Firm Placing and Conditional Placing to raise £510,000
Conditional Issue of Director Salary Shares
Notice of General Meeting
Appointment of Joint Broker
Edenville Energy Plc (AIM: EDL), the AIM quoted company developing a coal project in southwest Tanzania, today announces that it has raised a total of £100,000 (before expenses) by means of a Firm Placing of 500,000,000 new ordinary shares of 0.02 pence each in the capital of the Company (“Ordinary Shares”) at 0.02 pence per Ordinary Share and has further conditionally raised a total of £410,000 (before expenses) by means of a Conditional Placing of 2,050,000,000 new Ordinary Shares at 0.02 pence per Ordinary Share (together the “Placing”).
The net proceeds of the Placing will provide the Company with additional working capital and to specifically increase the available Run of Mine (“ROM”) coal for processing through the opening up of the Company’s northern pit area at the Rukwa Coal Project in Tanzania (the “Project”).
The Placing has been undertaken by Brandon Hill Capital and Brandon Hill Capital has also been appointed as the Company’s Joint Broker with immediate effect.
A Circular setting out full details of the Conditional Placing (the “Circular”) will today be posted to Shareholders. The Circular contains a notice of General Meeting (“GM”) of the Company to be held at the offices of Womble Bond Dickinson (UK) LLP, 4 More London Riverside, London, SE1 2AU at 11.00 am on 17 May 2019. The purpose of the GM is to grant the Board the authority to allot Ordinary Shares in order to proceed with the Conditional Placing and to issue and allot a total of 213,980,200 Ordinary Shares in lieu of unpaid salaries to certain Directors (the “Director Salary Shares”).
A copy of the Circular will shortly be available from the Company’s website at www.edenville-energy.com.
Dr Jeffrey Malaihollo, Non-Executive Chairman, commented:
“Following the low level of take up in the Open Offer to shareholders conducted in February 2019 at 0.12p per share, the Company was forced to place operations at its Rukwa coal project on a limited production profile to conserve capital.
“Edenville is pleased to confirm that it has now been able to recapitalise the Company through the proposed Placing, whilst also bringing on two cornerstone shareholders as part of this financing round. Accordingly, subject to shareholder approval of the Conditional Placing, the proposed financing of £510,000, coupled with the reduction of salaries by the Board and other cost-saving measures, the Company now expects to have sufficient capital to enable a return to full operations. Moreover, Edenville also expects to be able to benefit for the first time from the additional investment in plant and equipment that was made in H2 2018, whilst also opening up the new northern mining area at the Project, which should collectively lead to a further increase in production levels.
“During 2019, the Company has also continued its marketing efforts to identify new customers for both its washed coal and fine coal, as well as maintaining existing relationships. Accordingly, with this funding, the Directors expect the Company to be in a position to boost both production and subsequent sales, thereby placing the Project in a position where it is initially self-sustaining, before turning cashflow positive during the next twelve months.
“Whilst we acknowledge existing shareholders’ frustration at the operational performance to date, which has significantly damaged the share price, we do believe upon the closing of this financing the Company will finally be in a position to move towards profitability. I therefore strongly encourage our Shareholders to read the Circular and vote in favour of the Resolutions.”
First Admission and Total Voting Rights
Application for the admission to trading on AIM of the Firm Placing Shares on AIM will be made to the London Stock Exchange (“First Admission”) and First Admission is expected to become effective at 8am on or around 2 May 2019.
Following First Admission, the issued share capital of the Company will be 2,148,261,562 Ordinary Shares. The Firm Placing Shares will rank pari passu with the existing Ordinary Shares. In accordance with the Financial Conduct Authority’s Disclosure and Transparency Rules, the Company hereby announces that, following First Admission, it has 2,148,261,562 Ordinary Shares, each share carrying the right to one vote. The Company does not hold any Ordinary Shares in treasury. The above figure of 2,148,261,562 Ordinary Shares may be used by shareholders in the Company as the denominator for the calculations by which they will determine if they are required to notify their interest in, or a change to their interest in, the share capital of the Company under the Financial Conduct Authority’s Disclosure and Transparency Rules.
