TIDMIOF
RNS Number : 4824Z
Iofina PLC
20 May 2019
THE INFORMATION COMMUNICATED IN THIS ANNOUNCEMENT IS INSIDE
INFORMATION FOR THE PURPOSES OF ARTICLE 7 OF REGULATION
596/2014.
20 May 2019
Iofina plc
("Iofina", the "Group", or the "Company")
(LSE AIM: IOF)
Conditional Placing, Subscription and Open Offer to raise gross
proceeds of up to GBP7.5 million
Notice of Annual General Meeting
Iofina, specialists in the exploration and production of iodine
and manufacturers of other halogen-based derivatives at its
specialty chemical company, today announces a proposed conditional
placing, subscription and open offer (together the "Fundraising")
to raise gross proceeds of up to GBP7.5 million at 16 pence per
share.
The net proceeds of the Fundraising will enable Iofina to
accelerate its plant upgrading programme, which in turn will
increase iodine production and sales, as well as reduce the
Company's debt.
The Directors intend that the net proceeds of the Fundraising
will be used primarily for the following purposes:
-- Accelerate the development and construction of the IO#8 iodine processing plant;
-- Extinguish the Company's $3.26m term loan facility;
-- Complete upgrades at its other plants, which will increase iodine production; and
-- Investment in new product development at Iofina Chemical.
In connection with the Fundraising, one of the Company's secured
lenders, Southern Rock Insurance Company Limited ("SR"), has
agreed, subject to the passing of the Resolution approving the
issue and allotment of the Placing Shares and the Subscription
Shares (the "Condition"), to convert 75 per cent. of the total debt
owing to it under the Loan Notes 2020 into ordinary shares in the
capital of the Company (the total debt amounting to approximately
US$5,592,986). Subject to the Condition being satisfied, the amount
which shall be converted by SR is approximately US$4.19 million,
and the conversion will be effected by the issue by the Company to
Southern Rock of the Debt for Equity Shares at the Issue Price.
The Directors are unanimous in wanting to ensure that all of the
Company's existing shareholders have the opportunity to participate
in the Fundraising. The Directors scaled back the potential
proceeds of the Placing to ensure our shareholders could
participate in the Fundraising in a meaningful way, specifically
given that some of our shareholders have been with us from the
start of our publicly quoted journey. Therefore, comprised within
the Fundraising, is the Open Offer. The Company is providing all
Qualifying Shareholders with the opportunity to subscribe for Open
Offer Shares, to raise up to approximately GBP2.04 million (before
expenses). Shareholders subscribing for their full entitlement
under the Open Offer may also request further Open Offer Shares
through an Excess Application Facility. The Open Offer will not be
underwritten. The net proceeds of the Open Offer receivable by the
Company will be utilised to further support the Group's strategic
plan.
The terms and conditions of the Open Offer, including the Excess
Application Facility, are set out in the Circular to Shareholders,
which also includes a notice convening the 2019 Annual General
Meeting. The Circular sets out the reasons for, and provide further
information on, the Fundraising, to explain why the Board considers
the Fundraising to be in the best interests of the Company and
Shareholders as a whole and why the Directors unanimously recommend
that Shareholders vote in favour of the Resolutions. The Circular
will be dispatched today and will also be available at this time on
the Company's website at www.iofina.com
The Placing and Subscription is conditional, inter alia, on the
approval of the relevant Resolution by Shareholders at the Annual
General Meeting to be held at 9.00 a.m. on 13 June 2019 at
Dartmouth House, 37 Charles Street, Mayfair, London W1J 5ED and on
the Admission of the Placing Shares and the Subscription Shares to
trading on AIM. The Open Offer is conditional, inter alia, on the
Placing and the Subscription. It is expected that Admission will
become effective and that dealings in the New Shares will commence
at 8.00 a.m. on 14 June 2019.
Commenting, President and CEO Dr. Tom Becker stated: "Given
complex market conditions, we believe that it is in the best
interests of shareholders as a whole to conclude this
oversubscribed placing. The Directors have been vocal and
unwavering in that our supportive and current shareholders have the
opportunity, through the Open Offer, to participate in this
fundraising and allow all investors to partake in the company's
bright future.
"The strengthening iodine prices and demand makes it an
opportunistic time to execute on our expansion plans. We have
identified areas for growth and will utilise the new funds to
fast-track investment in new plants, as well as to upgrade existing
plants, which will increase iodine production and further enhance
cost control measures.
"In addition, the demand for our iodine products and the growing
applications in this sector, means that we are committed to new
product development, whilst eliminating the high interest term loan
debt and reducing our overall debt under the Loan Notes 2020, which
will strengthen the Group's financial position."
Enquiries:
Dr. Tom Becker, CEO & President
Iofina plc
Tel: +44 (0)20 3006 3135
Christopher Raggett/Giles Rolls/Matthew Radley (corporate
finance)
Camille Gochez (ECM)
finnCap Ltd
Tel: +44 (0)20 7220 0500
Media Contact:
Charles Goodwin/Harriet Jackson
Yellow Jersey PR Limited
Tel: +44 (0)7544 275 882
About Iofina:
Iofina specialises in the exploration and production of iodine,
halogen based specialty chemical derivatives and produced water.
Iofina's business strategy is to identify, develop, build, own and
operate iodine extraction plants currently focused in North
America, based on Iofina's WET(R) IOsorb(R) technology. Iofina has
production operations in the United States, specifically in
Kentucky and Oklahoma. It is a vertically integrated company,
covering the process from the production of iodine in the field, to
the manufacture of the chemical end-products derived from iodine,
supplying them to the consumer, and the recycling of iodine using
iodinated side-streams from waste chemical processes. Iofina
utilises its portfolio of patented and patent-pending technology,
and proprietary methods and trademarks throughout all business
lines.
www.iofina.com
DEFINITIONS
The following definitions apply throughout the Circular unless
the context otherwise requires:
"Accredited Investor" such term as defined under Rule 501(a)
of Regulation D under the Securities Act.
"Admission" the admission of the New Ordinary Shares
and the Debt for Equity Shares to trading
on AIM becoming effective in accordance
with Rule 6 of the AIM Rules.
"AGM" or "Annual General the 2019 annual general meeting of the
Meeting" Company, notice of which is set out at
the end of the Circular, and including
any adjournment(s) thereof.
