TIDMAMBR
RNS Number : 7093A
Ambrian PLC
30 September 2015
Not for release, publication or distribution, in whole or in
part, directly or indirectly, in, into or from any jurisdiction
where to do so would constitute a violation of the relevant laws or
regulations of such jurisdiction.
FOR IMMEDIATE RELEASE
30 September 2015
Ambrian plc
("Ambrian" or the "Company")
Proposed Issue of Convertible Loan Notes and Warrants
Ambrian announces a conditional fundraising to raise
approximately GBP2,567,000 (before expenses) through the issue of
convertible loan notes and warrants to certain existing
shareholders (including Kestrel Partners LLP, on behalf of its
discretionary clients, and Charles Davies), certain Directors and
senior managers of the Company (the "Fundraising").
The Fundraising is conditional on, amongst other things, the
passing of a special resolution (the "Resolution") by Ambrian's
shareholders ("Shareholders"). Shareholders should note that the
Fundraising is not being underwritten and that neither the
convertible loan notes nor the warrants will themselves be admitted
to trading on AIM or any stock exchange. However, application will
be made in due course for the admission to trading on AIM of
Ambrian's ordinary shares ("Ordinary Shares") resulting from any
exercise of conversion rights under the Convertible Loan Notes and
any exercise of subscription rights under the Warrants. Details of
the convertible loan notes and the warrants are set out below.
Reasons for the Fundraising and Use of Proceeds
The Company today announced its interim results for the six
month period ended 30 June 2015 in which it reported turnover of
US$0.92 billion (1H 2014: turnover of US$1.53 billion) and a loss
before tax of US$6.35 million (1H 2014: profit before tax of
US$1.17 million) including a provision of US$2.23 million to
reflect the impact of possible continuing adverse conditions in the
trading of semi-finished products. Net asset value as at 30 June
2015 was reported as US$44.22 million (31 December 2014: US$29.21
million), equivalent to US 18.0 cents per share (31 December 2014:
US 29.0 cents).
Trading and Logistics
As Ambrian reported in May this year, the first half of 2015
trading conditions in most industrial metals and minerals continued
to be subdued following on from similar conditions in the last
quarter of 2014. Softer economic conditions in the first half of
2015, inventory drawdowns by customers and tighter credit
availability in China resulted in trading volumes down by
approximately 40 per cent. when compared with the same period in
2014. Continued focus on operating costs and improving the mix of
our business lines to those commanding higher margins have, to some
extent, mitigated the challenges we have faced, in particular, the
sharp reduction in physical premiums affecting semi-finished
products.
The principal issues faced by the business over the period have
been (i) little or no opportunities to arbitrage metal premiums,
(ii) copper backwardation combined with a build-up in inventories
resulting in increased finance and warehousing costs and (iii)
alleged frauds in two ports in China which unsettled trade finance
banks and resulted in some banks re-assessing their level of
exposure in commodity financing thus affecting market volumes.
The Company has implemented a number of actions to address these
challenging trading conditions.
These include (i) the reduction in inventories where practical
and commercial to do so, (ii) marketing
semi-finished products in markets other than the markets in
which the Company and its subsidiaries (the "Group") has
traditionally been active, (iii) increasing tolling of concentrates
into metal thus improving margins and (iv) entering into exclusive
agency agreements with producers to represent their metal brands in
certain markets thus reducing the risks associated with acting as a
principal.
Cement operations
On 30 July 2015, Ambrian announced the mechanical completion of
the cement plant in Beira. A further significant milestone has
since been achieved with the completion of the electricity
substation and its connection to the national grid.
To mitigate the impact of delay to commercial production of the
cement plant, the Company has taken certain steps such as (i) the
negotiation of payment terms on open account with suppliers of raw
materials, (ii) negotiation of additional working capital
facilities with local banks, (iii) rescheduling debt service under
the long term loans granted by Industrial Development Corporation
of South Africa Limited ("IDC"), (iv) scheduling longer payment
terms with the suppliers of equipment and services in Mozambique
and (v) negotiating with the IDC its pro rata participation in the
funding of the cost overruns that have been supported by the Group
to date.
