Proposed additional investment in MRS 4:42 pm 10 Apr 2017

Monday 10 April, 2017

URU Metals Limited

Proposed additional investment in MRS

RNS Number : 1121C
URU Metals Limited
10 April 2017
 

 

URU Metals Limited

 

("URU Metals" or "the Company")

 

 

URU as lead investor in proposed MRS Placing

 

 

URU Metals (AIM:URU), the base metals and uranium explorer and development company, is pleased to announce that it proposes to invest £500,000 in a conditional placing being undertaken by Management Resource Solutions Plc ("MRS") to raise up to £3m before expenses at 5p per share ("the proposed MRS Placing").

If the proposed MRS Placing proceeds, is fully subscribed and becomes unconditional in all respects, the Company will be interested in 17,550,000 MRS shares, representing approximately 11.4 per cent. of the enlarged issued share capital of MRS.

Further information on the background to and conditions of the proposed MRS Placing is in the MRS announcement which was released earlier today, extracts from which are set out in the appendix to this announcement.

John Zorbas, CEO of URU Metals, has been appointed to the board of MRS as its new Non-Executive Chairman.  

Further information on MRS, including its unaudited interim results for the six months ended 31 December 2016, is available on the MRS website https://mrsplc.net/ 

 

John Zorbas, CEO of URU Metals, commented:

"At the time we acquired our original shareholding in MRS, we said we were making it both for long term investment reasons and for the potential synergies we see between the two companies. We continue to see our investment as having considerable upside potential. As mentioned previously, URU also looks forward to developing its relationship with MRS, especially as we seek to develop our South African projects, where we see opportunities to benefit from its broad range of skills and expertise that directly support mining across every phase of the mining cycle.

I look forward to updating shareholders on the progress which the new MRS Board is confident of achieving following MRS shareholder approval of our proposals."

 

This announcement contains inside information for the purposes of Article 7 of Regulation 596/2014.

 

END

 

For further information, please contact:

URU Metals Limited

John Zorbas

(Chief Executive Officer)

+1 416 504 3978

 

Northland Capital Partners Limited

(Nominated Adviser and Joint Broker)

Edward Hutton / Matthew Johnson

+ 44 (0) 203 861 6625

Beaufort Securities Limited

(Joint Broker)

Jonathan Belliss

 

+ 44 (0) 207 382 8300

SVS Securities Plc

(Joint Broker)

Tom Curran

 

+44 (0) 203 700 0093

 

Appendix

The following is an extract from the announcement released by MRS earlier today:

Management Resource Solutions plc

Planned Placing at 5 pence per Share to raise £3m
Board changes
Notice of General Meeting

10 April 2017

1.       Introduction

The Company today announces plans to launch a conditional placing of 60 million new Shares at a placing price of 5 pence per Placing Share, to raise £3 million (before expenses). Completion of the Placing will be conditional inter alia on the approval of the Company's Shareholders and other conditions precedent as explained below. Accordingly, the Company will be seeking the approval of Shareholders at a General Meeting to provide the Directors with authority to allot and issue the Placing Shares.

In addition, the Company is announcing various changes to its Board, with the appointment of John Zorbas as the Company's new Non-Executive Chairman, and the appointments of each of Nigel Burton and Trevor Brown as additional Non-Executive Directors. The appointments of Mr Zorbas, Dr. Burton and Mr Brown are conditions of the Placing proceeding. Mr Zorbas is the CEO and a shareholder of URU Metals Limited, which is an existing Shareholder and an intended participant in the Placing. In addition, Chris Berkefeld has resigned as a Director of the Company. The Board thanks Mr Berkefeld for his contribution to the Company. Further details of the new Directors are set out in paragraph 4 below.

As explained in paragraph 7 below, the Placing will be conditional inter alia on the passing of both of the Resolutions by Shareholders at the General Meeting. If both of the Resolutions to authorise the Placing are not passed at the General Meeting and the Placing does not complete, the admission of the Company's Shares to AIM will be cancelled and the Company will be forced to seek alternative sources of potential funding which may or may not be on similar commercial terms and may or may not be obtainable on a timely basis or at all. If any such alternative sources of potential funding are not available in an extremely short time frame, it is highly likely that the Company or some or all of its operations will be forced into administration.

The Placing and the changes to the Company's Board are supported by the Company's former Chief Executive Officer, Paul Morffew, who together with his wife, Santina Morffew, and SCOPN Pty Ltd, a company owned by Santina Morffew, has irrevocably undertaken to vote in favour of the Resolutions to be proposed at the General Meeting, as described in paragraph 8 below.