"AIM" the market of that name operated by the
London Stock Exchange.
"AIM Rules" the AIM Rules for Companies published
by the London Stock Exchange from time
to time.
"Application Form" the application form accompanying the
Circular pursuant to which Qualifying
Non-CREST Shareholders may apply for Open
Offer Shares in respect of the Open Offer.
"Articles" the articles of association of the Company.
"Board" or "Directors" the board of directors of the Company
or any duly authorised committee thereof.
"Business Day" or any day on which banks in London are open
"Business Days" for normal banking business and the London
Stock Exchange is open for trading.
"CA 2006" the Companies Act 2006, as amended.
"Circular" Circular dated 20 May 2019.
"Closing Price" the closing middle market price of an
Existing Ordinary Share as derived from
the AIM Appendix to the Daily Official
List of the London Stock Exchange.
"Company" or "Iofina" Iofina plc a company incorporated in England
and Wales with company number 05393357,
whose shares (comprised of the Ordinary
Shares) are traded on AIM under the symbol
IOF.
"CREST" the relevant system (as defined in the
CREST Regulations) in respect of which
Euroclear is the Operator (as defined
in the CREST Regulations).
"CREST Manual" the compendium of documents entitled "CREST
Manual" issued by Euroclear from time
to time.
"CREST member" a person who has been admitted by Euroclear
as a system member (as defined in the
CREST Regulations).
"CREST participant" a person who is, in relation to CREST,
a system participant (as defined in the
CREST Regulations).
"CREST payment" has the meaning given in the CREST Manual.
"CREST Proxy Instruction" the appropriate CREST message made to
appoint a proxy, properly authenticated
in accordance with Euroclear's specifications.
"CREST Regulations" the Uncertificated Securities Regulations
2001, as amended.
"CREST sponsor" a CREST participant admitted to CREST
as a CREST sponsor.
"CREST sponsored member" a CREST member admitted to CREST as a
sponsored member.
"Debt for Equity Conversion" the conditional debt for equity conversion,
further details of which are set out in
paragraph 2 of Part I of the Circular.
"Debt for Equity Shares" the 20,449,355 new Ordinary Shares to
be issued to Southern Rock pursuant to
the Debt for Equity Conversion.
"Enlarged Share Capital" the Ordinary Shares in issue immediately
following Admission, comprising the Existing
Ordinary Shares, the Placing Shares, the
Subscription Shares and the Open Offer
Shares (assuming that Qualifying Shareholders
take up their Open Offer Entitlements
in full).
"EU" The European Union.
"Euroclear" Euroclear UK & Ireland Limited, the operator
of CREST.
"Excess Application the arrangement pursuant to which Qualifying
Facility" Shareholders may apply for Open Offer
Shares in excess of their Open Offer Entitlement.
"Excess CREST Open in respect of each Qualifying CREST Shareholder,
Offer Entitlement" the entitlement to apply for Open Offer
Shares in addition to such holder's Open
Offer Entitlement credited to their stock
account in CREST, pursuant to the Excess
Application Facility, which is conditional
on them taking up their Open Offer Entitlement
in full and which may be subject to scaling
back in accordance with the provisions
of the Circular.
"Excess Open Offer an entitlement for each Qualifying Shareholder
Entitlement" to apply to subscribe for Open Offer Shares
in addition to their Open Offer Entitlement
pursuant to the Excess Application Facility
which is conditional on them taking up
their Open Offer Entitlement in full and
which may be subject to scaling back in
accordance with the provisions of the
Circular.
"Excess Shares" Open Offer Shares in addition to the Open
Offer Entitlement for which Qualifying
Shareholders may apply under the Excess
Application Facility.
"Ex-entitlement Date" the date on which the Existing Ordinary
Shares are marked "ex" for entitlement
under the Open Offer, being 20 May 2019.
"Existing Ordinary the 127,569,398 Ordinary Shares in issue
Shares" at the date of this announcement.
"FCA" the Financial Conduct Authority in the
UK or its successor from time to time.
"finnCap" finnCap Ltd, nominated adviser and broker
to the Company.
"Form of Proxy" the form of proxy accompanying the Circular
relating to the AGM.
"FSMA" the Financial Services and Markets Act
2000, as amended.
"Fundraising" together the Placing, the Subscription
and the Open Offer and, where the context
permits, the Debt for Equity Conversion.
"Group" Iofina plc and its subsidiaries.
"Iofina Chemical" Iofina Chemical, Inc., an indirectly held
wholly-owned subsidiary of the Company,
incorporated in the State of Delaware,
US.
"Iofina Resources" Iofina Resources, Inc., an indirectly
held wholly-owned subsidiary of the Company,
incorporated in the State of Colorado,
US.
"Issue Price" 16 pence per New Ordinary Share and Debt
for Equity Share.
"Loan Notes 2020" the secured loan notes issued by the Company
in principal amounts of US$15,000,000
and US$5,000,000 and issued to each of
Stena and Southern Rock respectively;
further details of which are set out in
the RNS announcement made by the Company
on 1 April 2019 (which can be seen on
either the Company's website at www.iofina.com
or the London Stock Exchange's website
at www.londonstockexchange.com).
"London Stock Exchange" London Stock Exchange plc.
"MAR" the Market Abuse Regulation (EU/596/2014).
"Money Laundering The Money Laundering, Terrorist Financing
Regulations" and Transfer of Funds (Information on
the Payer) Regulations 2017, as amended.
"MT" metric tonnes.
"New Ordinary Shares" the Placing Shares, Subscription Shares
and Open Offer Shares.
"Non-Qualifying Shareholders" Shareholders who are resident or located
in a Restricted Jurisdiction.
"Notice of Annual the notice of Annual General Meeting,
General Meeting" set out at the end of the Circular.
"Open Offer" the conditional invitation made by the
Company to Qualifying Shareholders to
apply to subscribe for the Open Offer
Shares at the Issue Price on the terms
and subject to the conditions set out
in Part III of the Circular and, where
relevant, in the Application Form.
"Open Offer Entitlement" the pro rata basic entitlement for Qualifying
Shareholders to apply to subscribe for
1 Open Offer Share for every 10 Existing
Ordinary Shares held by them on the Record
Date pursuant to the Open Offer.
