Greenstone was established in Guernsey, Channel Islands on 16
July 2013 and was registered with the Guernsey Financial Services
Commission ("GFSC") as a closed ended investment fund on 8 August
2013. Greenstone was established with the purpose to pursue
investments in post-exploration metals and mining projects (from
pre-feasibility study through to production stages) in both
developed and emerging markets. Greenstone's manager and general
partner is Greenstone Management Limited ("GML"), a non-cellular
Guernsey company limited by shares. GML's directors are Michael
Haworth, Mark Sawyer, Sadie Morrison and Jo-Anna Duquemin-Nicolle.
GML is licensed by the GFSC to carry out the activities of
Promotion, Subscription, Registration, Dealing, Management,
Administration and Advising with registration number 2103131.
Investment decisions relating to Greenstone are taken by GML.
9. General Meeting
A notice convening the General Meeting to be held at 11.00 a.m.
at the offices of Shakespeare Martineau LLP, 5(th) Floor, One
America Square, Crosswall, London, EC3N 2SG on 28 August 2015 is
set out in the Circular. At the General Meeting, Shareholders will
be asked to consider the Resolution, which must be passed in order
to effect the Greenstone Placing, the Open Offer and the Placing,
as well as to give the Company authority to raise further equity
for working capital purposes should this be required. The text of
the Resolution is set out in the notice set out in the
Circular.
The Resolution is required in order to give the Directors (and,
where appropriate, the Independent Directors) authority to issue
and allot equity securities pursuant to the Greenstone Placing, the
Open Offer and the Placing free of statutory pre-emption rights.
Although the level of pre-emption waiver sought pursuant to the
Resolution represents, in theory, a maximum number of 3 billion
equity securities (as at the date of this Circular), this
pre-emption waiver is strictly limited to:
(a) the issue of an initial US$1.2 million of Convertible Loan
Notes and up to a further US$2.8 million of Convertible Loan Notes
(pursuant to the Greenstone Placing and Underwriting Facility,
should it be required in full), and any further Convertible Loan
Notes arising from settlement of unpaid interest by the issue of
further Convertible Loan Notes in accordance with the Convertible
Loan Note Instrument;
(b) the issue of Ordinary Shares on any conversion of the
Convertible Loan Notes at the Conversion Price;
(c) the issue of Ordinary Shares pursuant to the Open Offer at
the relevant Issue Price in a manner which, due to regulatory
constraints, is not fully pre-emptive;
(d) the issue of Ordinary Shares pursuant to the Placing at the relevant Issue Price; and
(e) new Ordinary Shares to raise up to US$2.0 million, which may
be issued by the Directors prior to the Company's next annual
general meeting (should the Company need to issue further Ordinary
Shares during this time for working capital purposes).
Pursuant to the Resolution, the Directors (and, where
appropriate, the Independent Directors) will, assuming the
Resolution is passed, have authority to allot the equity securities
described in (a) to (e) (inclusive) above, free of statutory
pre-emption rights. The number of Ordinary Shares to be issued
pursuant to the authority to be conferred by the Resolution
(assuming it is approved) cannot, currently, be specified. This is
because:
(i) the number of Ordinary Shares resulting on conversion of the
Convertible Loan Notes will depend on the Conversion Price (being
the lower of the Issue Price converted into US$ applying the FT
Exchange Rate and US$0.0046413, which is yet to be determined) and
whether any Convertible Loan Notes may be issued to settle unpaid
interest; and
(ii) the Issue Price has not yet been set; this will be
determined by reference to the market value of the Company's
Ordinary Shares at the time the Open Offer and Placing are
launched.
Notwithstanding this, the Resolution, if it is approved, will
not confer blanket authority on the Board to issue 3 billion
Ordinary Shares free of statutory pre-emption rights. The
Resolution only authorise those issues set out in (a) to (e)
inclusive above free of statutory pre-emption rights and it is
highly unlikely that these would fully utilise the full authority
except in extreme circumstances where the Placing and Open Offer
raises no money, the Underwriting Facility is called in full, the
Company fails to pay any interest on the Convertible Loan Notes,
there are some very unfavourable exchange rate movements prior to
launch of the Placing and Open Offer and the full amount of
additional working capital of US$2.0 million is required. Any
proposed issue of Ordinary Shares free of pre-emption rights in
addition to the issues set out in (a) to (e) (inclusive) above,
including any issue of Ordinary Shares in connection with the Phase
Two Fundraising, will require further prior Shareholder
approval.
