Euromax Announces Intention to Complete Private Placement Financing VANCOUVER
Euromax Announces Intention to Complete
Private Placement Financing
VANCOUVER
, Feb. 12, 2019 /CNW/ -
Euromax Resources Ltd.,
(TSX: EOX): (
Euromax
or the
Company
), is pleased to announce a non-brokered private placement to one of its current major
shareholders, Galena Resource Equities Limited (
Galena
), an entity controlled by Galena Asset
Management S.A., which is an affiliate of Trafigura Pte Ltd. (
Trafigura
), of 122,507,200 units (the
Units
), each consisting of one common share in the capital of the Company (each, a
Common
Share
) and one Common Share purchase warrant (each, a
Warrant
), at an offering price of
CAD$0.075
per Unit for gross proceeds of approximately
CAD$9,188,040
(USD$6,900,000)
based
on a Canadian Dollar against United States Dollar exchange rate of 1.3316 (the
Private
Placement
).
Each Warrant entitles the holder thereof to acquire one common share of the Company (each, a
Warrant Share
) at an exercise price of
CAD$0.23
for a period of two years following the closing of
the Private Placement. The proceeds of the Private Placement will be used for the development of
the Company's Ilovica-Shtuka Copper-Gold Project (
Ilovica-Shtuka
or the
Project
) and for general
corporate purposes.
Further, Euromax will also invite other existing major shareholders to participate in a concurrent
financing (the
Concurrent Offering
and, together with the Private Placement, the
Transaction
), on
the same terms as the Private Placement, of up to 55,039,467 Units at an offering price of
CAD$0.075
per Unit (each Unit consisting of one Common Share and one Warrant) for gross
proceeds of up to approximately
CAD$4,127,960
(USD$3,100,000)
based on a Canadian Dollar
against United States Dollar exchange rate of 1.3316 so as to provide additional funding for the
Company. No insiders of the Company are currently expected to participate in the Concurrent
Offering other than
Martyn Konig
, a director of the Company.
Martyn Konig
has committed to
participating in the Concurrent Offering in an amount up to
USD$328,000
representing 5,823,531
Units.
It is anticipated that the Company will require additional financing in the first half of 2020 or will need
to reduce expenditures.
In connection with the closing of the Private Placement, the Company and Galena will amend their
existing ancillary rights agreement dated
April 10, 2018
(the
Ancillary Rights Agreement
) to
provide Galena with the right to nominate two additional directors of the Company's board of
directors (the
Board
) (for four directors in total) until such time as Galena (collectively with its
affiliates) no longer holds greater than 20% of the Company's issued and outstanding Common
Shares (calculated on a fully diluted basis). If Galena (collectively with its affiliates) holds between
10% and 20% of the Company's issued and outstanding Common Shares (calculated on a fully
diluted basis), Galena can only nominate two directors to the Board. The Ancillary Rights Agreement
provides that the Board shall consist of eight directors should Galena hold greater than 10% and
less than 55% of the Company's issued and outstanding Common Shares (calculated on a fully
diluted basis). In the event that Galena (collectively with its affiliates) holds greater than 55% of the
Company's issued and outstanding Common Shares (calculated on a fully diluted basis), Galena will
have the right to nominate an additional director to the Board (for five directors in total), increasing
the total number of Board members to nine. The Company will also amend the offtake agreement
executed on
April 6, 2018
with Trafigura on closing of the Private Placement such that Trafigura will
have 100% ownership of the sale of copper concentrate produced at Ilovica-Shtuka.
In addition, in connection with the Private Placement, Galena shall be provided with a right of first
refusal to participate in any proposed equity-linked financing in an amount up to 60% of such
financing subject only to participation rights held by the European Bank for Reconstruction and
Development (
EBRD
) and CC Ilovitza Limited (
CCC
), an affiliate of Consolidated Contractors
Company Group.
A condition to closing the Private Placement is that the Company obtain agreements from each of
EBRD and CCC to extend the maturity date of EBRD's and CCC's previously issued convertible
debentures in the aggregate principal amounts of
USD$5,000,000
and
CAD$5,200,000
,
respectively, from
February 28, 2019
to
February 1, 2020
(collectively, the
Debenture
Amendments
), and to waive any pre-emptive or participation rights EBRD and CCC may have with
respect to the Private Placement.
