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Conroy Gold & Natural Resources Plc - Notice of Extraordinary General Meeting

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6 December 2021

Conroy Gold and Natural Resources plc
(“Conroy Gold” or “the Company”)

Notice of Extraordinary General Meeting

Further to the announcement on 30 November 2021, Conroy Gold and Natural Resources plc (AIM: CGNR), the gold exploration and development company focused on Ireland and Finland, announces that it is today posting to shareholders the notice of extraordinary general meeting of the Company's shareholders (the "General Meeting") to be held at 12:00 noon on 22 December 2021 at The Alex Hotel, 41-47 Fenian Street, Dublin, D02 H678 in relation to the proposed Joint Venture with Demir Export A.? (“Demir Export”) over the licences held by Conroy Gold along its 65km district scale gold trend in the Longford-Down Massif in Ireland.

The circular containing the Notice of General Meeting will be posted to shareholders today and made available on the Company's website (www.conroygold.com).

The letter from the Chairman has been extracted from the circular and is reproduced in full below.

For further information please contact:

Conroy Gold and Natural Resources PLC

Tel: +353-1-479-6180

Professor Richard Conroy, Chairman

Allenby Capital Limited (Nomad)

Tel: +44-20-3328-5656

Nick Athanas/Nick Harriss

First Equity Limited (Broker)

Tel: +44-20-7330-1883

Jason Robertson

Lothbury Financial Services

Tel: +44-20-3290-0707

Michael Padley

Hall Communications

Tel: +353-1-660-9377

Don Hall

CHAIRMAN’S LETTER TO SHAREHOLDERS

Dear Shareholder,

PROPOSED JOINT VENTURE WITH DEMIR EXPORT

AND

NOTICE OF EXTRAORDINARY GENERAL MEETING

1. Introduction

The Company is pleased to announce that agreement has been reached on the main terms for a definitive agreement for the proposed Joint Venture with Demir Export. The LOI terms (announced on 25 February 2021) form the basis for the definitive agreement, the main terms of which have now been agreed in principle between Conroy and Demir Export but the definitive agreement has not yet been entered into by the parties. The Board today gives notice (as set out in Part 4 of this document) of the EGM to be held at The Alex Hotel, 41-47 Fenian Street, Dublin, D02 H678 Ireland on 22 December 2021 at 12.00 noon to approve the JV. The JV is a proposed fundamental change of business pursuant to AIM Rule 15 and accordingly is conditional on the consent of shareholders being given in an extraordinary general meeting of the Company.

Completion of the Joint Venture agreement is also conditional on the necessary regulatory consents being granted in the Republic of Ireland and Northern Ireland for the transfer of the licences to the respective Joint Venture Companies. The definitive agreement is expected to be entered into by both parties prior to the EGM and would become unconditional upon satisfaction of the outstanding conditions.

2. Overview

Your Board has been exploring for some time the most appropriate way of developing an operational mine in the Longford-Down Zone and have concluded that a joint venture with Demir Export, an established gold mine operator, is the best way of progressing this project. The details of the Agreement under which the JV is being established are set out below and are materially similar to that outlined in the announcements of 25 February 2021 and 30 November 2021. Your Board believes that the Agreement and the JV provide a clear and funded path towards an operational mine within the Longford-Down Zone.

3. Background

Demir Export is a long established mining company with interests in iron, coal, gold and base metals, including zinc and copper, in Turkey (Demir is the Turkish for iron), and has a strong in-house technical team with mining and exploration expertise. It brings over 60 years of mine operating experience to bear on the project and places a strong emphasis on the adoption of international environmental, and health and safety management standards.

The primary focus of the JV is the development of the gold deposit in the Clontibret Licence (situated within the Longford-Down Zone) to Construction Ready Status and bringing it into operation as a gold mine. The Clontibret Licence gold target is one of a series of potentially multimillion ounce gold targets located along the 65km (40 mile) new district scale gold trend which the Company has discovered in the Longford-Down Zone. A (JORC 2012) gold resource of 517,000 Oz Au has been estimated on part of the Clontibret Licence. The parties’ further aim is to also develop the Northern Ireland Licences and the Other Irish Licences within the Longford-Down Zone to Construction Ready Status.

4. Key Terms of the JV

The investment by Demir Export will be directly into three special purpose companies (currently wholly owned subsidiaries of the Company) each holding the relevant licence or group of licences.

The Earn-in Period will be divided into three phases:

· Phase 1: Investment in the Joint Venture Companies by Demir Export in work commitments (except Demir in-house costs and operator fees) for an aggregate amount of expenditure of €5.5 million plus the costs to the JV Companies of the MRWC, will earn a 25% interest in each of the JV Companies.

