TIDMPERE
RNS Number : 8159I
Pembridge Resources plc
06 April 2020
6 April 2020
Pembridge Resources plc
Restructuring to Remove Direct Ongoing Pembridge Financial
Commitments of $6.4M-$22.1M
London, United Kingdom - Pembridge Resources plc (LSE: PERE)
("Pembridge" or the "Company"), and together with its subsidiaries,
the "Group"), provides the following update with respect to its
funding obligations to Minto Explorations Ltd ("Minto") and future
capital requirements:
Proposed Changes to Ownership and Reduction of Financial
Liabilities
In light of the current financial market conditions as a result
of the COVID-19 pandemic and the potential for material cash calls
on Pembridge, the Company has agreed with the other shareholders of
Minto (collectively "the US Investors") to remove certain future
funding obligations of Pembridge and to restructure the Minto share
ownership. This decision was in part aided by the additional risk
posed by a potential legal dispute between Pembridge and the US
Investors under the Shareholders' Agreement dated 3 June 2019
between Pembridge, Minto, and the US Investors (collectively the
"Shareholders' Agreement"), which is outlined below.
Previously, the Joint Advisory Committee of Minto (consisting of
representatives from Pembridge and the US Investors) authorized a
$3 million capital call to fund working capital, which was due to
be paid by Pembridge under the Shareholders' Agreement. As
previously reported, Pembridge has loaned Minto the equivalent of
US$3 million via payment into an escrow surety account on behalf of
Minto (the "Control Account") and thus considered that Pembridge
had met its obligations with respect to its US$3 million cash call
contribution to Minto.
The US Investors informed Pembridge that their legal advisers
disagreed with the Company's contractual interpretation, suggesting
Pembridge should pay US$3.0 million directly to Minto to satisfy
the cash call requirement. In an effort to avoid a potential legal
dispute, the Company engaged in a regular dialogue with the US
Investors to reach an amicable and mutually beneficial solution.
Whilst Pembridge maintains its belief that its interpretation of
the Shareholders' Agreement is accurate, any efforts to enforce
this belief would most likely involve a fairly protracted legal
dispute in New York (which governs the Shareholders' Agreement),
bringing with it significant costs.
In light of the potential cash needs of Minto in the current
environment and the subsequent future financial commitments on
Pembridge that this would impose, having undertaken a strategic
review the Board of Pembridge has concluded it is in the best
interests of the Company to seek an agreement with the US
Investors, whereby Pembridge reduces its percentage ownership in
Minto in exchange for removing certain future financial
liabilities, thereby ensuring the financial stability of the
Company.
Agreement with the US Investors
Pembridge has reached an agreement in principle with the US
Investors, which is subject to final documentation, that will
provide cash for Minto to meet its current cash requirements as
well as assist Pembridge's liquidity in the current unprecedented
market conditions.
The US Investors will subscribe for new Class B shares in Minto
to a value of US$3 million so as to support the short-term
financial needs of Minto, thereby ensuring its ability to continue
to operate in the current challenging times. As a result of this
investment into Minto by the US Investors, Pembridge's economic
interest will be reduced from 33% to 11%.
In addition, the US Investors have agreed to support a decision
by the Minto Board of Directors for Minto to take over all of
Pembridge's future payment obligations with respect to the Control
Account (as described below). This action will reduce the future
financing commitments of Pembridge by a minimum of CAD$2 million
and up to CAD$3 million.
Further, the US Investors have also agreed to support a decision
by the Minto Board of Directors for Minto to take over all future
consideration payments due from Pembridge to Capstone Mining
Corporation ("Capstone") in accordance with the Share Sale and
Purchase Agreement ("SPA") dated 3 June 2019 (as explained below).
Previously Pembridge had been expected to pay a minimum of US$5
million and up to US$20 million out of the income that it derived
from Minto.
With respect to the Minto Board, two new additional independent
directors are to be appointed. Further changes to the Minto Board
are potentially possible based on certain trigger events, which may
or may not occur.
Control Account Funding
As announced on 14(th) February 2020, Pembridge has loaned Minto
the equivalent of US$3 million (CAD$ 4.0 million) for the purpose
of funding Minto's Control Account, which supports its
environmental liability insurance and for the purpose of meeting
the Company's obligation under the Shareholders' Agreement for the
first US$3.0 million cash requirements.
