TIDMVGM

RNS Number : 4312L

Vatukoula Gold Mines PLC

12 August 2013

12 August 2013

Vatukoula Gold Mines plc.

("Vatukoula", "VGM" or "the Company")

Investment Agreement for US$ 40 million financing of the Vatukoula Gold Mine

Vatukoula Gold Mines plc, the AIM listed gold producer focused on Fiji, is pleased to announce that the Company has entered into an investment agreement with Zhongrun International Mining Co. Ltd ("Zhongrun") for Zhongrun to provide US$ 40 million of funding to implement the production growth strategy and capital investment plan at the Vatukoula Gold Mine ("Investment Agreement")..

Under the Investment Agreement the funding will be provided in two tranches of approximately US$ 20 million each. The first tranche will be provided by the issue by the Company of 188,897,000 new ordinary shares at a subscription price of 6.89 pence per share ("Equity Funding"). This will raise gross proceeds of approximately GBP13 million. The second tranche will be provided by Zhongrun subscribing for US$ 20 million of secured loan notes ("Loan Notes").

The Equity Funding will be subject to shareholder approval at General Meeting to be convened shortly and to be held in early September. The Company has obtained irrevocable undertakings from approximately 51% of its shareholders to vote in favour of the Equity Funding. Subject to shareholder approval it is expected that the Equity Funding will be completed by the 10(th) September 2013 when the new ordinary shares will be admitted to AIM. Once these shares are issued they will represent approximately 55% of the enlarged share capital of the Company.

Zhongrun currently holds 37,800,000 ordinary shares in the Company and following the completion of the Equity Funding will hold 226,697,000 ordinary shares, representing approximately 66% of the enlarged share capital of the Company.

The Debt Funding is conditional on the completion of the Equity Funding and the Loan Notes will carry an interest rate of 13% per annum and be for a term of six years. During the first three years the Company will not make any payments of interest (which will continue to accrue) or repayments of the principle. Following the initial period of the three years the Loan Notes will be repaid over the remaining term of three years. The Investment Agreement provides for the subscription for the Loan Notes in early December 2013.

The Investment Agreement is also subject to approval by the shareholders of Zhongrun's ultimate holding company, Zhongrun Resources Investment Corp ("ZRIC"). Irrevocable undertakings have been given by certain of ZRIC's shareholders to vote in favour of the transaction in respect of a total of approximately 47% of its share capital. ZRIC require 50% of its shareholders to vote in favour to approve the transaction.

As a result of the size of Zhongrun's existing shareholding in the Company, the Investment Agreement constitutes a related party transaction under the AIM Rules. The Directors of Vatukoula (with the exception of Yeung Ng, Fengwen Zheng and Ian He who were nominated for appointment by Zhongrun and accordingly did not participate in the Board's deliberations)) consider, having consulted with WH Ireland, the Company's nominated adviser, that the terms of transaction are fair and reasonable insofar as the Company's other shareholders are concerned.

David Paxton, CEO of Vatukoula Gold Mines Commented:

"We are delighted to have secured the funding to develop the Vatukoula Gold Mine to its full potential. The funding has come from our largest shareholder which demonstrates the continued confidence they have in the robustness of the Vatukoula Gold Mine. This agreement provides financing support on competitive terms in line with recent financings. The US$40 million will provide us with the balance sheet flexibility to embark on our capital investment programme early in the coming fiscal year. We look forward to working with Zhongrun as we deliver our Company strategy to grow our production to sustainable and profitable level."

-Ends-

 
 
   Enquiries: 
 
   Vatukoula Gold Mines plc                    Pelham Bell Pottinger 
                           + 44 (0)20 7440                             + 44 (0)20 7861 
 David Paxton               0643             Charles Vivian             3232 
 Kiran Morzaria                              Daniel Thöle 
 
   W.H. Ireland Limited                        Daniel Stewart 
                           + 44 (0)20 7220                             +44 (0)20 7776 
 James Joyce                1666             Colin Rowbury              6550 
 James Bavister

This information is provided by RNS

The company news service from the London Stock Exchange

END

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