REG - Red Rock Resources - Conditional agreement, Australian gold subsidiary
13/03/2024 08:00
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RNS Number : 6645G Red Rock Resources plc 13 March 2024
Red Rock Resources PLC
("Red Rock" or the "Company")
Heads of Terms Signed
Conditional Agreement to take 100% ownership of Australian Gold Subsidiary
13 March 2024
Red Rock Resources Plc, the natural resource development company with
interests in gold, base metals, battery metals, and hydrocarbons, principally
in Africa and Australia, announces that it has entered into conditional Heads
of Terms ("HoT"), under which it would, subject to due diligence and funding,
board approval, and any shareholder approvals required, acquire the 49.9%
beneficial interest in Red Rock Australasia Pty Ltd ("RRAL") not already
owned, and would become the 100% beneficial owner of RRAL ("Acquisition"). The
HoT is subject to board approval of both parties, shareholder and regulatory
approval (as required), and is subject to contract.
Currently Red Rock owns 50.1% of New Ballarat Gold Corporation Plc ("NBGC"),
and Power Metal Resources Plc (AIM:POW)("POW") owns 49.9% of NBGC. NBGC in
turn acts as the holding company of RRAL, of which it owns 100%.
Under the Heads of Terms, Red Rock would upon fulfilment of the conditions,
acquire the entire interest of POW in the share capital of NBGC, as well as
the benefit of any shareholder loans of POW to NBGC or RRAL, for an aggregate
consideration of £1,500,000 in fixed and contingent payments (the
"Consideration").
The principal assets of RRAL are 16 gold exploration licences in the State of
Victoria in Australia, together with some permitted areas of State land within
them, totalling 2,517 sq km, and a 560 sq km licence in Southern Australia.
As Red Rock owns a controlling interest in NBGC, all relevant developments
and information in relation thereto has been notified by Red Rock and details
are provided on the Red Rock website in accordance with the AIM Rules.
Red Rock Chairman Andrew Bell states: "We have had a successful collaborative
relationship with Power Metal Resources since we began the development of Red
Rock Australasia into a company specialising in gold exploration in Victoria.
Recent drilling results at Berringa have shown that the next step should be to
push forward a process that could lead to early production, and the parties
have decided that their interests will best be served at this stage by
concentrating ownership in the hands of a single shareholder that can focus on
these next stages of development.
If this transaction completes, it will enlarge Red Rock's gold footprint at a
time when interest in advanced gold stories has increased as the gold price
rises to new all-time highs".
Since the completion of the proposed transaction is subject to the Conditions
noted below, there can be no guarantee that the transaction will be completed.
Most of the Consideration is payable in either cash or shares, and the Company
will inter alia need to assure itself in the due diligence period, in the
light of market conditions and other factors, that cash and other
Consideration will be available over the next year on the terms and schedule
provided in s5 of the HoT below. In addition the Company will need to provide,
from itself or pre-IPO investors, funding for the future planned operations of
RRAL. Although the Company expects to receive proceeds from DRC compensation,
asset sales including sales of subsidiary interests and other external funding
will be required in order for the Company to advance its projects. Full
satisfaction of condition (a) below, Red Rock board approval, can only occur
after conclusion of due diligence inquiries and compliance with the
requirements of the AIM Rules set out in the section headed "Related Party
Transaction" below.
Principal terms of the proposed transaction:
1 Purchase and Sale POW agrees to sell and Red Rock agrees to buy the entire interest of POW in
the share capital of NBGC whose principal asset is a 100% holding in RRAL, on
the terms and conditions set out below.
RRAL holds 2,517 sq km of granted licences in Westen Australia and a 560 sq km
granted licence in South Australia (together with the share capital of RRAL,
the "Assets").
2 Consideration The Consideration for the Purchase is the payment of £1,500,000 in fixed and
contingent payments subject to the terms and conditions set out in this HoT
and as described in the Payment schedule.
