REG - Capital Limited - Sale of shares in Predictive Discovery Limited

CapitalAnnouncement

14/08/2024 08:00

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RNS Number : 4128A  Capital Limited  14 August 2024

FOR IMMEDIATE RELEASE

14 August 2024

 

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART IN, INTO OR
FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE
RELEVANT LAWS OF SUCH JURISDICTION

 

Capital Limited

("Capital" or the "Company")

 

Sale of shares in Predictive Discovery Limited

Capital (LSE: CAPD), a leading mining services company, is pleased to announce
the sale of its entire shareholding in Predictive Discovery Limited ("PDI")
(being 225,349,418  shares ("Sale Shares")) to Perseus Mining Limited
("Perseus") for total cash consideration of A$47,323,378 (A$0.21 per Sale
Share)(the "Sale"), equivalent to approximately US$31.2 million today.

The agreement with Perseus includes a profit share arrangement whereby Capital
and Perseus have agreed to share (on a 50/50 basis) the profit, if any,
derived by Perseus from a subsequent sale by Perseus of the Sale Shares to any
third party that occurs on or prior to 31 December 2025.

In addition, the agreement states that should Perseus make a takeover offer
for PDI's shares ("Takeover Offer") or propose a scheme of arrangement in
relation to PDI's shares ("Scheme") on or prior to 31 December 2025 at a price
of greater than A$0.21 per ordinary share in PDI (or equivalent value if scrip
is offered) (the "Premium"), then Capital will, subject to certain conditions
being satisfied prior to that end date, (1) in the case of a Takeover Offer,
have a call option to acquire back from Perseus the Sale Shares for the
original sale price, subject to Capital's commitment to accept that Takeover
Offer from Perseus in respect of such Sale Shares, or (2)  in the case of a
Scheme, have a call option to acquire back from Perseus those Sale Shares
(which would be acquired by Perseus under the scheme) or Perseus may elect to
cancel the call option by paying a cash fee to Capital equal to any Premium.

 

Further details of the agreement effecting the Sale are set out in the
Appendix to this announcement.

 

Capital notes that Perseus has advised Capital that, as part of its
acquisition of the Sale Shares, it is not currently in discussions with PDI
and, subject to there being no actual or proposed material change in the
shareholding of PDI (including a change of control proposal) or the actions of
PDI, Perseus has no current intention to acquire control or make a takeover
offer for PDI.

 

Capital has decided to dispose of the Sale Shares in order to recycle funds
back into its broader business, predominantly applying the proceeds of the
Sale in reducing Capital's debt levels.

 

In the opinion of the board of directors of Capital, the Sale is in the best
interest of the shareholders of the Company as a whole.

 

Jamie Boyton, Capital's Executive Chairman, has recused himself from all
transaction negotiations and voting as part of Capital's independently chaired
Investment Committee and voting as part of the Board of Capital. In a separate
transaction, Jamie Boyton has accepted the same terms as negotiated by Capital
and sold his personal PDI holdings to Perseus.

 

Further details of the Sale, and disclosures required under Listing Rule
UKLR7, are set out in the Appendix to this Announcement.

 

Management will be available for questions regarding this transaction
alongside the Group's interim results webcast presentation at 09:00 London
time on the 15th August 2024.

 

Commenting on the sale, Peter Stokes, Chief Executive Officer, said:

'Predictive Discovery has been an excellent investment for Capital, as well as
an excellent client for Capital's drilling business. As Predictive moves
towards permitting and then construction, we see this as the right time to
recycle this investment back into the broader business, particularly to lower
the Group's debt levels.'

 

This announcement contains inside information for the purposes of Article 7 of
the Market Abuse Regulation (EU) No. 596/2014 (as it forms part of domestic
law by virtue of the European Union (Withdrawal) Act 2018, as amended)

 

For further information, please visit Capital Limited's website
www.capdrill.com (http://www.capdrill.com/) or contact:

 

 Capital Limited                                                   investor@capdrill.com

 Peter Stokes, Chief Executive Officer

Rick Robson, Chief Financial Officer

 Conor Rowley, Corporate Development & Investor Relations

 Tamesis Partners LLP                                              +44 20 3882 2868

 Charlie Bendon Richard Greenfield
 Stifel Nicolaus Europe Limited                                    +44 20 7710 7600

