REG - Central Asia Metals - Proposed acquisition of Lynx Resources Limited <Origin Href="QuoteRef">CAML.L</Origin> - Part 13
22/09/2017 07:08
- Part 13: For the preceding part double click ID:nRSV5104Rl
Sales........................................................................................................................................................................................................................................ 454,762
Intercompany loans............................................................................................................................................................................................................ 10,395,509
At 30 June 2017..................................................................................................................................................................................................................... 5,994,486
Translation differences as above of $5,994,486 (30 June 2016: $2,643,625) originates from the intercompany loan between
Lynx Mining and Lynx Europe, which is considered a net investment as settlement, which the timing of repayment is
uncertain.
15. Deferred revenue-received advances for silver delivery
The carrying amounts of the deferred revenue-received advances for silver delivery are as follows:
30 June 2017 31 December 2016
Deferred revenue - received advances for silver delivery.............................................................................................. 20,626,969 21,573,555
20,626,969 21,573,555
30 June 2017 31 December 2016
Current......................................................................................................................................................................................... 2,143,404 1,970,092
Non-current................................................................................................................................................................................ 18,483,565 19,603,463
20,626,969 21,573,555
On 1 September 2016, Lynx Group entered into a Silver Purchase Agreement with Lynx Metals Limited (Lynx Metals) by netting
of its existing Loan payable with Lynx Metals. The prepayment for the purchase of silver are recognized as deferred income
and are related to production of silver during the life time of the mine. Deferred income is recognized to the statement of
comprehensive income as the silver is delivered based on the units of production.
16. Trade payable and other financial liabilities
30 June 2017 31 December 2016
Domestic trade payables......................................................................................................................................................... 1,831,864 2,596,279
Foreign trade payables............................................................................................................................................................ 499,218 813,117
Trade payables......................................................................................................................................................................... 2,331,082 3,409,396
Employee related liabilities................................................................................................................................................... 685,669 602,923
Concession liability................................................................................................................................................................ 684,213 204,361
Professional fees payable........................................................................................................................................................ 154,243 116,285
Freight cost payable................................................................................................................................................................. 96,334 30,847
Other current liabilities.......................................................................................................................................................... 119,390 1,042,235
Other financial liabilities.................................................................................................................................................... 1,739,849 1,996,651
17. Borrowings
30 June 2017 31 December 2016
Non-current 57,449,924 62,571,429
Borrowings..............................................................................................................................................................................
Current 14,219,300 28,752,611
Borrowings..............................................................................................................................................................................
Accrued interest payable..................................................................................................................................................... - -
71,669,224 91,324,040
Current and non-current borrowings represent the long-term loan that was issued in amount of $75,000,000 from Societe
Generale, Investec and Ohridska Banka (the Senior Facility) obtained in October 2016 with an interest rate of 3 month LIBOR
plus 5%, maturing on 30 September 2023. For the six month period ending 30 June 2017 there have been repayments of
borrowings.
Bank borrowings from Ohridska Banka represent short-term loans. The first loan was issued in amount of $5,307,885 with
interest rate of 6.2% p.a. which matured on 30 June 2017 has been repaid. The second loan was issued in amount of $525,948
with interest rate of 4.5% p.a. and has a maturity date on 5 September 2017. The third loan was approved in amount of
$1,051,707 with interest rate of 4.5% p.a. maturing on 30 November 2017. For the six month period ending 30 June 2017 there
have been repayments of borrowings.
The carrying amounts and fair value of all borrowings are as follows:
Carrying amount Fair value
30 June 2017 31 December 2016 30 June 2017 31 December 2016
Ohridska Banka AD Skopje............................................. 5,182,275 18,324,040 5,182,275 18,324,040
SG Facility............................................................................ 66,486,949 73,000,000 66,486,949 73,000,000
71,669,224 91,324,040 71,669,224 91,324,040
The fair value of all borrowings equals their carrying amount, as the impact of discounting is not significant. The
information in relation to the pledge of collateral is presented in Note 10.