The Company has come to agreements in principle with EBRD and CCC in respect of the Debenture
Amendments and expects to enter into definitive documentation in a timely manner.
Closing of the Transaction, including implementation of the Debenture Amendments, is subject to the
satisfaction of various conditions, including the waiver of certain rights held by existing shareholders,
and the receipt of all necessary corporate and regulatory approvals, including the approval of the
Toronto Stock Exchange (the
TSX
).
The Transaction triggers the requirement for approval from the holders of a majority of the currently
issued and outstanding Common Shares, excluding the votes attached to the Common Shares held
by Galena and EBRD, under Sections 607(g)(i), 607(g)(ii), 604(a)(i) and 604(a)(ii) of the TSX
Company Manual, unless an exemption is applicable, as the Transaction will (i) result in the issuance
of Common Shares that is greater than 25% of the number of Common Shares currently issued and
outstanding, (ii) result in the issuance of Common Shares to insiders of the Company that is greater
than 10% of the number of Common Shares currently issued and outstanding, (iii) provide for the
issuance of securities that could materially affect the control of the Company as the Transaction
would result in a new holding of more than 20% of the voting securities by one security holder, and
(iv) provide for consideration to an insider that is greater than 10% of the current market
capitalization of the Company.
The Company is in serious financial difficulty and will not be able to repay EBRD's and CCC's
previously issued convertible debentures in the aggregate principal amounts of
USD$5,000,000
and
CAD$5,200,000
plus interest respectively, which mature at the end of
February 2019
. The
Company, as a result of permitting delays for the Project over the last 24 months, has been unable
to secure sufficient third party financing to repay these convertibles or to finance working capital and
particularly in the current difficult market conditions. Given the situation, the Company has
immediate capital needs and cannot fund its current obligations necessary in order to comply with
the terms of the debentures held by EBRD and CCC and continue permitting work on the Project.
Pursuant to Section 604(e) of the TSX Company Manual, the Company has applied for an exemption
from the shareholder approval requirements of the TSX described above, on the basis of financial
hardship, given that the Company is in serious financial difficulty with limited alternatives and the
immediacy of the Company's need to address its financial obligations through the Transaction does
not afford it sufficient time to hold a special shareholders' meeting. If granted, the Company wishes
to rely upon Section 604(e) to dispense with the requirement to obtain disinterested shareholder
approval of the Transaction.
The Company expects that, as a consequence of its financial hardship application, the TSX will place
Euromax under remedial delisting review, which is normal practice when a listed issuer seeks to rely
on the Section 604(e) financial hardship exemption. No assurance can be provided as to the
outcome of such review and therefore, continued qualification for listing on the TSX.
As each of Galena, EBRD and
Martyn Konig
are insiders of the Company, the Private Placement (as
it relates to Galena), the Concurrent Offering (as it relates to Mr. Konig) and Debenture
Amendments (as they relate to EBRD) constitute related party transactions under Multilateral
Instrument 61-101 – Protection of Minority Security Holders in Special Investments (
MI 61-101
). The
Company is relying on the exemption from the formal valuation requirement in Section 5.5(g) of MI
61-101 and the exemption from the minority approval requirement in Section 5.7(1)(e) of MI 61-101
based on the Board, acting in good faith, having determined, and at least two-thirds of the
Company's independent directors, acting in good faith, having determined, that the Company is in
serious financial difficulty with limited alternatives, that the Private Placement, Concurrent Offering
and Debenture Amendments are designed to improve the Company's financial position, that the
terms of the Private Placement, Concurrent Offering and Debenture Amendments are reasonable in
the Company's circumstances, that the immediacy of the Company's need for financing through the
Private Placement, Concurrent Offering and Debenture Amendments does not afford it sufficient
time to hold a shareholders' meeting and that the Private Placement, Concurrent Offering and
Debenture Amendments are fair to, and in the best interests of, the shareholders of the Company.
The Company anticipates it will file a material change report less than 21 days before the closing of
the Transaction. This shorter period is reasonable and necessary in the circumstances as the
Company wants to complete the Private Placement, Concurrent Offering and Debenture
Amendments as expeditiously as possible given the immediacy of the Company's need for financing.