· Phase 2: Investment in the Joint Venture Companies by Demir Export in work commitments (except Demir in-house costs and operator fees) for an aggregate amount of expenditure of €4.5 million plus the costs to the JV Companies of the MRWC will earn an additional 15% in each of the JV Companies.

· Phase 3: Investment in the Joint Venture Companies by Demir Export for the additional funds required to reach Construction Ready Status will earn an additional 17.5% interest in the JV Company which has reached Construction Ready Status in respect of any Licence thus increasing Demir Export’s holding to a total of 57.5% in that JV Company.

Conroy, after Construction Ready Status is achieved, may either retain its 42.5% interest in that JV Company by participating pro rata in the expenditures for mine construction, or avail itself of a number of options including diluting its interest being carried for the expenditures through to commercial production with a “Carry Loan”. If Conroy avails of this option, it will retain a 25% interest in that JV Company with repayment of the loan from 50% of the net profits due to Conroy within a maximum payback period of six years. Demir Export’s sole recourse in the event of non payment of this Carry Loan is Conroy’s shares in that JV Company. Alternatively, it can have its interest in such JV Company converted into a 2% net smelter revenue royalty.

The licences in the JV will be divided into three licence groups, namely the Clontibret Licence, the two Northern Ireland Licences, and the nine Other Irish Licences with the Joint Venture Companies (being currently wholly owned subsidiaries of Conroy), each owning a different licence group.

The aggregate compensation for the transfer of the Licenses to the Joint Venture Companies will be €1,000,000 which will be paid to Conroy on completion under the Agreement as part of Phase 1. These funds will be used by Conroy to support activities in relation to the Company’s other licences outside of the scope of the Joint Venture, to discharge its fees incurred in respect of the Joint Venture and for general working capital purposes.

The JMC will be established to oversee, plan and execute the various plans, in the work programme of the JV. The JMC will be comprised of four members, two from each party, but with a Demir Export representative having a casting vote, with minority protection rights contained in a shareholders agreement to be entered into on completion of the Agreement. It is anticipated that Conroy will be appointed as operator for an initial two year period after which the matter of operatorship will be reviewed.

Conroy is giving a limited number of warranties to Demir Export as set out in the Agreement. It is also guaranteeing that, while it controls the JV Companies, it will ensure that they adhere to the terms of the Contribution Agreements.

The Agreement is subject to the Conditions, being:

a) the passing of the Resolution;

b) no material adverse change having occurred prior to the satisfaction of the other Conditions, which change materially impairs Conroy's ability to perform its obligations under the JV or to the Licences;

c) the Implementation Steps having been completed (these being the necessary consents for the transfer of the Licences to the three JV Companies as further outlined in Part 3 of this document); and

d) certain fundamental warranties remaining true and correct.

The Agreement is subject to the approval of Shareholders under AIM Rule 15 as under the terms of the Agreement, Conroy may cease to control part or all of the Longford-Down Zone, which currently constitutes over 75% of its activities, as the JV develops under the phases outlined above. Conroy will retain an economic interest under the JV as set out above. For the avoidance of doubt, Conroy would, on completion of the Agreement, continue to be classified as an operating company and not a cash shell pursuant to AIM Rule 15.

As the Longford-Down Zone assets are not currently producing and the structure of the JV involves no immediate reduction in Conroy’s interest, the moving of the assets into the Joint Venture Companies will result in no immediate change in either the net assets or financial performance of Conroy. Longer term, it is hoped that the JV will have a positive impact on both the net assets and the financial performance of Conroy, however that cannot be assured.

In the year to 31 May 2021, Conroy had total assets of €24,970,503 (2020 - €22,548,653), net assets of €19,987,222 (2020 - €17,645,315) and generated a profit before taxation of €211,010 (2020 - loss before taxation of €677,380). Approximately 90% of these numbers relate to the Longford-Down Zone and the licences subject to the Agreement. The Longford-Down Zone forms the majority of the expenditure on intangible assets in Ireland during the financial year to 31 May 2021. The total direct expenditure on the Longford-Down Zone in that period was €586,512 (2020 - €494,006) of which licence and appraisal costs represented €281,261 (2020 - €180,265) and operating costs represented €305,251 (2020 - €313,741).

Given the need for binding contractual documentation to be executed and satisfaction of the Conditions, including approval from shareholders of Conroy being given at the EGM and applicable regulatory consents, there can be no guarantee at this stage that the Agreement will become unconditional.

