30th Oct 2006 11:52
Dwyka Diamonds Limited30 October 2006 DWYKA DIAMONDS LIMITED NOTICE OF ANNUAL GENERAL MEETING AND EXPLANATORY MEMORANDUM Date of Meeting: Thursday 30 November 2006 Time of Meeting: 10.00 am (WST) Place of Meeting: Sandalwood Room Ground Floor Holiday Inn Centre 788 Hay Street Perth, Western Australia This Notice of Annual General Meeting and Explanatory Memorandum should be readin their entirety. If shareholders are in doubt as to how they should vote,they should seek advice from their accountant, solicitor or other professionaladviser prior to voting. Notice is hereby given that an annual general meeting of shareholders of DwykaDiamonds Limited ACN 060 938 552 ("Company") will be held at the SandalwoodRoom, Ground Floor, Holiday Inn City Centre, 788 Hay Street, Perth, WesternAustralia at 10.00 am (WST) on Thursday 30 November 2006. The Explanatory Memorandum which accompanies and forms part of this Notice ofMeeting describes the various matters to be considered and contains a glossaryof defined terms for terms that are not defined in full in this Notice ofMeeting. AGENDA Financial Statements and Reports To receive and consider the financial statements, the Directors' report andauditor's report for the Company and its controlled entities for the year ended30 June 2006. Resolutions 1. Adoption of Remuneration Report To consider and, if thought fit, to pass, with or without amendment, thefollowing as an ordinary resolution: "That the remuneration report for the Company and its controlled entities forthe year ended 30 June 2006 be adopted." The vote on this resolution is advisory only and does not bind the directors orthe Company 2. Re-election of Mr Adrian Griffin as a Director To consider and, if thought fit, to pass, with or without amendment, thefollowing as an ordinary resolution: "That Mr Adrian Griffin, who was appointed as a director of the Company to filla casual vacancy on 1 December 2005, retires in accordance with the Company'sconstitution and being eligible, offers himself for re-election, be re-electedas a Director." 3. Re-election of Ms Melissa Sturgess as a Director To consider and, if thought fit, to pass, with or without amendment, thefollowing as an ordinary resolution: "That Ms Melissa Sturgess, who retires by rotation in accordance with theCompany's constitution and being eligible, offers herself for re-election, bere-elected as a Director." 4. Ratification of a convertible note issue To consider and, if thought fit, to pass, with or without amendment, thefollowing as an ordinary resolution: "That, for the purposes of ASX Listing Rule 7.4 and for all other purposes, theCompany ratifies and approves the issue on 22 June 2006 of convertible notes tothe value of GBP 1,000,000, convertible into fully paid ordinary shares in thecapital of the Company at GBP 0.36 per share on or before 22 June 2010 toWestpac Custodian Nominees Ltd, on the terms and conditions contained in theExplanatory Memorandum." The Company will disregard any votes cast on this resolution by a person whoparticipated in the issue and an associate of that person (or those persons).However, the Company need not disregard a vote if it is cast by a person asproxy for a person who is entitled to vote, in accordance with the directions onthe proxy form, or it is cast by the person chairing the meeting as proxy for aperson who is entitled to vote, in accordance with a direction on the proxy formto vote as the proxy decides. 5. Issue of Shares to Adrian Griffin under the Share Plan To consider and, if thought fit, to pass, the following as an ordinaryresolution: "That, for the purposes of subsection 208(1) of the Corporations Act, ListingRule 10.14 and for all other purposes, Shareholders approve and authorise theissue of up to 1,000,000 shares in the capital of the Company at an issue priceof $1.00 per share to Adrian Griffin in accordance with the Dwyka Diamonds SharePlan (which was approved by shareholders on 30 November 2005) and otherwise onthe terms and conditions set out in the Explanatory Memorandum." The Company will disregard any votes cast on this resolution by a director ofthe Company (except one who is ineligible to participate in any employeeincentive scheme in relation to Dwyka) and any associate of such director.However, the Company need not disregard a vote if it is cast by a director