2.       Background to and Reasons for the Placing

The Company announced on 27 October 2016 that, whilst preparing its consolidated accounts for the year ended 30 June 2016, the audit process revealed a number of operational and financial matters that required further review. The Company requested that its Shares be suspended from trading on AIM with immediate effect pending clarification of its financial position.

Internal investigations revealed that there were significant shortcomings in the Group's contracts with PEAL in Papua New Guinea and with Aiotec in New South Wales. Following legal advice, the Company put these contracts into dispute immediately and ceased all work, thus eliminating a significant ongoing cash drain on the Group. In addition, the Directors were made aware that certain of the funds raised in August 2016 to finance the acquisition of SubZero (now MRS Services Group) were not applied to MRS Services Group's working capital as anticipated. Both factors resulted in a cash constraint and to cover losses in these contracts a provision of A$6.6m was included in the audited consolidated accounts of the Company to 30 June 2016 which were published on 30 March 2017.

The Company ceased work on the PEAL and Aiotec contracts, which resulted in the closure of the consulting business and enabled savings of approximately A$1.5m. MRS PNG Limited and MRS Guernsey Limited, two of the Company's subsidiaries, were placed into voluntary liquidation in December 2016 and Management Resource Solutions Pty Ltd, an Australian subsidiary of the Company, was placed into voluntary administration with effect from 7 February 2017.

Since the announcement of 27 October 2016, Paul Morffew ceased to be Chief Executive Officer and was replaced by Joe Clayton, and Murray d'Almeida stepped down and was replaced as Chairman by Christopher Berkefeld, who has since resigned and has now been replaced by John Zorbas.

Following the completion of the FY16 audited accounts and the H1 management accounts for FY17, the Company has found no fraudulent activity, misappropriation of funds or gross misconduct by the former CEO, Paul Morffew, and will not be pursuing these or other matters any further.

As a consequence of these contractual issues and cash constraints the Company now urgently requires additional funding. Accordingly, the Company plans to raise conditionally £3m (before expenses) by the Placing of the Placing Shares to certain investors at 5 pence per Placing Share.

The proceeds of the planned Placing of approximately £3m will be applied to:

 

 

 

 

 

 

£'m

Payment of trade creditors

2.15

Settlement with Paul Morffew

0.25

Repayment of part of bank overdraft

0.30

Estimated cash costs of the Placing

0.15

Cash retained as working capital

0.15

Total

3.00

 

 

 

As explained in paragraph 7 below, the planned Placing will be conditional inter alia on the passing of both Resolutions by Shareholders at the General Meeting. If both of the Resolutions are not passed at the General Meeting and the Placing does not complete, the admission of the Company's Shares to AIM will be cancelled and the Company will be forced to seek alternative sources of potential funding which may or may not be on similar commercial terms and may or may not be obtainable on a timely basis or at all. If any such alternative sources of potential funding are not available in an extremely short time frame, it is highly likely that the Company or some or all of its operations will be forced into administration.

As trading in the Shares on AIM was suspended on 27 October 2016 (pending clarification of the Company's financial position), under the AIM Rules the admission of the Shares to AIM will be cancelled if trading has not resumed on or before 28 April 2017.

 

The Placing Shares will be issued credited as fully paid and will rank pari passu with the existing Shares, including the right to receive all dividends and other distributions declared, made or paid on or in respect of such Shares after Admission.

The Placing will be conditional inter alia upon the following condition precedents being satisfied:

•        the passing of the necessary Resolutions by the Shareholders at the General Meeting to be held on 27 April 2017, as explained in paragraph 7 below;

•        the suspension of trading in the Shares being lifted;

•        the Group's senior lender confirming to the Company that the Group's facilities are all operating within arrangements, that no breach notices have been issued and the senior lender has waived its covenant test for the quarter ending 31 March 2017 and that, subject to payment of not less than A$500,000 outstanding under the Group's temporary overdraft facility the balance of A$600,000 will be extended and/or amortised for (or over) a period of not less than 12 months to 31 March 2018; and

•        Admission of the Placing Shares,

in each case, on or before 5.00 p.m. on 28 April 2017.

Application will be made to AIM for the Placing Shares to be admitted to trading on AIM. Subject to the satisfaction of the other conditions to the Placing, it is anticipated that the suspension of the trading of the Shares on AIM will be lifted on or around 7.30 a.m. and Admission will occur on or around 8.00 a.m. in each case on 28 April 2017.