5. Future Strategy

It has long been the Company’s strategy to develop an operational and producing gold mine within the Longford-Down Zone, and having evaluated various options for achieving this, the Board believes the proposed JV with Demir Export to be the most appropriate solution. It offers Shareholders significant potential upside but mitigates much of the financial, operational and technical risk by allying with a partner who has greater resources in each of these three areas. While the JV may lead (especially if successful assumptions are made on progress) to the Company having a much reduced percentage stake in the licences subject to the JV, the Board believes the economic value of this reduced stake will be significantly enhanced – “a smaller slice of a much larger pie” in simple terms.

The anticipated principal future activity of the Company will continue to be focussed on the Longford-Down Zone through its participation in the JMC. The Company’s eight gold exploration licences in Finland and one other licence owned by Conroy in Ireland are not subject to the proposed JV and will remain 100% owned by Conroy. Demir Export has been granted a right of first refusal over these licences until 31 December 2023.

6. Extraordinary General Meeting

Shareholder approval is being sought to proceed with the Agreement pursuant to Rule 15 of the AIM Rules.

Part 4 of this document contains Notice of an Extraordinary General Meeting that is being convened at 12 noon on 22 December 2021 at The Alex Hotel, 41-47 Fenian Street, Dublin, D02 H678 Ireland. At the Extraordinary General Meeting, the Resolution set out in Part IV of this document will be proposed to Shareholders.

The Board has continued to monitor closely the COVID-19 pandemic. The holding of the meeting will be kept under review in line with public health guidance Ireland, and based on the Government’s roadmap for relaxing restrictions on 22 October 2021, it is hoped that there will be no further formal public health restrictions on attendance by shareholders.

The Company will ensure that the meeting is quorate and that the legal requirements are met.

SHAREHOLDERS WISHING TO VOTE ON ANY OF THE MATTERS OF BUSINESS ARE STRONGLY URGED TO DO SO THROUGH COMPLETION OF A FORM OF PROXY which must be completed and submitted in accordance with the instructions printed on it.

As for all of the Company’s meetings, the Company’s registrars, Avenir Registrars Limited, will collate and count the proxy votes received before the cut-off point and will provide a certified summary to the Board for use in the meeting.

The Resolution being proposed is an Ordinary Resolution and will be passed if 50 per cent. or more of the votes cast at the Extraordinary General Meeting are in favour of it.

7. Action to be taken in respect of the Extraordinary General Meeting

A Form of Proxy is enclosed for use in respect of the Extraordinary General Meeting. To be valid, the Form of Proxy must be completed and returned as soon as possible and received by the Registrars by no later than 12 noon on 20 December 2021. You can return your Form of Proxy by post to the Registrars, Avenir Registrars, No 1 Main Street, Blessington, Co Wicklow W91 V82T, Ireland (if delivered by post) or Avenir Registrars, No 1 Main Street, Blessington, Co Wicklow W91 V82T, Ireland (if delivered by hand).

Persons who hold their interests in Ordinary Shares as Belgian law rights through the Euroclear system or as CDIs through the CREST system should see notes 6 to 8 to the Notice of EGM and consult with their custodian, stockbroker or other intermediary at the earliest opportunity for further information on the processes and timelines for submitting proxy appointments and voting instructions for the EGM through the respective systems.

8. Recommendation

The Directors consider that the Agreement and subsequent JV will be beneficial for the Company and its Shareholders as a whole. Accordingly, the Directors unanimously recommend that you vote in favour of the Resolution to be proposed at the Extraordinary General Meeting.

The Directors intend to vote in favour of the Resolution in respect of their aggregate beneficial shareholdings of 3,588,425 Ordinary Shares representing approximately 9.14% of the Ordinary Shares in issue at the date of this document.

Yours faithfully,

Professor Richard Conroy

Chairman

DEFINITIONS

“Act”
“AIM”

Companies Act 2014;
AIM, a market operated by the London Stock Exchange;

“Agreement”

the framework agreement to be entered into between Conroy, Demir Export and each of the JV Companies to establish the structure of the JV;

“AIM Rules”

the AIM Rules for Companies and the AIM Rules for Nominated Advisers;

"Board" or "Directors"

“Circular”

the directors of the Company or any duly appointed committee thereof;
this Circular dated 6 December 2021;

“Clontibret Licence”

the PL2194 licence held by Conroy Gold Limited in County Monaghan, Ireland, within the Longford-Down Zone, which will be transferred to JVCo 1 on completion of the Agreement;

"Company" or "Conroy"

Conroy Gold and Natural Resources plc, a public limited company incorporated and registered in Ireland with registered number 232059);

"Conditions"

the pre-conditions to completion of the Agreement being:
a) the passing of the Resolution;
b) no material adverse change having occurred, which change materially impairs Conroy's ability to perform its obligations under the JV;
c) the Implementation Steps having been completed; and
d) certain fundamental warranties remaining true and correct.

