LONDON (Alliance News) - African Potash Ltd Friday said it has secured up to USD3.8 million in financing through an issuance of zero-coupon convertible securities to an institutional investment fund managed by New York-based alternative asset manager Bergen Asset Management LLC.
Shares were early Friday quoted down 12% at 3.09 pence.
In a statement, the AIM-listed exploration company focused on sub-Saharan potash assets said the investment will provide capital and support its future exploration programmes.
The convertible securities will be issued in four tranches to Bergen Opportunity Fund LP, with the initial tranche to have a nominal value of USD830,000. It will be issued shortly, African Potash said.
Each of the three subsequent tranches will be issued 90 days after the date of issuance of the previous convertible security and have the nominal value of between USD500,000 and USD1.0 million. African Potash said it will have the right to repurchase the securities for cash at 105% of their nominal value and without fee or penalty, though it can only do so within a defined redemption period. It also said that it will have the right to terminate the deal at any time and not to issue the remaining convertibles, so long as it pays a "modest" termination fee.
The securities can be converted into shares at a price determined by the lower of either 91% of the average of five daily volume-weighted average prices of the shares on AIM during a specified period, or 140% of the average of the daily volume-weighted average prices of the shares for the 20 consecutive trading days preceding the date of execution of the convertible securities issuance deed agreed with Bergen.
The alternative asset manager has agreed to certain limitations on its ability to dispose of the shares following a conversion, as well as on its ability to make the conversion in the first place. This includes a limit on the proportion of convertible securities can be converted in a specific time period. African Potash said that Bergen has agreed not to short-sell the shares.
In connection with the convertible securities issuance deal, African Potash said it has issued 1.5 million shares to Bergen as a commencement fee in relation to the overall funding. It has also issued 4.8 million shares under the convertible securities issuance deed.
It said that Bergen may be required to make a further payment to African Potash once all of the obligations of the deed have been met and no amount remains outstanding to Bergen, depending on the share price at the time.
In addition, African Potash said that it will, depending on certain conditions, issue 3.9 million warrants an exercise period of 30 months from the date of issue, that will entitle Bergen to subscribe for one share per warrant at an exercise price equal to 140% of the average of the daily volume-weighted average prices of the shares during the 15 days prior to the date of execution of the deed.
In addition, the African Potash has also agreed to issue 1.4 million new shares in the place of payment to an adviser to the company.
"With an investment of up to USD3.8 million we are well set to advance our Lac Dinga Potash Project, which is located in a world-class potash bearing region and has proven potential to host a commercial potash deposit. We recently commenced our maiden drilling campaign in order to improve our understanding of the asset, and the results from this will provide a basis for determining future exploration programmes. With a highly prospective licence, drilling underway, and funding secured to implement future exploration, this is an exciting development for African Potash," Chief Executive Edward Marlow said in a statement.