TIDMFRI
RNS Number : 2289O
Frontier Resources International
05 February 2016
For immediate release
5 February 2016
Frontier Resources International Plc
("Frontier" or the "Company")
Conditional Subscription
Board changes
Bonus Warrant issue
Corporate update
The Board of Frontier (AIM Ticker: FRI) announces that the
Company has today conditionally issued, though a direct
subscription, 4,750,000,000 new ordinary shares of 0.01p each (the
"Subscription Shares") with existing and new investors at a placing
price of 0.03p per Subscription Share (the "Subscription Price") to
raise GBP1,425,000 before expenses (the "Subscription"),
conditional on admission of the Subscription Shares to trading on
AIM ("Admission").
The proceeds of the Subscription will be used to provide working
capital for the Company and to support the investment in new
projects. The Board does not intend to provide any further capital
to the Company's existing oil exploration projects, the future of
which the Board intends to consider following completion of the
Subscription.
To support a new strategic direction for the Company, there are
a number of proposed changes to the Board. On completion, Adam
Reynolds will be appointed to the Board as Chairman of the Company
and Jack Keyes and John O'Donovan will both cease to be directors
with immediate effect.
Background
Over the last six months, the Company has had an urgent need to
arrange additional funding for its immediate working capital
requirements over and above the potential commitments in respect of
its exploration projects.
Volatility in global financial markets and the steep decline in
oil prices have created very challenging conditions for oil
companies at all stages of development, and not just junior
exploration companies like Frontier. This market background has
made it exceptionally difficult for the Company to progress any of
its farm-out discussions, as potential partners have deferred their
own plans to acquire exploration acreage with upside potential.
Accordingly, the Board has been unable to secure any farm-out
partner on credible terms for any of the Company's oil exploration
projects, despite continued efforts over the last year.
Furthermore, there has been no current investor support for an
equity issue to provide further sufficient funding for the
Company's oil exploration projects.
The Board does not believe that there is any immediate prospect
of a material improvement in market conditions in the oil sector or
investor sentiment and has therefore concluded that it should now
pursue alternative options for the future funding and development
of the Group, including the disposal of the Group's existing oil
exploration projects and the investment in new projects outside of
the oil sector. Against this background, the Board has therefore
today agreed the terms of the Subscription (as defined below) with
existing and new investors to support the future development of the
Group in a new sector. The funds raised from the Subscription will
not be used to support the Group's existing oil exploration
projects, an update on which is provided below.
To support a new strategic direction for the Company, there are
a number of proposed changes to the Board. On completion of the
Subscription, Adam Reynolds will be appointed as a director of the
Company with immediate effect as Chairman. Mr Reynolds has a track
record of implementing change strategies for companies and the
Board believe that his appointment will enable the Company to
develop in a new strategic direction to re-build shareholder
value.
Mr Reynolds is currently a director of several AIM-traded
companies: He is a non-executive director of EKF Diagnostics
Holdings plc (a point-of-care, central laboratory, and molecular
diagnostics company), Premaitha Health Plc (a company involved in
the development of prenatal screening devices) and Optibiotix
Health Plc (a life sciences business developing compounds to tackle
obesity, high cholesterol and diabetes). Mr Reynolds is also
non-executive Chairman of New World Oil & Gas Plc and a
non-executive director of Orogen Gold Plc. He is Chairman of
Autoclenz Group Limited and Reyco Limited. Further information on
Mr Reynolds as required by the AIM Rules is set out in Appendix I
below.
On completion of the Subscription, Jack Keyes and John O'Donovan
will both cease to be directors of Frontier with immediate effect,
and the Board would like to thank them both for their tireless
efforts to develop the oil exploration projects of the Company in
such challenging markets.
Subscription
The Company has today conditionally issued, though a direct
subscription, 4,750,000,000 new ordinary shares of 0.01p each (the
"Subscription Shares") with existing and new investors at a placing
price of 0.03p per Subscription Share (the "Subscription Price") to
raise GBP1,425,000 before expenses (the "Subscription"),
conditional on admission of the Subscription Shares to trading on
AIM ("Admission").