Closing of the Transaction and the implementation of the Debenture Amendments will occur on or
after
February 21, 2019
, pursuant to the rules of the TSX.
The only entity or person who is expected (to the knowledge of the Company) to own or exercise
control and direction over more than 10% of the issued and outstanding Common Shares upon
completion of the Transaction, is Galena, which is currently expected to then exercise control and
direction over approximately 51.35% of the outstanding Common Shares (on a non-diluted basis and
assuming the Concurrent Offering is not completed in full except for
Martyn Konig's
participation).
The existing holdings of pre-Transaction Common Shares by current insiders, and their expected
post-Transaction holdings (assuming, for illustrative purposes, that the Transaction occurs on
February 21, 2019
), are set forth below:
Investor
Number (%) of Common Shares and
Warrants Held Before the Transaction
1
Number of Common Shares and
Warrants Held After the
Transaction
% of the Common Shares Owned by Investors
After the Transaction on a Partially-Diluted Basis
2
3
Galena Resource Equities
Limited / Trafigura Pte Ltd.
29,000,000 Common Shares (17.39%) and
29,000,000 existing warrants
151,507,200 Common Shares and
151,507,200 Warrants
67.85%
Richard Griffiths/Blake
Holdings Limited
4
23,562,799 Common Shares (14.13%) and
1,500,000 existing warrants
23,562,799 Common Shares and
1,500,000 Warrants
8.45%
Martyn Konig
3,115,739 Common Shares (1.87%) and
206,713 existing warrants
8,939,269 Common Shares and
6,030,244 Warrants
4.97%
EBRD
4
23,368,547 Common Shares (14.01%) and
5,915,000 existing warrants
23,368,547 Common Shares and
5,915,000 Warrants
9.73%
Euromax currently has 166,742,080 issued and outstanding Common Shares. A maximum of
355,093,334 Common Shares are issuable pursuant to the Transaction (assuming the Concurrent
Offering is completed in full and full exercise of the Warrants) representing 212.96% of the
Company's currently issued and outstanding Common Shares. Pursuant to the Private Placement, a
maximum of 245,014,400 Common Shares (representing 146.94% of the Company's outstanding
Common Shares on a Pre-Transaction, non-diluted basis) would be issuable to Galena, an insider of
the Company, assuming that Galena fully exercises its Warrants. Pursuant to the Concurrent
Offering, a maximum of 11,647,062 Common Shares (representing 6.99% of the Company's
outstanding Common Shares on a pre-Transaction, non-diluted basis) would be issuable to Mr.
Konig, an insider of the Company, assuming that Mr. Konig fully exercises his Warrants. Following
completion of the Transaction, Euromax will have 344,288,747 issued and outstanding Common
Shares (on a non-diluted basis), assuming that the Concurrent Offering is completed in full.
_____________________________
1
Calculated on a non-diluted basis.
2
Assumes that none of the other investors convert their respective Warrants.
3
Assumes that the Concurrent Offering is not completed, except for Martyn Konig's participation.
4
Richard Griffiths and EBRD are not currently expected to participate in the Concurrent Offering.
Following completion of the Private Placement (assuming that no Units are issued pursuant to the
Concurrent Offering) and assuming the full exercise of the Warrants and existing warrants held by
Galena, Galena will hold 303,014,400 Common Shares, representing approximately 64.50
%
of the
issued and outstanding Common Shares. Immediately prior to the completion of the Private
Placement, the total number of securities issuable to Galena would represent, on a non-diluted
basis, approximately 17.39% of the 166,742,080 Common Shares currently issued and outstanding.
If the Concurrent Offering is completed in full, Galena will hold, on a non-diluted basis, approximately
44.01% of the 344,288,747 Common Shares issued and outstanding and, assuming full exercise of
the Warrants and existing warrants held by Galena, approximately 53.70% of the 564,073,945
Common Shares issued and outstanding (on a fully-diluted basis).
The securities issued pursuant to the Transaction will be subject to a four month hold period from the
date of closing in accordance with applicable Canadian securities laws.
About Euromax Resources Ltd.