The carrying amounts of the borrowings are denominated in the following currencies:
30 June 2017 31 December 2016
MKD............................................................................................................................................................................................. 5,182,275 18,324,040
USD.............................................................................................................................................................................................. 66,486,949 73,000,000
71,669,224 91,324,040
18. Related party transactions
The Lynx Group has related party transactions with subsidiaries of its parent company during its normal course of business
activities. All transactions with related parties are conducted under normal trading and commercial terms at mutually
agreed terms. The tables below provide information for the volume and balances of the related party transactions as of and
for the period ended 30 June 2017, 30 June 2016 and year ended 31 December 2016.
(i) Year-end balances arising from purchases/sales of commodities and services
30 June 2017 31 December 2016
Receivables from related parties 17,409,357 3,690,147
Subsidiaries of the ultimate beneficiaries of the Lynx Group.......................................................................................
17,409,357 3,690,147
(ii) Sales of commodities and services
30 June 2017 30 June 2016
Sales towards Lynx Metals 54,084,815 35,644,648
Subsidiaries of the ultimate beneficiaries of the Lynx Group.......................................................................................
Sales of silver............................................................................................................................................................................. 2,054,166 -
Marketing cost........................................................................................................................................................................... (1,373,143) (4,085,191)
54,765,838 31,559,457
(iii) Services obtained
30 June 2017 30 June 2016
Services obtained from Fusion Capital - shareholder of Lync Resources........................................................... 1,802,500 1,500,000
1,802,500 1,500,000
30 June 2017 30 June 2016
Services obtained from Lynx Metails 1,373,143 4,085,191
Marketing cost...........................................................................................................................................................................
1,373,143 4,085,191
(iv) Deferred revenue
Please refer to note 15 for details of deferred revenue recognized in relation to the Silver Purchase Agreement with Lynx
Metals.
19. Commitments
The Lynx Group has signed long-term contracts to either support its standard operational activity (production materials,
oil, explosives, etc.) or develop new projects. In the latter category, the Lynx Group is currently committed to the
construction of facilities for the appropriate treatment of "tailings" and has engaged one main contractor for the related
construction work; the total value of all standing commitments after 30 June 2017 is approximately $840,000.
20. Contingencies
Legal proceedings
From time to time and in the normal course of the business, claims against the Lynx Group may be received. On the basis of
its own estimates and both internal and external professional advice, the Management of the Lynx Group is of the opinion
that no material losses will be incurred in respect of claims and accordingly no provision has been made in this
consolidated financial information.
21. Events after the reporting period
On 22 September 2017, it was announced that CAML will, subject to the satisfactory completion of certain conditions,
acquire the entire issued share capital of Lynx Resources Limited.
There are no events after the reporting period that would have impact on the 30 June 2017 condensed consolidated interim
statement of comprehensive income, condensed consolidated interim statement of financial position, condensed consolidated
interim statement of cash flows.
27. Unaudited Pro Forma Statement of Net Assets of the Enlarged Group
The unaudited pro forma financial information of the Enlarged Group in this section 27 has been prepared to illustrate the
effect on the net assets of CAML as if the Acquisition, the Debt Financing and the Company Placing had taken place on 30
June 2017.
The unaudited pro forma financial information is based on the consolidated net assets of CAML as at 30 June 2017 and has
been prepared using accounting policies consistent with those set out in the interim financial statements of the Group for
the six months ended 30 June 2017.
The unaudited pro forma financial information has been prepared for illustrative purposes only and, because of its nature,
addresses a hypothetical situation and, therefore, does not represent CAML's or the Enlarged Group's actual financial
position. The unaudited pro forma financial information has been prepared on the basis set out in the notes below and in
accordance with Schedule Two of the AIM Rules for Companies.
The unaudited pro forma information does not constitute financial statements within the meaning of Section 434 of the Act.
