TIDMAURA
RNS Number : 9677E
Aura Energy Limited
04 March 2020
4 March 2020
AURA ENERGY LIMITED
("Aura" or the "Company")
Background to Board Change requests
notices to gain control of the aura energy board of directors by
Asean deep value fund and john bennett
Aura Energy Limited (AEE; ASX, AURA; AIM) refers to its
announcement on 24 February 2020 and advises shareholders of the
background circumstances which appear to have led to its largest
shareholder, ASEAN Deep Value Fund ("ASEAN"), and John Bennett
seeking significant changes to the board of directors through the
nomination of six new directors.
In February 2019, the Company initiated a fund-raising plan via
a placement and a share purchase plan (SPP). The placement was only
partially completed due to the failure of some subscribers to
honour their subscription agreements, and as a result, Aura
urgently sought additional funding in order to maintain the
business in good standing. Aura subsequently executed a convertible
note for $2 million with the Lind Global Macro Fund, which was
approved by shareholders. Aura' Management and Board were and are
grateful to Lind for the speed of which they were able to execute
the transaction and for offering funds on superior terms that were
available at the time from other funding sources.
In the past 4-6 weeks ASEAN, which holds an approximate 18%
shareholding in Aura, approached Aura with a proposal to replace
the existing convertible note. The proposed terms were as
follows:
-- Convertible Note - A$3-4 million
-- Coupon/Interest rate - 15% p.a.
-- Term - 24 months
-- Conversion Price - 1-month VWAP at 24 months
-- Aura to have a right to buyback the Convertible Note after:
o 1 year for A$6 million (100% of face value); or
o 2 years for A$9 million (200% of face value)
-- Royalty - US$1 per pound royalty on each pound of Tiris
production, which based on the current mining plan would be
equivalent to US$17m over the current life-of-mine
-- Majority board representation for ASEAN for arranging the
convertible note when ASEAN's holding in Aura is only 18%.
-- Finder's fee payable to ASEAN of 5% of the value of the
replacement note raised, equivalent to an option over 23 million
ordinary shares of the Company, exerciseable at 0.7c per ordinary
share
The Aura Board rejected the offer on these terms which it
considered to be unacceptable and well in excess of terms for
comparable transactions. In particular the US$17 million royalty to
be granted was disproportionate to the A$3-4 million funding being
provided from the convertible note. This royalty would force the
overall cost of the ASEAN convertible note to be several orders of
magnitude more expensive than the existing convertible note.
Additionally, ASEAN would not reveal the counterparties behind
the funding to be provided for the proposed convertible note and
the Board considered this to be vital information for a proper
assessment of the offer. Accordingly, Aura did not believe the
overall terms of the convertible note proposed by ASEAN were in the
best interests of the Company or its shareholders. Negotiations on
the note were then suspended.
Whilst the existing convertible note supplied critical funds for
Aura at an important time for the Company the Aura Board has been
open to replacing the existing convertible note but only on
reasonable financial terms.
Additionally Aura notes other elements of ASEAN requests,
anomalies from the notices and important implications of the
proposed changes. These are:
-- Prior to John Bennett's election ASEAN requested Aura appoint
Mr Bennett to the board with immediate effect
-- ASEAN also requested Aura discontinue legal proceedings
against Mr Bennett for the alleged non-payment of subscription
monies in the February 2019 placement. Aura's directors maintain
they have a fiduciary duty to continue this action
-- No details of the experience or qualifications of the three
directors proposed by John Bennett, and limited information on the
ASEAN nominees, have been provided to Aura
-- The AIM Rules require the Company's nominated adviser to
approve the suitability of any new directors and the efficacy of
the board as a whole. In the absence of information about the
proposed new directors, there is no guarantee that the proposed
directors will be deemed suitable or that the new board would have
efficacy, which could put the Company's admission to AIM at
risk
-- The existing convertible note also contains an event of
default triggered by a change of more than 50% of the Company's
directors. This event of default gives the holder the right to
request repayment of all outstanding amounts, currently
approximately $2 million under the convertible note
-- The potential appointment of 6 new directors to the Aura
Board is not structually, or financially, sustainable and as such
its future shape and compostion is very unclear
-- The holders of the exisiting convertible have expressed
concern that they have no knowledge regarding the proposed board
members by John Bennett
Costs
Aura Energy's directors have always maintained a strong focus on
keeping costs at as low a level as possible. On 13 November 2019,
the Company announced a range of cost saving measures as outlined
in its announcement. An unfortunate element to these cost
reductions is that key technical staff, who have specialisations
particular to Aura's projects, are currently not retained by Aura
and this puts their future with Aura at risk. Also as part of these
reductions the salary of the CEO was reduced to A$280,000 per annum
from the end of October 2019 and that level remains ongoing.
For more information please visit www.auraenergy.com.au or
contact the following:
Aura Energy Limited Telephone: +61 (3) 9516 6500
Peter Reeve (Executive Chairman) info@auraenergy.com.au
SP Angel Corporate Finance LLP Telephone: +44 (0) 203 470
(Nominated Advisor and Joint Broker) 0470
Ewan Leggat
Caroline Rowe
WH Ireland Limited
(Joint Broker)
Adrian Hadden Telephone: +44 (0) 207 220
James Sinclair-Ford 1666
Yellow Jersey PR Limited Telephone: +44 (0) 7769 325
Felicity Winkles 254
Joe Burgess
The information contained within this announcement is deemed by
the Company to constitute inside information under the Market Abuse
Regulation (EU) No. 596/2014.
This announcement has been authorised for release by the
Company's an authorised sub-committee of the board.
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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