Contango Holdings PLC (AIM: CGO) shares rose sharply in early trading, gaining around 50%, after the company announced a proposed subscription with strategic investors Pacific Goal Investments Private Limited and Huo Investments.
The fundraising is expected to raise approximately £5 million through the issue of new ordinary shares priced at 1.11 pence each, representing a 39% premium to the current share price.
Contango said the proceeds will be used to repay all outstanding debt, including shareholder loans, leaving the company debt-free. Management added that this could position the business to return cash to shareholders in the future as royalty income continues to grow.
The subscription remains conditional on the granting of a waiver under Rule 9 of the Takeover Code and approval from shareholders at a forthcoming General Meeting.
Proposed Subscription with Strategic Investors to Raise approximately £5m
Highlights:
· Proposed Subscription of approximately £5,000,000 at 1.11p per share to existing Muchesu Mine Operator Pacific Goal Investments Private Limited (PGI) and major Company shareholder Huo Investments (Pvt) Limited (“Huo Investments”), collectively the (“Strategic Investors”)
· Funds will be deployed to repay all outstanding debt, including previously reported Shareholder Loans
· Subscription price represents a premium of 39% to current share price
· The Subscription is subject to a Waiver of Rule 9 of the Takeover Code and passing of certain resolutions at a General Meeting
Danny dos Santos, CEO of Contango, commented:
‘I am delighted to announce this conditional Subscription at a healthy premium to current trading levels, which will recapitalise the Company and enable us to repay all existing shareholder loans. This will leave the Company debt free and now in a position to pay dividends to shareholders as royalty income grows at Muchesu.
Huo Investments are already a major shareholder and I am pleased they have elected to maintain their percentage ownership in the Company through a pro rata investment of approximately £1 million. PGI have undertaken material capital investment at site already and with their circa £4 million participation in the Subscription, they will become our largest shareholder.
Combined, the long-term Strategic Investors will have an approximate 50% stake in the Company and are heavily aligned with existing shareholders to deliver value within Contango for the benefit of all shareholders.
I look forward to providing further updates as we position Contango for a period of growth and expansion.’