"Open Offer Shares" up to 12,756,939 New Ordinary Shares to
be issued pursuant to the Open Offer.
"Ordinary Shares" ordinary shares of 1 penny each in the
capital of the Company.
"Overseas Shareholders" all Shareholders resident outside of the
United Kingdom including those in a Restricted
Jurisdiction.
"Placees" those persons procured by the Company
who subscribe for Placing Shares pursuant
to the Placing.
"Placing" the conditional placing of the Placing
Shares.
"Placing Agreement" the conditional agreement dated 19 May
2019 between the Company and finnCap relating
to the Placing.
"Placing Shares" the 33,804,375 New Ordinary Shares to
be issued to the Placees pursuant to the
Placing.
"Prospectus Rules" the Prospectus Rules made in accordance
with EU Prospectus Directive 2003/7l/EC.
"QIBs" qualified institutional buyers as detailed
in Rule 144A of the Securities Act.
"Qualifying CREST Qualifying Shareholders whose Existing
Shareholders" Ordinary Shares on the register of members
of the Company at the close of business
on the Record Date are held in uncertificated
form.
"Qualifying Non-CREST Qualifying Shareholders whose Existing
Shareholders" Ordinary Shares on the register of members
of the Company at the close of business
on the Record Date are held in certificated
form.
"Qualifying Shareholders" all holders of Existing Ordinary Shares
on the Record Date (whether or not such
shares are held in uncertificated or certificated
form) that are not Non-Qualifying Shareholders.
"Record Date" 6:00 p.m. on 16 May 2019.
"Registrars" or "Receiving Link Asset Services, Corporate Actions,
Agent" The Registry, 34 Beckenham Road, Beckenham,
Kent BR3 4TU.
"Regulation S" Regulation S under the Securities Act.
"Regulatory Information has the meaning given in the AIM Rules.
Service"
"Resolutions" or "Resolution" the resolutions (or any one of them) to
be proposed at the Annual General Meeting
which are set out in full in the Notice
of Annual General Meeting.
"Restricted Jurisdiction" any of the United States, Australia, Canada,
or "Restricted Jurisdictions" Japan, New Zealand and the Republic of
South Africa and any other jurisdiction
where the extension or availability of
the Open Offer would breach any applicable
law or regulations
"Securities Act" the US Securities Act of 1933, as amended.
"Shareholders" holders of Ordinary Shares.
"Southern Rock" Southern Rock Insurance Company Limited,
being one of the Company's secured lenders.
"Stena" Stena Investment S.à.r.l., being
one of the Company's secured lenders.
"Subscribers" those Directors who subscribe for Subscription
Shares pursuant to the Subscription.
"Subscription" the conditional subscription of the Subscription
Shares.
"Subscription Shares" the 570,625 New Ordinary Shares to be
issued to Subscribers pursuant to the
Subscription.
"United Kingdom" or the United Kingdom of Great Britain and
"UK" Northern Ireland.
"United States" or the United States of America, its territories
"US" and possessions, any state of the United
States and the District of Columbia and
all other areas subject to its jurisdiction.
"USE" an unmatched stock event.
"GBP" or "Sterling" pounds sterling, the basic currency of
the United Kingdom.
"US$" United States dollar, the legal currency
of the United States.
TIMETABLE
2019
Record Date and time for entitlements under 6:00 p.m. on 16
the Open Offer May
Announcement of the Fundraising 7:00 a.m. on 20
May
Ex-entitlement date of the Open Offer 8:00 a.m. on 20
May
Posting of the Circular, Form of Proxy and 20 May
Application Form (where applicable)
Open Offer Entitlements and Excess CREST Open 8:00 a.m. on 21
Offer Entitlements credited to stock accounts May
in CREST of Qualifying CREST Shareholders
Latest recommended time and date for requesting 4:30 p.m. on 6
withdrawal of Open Offer Entitlements and June
Excess CREST Open Offer Entitlements from
CREST
Latest time for depositing Open Offer Entitlements 3:00 p.m. on 7
and Excess CREST Open Offer Entitlements into June
CREST
Latest time and date for splitting Application 3:00 p.m. on 10
Forms (to satisfy bona fide market claims) June
Latest time and date for receipt of Forms 9:00 a.m. on 11
of Proxy June
Latest time and date for receipt of completed 11:00 a.m. on
Application Forms and payment in full under 12 June
the Open Offer or settlement of relevant CREST
instruction (as appropriate)
Annual General Meeting 9:00 a.m. on 13
June
Announcement of results of the Annual General 13 June
Meeting and the Fundraising
Admission of the New Ordinary Shares and the 8:00 a.m. on 14
Debt for Equity Shares to trading on AIM and June
commencement of dealings
CREST accounts to be credited for the New 14 June
Ordinary Shares and the Debt for Equity Shares
to be held in uncertificated form
Despatch of definitive share certificates by 21 June
for the New Ordinary Shares to be held in
certificated form
Notes:
(1) All references to time in this announcement are to London
(UK) time unless otherwise stated.
(2) The dates and times given in this announcement are based on
the Company's current expectations and may be subject to change. If
any of the above times or dates should change at the discretion of
the Company, the revised times and/or dates will be notified to
Shareholders by an announcement on a Regulatory Information
Service.
If you have any queries please contact Link Asset Services on
+44 (0)371 664 0321. Calls are charged at the standard geographic
rate and will vary by provider. Calls outside the United Kingdom
will be charged at the applicable international rate. The helpline
is open between 9:00 a.m. and 5:30 p.m., Monday to Friday excluding
public holidays in England and Wales. Different charges may apply
to calls from mobile telephones and calls may be recorded and
randomly monitored for security and training purposes. The helpline
cannot provide advice on the merits of the Resolutions or give any
financial, legal or tax advice.
FURTHER INFORMATION
1. Introduction
The Company announces the successful completion of a proposed
placing and subscription with new and existing investors. A total
of 33,804,375 Placing Shares and 570,625 Subscription Shares have
been conditionally placed at a price of 16 pence per New Ordinary
Share, raising gross proceeds of GBP5.5 million. The Company is
also proposing to raise up to GBP2.04 million by way of the Open
Offer which will be available to all Qualifying Shareholders on the
Record Date. The Fundraising comprises the Placing, the
Subscription and the Open Offer and, where the context permits, the
Debt for Equity Conversion. For the avoidance of doubt, the Company
will not receive any funds pursuant to the Debt for Equity
Conversion.