Pembridge has a contractual commitment to fund the Control
Account at a rate of CAD$1 million per quarter until 60 days after
Minto reaches its Restart Date, being the earlier of the occurrence
of 60 consecutive production days during which ore has been
processed through the Minto Mine mill facilities at a rate of
production of not less than 2,400 tonnes per day ("Commercial
Production") and January 31, 2021. At that point, Minto is
responsible for making contributions in the Control Account until
the account reaches a balance of CAD$10 million. Minto will then
continue to pay CAD$1 million each quarter to Pembridge until it
has repaid the CAD$4 million that has been advanced to the Control
Account by Pembridge, together with accrued interest on the funding
provided by Pembridge.
Currently it is expected that Minto will reach Commercial
Production some time in Q4 of 2020, and therefore Pembridge's
commitments for funding the Control Account could amount to at
least an additional CAD$2 million (US$1.4 million at current
exchange rates) and could be up to CAD$3 million (US$2.1 million at
current exchange rates) if the specified level of production is not
attained prior to January 31, 2021. These payments are now to be
made by Minto rather than Pembridge under the agreement reached
with the US Investors.
Minto Acquisition Funding
In addition to the Control Account funding commitments described
above, in accordance with the SPA, Pembridge has an obligation to
pay up to US$20 million for the Minto acquisition. The first US$5
million of this obligation is due no later than 31 March 2021. It
has been Pembridge's expectation that it would be able to fund the
payments to Capstone from Minto cash flow that it receives; however
in light of the current market conditions and a current market cap
of circa US$4 million, the Board believes it would be highly
improbable that Pembridge could raise sufficient funds to cover the
payment(s) to Capstone under the SPA without more heavier dilution
in Pembridge than is being proposed at the asset level. The
proposed agreement with the US Investors extinguishes this direct
liability, as outlined above.
Gati Al-Jebouri, Chief Executive Officer and Chairman of the
Board said:
"The current unprecedented market conditions have led to this
development. The agreement we have reached with the US Investors
will result not only in Pembridge removing potentially crippling
financial liabilities, but also ensure that Minto is now in a much
stronger financial position to continue with the development.
Pembridge will retain an 11% interest in Minto and has now
removed the direct liabilities, which potentially stood somewhere
between US$6.4 million and US$22.1 million. In addition, Pembridge
can reasonably expect the repayment of its loan to Minto, arising
from previous contributions of CAD$4 million into the Control
Account, in 2022.
As the largest shareholder in Pembridge, having personally
invested over GBP4M in the Company since October 2019, I am pleased
that the Board of Directors of Pembridge have taken these steps to
ensure our company will have the best chances of continuing to
operate and develop the Minto opportunity. I remain focused on
ensuring Pembridge becomes a success and look forward to updating
shareholders in what hopefully proves more advantageous times."
ENDS
NOTES TO EDITORS
About Pembridge Resources plc
Pembridge is a mining company that is listed on the standard
segment of the Official List of the FCA and trading on the main
market for listed securities of London Stock Exchange plc. Minto is
a British Columbia incorporated business operating the Minto mine
in Yukon, Canada. Pembridge owns 11% (in Class A shares) of
Minto.
About Minto Explorations Limited
Minto operates the underground copper-gold-silver mine located
in central Yukon, approximately 240 kilometres north of the capital
Whitehorse along the Klondike Highway. In excess of US$350 million
of capital expenditure has been invested into Minto operations
since site construction began in 2006. The Minto mine was in
continuous production between 2007 and 2018, when the mine was
placed onto temporary care and maintenance. Pembridge acquired
Minto from Capstone Mining Corporation in June 2019 and restarted
operations in October 2019.
For further information contact:
Pembridge Resources plc: +44 (0)20 7917 2968
Gati Al-Jebouri, Chief Executive Officer and Chairman of the
Board
David James, Chief Financial Officer
Brandon Hill Capital - United Kingdom broker: +44 (0)20 3463 5016
Jonathan Evans
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END
MSCEAPLSEDLEEFA
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April 06, 2020 02:00 ET (06:00 GMT)
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