3 Conditions Precedent The transaction is subject to
(a) approval of the boards of both parties,
(b) shareholder approval by shareholders of Red Rock of the issue of the
Initial Share Consideration ("ISC"),
(c) regulatory approval and compliance with the AIM Rules,
(d) completion of due diligence by Red Rock ("Due Diligence"),
(e) Red Rock confirming by the close of Due Diligence that it has access to
funding required for the settlement of all amounts due on Completion and for
the ongoing financing of NBGC and RRAL; and
(f) the addition to this HoT, or the incorporation with the terms of the HoT
in a new contractual document, of any additional terms found to be necessary
for the completion and execution of the transaction.
Condition (a) shall be deemed satisfied upon written notice of approval given
by each party;
Condition (b) shall be deemed satisfied upon the passage by the shareholders
of Red Rock of a resolution approving the ISC;
Condition (c) shall be deemed satisfied upon the approval by the Nominated
Adviser of each Party of RNS publication announcing the terms of this HoT, and
relevant approval(s) and/or confirmation(s) by the AIM Regulation team and/or
the Seller's Nomad that the Transaction does not constitute 'fundamental
change of business' of the Seller as per AIM Rule 15.
Conditions (d) and (e) shall be satisfied on receipt of written confirmation
from Red Rock to POW ("Confirmation");
Condition (f) shall be deemed satisfied when each Party confirms in writing
that it has no further comment on the terms.
It is the intention of the Parties that conditions (a), (c), and (f) should be
satisfied within 7 days of Confirmation as defined above, and that Red Rock
should have called a General Meeting if in the judgment of the Purchaser such
meeting is desirable or required to authorise the ISC within that same period.
Should all conditions precedent not be satisfied or agreed in writing by the
parties to be waived within 13 weeks of the date of this HoT, the HoT shall be
terminated.
4 Completion Completion shall be effected within five days of the satisfaction of the
Conditions Precedent (or, in the case of condition (b), its waiver by POW) by:
(a) POW delivering its shares in NBGC to Red Rock with a signed transfer;
(b) Red Rock delivering the Convertible Loan Notes ("CLNs") to POW;
(c) Red Rock delivering upon their approval the ISC and accompanying warrants
to POW.
("Completion" means completion of the Transaction in accordance with this
paragraph 4).
5 Payment schedule (a) Upon Completion, Red Rock will pay POW the CLN consideration, namely
£250,000 to be settled by the issue of 250 Convertible Loan Notes of £1,000
which will be convertible to Shares at the price of any placement of new
Shares to raise proceeds of over £200,000 gross to be carried out in the six
months after their issue ("Placement"), and in the event no Placement occurs
to be redeemed by a cash payment on a date six months after Completion;
(b) Upon the approval by shareholders of Red Rock of the ISC, the payment by
Red Rock to POW of £250,000 to be settled by the issue of 166,666,667 new
Ordinary Shares of Red Rock ("Shares") at a price of 0.15 pence per Share, or
cash (at Red Rock's election) and 166,666,667 warrants each exercisable into
one Share at a price of 0.25p per Share and exercisable during a period
expiring 3 years after the date of their issue;
(c) On the date two months after Completion, the payment by Red Rock to POW of
£250,000 in cash;
(d) The payment on each of the three following occasions by Red Rock to POW of
£250,000 in cash or, at Red Rock's election, Shares in Red Rock to that value
calculated by reference to the last 10 trading days' VWAP (volume-weighted
average price), provided that if Shares are issued then accompanying warrants
with a three year life and each converting into one Share at a 50% premium to
the price of issue of the Shares will also be issued on the basis of one
warrant for every two Shares issued:
(1) £250,000 on the date nine months after Completion;
(2) £250,000 on the confirmation by announcement by a regulatory news
service or a declaration by a Qualified or Competent person (as those terms
are defined in the AIM Rules) of a 20,000 oz gold or gold equivalent JORC
Resource according to the JORC 2012 Code from within the boundaries of the
current licence area or any future licence renewal(s) of that area or part
thereof;
(3) £250,000 on the confirmation by announcement by a regulatory news
service or a declaration by a Qualified or Competent person (as those terms
are defined in the AIM Rules) of a 200,000 oz gold or gold equivalent JORC
Resource according to the JORC 2012 Code from within the boundaries of the
current licence area or any future licence renewals of that area or part
thereof.