The purpose of the Fundraising is to provide the Company with
capital to accelerate its growth strategy, which shall include
developing and constructing its IO#8 iodine processing plant,
completing upgrades at its other plants, developing new products
and reducing debt.
The Company is seeking Shareholder approval to grant the
Directors authority to allot equity securities and to disapply
statutory pre-emption rights in respect of an allotment of equity
securities for cash in connection with the Fundraising.
The Placing, Subscription and Open Offer, together with the Debt
for Equity Conversion, are each conditional upon the passing by
Shareholders of the Resolutions applicable to each of these
components at the AGM to be held at Dartmouth House, 37 Charles
Street, Mayfair, London W1J 5ED at 9:00 a.m. on 13 June 2019 for
the purposes of authorising the Directors to allot the Placing
Shares, the Subscription Shares, the Open Offer Shares and the Debt
for Equity Shares and to disapply statutory pre-emption rights in
relation thereto (as applicable). The Placing and Subscription is
conditional upon the Open Offer and the Debt for Equity Conversion
occurring and the Open Offer and the Debt for Equity Conversion are
conditional upon the Placing and Subscription occurring.
The purpose of this letter is to set out the background to, and
the reasons for, the Fundraising. It explains why the Directors
consider the Fundraising to be in the best interests of the Company
and its Shareholders as a whole. It also highlights that the
Directors recommend that Shareholders vote in favour of the
Resolutions to be proposed at the AGM, as they have undertaken to
do in respect of their own beneficial holdings of Ordinary
Shares.
Your attention is drawn to the Notice of Annual General Meeting
contained at the end of the Circular and paragraphs 10 and 11 of
this announcement which explain the action to be taken by you in
relation to the AGM.
2. Background to and reasons for the Fundraising
Iofina, the second largest producer of iodine in North America,
specialises in the exploration and production of iodine and
manufactures other halogen-based derivatives at its specialty
chemical company, Iofina Chemical.
Iofina has developed a proven IOsorb(R) technology to isolate
iodine from produced water from oil and gas. Using extensive,
proprietary geological knowledge, the Company is able to identify
and utilise brine sources and it currently operates four plants at
locations rich with brine. Iofina also operates Iofina Chemical, a
specialty chemical business, which produces iodine products and
speciality fluoro- and chloro- derivatives. Iofina Chemical sells
these products directly into the market and achieved US$24 million
in revenue in 2018.
Approximately 36,000MT of iodine is currently consumed on a
global basis and this figure is expected to grow 3-4 per cent.
year-on-year. This, coupled with the reduction of output and
closure of Chilean iodine mines in recent years, means that Iofina
is in a strong position to accelerate its expansion plans, in order
to benefit from the strengthening iodine market pricing and
demand.
Iofina has identified areas for growth and improved capital
efficiencies and will utilise the Fundraising estimated net
proceeds of GBP7.24 million to deliver on this. First, the Company
intends to replicate the success of IO#7, its latest and most
efficient iodine plant, with the construction of IO#8. Geological
teams have identified multiple sites for IO#8 and negotiations are
progressing for specific sites. Assets from IO#1 and IO#5, both
dormant plants, will be utilised where possible, helping to
minimise costs whilst focusing on expansion. The Directors believe
that IO#8, together with additional sites, will expand production
and deliver profit growth. Secondly, a proportion of the
Fundraising estimated net proceeds will be utilised to reduce the
Company's current debt, by paying down the outstanding US$3.26
million owed to Stena under the term loan facility, and invest in
new products.
Ultimately, the net proceeds of the Fundraising will allow
Iofina to accelerate the increase in iodine production, boosting
sales and earnings, which will facilitate the time in which the
Company can pay down its debt, thus creating greater shareholder
value.
Debt for equity conversion
In connection with the Fundraising, one of the Company's secured
lenders, Southern Rock, has agreed to convert 75 per cent. of its
aggregate principal amount of US$5,000,000 outstanding and owing to
it under the Loan Notes 2020, including capitalised and unpaid
interest thereon as at 31 December 2018 of US$592,986, for equity
in the Company, namely the Debt for Equity Shares, at the Issue
Price. The amount being converted pursuant to the Debt for Equity
Conversion is approximately US$4.19 million. The Debt for Equity
Conversion is conditional on the passing of the Resolution relevant
to the Placing and Subscription. On the passing of the Resolution
relevant to the Placing and the Subscription, the Debt for Equity
Shares shall be allotted and issued to Southern Rock. The issue and
allotment of the Debt for Equity Shares can occur under the
Company's existing share authorities, as approved by Shareholders
at the Company's 2018 annual general meeting.
An exchange rate of US$1.00/GBP0.78 was used for the Debt for
Equity Conversion, being the prevailing rounded exchange rate shown
by Bloomberg L.P. as at approximately 8:00 a.m. on 17 May 2019.
Subject to the passing of the Resolutions relevant to the Placing
and Subscription and the Debt for Equity Conversion, the aggregate
amount of approximately US$4.19 million shall be converted into the
Debt for Equity Shares at the Issue Price, being 20,449,355 new
Ordinary Shares.
Subject to the Placing, Subscription and Debt for Equity
Conversion occurring, the Company will be able to significantly
reduce its debt exposure. The Company's current debt is comprised
of approximately US$22.37 million under the Loan Notes 2020 (which
is comprised of a principal amount of US$20 million and capitalised
and unpaid interest thereon as at 31 December 2018 of approximately
US$2.37 million) and approximately US$3.26 million under the term
loan facility, being an aggregate of approximately US$25.63
million. Assuming the Placing, Subscription and Debt for Equity
Conversion all occur, the Company will be able to reduce its debt
to approximately US$18.18 million. The remaining debt would be
comprised of the Loan Notes 2020 held by Stena and the reduced
balance of the Loan Notes 2020 held by Southern Rock (pursuant to
which an interest rate of 7.5 per cent per annum is payable).
The Directors consider that the potential long-term value
creation benefit to Shareholders arising from the Debt for Equity
Conversion outweighs the dilutive effects of the issue of the Debt
for Equity Shares.