 Ashton Clanfield Callum Stewart Rory Blundell
 Buchanan                                                          +44 20 7466 5000
 Bobby Morse                                                       capital@buchanan.uk.com (mailto:capital@buchanan.uk.com)

 George Pope
 About Capital Limited

 

Capital Limited is a leading mining services company providing a complete
range of drilling, mining, maintenance and geochemical laboratory solutions to
customers within the global minerals industry, focusing on the African
markets. The Company's services include: exploration, delineation and
production drilling; load and haul services; maintenance; and geochemical
analysis. The Group's corporate headquarters are in the United Kingdom and it
has established operations in Canada, Côte d'Ivoire, Democratic Republic of
Congo, Egypt, Gabon, Guinea, Kenya, Mali, Mauritania, Pakistan, Saudi Arabia
and Tanzania.

 

 

 

APPENDIX

 

1.    Introduction

 

The Sale constitutes a significant transaction for the purposes of UKLR7 of
the Listing Rules published by the United Kingdom's Financial Conduct
Authority, because (pursuant to Annex 1 Part 1 Paragraph 4R(3) of UKLR7) the
total consideration payable by Perseus to Capital for the Sale Shares is not
subject to any maximum, and the percentage ratio of the transaction under the
gross assets test in Annex 1 Part 1 Paragraph 2R of UKLR7 exceeds 5%.

 

In addition to the drilling, mining (load and haul), crushing, mineral
assaying and surveying services of Capital and its subsidiaries (the "Group"),
the Group also has a portfolio of investments in listed and unlisted
exploration and mining companies, held for performance and strategic
alignment. This constitutes an important element of the Group's business
development strategy, allowing it to leverage its infrastructure,
relationships and expertise by investing in exploration and mining companies
which are strategically aligned with its broader operations. The Sale Shares
were part of that portfolio. The Group's investment activity is overseen by a
dedicated investment committee operating with a defined mandate with
investments satisfying a number of criteria:

·      stand-alone investment case;

·      strategic alignment with Capital's operations; and

·      potential to gain commercial services contracts through
traditional tendering process.

 

The effect of the Sale will be that Capital will crystallise the value of the
Sale Shares with the benefit that it may receive further consideration for the
Sale Shares if Perseus disposes of the Sale Shares prior to 31 December 2025,
and would be able to participate in a takeover of PDI by Perseus should such
takeover occur prior to 31 December 2025 (further details of which are set out
in paragraph 3(a) below). However, other than the potential to receive this
further consideration, Capital would not obtain the benefit of any future
increase in the share price of PDI or the payment of any future dividends or
distributions by PDI.

 

2.    Financial Information in relation to the Sale

 

The value of the gross assets the subject of the Sale, being the Sale Shares,
was A$42.0 million (US$28.6 million at US$/A$ 1.4678) as at 31 December 2023,
and the aggregate value at which the Sale Shares are being sold in the Sale is
A$47,323,378.

 

The gain of the Group attributable to the assets the subject of the Sale,
being the Sale Shares, was US$4.79 million in 2023. Once combined with the
rest of the Group's investment portfolio, Capital recorded a fair value gain
on investments of US$3.0 million in 2023.

 

The information above is derived from the audited accounts of the Group for
the financial year ending 31 December 2023.

 

As a result of the Sale, the Sale Shares will no longer form part of the
Group's assets, but the Group will receive the cash consideration for the Sale
Shares. The Group does not anticipate any other effect of the Sale on its
assets or liabilities. The Group anticipates recognising a realised loss on
investment of approximately US$0.7 million in 2024 as a result of the disposal
of the Sale Shares. In comparing the price per Sale Share at which the Sale
Shares are being sold to the value of the Sale Shares as at 30 June 2024, the
Group anticipates recognising a realised gain on investment of approximately
US$4.9 million in H2 2024 (based on proceeds of ~$31.2 million).

 

The amount of the dividends or other distributions paid to the Group by PDI in
relation to the Sale Shares over the two years prior to the date of this
announcement are nil.

 

The price of each of the ordinary shares in PDI ("PDI Shares"), and the
imputed aggregate value of the Sale Shares, at the close of business on each
of (i) the last business day of the six months prior to the date of this
announcement; and (ii) the day prior to the date of this announcement, are as
follows:

 

 Date              Price per PDI Share (A$)  Imputed Value of Sale Shares (A$)
 29 February 2024  $0.20                     39,000,000
 28 March 2024     $0.23                     45,000,000
 30 April 2024     $0.21                     42,000,000
 31 May 2024       $0.20                     43,943,137
 28 June 2024      $0.18                     39,436,148
 31 July 2024      $0.18                     40,562,895
 13 August 2024    $0.20                     43,943,137

 

Since 31 December 2023, being the end of the last financial period for which
financial statements have been published by the Company, there has been no
significant change in the financial position of the Group.