3.       Current Trading and Prospects

Interim results

On 7 April 2017 the Company announced its unaudited interim results for the six months ended 31 December 2016. The results show a net loss before tax of A$3.2m on revenues of A$20.6m and net liabilities of A$2.5m. The full results are available at www.mrsplc.net.

In its announcement of 8 March 2017 the Company said that the interim results would be subject to a review by the auditors. However, the timing of the Placing has prevented the completion of this review.

As at 31 December 2016 the Company and its subsidiaries had bank debt facilities of A$20.4 million (£12.3m), comprising term debt, lease finance, bank guarantee facilities, invoice discounting facilities and a temporary overdraft facility of A$500,000.  The overdraft facility has since been increased to A$1,100,000 and extended to 30 April 2017.  The Group's senior lender, who provides this overdraft facility, has confirmed to the Company that the Group's facilities are all operating within arrangements and that no breach notices have been issued. The Board is in negotiations with its senior lender to agree a restructure of the A$1,100,000 facility whereby A$500,000 will be paid out of the proceeds of the Placing with the balance of A$600,000 to be extended and/or amortised over a period of not less than 12 months to 31 March 2018.

4.       Changes to the Board

It is a condition of the Placing proceeding that John Zorbas is appointed as the new Non-Executive Chairman of the Company and that each of Nigel Burton and Trevor Brown be appointed as additional Non-Executive Directors of the Company. Mr Zorbas, Dr Burton and Mr Brown were appointed as Directors today.

Mr Zorbas is also Chief Executive Officer and a 3.7 per cent. shareholder of AIM-listed URU Metals Limited, an AIM-listed mining exploration and development company (AIM: URU). URU is an existing Shareholder with an interest in 7,550,000 Shares representing 8.8 per cent. of the Existing Share Capital.

Chris Berkefeld resigned as a Director on today. The Board thanks Mr Berkefeld for his contribution to the Company.

Details of the new Directors are set out below:

John Zorbas, Non-Executive Chairman

John Zorbas is a resource entrepreneur with a proven track record in the metals exploration and development industry. He has held senior advisory positions in various facets of business including operations, marketing, sales, strategic planning and structured finance. Mr. Zorbas is the Chief Executive Officer of URU Metals Limited. He served as Executive Chairman and Managing Director of NWT Uranium Corp. from June 2008 to December 2016. He also served as the President of MGM Productions Group Inc., as well as Director of both ZorCorp Capital Holdings and Starline Capital Holdings Infrastructure Fund. He served as the Chief Executive Officer and a Director of Monchhichi PLC (formerly: Mercom Capital PLC) until 23 December 2016. Mr. Zorbas also served as a director of Millennial Esports Corp. until 20 October 2016 and Stratton Capital Corp. He is a founding shareholder of Asian Coast Development Ltd.

Nigel Burton, Non-Executive Director

Dr Nigel Burton has over 25 years' experience in operational and financial management, debt and equity financing, acquisition and integration of businesses, disposals, IPOs and trade sales. Following over 14 years as an investment banker at leading City institutions including UBS Warburg and Deutsche Bank, including as the managing director responsible for the energy and utilities industries, Nigel has spent 15 years as CFO of a number of private and public companies, including Navig8 Product Tankers Inc, PetroSaudi Oil Services Limited, Advanced Power AG, and Granby Oil and Gas plc. Nigel is currently CEO of Nu-Oil and Gas plc, which is listed on AIM. Nigel is a Chartered Electrical Engineer (FIET) and a Past President of the IET. He has a B.Sc. (First Class Hons) in Electrical and Electronic Engineering and a Ph.D in Acoustic Imaging from University College London.

Trevor Brown, Non-Executive Director

Trevor Brown has been a strategic investor in real estate and equities for more than 30 years. He is the chief executive officer of Braveheart Investment Group plc and Flying Brands Ltd, and has been a director of Peterhouse Corporate Finance Limited.

John Zorbas, aged 45, Nigel Burton, aged 59, and Trevor Brown, aged 70, are currently directors of the following companies respectively:

John Zorbas

Nigel Burton

Trevor Brown

Zorcorp Capital Holdings Limited

Highbec Limited

Free Publishing Limited

Uru Metals Limited

Wasdale Head Limited

Flying Brands Holdings (UK) plc

Eaton Equities Limited

Wasdale Head Inn Limited

Feedback plc

 

Sensetoys Limited

Braveheart Investment Group plc

 

NU-Oil and Gas plc

Stone Checker Software Ltd

 

 

Prostate Checker Software Ltd

 

 

Ridings Holdings Limited

 

 

Kirkstall Limited

 

 

Caledonia Portfolio Realisations Limited

 

 

Caledonia LP Limited

 

 

Strathclyde Innovation Fund GP Limited

 

 

Braveheart Nominees Limited

 

 

The Ridings Early Growth Investment Company Limited

 

 

Paraytec Limited

 

 

Braveheart Academic Seed Fund GP Ltd

In the past five years, they have been directors of the following companies respectively:

John Zorbas

Nigel Burton

Trevor Brown

Monchhichi plc

Procurement Services (Delaware) Inc.