6 Other Terms The transaction will be subject to the following additional terms:
(a) Royalties: POW will retain the royalty interests namely a 0.75% GPR over
the RRAL licence interests held as at the date of execution of this HoT or any
current licence area renewed or the subject of a future disposal;
(b) Performance Guarantee: Red Rock undertakes that for the next 12 months
from the date of this HoT it will ensure:
(1) That RRAL retains the licences containing the old Berringa and Ajax
mines in Victoria, Australia in good standing, subject to any requirement to
surrender a portion of any licence upon the second or later anniversary of its
grant;
(2) That where any licence expenditure and other commitments will not be
satisfied and a reduced expenditure has not been agreed, or where licences
(other than any situate in Western Australia) are to be surrendered (other
than pursuant to 6(b)(2) above), POW will be given 3 months' notice of same by
Red Rock prior to licence expiry and the option to acquire each such interest
for A$1;
(3) That if Red Rock does not make any Consideration payments under 5 above
within 3 business days of the due date, a Default may be declared by POW in
writing to Red Rock, in which case interest will be charged at 2% per month or
part thereof and Red Rock must cure the Default within 60 days, after which,
provided the delay is not due to any event of force majeure, POW may reacquire
its original 49.9% NBGC issued share capital for A$1 and a five year Note for
an amount equivalent to any cash Consideration paid up to that date (and any
cost incurred in licensing a small area of State land within EL007328);
(4) That no significant exploration interests of or controlling interest in
Red Rock's group in Australia should be transferred out or disposed of or
agreed to be so transferred or disposed by Red Rock to another Party without
an opportunity being given to POW to match the terms offered by such other
Party; and
(5) Should Red Rock dispose of any of the interests currently held by NBGC /
RRAL within 12 months 15% of disposal proceeds after agreed costs will be
payable to POW, or 5% in months 13-24.
(6) So long as any of the payments set out in 5(a) to (c), and 5(d)(1)
remain outstanding, any disposal under 6(b)(5) above shall be subject to prior
written agreement of POW, such consent not to be unreasonably withheld.
(7) The obligations of Red Rock under 5(d)(2) and (3) shall not be
extinguished by any disposal under 6(b)(5) above, except with the written
agreement of POW.
(c) Aggregate Consideration: The Parties agree that the aggregate
consideration payable to the Seller pursuant to this HoT shall not exceed
74.9% of the market capitalisation of the Seller as at the date of this HoT,
using the mid-market closing price of ordinary shares of the Seller on the
trading day immediately prior to the date of this HoT.
(d) Other
(1) Unless otherwise agreed by the Parties, Due Diligence will be completed
by Friday 19(th) April 2024.
(2) From the date of execution of this HoT or the Long Stop Date, whichever
shall be sooner, until Completion, each Party will contribute A$20,000 per
month towards the costs of RRAL, with any further costs to that date being met
by Red Rock.
7 Warranties Each Party represents and warrants that:
(a) incorporation: it is a corporation incorporated (or taken to be
incorporated) or registered and validly existing under laws of the
jurisdiction in which it is domiciled.
(b) corporate power: it has the corporate power to own its assets and to
carry on its business as it is now being conducted.
(c) authority: it has, other than as noted in this HoT, full power and
authority to enter into and perform its obligations under this agreement.
(d) authorisations: it has taken or will take all necessary action to
authorise the execution, delivery and performance of this agreement in
accordance with its terms; and
(e) binding obligations: this HoT constitutes legal, valid and binding
obligations and, subject to any necessary stamping and registration, is
enforceable in accordance with its terms (subject to laws generally affecting
creditors rights and to principles of equity); and
POW warrants:
(f) Legal and beneficial owner; POW is the recognised legal and beneficial
owner of the NBGC shares sold and no other Party has any claim or interest in
them whatsoever.