Current trading and outlook
Iofina Resources
In 2018, Iofina Resources saw crystalline IOflo(R) iodine
production climb by 17 per cent. from 503MT to 588.8MT. This
increase was a result of the improved efficiencies and the
commissioning of the IO#7 plant. In the second half of 2018, the
Group achieved record Iodine production of 324.7MT, which was an
increase of 23 per cent. over the first half of the year.
The Company's largest iodine producing plants are tied into the
main brine line system instead of the individual injection well.
The commissioning of IO#7 was one of the highlights of 2018, which
was achieved on budget and was coupled with the site's quick
progress to profitability. This was achieved with improved overall
safety policies, pre-job safety requirements, and industrial
hygiene controls. Additional procedures have been implemented in
the field to instil a culture of safety and to ensure a healthy and
environmentally sustainable workplace. As in previous years, the
second and third quarters of 2018 generated the highest volume of
iodine production due to improved weather conditions and iodine
recovery efficiencies. As of December 2018, IO#7 became the highest
producing plant.
Iofina's geological team has identified numerous opportunities
for growth. Areas close to the Company's current plants, as well as
locations outside of the core area, have been identified and are
under consideration. The implementation of IO#7 is being used
internally as a model for future iodine plant development.
Iofina Chemical
2018 was one of the most successful years in the history of
Iofina Chemical. The continued strengthening of the iodine markets,
coupled with robust sales, resulted in a very positive year. Iofina
Chemical produced new and innovative compounds that it had not
previously produced, and it continued to add testing equipment to
increase productivity.
The Group expanded an iodine-related product to double capacity
per working shift along with certain product lines going to 24-hour
production as those products continue to grow. An excellent sales
mix, along with meeting budgeted operational expenses, resulted in
strong earnings. Iofina Chemical continued to expand its internal
research and development through hiring new talent in 2018.
New product offerings continued to gain strength with improved
margins and more robust potential uses. A significant new product
for Iofina Chemical was developed in 2018 and has come to the
forefront in 2019 as it scales up for this major project.
Non-iodine products continue to grow along with diversification to
the specialty chemical business.
Iofina Chemical's robust performance in 2018 enabled the Group
to achieve record EBITDA of US$2.6 million, up 89 per cent. on
2017. Looking ahead, 2019 is expected to be a particularly strong
year for Iofina Chemical, due to the continued rising demand of the
iodine market and predicted continued growth of niche products.
IofinaEX
The Company recently applied for a handler/processor licence
under the Industrial Hemp Program in the Kentucky Office of
Agriculture. The Company anticipates it will receive approval of
this licence in Q2 2019 which will allow its newly created business
unit, IofinaEX, to examine whether the extraction of cannabinoids
is a viable, commercial project for the Group. The Company intends
to use its expertise in specialty chemicals together with its
readily available laboratories and production facilities in
Kentucky to examine this business opportunity quickly but with
limited capital expenditure.
Iodine market
Iodine pricing continues to be well below historical levels but
improved again throughout 2018. Typical pricing late in 2018 for
large purchases of prilled iodine ended near US$26/kg. This is a
significant increase in the past two years (30 per cent.) as spot
prices in early 2017 for iodine were approximately US$20/kg.
Iodine and iodine derivatives are essential for life and
industry. Human health applications are the largest consumers of
iodine-based products. The largest global use of iodine is in the
area of X-ray contrast media formulations. This constitutes about
one-fourth of the total uptake of iodine and continues to grow as
global health care improves. Other direct human health applications
of iodine and iodine compounds include: pharmaceuticals, human
nutrition (thyroid control, goiter prevention), and antiseptics
(PVPI), LCD screen polarizing films, animal health and nutrition,
biocides, industrial catalyst applications, and use in nylon as a
heat stabilising agent.
The worldwide market for iodine in 2018 was over 36,000MT. Newer
applications such as emission control industries and demand growth
related human health applications, as well as the LCD market,
resulted in higher consumption of iodine products.
The Group believes that iodine prices are likely to rise further
in 2019 as demand continues to grow at a modest pace. Iodine prices
in Q1 2019 moved higher relative to late 2018 and this trend, of a
modest increase in pricing, has continued in Q2 2019. There are
market indications that global iodine supply remains tight relative
to demand. Increased capacity initiatives at the world's largest
iodine producer may have an impact on global supply in the future.
However, the Board anticipates that prices shall continue to
rise.
Outlook
2018 was a strong operational year for the Group, in which
Iofina successfully executed expansion with the opening of IO#7.
The Board believes that the Group can expand its iodine production
quicker and with less initial capital expenditure compared against
its competitors. The Directors are committed to expanding iodine
production in a prudent manner and being highly selective in
choosing locations for new facilities as determined by the Group's
geological and business development teams. The iodine market
continues to strengthen and any increase in iodine prices will
directly benefit the Group, specifically as a result of additional
iodine production. Development of new, niche specialty chemical
products is also a focus of the Group moving forward.
The Group's strong operational gearing means that any increases
in iodine production or price will have a quick and tangible
benefit on the Company's profitability.
3. Details of the Placing
The Company has conditionally raised approximately GBP5.4
million by way of a placing of the Placing Shares at the Issue
Price.
The Placing Shares represent approximately 26.5 per cent. of the
Company's issued share capital as at 17 May 2019 (being the latest
practicable date prior to the publication of the Circular) and
shall represent approximately 17.3 per cent. of the Enlarged Share
Capital assuming no other issuances of Ordinary Shares prior to
Admission. The Issue Price represents a discount of approximately
15.8 per cent. to the Closing Price of 19 pence per Ordinary Share
on 17 May 2019, being the last practicable date prior to the
announcement of the Fundraising.
In order to broaden the Company's institutional shareholder base
and to minimise the time and transaction costs of the Placing, the
Placing Shares have been placed by finnCap with a limited number of
new institutional shareholders. The Placing Shares are not being
made available to the public. The Directors consider that the
potential long-term value creation benefit to Shareholders arising
from the application of the Placing proceeds (less those expenses
incurred in connection with the Fundraising) outweighs the dilutive
effects of the Placing.
Placing Agreement
On 19 May 2019, the Company and finnCap entered into the Placing
Agreement, pursuant to which the Company appointed finnCap as the
Company's agent to use its reasonable endeavours to procure
subscribers for the Placing Shares at the Issue Price. The Placing
is not being underwritten by finnCap. The Company has agreed to pay
finnCap certain commissions and fees in connection with its
appointment.
