TIDMIRON
RNS Number : 5723S
Ironveld PLC
15 July 2022
15 July 2022
Ironveld plc
("Ironveld" or the "Company")
Posting of Circular and Notice of General Meeting
As announced on 29 June 2022, Ironveld received a requisition
notice ( the " Requisition Notice ") from Richard Jennings,
director of Align Research Ltd ("Align"), pursuant to section 303
of the Companies Act 2006 (the "Act"), requiring that Ironveld's
board of directors (the "Board") convene a general meeting of
shareholders for the purposes of considering the following ordinary
resolutions (the "GM Resolutions"):
1. that Chairman Giles Clarke be removed as a Director of the Company; and
2. that CEO Martin Eales be removed as a Director of the Company .
As a result, the Board is today posting a Circular convening the
General Meeting for shareholders which is to be held at Ashurst
LLP, London Fruit & Wool Exchange, 1 Duval Square, London, E1
6PW at 4.00pm on Friday 12 August.
The Board Unanimously Recommends Shareholders VOTE AGAINST ALL
Resolutions
A statement from the Board of Ironveld,
"Richard Jennings has put to the Board a number of funding
proposals in recent months which have been considered and rejected
out of hand by all Directors. It is the Board's view that these
proposals, which include expensive debt and highly dilutive
warrants would suit Mr Jennings very well, but would be to the
detriment of the Company's shareholders and the Company itself.
Shareholders should recognise that Mr Jennings' proposals are not
in their best interests or those of the Company's wider
stakeholders, in particular its South African partners who are
essential to the Company's activities, and we therefore recommend
shareholders to vote against Mr Jennings' resolutions."
Extracts from the Shareholder Circular are available below. A
copy of the Shareholder Circular will shortly be available to view
at www.ironveld.com
For further information, please contact:
Ironveld plc c/o BlytheRay
Giles Clarke, Chairman +44 20 7138 3204
Martin Eales, Chief Executive Officer
finnCap (Nomad and Joint Broker)
Christopher Raggett / Charlie Beeson +44 20 7220 0500
Turner Pope (Joint Broker)
James Pope/Andrew Thacker +44 20 3657 0050
BlytheRay
Tim Blythe / Megan Ray +44 20 7138 3204
LETTER FROM THE CHAIRMAN
IRONVELD PLC
(incorporated and registered in England and Wales under the
Companies Act 1985 with registered number 04095614)
Directors: Registered Office:
Giles Clarke - Chairman Unit D
Martin Eales - Chief Executive Officer De Clare House
Nicholas Harrison - Non-Executive Director Sir Alfred Owen Way
Peter Cox - Technical Director Pontygwindy Industrial
Estate
Caerphilly
Wales CF83 3HU
15 July 2022
To the Shareholders and, for information only, to holders of
options / warrants
Dear Shareholder,
NOTICE OF GENERAL MEETING
The Board considers resolutions proposed by Mr Jennings to be
vexatious, self-serving and linked to a number of commercial
proposals Mr Jennings has put to the Company
The Board Recommends Shareholders VOTE AGAINST ALL
Resolutions
As announced on 29 June 2022, Ironveld received a requisition
notice (the "Requisition Notice") from Richard Jennings, director
of Align Research Ltd ("Align"), pursuant to section 303 of the
Companies Act 2006 (the "Act"), requiring that Ironveld's board of
directors (the "Board") convene a general meeting of shareholders
for the purposes of considering the following ordinary resolutions
(the "GM Resolutions"):
1. that Chairman Giles Clarke be removed as a director of the Company; and
2. that CEO Martin Eales be removed as a director of the Company.
As a result, the Board is convening the General Meeting for
shareholders which is to be held at Ashurst LLP, London Fruit &
Wool Exchange, 1 Duval Square, London, E1 6PW at 4.00pm on Friday
12 August.
A statement from the Board of Ironveld,
"Richard Jennings has put to the Board a number of funding
proposals in recent months which have been considered and rejected
out of hand by all Directors. It is the Board's view that these
proposals, which include expensive debt and highly dilutive
warrants would suit Mr Jennings very well, but would be to the
detriment of the Company's shareholders and the Company itself.
