VANCOUVER, Jan. 27 /CNW/ - Zoloto Resources Ltd. (TSX-V - ZR) ("Zoloto" or "ZR") announces that it has reached an agreement in principle (the "Agreement") to acquire all of the assets of Grafton Resource Investments Limited ("Grafton"). Grafton is a Cayman Island investment company that is listed on the Irish Stock Exchange and that holds a portfolio of investments in the resources sector.
Under the terms of the Agreement, Zoloto will acquire Grafton's entire investment portfolio on the following basis:
(a) ZR will first settle all of its outstanding material liabilities
either by way of cash or shares-for-debt settlement (which will
involve ZR completing a private placement of up to $400,000
(8,000,000 shares at $0.05 per share); and issuing 30,000,000 shares
to settle $1,500,000 of debt); and ZR will subsequently consolidate
its outstanding share capital on the basis of one new ZR common share
for every 20 outstanding common shares;
(b) the number of post-consolidated ZR Shares to be issued to acquire the
Grafton Assets will be calculated on the basis of:
(i) the value of ZR will be deemed to be $5,000,000 (the "ZR
Value") following its share consolidation and the settlement of
all material debts (by way of cash payment from private
placement proceeds, or shares-for-debt transactions);
(ii) the net asset value of the Grafton Assets will be as determined
as the fair market value of its assets, less the amount of
outstanding Loan Stock and other payables, as of the date of
closing (the "Grafton Asset Value");
(iii) the number of ZR Shares to be issued to acquire the Grafton
Assets will be calculated as the Grafton Asset Value divided by
the ZR Value, and that quotient multiplied by the number of ZR
Shares outstanding on the date of the acquisition. As of
December 31, 2009, the net asset value of the Grafton Assets
(c) Zoloto will also issue new loan stock in exchange for the existing
Grafton loan stock upon the same terms as that currently in issue
save that the conversion price and number of shares will be adjusted
to reflect the exchange rate between Grafton and Zoloto shares;
(d) Zoloto will issue new warrants in exchange for the existing Grafton
warrants upon the same terms as that currently in issue save that the
conversion price and number of shares will be adjusted to reflect the
exchange rate between Grafton and Zoloto shares; and
(e) Grafton will subsequently liquidate and wind-up its affairs, and
distribute the ZR Shares to its Grafton shareholders on a pro rata
All of the ZR Shares held by principals will be subject to such escrow requirements as may be imposed by the Exchange, and all the new ZR Shares to be issued to Grafton shareholders will be subject to a hold period, and tradeable as to 20% four months following the closing date, and an additional 20% every three months thereafter.
Grafton was incorporated under the laws of the Cayman Islands on 3 January, 2007, as an exempted, limited liability investment company. The Shares, Warrants and Series 1 Loan Stock were admitted to the Official List and to trading on the Main Market of the Irish Stock Exchange on 6 July 2009 and the Series 2 Loan Stock were admitted to the Official List and trading on the Main Market of the Irish Stock Exchange on 23 September 2009. Newland Fund Management LLP serves as the investment manager to Grafton; responsible for Grafton's investment operations. Grafton's principal investment objective is to achieve capital gains in the medium term from investments in the resource sector. Grafton's portfolio of investments has been created through a number of share swaps. The total number of holdings is currently just over fifty.
The commodity breakdown of the portfolio as at September 30, 2009 was:
Precious Metals 37%
Water & Timber 25%
Base Metals 14%
Grafton's top five shareholdings are
a. Hidrostroy-Bourgas Ltd - 50% stake in a water supply dam to feed the
southern Black Sea coastal region in and around the city of Bourgas,
the third largest city in Bulgaria;
b. Madagascar Oil - was established in 2004 to develop heavy and ultra
heavy oil fields of Madagascar and explore prospective onshore
regions for conventional oil and gas;
c. Canada Gold Corporation - will design, build, own and operate a gold
toll processing plant in Peru;
d. Phoenix Lumber - Obtaining rights from local communities to extract
and sell lumber from material portions of the forestry areas
destroyed by Hurricane Felix; and
e. South American Ferro Metals - investigating and investing into the
Ponte Verde iron ore property in Brazil.
Grafton is a limited life company which originally planned to operate for five years following the close of the Initial Offering Period which occurred on 31 October 2008. Thereafter, its Shareholders may resolve, by ordinary resolution, to operate the Fund for a further one year period or, by special resolution, to place the Fund into voluntary liquidation.