The Placing is conditional, amongst other things, on:
-- the passing of Resolution 8 to be proposed at the AGM
pursuant to which the Debt for Equity Conversion shall become
unconditional;
-- the Placing Agreement becoming or being declared
unconditional in all respects and not having been terminated in
accordance with its terms prior to Admission; and
-- Admission of the Placing Shares and Subscription Shares
occurring on or before 8:00 a.m. on 14 June 2019 (or such later
time and/or date as the Company and finnCap may agree, being not
later than 8:00 a.m. on 28 June 2019).
The Placing Agreement contains certain customary warranties
given by the Company concerning the accuracy of information given
in the Circular and the announcement made by the Company in respect
of the Fundraising as well as other matters relating to the Group
and its business. The Placing Agreement is terminable by finnCap in
certain circumstances prior to Admission, including for force
majeure or in the event of a material adverse change to the
business of the Company or the Group. The Company has also agreed
to indemnify finnCap against all losses, costs, charges and
expenses which it may suffer or incur as a result of, occasioned by
or attributable to the carrying out of its duties under the Placing
Agreement in respect of the Placing Shares.
The Placing Shares will, when issued, be subject to the
Articles, be credited as fully paid and rank pari passu in all
respects with each other and with the Existing Ordinary Shares,
including the right to receive all dividends and other
distributions declared, made or paid in respect of the Ordinary
Shares after the date of issue of the Placing Shares.
4. Details of the Subscription
The Company has conditionally raised GBP91,300 by way of a
subscription for the Subscription Shares at the Issue Price.
The Subscription Shares represent approximately 0.4 per cent. of
the Company's issued share capital as at 17 May 2019 (being the
latest practicable date prior to the publication of the Circular)
and will represent approximately 0.3 per cent. of the Enlarged
Share Capital assuming no other issuances of Ordinary Shares prior
to Admission.
The Subscription Shares have been subscribed for directly by the
Subscribers. The Subscription Shares are not being made available
to the public. The Directors consider that the potential long-term
value creation benefit to Shareholders arising from the application
of the net Subscription proceeds (less those expenses incurred in
connection with the Fundraising) outweighs the dilutive effects of
the Subscription.
The Subscription is conditional, amongst other things, on:
-- the passing of Resolutions 8 to be proposed at the AGM
pursuant to which the Debt for Equity Conversion shall become
unconditional; and
-- Admission of the Placing Shares and the Subscription Shares
occurring on or before 8:00 a.m. on 14 June 2019 (or such later
time and/or date as the Company and finnCap may agree, being not
later than 8:00 a.m. on 28 June 2019).
The Subscription Shares will, when issued, be subject to the
Articles, be credited as fully paid and rank pari passu in all
respects with each other and with the Existing Ordinary Shares,
including the right to receive all dividends and other
distributions declared, made or paid in respect of the Ordinary
Shares after the date of issue of the Subscription Shares.
5. Details of the Open Offer
The Board recognises and is grateful for the continued support
received from Shareholders and has therefore decided to provide an
opportunity for all existing Qualifying Shareholders to participate
in a further issue of new Ordinary Shares to raise up to
approximately GBP2.04 million at the Issue Price by way of the Open
Offer.
The Open Offer is being made so as to enable all Qualifying
Shareholders to subscribe for Open Offer Shares at the Issue Price
on a pro rata basis to their current holdings and with the option
for increasing their allocation pursuant to an Excess Application
Facility.
The Open Offer has been structured so that it is not available
to Non-Qualifying Shareholders, being Shareholders resident or
located in any Restricted Jurisdiction. The Open Offer is
conditional on the Placing and Subscription being approved.
Structure
The Directors have considered the best way to structure the Open
Offer, having regard to, inter alia, the importance of pre-emption
rights to all Shareholders, the extent to which there are Overseas
Shareholders, the regulatory requirements applicable to companies
listed on AIM, cost implications and market risks. After
considering these factors, the Directors have concluded that the
most suitable structure for the Open Offer, for both the Company
and its Shareholders as a whole, is that the Open Offer be made
only to Qualifying Shareholders who are not resident or located in
any Restricted Jurisdiction.
The Open Offer provides an opportunity for all Qualifying
Shareholders to acquire Open Offer Shares pro rata to their current
holdings of Existing Ordinary Shares as at the Record Date with the
option for subscribing for more shares pursuant to the Excess
Application Facility. The Issue Price for the Open Offer is the
same as the Issue Price for the Placing and Subscription. Once
subscriptions by Qualifying Shareholders under their respective
Open Offer Entitlements have been satisfied, the Company shall, in
its absolute discretion, determine whether to meet any excess
applications in full or in part and no assurance can be given that
applications by Qualifying Shareholders under the Excess
Application Facility will be met in full, in part or at all.
Principal terms of the Open Offer
The Open Offer is conditional on:
-- the passing of Resolution 8 to be proposed at the Annual General Meeting; and
-- Admission of the Open Offer Shares occurring on or before
8:00 a.m. on 14 June 2019 (or such later time and/or date as the
Company and finnCap may agree, being not later than 8:00 a.m. on 28
June 2019).
Accordingly, if any of such conditions are not satisfied, the
Open Offer will not proceed. It is a condition of the Open Offer
that the Placing and Subscription also proceed.
Further terms of the Open Offer are set out in Part III of the
Circular and in the Application Form.
Subject to the fulfilment of the conditions referred to above
and set out below and also set out in Part III of the Circular,
Qualifying Shareholders are being given the opportunity to
subscribe for the Open Offer Shares at the Issue Price per Open
Offer Share, pro rata to their holdings of Existing Ordinary Shares
on the Record Date on the basis of:
1 Open Offer Share for every 10 Existing Ordinary Shares
held
Qualifying Shareholders are also being given the opportunity,
provided that they take up their Open Offer Entitlement in full, to
apply for Excess Open Offer Entitlement through the Excess
Application Facility. Assuming full take-up under the Open Offer,
the issue of the Open Offer Shares will raise gross proceeds of
approximately GBP2.04 million for the Company. The Open Offer is
not being underwritten. The Open Offer Shares will, upon issue,
rank pari passu with the Existing Ordinary Shares.