as aproxy for a person who is entitled to vote, in accordance with the directions onthe proxy form, or it is cast by a person chairing the meeting as a proxy for aperson who is entitled to vote, in accordance with a direction on the proxy formto vote as the proxy decides. By order of the board Michael Langoulant Company Secretary DATED: 30 October 2006 PROXY AND VOTING ENTITLEMENT INSTRUCTIONS PROXY INSTRUCTIONS Shareholders are entitled to appoint up to two individuals or bodies corporateto act as proxies to attend and vote on their behalf. Where more than one proxyis appointed each proxy may be appointed to represent a specific proportion ofthe shareholder's voting rights. If the appointment does not specify theproportion or number of votes each proxy may exercise, each proxy may exercisehalf of the votes. The proxy form (and the power of attorney or other authority, if any, underwhich the proxy form is signed) or a copy or facsimile which appears on its faceto be an authentic copy of the proxy form (and the power of attorney or otherauthority) must be deposited at or sent by facsimile transmission to theCompany's office, 98 Colin Street, West Perth WA 6005, +61 8 9324 2977, not lessthan 48 hours before the time for holding the Meeting, or adjourned meeting asthe case may be, at which the individual or body corporate named in the proxyform proposes to vote. The proxy form must be signed by the shareholder or his/her attorney dulyauthorised in writing or, if the shareholder is a corporation, in a mannerpermitted by the Corporations Act. The proxy may, but need not, be a shareholder of the Company. In the case of shares jointly held by two or more persons, all joint holdersmust sign the proxy form. VOTING ENTITLEMENT For the purposes of determining voting entitlements at the Meeting, shares willbe taken to be held by the persons who are registered as holding the shares at7.00 pm on Tuesday 28 November 2006. Accordingly, transactions registered afterthat time will be disregarded in determining entitlements to attend and vote atthe Meeting. EXPLANATORY MEMORANDUM This Explanatory Memorandum has been prepared for the information ofShareholders in connection with the business to be considered at the annualgeneral meeting of Shareholders to be held at the Sandalwood Room, Ground Floor,Holiday Inn City Centre, 788 Hay Street, Perth, Western Australia at 10.00 am(WST) on Thursday 30 November 2006. The Explanatory Memorandum should be read in conjunction with the accompanyingNotice of Meeting. For the assistance of Shareholders, a glossary of definedterms is included at the end of the Explanatory Memorandum. Full details of the business to be considered at this Annual General Meeting areset out below. 1. Resolution 1 - Adoption of Remuneration Report The remuneration report of the Company for the financial year ended 30 June 2006is set out on pages 14 to 19 of the Company's 2006 annual report. Pursuant to the Corporations Act, a resolution that the remuneration report beadopted must be put to vote at the Company's annual general meeting. The voteon this resolution is advisory only and does not bind the directors or theCompany. However, the Board will take the outcome of the vote intoconsideration when reviewing the remuneration practices and policies of theCompany. 2. Resolutions 2 and 3 - Re-election of Directors It is a requirement under the Company's constitution that Mr Adrian Griffin, whowas appointed to fill a casual vacancy on 1 December 2005, retires at the AnnualGeneral Meeting. Mr Griffin, being eligible for re-election pursuant to theCompany's constitution, offers himself for re-election. The remaining Directors recommend to shareholders that Mr Griffin be re-elected. It is a requirement under the Company's constitution that Ms Melissa Sturgessretires by rotation at the Annual General Meeting. Ms Sturgess, being eligiblefor re-election pursuant to the Company's constitution, offers herself forre-election. The remaining Directors recommend to shareholders that Ms Sturgess bere-elected. 