The principals of Grafton are Peter Seabrook, Director; David Hutchins, Director; Kjeld Thygesen, Fund Manager; and David Cather, Consulting Mining Engineer.
As at the date hereof Grafton has the following securities outstanding:
a. 2,033,139.93 Grafton shares;
b. 115,248 Warrants exercisable at US$110 per Share until 31 October
c. $5.0 million of 12.75% unsecured Series 1 Loan Stock, convertible at
$42.59 per Share, redeemable on 31 October 2013; and
d. $2.0 million of 12.75% unsecured Series 2 Loan Stock convertible at
$44.90 per Share, redeemable on 31 October 2013.
Terms of the Acquisition
The purchase and sale of Grafton's Assets is subject to a number of conditions precedent, in addition to ZR settling its liabilities and consolidating its share capital, including:
1. the change of the corporate name of Zoloto to such name as is
acceptable to Grafton and the Exchange;
2. the tendering of resignations of certain of Zoloto's current
directors; and the appointment of Grafton's replacement
representatives to Zoloto's board of directors;
3. the passing of resolutions by the shareholders of Zoloto approving
the transactions and any resulting change of control;
4. the passing of resolutions by the shareholders of Grafton approving
5. Zoloto, as at the closing of the acquisition, meeting all minimum
listing requirements as a Tier 2 mining issuer; and
6. receipt of written notice from the Exchange that it has accepted the
Agreement for filing.
No finder's fee is payable with respect to the acquisition.
The transaction was negotiated at arm's length, although Grafton is currently the largest shareholder of Zoloto.
Change in Board
It is proposed that each of Peter Seabrook, David Hutchins, and Kjeld Thygesen, all principals of Grafton, will be appointed to Zoloto's board of directors upon closing of the Qualifying Transaction and coincident with the resignations of two existing board members. The following provides a summary of each proposed board member:
David Hutchins, CEO & President
Mr. Hutchins has 20 years' experience as a resources analyst and fund manager. His career began with the Melbourne Stock Exchange in 1979 and subsequently became an executive director of M&G Investment Management. He headed the International Desk at M&G Investment Management from 1995, where he was concurrently responsible for M&G's investments in the precious metals and commodities sector globally. He left M&G Investment Management in December 1996 and later became involved in Fund Management at Yorkton Securities and acted as a consultant at AWI Administration Services in Australia. He was a founding director of Resources Investment Trust plc at the launch in January 2002, and is a non-executive director of Rivington Street Holdings Plc, and a non-executive director of Australian listed SA Metals Limited.
Peter Seabrook, Director
Mr. Seabrook is a graduate of Oriel College, Oxford, and has over twenty years experience as an investment manager. He joined Fleming Investment Management Limited in 1984 and became a director of Robert Fleming Holdings Limited in 1994. During his tenure there he was appointed UK chief investment officer. In 1997 Peter moved to Societe Generale Asset Management in a similar role, and after leaving in 2002 he held the post of chairman at Ocean Resources Capital Holdings until its solvent voluntary liquidation in 2007.
Kjeld Thygesen, Executive Director
Mr. Thygesen is a graduate of the University of Natal in South Africa and has 30 years experience as a resources analyst and fund manager. He joined African Selection Trust in 1970, researching and managing a portfolio of South African mining companies. In 1972 he joined James Capel and Co. in London as part of their highly rated gold and mining research team, and subsequently became manager of N M Rothschild & Sons' commodities and Natural Resources Department in 1979. In 1987 he became an executive director of N M Rothschild International Asset management Limited, before co-founding Lion Resource Management Limited, a specialist investment manager in the mining and natural resources sector, in 1989. Mr. Thygesen has been a director of Ivanhoe Mines Ltd since 2001 and served as Investment Director for Resources Investment Trust PLC from 2002 - 2006.
Robert Maddigan, Executive Director
Mr. Maddigan has twenty years of Arctic and cold climate engineering and project management experience. He is a civil engineer by training and received his B.Sc. from the University of Alberta in 1986. During the last ten years he has focused on projects in Russia's Far East. Prior to that, he worked extensively in northern Canada. As a director of FSC, a company specializing in cold climate design and construction, he has worked throughout the Russian Far East. Mr. Maddigan has spent the last six years in Chukotka, and, with his company, plays a key part in Governor Abramovich's infrastructure rebuilding team. Mr. Maddigan managed a team of over 400 employees throughout Russia. Prior to working in Chutkotka, Mr. Maddigan spent many years managing construction projects in the Russian North, especially in the Republics of Sakha and Sakhalin.