Fractions of Open Offer Shares will not be allotted. The terms
of the Open Offer provide that each Qualifying Shareholder's
entitlement under the Open Offer will be rounded down to the
nearest whole number. Qualifying Shareholders with holdings of
Existing Ordinary Shares in both certificated and uncertificated
form will be treated as having separate holdings for the purpose of
calculating the Open Offer Entitlements.
It should be noted that the Open Offer is not a rights issue.
Accordingly, the Application Form is not a document of title and
cannot be traded.
Excess Application Facility
The Excess Application Facility will enable Qualifying
Shareholders, provided that they take up their Open Offer
Entitlement in full, to apply for an Excess Open Offer Entitlement.
Qualifying Non-CREST Shareholders who wish to apply to acquire more
than their Open Offer Entitlement should complete the relevant
sections on the Application Form. Qualifying CREST Shareholders
will have Excess Open Offer Entitlements credited to their stock
account in CREST and should refer to paragraph 4 of Part III of the
Circular for information on how to apply for Excess Open Offer
Entitlement pursuant to the Excess Application Facility.
Applications for Excess Open Offer Entitlements will be
satisfied only and to the extent that corresponding applications by
other Qualifying Shareholders are not made or are made for less
than their Open Offer Entitlements. Once subscriptions by
Qualifying Shareholders under their respective Open Offer
Entitlements have been satisfied, the Company shall, in its
absolute discretion, determine whether to meet any excess
applications in full or in part and no assurance can be given that
applications by Qualifying Shareholders under the Excess
Application Facility will be met in full, in part or at all.
Application will be made for the Open Offer Entitlements and Excess
Open Offer Entitlements in respect of Qualifying CREST Shareholders
to be admitted to CREST. It is expected that such Open Offer
Entitlements and Excess Open Offer Entitlements will be admitted to
CREST by 8:00 a.m. on 14 June 2019. Applications through the means
of the CREST system may only be made by the Qualifying Shareholder
originally entitled or by a person entitled by virtue of a bona
fide market claim.
Qualifying Non-CREST Shareholders will receive an Application
Form with the Circular which sets out their entitlement to Open
Offer Shares as shown by the number of Open Offer Entitlements
allocated to them.
Qualifying CREST Shareholders will receive a credit to their
appropriate stock accounts in CREST in respect of their Open Offer
Entitlements by 21 May 2019. Qualifying CREST Shareholders should
note that although the Open Offer Entitlements and Excess Open
Offer Entitlements will be admitted to CREST and be enabled for
settlement, applications in respect of entitlements under the Open
Offer may only be made by the Qualifying Shareholder originally
entitled or by a person entitled by virtue of a bona fide market
claim. If applications are made for less than all of the Open Offer
Shares available, then the lower number of Open Offer Shares will
be issued and any outstanding Open Offer Entitlements will
immediately lapse.
Further information on the Open Offer and the terms and
conditions on which it is made, including the procedure for
application and payment, are set out in Part III of the Circular
and on the Application Form.
For Qualifying Non-CREST Shareholders, completed Application
Forms, accompanied by full payment, should be returned by post
using the reply-paid envelope provided to Link Asset Services,
Corporate Actions, The Registry, 34 Beckenham Road, Beckenham, Kent
BR3 4TU or by hand (during normal business hours only) to Link
Asset Services, Corporate Actions, The Registry, 34 Beckenham Road,
Beckenham, Kent BR3 4TU so as to arrive as soon as possible and in
any event so as to be received no later than 11:00 a.m. on 12 June
2019. For Qualifying CREST Shareholders, the relevant CREST
instructions must have been settled as explained in the Circular by
no later than 11:00 a.m. on 12 June 2019.
Other information relating to the Open Offer
The Open Offer will result in the issue of in aggregate
12,756,939 Open Offer Shares, assuming full take up under the Open
Offer (representing approximately 6.5 per cent. of the Enlarged
Share Capital). The Open Offer Shares, when issued and fully paid,
will rank pari passu in all respects with the Existing Ordinary
Shares and therefore rank equally for all dividends or other
distributions declared, made or paid after the date of issue of the
Open Offer Shares. No temporary documents of title will be issued.
Following the issue of the Open Offer Shares pursuant to the Open
Offer (and assuming that the Open Offer is taken up in full),
Qualifying Shareholders who do not subscribe for any of their Open
Offer Entitlements will suffer a dilution of approximately 5.2 per
cent. to their interests in the Company, as a result of the
Fundraising.
6. Action to be taken in respect of the Open Offer
Qualifying Non-CREST Shareholders
If you are a Qualifying Non-CREST Shareholder you will have
received an Application Form which gives details of your maximum
entitlement under the Open Offer (as shown by the number of Open
Offer Entitlements allocated to you). If you wish to apply for Open
Offer Shares under the Open Offer (whether in respect of your Open
Offer Entitlement or both your Open Offer Entitlement and any
Excess Open Offer Entitlements), you should complete the
accompanying Application Form in accordance with the procedure for
application set out in paragraph 4 of Part III of the Circular and
on the Application Form itself.
Qualifying CREST Shareholders
If you are a Qualifying CREST Shareholder and do not hold any
Ordinary Shares in certificated form, no Application Form
accompanies the Circular and you will instead receive a credit to
your appropriate stock account in CREST in respect of the Open
Offer Entitlements representing your maximum entitlement under the
Open Offer except (subject to certain exceptions) if you are a
Non-Qualifying Shareholder or an Overseas Shareholder who has a
registered address in, or is a resident in or a citizen of a
Restricted Jurisdiction. Applications by Qualifying CREST
Shareholders for Excess Open Offer Entitlements in excess of their
Open Offer Entitlements should be made in accordance with the
procedures set out in paragraph 4 of Part III of the Circular.
The latest time for applications under the Open Offer to be
received is 11:00 a.m. on 12 June 2019. The procedure for
application and payment depends on whether, at the time at which
application and payment is made, you have an Application Form in
respect of your entitlement under the Open Offer or have Open Offer
Entitlements credited to your stock account in CREST in respect of
such entitlement.
The procedures for application and payment are set out in Part
III of the Circular. Qualifying CREST Shareholders who are CREST
sponsored members should refer to their CREST sponsors regarding
the action to be taken in connection with the Circular and the Open
Offer.
