Industrial Metals

SouthGobi Resources (TSX:SGQ) provided an update regarding progress on its funding plan to meet its obligations. It also announced an extension of its Toronto Stock Exchange delisting review to permit completion of proposed private placements of its common shares.

SouthGobi Resources (TSX:SGQ) provided an update regarding progress on its funding plan to meet its obligations. It also announced an extension of its Toronto Stock Exchange delisting review to permit completion of proposed private placements of its common shares.

As quoted in the press release:

Since April 23, 2015 when the Company announced the successful completion of a private placement with Novel Sunrise Investments Limited (“Novel Sunrise”) as a new significant investor and strategic partner, the Company has ramped up its mining operations gradually and progressed the Funding Plan that was referred to in the Company’s Management Discussion and Analysis (“MD&A”) issued on May 11, 2015 in Section 5. “Liquidity and capital resources” under the subheading “Proposed Funding Plan” and available at www.sedar.com.

In this connection, the Company announces the following arrangements in furtherance of its Funding Plan, subject to all necessary regulatory filings and approvals:

  • Private Placements of Common Shares – The Company has negotiated private placements of its common shares for aggregate gross proceeds of US$31.6 million with sophisticated investors (the “Investors”) to inject additional capital resources into the Company. Closing of the placements is expected to occur on or before July 14, 2015. Under the terms of the subscription agreements for the private placements, the Company will issue the Investors approximately 55 million common shares in the Company (each, a “Common Share”), priced at C$0.71 per share (a 20% discount to the five day volume weighted average price of the common shares on the TSX at June 19, 2015). As a result, the new Common Shares represent in the aggregate an approximately 21% equity interest in the Company following completion of these issuances.
  • Offtake Arrangements – A supply agreement has been executed with a China-based buyer for the sale of 1.8 million tonnes of coal from July 2015 to July 2016. Discussions are continuing with other third parties in connection with additional coal supply agreements and the Company anticipates negotiating further agreements as it ramps up its production schedule as a result of securing additional financing to address its working capital requirements.
  • Interim Loan – Until the proceeds of the private placements are received, the Company has secured a loan for up to US$8 million from a principal of Novel Sunrise, with immediate availability, to address funding obligations pending the closing of the private placements. Advances will be in a minimum amount of US$2 million, with interest at LIBOR + 12% per annum, payable in cash on a quarterly basis in arrears, and maturing on June 18, 2016. The loan is unsecured and is subject to mandatory repayment upon completion of US$30 million of equity or other debt financing.
  • Revolving Loan Commitment – the Company has also secured a revolving loan commitment of RMB200 million (approximately US$32 million) from a Chinese commercial bank, subject to the finalization of definitive documentation. The revolving loan commitment is intended to provide additional support to the Company in funding its operational objectives.
  • The utilization of these funding facilities made available to the Company will meet the requirements for permitted debt under its existing convertible debenture agreement with the China Investment Corporation (“CIC”).

Click here to read the SouthGobi Resources (TSX:SGQ) press release

See this press release on Marketwire

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