REG - Kropz PLC - New Convertible Facility Agreement and GM Notice

KropzAnnouncement

11/05/2022 09:00

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RNS Number : 0807L  Kropz PLC  11 May 2022

The information contained within this announcement is deemed to constitute
inside information as stipulated under the retained EU law version of the
Market Abuse Regulation (EU) No. 596/2014 (the "UK MAR") which is part of UK
law by virtue of the European Union (Withdrawal) Act 2018. The information is
disclosed in accordance with the Company's obligations under Article 17 of the
UK MAR. Upon the publication of this announcement, this inside information is
now considered to be in the public domain.

 

11 May 2022

Kropz Plc

("Kropz" or the "Company")

New Convertible Facility Agreement

and

General Meeting Notice

Kropz Plc (AIM: KRPZ), an emerging African phosphate producer and developer,
announces it has entered into a new conditional convertible equity facility of
up to ZAR 177 million (approximately US$11 million) ("ZAR 177 Million Equity
Facility"), with the ARC Fund ("ARC"), the Company's major shareholder, to
fund the Company's Elandsfontein phosphate project to first revenues from bulk
concentrate sales.

As announced on 27 April 2022, Kropz and ARC entered into a ZAR 25 million
(approximately US$ 1.60 million) bridge loan facility (the "Loan") to meet
cash requirements in April 2022. The Loan will be set-off against the ZAR 177
Million Equity Facility, once approved and unconditional, leaving ZAR 152
million available for drawdown over the term.

As set out in the announcement on 27 April 2022, the Company faces a funding
shortfall of approximately US$ 11 million (approximately ZAR 177 million)
comprising the ZAR 25 million cash requirement for April 2022 and an
additional ZAR 152 million required to deliver the Company's Elandsfontein
phosphate project to first revenues from bulk concentrate sales.  The
shortfall is due to slower than expected progress in the ramp up of operations
at Kropz Elandsfontein (Pty) Ltd ("Kropz Elandsfontein"), resulting in delays
in the production of sufficient phosphate rock concentrate required for the
first bulk sales. Kropz Elandsfontein is now expected to achieve its first
significant revenues in late Q2. The delay in commissioning was largely driven
by the need to re-engineer parts of the fine flotation circuit proposed by the
vendor,  but further exacerbated by early unpredicted ore variability and
lack of operator experience.

The ZAR 177 Million Equity Facility is in addition to the ZAR 200 million
facility, which ARC and the Company entered into in February 2021 ("ZAR 200
Million Equity Facility"). The ZAR 200 Million Equity Facility has been fully
drawn down, with the last  remaining ZAR 33 million drawn on 26 April 2022.

ZAR 177 Million Equity Facility Highlights

·    The ZAR 177 Million Equity Facility comprises a total commitment of
up to ZAR 177 million provided by ARC, which can be drawn down following a
written request from Kropz and at the discretion of ARC;

·    At any time during the term of the ZAR 177 Million Equity Facility,
repayment of the ZAR 177 Million Equity Facility capital amount will, at the
election of ARC, either be:

o  In the form of the conversion into ordinary shares of 0.1 pence each
("Ordinary Shares") in the Company and issued to ARC, at a conversion price of
9.256 pence per Ordinary Share each, representing the 30-day Volume Weighted
Average Price ("VWAP") on 4 May 2022, and at a fixed exchange rate of
ZAR 1 = GBP 0.0504 ("Conversion"); or

o  Payable in cash by the Company;

·    The first drawdown is expected on or around 30 May 2022;

·    Following a Conversion, the Company will apply for the newly issued
Ordinary Shares in the capital of the Company to be admitted to trading on
AIM;

·    The ZAR 177 Million Equity Facility will bear interest at 14 per
cent. per annum and will be compounded monthly ("Interest"). Interest will be
payable in cash to ARC by the Company;

·    The term of the ZAR 177 Million Equity Facility will be from the
Effective Date to the earlier of:

o  Five years from the Effective Date; or

o  One year after the term loan facility provided by BNP Paribas to Kropz
Elandsfontein (in the amount not exceeding US$ 30 million), has been repaid;

·    The ZAR 177 Million Equity Facility will be secured by the shares
that Kropz holds in Cominco Resources Ltd ("Share Charge") and is conditional
on entering into the Share Charge, which will be entered into before the
General Meeting; and

·    The ZAR 177 Million Equity Facility will be conditional on:

o  approval from the South African Reserve Bank ("SARB"). The SARB
application will be lodged imminently and the approval, once received, will be
announced via the Regulatory News Service ("RNS"); and

o  shareholder approval.

 

Notice of General Meeting and Irrevocable Undertakings

The ZAR 177 million Equity Facility is above the authorisation limits given at
the last Annual General Meeting in June 2021 and is conditional on shareholder
approval which is being sought from the Company's shareholders at a General
Meeting to be held in London on 30 May 2022 at the offices of Memery Crystal,
165 Fleet Street, London, EC4A 2DY ("General Meeting").

At the General Meeting, the Company is proposing resolutions to give the
Company's directors authority to issue and allot, on a non-pre-emptive basis,
shares in the Company to meet the full demand under the ZAR 177 Million Equity
Facility if converted (this authority is in addition to the authorities
granted at the previous Annual General Meeting).