Shareholders should recognise that Mr Jennings' proposals are not
in their best interests or those of the Company's wider
stakeholders, in particular its South African partners who are
essential to the Company's activities, and we therefore recommend
shareholders to vote against Mr Jennings' resolutions."
The Board Recommends that Shareholders VOTE AGAINST ALL
Resolutions
The Board believes that the GM Resolutions for the General
Meeting requisitioned by Mr Jennings and being held on 12 August
2022 are NOT in the best interests of the Company and its
shareholders as a whole and is unanimously recommending that you
vote AGAINST ALL of the GM Resolutions.
The reasons why the Board recommends you VOTE AGAINST ALL the
resolutions
Mr Jennings' interests do not match those of all
shareholders
The Board believes Mr Jennings' interests do not align with
those of the other shareholders. Mr Jennings has made a series of
funding offers to the Company in recent months, including most
recently on 3 July 2022, in which he offered to retract his
requisition for a general meeting if the Company agreed to accept
his terms, although still demanding the resignation of the
Chairman. The email which contained the funding offer that Mr
Jennings sent to the Company dated 3 July 2022 was published on
Align Research's Blog website on 9 July 2022.
Mr Jennings' funding offers are typically structured as a mix of
equity and debt, with a small amount of equity raised at a price
significantly above the market price for the shares (without ever
providing a logical explanation as to why other investors would
purchase shares in sufficient quantity above the market price) and
then a loan balance that can only be drawn in small tranches,
typically monthly.
The simple fact is that Mr Jennings has not offered sufficient
funding to complete the smelter acquisition and the planned
refurbishment - his most recent offer was for GBP3.0 million
(gross) in total over 12 months whereas the equity placing
announced on 13 July 2022 (the "Placing") delivered a minimum of
GBP4.0 million plus GBP0.5 through the Broker Option immediately -
and we do not think any additional funding would be made available
on his terms by investors outside his group.
Mr Jennings' funding structure requires the issue of warrants
alongside the equity portion and the debt portion. Crucially these
warrants would have to be repriced downwards and more issued in the
event that any equity placing of shares at less than 1p a share
were to take place in the next 12 months (for the 'equity
warrants') and next 24 months (for the 'debt warrants'). If the
Company was unable to repay the GBP2.0 million debt plus interest
in two years' time it would be forced into swapping debt for equity
at potentially lower prices than the current placing price of 0.3p
a share (the "Placing Price") - as well as repricing and increasing
the number of warrants.
As part of their announced fee arrangements Turner Pope will
receive 375 million warrants at the Placing Price. These are fixed
price and will not be adjusted.
If the Company were to accept Mr Jennings' structure of GBP1.0
million equity with a "3 for 2" warrant this would require the
issue of 150 million warrants and the GBP2.0 million debt portion
would require the issue of 200 million warrants but only if the
Company were not to raise money at less than 1p during the
applicable time periods.
As a simple example, if the Company were to require an equity
raising in 11 months' time to support growth or an additional
accretive acquisition or for any other reason at 0.70p per share
(being the unaffected price of the Company's shares on 28 June
2022, being the last day before the announcement of Mr Jennings'
actions) or 0.30p per share (being the Placing Price) the 350
million warrants above issued alongside the GBP3.0 million package
suggested by Mr Jennings would have to be adjusted as follows:
Initial Adjusted Adjusted
Award total for total for
any Placing any Placing
at 0.70p at 0.30p
Equity Warrants 150,000,000 214,285,715 500,000,000
Debt Warrants 200,000,000 285,714,285 666,666,667
Total 350,000,000 500,000,000 1,116,666,667
In this example alone the initial 350 million warrants at 1p
must be adjusted to 500 million warrants at 0.70p in the event of a
0.70p fundraising, an uplift of 42.8 per cent; and to 1,116,666,667
at 0.30p in the event of a 0.30p fundraising, an uplift of 219 per
cent, all because they are anchored against an initial specious
'equity subscription' level of 1.0p. These would need to be issued
to the lenders alongside GBP2.0 million (plus interest) of shares
at the same fundraising price if the debt was incapable of being
repaid.