Unaudited Pro Forma Statement of Net Assets
(Note 1) (Note 2) (Note 3) (Note 4) (Note 5)
Non-current assets
Property, plant and equipment 50,361 186,392 - - - 236,753
Intangible assets 41,761 10,438 200,798 - - 252,997
Other non-current receivables 2,653 - - - - 2,653
94,775 196,830 200,798 - - 492,403
Current assets
Inventories 4,406 2,094 - - - 6,500
Trade and other receivables 975 17,409 - - - 18,384
Other financial receivables - 3,879 - - - 3,879
Deferred tax assets - 131 - - - 131
Restricted cash 122 - - - - 122
Cash and cash equivalents 41,580 14,815 (285,676) 117,360 147,207 35,286
47,083 38,328 (285,676) 117,360 147,207 64,302
Total assets 141,858 235,158 (84,878) 117,360 147,207 556,705
Non-current liabilities
Borrowings - 57,450 - 101,360 - 158,810
Deferred Consideration - - 12,000 - - 12,000
Deferred revenue received advances for silver delivery - 18,484 - - - 18,484
Deferred income tax liability 8,661 - - - - 8,661
Provisions for other liabilities and charges 2,023 2,750 - - - 4,773
10,684 78,684 12,000 101,360 - 202,728
Current liabilities
Borrowings - 14,219 - 16,000 - 30,219
Deferred revenue adances for silver delivery - 2,143 - - - 2,143
Other financial liabilities - 1,740 - - - 1,740
Provisions for other liabilities and charges - 58 - - - 58
Trade and other payables 4,770 3,612 (771) - - 7,611
4,770 21,772 (771) 16,000 - 41,771
Total liabilities 15,454 100,456 11,229 117,360 - 244,499
Net assets 126,404 134,702 (96,107) - 147,207 312,206
117,360
-
244,499
Net assets
126,404
134,702
(96,107)
-
147,207
312,206
Notes:
(1) The net assets of CAML as at 30 June 2017 have been extracted without material adjustment from the unaudited
interim financial statements of CAML for the six months ended 30 June 2017, which is available at
www.centralasiametals.com.
(2) The net assets of the Lynx Group for the six months ended 30 June 2017 have been extracted without material
adjustment from the unaudited interim financial information of the Lynx Group for the six months ended 30 June 2017, set
out in section C of section 26 of this announcement.
(3) The adjustments arising as a result of the acquisition of the Lynx Group are set out below:
(a) The adjustment to current assets of $285.7 million represents the aggregate of $273.5 million cash
consideration payable to the Sellers for the Acquisition and $12.2 million of estimated transaction costs. This includes
$0.8 million of estimated transaction costs which were accrued as at 30 June 2017. In addition, transaction costs of $0.1
million were paid prior to 30 June 2017. Estimated Acquisition costs include those of the financial and legal advisers,
fees, reporting accountant and other costs associated with the Acquisition. In accordance with IFRS, no provision has been
made for possible contingent costs associated with the Acquisition, estimated at $23.0 million.
(b) The unaudited pro forma statement of net assets has been prepared on the basis that the acquisition of Lynx
will be accounted for using the acquisition accounting method. The excess of consideration over the book value of assets
acquired has been reflected as intangible assets. No account has been taken of any fair value adjustments which may arise
on the acquisition, including for any amounts that may be reclassified to property, plant and equipment (mining assets).
The intangible assets arising on this basis have been calculated as follows:
$'m
Consideration:
Cash consideration (note 3(i)) 273.5
Deferred consideration (note 3(ii)) 12.00
Equity consideration (note 3(iii)) 50.0
335.5
Less net assets of the Lynx Group (note 3(iv)) (134.7)
Intangible assets 200.8
(i) The cash consideration of $273.5 million will be financed by the $120.0 million new debt facilities provided
by Traxys (Note 4) and the proceeds of the Placing (Note 5). No adjustment has been made for any net debt and net working
capital adjustments under the Acquisition Agreement.
(ii) Deferred cash consideration of $12.0 million has been accrued, payable in six equal monthly instalments
commencing on the first anniversary of the completion of the Acquisition.
(iii) The equity consideration amount assumes the issue of $50 million of new CAML shares.
(iv) The net assets of the Lynx Group are those as at 30 June 2017 as set out Section C of section 26.
(4) As set out in section 28.4 of this announcement the Company entered into a term loan agreement dated 22
September 2017 with Traxys to advance aggregate facilities of $120.0 million. This adjustment illustrates the impact of the
draw down of $120.0 million of the Debt Fiancing. Estimated costs of $2.6 million associated with the Debt Financing have
been capitalised against non-current borrowing.
(5) Adjustment to reflect the net proceeds of the Company Placing by the Company of $147.2 million, net of
associated costs of $6.3 million, which for the purposes of the pro forma financial information have been assumed as being
directly attributable to the Company Placing and therefore capitalised.
(6) The unaudited pro forma financial information does not take into account trading of either CAML subsequent to
the interim balance sheet date of 30 June 2017 or of the Lynx Group subsequent to the interim balance sheet date of 30 June
2017.
