Euromax Announces Updated Terms of Private Placement Financing VANCOUVER
Euromax Announces Updated Terms of Private
Placement Financing
VANCOUVER
, March 22, 2019 /CNW/ -
Euromax Resources Ltd.,
(TSX: EOX): Euromax
Resources Ltd. (
Euromax
or the
Company
) announces that the terms of the private placement
financing to one of its current major shareholders, Galena Resource Equities Limited (
Galena
), an
entity controlled and managed by Galena Asset Management S.A., which is an affiliate of Trafigura
Pte Ltd. (
Trafigura
), for gross proceeds of
CAD$9,188,040
(USD$6,900,000)
previously disclosed
on
February 12, 2019
(the
Private Placement
) have been revised as a result of further negotiations.
As was previously announced, in connection with the Private Placement, Euromax has agreed with
the holders of its convertible debentures, the European Bank for Reconstruction and Development
(
EBRD
) and CC Ilovitza Limited (
CCC
), an affiliate of Consolidated Contractors Company Group, to
further amend the terms such debentures (the
Debentures
).
The Private Placement is now comprised of 147,008,640 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$0.0625
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
Updated
Private Placement
).
Each Warrant entitles the holder thereof to acquire one Common Share of the Company at an
exercise price of
CAD$0.15
for a period of two years following the closing of the Updated Private
Placement. The proceeds of the Updated 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, two other existing shareholders of Euromax will participate in a concurrent financing (the
Updated
Concurrent Offering
and, together with the Updated Private Placement, the
Transaction
), on the same terms as the Updated Private Placement, of up to 17,641,037 Units at
an offering price of
CAD$0.0625
per Unit for gross proceeds of
CAD$1,102,565
(USD$828,000)
,
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 participating in the Updated
Concurrent Offering other than
Martyn Konig
, a director of the Company. Mr. Konig has committed
to participating in the Updated Concurrent Offering in an amount up to
USD$328,000
representing
6,988,237 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 Updated 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 Updated 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 Updated 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 EBRD and CCC.
A condition to closing the Updated Private Placement is that the Company obtain agreements from
each of EBRD and CCC, amongst other things to: (i) extend the maturity date of the Debentures
from
March 22, 2019
to
February 28, 2021
, (ii) revise the conversion price in respect of the
principal, accrued interest, and applicable fees owing under the Debentures to
CAD$0.15
per
Common Share, (iii) reduce the interest rate owning under the Debentures from 20% to 7% per
annum (compounding annually) effective
March 31, 2019
, and (iv) waive any pre-emptive or
participation rights EBRD and CCC may have with respect to the Updated Private Placement
(collectively, the
Updated
Debenture Amendments
).
The Company has entered into definitive documentation with each of EBRD and CCC in respect of
the Updated Debenture Amendments, which reflects that the Updated Debenture Amendments will
not become effective until completion of the Updated Private Placement and satisfaction of additional
conditions precedent as set out in the definitive documentation. Pending such completion, each of
EBRD and CCC has agreed to extend the maturity date of their respective Debentures from
March
22, 2019
until
May 10, 2019
, with all other terms of the Debentures remaining unchanged.
Closing of the Transaction, including implementation of the Updated Debenture Amendments, is
subject to the satisfaction of various conditions, including the waiver of certain rights held by existing
shareholders of the Company and the receipt of all necessary corporate and regulatory approvals,
including approval of the Macedonian Commission for Competition (the
Macedonia Competition
Approval
) and the final 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 the Debentures, which
mature at
March 22, 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 and continue permitting work on the
Project.
In light of the Company's financial condition, Galena has agreed to issue an unsecured promissory
note in the amount of up to
USD$1,000
,000 (the
Promissory Note
) to the Company in order to
provide it with the interim working capital required to fund its operations until such time as the
conditions of closing the Updated Private Placement have been satisfied. Upon completion of the
Updated Private Placement, funds owing pursuant to the Promissory Note will be set-off against the
proceeds of the Updated Private Placement. The initial portion of the funds issuable pursuant to the
Promissory Note are expected to be received by the Company on
Monday, March 25, 2019
.