The Board feels that the traditional uncertainty inherent in
smaller companies such as Ironveld means that overly complicated
structures such as those proposed by Mr Jennings bring far more
risk to all shareholders than the standard Placing, as already
announced, and a potential for increasing concentration of control
of the Company's shares in the hands of lenders.
Notwithstanding that the Board found the proposed terms of the
warrant package alongside Mr Jennings' proposal unattractive, the
interest rate to be charged on the GBP2.0 million debt would be 12
per cent per annum, which is also extremely expensive.
Finally, in Mr Jennings' proposal dated 3 July 2022 he stated
that he had "solid commitments from selected existing shareholders"
for an equity subscription of GBP1.0 million at 1p, to which he
would subscribe GBP250,000. When the Company enquired of Mr
Jennings on 4 July 2022 who the remaining funds would be subscribed
by, he gave the name of a fund manager well known to Ironveld.
Ironveld contacted the same fund manager on 4 July 2022 to verify
these details, only to be told that he had verbally indicated to Mr
Jennings that he would be interested in also subscribing for
GBP250,000 of such a GBP1.0 million subscription, which meant that
neither GBP750,000 nor a "solid commitment" existed. When this was
queried with Mr Jennings he immediately claimed that he could
underwrite GBP750,000 himself - so why not make this clear in the
first place? We note that the net assets of Align Research Limited
as at 28 February 2022 were only GBP1.39 million and the company
owed long term creditors over GBP700,000.
To summarise:
-- Mr Jennings' offer is unnecessarily complex, adds expensive
debt to the business and potentially brings the risk of much
greater dilution for shareholders in the future as opposed to the
fixed terms of the Placing Shares and Warrants proposed to be
issued as part of the current Placing;
-- By requisitioning the GM after being "wall crossed" on the
intended Placing, Mr Jennings' actions have materially affected the
Company's share price in a manner designed to make the small equity
element of his proposal at the 1p subscription price look more
attractive - and created some uncertainty amongst investors and the
market which the Board believes made the Placing Price lower than
it would otherwise have been; and
-- He has made funding proposals to the Company that are
insufficient in quantum, are expensive and which lack credibility
given GBP500,000 of his "solid commitments" for GBP1.0 million
failed to be backed up by the first piece of cursory checking by
the Company.
The Board considers it is being coerced into an inappropriate
and expensive funding structure
In addition, the Board informs shareholders that the Directors
have been subjected to what they personally consider to be forms of
coercion, threats and bullying by Mr Jennings over many months. He
has been repeatedly in contact with the Directors via WhatsApp
asking for information and detail which could be considered to be
price sensitive and would be inappropriate to send to a single
shareholder. The Board has taken the unanimous decision that this
type of behaviour will not be tolerated.
Mr Jennings has no track record as a PLC director, but does have
a track record of selling additional 'services' to other Align
Research clients at a huge cost to them
Mr Jennings has never been a public company director. As a
result of his behaviour, the Board considers that Mr Jennings does
not understand that a director's fiduciary duty is to ALL
shareholders, not just one, nor does he understand, based on what
the Board has experienced to date, how to run a public company.
Mr Jennings' Align Research business operates by selling a
promotional research product to smaller companies, taking a
shareholding as part of his research compensation and then
typically offering other 'funding services' to those companies. If
they do not take it up, he often tries to replace members of the
Board to get his way. On 4 April 2018, Pathfinder Minerals, a
client of Align Research, received a requisition from Mr Jennings
to replace the CEO, Nick Trew, and the Chairman, Sir Henry
Bellingham. Mr Jennings, who held three per cent of the shares in
Pathfinder Minerals via Align Research, released an announcement on
Align Research's website on 26 March 2018 stating that Pathfinder
Minerals had been "planning a capital raise at 0.6p in recent days
even though we [Align Research] have represented that we [Align
Research] stand ready to inject funds at 1p." In the case of
Tectonic Gold, Mr Jennings' GBP100,000 original loan ended up being
worth GBP600,000 to him when he accepted an asset in lieu of cash
repayment and sold it into another company for a significant
shareholding.