3. Resolution 4 - Ratification of a convertible note issue 3.1 Listing Rule 7.4 The Company seeks shareholder approval and ratification for the issue on 22 June2006 of 1,000 convertible notes (convertible into Shares in the capital of theCompany) with an aggregate face value of GBP 1 million to Westpac CustodianNominees Ltd for the purposes of Listing Rule 7.4. The Notes, which are unsecured, attract a yield of 8 per cent, payable quarterlyin arrears, from the issue date of 22 June 2006 to the maturity date of 22 June2010. Each of the Notes may be converted into 2,778 Shares in the Company, at any timeuntil 22 June 2010, at a conversion price of GBP 0.36. In the event of any reorganisation (including consolidation, bonus issues, sharesplits) of the issued capital of the Company, the Notes will be reorganised inaccordance with the Listing Rules. Application will not be made for official quotation of the Notes on ASX. TheCompany will apply for official quotation of Shares issued pursuant to theconversion of the Notes, in accordance with the Listing Rules. Upon a change of control resulting from the acquisition of more than 50 per centof the Company's Shares, the Note holders can require the Company to repurchasethe Notes at a price equal to 101 per cent of the principal amount plusinterest. From 12 months after the issue date, the Company can call the Notesfor conversion if the 20-day average price of its Shares is at least GBP 0.55.The Notes are transferable. The purpose of seeking shareholder approval and ratification of the issue of theNotes is to effectively reinstate the maximum limit under the Listing Rules onthe number of securities that the Company may issue in any 12 month periodwithout shareholder approval. 3.2 Disclosure Requirements Set out below is the information required to be disclosed in relation to theNotes in compliance with Listing Rule 7.5: a) The Company issued 1,000 Notes with each Note being convertible (at a priceof GBP 0.36 per Share) into a maximum of 2,778 Shares (subject to anyadjustments in accordance with the terms and conditions of the Notes) on orbefore 22 June 2010. b) Each Note was issued with a face value of GBP 1,000. The aggregate facevalue of the Notes is GBP 1,000,000. The Notes are convertible into Shares at aprice of GBP 0.36 per Share. c) The terms of the Notes are set out in section 3.1 of this ExplanatoryMemorandum. Any Shares allotted and issued on conversion of the Notes will rankequally with all existing Shares. d) The Notes were issued to Westpac Custodian Nominees Ltd. e) The funds raised from the issue of the Notes will be used to advanceexploration activities in relation to the Company's Bosele fissure project inSouth Africa and for working capital to assess other opportunities. No fundswill be raised from the issue of Shares on conversion of the Notes. 4. Resolution 5 - Issue of Shares to Adrian Griffin under the Share Plan 4.1 Details of proposed Share issue The Company proposes to issue Shares to Adrian Griffin, a director of theCompany, in accordance with the terms of the Share Plan. The proposed issue ofShares under the Share Plan is intended to: a) provide an appropriate and adequate incentive for the Recipient Director; b) ensure that the Company may retain the services of the Recipient Director;and c) reinforce the commitment of the Recipient Director to the Company. The Recipient Director will only benefit from an issue of Shares under the SharePlan when there is an improvement in the Company's share price since the date onwhich he was offered the Shares. Resolution 5 seeks shareholder approval for the issue of 1,000,000 Shares to theRecipient Director. The number of Shares proposed to be issued to the Recipient Director reflectsthe level of commitment provided or to be provided by him to the Company, takinginto account his responsibilities and time commitments. The number of Sharesproposed to be issued to the Recipient Director also reflects the value theBoard feels that the Recipient Director brings to the enhancement of theCompany. The issue price of the Shares offered to the Recipient Director under the SharePlan is $1.00, being greater than the weighted average price of shares on ASXduring the 5 day trading period immediately before 22 December 2005, the date ofthe offer, which was $0.61. The Shares to be issued pursuant to Resolution 5 may not be transferred orotherwise dealt with and will not be quoted until the later to occur of thefollowing: a) the loan amount in respect of the relevant share has been repaid; and b) in respect of: (i) one third of the Shares issued under the offer, 12 months after the date ofissue of the Shares; (ii) another