Description of business:
The acquisition of 90 per cent. of the participatory interest in the charter capital of Joint Venture Kazakh-Russian Mining Company LLP ("KRMC") by GMA Resources plc (" the Acquisition") will result in a reverse takeover under the AIM Rules. On approval of the acquisition and prior to admission to AIM, GMA Resources will, subject to shareholder approval, change its name to Kemin Resources plc.
The main country of operation of the enlarged group will be Kazakhstan. The business of the enlarged group will be that of KRMC.
KRMC was established and registered in December 2001 as a limited liability partnership in accordance with the laws of Kazakhstan.
In December 2004, subsoil use contracts were entered into by KRMC and the Ministry of Energy and Mineral Resources of the Kazakhstan Republic, the precursor of the Ministry of Industry and New Technologies of Kazakhstan ("MINT"), in respect of the Drozhilovskoye molybdenum-tungsten deposit in Denisovski rayon of Kostanai oblast and the Smirnovskoe molybdenum-tungsten-copper deposit in Karabalyksky rayon, also of the Kostanai oblast. The Drozhilovskoye Subsoil Use Contract has an initial term of 30 years while the Smirnovskoe Subsoil Use Contract has an initial term of 36 years. The exploration period under each contract may be extended twice for two further years each upon agreement between KRMC and the MINT if KRMC applies not later than six months prior to the expiry date of the exploration term.
Current status of Subsoil Use Contracts
In September 2010, the MINT by its order purported to terminate the Smirnovskoe Subsoil Use Contract, citing non-compliance with the work programme. KRMC successfully contested the order and the purported termination.
Similarly, in March 2011, the MINT purported to terminate the Drozhilovskoye Subsoil Use Contract citing expiration of the exploration period and rejection of KRMC's application to extend its term. KRMC successfully contested the order and the purported termination.
Based on KRMC's understanding with MINT, the period during which KRMC was unable to carry out subsoil use due to the termination of the Subsoil Use Contacts by the MINT will be deemed a suspension period under such contracts.
Following completion of the Acquisition, KRMC will apply to the MINT for the reinstatement of the Subsoil Use Contracts ("Contract Reinstatement"). It is expected that it could take up to six weeks after Admission before Contract Reinstatement. The Directors and Proposed Directors believe that the application to the MINT will be successful.
Under the terms of the Acquisition Agreement, the Company has agreed to acquire 90 per cent. of the participatory interests in KRMC for a consideration of £40 million to be satisfied by the issue of 148,320,720 B Shares to Lother Enterprises Limited ("Vendor") or, at the Vendor's request, to Bergfolk Corporation, Strathland Enterprises Limited and Hanson Central European Fund LP. Pursuant to their terms, the B Shares shall convert into 148,320,720 New Ordinary Shares if the Contract Reinstatement becomes effective on or before 31 May 2013.
In the event that the Contract Reinstatement does not become effective on or before 31 May 2013, the Consideration Shares shall automatically convert into Deferred Shares on the basis of one Deferred Share for every 499 B Shares held. Where a fraction of a Deferred Share would fall to be issued, the B Shares will instead convert into New Ordinary Shares on a one for one basis. In addition, in such event, pursuant to the Acquisition Agreement, the Company will transfer its participatory interests in KRMC back to the Vendor for £1, subject to the approval of the Shareholders pursuant to the AIM Rules.
GMA was first admitted to trading on AIM in May 2003 and having disposed of all revenue generating assets was classified as an investing company in April 2012.
In the event that the Contract Reinstatement does not become effective on or before 31 May 2013, then dealings in the New Ordinary Shares on AIM will be suspended on 3 June 2013, the Company will revert to being an investing company under Rule 15 of the AIM Rules and dealings in the New Ordinary Shares on AIM will be cancelled six months thereafter if the Company has not implemented its investing policy by that date.
GMA Resources plc, to be renamed Kemin Resources plc (the "Company")