On 5 May 2022, Mr Jennings sent a letter requisitioning another
general meeting addressed to Giles Clarke and Nick Harrison in
their roles as directors of Kazera Global plc, however the text of
the letter requested a general meeting for Ironveld plc. It seems
that Mr Jennings is so frequently requisitioning unnecessary
general meetings that he forgets which company he is trying to
write to.
Ironveld is still a corporate client of Align Research and Mr
Jennings, who are under contract to provide research services for
the Company. This contract was extended by Mr Jennings by an extra
12 months in March/April 2020 until 2023 due to balance sheet
issues at Align Research resulting in an inability to meet the
agreed drawdown date for a GBP200,000 loan facility agreed in
February 2020. As a fee-paying client of Align Research, the Board
disagrees with the approach undertaken by Mr Jennings and Align
Research towards a client.
As demonstrated in the examples above, Mr Jennings has a track
record of offering loans to clients of Align Research and, if these
proposals are rejected, Mr Jennings attempts to remove key
management which can cause significant disruption to a company's
operations and progress. This is why the Board strongly recommends
that shareholders vote against the proposals at the General Meeting
requisitioned by Mr Jennings and being convened for 12 August
2022.
By contrast Giles Clarke has a track record of building value
and making money for investors
As many shareholders will know, Giles Clarke is a serial
entrepreneur with a track record of making money for investors,
having co-founded and grown Majestic Wine, PetCity, Safestore and
Amerisur Resources. All these businesses were successfully sold to
the benefit of all shareholders.
Giles Clarke has been a PLC director for 40 years since he was
29 and is a former Chairman of the England & Wales Cricket
Board ("ECB"). When Giles became Commercial Chairman at the ECB in
2004 it had net liabilities of approximately GBP2 million; when he
stepped down as Chairman of the ECB in 2015 it had net funds in
excess of GBP70 million.
Martin Eales has been instrumental in driving Ironveld towards
production and cash flow generation
The Board strongly believes that the smelter acquisition would
never have been identified and progressed to the current cusp of
completion without Martin's tenacity and professionalism. He has
developed a strong relationship with the sole creditor (a leading
South African financial institution) and negotiated terms for the
acquisition that are highly attractive for Ironveld and its
shareholders. Without Martin in place as Chief Executive Officer
the transaction could be placed under serious threat.
If passed, the GM Resolutions risk the good financial health of
Ironveld
The GM Resolutions were proposed at a time when the Directors
were the largest creditors to the Company which included GBP140,000
of Director Bridge Loans immediately repayable if Giles Clarke and
Martin Eales left the Board, as would a further GBP260,000 of the
Bridge Loan funding from third party investors announced on 24 May
2022. As stated in the Placing announcement dated 13 July 2022, the
Board has further supported the Company by subscribing GBP100,000
in cash to the Placing.
Ironveld is on the cusp of a transformational acquisition which
would be put at risk by changing the Board
The timing of Mr Jennings' actions is completely inappropriate.
The Board has spent at least 10 years getting Ironveld into a
position where it is about to commence production after much hard
work. Progress is being made in the development journey with final
contracts for the smelter acquisition progressing well. The complex
smelter transaction would be irreparably derailed if the CEO and
Chairman were removed prior to completion. As a reminder to
shareholders, the smelter is being bought for ZAR 15 million now
(approximately GBP750,000) and ZAR 100 million (approximately
GBP5.0 million) over the next 10 years and the Company has been
advised to insure the facility for at least ZAR 600 million
(approximately GBP30 million). The acquisition of the smelter will
provide the Company with up to 7.5 MW of smelting capacity within
six to nine months, enabling processing of approximately 40,000
tonnes of magnetite ore on an annualised basis. Once the
acquisition and refurbishment of the smelter have been completed,
first product sales and cashflows are expected within 12
months.
