Papua Mining plc
Proposed Placing of 12,500,000 Placing Units
Offer for Subscription of up to 7,500,000 Offer Units
Director Placing
and
Notice of General Meeting
Papua Mining plc (“Papua” or the “Company”), a UK company focused on the exploration for and, if commercially feasible, development of gold and copper deposits in Papua New Guinea is pleased to announce that it has conditionally raised £2.5 million before expenses through the issue of 12,500,000 Placing Units at a price of £0.20 per Placing Unit (“Issue Price”), which comprises one ordinary share of 10 pence each in the Company (“Ordinary Share”) and one warrant to subscribe for an Ordinary Share (“Warrant”) to certain institutional investors, certain current shareholders and a Director. The Issue Price represents a discount of approximately 7.0per cent. to the price of £0.215per share, being the closing price on 9 June 2014.
The Board of the Company feels strongly that its existing Shareholders should, where it is practical for them to do so, have the opportunity to participate in the capital raising process at the same price as was offered to those participating in the Placing. Accordingly, a shareholder circular (the “Circular”) has today been published which invites existing Shareholders to subscribe in aggregate for up to 7,500,000 Offer Units, which consist of one Ordinary Share and one Warrant, to raise up to an additional £1.5 million before expenses (the “Offer for Subscription”).
The Placing and the Offer for Subscription are conditional, inter alia, on the passing of certain Resolutions at a General Meeting of Shareholders to be held at the offices of Fasken Martineau LLP, 3rd Floor, 17 Hanover Square, London W1S 1HU on 26 June 2014 at 11:00 a.m., notice of which is set out in the Circular. The Offer for Subscription will not proceed if the Placing is not completed and Admission of the Placing Shares does not become effective.
Hugh McCullough, Chief Executive Officer, commented: “We have made some excellent progress with our exploration programmes so far and we look forward to continuing our efforts. We are therefore delighted with the strong support from investors for the further drilling of our principal targets.”
Background to and reasons for the Placing
Since the Company’s admission to AIM in March 2012, it has expended approximately US$12.9 million on exploration and related activities with the aim of identifying gold and copper deposits in its licence areas. Following encouraging initial airborne geophysics studies the Company has employed a systematic “boots on the ground” exploration approach including ground geophysics, soil, rock and trench sampling and field mapping to identify and delineate its drill targets.
The Company has recently focused its exploration activity on the Mount Nakru region of New Britain Island in Papua New Guinea (“PNG”), where it has identified widespread high-grade copper mineralization at surface in numerous locations in particular within one of its licence areas, EL1462. Integration of soil geochemistry with rock chip sampling, geophysical survey and geological mapping data has defined three main anomalies in this area, namely the Flying Fox, Junction and Tripela drill targets. In total, just over 4,000 metres of drilling has been completed to date in the Mt Nakru area. Exploration results to date confirm the potential of this volcanic arc environment to host porphyry copper-gold deposits.
Drilling commenced at the Junction and Flying Fox targets in April 2013, where three drill holes were completed. In January 2014 the Company embarked on a drilling programme at the Tripela target area. An initial shallow vectoring programme was completed in early May 2014 for a total of 2,100 metres of drilling and it is this target that has been delineated as the Company’s primary focus in the search for a buried porphyry copper-gold deposit. The drill programme was designed to test for alteration mineralogy and other data which would enable the Company to vector towards the buried porphyry body interpreted from geological evidence. A number of holes in this programme intersected broad zones of visible copper mineralisation which, although not of economic grade, represent further positive vectors towards the projected deeper porphyry.
These results, combined with the surface discovery of high grade copper mineralisation in outcrops, many of which are interpreted as D Veins, point to the likely presence of a porphyry nearby.
Modelling of the downhole geochemical and alteration mapping data from the relatively shallow drilling here to date will be used to direct the planned deeper targeted drilling.
In addition, as announced on 16 May 2014, the Company has continued to undertake a modest but focused regional exploration programme on its other licences. A field programme in the EL2051 licence area carried out in March and April 2014 located evidence of extensive surface mineralisation in both float and outcrop in a predominantly intrusive rock suite in the southern part of the licence area. This area is located some 20 kilometres north of EL1462. Assay results received confirm that the outcrop and float contains significant gold mineralisation with values up to 35.5 grams per tonne. Of 326 samples collected, 28 graded above 1.0 grams per tonne gold and 13 were greater than 5 grams per tonne gold. The maximum grade returned was 35.5 grams per tonne gold from a sulphide rich andesitic outcrop. Anomalous samples fell largely within a zone with a north-south extent of 4.5 kilometres and an east-west extent of 1.5 kilometres. The Company’s XRF analyses of these high grade samples show that they also contain copper values.
