Red Rock Resources Plc
("Red Rock" or the "Company")
Colombian Gold Assets - Execution of Sale Agreement
14 April 2015
Red Rock Resources plc, the mining and exploration company with interests in gold in Africa and Colombia, and investments in other mineral assets, announces the signing of a Sale Agreement in relation to the sale of its El Limón gold assets in Colombia.
Highlights:
o Sale Agreement signed with Colombia Milling Limited ("CML")
o Total sale proceeds of USD5m (including USD100,000 previously received and up to USD3m
of future royalty payments)
o Initial tranche of USD450k
o Second tranche of USD225k in 9 months
o Third tranche of USD225k in 15 months
o Secured promissory note of USD1m
o Royalty (NSR) payments of USD3M to begin at the earlier of 9 months or 100tpd plant
processing and production
o Completion set for 30 April 2015
Overview:
Further to the announcements of 13 May 2014 and 21 November 2014, Red Rock has now executed a Sale Agreement with Colombia Milling Limited ("CML"), a private company registered in Belize. CML is the nominee of Nicaragua Milling Company ("NML"), with which Red Rock signed a Letter of Intent on 12 May 2014. CML is represented by James Randall Martin, an experienced mining executive who was the CEO of Colombia Goldfields Ltd and was the founder and Chairman of Nicaraguan gold producer Hemco.
Under the Sale Agreement, the Company sells, and CML buys, (a) a 100% interest in American Gold Mines Limited ("AGM"), which owns a 50.002% interest in Four Points Mining SAS ("FPM"), the owner of the El Limón mine, and (b) its loans to FPM, for a total consideration of USD5,000,000. CML will also purchase an 11.2% stake from a minority shareholder in the business.
Payment of the unchanged consideration of USD5,000,000 will occur in tranches. The initial payment of USD100,000, was previously made in respect of the CML's due diligence review.
The first tranche of USD450,000 will be payable at the closing of the transaction ("Completion"), which is expected to be on 30 April 2015. The second tranche of USD225,000 will be payable on the date that is 9 months from Completion. The third tranche of USD225,000 will be payable on the date that is 15 months from Completion.
A further payment of USD1,000,000 will be satisfied by the issuance by CML to Red Rock at Completion of a three year convertible 5% promissory note ("PN"), secured on the acquired shares in AGM and providing that during its currency the CML will procure that AGM does not alienate or dispose of its interest in FPM. Security for the PN will be held in the form of a charge over 100% of the shares in AGM and conversion is possible following any listing of CML or vend of the assets into a public vehicle.
Additional payments of up to USD2,000,000 will be paid in the form of a 3% net smelter return royalty ("First NSR") payable quarterly on gold production from FPM commencing on the earlier of (a) 9 months from Completion; and (b) the achievement of commercial gold production and processing through the El Limon plant of at least 100 tons per day for 30 consecutive calendar days.
A final royalty stream of up to USD1,000,000 will be paid following the payment in full of the First NSR in the form of a 0.5% net smelter return royalty ("Second NSR") payable quarterly on gold production from FPM.
The assets have been held for sale since 2014 and the carrying value is $2.9m at signing.
Completion is subject to various procedural conditions that the Company considers are satisfied or are in process of being satisfied, and to CML's confirmation of funding.
Company Chairman Andrew Bell comments:
"This is a good outcome to a long process. Our key objective, as any buyer was likely to want to back-end some payments given the investment required to upgrade the assets, was to find a technically competent buyer, specialised in this type of mining and in this region, and with a record of success. Though a seller, we also looked for the same qualities of character and skill we would look for in a partner, since we would remain to some degree co-venturers.
Mr. Martin and the purchasing group at CML combine geological and engineering skills with a historic knowledge of El Limon, as well of as the regional potential for sourcing additional ore for the plant.
For Red Rock the finalization of this sale brings with it the end of a period that began in 2010 with a very different junior mining sector to that of today. Red Rock is confident that CML will develop the mine better than it would have done, maximising the Company's outcome, while Red Rock's management and financial resources can now be more effectively deployed in fields in which it enjoys a greater comparative advantage.
This sale forms a key element in the strategic repositioning of the Company. We look forward to building on this during the remainder of 2015 and once again driving Red Rock to be the dynamic and opportunistic exploration Company we have envisioned since our inception."
For further information, please contact:
Andrew Bell 0207 747 9990 or 0776 647 4849 Chairman Red Rock Resources Plc
Roland Cornish/ Rosalind Hill Abrahams 0207 628 3396 NOMAD Beaumont Cornish Limited
Jason Robertson 0129 351 7744 Broker Dowgate Capital Stockbrokers Ltd.
Christian Pickel 0203 128 8817 Media Relations MHP Communications