Why the criticism of the Board by Richard Jennings should be
dismissed out of hand
Accusation
-- "We are presently working on our own proposals ref financing
the company that does not require such a large immediate raise and
at a blended premium to the current stock price and that allows
existing shareholders to preserve their equity worth."
Facts
The Placing is in the view of the Board vastly preferable to the
debt and warrant laden structure on offer from Mr Jennings, which
the Board considers unnecessarily complex and potentially more
dilutive in future due to the requirement to adjust the strike
price and volume of warrants for any Placing below the artificial
initial price of 1p. The Placing also has the benefit of taking the
project into production and cash generation by fully funding the
acquisition and refurbishment of Ferrochrome Furnaces Limited's
("FCF") smelter, which Mr Jennings' proposal did not. All
shareholders were invited to participate in the Placing through the
Broker Option available via Turner Pope, so the Placing need not be
dilutive.
The Board set out its reasons for proceeding with the Placing in
the RNS announcement dated 13 July 2022 and the Placing Circular,
also published today, at length and shareholders will have the
opportunity to vote on the Placing at the General Meeting on 1
August 2022. These can be summarised as follows:
Timing - On 24 May 2022 Ironveld announced the agreed terms of
the transaction to acquire the smelter and that it had agreed a
three month exclusivity period ("Exclusivity Period") with Tayfin
Forensic and Investigative Auditors and the sole creditor. In this
announcement Ironveld explained that if it could not be sure that
the investment by Grosvenor Resource Pty Limited ("Grosvenor") in
the Company would be completed in line with the agreed Exclusivity
Period it would seek alternative funding routes to finance the
acquisition and refurbishment of the FCF smelter. In this
announcement it was stated at Mr Jennings' insistence that
shareholders holding approximately 9.0 per cent of the Company's
shares would "hold their corner" in an alternative equity
fundraising of up to GBP5.0 million at a price of up to 1.25p per
new ordinary share and an offer of alternative loan capital.
Following discussions with the Company's Joint Broker, Turner Pope
Investments, and the favourable response of investors immediately
following the announcement of the FCF acquisition Ironveld
commenced with a bookbuild for the Placing on 24 June 2022 to
ensure that all necessary funds would be obtained within the
Exclusivity Period, rather than for Grosvenor's funding process to
complete.
Far from holding his corner for 9 per cent. of a Placing, as he
had previously confirmed, Mr Jennings submitted his requisition to
the Company to call a general meeting and propose the GM
Resolutions within 30 minutes of being "wall crossed".
Certainty and Quantum - The Placing is the most appropriate
method to raise a sufficient quantum of funding to cover the FCF
acquisition, refurbishment and the Company's working capital
requirements until the forecast sales revenues from finished
products will be received. No other potential funding route
available to the Company at the time the Placing was undertaken
provided sufficient funds to meet the Company's requirements.
Appropriate mix of equity and debt - The acquisition terms for
the smelter include the purchase of ZAR 100 million (approximately
GBP5.0 million) of debt from the sole creditor to FCF. Importantly
this is only secured on the smelter itself and not Ironveld's wider
assets. Given the market capitalisation of Ironveld, the Board
considers it unwise to enter into materially more debt than this
amount given the Company's current circumstances. Other offers of
funding to the Company (including those from Mr Jennings) included
high proportions of debt with onerous terms that would have to be
repaid (whilst equity, of course, does not)) either in cash or
shares at the prevailing price and typically with the requirement
to also award extremely high levels of warrants with no fixed floor
price.
Pricing - The Company's last fundraising was conducted at 0.30p
in November 2020, when there was no immediate route to production
and development, compared to that provided by the Placing and
smelter acquisition today. The Placing Price of 0.30p is exactly in
line with the previous transaction and indeed the same price that
Mr Jennings received shares in the Company alongside the 2020
placing. Without the actions of Mr Jennings, whereby his
requisition and the Placing had to be announced on 29 June 2022,
the Board strongly believes that the Placing would have been
completed at a significantly higher price. The closing price of the
Company's shares on 28 June 2022 was 0.70p.