one third of the Shares issued under the offer, 24 months after thedate of issue of the Shares; and (iii) the remaining one third of the Shares issued under the offer, 36 monthsafter the date of issue of the Shares. The Shares to be issued pursuant to Resolution 5 are in addition to the fee andremuneration package payable by the Company to the Recipient Director. Incalculating the fee and remuneration package provided to the Recipient Directoras set out in section 4.2(h) of the Explanatory Memorandum, the Board has takeninto consideration the issues of securities proposed in Resolution 5. The Boardconsiders that the appropriate remuneration package for the Recipient Directorcomprises both the remuneration set out in section 4.2(h) of the ExplanatoryMemorandum and the securities to be issued if Resolution 5 is passed byshareholders. Given the size of the Company, the Board considers it appropriatefor part of the remuneration package to comprise non-cash, incentive-basedremuneration. 4.2 Chapter 2E of the Corporations Act Chapter 2E of the Corporations Act prohibits the Company from giving a financialbenefit to a related party of the Company unless either: a) the giving of the financial benefit falls within one of the nominatedexceptions to the provisions; or b) prior shareholder approval is obtained to the giving of the financialbenefit. For the purposes of Chapter 2E, the Recipient Director is a related party andthe issue of Shares to the Recipient Director and provision of a loan by theCompany to the Recipient Director to fund payment of the subscription price forthe Shares constitutes the giving of a financial benefit. Accordingly,Shareholder approval is required. In accordance with the requirements of Chapter 2E, and in particular withsection 219, of the Corporations Act, the following information is provided toShareholders to allow them to assess the proposed issue of Shares to theRecipient Director and the provision of a loan by the Company to the RecipientDirector to fund payment of the subscription price for the Shares: a) the Recipient Director is a related party of the Company to whom proposedResolution 5 would permit the financial benefit to be given; b) the nature of the financial benefit to be given to the Recipient Director isthe issue of 1,000,000 Shares and a loan in respect of those Shares, being$600,000, based on the last sale price of Shares before the Notice of Meetingwas lodged with ASIC, under the Share Plan; c) it is proposed that the Shares to be issued under the Share Plan will beissued on one date within 12 months from the date of the Annual General Meeting,but the Company reserves its right to issue the Shares progressively; d) the terms of the Share Plan (approved by shareholders on 30 November 2005),under which Shares will be issued to the Recipient Director, are summarised inSchedule 1 to this Explanatory Memorandum; e) initially no funds will be raised by the issue of Shares to the RecipientDirector under the Share Plan due to the provision of the Loan to the RecipientDirector. However, when the Loan has been repaid, the funds raised by the issueof the shares will be used for working capital purposes, as the Board thinksfit; f) as at the date of this Notice, the capital structure of the Company is asfollows: Capital Number Ordinary shares 92,737,135 Options (unquoted) ($0.52 exercisable on or before 30 1,100,000June 2007) Options (unquoted) ($0.87 exercisable on or before 30 250,000June 2009) Options (unquoted) ($1.00 exercisable on or before 30 1,250,000June 2009) Convertible Notes (unquoted) (each convertible into a 1,000 (convertible into 2,778,000 Shares)maximum of 2,778 shares at GBP0.36 per share on orbefore 22 June 2010) Total ordinary shares if all options and convertible 98,115,135notes on issue are exercised If Shareholders approve Resolution 5 and all 1,000,000 Shares in relation toResolution 5 are issued under the Share Plan, as contemplated by this Notice,the issued capital of the Company would be as follows: Capital Number Ordinary shares 93,737,135 Options (unquoted) ($0.52 exercisable on or before 30 1,100,000June 2007) Options (unquoted) ($0.87 exercisable on or before 30 250,000June 2009) Options (unquoted) ($1.00 exercisable on or before 30 1,250,000June 2009) Convertible Notes (unquoted) (each convertible into a 1,000 (convertible into 