8 Terms Binding Upon fulfilment of the Conditions, this HoT will be legally binding on the
Parties, but if requested by either Party, the Parties agree to enter into a
formal sale and purchase agreement to more fully document the terms of the
Transaction
Licences held by RRAL
Licence Number Project Name Area (km(2))
EL007271 Buninyong 133
EL007281 Blue Chip 74
EL007282 Blue Sky 489
EL007285 Blue Ribbon 8
EL007327 Dereel 60
EL007385 Sardinia 4
EL007329 Kilmore 484
EL007301 Pitfield/Mt. Bute 85
EL007328 Blue Yonder 164
State land within EL007271
EL007505 -
EL007506 9
EL007507 9
8
EL007460 Kilmore West 325
EL007330 Daylesford 202
EL007294 Talbot 129
EL005535 Berringa 9 (228 net ha)
EL007756 Monmouth 22
State land within EL007327
EL007799 Dereel (2)
3
EL007826 Ballarat East 4
EL007460 Kilmore West 325
ELA2023/00017 (SA) Upalinna 560
EL007540 Outer Ballarat 142
(3 competing applications)
Further information on NBGC and RRAL
NBGC and its wholly owned subsidiary RRAL ("Australian Subsidiaries") are
accounted for as 50.1% subsidiaries of Red Rock and therefore their results
and assets and liabilities are consolidated within the Red Rock consolidated
accounts. The audited accounts of NBGC in the year to 30 September 2022 show a
consolidated after tax loss of £351,891, consolidated equity of £(800,048)
including a merger reserve of £(472,083), and amounts due to shareholders of
£1,134,902, of which the amount due to POW is £481,575. The Red Rock audited
accounts to 30 June 2023 ("Accounts"), as shown in Note 2. Segmental Analysis
in relation to "Gold Exploration Australia", the net loss before tax from
continuing operations of the Australian Subsidiaries was £(470,000). The net
assets of the Australian Subsidiaries consolidated within the Accounts were
£(1,052,642) (being on a 100% basis) and the non-controlling interest in
relation thereto (which effectively is what is being purchased now under the
Acquisition) was £(525,268). The current carrying value after writedowns of
the Australian Subsidiaries in the books of Red Rock is £888,911. The current
carrying value of the interests being acquired in the books of POW is
£870,784.
Plans for Exploration post-Completion
During the Due Diligence period Red Rock will, assisted by professional
experts, conduct a technical review of its Exploration Programme and of the
Assets, and assess the market for prospects of the type and quality of the
Assets comprising this proposed transaction.
Related Party Transaction
As Mr Sean Wade is a director of RRAL and is the sole executive Director of
POW, the Acquisition is being treated as a Related Party Transaction for the
purpose of the AIM Rules, Accordingly, the Directors of Red Rock, all of whom
are independent of the Acquisition will consider, following the results of the
Company's due diligence inquiries, and having consulted with the Company's
Nominated Adviser, whether the terms of the Acquisition are fair and
reasonable insofar as the Company's Shareholders are concerned.
The Company will report further on its plans for Exploration at the conclusion
of the Due Diligence period.
For further information, please contact:
Andrew Bell 0207 747
9990
Chairman Red Rock Resources Plc
Roland Cornish/ Rosalind Hill Abrahams 0207 628 3396 NOMAD
Beaumont Cornish Limited
Bob Roberts 0203 8696081
Broker Clear Capital Corporate Broking
This announcement contains inside information for the purposes of Article 7 of
Regulation 2014/596/EU, which is part of domestic UK law pursuant to the
Market Abuse (Amendment) (EU Exit) regulations (SI 2019/310) and is disclosed
in accordance with the Company's obligations under Article 17.
Beaumont Cornish Limited ("Beaumont Cornish") is the Company's Nominated
Adviser and is authorised and regulated by the FCA. Beaumont Cornish's
responsibilities as the Company's Nominated Adviser, including a
responsibility to advise and guide the Company on its responsibilities under
the AIM Rules for Companies and AIM Rules for Nominated Advisers, are owed
solely to the London Stock Exchange. Beaumont Cornish is not acting for and
will not be responsible to any other persons for providing protections
afforded to customers of Beaumont Cornish nor for advising them in relation to
the proposed arrangements described in this announcement or any matter
referred to in it.
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