28. Additional Information
28.1 Current and previous directorships or partnerships
The Directors hold, and have during the five years preceding the date of this announcement held, the following
directorships or partnerships (other than the Company):
Name Current directorships/partnerships Previous directorships/partnerships
Nicholas Royston Clarke ........... Wolf Minerals LimitedWolf Minerals (UK) Limited Empire Mining Corporation (now known as Columbus Copper Corporation)
Nigel Francis Robinson .............. Copper Bay Limited Copper Bay (UK) Ltd CAML Kazakhstan BV Shuak BVCopper Bay Chile Limitada Minera Playa Verde Limitada CAML MK Limited CAML Mongolia BV
Gavin Ronald Ferrar...................... Copper Bay LimitedCopper Bay Chile LimitadaMinera Playa Verde LimitadaTredore Consulting Limited New World Investment
Managers Limited
Christopher Nigel Hurst- Hotchkis and Wiley LtdBorders & Southern Petroleum plcStrath Halladale PartnershipSainne Partnership
Brown.........................................
Robert Maitland Cathery............. Redburn Events Limited 9 Redburn Street Limited Vostok Energy plc (dissolved)Dipley Resources Limited
(dissolved)SOCO International plcSalamander Energy plc
David John Swan.......................... Sunrise Resources plcOriel Resources Limited Cambridge Mineral ResourceplcLubel Coal Company (UK)
Limited
Roger Owen Davey .................... Atalaya Mining plc Orosur Mining Inc Condor Gold plcAtalaya Touro (UK) LimitedAtalaya Minasderiotinto Project Alexander Mining Plc Master Drilling Group Ltd Martwick Ltd
(UK) LimitedPiazza Barnaloft Management
LimitedTharisa plc
Kenges Rakishev ........................ Evoshave LimitedSAT & Company JSCNet Element International, Inc.Mobli Media Inc.Mobli Technology 2010TriPlay Inc.Singulariteam LP PTE. LTDSingulariteam GP PTE. LTDBTA Bank JSCJSC "Insurance Company "Kazkommerts-Policy"JSC "Life Insurance Company "Kazkommerts-Life" Satferro Limited (dissolved)Kazkommersbank JSC Jinsheng SAT (Tianjin) Commercial and
Trading Co.LtdBaicheng Jinsheng Nickel
Industry Co.LtdTaonan City Jinsheng
Metallurgical Product Co.LtdUlanhot Jinyuanda Heavy
Chemical Industry Co.LtdSAT Ferro LimitedSAT & Co Netherlands N.VAvanteguard Services Limited
(dissolved)Beyond VerbalCommunication,
Ltd.CB MoskommertsbankAlnair Capital Holdings JSC
(Qazaq Financial Group JSC)ShalkiyaZinc N.VNational Company Kazakhstan
Engineering
Nurlan Zhakupov.......................... SPK AstanaJSC Kazatomprom
Robert Maitland Cathery was a director of Vostok Energy Public Limited Company when it went into administration on 14
October 2013. All known creditors of the company were paid in full, together with statutory interest.
Robert Maitland Cathery was a director of Dipley Resources Limited when it was dissolved on 24 April 2012 via compulsory
strike-off.
David John Swan was a director of Lubel Coal Company (UK) Limited within twelve months preceding the date on which it was
dissolved on 26 June 2012 via voluntary strike-off.
Gavin Ronald Ferrar is the sole director of Tredore Consulting Limited which is in the process of being dissolved on a
voluntary basis.
Gavin Ronald Ferrar was a director of New World Investment Managers Limited from 11 December 2012 to 17 May 2014. A
liquidator was appointed on 23 September 2014 and the company was dissolved on 5 April 2016. All creditors were paid in
full and shareholders' funds were returned.
Nigel Francis Robinson was a director of CAML Mongolia BV when it was liquidated on 5 July 2017 via a turbo liquidation
process. There were no outstanding creditors.
Kenges Rakishev was a director of Avanteguard Services Limited when it was dissolved on 17 January 2017 via voluntary
strike-off.