"Construction Ready Status"

in respect of any JV Company, that the JV Company is ready to commence mine construction in respect of any Licence and shall include the steps that:
(a) a bank feasibility study or equivalent has been prepared for the project in a form reasonably suitable for presentation to a bank for approval;
(b) planning permission for a mine in a form reasonably acceptable to the JV Company has been obtained; and
(c) licenses to mine, in a form reasonably acceptable to the JV Company have been obtained;

"Contribution Agreements"

the subscription agreements to be entered into between Conroy, Demir Export and each of the JV Companies under which the shares in the JV Companies will be issued to Demir Export;

“COVID-19”
"CREST"

the respiratory virus Coronavirus 2019-nCoV;
the relevant system (as defined in the CREST Regulations) in respect of which Euroclear is the Operator (as defined in the CREST Regulations);

"CREST Regulations"

“Demir Export”

the Uncertificated Securities Regulations 2001 (as amended);
Demir Export A.?, a company organised under the laws of the Republic of Turkey whose registered office is at Izmir Caddesi Koç Han 25-7 Kizilay, Çankaya-Ankara, Turkey;

"Earn In Period"

the period from closing of the Agreement to, in respect of each Joint Venture Company, being at Construction Ready Status;

“EGM”

the extraordinary general meeting of the Company, notice of which is set out at the end of this document and including any adjournment(s) thereof;

"Form of Proxy"

the form of proxy accompanying this document relating to the Extraordinary General Meeting;

"Group"

the Company and its subsidiaries and subsidiary undertakings (in each case as defined in the Act);

"Implementation Steps"

in respect of:
a) JVCo 1, having secured the consent of the Minister, the transfer of the Clontibret Licence to JVCo 1;
b) JVCo 2, having secured the consent of the Crown Estate and the Northern Ireland Department for the Economy, the transfer or issue of the Northern Ireland Licenses to JVCo 2; and
c) JVCo 3, having secured the consent of the Minister, the transfer of the Other Licenses to JVCo 3;

“JV” or “Joint Venture”


"JVCo 1"

"JVCo 2"

"JVCo 3"

the joint venture between Conroy and Demir Export by the investment by Demir Export in the JV Companies under the terms of the Agreement and the Contribution Agreements;
Conroy Gold (Clontibret) Limited, a company incorporated under the laws of Ireland with registration number 707508;
Conroy Gold (Armagh) Limited, a company incorporated under the laws of Northern Ireland with registration number NI683804 ;
Conroy Gold (Longford Down) Limited, a company incorporated under the laws of Ireland with registration number 707530;

“Joint Venture Companies” or "JV Companies"

JVCo 1, JVCo 2 and JVCo 3;

“JMC”

the joint management committee that will be established by Conroy and Demir Export under the Agreement to manage the JV;

"Licenses"

the Clontibret Licence, the Northern Ireland Licences and the Other Irish Licences;

“LOI”

the letter of intent between the Company and Demir Export that was announced on 25 February 2021 regarding the proposed JV;

“Longford-Down Zone”

the twelve licences held by the Group, along its 65km district scale gold trend in the Longford-Down Massif in Ireland;

"Minister"

the Minister for the Environment, Climate and Communications;

"MRWC"

the minimum regulatory work commitments being the essential indicative spending required to maintain the Licenses in good standing during the Earn In Period;

“Northern Ireland Licences”

the two licences, C1/19 and C3/19, and the two Mines Royal Options, C1 (Keady) and C3 (Newtownhamilton), held by Conroy in Northern Ireland;

"Notice of EGM"

the notice of EGM, set out at the end of this document;

"Ordinary Shares"

ordinary shares of €0.001 each in the capital of the Company;

“Other Irish Licences”

the PL1870, PL2683, PL3028, PL3066, PL3065, PL3469, PL4098, PL3130 and PL3400 licences in Ireland;

“Registrars”

Avenir Registrars Limited, No 1 Main Street, Blessington, Co Wicklow W91 V82T, Ireland;

"Resolution"

the resolution to be proposed at the EGM which is set out in full in the Notice of EGM to approve the Agreement;

"Shareholders"

holders of Ordinary Shares; and

"UK"

the United Kingdom of Great Britain and Northern Ireland.

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