REG - Metals Exploration - Proposed Buy Back of RHL Shares

Metals ExplorationAnnouncement

20/06/2024 07:00

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RNS Number : 1347T  Metals Exploration PLC  20 June 2024

20 June 2024

 

 

METALS EXPLORATION PLC

 

Proposed Buy Back of RHL Shares, Settlement with Lenders, Production Fee Deed

 and Update on YMC Acquisition

 

Metals Exploration plc (AIM: MTL) ("Metals Exploration", the "Company" or the
"Group"), a gold producer in the Philippines, is pleased to announce that it
has agreed the terms of a conditional settlement agreement with Runruno
Holdings Limited ("RHL") and D & A Holdings Limited ("D&A") (together,
the "RHL Group"), involving inter alia, the acquisition of RHL's equity
holding in the Company's ordinary share capital and the settlement of
outstanding debt and legal fees. Further, the Company provides an update on
the proposed YMC acquisition.

 

Proposed Buy Back of RHL Shares, Settlement with the RHL Group and Production
Fee Deed

 

Further to the Company's announcements of 27 March 2024 and 9 May 2024, the
Company has agreed the following terms with the RHL Group:

 

Buy Back of RHL Shares

Subject to the requisite shareholder approvals being granted, the Company has
conditionally agreed to purchase the RHL Group's entire holding in the
Company, being 393,513,302 ordinary shares of £0.0001 each in the capital of
the Company ("Ordinary Shares") (the "RHL Shares") over three tranches and at
a price of 5 pence per share, by means of an off-market buy back (the "Buy
Back"). The price of 5 pence per share was agreed by the Company and RHL at a
date during negotiations of the Buy Back, based on the 30-day trailing volume
weighted average market price at that date. The tranches of the Buy Back would
be staged as follows:

 

·      203,640,000 RHL Shares shortly following the requisite shareholder
approvals being granted;

·      94,936,651 RHL Shares by no later than 30 August 2024; and

·      94,936,651 RHL Shares by no later than 30 September 2024.

The aggregate consideration for the Buy Back would be £19,675,665, which is
expected to be satisfied from the Company's existing cash resources and future
cash flows generated from operations.  If approved, and following each
purchase, the Company intends to hold such shares in treasury.

 

Rule 9 Waiver

The Buy Back, should it proceed, would result in a proportionate increase in
existing shareholders' percentage voting interests, as the Ordinary Shares
acquired by the Company are expected to be held in treasury and would
therefore not carry any voting rights. When a company redeems or purchases its
own voting shares, any resulting increase in the percentage of shares carrying
voting rights in which a person or group of persons acting in concert is
interested will be treated as an acquisition for the purpose of Rule 9 of the
City Code on Takeover and Mergers (the "City Code"), which requires that when
any person, together with persons acting in concert with that person, is
interested in shares which in the aggregate carry not less than 30% of the
voting rights of a company but does not hold shares carrying more than 50% of
such voting rights and such person, or any person acting in concert with that
person, acquires an interest in any other shares which increases the
percentage of shares carrying voting rights in which that person is
interested, a mandatory offer will normally be required.

 

MTL (Luxembourg) S.à r.l. ("MTL Lux") currently holds Ordinary Shares
carrying 43.62% of the voting rights of the Company, and the Buy Back would
result in MTL Lux's (and persons acting in concert with it) holding of
Ordinary Shares carrying voting rights increasing from its current level to
more than 50% of such voting rights. As a result, a waiver of the obligation
on MTL Lux (or any person acting in concert with it) to make a mandatory offer
under Rule 9 of the City Code that would otherwise arise following
implementation of the Buy Back will be sought from the Takeover Panel, and
shall be subject to the passing of a resolution by independent shareholders on
a poll at a general meeting to be convened in due course (the "Rule 9
Waiver").

 

General Meeting Voting Undertaking

RHL has irrevocably undertaken to vote in favour of all resolutions proposed
for the Company's annual general meeting (which has been convened for 10.30
a.m. on 28 June 2024) and to be proposed at the forthcoming general meeting
referred to below (save for the Buy Back resolution itself, which RHL is not
permitted to vote on pursuant to the Companies Act 2006 (the "Act"), and the
Rule 9 Waiver resolution).

 

Relationship Agreement

As a result of the purchase of the first tranche of RHL Shares pursuant to the
Buy Back, RHL's interest in the voting share capital of the Company would fall
below 10% and, accordingly, each of the relationship agreement between the
Company and RHL dated 24 October 2020 and the bilateral shareholders'
agreement entered into between RHL and MTL Lux (as referred to in the
Company's announcement of 18 September 2023) would terminate. RHL would also
no longer be entitled to have an appointee on the Board.