Save as disclosed above, none of the Directors has:
(A) any unspent convictions relating to indictable offences (including fraudulent offences);
(B) any bankruptcies or entered into any individual voluntary arrangements with his creditors;
(C) been a director of any company at the time of, or within the 12 months preceding, any receivership or liquidation
(including compulsory liquidation, creditors' voluntary liquidation), administration, company voluntary arrangement or
any composition or arrangement with creditors generally or any class of creditors of such company;
(D) been a partner of any partnership at the time of, or within the 12 months preceding, any compulsory liquidation,
administration or partnership voluntary arrangement of such partnership;
(E) had any of their assets made the subject of any receivership or have been a partner of a partnership at the time of or
within the 12 months preceding any assets thereof being the subject of a receivership; or
(F) received any official public incrimination and/or sanction by any statutory or regulatory authorities (including
recognised professional bodies) or been disqualified by a court from acting as a director of a company or from acting in
the management or conduct of the affairs of a company.
28.2 Payments made to third parties
Excluding professional advisers otherwise named in this announcement, trade suppliers and other consultants engaged in the
ordinary course of business, no person has at any time within the 12 months preceding the date of this announcement
received, directly or indirectly, from the Company, the Group or the Lynx Group or entered into any contractual arrangement
to receive, directly or indirectly, from the Company, the Group or the Lynx Group on or after Admission any fees totalling
£10,000 or more or securities in the Company, the Group or the Lynx Group with a value of £10,000 or more or any other
benefit with a value of £10,000 or more.
28.3 Payments made to government or regulatory authorities
A summary of payments aggregating over £10,000 made to any government or regulatory authority or similar body by the
Enlarged Group or on behalf of it, with regard to the acquisition of, or maintenance of, its assets, as at the date of this
announcement, is set out in the table below:
Government authority Description Acquisition Maintenance Total
SPK Saryarka (National Company Social and Entrepreneural Corporation Saryarka) Signature bonus $151,812 - $151,812
DGP Karaganda NPZem, Kazakhstan Operating land plot designservice $15,928 - $15,928
Department of State Revenues of Balkhash Land Lease Fees - $4,339,528 $4,339,528
Department of State Revenues of Balkhash Government Compensation Fee - $106,035 $106,035
Department of State Revenues of Balkhash Historical Geological Costs - $27,119 $27,119
Park of Innovation Technologies Research and DevelopmentCosts - $22,534 $22,534
Department of State Revenues of Balkhash Commercial Discovery Bonus - $3,713,901 $3,713,901
Department of State Revenues of Balkhash Compulsory SocialContributions - $160,000 $160,000
SPK Saryarka (National Company Social andEntrepreneural Corporation Saryarka) Compulsory SocialContributions - $1,137,316 $1,137,316
SPK Saryarka Corporate Foundation Compulsory SocialContributions - $235,940 $235,940
Ministry of Finance, Macedonia Land Acquisitions £16,004 - £16,004
Macedonian Government/ Municipality Kamenica 78% Concession Fee - £2,372,344 £2,372,344
Macedonian Government Concession Fee MKD616,039,970 - MKD616,039,970
MKD616,039,970
-
MKD616,039,970
28.4 Material Contracts
The following contracts (i) not being contracts entered into in the ordinary course of business have been entered into by
members of the Enlarged Group (a) in the two years immediately preceding the publication of this announcement and are, or
may be material or (b) contain provisions under which any member of the Enlarged Group has any obligation or entitlement
which is material to the Enlarged Group as at the date of this announcement or (ii) are subsisting agreements which are
included within or which relate to the assets and liabilities of the Enlarged Group (regardless of whether such agreements
are within the ordinary course or were entered into outside the two years immediately preceding publication of this
announcement).
Summaries of the key contracts relating to the Enlarged Group's assets in Kazakhstan and Macedonia are set out in sections
22.3 and 23.3 of this announcement.
THE GROUP
(A) The Acquisition Agreement, details of which are set out in section 19 of this announcement.
(B) The Shareholder Participation Agreement
Orion has also entered into the Shareholder Participation Agreement with the Company pursuant to which it has undertaken,
for a period of 12 months from Completion, not to:
● acquire shares in the Company;
● influence the voting of the Ordinary Shares;
● seek to control or influence the Company's management or obtain representation on the Board; or
● engage in any discussions which may result in Orion gaining control over CAML.
