TIDMGCM
RNS Number : 3308F
GCM Resources PLC
26 October 2018
26(th) October 2018
GCM Resources plc
("GCM" or the "Company")
(LON:GCM)
Power Plant & Mine Consulting Agreement
Further to the announcement on 2 July 2018, GCM Resources plc
(LON:GCM), an AIM quoted mining and energy company, is pleased to
announce that it has entered into a new consulting agreement
("Agreement") with Dyani Corporation Limited ( ) ("Consultant").
The consultancy is in relation to securing prospective Chinese
strategic partners for the Phulbari Power and Coal Project in line
with GCM's strategy, as well as advancing the existing relationship
with China Gezhouba Group International Engineering Co. Ltd
("CGGC").
Company Strategy
GCM's mission is to be the cheapest electricity supplier in
Bangladesh, providing up to 6,000MW of power, by developing the
Company's mine proposal along with three groups of mine mouth power
plants of up to 2,000MW each. The Company believes that the
combined mine mouth and power plants, known as the Phulbari Coal
and Power Project ("the Project"), would not only be the single
largest provider of electricity in the country, greatly
contributing to Bangladesh's much needed energy requirements, but
also be a catalyst for regional economic growth and social
development in North West Bangladesh.
In order to realise this aim, the Company's strategy is to
present the combined mine mouth and power plants alongside large,
internationally renowned Chinese State-owned enterprises ("SOE's"),
as a holistic power solution which meets the needs and objectives
of the Government of Bangladesh. Securing such strategic partners
strongly enhances the credibility of the proposal, and in the
opinion of the Board of Directors, greatly enhances the prospects
of achieving the necessary approvals from the Government of
Bangladesh for developing the Project.
In this context obtaining access to, and securing the interest
of, Chinese SOE's as strategic partners is critical to achieving
the Company's goals. Noting the Consultant's success in securing
the partnership with CGGC for GCM, and the recent interest of
Sinohydro Corporation Limited, a subsidiary of Power Construction
Corporation of China Ltd, the Company is delighted to finalise the
Agreement with the Consultant today.
The Consulting Agreement
Under the terms of the Agreement which expires on 30 June 2020,
the Consultant shall provide services to assist the Company in:
-- Securing the interest of Chinese SOE's acceptable to the
Company to joint venture, cooperate or invest in each of the three
proposed groups of power plants of up to 2,000MW (up to 6,000MW in
total); and
-- Securing the interest of a Chinese SOE acceptable to the
Company to joint venture, cooperate or invest in the proposed
mine.
For each of the prospective strategic partners in relation to
the three groups of power plants, the Consultant will be required
to deliver the following key milestones: a memorandum of
understanding ("MOU"); a legally binding framework agreement in
relation to a joint venture, cooperation or investment; a legally
binding definitive agreement in respect to a joint venture,
cooperation or investment; and a legally binding agreement for the
engineering, procurement and construction of the power plant.
In obtaining a strategic partner for the mine, the Consultant
will be required to deliver the following key milestones: a
memorandum of understanding ("MOU"); a legally binding framework
agreement in relation to a joint venture, cooperation or
investment; and a legally binding definitive agreement in respect
to a joint venture, cooperation or investment.
In return for their services, the Consultant shall receive
share-based success fees on achieving milestones as well as a
monthly retainer fee. The retainer fee is GBP25,000 per month from
1 July 2018, and shall be paid quarterly in arrears by the issuance
of new ordinary shares in the Company at 14p per share.
The share-based success fees will be paid in lieu of any cash
payment, and will be paid only upon achieving the key milestone in
question, as evidenced by the signing of documents in forms
agreeable to the Company. The fees will be satisfied by the issue
of new shares, equal to a percentage of the issued capital of the
Company at the date of the Agreement as follows:
Acceptable Strategic MOU Framework Agreement All Definitive
Partner for: Agreements
Mine 2% 3% 4%*
------ -------------------- ---------------
Power plant group 1 (up
to 2,000MW) Nil** Nil** 5%
------ -------------------- ---------------
Power plant group 2 (up
to 2,000MW) 2% 3% 4%*
------ -------------------- ---------------
Power plant group 2 (up
to 2,000MW) 2% 3% 4%*
------ -------------------- ---------------
* In the event that a framework agreement was not signed prior
to the completion of definitive agreements, the fee shall be 6% of
issued capital
** The MOU and framework agreements have already been achieved
in respect to Power plant group 1, where the strategic partner is
CGGC
Other principal terms under the Agreement are as follows:
-- Any share issue to the Consultant is conditional upon the
Consultants' interest, together with the interest of any parties
with which it is in concert, remaining below 30% of the Company's
issued capital
-- With the exception of the monthly retainer, the Consultant is
restricted from disposing of any shares received under the
consulting agreement for a period of six months from issue.