Current trading and future prospects
Trading and Logistics
Since 30 June 2015, the Company has taken steps to reduce its
exposure to business lines that it believes are unlikely to show a
positive contribution in the next twelve months and are adjusting
the
Group's mix of services and products towards higher margin
businesses.
Market conditions appear to be gradually improving and the Group
expects to increase trading volumes and firming physical premiums
for the products it trades. Trading since 30 June 2015 has made a
positive contribution to gross profits.
Cement operations
The market for cement in central Mozambique remains strong and
the Directors expect it to grow in line with the country's GDP
growth. Prices have firmed since the beginning of the year as a
result of local demand and the collective appetite of cement
producers not to oversupply the market. However, this is mitigated
to some extent by the weakening of the local currency against the
US dollar. To ensure that early production is achieved on the best
possible commercial terms, we have recruited a commercial director
who is familiar with the cement market in central Mozambique and
who has assumed this role prior to commercial production.
To date, approximately 43,000 tonnes of raw materials have been
purchased which is sufficient for approximately two months of
forecast production. Commercial production is expected to
commence
immediately after the successful completion of the hot
commissioning of the mill and the sequence testing of all sections
of the plant. We expect the cement plant to be contributing
positively to the Group's results from next month onwards.
The Company has assumed that after an initial ramp up phase
average annual cement sales will reach approximately 30 per cent.
of the plant's rated capacity with cash margins ranging between 20
per cent. and 30 per cent.
Fundraising
To cover the US$3 million for both immediate cost overruns at
Cimentos de Beira Limitada ("CdB") (an 87.5 per cent. subsidiary of
Ambrian) and for general working capital purposes, Ambrian has
conditionally agreed to raise GBP2,567,000 through the issue of 10
per cent. p.a. convertible unsecured loan notes (the "Convertible
Loan Notes") and warrants to subscribe for Ordinary Shares (the
"Warrants"). The net proceeds of the Fundraising, after satisfying
the cost overruns at CdB, will provide the Group with additional
headroom of approximately US$2 million, which the Directors
consider to be sufficient for Ambrian's foreseeable working capital
requirements.
In reviewing the Group's working capital requirements, the
Directors have made the following assumptions about future
trading:-
-- Normalised cement sales volumes are expected to reach 30 per
cent. of the plant's rated capacity or one third of the total
regional market (50 per cent. of the regional market is
concentrated in Beira).
-- As the plant is located in Beira, CdB's share of the local
market is likely to be more than one third.
-- Current average cement prices are expected to range between
US$110 - 120 per tonne with cash margins ranging between 20 per
cent. and 30 per cent. assuming constant raw material intake
costs.
-- Ambrian Metals Limited's net premium on average ranges between US$17 - 37 per tonne.
-- On a normalised basis, Ambrian Metals Limited trades
approximately 400 - 450ktpa of metal equivalent excluding any new
business lines to be added.
On 30 July 2015, Ambrian announced that during the first six
months of 2015, Jean Pierre Conrad, Ambrian's CEO, made an advance
of EUR300,000 (to the Company, but with funds remitted at the
direction of the Company to CGM (UAE) FZE, a wholly-owned
subsidiary of the Company), and two advances (to the Company, but
with funds remitted at the direction of the Company to Ambrian
Resources AG) totalling CHF 200,000. These advances, which it has
been agreed will be the equivalent of GBP354,816 in aggregate, are
unsecured, interest-free and repayable before 31 December 2015.
Subject to the passing of the Resolution, and in lieu of repayment
of these facilities, Mr Conrad has agreed to receive Convertible
Loan Notes (with Warrants attached) in the same aggregate amount.
As noted below, Mr Conrad is one of the Directors who has also
agreed to provide a further short term loan (in Mr Conrad's case in
an amount of GBP45,184, bringing the total amount of loans from Mr
Conrad to the Company to GBP400,000).
Taking into the account the conversion of Mr Conrad's advances,
as described above, into Convertible Loan Notes (with Warrants
attached), the net cash received by the Company pursuant to
the Fundraising will be approximately GBP2.4 million.