Orion has also undertaken until the earlier of (i) 18 months from Readmission, or (ii) the date on which they hold in
aggregate less than 4 per cent. of the issued Ordinary Shares to vote, or cause to be voted at all meetings of the
Company's shareholders, in a manner consistent with the recommendation made by management of the Company or the Board in
relation to a number of matters, including the election or re-election of directors and auditors, the renewal of, or
adoption of new, share incentive plans, executive remuneration and certain acquisitions.
In addition, subject to certain exceptions, the Shareholder Participation Agreement requires Orion not to sell any
Consideration Shares for the first six months following Completion, and not to sell more than 50 per cent. of the
Consideration Shares between six months from Completion and the first anniversary of Completion (without the prior consent
of the Company). Any Consideration Shares forming part of the 50 per cent. referred to above that are sold in the second
six months must be sold via the Joint Bookrunners in order to maintain orderly markets.
(C) The Debt Financing Agreement
The Company (as borrower), KCC (as seller), Sary Kazna and CAML Kazakhstan BV (both as guarantors) and Traxys (as lender,
facility agent and security agent) entered into an agreement on 22 September 2017 in respect of a US$120,000,000 prepayment
facility.
The Debt Financing Agreement, which was put in place to partially fund the cash consideration payable for the Acquisition,
has a term of five years, with monthly repayments of US$2,000,000 per month. Early repayment may be required following
typical events such as events of default, change in control and illegality. Interest will be payable at LIBOR plus 4.75%.
Security will be provided over the shares in CAML Kazakhstan BV, certain bank accounts and the Traxys Offtake Agreement
between Traxys and KCC. The agreement contains typical covenants for this type of facility, including financial covenants
related to financial performance of the Company's operations in Kazakhstan.
The Debt Financing Agreement forms part of a pre-payment arrangement between the Group and Traxys under which Traxys is
advancing funds in expectation of acquiring production from the Group's business in Kazakhstan.
Traxys will be funding the advances made under the pre-payment arrangement from its own lenders and the availability of the
facility is subject to the availability of such funding to Traxys. The agreement contains other conditions precedent to
drawdown which are typical for this type of facility.
(D) The Nominated Adviser Agreement
The Company, the Directors and Peel Hunt entered into an agreement on 10 March 2014 in relation to Peel Hunt's obligations
as nominated adviser to the Company.
Under the nominated adviser agreement the Company has agreed to pay certain fees and to reimburse certain expenses to Peel
Hunt in respect of the services to be provided to the Company by Peel Hunt in connection with its role as Nominated
Adviser.
The Company has agreed to indemnify Peel Hunt and its subsidiaries, holding company, branches, affiliates, directors,
officers, representatives, agents and employees in respect of losses incurred in connection with the performance by Peel
Hunt LLP of its services under the nominated adviser agreement, subject to certain carve-outs.
Peel Hunt can terminate the nominated adviser agreement in certain circumstances, including in relation to the Company's
failure to perform a material obligation under the nominated adviser agreement which is not remedied.
(E) Placing Agreement
On 22 September 2017, the Company, the Directors and the Lead Managers entered into a Placing Agreement pursuant to which
the Lead Managers have agreed, subject to certain terms and conditions, to use reasonable endeavours to procure subscribers
for, or failing which the Joint Bookrunners have agreed to subscribe for, at the Placing Price, the Company Placing Shares
to be issued pursuant to the Company Placing.
The Placing Agreement contains, amongst others, the following further provisions:
1) the obligations of the Lead Managers to procure subscribers for, or failing which, the Joint Bookrunners themselves
pursuant to the Placing Agreement, are subject to certain conditions including approval of the Resolutions, approval by the
Kazakh government for the issue of the Company Placing Shares and the Consideration Shares and certain conditions that are
customary for an agreement of this nature including, amongst others, the Company and the Directors providing a certificate
to the Lead Managers, in the form set out in Schedule 5 of the Placing Agreement by 5.00pm on the Business Day immediately
prior to the day of Admission, Admission having occurred by not later than 8.00 a.m. (London time) on 12 October 2017 (or
such later time and/or date as the Joint Bookrunners may agree, not being later than 26 October 2017) and there having
occurred no material adverse effect in relation to the Group or the Target Group since the date of the Placing Agreement.