Peterhouse Corporate Finance

Stratton Capital Corp.

New Day Energy Indonesia

Advanced Oncotherapy

Starline Capital Holdings

 

Free Association Books Limited

MGM Productions Group

 

 

NWT Uranium Corp.

 

 

Save for the above, there is no further information that is required to be disclosed in accordance with Rule 17 and paragraph (g) of Schedule 2 of the AIM Rules for Companies with respect to the appointments.

5.       Proposed Open Offer

The Group's financial position, as outlined in paragraphs 2 and 3 above, has necessitated the Board seeking to conclude a fundraising as soon as practicable. The Board considers that the Placing will, if it completes, provide funds for the Group in the shortest practicable timeframe, and that it is not practicable or cost-effective to conduct a general pre-emptive offer to its Shareholders at this time.

However, it is the intention of the Board that the Company will conduct an open offer to its Shareholders as soon as practicable and at a price per Share not greater than the Placing Price.

Accordingly, the Resolutions to be proposed at the General Meeting would, if passed, inter aliaauthorise the Board to conduct such an open offer as soon as practicable.

6.       Settlements with Management and Creditors

The Company has agreed, or will seek to agree, settlements or amendments to the terms of engagement of certain of its former and current management, advisers and creditors.

As at the date of this document:

•        it has been agreed in principle that Joe Clayton, the Company's Chief Executive Officer, will, upon completion of the Placing and subject to the passing of the Resolutions, be granted Warrants to subscribe for 2,500,000 new Shares (representing 1.62 per cent. of the Enlarged Share Capital) at 5 pence per Share for a period of five years, subject to the lapse of such Warrants if Mr Clayton leaves the Group as a 'bad leaver' during the first year. These Warrants are to be granted to Mr Clayton in lieu of a reduction in his base salary;

•        it has been agreed that Chris Berkefeld, the Company's former Chairman, will be granted Warrants to subscribe for 547,120 new Shares (representing 0.36 per cent. of the Enlarged Share Capital) at 5 pence per Share for a period of five years. These Warrants are to be granted to Mr Berkefeld in lieu of his being paid in respect of his notice period provided that the Warrants are granted by 5 May 2017;

•        it has been agreed in principle that Vantage Performance, a financial adviser to the Company, will, upon completion of the Placing and subject to the passing of the Resolutions, be issued with 1,823,708 Shares (representing 1.2 per cent of the Enlarged Share Capital) in lieu of fees and will be granted Warrants to subscribe for 5,000,000 new Shares (representing 3.25 per cent. of the Enlarged Share Capital) at 5 pence per Share for a period of five years in satisfaction of fee arrangements;

•        it has been agreed with Tim Jones that the Company will discharge its liability to pay certain accrued fees to Mr Jones by the allotment to Mr Jones of 347,240 new Shares credited as fully paid up at the Placing Price. In addition it has been agreed that the notice provision in Mr Jones' agreement of three months on either side will be waived in consideration of the grant of Warrants to subscribe for 360,000 new Shares (representing 0.23 per cent. of the Enlarged Share Capital) at 5 pence per Share for a period of five years, subject to the passing of the Resolutions;

•        it has been agreed that Mr Morffew will be repaid a loan of A$323,910.66 and paid AS$90,000 (less tax) in respect of employment entitlements (including superannuation), out of the proceeds of the Placing, in full and final settlement of all amounts owing by the Group to Mr Morffew, Santina Morffew or SCOPN Pty Ltd. In addition, subject to the passing of the Resolutions, Mr Morffew will be granted Warrants over 2,000,000 new Shares (representing 1.3 per cent. of the Enlarged Share Capital), exercisable at 5 pence per Share for five years; and

•        it has been agreed that broking commission amounting to 10 per cent. of the value of the Placing will be satisfied by the issue of 6,000,000 new Shares credited as fully paid up at the Placing Price.