2,778,000 Shares)maximum of 2,778 shares at GBP0.36 per share on orbefore 22 June 2010) Total ordinary shares if all options and convertible 99,115,135notes on issue are exercised If Shareholders approve the issue of 1,000,000 Shares to the Recipient Directorunder the Share Plan, the effect will be to dilute the shareholding of existingmembers by approximately 1.06%, based on the existing number of Shares as at thedate of this Notice, or 1.00% based on the existing number of Shares as at thedate of this Notice and assuming all existing options and convertible notes areexercised. g) as at the date of this Notice, the Recipient Director does not hold anysecurities in the Company (whether directly or indirectly). If Shareholders approve Resolution 5 and all Shares are issued as contemplatedby this Notice, the Recipient Director will hold the following securities in theCompany, representing 1.08% of the issued capital of the Company based on theexisting number of Shares as at the date of this Notice, or 1.02% based on theexisting number of Shares as at the date of this Notice and assuming allexisting options and convertible notes are exercised: Recipient Director Number of Shares Number of Shares Number of Options Number of held Directly held Indirectly held Directly Options held Indirectly Adrian Griffin 1,000,000 nil nil nil h) details of the Recipient Director's remuneration for the year ended 30 June2006 (based on information extracted from the Company's 2006 Annual Report) areas follows: Recipient Directors' Salary Superannuation Non-monetary Equity Total ($)Director Fees ($) ($) ($) benefits ($) Options ($) Adrian Griffin 20,417 83,653 9,366 nil nil 113,436 Details of the estimated remuneration payable to the Recipient Director for theyear beginning 1 July 2006 are as follows: Recipient Directors' Salary Superannuation Non-monetary Equity Total ($)Director Fees ($) ($) ($) benefits ($) Options ($) Adrian Griffin 35,000 125,000 14,400 - 44,000 354,400 i) the subscription price at which 1,000,000 Shares may be issued to theRecipient Director under the Share Plan will be $1.00 per Share (being greaterthan the weighted average price of Shares on ASX over the 5 trading daysimmediately before the date on which the Recipient Director was offered theShares, which was $0.61), with the subscription price being loaned to theRecipient Director on the key terms set out in Schedule 1, in accordance withthe terms of the Share Plan; j) during the last 12 months before the date of lodgement of this Notice withthe ASIC, the highest trading price of the Shares was $0.945 on 13 March 2006and the lowest trading price of the Shares was $0.49 on 28 August 2006. Therehave been no market sales Company's Shares over the 5 days of trading on ASX upto and including 13 October 2006 being the day this Notice of Meeting was lodgedwith the ASIC. The last sale price of the Shares before this Notice of Meetingwas lodged with the ASIC, was $0.60 per Share on 5 October 2006; k) assuming a market price on the date of repayment of the loan of $0.60, beingthe last sale price before the date of lodgement of this Notice with ASIC, theCompany will receive $600,000 from the issue of the 1,000,000 shares under theShare Plan; l) the primary purpose of the issue of the Shares to the Recipient Directorunder the Share Plan is to provide an incentive to the Recipient Director.Given this purpose, the Directors do not consider that there is any opportunitycost or benefit foregone to the Company in issuing the Shares proposed byResolution 5; m) the issue of securities to the Recipient Director is a more cost effectiveincentive for the Company as opposed to the payment of cash compensation; n) Adrian Griffin has a material personal interest in the outcome of Resolution5, as the recipient of the Shares proposed to be issued; o) the Recipient Director does not wish to make a recommendation to Shareholdersabout Resolution 5 because he has an interest in the outcome of some of thatResolution, as set out in paragraph (n) above; p) a valuation of the Shares proposed to be issued to the Recipient Directorunder the Share Plan has been calculated by the Company using the Black andScholes option pricing model and based upon the following assumptions: - the underlying value of each share in the Company is based on the closingshare price of $0.60 as at 11 