Funding Update

RNS Number : 1492R

Zanaga Iron Ore Company Ltd

26 June 2020

 

26 June 2020

Subscription Agreement with Shard Merchant Capital Ltd

Zanaga Iron Ore Company Ltd ("ZIOC" or the "Company") (AIM: ZIOC), is pleased to announce that it has entered into a subscription agreement ("Subscription Agreement") with Shard Merchant Capital Ltd ("SMC"), an institutional investor, dated 25 June 2020.

Under the Subscription Agreement the Company will issue and SMC will subscribe for up to 21 million ordinary shares of no par value in the Company ("Subscription Shares") in up to three tranches of up to 7 million shares each (as described below).

In the event the maximum number of Subscription Shares are issued by ZIOC and subscribed for by SMC, the share capital of ZIOC will be increased by c.6.8% on a fully diluted basis, based on the   286,034,367 ordinary shares in the Company in issue as at today's date.

Pursuant to the Subscription Agreement, SMC has undertaken 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 Subscription Agreement provides 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 Subscription Agreement, Subscription Shares will be issued and SMC will subscribe for the Subscription Shares in tranches of up to 7 million shares. The first tranche of 7 million Subscription Shares (the "First Tranche") will be subscribed for by SMC within three trading days of the date of the Subscription Agreement.

A second Tranche of 7 million Subscription Shares (the "Second Tranche") will 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 7 million Subscription Shares will be subscribed for by SMC (the "Third Tranche" and together with the First Tranche and the Second Tranche, each a "Tranche"). Any such subscription will 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 Second Tranche; or (b) such other date as SMC and the Company agree.

Sales of Subscription Shares

As regards each Tranche, SMC has agreed 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 can 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 is for a three month period from the giving of the extension notice. All such sales are subject to trading restrictions, as mentioned below.

Payment of proceeds of Subscription Shares

In respect of each Tranche, the amount which SMC has undertaken to pay for the Subscription Shares issued to it in that Tranche is 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 Subscription Agreement provides for regular payments to be made by SMC to ZIOC following any sales of Subscription Shares.

· Payments under the First Tranche are to be made weekly and then fortnightly.

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

Illustrative example

For illustrative purposes only, if the average price at which SMC places the 14 million Subscription Shares comprised in the First Tranche and the Second Tranche was 6.27 pence (being ZIOC's mid-market closing share price on Wednesday 24 June 2020), the net proceeds received by ZIOC from such sales would be approximately £0.9m. Further, ZIOC has the discretion to elect to issue up to a further 7 million shares by way of the Third Tranche.

Custodian

The Subscription Agreement provides that the Subscription Shares are to be held by a custodian authorized by the Financial Conduct Authority (FCA). Proceeds of any sale of Subscription Shares by SMC will be held by the Custodian until remitted by the Custodian to SMC and SMC shall 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, are to be held by SMC on trust for the benefit of the Company.

Termination and Unsold Shares

The Subscription Agreement can be terminated by the Company at any time and by SMC on the occurrence of certain specified events.

If on termination of the Subscription Agreement, any Subscription Shares subscribed for by SMC have not been sold by it (the "Unsold Shares"), the Subscription Agreement provides that such Unsold Shares shall be bought back by the Company from SMC at the same price that SMC has subscribed for such Unsold Shares (the "Buy-Back") . Completion of the Buy-Back may 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 has 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 will 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 has agreed 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 31 May 2020 was US$434,000, with no debt and the Company continues with its prudent cash management, with additional cost reductions having been implemented in 2019. The proceeds received by the Company from SMC pursuant to the Subscription Agreement will be applied to general working capital, including the provision of further contributions to the Zanaga Iron Ore Project's operations.

The 7 million Subscription Shares in the First Tranche are expected to be admitted to trading on AIM on 29 June 2020. The First Tranche of Subscription Shares will rank pari passu with the Company's existing Ordinary Shares. The Company does not hold any shares in treasury. Following admission of the First Tranche of Subscription Shares, the total number of Ordinary Shares and voting rights in the Company will be 293,034,367.

This figure of 293,034,367 Ordinary Shares may be used by shareholders as the denominator for the calculations by which they will determine if they are required to notify their interest in, or a change to their interest in, the Company under the FCA's Disclosure Guidance and Transparency Rules.

This announcement contains inside information for the purposes of Article 7 of Regulation (EU) No 596/2014. Upon the publication of this announcement, this inside information is now considered to be in the public domain.

Clifford Elphick, Chairman of ZIOC commented:

"Following entry into of the Subscription Agreement, ZIOC is pleased that a financing structure has been put in place which will give the Company access to funding through a relatively low cost structure which minimises dilution to shareholders.

This transaction enables ZIOC to secure capital in the future as the project progresses and further milestones are achieved."

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]

Liberum Capital Limited

Nominated Adviser  Scott Mathieson, Edward Thomas

and Corporate Broker   [phone]

About us:

Zanaga Iron Ore Company Limited (AIM ticker: ZIOC) is the owner of 50% less one share in the Zanaga Iron Ore Project based in the Republic of Congo (Congo Brazzaville) through its investment in its associate Jumelles Limited. The Zanaga Iron Ore Project is one of the largest iron ore deposits in Africa and has the potential to become a world-class iron ore producer.

 

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