Euromax is a minerals development company whose corporate strategy is centered on the
development of the Ilovica-Shtuka Project, the company's core copper and gold development project
located in
Macedonia
. Euromax, through its local subsidiaries, has been involved in the exploration
and development of a number projects in south-eastern
Europe
since
January 2011
.
About Galena Resource Equities Limited
Galena Resource Equities Limited is a wholly-owned subsidiary of Galena Asset Management S.A.
and its principal business is to investment in equity and debt in late stage small and mid-sized
companies in development or expansion phase across the natural resources and mining sector.
About Galena Asset Management S.A.
Galena Asset Management S.A. (
Galena Asset Management
) is the wholly-owned investment arm
of the Trafigura Group, a world leading commodity trading firm, and is authorized and regulated by
the Swiss Financial Market Supervisory Authority (FINMA). For more than a decade Galena Asset
Management has operated at the intersection of financial and physical commodity markets, enabling
leading institutional investors to access investment opportunities alongside the Trafigura Group
through funds or managed accounts. Galena Asset Management's portfolio management specialists
have built considerable experience in metals, minerals, oil, shipping and infrastructure. Galena Asset
Management acts independently, but derives significant benefits from its relationship with Trafigura,
its principal anchor investor.
Galena Asset Management has unparalleled access to the commercial and technical expertise of the
Trafigura Group in the non-ferrous and ferrous space. The investment professionals have the ability
to leverage Trafigura's global presence with 66 offices in 38 countries and rely on the Trafigura
Group's solid reputation. The fund invests globally and usually intervenes actively in the strategic
direction of companies invested in. Trafigura is a limited partner in the fund. Visit:
www.galena-invest.com
Forward-Looking Information
This news release contains forward-looking information. Forward-looking statements include, but
are not limited to the completion of the Transaction, the use of proceeds from the Transaction,
implementation of the Debenture Amendments, the continued advancement of the Company's
general business plan and the development of Ilovica-Shtuka, and the receipt of all necessary
government approvals and consents. When used in this press release, the words "will", "shall",
"anticipate", "believe", "estimate", "expect", "intent", "may", "project", "plan", "should" and similar
expressions may identify forward-looking statements. Although Euromax believes that their
expectations reflected in these forward looking statements are reasonable, such statements involve
risks and uncertainties and no assurance can be given that actual results will be consistent with
these forward-looking statements. Important factors that could cause actual results to differ from
these forward-looking statements include, but are not limited to, the possibility that the Transaction
will not be completed as contemplated, or at all, because the necessary regulatory approvals are
not received or other conditions to completion of the Transaction are not satisfied, the possibility
that the Company has to allocate proceeds to other uses or reallocate proceeds differently among
the anticipated uses due to changes in project parameters or other unforeseen circumstances
associated generally with the unpredictability of mining operations, the ability of the Company to
come to definitive agreements with the holders of debentures with respect to the implementation of
the Debenture Amendments, the ability to implement corporate strategies, the ability to obtain
financing as and when required and on reasonable terms, the risk that the development of the
Project may not proceed as anticipated, including the inability to obtain necessary government
approvals for its activities in a timely manner, political or economic instability in the jurisdiction in
which the Project is located, changes in national and local government legislation, regulation, and
taxation, and other risks disclosed in our filings made with Canadian securities regulators available
on SEDAR at
www.sedar.com
. This list is not exhaustive of the factors that may affect any of
Euromax's forward-looking statements. Investors are cautioned not to put undue reliance on
forward-looking statements. Forward-looking statements contained herein are made as of the date
of this news release and Euromax disclaims any obligation to update any forward-looking
statements, whether as a result of new information, future events or results or otherwise, except as
required by applicable securities laws.
SOURCE
Euromax Resources
View original content:
http://www.newswire.ca/en/releases/archive/February2019/12/c9576.html
%SEDAR: 00009131E
For further information:
please visit www.euromaxresources.com or contact: Varshan Gokool,
President & Chief Executive Officer, +44 (0) 20 3918 5160, [email protected];
Martina Kostovska, Communications Manager, +389 2 3 220 998,
CO: Euromax Resources
CNW 18:22e 12-FEB-19