In addition, and as part of the Fundraising, Ambrian today
announced that certain Directors - being Jean-Pierre Conrad, Robert
Adair (via a family trust of which he is a life tenant) and Nicolas
Rouveyre
- and certain senior managers of the Company have entered into
loan agreements in terms of which
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they have agreed to make available to the Company short term
loans totalling GBP542,184 (the "Short Term Loans") by no later
than the close of business on 30 September 2015, in order to
provide the Company with working capital ahead of completion of the
Fundraising. The Directors consider that the Short Term Loans are
important as there are several immediate expenses at CdB which, if
paid at once, are expected to ensure there are no further delays to
the commencement of commercial production at the plant. Subject to
the passing of the Resolution and to not less than GBP1,600,000
being raised in the Fundraising (other than from the Directors and
senior managers), the Short Term Loans (together with the other
prior advances of GBP354,816 from Mr Conrad, described above) will
mandatorily convert into Convertible Loan Notes (with Warrants
attached) at the Placing Price. The Short Term Loans will be
unsecured and, if not so converted, will be repayable by no later
than 31 December 2015. Interest will be payable on the Short Term
Loans at a rate of 6 per cent. per annum, which will rise to 12 per
cent. if the Short Term Loans have not been so converted or else
repaid by 30 October 2015.
Principal terms of the Fundraising
As described above, the Company proposes to raise approximately
GBP2,567,000 (before expenses) in aggregate by way of the
Fundraising.
The shareholder approval necessary for the Fundraising will be
sought at a general meeting to be held at 11.00 a.m. on 16 October
2015 (the "General Meeting"), the full details of which are set out
in a shareholder circular to be posted today.
The Fundraising is conditional on, amongst other things, the
passing of the Resolution and the Placing Agreement (as referred to
below) becoming unconditional. Completion is anticipated to take
place on the day of, and immediately following, the General
Meeting.
Convertible Loan Notes
The principal terms of the Convertible Loan Notes are as
follows:-
a) the Convertible Loan Notes will be repayable at their full
nominal value on 16 October 2019, unless the Company elects to
repay the Convertible Loan Notes at their full nominal value (but
in multiples of GBP100 nominal) at any earlier time that is not
within a 'close period' (as defined in the AIM Rules for Companies
(the "AIM Rules")) or when it is not prevented from doing so under
the Listing Rules, by giving not less than 20 days' notice thereof
to the holders of the Convertible Loan Notes (the "Noteholders") or
such notice period as the Company and the relevant holder may
agree;
b) the Convertible Loan Notes will become repayable immediately
(together with interest accrued thereon) upon certain events of
default occurring in relation to the Company (including for this
purpose, a takeover offer for the Company becoming or being
declared wholly unconditional);
c) interest will be payable on the Convertible Loan Notes at the
rate of 10 per cent. per annum payable in arrears on 30 June and 31
December following the issue of the Convertible Loan Notes, but
with the first interest not becoming payable until 30 June
2016;
d) a Noteholder will have the right at any time upon written
notice to the Company, to convert the principal amount of the
Convertible Loan Notes held by him into new Ordinary Shares at
GBP0.08 per share (with such conversion then becoming effective 2
business days after service of the conversion notice on the
Company);
e) a Noteholder will also have the right at any time upon not
less than 5 business days' written notice to the Company prior to
any half-yearly interest payment date, to convert the interest
payable on that interest payment date in respect of the Convertible
Loan Notes held by him into new Ordinary Shares at GBP0.08 per
Ordinary Share (with such conversion then becoming effective on
that interest payment date);
f) the conversion rights under the Convertible Loan Notes will
be subject to adjustment as the auditors of the Company, the
Company's nominated adviser (or such other person authorised to act
as both a nominated adviser under the AIM Rules and as a sponsor
under the Listing Rules as appointed by the Board) thinks fit in
the event of specific corporate actions affecting the share capital
of the Company;
g) the Convertible Loan Notes registered in a Noteholder's name
will be evidenced by a Convertible Loan Note certificate issued by
the Company (and will not be issued in uncertificated form);
h) the Convertible Loan Notes will be freely transferable (in multiples of GBP100);
i) the Convertible Loan Notes will not be listed on AIM or any other stock exchange;
j) Ordinary Shares issued on the exercise of conversion rights
in respect of the principal of, or interest on, the Convertible
Loan Notes will be issued in certificated form or uncertificated
form (at the election of the Noteholder in the notice exercising
the relevant conversion rights);
k) following conversion of any Convertible Loan Notes the
Company shall, within 3 business days after the relevant
conversion, allot and issue the new Ordinary Shares to be issued
upon such exercise and, provided the Ordinary Shares are traded on
AIM (or any other stock exchange), make an application for the new
Ordinary Shares to be admitted to trading on AIM (or that other
stock exchange); and
l) upon the passing of a resolution (or issue of an order) to
wind up the Company, a Noteholder may, on written notice to the
Company within 3 months of the date of the passing of such
resolution or order, elect to be treated as if he had been entitled
to and had elected to convert his Convertible Loan Notes before
such date.