10. Use of Proceeds of the Greenstone Placing
As agreed pursuant to the Subscription Agreement, the proceeds
of the Greenstone Placing (assuming the Resolution is approved and
the Conditions are satisfied or waived) shall be used, for the
purposes stated in the Work Programme (which nominally assumes that
the Mining Licence will be issued on or before 31 October 2015).
This includes, among other things, to cover the costs through to
the end of 2015 and a construction decision for FEED on the revised
process flow sheet, early development of the Namib Project's North
decline, sourcing of plant and equipment, and the ongoing
underground development programme required to establish access for
the next phase of resource expansion drilling and the initial
recruitment required to advance the Namib Project. The Board will
only be able to take a decision to commence construction once the
Mining Licence has been received, appropriate financing to cover
the costs of construction (by way of the Phase Two Fundraising) has
been agreed and subject to an assessment of the economics of the
Namib Project at the time. The proceeds will also cover general
corporate overheads and costs associated with fundraising,
including the costs related to the Phase One Fundraising.
11. Irrevocable Undertakings
As at the date of this Circular, the Company has received the
following irrevocable undertakings to vote in favour of the
Resolution:
Name Number of Ordinary Percentage of Issued
Shares irrevocably Share Capital
committed
Greenstone 564,858,446 29.48
Brett Richards 15,049,067 0.79
Mark Thompson 28,571,429 1.49
Total 608,478,942 31.76
12. Recommendation
In considering whether the terms of the Greenstone Placing are
fair and reasonable, the Independent Directors, with advice from
Strand Hanson, have had regard to various factors, including
(without limitation) the following:
(a) Immediate funding requirement - as noted above, the Company
has an immediate funding requirement in the amount of US$1.2
million. Subject to approval of the Resolution and the Conditions
being satisfied or waived, the issue of the Tranche One Notes
satisfies that requirement on terms which the Independent Directors
consider to be in line with market norms for financings of this
nature. Without access to these funds the Company is unlikely to be
able to survive in its present form, if at all, and administration,
or some other form of insolvency proceedings, may be
inevitable.
(b) Value of the Underwriting Facility - the Company is of the
view that, in order to progress with its expenditure plans under
the Work Programme in a timely fashion, the Company needs to have
committed funding for these expenditure plans as soon as possible
such that orders and works can be progressed. In addition, for
Shareholders and potential investors to be confident that the
Company is funded for its working capital requirements up to a
construction decision, it is beneficial to have secured, through
the Greenstone Placing, a conditional commitment to fund the US$4.0
million prior to the launch of the Open Offer and Placing. It is
hoped that the Greenstone Placing will encourage participation in
the Open Offer and Placing, such that recourse to the Underwriting
Facility will be minimal as there is less risk of a funding
shortfall (although this cannot be guaranteed). The Greenstone
Placing provides the underwriting commitment on terms which the
Independent Directors consider to be in line with market norms. In
addition, the Greenstone Placing demonstrates to the Shareholders
and potential investors Greenstone's continued support for the
Company following termination of the 2014 Investment Agreement.
(c) Alternative funding options if the Greenstone Placing does
not proceed - without the Greenstone Placing there is significant
uncertainty as to whether the Company would be able to survive in
its present form.
(d) Ability for Shareholders to consider the terms of the
Greenstone Placing and vote on the Resolution - As noted above,
Greenstone is not seeking a Whitewash in relation to the
Convertible Loan Notes. However, the Greenstone Placing is
conditional on the Resolution being approved by Shareholders, and
therefore Shareholders (including Greenstone) have the opportunity
to consider, and vote on, the Resolution having regard to the terms
of the Greenstone Placing. The Independent Directors therefore
consider that Shareholders are being given appropriate opportunity
to consider, and vote on, the Greenstone Placing.
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