Capitalised terms used but not otherwise defined in this announcement bear the meanings ascribed to them in the Circular.
EXPECTED TIMETABLE OF PRINCIPAL EVENTS
INTRODUCTION
Completion of the Conditional Placing and the other proposals are subject to shareholders approving certain Resolutions being put to the General Meeting. The Directors are seeking authority from Shareholders to allot the Conditional Placing Shares and Director Salary Shares on a non-pre-emptive basis.
Current Operations
The Company’s key focus is on the ongoing development and expansion of the Project. On 1 April 2018 the Company announced that recent progress at the Project had been limited as a result of working capital constraints, further described below.
Coal Production and Sales
ROM Coal
As announced on 1 April 2019, between 1 January 2019 and 26 March 2019, the Company processed approximately 17,760 tonnes of Run of Mine (“ROM”) coal, producing approximately 3,116 tonnes of washed coal to customer specifications and approximately 7,992 tonnes of fine coal. In Q1 2019, approximately 3,510 tonnes of coal were sold and shipped, the majority being washed coal. These production numbers are currently unaudited and may be subject to small variations upon plant and mine reconciliation.
Given the Company’s current working capital constraints, whilst allowing some supply to continue to long term customers, from the start of April 2019 the operation has limited production to conserve consumables as much as possible. All mining operations have been scaled back whilst allowing the plant to continue operating. Access to the additional capital from the Firm Placing and the Conditional Placing will allow the Company to open up the new northern mining area at the Project and increase production levels.
Fine Coal
In addition to the ROM coal that is supplied to the plant, the Company has stockpiles of unprocessed ROM coal, part processed coal and fine coal.
Limited quantities of fine coal are currently being sold from the approximately 40,000 tonne fine coal stock pile the Company has at the Project site. The sale of fine coal will provide an additional income stream for the Company and several customers are taking regular shipments.
As announced on 1 April 2019, the Company recently received an order for 1,000 tonnes of fine coal and the Company will commence shipments to this customer upon receipt of payment for this order. The Board anticipate that successful completion of this order will be followed up with a continuing regular monthly order for between 5,000 and 10,000 tonnes per month. Discussions with this customer remain ongoing and detailed planning on logistics and transport have been completed. Although no assurances can be given, the Directors remain confident that an appropriate contract for this fine coal can be finalised in due course.
Plant Upgrades
The recent plant upgrades at the Project are all now operational. The Lamella water treatment plant has been operating since January 2019 and is providing clean recycled water for the main wash plant. The prescreen has been fully operational since the end of January 2019 and separates out fines and large size material prior to the coal reaching the main plant. These units are currently performing as planned.
Due to constrained working capital, the supply of consumables such as fuel and magnetite have been adversely affected, resulting in falling production rates over Q1 2019.
Annual Results for the year ended 31 December 2018
The Company intends to publish its annual financial results for the year ended 31 December 2018 in early June 2019.
Background to and Reasons for the Placing
On 15 February 2019 the Company announced that it had raised gross proceeds of £62,418 from an open offer to existing shareholders priced at 0.12p per Ordinary Share (the “Open Offer”), coupled with a further £15,000 that was raised following a subscription for Ordinary Shares by Jeffrey Malaihollo, the Company’s Chairman.
The Open Offer sought to raise gross proceeds of up to £619,099 to strengthen the Company’s balance sheet and to progress the Company’s operations at the Project, one task being to increase the available ROM coal for processing through the opening up of the Company’s northern pit area.
Given the low level of take up from the Open Offer, progress at the Project has been limited in recent weeks and the Company’s operations have been constrained due to cost cutting measures implemented by the Directors to preserve working capital. As a result, and despite having the requisite approvals, the Company has as yet been unable to expand its operations or increase mining capacity by opening up the northern mining area.
Following on from the Open Offer, the Group has undertaken the Placing to fund the Company’s ongoing operations at the Project and to cover other general working capital needs during the course of 2019.
Use of Proceeds
The net proceeds of the Placing, which are estimated to be £454,200, will be used as follows:
· to expand the existing mining operations at the Company’s Rukwa Project, specifically the opening up of the northern mining area; and
· to provide additional working capital primarily to allow the Project to increase plant throughput and generate additional sales of washed coal.