Shareholders may attend the General Meeting to vote or appoint a proxy or vote
online by following the instructions set out in the Notice of General Meeting
attached to this announcement. Proxy votes must be received no later than
13:30 on 26 May 2022.

A copy of the Notice of General Meeting and this announcement is being posted
to shareholders today and will shortly be available for AIM Rule 26 on the
Company's website at www.kropz.com/investors/general-meetings.

The Company has received irrevocable undertakings from the directors in
respect of their holdings of 0.3 per cent. of the Company's issued share
capital and from shareholders holding 83.65 per cent. of the Company's issued
share capital to vote in favour of the resolutions proposed.

Related Party Transaction

The ZAR 177 Million Equity Facility is a related party transaction
("Transaction") pursuant to Rule 13 of the AIM Rules. Machiel Reyneke is a
director of the Company and the representative of ARC. Further, as noted
below, ARC and Kropz International are treated as acting in concert for the
purposes of the City Code on Takeovers and Mergers (the "Code") and have
individual and aggregate interests in the Ordinary Shares as set out above.
Mike Nunn, a director of the Company, is the beneficial owner of Kropz
International. Accordingly, Mr Reyneke and Mr Nunn have not been involved in
the approval of the Transaction by the Company's board.

The directors of the Company who are considered independent for the purposes
of the Transaction (being the directors excluding Mr Reyneke and Mr Nunn),
having consulted with the Company's Nominated Adviser, consider the terms of
the Transaction to be fair and reasonable insofar as the Company's
shareholders are concerned.

Draw Down

As noted above, the Company will be making the first draw down request under
the ZAR 177 Million Equity Facility on or around 30 May 2022.

Details of further drawdowns will be made in separate announcements in due
course.

Concert Parties and Impact on Shareholdings

As noted in the Company's AIM admission document, ARC and Kropz International
are treated as acting in concert for the purposes of the Code and have
individual and aggregate interests in the Ordinary Shares as set out in the
table below. It is noted that, both before and after the closing of the
Further Equity Facility, on an aggregate basis, ARC and Kropz International
hold and will continue to hold more than 50 per cent. of the Ordinary Shares
and voting rights in the Company. On a standalone basis ARC, through its
option with Kropz International, currently has a fully diluted interest of
86.2 per cent. of the Company (see footnote 3 below).

Maximum Interests in Ordinary Shares ((1))

                                         Existing ordinary shares        Maximum no. of further shares to be issued pursuant to the ZAR 200 Million  Maximum shareholdings following the ZAR 200 Million Equity Facility and the
                                                                         Equity Facility and the ZAR 177 Million Equity Facility  ((1))              ZAR 177 Million Equity Facility ((1))
                                         No.                       %     No.                                                                         No.                                                                          %
 ARC ((2))                               768,339,330               83.2  315,651,504                                                                 1,083,990,834                                                                87.5
 Kropz International S.a.r.l ((2)(3))    54,933,474                5.9   0                                                                           54,933,474                                                                   4.4
 Concert Party                           823,272,804               89.1  315,651,504                                                                 1,138,924,308                                                                91.9

(1) Assumes for illustrative purposes that the ZAR 177 Million Equity
Facility is fully drawn and that all capital under the ZAR 177 Million Equity
Facility and ZAR 200 Million Equity Facility (which is fully drawn) is
converted into equity.

(2) ARC and Kropz International are deemed to be acting in concert as defined
in the Code.

(3) Kropz International and ARC have entered into an arrangement pursuant to
which Kropz International has granted to ARC a call option over 50 per cent.
of its shareholding. The call option over Kropz International's Ordinary
Shares can be exercised by ARC if the value of ARC's shareholding on the third
anniversary of Admission is 20 per cent. lower than its value on IPO on 30
November 2018. The call option has an alternative settlement of cash or
assets, if the transfer of the Ordinary Shares would require the transferee to
make a Rule 9 offer for the Company pursuant to the City Code.

(4) Mike Nunn, a director of Kropz, holds his beneficial interest in Kropz
through Kropz International.

(5) Exchange rates used are fixed at ZAR 1 = GBP 0.0504 for the ZAR 177
Million Equity Facility.

For further information visit www.kropz.com (http://www.kropz.com/)  or
contact:

 

 Kropz Plc
 Mark Summers (CEO)                +27 (0) 79 744 8708

 Grant Thornton UK LLP             Nominated Adviser
 Samantha Harrison                 +44 (0) 20 7383 5100

 Harrison Clarke

 George Grainger

 Ciara Donnelly

 Hannam & Partners                 Broker
 Andrew Chubb                       +44 (0) 20 7907 8500

 Ernest Bell

 Tavistock                         Financial PR & IR (UK)
 Nick Elwes                        +44 (0) 207 920 3150

 Jos Simson                        kropz@tavistock.co.uk

 Oliver Lamb

 R&A Strategic Communications      PR (South Africa)
 James Duncan                      +27 (0) 11 880 3924

                                   james@rasc.co.za

 

About Kropz Plc

Kropz is an emerging African phosphate producer and developer with projects in
South Africa and the Republic of Congo. The vision of the Group is to become a
leading independent phosphate rock producer and to develop into an integrated,
mine-to-market plant nutrient company focusing on sub-Saharan Africa.

 

-ENDS-

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