The issues of Warrants and Shares to Messrs Clayton, Berkefeld, Jones and Morffew are classed as related party transactions under the AIM Rules for Companies. The independent directors, being Messrs Zorbas, Burton and Brown, having consulted Northland, the Company's nominated adviser, consider that the terms of the grants are fair and reasonable.

The Board considers that it is important for the Company to conserve cash, and accordingly it will endeavour to agree appropriate settlements with former management and other corporate and trade creditors of the Group, which may or may not include the allotment of new Shares and/or the grant of Warrants.

Any issue of new Shares or grant of Warrants requires the approval of Shareholders, as outlined in paragraph 7 below. It is a condition of the Placing that the necessary Resolutions to enable such issues of Shares and grants of Warrants as are described above be passed to provide the Board with flexibility to agree appropriate settlements with management and creditors. Accordingly, the Resolutions to be proposed at the General Meeting would, if passed, inter alia authorise the Board to issue such Shares and grant such Warrants.

7.       Resolutions to be proposed at the General Meeting

At the Company's Annual General Meeting held in December 2016, the customary annual resolutions to authorise the Company's directors to allot Shares and to disapply statutory pre-emption rights in respect of issues of Shares for cash were not passed. As a result, the Company cannot allot the Placing Shares without the approval of its Shareholders.

In addition, the Company will seek the approval of Shareholders to provide the Directors with additional limited authority to allot further Shares and securities convertible into Shares, it being envisaged that this would be used to issue Shares and grant the Warrants and satisfy any other arrangements that the Company concludes as explained in paragraph 6 above, conduct an open offer as explained in paragraph 5 above and otherwise as may be required for future fundraising to assist with the Group's working capital.

Accordingly, the Company will today, subject to the Placing being concluded, announce the calling of a General Meeting of the Company to be held at the offices of Memery Crystal, 44 Southampton Buildings, London WC2A 1AP at 10.00 a.m. on 27 April 2017 at which the necessary Resolutions will be proposed.

The planned Placing will be conditional inter alia on the passing of both of the Resolutions by Shareholders at the General Meeting. If both of the Resolutions are not passed at the General Meeting and the Placing does not complete, the admission of the Company's Shares to AIM will be cancelled and the Company will be forced to seek alternative sources of potential funding which may or may not be on similar commercial terms and may or may not be obtainable on a timely basis or at all. If any such alternative sources of potential funding are not available in an extremely short time frame, it is highly likely that the Company or some or all of its operations will be forced into administration.

8.       Irrevocable Undertakings

The Company has received irrevocable undertakings to vote in favour of both of the Resolutions at the General Meeting from existing Shareholders in respect of, in aggregate, 15,303,629 Shares representing approximately 17.8 per cent. of the Existing Share Capital.

URU, which is an existing Shareholder, has irrevocably undertaken to vote in favour of both of the Resolutions to be proposed at the General Meeting in respect of, in aggregate, the 7,550,000 Shares in which it is interested, representing approximately 8.8 per cent. of the Existing Share Capital. MRS's Non-Executive Chairman, John Zorbas, is the Chief Executive Officer of URU and is interested in 3.9 per cent. of the issued share capital of URU.

The Company's former Chief Executive Officer, Paul Morffew, together with his wife, Santina Morffew, and SCOPN Pty Ltd, a company owned by Santina Morffew, has irrevocably undertaken to vote in favour of both of the Resolutions to be proposed at the General Meeting in respect of, in aggregate, the 7,620,296 Shares in which they are interested, representing approximately 8.9 per cent. of the Existing Share Capital.

In addition, an irrevocable undertaking to vote in favour of both of the Resolutions at the General Meeting has been received from Tim Jones (the only Director who has an interest in Shares) in respect of the 133,333 Shares in which he is interested, representing approximately 0.2 per cent. of the Existing Share Capital.

 

This Announcement contains inside information for the purposes of Article 7 of EU Regulation 596/2014 ("MAR"). In addition, market soundings (as defined in MAR) were taken in respect of the Placing with the result that certain persons became aware of inside information (as defined in MAR), as permitted by MAR. This inside information is set out in this Announcement. Therefore, those persons that received inside information in a market sounding are no longer in possession of such inside information relating to the Company and its securities.

 

About MRS

MRS provides project, quality, environmental and health & safety management services to some of the largest companies and projects across Australia, Oceania and Southeast Asia.  MRS is a sector specialist in the construction, engineering, civil engineering, petrochemical and coal seam gas sectors. MRS sources its contractors from a database of over 23,000 professionals around the globe, allowing it to react quickly and fully to client requirements.

Further information on the Company can be found at http://www.mrsplc.net/.

 


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END