Notice to Overseas Shareholders
Information for Overseas Shareholders who have registered
addresses outside the UK or who are citizens or residents of
countries other than the UK appears in paragraph 6 of Part III of
the Circular, which sets out the restrictions applicable to such
persons. If you are an Overseas Shareholder, it is important that
you pay particular attention to paragraph 6 of Part III of the
Circular.
None of the Placing Shares, Subscription Shares or Open Offer
Shares have been, nor will be, registered under the Securities Act
or the securities laws of any state or jurisdiction of the United
States, and may not be offered or sold within the United States to,
or for the account or benefit of, a US person (as that term is
defined in Regulation S under the Securities Act), except pursuant
to an exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act and such other
applicable state securities laws.
Accordingly, the Subscription Shares are being offered only: (i)
outside the United States in reliance upon Regulation S under the
Securities Act in offshore transactions; or (ii) to QIBs or
Accredited Investors in reliance on an exemption from, or in a
transaction not subject to, the registration requirements of the
Securities Act, in each case to investors who will be required to
make certain representations to the Company and others prior to the
investment in the Subscription Shares and, to the extent
applicable, the Placing Shares and Open Offer Shares.
Until 40 days after Admission, an offer or sale of the
Subscription Shares, Placing Shares or Open Offer Shares within the
United States by any dealer (whether or not participating in the
Offer) may violate the registration requirements of the Securities
Act if such offer or sale is made otherwise than pursuant to an
available exemption from registration under the Securities Act.
None of the Subscription Shares, Placing Shares or Open Offer
Shares have been approved or disapproved by the US Securities and
Exchange Commission, any state securities commission in the United
States or any other United States regulatory authority, nor have
the foregoing authorities passed upon or endorsed the merits of the
Fundraising or the accuracy or adequacy of the Circular. Any
representation to the contrary is a criminal offence in the United
States.
7. Admission, settlement and CREST
Application will be made to the London Stock Exchange for
Admission of the New Ordinary Shares and the Debt for Equity Shares
to trading on AIM. It is expected that, subject to the passing of
the Resolutions applicable to the Placing, Subscription, Open Offer
and Debt for Equity Conversion at the Annual General Meeting,
Admission will become effective at 8:00 a.m. on 14 June 2019 (or
such later date as the Company and finnCap may agree, being not
later than 8:00 a.m. on 28 June 2019) and that dealings in the New
Ordinary Shares and the Debt for Equity Shares will commence at
that time.
The Articles permit the Company to issue shares in
uncertificated form. CREST is a computerised paperless share
transfer and settlement system which allows shares and other
securities to be held in electronic rather than paper form. The
Existing Ordinary Shares are already admitted to CREST and
therefore the New Ordinary Shares and the Debt for Equity Shares
will also be eligible for settlement in CREST. CREST is a voluntary
system and subscribers of the New Ordinary Shares who wish to
retain certificates will be able to do so upon request. The New
Ordinary Shares due to uncertificated holders are expected to be
delivered in CREST on 14 June 2019.
8. Working capital
The Company is of the opinion that, taking into account the net
proceeds of the Fundraising, the working capital available to the
Group will be sufficient for the Group's present requirements, that
is, for at least the next 12 months following the publication of
the Circular.
9. Related party transaction
The Subscribers have subscribed for the following Subscription
Shares:
No. of Subscription Value at
Shares subscribed the Issue
Subscriber Role for Price (GBP)
Lance Baller Non-Executive Chairman 312,500 50,000
Chief Executive Officer
Thomas Becker and President 93,750 15,000
Malcolm Lewin Chief Financial Officer 93,750 15,000
William Bellamy Non-Executive Director 46,875 7,500
J. Frank Mermoud Non-Executive Director 23,750 3,800
Given that all the Directors are participating in the
Fundraising, there are no independent Directors of the Company.
finnCap, the Company's nominated adviser, considers that the terms
of subscription for the Subscription Shares by the Directors (in
the proportions set out above) are fair and reasonable insofar as
Shareholders are concerned.
10. Annual General Meeting
The Directors require the authority of Shareholders in order to
allot the Placing Shares and the Subscription Shares for cash free
of statutory pre-emption rights. Given the time of year, and
because the Company has recently published its annual report for
the year ended 31 December 2018, the Directors believe it to be in
the best interests of the Company and Shareholders as a whole,
principally due to associated time and cost savings, to propose the
Resolution specific to the Placing and the Subscription at the same
time as those Resolutions which are typically, or otherwise
required to be, tabled at annual general meetings of the
Company.
You will therefore find at the end of the Circular Notice of the
Annual General Meeting to be held at Dartmouth House, 37 Charles
Street, Mayfair, London W1J 5ED on 13 June 2019 at 9:00 a.m. for
the following purposes:
11. Recommendation
The Directors believe that the Fundraising will promote the
success of the Company for the benefit of Shareholders as a whole.
Accordingly, the Board unanimously recommends that you vote in
favour of the Resolutions to be proposed at the Annual General
Meeting, as each Director (being a Shareholder) intends to do in
respect of their own beneficial holdings, amounting to (in
aggregate) 4,500,000 Ordinary Shares and thereby representing 3.53
per cent. of the share capital of the Company at the date of the
Circular.
Shareholders are reminded that the Fundraising is conditional,
amongst other things, on the passing of the relevant Resolutions to
be proposed at the AGM (as more fully explained at paragraph 10 of
this letter). Accordingly, the Open Offer is conditional upon the
Placing and Subscription proceeding, which means that should the
Placing and Subscription not proceed, neither shall the Open Offer.
Further, the Debt for Equity Conversion is conditional upon the
Placing and Subscription proceeding, which means that should the
Placing and Subscription not proceed, neither shall the Debt for
Equity Conversion. Shareholders should be aware that should the
relevant Resolutions not be passed and the proceeds of the
Fundraising not be received by the Company and should it be unable
to raise additional capital, in sufficient amounts and on terms
acceptable to the Company, the Company would need to pursue
additional or alternative funding sources which, if they are
available at all, may be expensive and/or onerous for the Company
and could risk leading to substantial dilution for Shareholders,
and which may require the Company to significantly delay, scale
back or discontinue certain operational activities.
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
MSCUKVKRKUAVAAR
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