John Tichotsky, Director
Dr. Tichotsky, a current director of Zoloto, has lived and worked in Russia since 1986, and is an international policy advisor to Roman Abramovich, the Chairman of Chukotka's legislature. A graduate from Dartmouth College in Russian and Economics, he completed his masters degree, "Gold and Tin Mining in the Russian Northeast", at Cambridge University, UK. He received his Ph.D. from Cambridge University in 1997. In 2000, he published a book entitled The Republic of Sakha: Russia's Diamond Colony (Harwood Academic Press). Dr. Tichotsky has been active in economic issues linking Alaska and the Russian North. His work with the Institute of Social and Economic Research at the University of Alaska Anchorage, University of Hawaii at Manoa and Cambridge University included research and policy development for oil and gas, tourism, fishing, timber, mining and transportation. He was an analyst and director for Fitch, the rating agency, and conducted credit ratings for regions in Europe, Russia, US and former Soviet Union.
Ron Miller, Advisor
Mr. Miller, a current director of Zoloto, will resign but remain as an advisor to the Zoloto board regarding operations in Russia. He is an Alaska-based attorney and businessman with 14 years experience in Russia representing clients in a wide-variety of business transactions in addition to managing his own joint ventures. He recently completed a five-year term as Executive Director of the State of Alaska's development finance agency, the Alaska Industrial Development and Export Authority, and Alaska's energy office, the Alaska Energy Authority (AEA). Mr. Miller serves on the board of the International Virtual e-Hospital Foundation, a non-profit organization dedicated to establishing telemedicine networks in developing countries. Mr. Miller's undergraduate work was in Russian studies and, in addition to JD and LLM degrees, holds an MBA from IMD in Lausanne, Switzerland.
Zoloto is a Canadian company focused on gold exploration in the Russian Far East and Siberia. Since the second half of 2006, Zoloto acquired five exploration properties in the Russian Far East - two in Irkutsk and three in Chukotka. At present Zoloto's gold licences are not being explored and Zoloto is considering all options to monetise the assets in Chukokta and liquidate the assets in Irkutsk.
Zoloto has 145,485,300 common shares outstanding prior to the above mentioned private placement and shares for debt transactions, and the following warrants and options:
a. 21,650,000 warrants with an exercise price of C$0.10-$0.15 per share
expiring in March-April, 2014.
b. 17,130,000 options exercisable from C$0.25 to C$2.00 per share, with
a weighted average price of C$0.80, expiring on various dates ranging
from July 2010 to July 2013.
Grafton is the single largest shareholder of Zoloto, holding 24,065,000 shares; and will receive additional shares through the shares-for-debt transaction.
Zoloto has retained Jordan Capital as its sponsor.
Shares to Remain Halted
The proposed transaction with Grafton amounts to a fundamental acquisition, and accordingly Zoloto's shares are currently halted from trading on the Exchange. Trading will resume upon Zoloto having made adequate filings with the Exchange.
Further information on both Grafton and Zoloto may be found on their web sites at www.graftonresources.net and www.zolotoresources.com.
ON BEHALF OF THE BOARD
Completion of this transaction is subject to a number of conditions, including but not limited to, Exchange acceptance and majority of the minority shareholder approval. The transaction cannot close until the required shareholder approval is obtained. There can be no assurance that the transaction will be completed as proposed or at all.
This news release contains forward-looking information which is not comprised of historical facts. Forward-looking information involves risks, uncertainties and other factors that could cause actual events, results, performance, prospects and opportunities to differ materially from those expressed or implied by such forward-looking information. Forward looking information in this news release includes, but is not limited to, the Company's objectives, goals or future plans, the timing of completion of the Company's annual audit, the expected time for filing Financial Statements, MD&A and the Certificates. Factors that could cause actual results to differ materially from such forward-looking information include, but are not limited to, those risks set out in the Company's public documents filed on SEDAR. Although the Company believes that the assumptions and factors used in preparing the forward-looking information in this news release are reasonable, undue reliance should not be placed on such information, which only applies as of the date of this news release, and no assurance can be given that such events will occur in the disclosed time frames or at all. The Company disclaims any intention or obligation to update or revise any forward-looking information, whether as a result of new information, future events or otherwise, other than as required by law.
Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
SOURCE ZOLOTO RESOURCES LTD.
For further information: For further information: Bart Lawrence, Yana Bobrovskaya, Investor Relations, Zoloto Resource Ltd., Phone: (604) 608-0223, Fax: (604) 608-0344