Equitable for shareholders - Via the Broker Option, which was
announced alongside the Placing, Shareholders were able to obtain
shares at the Placing Price and to share the benefits of the FCF
acquisition rather than these benefits principally accruing only to
Mr Jennings and his partners under their debt funding structure. We
were delighted to note that the Broker Option was subscribed for
GBP0.5 by shareholders.
Accusation
-- "What perplexes us and exercises our minds is IF the BoD
still believes that Grosvenor will complete (large questions need
asking ref why they have gone this far with them when we look at
the history above) then why does Mr Clarke in part or whole not put
up the interim funding to allow the deal to complete as opposed to
prejudicing existing shareholders many of whom not only believed
the BoD's multitude statements (and that they must own) but quite
possibly cannot "go again" ref holding their corner. Further, to
raise equity into this market environment is nonsensical."
Facts
The Board would like to thank shareholders for their patience
with regards to the Grosvenor funding, which has taken longer than
anticipated to close but has had several complicating factors. The
Board conducted thorough due diligence on Grosvenor, which is
backed by very well connected individuals in South Africa. The
Board remains confident the agreed funds will come from Grosvenor
when it secures its funding, indeed Ironveld would be duty bound to
inform the market otherwise if it felt that the transaction was not
going to complete. As noted in the 24 May 2022 announcement, the
smelter acquisition will materially aid Grosvenor's funding process
but should Mr Jennings' proposed GM Resolutions be passed the
smelter acquisition, which has been so painstakingly negotiated,
would be in jeopardy. As a reminder, the smelter is being bought
for ZAR 15 million now and ZAR 100 million over 10 years with an
insurance value many times higher than that.
Accusation
-- "Bluntly, you have run the company's cash pot bare whilst
holding onto your belief in Grosvenor and as a direct consequence
of these actions, shareholders face a XXXXX XXXXXX raise."
Facts
The Board considers this to be a ridiculous accusation from Mr
Jennings. At the time of Mr Jennings' requisition, the Directors
were the largest creditors to the Company with outstanding loans,
deferred salaries and deferred fees which included the GBP140,000
of Director Bridge Loans from Giles Clarke and Martin Eales, which
would be immediately repayable if they left the Board. In addition
to the GBP40,000 Bridge Loan Facility advanced in May 2022, the CEO
has deferred over 40 per cent of his salary since joining the
Company and prior to the Placing was owed over 13 months' worth of
salary in addition to his loan. As announced in the Placing
announcement dated 13 July 2022, the Directors are converting over
GBP350,000 of gross loans, salaries and fees and subscribing for a
total of GBP100,000 cash in the Placing.
Accusation
-- "As an aside, if during the last 12 months you and your
fellow BoD members have been accruing (let alone taking) salary
during this debacle this will speak volumes to me personally ref
your "alignment" (excuse the pun) with shareholders."
Facts
This is another ridiculous accusation. Shareholders do not
expect public company directors to work for free or not have their
contracts respected and illustrates that Mr Jennings has no
experience of managing public companies.
In addition, if a company does not pay its directors, it will
not obtain their services. The Company has, and always will under
the current management, honour its contracts.
Accusation
-- "Many of your and Mr Clarke's statements to me raise more questions than answers."
Facts
Mr Jennings has zero experience of running a public company. All
relevant and price sensitive information has been put into the
market via RNS. Mr Jennings has been constantly rude and in contact
with the Directors via WhatsApp asking for information and detail
which could be considered to be price sensitive and would be
inappropriate to send to a single shareholder. The Board has taken
the unanimous decision that this type of behaviour will not
tolerated.
The Board Recommends that Shareholders VOTE AGAINST ALL
Resolutions
Yours faithfully
Giles Clarke
Chairman
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END
MSCUSVRRUWUBAUR
(END) Dow Jones Newswires
July 15, 2022 02:00 ET (06:00 GMT)
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