 

Production Fee

The Group has agreed to pay RHL a production fee of US$164 per ounce of gold
produced at the Runruno contract area on any production that exceeds 204,269
ounces of gold from 1 May 2024 (being approximately 105% of the current
forecast for production from such date on the basis of the Group's life of
mine plan for the Runruno mine). The detailed provisions relating to the
production fee are set out in a production fee deed between RHL, FCF Minerals
Corporation and (as guarantors) the Company and Metals Exploration Pte. Ltd
(the "Production Fee Deed"). Any such production fee due would be paid
quarterly in arrears and will come into effect upon the termination of the
revolving credit facility agreement dated 24 October 2020 between (amongst
others) the Company and RHL (the "RCF"), which (subject to obtaining the
requisite shareholder approvals for the Buy Back) would take place upon the
purchase by the Company of the first tranche of the RHL Shares pursuant to the
Buy Back. Further, there will be no early termination fee payable to RHL or
MTL Lux as a result of the termination of the RCF.

 

Debt Settlement

In full and final settlement of all amounts of principal and/or interest
outstanding under the relevant agreements, the Company shall pay to the RHL
Group the amount of US$928,362 pursuant to the Group's mezzanine facilities,
US$828 pursuant to the Group's senior facility and, in addition, the amount of
US$715,000 in respect of legal fees and expenses incurred by the RHL Group in
connection with such facilities since October 2020.

 

Debt Settlement with MTL Lux

 

In addition, the Company has agreed to pay to MTL Lux (holding 70.7% of the
mezzanine debt), in full and final settlement of all amounts of principal
and/or interest outstanding under the relevant agreements: (i) the sum of
US$2.2 million, less an amount to be agreed in respect of a costs contribution
to the Company, but not to exceed US$400,000, pursuant to the Group's
mezzanine facilities; and (ii) the sum of US$1,989, pursuant to the Group's
senior facility.

 

Together with the initial settlement payments announced on 9 May 2024, the
settlement payments to the RHL Group and MTL Lux represent 100% of the amount
that would be due to MTL Lux and the RHL Group (respectively) under the
Company's mezzanine facilities were the rate of 15% (as opposed to 7%) to be
applied up to 31 March 2024.

 

Related Party Transaction

 

As RHL is a substantial shareholder of the Company, each of the Buy Back and
the entry into the Production Fee Deed are deemed to be a related party
transaction for the purpose of Rule 13 of the AIM Rules. The independent
directors of the Company (being Nick von Schirnding, Tim Livesey and Andrew
Chubb) consider that, having consulted with Strand Hanson Limited, the
Company's nominated adviser, the terms of the Buy Back and the entry into the
Production Fee Deed are fair and reasonable insofar as shareholders are
concerned.

 

 

YMC Acquisition

 

In addition, further to the Company's announcement of 12 January 2024, the
Company has agreed an extension of the long stop date, under the share
purchase agreement for the acquisition of a controlling interest in the YMC
Group (as defined in such announcement) (the "Acquisition"), from 30 June 2024
to 30 August 2024.

 

General Meeting

 

A circular to convene a general meeting of the Company to (amongst other
things) propose the resolutions necessary to enable the satisfaction of
certain of the conditions precedent to the Acquisition and to approve the Buy
Back and the Rule 9 Waiver, will be despatched to shareholders in due
course.

 

The resolutions to be proposed at such general meeting will include the
approval of the Acquisition as a substantial property transaction for the
purpose of section 190 of the Act, the adoption of a long-term incentive plan
and the issue of options to subscribe for new Ordinary Shares in connection
with the Acquisition and as part of the incentivisation of the Group's
management and senior employees and the issue of new Ordinary Shares pursuant
to the Company's 2023 Management Incentive Programme. All resolutions to be
proposed at the General Meeting are to be conditional upon the approval of the
Buy Back and Rule 9 Waiver resolutions.

 

Operations Update

 

Operations for the April and May 2024 period continued to result in a strong
performance at Runruno. An updated production and finance schedule covering
operations since the release of the Q1 2024 quarterly results is shown below.
Key highlights for the two month period to note include:

·      No lost time injuries occurred - over 23 million hours worked
without a reportable injury;

·      Gold revenue of US$33.9 million from gold sales of 14,476 ounces at
an average gold price of US$2,342 per ounce;

·      Positive cash flow of operations US$18.4 million;

·      Gold production of 13,249 ounces  at a head grade of 1.34g/t;

·      Gold recoveries of 88.1%;

·      Initial geochemistry and geophysics exploration programmes
commenced at the Abra project, with raw data yet to be analysed.