 

3.    Non-financial Information in relation to the Sale

 

a.     Material Contracts

 

Capital and its Group

 

Set out below is a summary of:

·      each material contract, other than contracts entered into in the
ordinary course of business, to which Capital or any member of its Group is a
party, for the two years immediately preceding publication of this
announcement; and

·      any other contract (not being a contract entered into in the
ordinary course of business) entered into by any member of the Group which
contains any provision under which any member of the Group has any obligation
or entitlement which is material to the Group as at the date of this
announcement,

and which, in each case, the Board considers that shareholders of Capital
would reasonably require information about for the purpose of making a
properly informed assessment of the Sale and its impact on Capital (together,
"Material Contracts").

 

On 14 August 2024, Capital DI Limited (the "Seller"), which is a wholly-owned
subsidiary of Capital, entered into a sale agreement (the "Sale Agreement")
with Perseus Mining Limited (the "Buyer"), pursuant to which the Seller agreed
to sell the Sale Shares to the Buyer for consideration of A$47,323,378 (being
A$0.21 per Sale Share), payable in cash on completion of the Sale.

 

The transfer of the Sale Shares to Perseus and payment of the purchase price
for the Sale Shares is expected to settle two business days following the date
of the Sale Agreement.

 

In addition to the initial cash consideration payable by the Buyer to the
Seller, if prior to 31 December 2025 either (i) a takeover bid for PDI, or a
scheme of arrangement to effect a takeover of PDI, is made by any party other
than the Buyer, the Seller or their associates and such transaction completes,
or (ii) the Buyer completes the sale of some or all of the Sale Shares to any
party other than the Seller or its associates, and the price per PDI Share in
any such transaction (the "Transaction Price") exceeds the price per PDI Share
paid to the Seller by the Buyer for the Sale Shares (the "Sale Price"), then
the Buyer must pay to the Seller 50% of the amount by which the Transaction
Price exceeds the Sale Price multiplied by the number of PDI shares sold by
the Buyer in such transaction.

 

Additionally, if prior to 31 December 2025, the Buyer makes a takeover bid for
PDI, or a scheme of arrangement to effect a takeover of PDI by the Buyer is
announced, in each case at a price per PDI Share that exceeds the Sale Price
(or equivalent value if scrip is offered), and such takeover becomes
unconditional resulting in the Buyer having an interest in not less than 50.1%
of all of the issued PDI Shares (on a fully diluted basis), or such scheme is
approved by the court, the Seller may exercise a call option to repurchase the
Sale Shares from the Buyer (or such less number of PDI Shares as the Buyer
beneficially owns at such time) at a price per PDI Share equal to the Sale
Price, provided that, in the case of a takeover bid, it undertakes to accept
the Buyer's takeover bid in respect of all of such Sale Shares; or, in the
case of a scheme, the Buyer may cancel the Seller's call option by paying to
the Seller a cancellation fee equal to the excess of the price per PDI Share
under such scheme over the Sale Price multiplied by the number of Sale Shares
(or such less number of PDI Shares as the Buyer beneficially owns at such
time).

 

The Sale Agreement contains warranties and indemnities from the Seller and the
Buyer to each other that are customary for an agreement of this nature.

 

The Sale Agreement does not contain any break fee arrangements.

 

The Sale Shares

 

Other than the Sale Agreement, as summarised above, there are no Material
Contracts in relation to the Sale Shares.

 

b.    Legal and Arbitration Proceedings

 

Capital and its Group

 

There are no governmental, legal or arbitration proceedings (including any
such proceedings which are pending or threatened of which the Company is
aware) during the period covering the 12 months preceding the date of this
announcement which may have, or have had in the recent past, significant
effects on the financial position or profitability of the Company or its
Group.

 

The Sale Shares

 

There are no governmental, legal or arbitration proceedings (including any
such proceedings which are pending or threatened of which the Company is
aware) during the period covering the 12 months preceding the date of this
announcement in relation to the Sale Shares.

 

 

 

 

 

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