The Company has the right (exercisable in its absolute
discretion) to transfer existing Ordinary Shares held by the
Company or any company in the Ambrian Group (whether or not such
Ordinary Shares are held as 'treasury shares') to any Noteholder in
satisfaction of Ordinary Shares to which such Noteholder would
otherwise become entitled on exercise of any conversion rights
under the Convertible Loan Notes.
Warrants
The principal terms of the Warrants are as follows:-
a) a holder of Warrants (a "Warrantholder") will have the right
at any time prior to 16 October 2025 upon written notice to the
Company, to subscribe for new Ordinary Shares (on the basis of one
new Ordinary Share for each Warrant held, subject to adjustment) at
GBP0.01 per Ordinary Share;
b) the Warrants will be freely transferable;
c) the Warrants will initially be granted in conjunction with
the Convertible Loan Notes (on the basis of 25 Warrants for each
GBP2 nominal of Convertible Loan Notes subscribed for) but will not
be 'stapled' to such Convertible Loan Notes (so that they will be
transferable separately from the Convertible Loan Notes);
d) the subscription rights under the Warrants will be subject to
adjustment as the auditors of the Company, the Company's nominated
adviser (or such other person authorised to act as both a nominated
adviser under the AIM Rules and as a sponsor under the Listing
Rules as appointed by the Board) thinks fit in the event of various
corporate actions affecting the share capital of the Company;
e) the Warrants registered in a Warrantholder's name will be
evidenced by a Warrant certificate issued by the Company (and will
not be issued in uncertificated form);
f) the Warrants will not be listed on AIM or any other stock exchange;
g) Ordinary Shares issued on the exercise of subscription rights
under the Warrants will be issued in certificated form or
uncertificated form (at the election of the Warrantholder in the
notice exercising the subscription rights; and
h) for as long as the Ordinary Shares are traded on AIM (or any
other stock exchange), it is the intention of the Company to apply
for the Ordinary Shares alloted to be admitted to trading on AIM
(or any other stock exchange).
Kestrel Partners LLP & Charles Davies
Kestrel Partners LLP ("Kestrel"), on behalf of its discretionary
clients, and Charles Davies have conditionally agreed to subscribe
for GBP800,000 nominal of Convertible Loan Notes (with 10,000,000
Warrants attached) and GBP800,000 nominal of Convertible Loan Notes
(with 10,000,000 Warrants attached) respectively. They are both
existing shareholders of the Company - owning 29,585,397 Ordinary
Shares and 27,018,854 Ordinary Shares respectively - and are
considered by the Directors to be 'acting in concert' in relation
to the Company and its Ordinary Shares for the purposes of the City
Code on Takeovers and Mergers (the "Takeover Code").
Under Rule 9 of the Takeover Code, when (i) a person acquires an
interest in shares which, taken together with shares in which he
and persons acting in concert with him are interested in, carry 30
per cent. or more of the voting rights of a company subject to the
Takeover Code, or (ii) any person who, together with persons acting
in concert with him, is interested in shares which in aggregate
carry not less than 30 per cent. of the voting rights of a company,
but does not hold shares carrying more than 50 per cent. of the
voting rights of the company subject to the Takeover Code, and such
person, or any persons acting in concert with him, acquires an
interest in any other shares which increases the percentage of the
shares carrying voting rights in which he is interested, then in
either case, that person together with the persons acting in
concert with him, is normally required to make a general offer in
cash, at the highest price paid by him, or any persons acting in
concert with him, for shares in that company or an interest in
shares in that company within the preceding 12 months, for all the
remaining equity share capital of that company.
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