Pursuant to Section 604(e) of the TSX Company Manual, the Company has applied for and
conditionally received an exemption from the shareholder approval requirements of the TSX, as
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. As a consequence of its financial hardship application, the TSX has placed 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 Mr. Konig are insiders of the Company, the Updated Private
Placement and the Promissory Note (as they relate to Galena), the Updated Concurrent Offering (as
it relates to Mr. Konig) and the Updated 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 Updated Private Placement, Updated Concurrent Offering and Updated Debenture
Amendments are designed to improve the Company's financial position, that the terms of the
Updated Private Placement, Updated Concurrent Offering and Updated Debenture Amendments are
reasonable in the Company's circumstances, that the immediacy of the Company's need for
financing through the Updated Private Placement, Updated Concurrent Offering and Updated
Debenture Amendments does not afford it sufficient time to hold a shareholders' meeting, and that
the Updated Private Placement, Updated Concurrent Offering and Updated 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 Updated Private Placement, Updated Concurrent Offering and Updated 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 Updated Debenture Amendments will occur
on or after
March 29, 2019
, pursuant to the rules of the TSX, subject to receipt of the Macedonia
Competition Approval. The Company will apply for the Macedonia Competition Approval as soon as
is reasonably practicable following the date hereof and such approval is expected to be received no
later than
June 30, 2019
.
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 53.11% of the outstanding Common Shares, on a non-diluted basis and
50.47% on a fully diluted basis. 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
March 22, 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
Galena Resource Equities Limited /
Trafigura Pte Ltd.
29,000,000 Common Shares (17.39%) and 29,000,000
existing warrants
176,008,640 Common Shares and
176,008,640 Warrants
69.38%
Richard Griffiths/Blake Holdings Limited
3
23,562,799 Common Shares (14.13%) and 1,500,000
existing warrants
23,562,799 Common Shares and 1,500,000
Warrants
7.53%
Martyn Konig
3,115,739 Common Shares (1.87%) and 206,713 existing
warrants
10,103,976 Common Shares and 7,194,950
Warrants
5.11%
EBRD
3,4
23,368,547 Common Shares (14.01%) and 5,915,000
existing warrants
23,368,547 Common Shares and 5,915,000
Warrants
8.68%
Euromax currently has 166,742,080 issued and outstanding Common Shares. A maximum of
482,305,070 Common Shares are issuable pursuant to the Transaction (assuming full exercise of the
Warrants) representing 289.25% of the Company's currently issued and outstanding Common
Shares.
Pursuant to the Updated Private Placement, a maximum of 294,017,280 Common Shares
(representing 176.33% 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 Updated Concurrent Offering, a maximum of 13,976,474 Common Shares
(representing 8.38% 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.
Pursuant to the Updated Debenture Amendments (including conversion of the principal, interest and
fees where applicable on the maturity date of
February 28, 2021
), a maximum of (i) 85,917,563
Common Shares (representing 51.5% of the Company's outstanding Common Shares on a pre-
Transaction, non-diluted basis) would, if the Updated Debenture Amendments become effective, be
issuable to EBRD, an insider of the Company, assuming that EBRD converts its Debentures into
Common Shares and excluding the exercise of its existing warrants; (ii) 67,805,949 Common Shares
(representing 40.7% of the Company's outstanding Common Shares on a pre-Transaction, non-
diluted basis) would be issuable to CCC assuming that CCC converts its Debentures into Common
Shares.
Assuming completion of the Transaction, Euromax will have 331,391,757 issued and outstanding
Common Shares (on a non-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.
__________________________
1
Calculated on a non-diluted basis.
2
Assumes that none of the other investors convert their respective Warrants.
3
Richard Griffiths and EBRD are not participating in the Revised Concurrent Offering.
4
Following completion of the Transaction, assuming that either EBRD or CCC converts their respective Debentures and exercise their existing Warrants, on a partially-diluted
basis: (i) EBRD would own 34.14% of the issued and outstanding Common Shares, and (ii) CCC would own 20.46% of the issued and outstanding Common Shares.
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
North 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 controlled and managed by 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.
Economic interests in Galena Resource Equities Limited are divided between the Trafigura Group
and a Bulgarian entity which is solely owned by Tzolo Voutov and related to Geotechmin Group.
Tzolo Voutov is a member of the Board of Directors of the Company and a major indirect
shareholder of Geotechmin OOD.
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,
including the Macedonian Competition Approval, 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/March2019/22/c1961.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 19:52e 22-MAR-19