The Joint Bookrunners may terminate the Placing Agreement in certain customary circumstances prior to Admission, including
the occurrence of certain material changes in the condition (financial, operational, legal or otherwise) of the Group or
the Target Group. The Placing Agreement will become unconditional in respect of the Company Placing and the Joint
Bookrunners' right to terminate the Placing Agreement in respect of the Company Placing will cease from Admission;
2) the obligations of Peel Hunt in connection with Readmission are subject to Admission and certain conditions that are
typical for an agreement of this nature including, amongst others, the Company and the Directors providing a certificate to
the Joint Bookrunners, in the form set out in Schedule 5 of the Placing Agreement by 5.00pm on the Business Day immediately
prior to the day of Readmission, Readmission having occurred by not later than 8.00 a.m. (London time) on the sixth
business day following satisfaction of the conditions to the Acquistion Agreement (or such later time and/or date as the
Joint Bookrunners may agree, not being later than 15 December 2017) and there having occurred no material adverse effect in
relation to the Group or the Target Group since the date of the Placing Agreement. The Joint Bookrunners may terminate the
Placing Agreement in certain customary circumstances prior to Readmission, including the occurrence of certain material
changes in the condition (financial, operational, legal or otherwise) of the Company or the Enlarged Group. The Placing
Agreement will become unconditional in respect of Readmission and the Joint Bookrunners' right to terminate the Placing
Agreement in respect of Readmission will cease from Readmission;
3) In consideration of the Lead Managers' services in connection with the Company Placing, the Company shall pay, inter
alia, the following commissions:
● to the Joint Bookrunners a commission of 0.5 per cent. of the aggregate of the Company Placing Shares at the Placing
Price in connection with the Joint Bookrunners' underwriting obligation payable on signing the Admission Document, and
● to the Lead Managers, a further commission of 3.25 per cent. of the aggregate of the Company Placing Shares at the
Placing Price payable on Admission,
together with an amount equal to any applicable value added tax payable therein.
4) the Company has agreed to pay or cause to be paid (together with, in each case, any related value added tax) certain
costs, charges, fees and expenses of, or in connection with, or incidental to, amongst other things, the Company Placing
and/or Admission and/or Readmission;
5) the Company has undertaken, amongst other things, during the period beginning on the date of this announcement and
continuing to and including the date 365 days after the date of Admission, not to issue, allot, pledge, lend sell, or grant
options, rights, warrants or contracts to purchase, contracts to issue, pledge or sell, or otherwise dispose of, directly
or indirectly, except for customary exceptions as provided in the Placing Agreement, any Ordinary Shares or any securities
of the Company that are substantially similar to the Ordinary Shares, including but not limited to any securities that are
convertible into, or exchangeable for, or that represent the right to receive, Ordinary Shares or any such substantially
similar securities (other than pursuant to employee stock option schemes, agreements and arrangements disclosed in this
announcement); and
6) the Company and the Directors have given certain warranties to the Lead Managers and in addition, the Company has
given certain indemnities to the Lead Managers and their associates, subsidiaries, divisions, branches and affiliates, and
current and former directors, officers, employees and agents of each of such persons. The Company's liabilities are
unlimited as to time and amount.
(F) Relationship Agreement
On 19 May 2014, Kenges Rakishev entered into a relationship agreement with the Company due to his position as both a Board
member and significant shareholder. This is to ensure that transactions entered into between any member of the Group and
Kenges Rakishev, or any of his associates, are conducted on an arm's length basis and on normal commercial terms.
Under this relationship agreement, Kenges Rakishev has given certain undertakings, including, to exercise his voting
rights, insofar as he is able, as a shareholder and as a board member, to: (1) ensure that no variations are made to the
Company's Articles of Association which would be contrary to the maintenance of the Company's independence; (2) that
transactions between Kenges Rakishev (and his associates) are made on an arm's length basis and on, in the Company's
opinion, normal commercial terms; and (3) that the Company will make decisions for the benefit of shareholders of the
Company as a whole and not solely for the benefit of Kenges Rakishev.
This agreement will terminate with effect from Admission upon Kenges Rakishev's interests in the Company falling below 14
per cent. of the Enlarged Share Capital, which is the threshold for automatic termination set out in the agreement.
(G) Transitional Services Agreement
In connection with the Acquisition and conditional on Completion, the Company has entered into a Transitional Services
Agreement with Fusion Capital pursuant to which it will have limited access to Chris James, Stefan Peschke, Florian Dax and
Patrick Henze for the provision of transitional services for a period of three months following Completion.