-- Notwithstanding the milestones as set out above, the total
shares issued under the Agreement as well as the previous agreement
(announcements dated 18 May 2017 and 2 July 2018) will be capped to
45% of the enlarged issued share capital of the Company. In the
event that this occurs, the Consultant shall remain obliged to
continue the services, even though no further shares will be
issued.
-- The number of shares to be issued upon reaching each
milestone will be adjusted proportionately in the event that the
issued capital of the Company increases or decreases following the
date of the Agreement in order to maintain the percentages as set
out above.
-- The Consultant is contracted on a non-exclusive basis.
-- The Company has entered into a separate relationship
agreement to safeguard shareholder interests and Board
independence, which takes effect only upon the Consultant being
interested in 25% or more of the issued share capital.
-- The entry into any of the agreements with strategic partners
is at the discretion of the Company.
Board assessment
As highlighted above, the Board believes that securing the
interest of Chinese SOE's as strategic partners is critical to
achieving the Company's goals. The Consultant has been instrumental
in enabling GCM's progress to-date in line with its strategy and
the Company believes the new Agreement will provide the framework
to make significant strides towards its objectives.
The Chairman has sought to negotiate the best possible terms on
behalf of the Company and has not found any other alternative party
who can deliver the services in as effective a manner as the
Consultant, whilst being willing to be paid entirely in shares and
with no other reimbursable expenditure, unless approved by the
Company. It is noteworthy that in this Agreement, the fees per
milestone are less than in the previous agreement with the
Consultant (announced 18 May 2017). In view of the Company's
present circumstances, the Company believes that an agreement with
the Consultant is the only realistic option for the Company to
achieve its strategy.
As the Consultant is currently a substantial shareholder with a
notified holding of 19.3% entering into the Agreement is deemed to
be a related party transaction for the purposes of Rule 13 of the
AIM Rules. The directors consider, having consulted with its
nominated adviser, Northland Capital Partners Ltd, that the terms
of the transaction are fair and reasonable insofar as its
shareholders are concerned.
The Executive Chairman, Datuk Michael Tang PJN, stated: "I am
delighted to re-engage the services of Dyani and look forward to
working with them to drive significant progress towards our goals
over the coming months. Completing this agreement is a considerable
breakthrough for the Company and I am confident that it will unlock
significant value for our shareholders in time to come."
This announcement contains inside information as defined in
Article 7 of the EU Market Abuse Regulation No 596/2014 and has
been announced in accordance with the Company's obligations under
Article 17 of that Regulation.
For further information:
GCM Resources plc Northland Capital Partners Ltd
James Hobson Nominated Adviser and Broker
Finance Director Tom Price
+44 (0) 20 7290 1630 Jamie Spotswood
+44 (0) 20 3861 6625
GCM Resources plc
Tel: +44 (0) 20 7290 1630
info@gcmplc.com; www.gcmplc.com
About GCM Resources
GCM Resources plc (LON:GCM), the AIM listed mining and energy
company, has identified a high quality coal resource of 572 million
tonnes (JORC 2004 compliant) at the Phulbari Coal and Power Project
(the Project) in north-west Bangladesh.
Utilising the latest highly energy efficient power generating
technology the Phulbari coal mine is capable of supporting power
plants of up to 6,000MW. GCM is awaiting approval from the
Government of Bangladesh to develop the Project. The Company has a
strategy of combining the Company's mine proposal with up to
6,000MW of power generation, together with credible,
internationally recognised strategic partners. GCM aims to deliver
a practical power solution to provide the cheapest electricity in
the country, in a manner amenable to the Government of
Bangladesh.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
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