3rd Jun 2015 08:42
LONDON (Alliance News) - Ferrum Crescent Ltd saw its London-listed shares fall sharply Wednesday after it said it had granted Principle Monarchy Investments (Proprietary) Ltd a six-week extension to make the first payment under a recently-agreed financing agreement between the pair to allow Principle time to complete an internal restructuring.
Ferrum had signed a memorandum of understanding with Principle in early May whereby Principle would buy a 39% stake in the Moonlight Iron Project in Limpopo Province, South Africa by subscribing for shares in the Ferrum Crescent unit that holds the project. It was to pay a total of SAR142 million, or USD12 million, with interim funding of SAR2 million a month to be made until the first SAR30 million bulk tranche was made. The memorandum of understanding would become binding once the first SAR2 million payment was made.
Principle is a so-called black economic empowerment company, which now must be involved in investments in South Africa.
Principle was supposed to make the first SAR2 million interim payment by June 1 and the first of three large tranche payments by December 1. However, Ferrum said Wednesday that Principle had requested an extension so that it could complete an internal restructuring. Under the revised terms of the memorandum of understanding, Principle must now make the first interim payment by July 14. The first bulk SAR30 million tranche must still be paid by December 1.
Payments will allow Ferrum to continue to the bankable feasibility study for the Moonlight Iron Project "in close consultation" with Principle. Once Principle does make its first payment and the agreement becomes binding, it would then have to pay Ferrum a SAR6 million charge if Ferrum terminated the agreement because Principle failed to make payments.
Ferrum does have non-binding arrangements in place with two other black economic empowerment companies should the Principle deal collapse. These separate contractual arrangements involve subscription in the Moonlight project holding company shares for the rand equivalent of USD8 million and the completion of the Moonlight Iron Project bankable feasibility study, respectively.
Ferrum Crescent shares were down 20.2% at 0.455 pence in London Wednesday morning.
By Steve McGrath; [email protected]; @stevemcgrath1
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