The mineralised zone falls within an area which is close to the eastern and southern boundaries of the EL2051 licence area. The Group has a pre-existing application for ELA1804 licence area which incorporates a possible southerly extension of the mineralised zone, immediately adjacent to the southern boundary of EL2051. A review of ground available for application immediately east of EL2051 was made with the Mineral Resource Authority in Port Moresby. On 19 May 2014 an application was lodged with the Mineral Resource Authority for an area of approximately 89 square kilometres contiguous with EL2051 and ELA1804. PNG mining legislation states that licence applications are received, processed and issued by the Mineral Resource Authority on a first come/first served basis. The application for the new licence, designated licence area ELA2322, has been accepted by the Mineral Resource Authority and the relevant application fee has been paid. In the normal course of events we would expect the licence to be granted following the successful completion of planned Warden’s Hearings.
Use of Proceeds
The Company intends to use the net proceeds of the Placing (which are expected to be approximately £2,380,000) and any additional funds received by way of the Offer for Subscription, to continue its drilling programme, including deeper targeted drilling, primarily at its Tripela target in the Mount Nakru region. It is expected that up to approximately 4,500 metres of drilling will be completed over the next year.
In addition, following the recent assay results at its EL2051 licence area, the Company also expects to apply some discretionary exploration expenditures on undertaking full and detailed geological mapping as well as geochemical soil sampling on a grid basis, to trace the extent and tenor of this exciting new mineralised zone.
The Company will also, in line with its strategy and subject to its available financial resources, continue with focused regional exploration on other selected target areas on other licences.
Summary Financial Information
The summary financial information set out below is extracted from the unaudited consolidated financial statements of the Group for the year ended 31 December 2013.
| Year Ended31 December 2013 (unaudited)US$ | Year Ended31 December 2012 US$ | |
| Consolidated incomestatement | ||
| Administrative expenses | 2,136,348 | 1,829,033 |
| Loss after tax | 2,089,635 | 1,758,120 |
| Loss per share | 0.06 | 0.06 |
| Consolidated balance sheet position | ||
| Capitalised exploration expenses | 5,386,020 | 2,804,091 |
| Cash | 3,626,880 | 6,996,182 |
| Total assets | 16,508,743 | 14,492,025 |
| Share based payment reserve | 1,073,442 | 584,459 |
The Company will publish its audited financial statements for the year ended 31 December 2013 by 30 June 2014.
Director and Substantial Shareholder Placing
Hugh McCullough, a director of the Company, is participating in the Placing. Details of his commitment and his holding in the Company before and after the Placing are set out in the table below:
| Name | Existing shareholding in the Company | % of current issued share capital: | Number of Ordinary Shares subscribed for in the Placing: | Shareholding in the Company after theFundraising: | % of enlarged issued share capital after the Fundraising*: |
| Hugh McCullough | 354,571 | 1.0 | 150,000 | 504,571 | 0.9 |
*Assuming that the Offer for Subscription is fully subscribed and that Hugh McCullough does not participate in it.
The participation of the above Director in the Placing constitutes a related party transaction under Rule 13 of the AIM Rules. The Independent Directors consider that, having consulted with Cenkos, the terms of the Director’s participation in the Placing are fair and reasonable insofar as Shareholders are concerned.
Michael Somerset-Leeke, who currently holds 18.6 per cent. of the Existing Share Capital and is therefore regarded as a Substantial Shareholder under the AIM Rules has agreed to subscribe for 4,700,000 Placing Units in the Placing. Therefore his participation in the Placing constitutes a related party transaction under Rule 13 of the AIM Rules. The Directors consider that, having consulted with Cenkos, the terms of Michael Somerset-Leeke’s participation in the Placing are fair and reasonable in so far as Shareholders are concerned. Following completion of the Placing, and assuming full take-up by Qualifying Shareholders (other than Michael Somerset-Leeke) under the Offer for Subscription, Michael Somerset-Leeke will hold 11,201,026 Ordinary Shares, equivalent to 20.4 per cent. of the Enlarged Share Capital.
Terms of the Placing and Offer for Subscription
Placing
The Company has conditionally placed 12,500,000 Placing Units at the £0.20 per Placing Unit with certain institutional investors, current Shareholders and one Director to raise £2,500,000 before expenses. The Placing has not been underwritten and is conditional (among other things) upon the Placing Resolutions being passed at the General Meeting. The Placing Shares will, when issued, rank pari passu in all respects with the Existing Ordinary Shares.
The Warrants to be issued pursuant to the Placing (“Placing Warrants”) will be created pursuant to the Warrant Instrument and will grant to the holder the right to subscribe for one new Ordinary Share per Warrant at the Warrant exercise price of £0.30, being a 50 per cent. premium to the Issue Price, at any time prior to the second anniversary of Admission of the Placing Shares.
Offer for Subscription
The Company considers it important that existing Shareholders have an opportunity (where their circumstances permit) to participate in the Fundraising on equivalent terms and conditions (as to, inter alia, price and number of Warrants per New Ordinary Share) to the Placing and accordingly, the Company is making the Offer for Subscription to those Shareholders on the register of members of the Company as at 6.00pm on 9 June 2014 (the “Record Date”) (“Qualifying Shareholders”). Application for Offer Units pursuant to the Offer for Subscription must be for at least a minimum subscription of £2,500 (“Minimum Subscription”). Applications for less than the Minimum Subscription will be rejected.
