 ordinary shares in the Company in issue as at today's date.

Pursuant to the 2024 ESA, SMC would undertake to use its reasonable endeavours to place the relevant Subscription Shares that it has subscribed for and to pay to ZIOC 95% of the gross proceeds of any such sales.

The ESA continues to provide a number of attractive advantages to ZIOC, which are highlighted below:

·    Relatively low level of dilution to ZIOC shareholders

·    ZIOC has the ability to repurchase any unsold Subscription Shares from SMC, subject to legal requirements - an important element of flexibility for ZIOC. Any Subscription Shares re-purchased will be cancelled, limiting dilution further

·    Low cost of capital - SMC will retain only 5% of the gross proceeds of any sale of Subscription Shares

Structure Overview:

Issues of Tranches of Subscription Shares

Under the 2024 ESA, Subscription Shares would be issued, and SMC would subscribe for, the Subscription Shares in tranches of up to 12 million shares. The first tranche of 12 million Subscription Shares (the "2024 First Tranche") would be subscribed for by SMC within three trading days of the date of the 2024 ESA.

A second Tranche of 12 million Subscription Shares (the "2024 Third Tranche") would be subscribed for by SMC 10 trading days following the earlier of: (a) the date on which SMC has sold all the Subscription Shares subscribed for in the First Tranche; and (b) such other date as SMC and the Company agree.

Solely at the discretion of the Company, a third tranche of up to 12 million Subscription Shares would be subscribed for by SMC (the "2024 Third Tranche" and together with the 2024 First Tranche and the 2024 Third Tranche, each a "Tranche"). Any such subscription would take place within 14 trading days of the earlier of: (a) the date on which SMC has sold all the Subscription Shares subscribed for in the 2024 Third Tranche; or (b) such other date as SMC and the Company agree.

Sales of Subscription Shares

As regards each Tranche, SMC would agree to use its reasonable endeavours to place all the Subscription Shares comprised in that Tranche within a three month period from the date of issue of the relevant Subscription Shares to it (the "Relevant Three Month Period"). Such period could be extended prior to the end of the Relevant Three Month Period by either the Company or ZIOC giving notice to the other. Any such extension would be for a three month period from the giving of the extension notice. All such sales would be subject to trading restrictions, as mentioned below.

Payment of proceeds of Subscription Shares

In respect of each Tranche, the amount which SMC would undertake to pay for the Subscription Shares issued to it in that Tranche would be 95% of the gross proceeds of sale received by SMC from all sales of the relevant Subscription Shares made by it during the Relevant Three Month Period (as extended, if that occurs).

The 2024 ESA would provide for regular payments to be made by SMC to ZIOC following any sales of Subscription Shares.

·    Payments under the 2024 First Tranche would be made weekly and then fortnightly.

·    Payments under the 2024 Third Tranche and any 2024 Third Tranche payments would be made every two weeks (unless an alternative time for payment is agreed between the parties).

Custodian

The 2024 ESA would provide that the Subscription Shares be held by a custodian authorized by the Financial Conduct Authority (FCA). Proceeds of any sale of Subscription Shares by SMC would be held by the Custodian until remitted by the Custodian to SMC and SMC would pay to ZIOC 95% of the gross proceeds of any such sales. To secure SMC's payment obligations, any proceeds of sale, as well as SMC's beneficial interest in the Subscription Shares, would be held by SMC on trust for the benefit of the Company.

Termination and Unsold Shares

The 2024 ESA could be terminated by the Company at any time and by SMC on the occurrence of certain specified events.

If on termination of the 2024 ESA, any Subscription Shares subscribed for by SMC have not been sold by it (the "Unsold Shares"), the 2024 ESA would provide that such Unsold Shares shall be bought back by the Company from SMC at the same price that SMC had subscribed for such Unsold Shares (the "Buy-Back"). Completion of the Buy-Back might be deferred if at the relevant time the Company is precluded from completing the buy-back arrangement under any applicable legislation.

Suspension of sales of Subscription Shares:

The Company would have the right to require that SMC cease to make (or procuring) sales of Subscription Shares under any Tranche for such time as the Company determines ("Suspension Period"). In such event, the relevant Three Month Period would be extended for the same amount of time as the Suspension Period.

Trading restrictions:

In order to preserve an orderly market in the Company's shares, SMC would agree to effect any sales of Subscription Shares made by it in accordance with customary orderly market provisions.

Future updates:

The Company will make appropriate further announcements in due course.

The Company's cash balance at 27 June 2024 was US100k, with US$740k of drawn debt and accrued interest under the Glencore Facility and the Company continues with its prudent cash management. The proceeds received by the Company from SMC pursuant to the 2024 ESA if and when entered into, are intended to be applied to general working capital, including the provision of further contributions to the Zanaga Iron Ore Project's operations.

Glencore loan facility:

The Company is also in discussions with Glencore regarding the Glencore Facility which falls due for repayment on 31 July 2024 (the "Due Date"). Such discussions are ongoing but could include the extension of the current facility or a subscription by Glencore to part settle the Glencore Facility prior to the Due Date. At this point there is no certainty as to whether the Glencore Facility will be extended or partially settled in shares and a further announcement will be made in due course.

Change of name of Nominated Adviser and Joint Broker

Following the completion of their corporate merger the Company's Nominated Adviser has changed its name to Panmure Liberum Capital Limited.

The Zanaga Iron Ore Company Limited LEI number is 21380085XNXEX6NL6L23.

For further information, please contact:

Zanaga Iron Ore

Corporate Development and                         Andrew Trahar

Investor Relations Manager                           [phone]

Panmure Liberum Capital Limited

Nominated Adviser, Financial                        Scott Mathieson, John More

Adviser and Corporate Broker                       [phone]

Shard Capital Partners LLP

Corporate Broker                                                Damon Heath

                                                                                   [phone]

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THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF ARTICLE 7 OF THE MARKET ABUSE REGULATION (EU) 596/2014 AS IT FORMS PART OF UK DOMESTIC LAW BY VIRTUE OF THE EUROPEAN UNION (WITHDRAWAL) ACT 2018 ("MAR"), AND IS DISCLOSED IN ACCORDANCE WITH THE COMPANY'S OBLIGATIONS UNDER ARTICLE 17 OF MAR

 

END