(H) Other material contracts relating to the Group's operations in Kazakhstan are set out in section 22 (Information on
Kazakhstan & Kazakh Mineral Policy and Law) of this announcement.
THE LYNX GROUP
(A) Solway Acquisition Agremeent
Lynx Europe's acquisition of Rudnik SASA DOOEL from the Solway Sellers completed on 3 November 2015. Pursuant to the
acquisition agreement, Lynx Europe has the right to make claims for breaches of warranties relating to the Solway Sellers'
capacity, authority and titles and a breach of the tax warranties or tax covenant until November 2020. The Solway Sellers
provided a tax covenant to Lynx Europe in respect of certain tax liabilities of Rudnik SASA DOOEL (including penalties,
charges and interest thereon), subject to customary limitations and exclusions. The tax covenant contains specific
provisions relating to current litigation with the Macedonian tax authority, details of which are set out in section 28.5
below. Pursuant to those provisions, the Solway Sellers are entitled to conduct negotiations with the Macedonian tax
authority in relation to the litigation (subject to certain restrictions and at the Solway Sellers' sole cost). Any amounts
repaid to Rudnik SASA DOOEL in respect of the litigation are repayable to the Solway Sellers under the provisions of the
tax covenant.
(B) Facility Agreement
Rudnik SASA DOOEL (as borrower), Lynx Europe and Lynx Mining (as guarantors) and Société Générale, London Branch and
Investec Bank plc (as lenders) entered into an agreement on 13 October 2016. The Facility Agreement has a term of seven
years, with amortisation payments from December 2016 to September 2023. Early repayment may be required following typical
events such as events of default, change in control and illegality. Interest is payable at LIBOR plus 5.00%. Security is
provided over the Macedonian assets and operations of the Group.The agreement contains typical covenants for the type of
facility, including financial covenants related to financial performance of the Rudnik SASA DOOEL's operations in
Macedonia.
(C) Other material contracts relating to the Lynx Group's operations in Macedonia are set out in section 23.3 (Information
on Macedonia and Macedonian Mineral Policy & Law) of this announcement.
28.5 Litigation
Neither the Company nor any member of the Group is or has been involved in any governmental, legal or arbitration
proceedings (including any such proceedings which are pending or threatened of which the Company is aware) which may have,
or have had during the 12 months prior to the date of this announcement, a significant effect on the Company and/or the
financial position or profitability of the Group.
Save as disclosed below, no member of the Lynx Group is or has been involved in any governmental, legal or arbitration
proceedings (including any such proceedings which are pending or threatened of which the Company is aware) which may have,
or have had during the 12 months prior to the date of this announcement, a significant effect on the financial position or
profitability of the Lynx Group.
The Macedonian tax authority, the Public Revenue Office (the "PRO"), has concluded that the loan provided to the former
shareholders of Rudnik SASA DOOEL (from whom Lynx Resources acquired Rudnik SASA DOOEL) was a fictive profit distribution.
As a result, Rudnik SASA DOOEL was required to pay MKD 646,796,624 of withholding tax, with an additional amount of MKD
11,642,339 which represents default interest for the period from 1 October 2013 to 31 November 2013 and for the period
after 1 December 2013, 0.03 per cent. of all due amounts as default interest until day of final payment. All amounts due
under the PRO's decision have been fully paid by Rudnik SASA DOOEL. The Macedonian courts have confirmed the PRO's decision
on appeal. Rudnik SASA DOOEL has appealed this decision to a higher court and the case is still pending. If Rudnik SASA
DOOEL's appeal is successful, any amounts received by Rudnik SASA DOOEL will be payable to the Solway Sellers. The PRO
could also choose to repay Rudnik SASA DOOEL by setting off any amounts owed to the company against future tax payments.
There is a remote risk that the situation could trigger a criminal investigation for tax evasion by the public prosecutor's
office which could lead to Rudnik SASA DOOEL being fined up to EUR 500,000.
28.6 No Significant Change
There has been no significant change in the financial or trading position of the Group since 30 June 2017, being the date
to which its last unaudited interim financial statements were prepared.
There has been no significant change in the financial or trading position of the Lynx Group since 30 June 2017, being the
date to which its last
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