The Warrants to be issued pursuant to the Offer for Subscription (the “Offer Warrants”) will also be created pursuant to the Warrant Instrument and will grant to the holder the right to subscribe for one new Ordinary Share per Offer Warrant at the Warrant exercise price of £0.30, being a 50 per cent. premium to the Issue Price, at any time prior to the second anniversary of Admission of the Offer Shares.
The Warrants (whether issued pursuant to the Placing or the Offer) are not transferable and no application will be made by the Company for them to be admitted to AIM or any other market or trading platform.
The Offer for Subscription is not an open offer or rights issue and Qualifying Shareholders will not have an automatic entitlement to subscribe for a pro rata number of shares. However, each Qualifying Shareholder may apply for such number of Offer Units as they wish (over the Minimum Subscription) up to the full number of 7,500,000 Offer Units available in the Offer for Subscription. In the event that one or more Qualifying Shareholders apply for an aggregate amount that is greater than £1,500,000, the Directors will use their discretion to scale back any Qualifying Shareholders who are participating in the Placing and who also choose to apply for Offer Units, so as to ensure that Qualifying Shareholders who are not participating in the Placing are able, to the fullest extent possible, to receive the maximum number of Offer Units which they have applied for.
In order to apply for Offer Units, Qualifying Shareholders should complete the Application Form in accordance with the instructions contained in the Circular.
Dilutionary Impact of the Fundraising
The proposed issue of Placing Shares pursuant to the Placing will dilute existing shareholdings of Shareholders. Qualifying Shareholders will be able to mitigate the extent of this dilution by applying for Offer Shares in the Offer for Subscription. Shareholders may suffer further dilution if and to the extent that Placing Warrants (and Offer Warrants issued to Qualifying Shareholders who choose to participate in the Offer for Subscription) are subsequently exercised.
The following table outlines the maximum dilution which a Shareholder will be subject to if he or she does not participate in the Placing or the Offer for Subscription:
Maximum Dilution
| Following the Placing | 26.3 per cent. |
| Following the Placing and Offer for Subscription and assuming the Offer is fully subscribed | 36.4 per cent. |
| Following the Placing and Offer for Subscription and assuming the Offer for Subscription is fully subscribed and full exercise of the Placing Warrants and Offer Warrants | 53.3 per cent. |
Admission
Application will be made to the London Stock Exchange for admission to trading of the 12,500,000 Placing Shares, which will rank pari passu with the existing Ordinary Shares in issue (“Admission”). Admission of the Placing Shares is expected to become effective at 8:00 a.m. on 27 June 2014.
Application will also be made to the London Stock Exchange for admission to trading for up to 7,500,000 Offer Shares, which will rank pari passu with the existing Ordinary Shares in Issue. Admission of the Offer Shares is expected to become effective at 8:00 a.m. on 30 June 2014.
Expected Timetable of Principal Events
|
2014 |
|
| Record Date |
6:00 p.m. on 9 June |
| Date of Circular and posting of the Application Form and Form of Proxy |
10June |
| Latest time and date for receipt of the Application Form |
23 June |
| Latest time and date for receipt of the Form of Proxy |
11.00am 24 June |
| General Meeting |
11.00am 26 June |
| Admission and commencement of dealings of the Placing Shares |
8:00 a.m. on 27 June |
| Admission and commencement of dealings of the Offer Shares |
8:00 a.m. on 30 June |
Action to be taken
The Circular has today been posted to Shareholders containing a notice convening the General Meeting to be held at the offices of Fasken Martineau LLP, 3rd Floor, 17 Hanover Square, London W1S 1HU at 11:00 a.m. on 26 June 2014 and a Form of Proxy for use in connection with the General Meeting. The Form of Proxy should be completed and returned in accordance with the instructions thereon.
Qualifying Shareholders wishing to participate in the Offer for Subscription should carefully read the Application Form and accompanying instructions, which are also enclosed with the Notice of General Meeting, and send the completed Application Form along with the appropriate remittance to Computershare at the address specified in the instructions.
Directors’ Recommendation
The Independent Directors (being the Board of Directors other than Hugh McCullough as he is participating in the Placing) unanimously recommend Shareholders to vote in favour of the Placing Resolutions, as the Independent Directors intend to do in respect of their beneficial shareholdings which amount in aggregate to 513,396 Ordinary Shares, representing approximately 1.5 per cent. of the Existing Ordinary Shares. Additionally, all of the Directors unanimously recommend Shareholders to vote in favour of the Offer Resolutions, as the Directors intend to do in respect of their beneficial shareholdings which amount in aggregate to 867,967 Ordinary Shares, representing approximately 2.5 per cent. of the Existing Ordinary Shares.
Defined terms in this announcement have the same meaning of such terms as set out in the Circular.
Enquiries:
| Papua Mining plc
Hugh McCullough, Chief Executive Officer +353 1 532 9535 |
|
| Cenkos Securities – Nominated Adviser & Broker
Beth McKiernan/Alan Stewart |
+44 131 220 6939
Square1 Consulting – Financial Public Relations
David Bick/Mark Longson
+44 207 929 5599