 

 

Production and Finance Summary

 

 Runruno Project Report                       April - May 2024             April - May 2023               FY 2024                      FY 2023
 FY 2024                                      Actual                       Actual                         Actual                       Actual
 PHYSICALS                      Units         2 months                     2 months                       5 Months                     5 Months
 Mining
 Ore Mined                      Tonnes        327,667                      376,830                        984,502                      659,086
 Waste Mined                    Tonnes        1,537,694                    2,110,148                      4,188,747                    4,567,301
 Total Mined                    Tonnes        1,865,361                    2,486,978                      5,173,249                    5,226,387
 Au Grade Mined                 g/tonne       1.47                         1.69                           1.39                         1.62
 Strip Ratio                                  4.63                         5.42                           4.20                         6.61
 Processing
 Ore Milled                     Tonnes        350,320                      367,790                        931,039                      913,874
 Au Grade                       g/tonne       1.34                         1.72                           1.36                         1.47
 S(2) Grade                     %             1.21                         1.52                           1.34                         1.37
 Au Milled (contained)          Ounces        15,044                       20,302                         40,619                       43,108
 Recovery                       %                            88.1                         85.5                           89.3                         89.7
 Au Recovered/Poured            Ounces        13,249                       17,368                         36,254                       38,667
 Sales
 Au Sold                        Ounces        14,476                       18,308                         35,941                       39,750
 Au Price                       US$/oz        2,342                        2,002                          2,179                        1,940
 FINANCIALS (Unaudited)
 Revenue
 Gold Sales                     (US$000's)    33,904                       36,652                         78,305                       77,110
 Operating Costs - Summary
 Mining                         (US$000's)    3,086                        3,495                          8,246                        8,739
 Processing                     (US$000's)    5,623                        5,634                          14,759                       14,866
 G&A                            (US$000's)    1,956                        2,041                          4,905                        4,992
 Total Operating Costs          (US$000's)    10,664                       11,170                         27,910                       28,598
 Excise Duty                    (US$000's)    1,354                        1,472                          3,128                        3,107
 UK/Philippine G&A              (US$000's)    2,419                        2,533                          4,090                        4,213
 Total Direct Production Costs  (US$000's)    14,437                       15,175                         35,128                       35,918
 Net Cash Income                (US$000's)    19,467                       21,477                         43,177                       41,192
 Total Capital Costs            (US$000's)    1,009                        1,733                          3,152                        3,605
 Total non-cash costs           (US$000's)    9,031                        6,123                          23,264                       13,975
 Free Cashflow                  (US$000's)    18,458                       19,744                         40,025                       37,587
 Cash Cost / oz Sold - C1       US$/oz        763                          713                            780                          829
 Cash Cost / oz Sold - AISC     US$/oz        1,094                        1,027                          1,068                        1,104

Note: AISC includes all UK Corporate costs.

 

 

Darren Bowden, CEO of Metals Exploration, commented:

 

"These proposals, once approved, confirm the Company is debt free and is no
longer subject to operational restrictions imposed upon it under the relevant
finance agreements. This will enable Metals Exploration to focus on its growth
strategy utilising its strong balance sheet and the free cash being delivered
from Runruno to swiftly respond to further appropriate acquisition
opportunities; with the objective to ensure ongoing future production and cash
flow for the Company and its shareholders."

 

 

This announcement contains inside information for the purposes of Article 7 of
EU Regulation 596/2014, which forms part of United Kingdom domestic law by
virtue of the European Union (Withdrawal) Act 2018 (as amended). Upon the
publication of this announcement, this inside information is now considered to
be in the public domain.

 

-       END    -

 

For further information please visit or contact:

 

 Metals Exploration PLC
 Via Tavistock Communications Limited     +44 (0) 207 920 3150
 Nominated & Financial Adviser:           STRAND HANSON LIMITED
 James Spinney, James Dance, Rob Patrick  +44 (0) 207 409 3494
 Financial Adviser & Broker:              HANNAM & PARTNERS
 Matt Hasson, Franck Nganou               +44 (0) 207 907 8500
 Public Relations:                        TAVISTOCK
 Jos Simson, Nick Elwes                   +44 (0) 207 920 3150

 

 

Web:                      www.metalsexploration.com
(http://www.metalsexploration.com)

Twitter:                  @MTLexploration
(https://twitter.com/MTLexploration)

LinkedIn:               Metals Exploration
(https://www.linkedin.com/company/metals-exploration-plc)

 

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