Current Prospects and Outlook
The most important near-term milestone for the Group will be to open the northern mining area at the Project and increase the production of washed coal. Edenville also expects to be able to benefit for the first time from the additional investment in plant and equipment that was made in H2 2018.
During 2019, the Company has continued its marketing efforts to identify new customers for both its washed coal and fine coal, as well as maintaining existing relationships. Accordingly, following completion of the Placing, the Directors expect the Company to be in a position to boost both production and subsequent sales, thereby placing the Project in a position where it is initially self-sustaining, before turning cashflow positive during the next twelve months.
In addition, as a result of the Company’s previously anticipated coal to power generation plans being on hold, the Company is also looking at ways to upgrade the fine coal to a product that will have more commercial value and appeal. Further beneficiation and / or briquetting are two options that are being considered.
Details of the Placing
The Company has raised £100,000 before expenses, by way of the Firm Placing through Brandon Hill Capital to new and existing investors of 500,000,000 Firm Placing Shares. Application has been made for the Firm Placing Shares to be admitted to trading on AIM, with First Admission expected to take place on 2 May 2019.
The Company has also conditionally raised £410,000 before expenses, by way of the Conditional Placing to new and existing investors of 2,050,000,000 Placing Shares through Brandon Hill Capital. The Placing Price represents a discount of 21.6 per cent. to the Company’s closing mid-price on 26 April 2019.
The Directors do not currently have the authority to allot and issue the Conditional Placing Shares, so completion of the Conditional Placing will be subject to the Company’s shareholders approving Resolutions 1 and 4 to increase the Directors’ authority to allot new Ordinary Shares, and to disapply statutory pre-emption rights in respect of the allotment of such new Ordinary Shares, at the General Meeting.
Assuming that Resolutions 1 and 4 are passed at the General Meeting, it is expected that the Second Admission of the 2,050,000,000 Conditional Placing Shares will take place on 20 May 2019 following the General Meeting.
Assuming the issue of all of the Placing Shares, the Placing Shares will represent approximately 57.8 per cent. of the Enlarged Share Capital.
The Placing Shares will, rank in full for all dividends and distributions declared, made or paid in respect of the issued Ordinary Share capital of the Company and otherwise rank pari passu in all other respects with the Existing Ordinary Shares.
The Placing Shares are not being made available to the public and none of the Placing Shares are being offered or sold in any jurisdiction where it would be unlawful to do so, including Australia, Canada, Japan, the Republic of Ireland, the Republic of South Africa or the United States. As noted above, the Placing Shares have not been, and will not be, registered under the Securities Act or under the securities laws of any state of the United States or qualify for distribution under any of the relevant securities laws of Australia, Canada, Japan, the Republic of Ireland or the Republic of South Africa.
The Placing and the Placing Agreement
In connection with the Placing, on 28 April 2019 the Company entered into the Placing Agreement pursuant to which Brandon Hill Capital has agreed to act as agent for the Company and use its reasonable endeavours to place the Placing Shares with certain new and existing institutional investors. The Conditional Placing is conditional, among other things, upon: (i) the passing of the Resolutions; (ii) First Admission of the Firm Placing Shares occurring not later than 3 May 2019; and (iii) Second Admission of the Conditional Placing Shares occurring as soon as practicable following the General Meeting or by such later time and/or date as Brandon Hill and the Company may agree but not later than 8.00 am on the Long Stop Date.
The Placing Agreement contains customary warranties from the Company in favour of Brandon Hill in relation to (amongst other things) the accuracy of the information in this Document and other matters relating to the Company and its business. In addition, the Company has agreed to indemnify Brandon Hill in relation to certain liabilities it may incur in undertaking the Placing. Brandon Hill has the right to terminate the Placing Agreement in certain circumstances prior to Second Admission. In particular, Brandon Hill may terminate in the event that there has been a breach of any of the warranties, the conditions of the agreement have become incapable of fulfilment or for force majeure. The Placing will not be underwritten.
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