16th Jul 2015 11:10
LONDON (Alliance News) - Ferrum Crescent Ltd shares rose on Thursday after it said it has been informed it should receive the first and well overdue payment under the financing agreement with Principle Monarchy Investments (Proprietary) Ltd on July 22.
Ferrum shares were up 12.9% to 0.525 pence per share on Thursday.
Ferrum 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 ZAR142 million, or USD12 million, with interim funding of ZAR2 million a month to be made until the first ZAR30 million bulk tranche was made. The memorandum of understanding would become binding once the first ZAR2 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 ZAR2 million interim payment by June 1 and the first of three large tranche payments by December 1, however the first payment has been delayed.
On Thursday, Ferrum Crescent said it has informed Principle that the ZAR2 million payment is overdue and said it has informed the company it has "undertaken to transfer funds to Ferrum Crescent on or around Wednesday 22 July 2015".
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 ZAR6 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.
By Joshua Warner; [email protected]; @JoshAlliance
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