The Subscription Price is a 57.1 per cent. discount to the
closing mid-market price on 3 February 2016 of 0.07p per existing
ordinary share of 0.01p each ("Ordinary Shares") and values the
existing ordinary share capital at approximately GBP108,600. This
discount reflects the Company's current financial position, the
failure to secure a farm-in partner for the Company's oil
exploration projects and the poor prospects for raising alternative
funding. The Board believes that in the absence of the Subscription
there is a very high likelihood that the Company would be unable to
continue trading by virtue of its financial position. The
Subscription, together with the proposed changes to the Board and
development of a new strategy, provides an opportunity to recover
some value for the Company existing shareholders.
The Board has considered whether it would be practicable or cost
effective to enable existing shareholders in the Company to
participate in the proposed equity issue on a pre-emptive basis.
The Board is acutely aware of the impact of dilution of the
Subscription on shareholders as the Subscription Shares will
represent approximately 7.1 per cent. of the issued share capital
of the Company as enlarged by the Subscription (the "Enlarged
Ordinary Share Capital"). However, the Board believes that the
costs and requirements of an open offer or rights issue are such
that it is not practicable or cost effective and cannot be achieved
in the timeframe required.
In order to provide existing shareholders with some ability to
subscribe should they so choose on similar terms to the
Subscription, the Board proposes that, subject to the certain
regulatory considerations relating to marketing securities in
certain jurisdictions, to issue new warrants ("Warrants") to
existing shareholders on the record date ("Qualifying
Shareholders") on a pro rata basis of one Warrant for every one
Ordinary Share ("Qualifying Shares") held (the "Warrant Bonus
Issue"). The Board believes that the Warrant Bonus Issue should
partially alleviate the impact of dilution on Qualifying
Shareholders. Further terms of the proposed Warrant Bonus Issue are
set out below. Should the Warrant Bonus Issue not proceed, the
Board would have to re-consider following completion of the
Subscription whether a subsequent pre-emptive offering is then
practicable or feasible.
The proceeds of the Subscription will be used to provide working
capital for the Company and to support the investment in new
projects. The Board does not intend to provide any further capital
to the Company's existing oil exploration projects, an update of
which is provided below.
Director Subscription participation
Neil Herbert, a director of the Company, has subscribed
GBP100,000 for 333,333,333 Subscription Shares at the Subscription
Price. The subscription by Neil Herbert is a Related Party
transaction for the purposes of Rule 13 of the AIM Rules. The
independent directors, comprising the Board other than Neil Herbert
(the "Independent Directors"), having consulted with the Company's
nominated adviser, consider that the subscription by Neil Herbert
is fair and reasonable insofar as the Company's shareholders are
concerned. The Independent Directors have taken into account in
particular that Neil Herbert is subscribing on the same terms and
conditions as the other subscribers for the Subscription Shares
procured by the Company from unconnected parties.
Directors' interests
Following the issue of the Subscription Shares and the Warrants,
the Directors' interests and proposed Director's interests in the
Company will be as follows:
Director / Proposed Number % interests Number of
Director of Ordinary in the Enlarged Warrants
Shares Ordinary (Note 3)
Share Capital
--------------------- ------------- ----------------- -----------
Adam Reynolds
(Note 1) 173,333,333 3.39% Nil
Neil Herbert 358,007,904 7.0% 24,674,571
Barbara Spurrier
(Note 2) 5,756,118 0.11% 5,756,118
--------------------- ------------- ----------------- -----------
Notes:
1. Adam Reynolds is a proposed director of the Company with
effect from admission of the proposed Subscription Shares.
2. 4,285,714 Ordinary Shares are held and 4,285,714 Warrants
will be held by CFPro Limited, a company beneficially owned by
Barbara Spurrier. A further 7,000 Ordinary Shares included in
Barbara Spurrier's interest notified on 22 July 2015 are held by
her adult sons.
3. Assumes Bonus Warrant Issue proceeds.
Admission
The Subscription Shares will, on issue, rank pari passu with the
existing Ordinary Shares in issue and application will be made for
the Subscription Shares to be admitted to trading on AIM. Admission
and trading in the Subscription Shares on AIM is expected to
commence on or around 17 February 2016 ("Admission").
(MORE TO FOLLOW) Dow Jones Newswires
February 05, 2016 05:35 ET (10:35 GMT)
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