Aim-listed Zanaga Iron Ore Company (ZIOC) has entered into an equity subscription agreement (ESA) with institutional investor Shard Merchant Capital (SMC).
This follows the successful implementation of an equity subscription agreement on similar terms in June 2020.
The proceeds received by the company from SMC pursuant to the ESA will be applied to general working capital, including the provision of further contributions to the Zanaga Iron Ore project’s operations, in Congo-Brazzaville.
Under the ESA, the company will issue, and SMC will subscribe for up to, 36-million ordinary shares of no par value in the company in up to three tranches of up to 12-million shares each.
In the event the maximum number of subscription shares are issued by ZIOC and subscribed for by SMC, the share capital of ZIOC will be increased by about 5.9% on a fully diluted basis.
Pursuant to the ESA, SMC has undertaken to use its reasonable endeavours to place the relevant subscription shares that it has subscribed for and to pay to ZIOC 95% of the gross proceeds of any such sales.
The ESA provides a number of attractive advantages to ZIOC, the company acclaims, including a relatively low level of dilution to ZIOC shareholders.
Moreover, ZIOC has the ability to repurchase any unsold subscription shares from SMC, subject to legal requirements – an important element of flexibility for ZIOC. Any subscription shares that are repurchased will be cancelled, limiting dilution further.
The company also noted the low cost of capital – SMC will retain only 5% of the gross proceeds of any sale of subscription shares.
ZIOC’s cash balance as at June 27 was $530 000, with $1.25-milllion of drawn debt and incurred interest under the Glencore Facility, and the company says it continues with its prudent cash management.