October 2006; - Risk free rate of return -5.8% (based on the 180 day bond indicator rate as at11 October 2006); - share price volatility of 60%; - issue price of the Shares of $1.00; - the Shares may not be transferred or otherwise dealt with, and will not bequoted on ASX or AIM, until the following conditions are met: A. in respect of one third of the Shares issued under the offer, the expiry of12 months from the date of issue of the Shares; B. another one third of the Shares issued under the offer, the expiry of 24months from the date of issue of the Shares; C. the remaining one third of the Shares issued under the offer, the expiry of36 months after the date of issue of the Shares; and D. any loan in respect of the Shares is repaid. Based on the above factors, the Black and Scholes Option Pricing Modelattributes a theoretical value to each Share of $0.18. The Black and Scholes Option Pricing Model assumes that the equity instrumentsthe subject of the valuation can be sold on a secondary market. The terms andconditions of the Share Plan states that no application will be made for theShares to be listed for official quotation on ASX or AIM, until certainmilestones are met. Accordingly a discount for lack of marketability isrequired to determine an indicative fair value of the options. In arriving at adiscount factor of 30%, the Company considered: - that discounts have traditionally been applied in the range of 10-30% toreflect the non-negotiability of unlisted equities; and - the fact that the securities will be unlisted. The Company has calculated an indicative fair value of the Shares, based on adiscount factor of 30% applied to the theoretical valuation of the Shares, of$0.126. The total value of the Shares to be issued to the Recipient Directorunder the Share Plan is deemed to be $126,000. q) additional information in relation to Resolution 5 is set out throughout thisExplanatory Memorandum. Shareholders should therefore read the ExplanatoryMemorandum in its entirety before making a decision on how to vote on Resolution5; r) the Company will incur no liabilities or costs in respect of the proposedissue of the Shares to the Recipient Director other than: (i) the fees payable to ASX or AIM for quotation of the shares. At the ratesapplying at the date of this notice, these fees would be approximately $3,943.However, these fees will not be payable until after the Loan in respect of theShares has been repaid; (ii) a value equal to the weighted average trading price of shares on theRelevant Stock Market in the five days immediately before the date of valuation,will be included as wages for the purposes of the Pay-roll Tax Act 2002 (WA),Pay-roll Tax Assessment Act 2002 (WA) and the Taxation Administration Act 2003(WA). If this value in addition to other wages paid or payable by the Companyduring a month is in excess of the monthly pay-roll tax threshold, the Companymay be required to register for pay-roll tax in the relevant jurisdiction. Ifthis value in addition to other wages that are taxable in the jurisdiction is inexcess of the annual pay-roll tax threshold, the Company will have a liabilityin respect of pay-roll tax in that jurisdiction; (iii) the cost of the Shares will be expensed through the Company's incomestatement in accordance with AASB2 Share Based Payments; and s) neither the Board nor the Company is aware of any other information thatwould reasonably be required by Shareholders in order to decide whether it is inthe best interests of the Company to pass Resolution 5, other than as stated inthis Explanatory Memorandum. 4.3 Listing Rule 10.14 Listing Rule 10.14 provides, in essence, that the approval of ordinaryshareholders by ordinary resolution is required before any of the followingpersons can acquire securities under an employee incentive scheme: a) director; b) an associate of a director; or c) a person whose relationship with the company or a related party is, in ASX'sopinion, such that approval should be obtained. The Recipient Director is a Director of the Company for the purpose of ListingRule 10.14. Accordingly, in order for the Recipient Director to acquire Sharesunder the Share Plan, the Company must obtain Shareholder approval pursuant toListing Rule 10.14. 4.4 Listing Rule Disclosure Requirements In accordance with Listing Rule 10.15, the following information is provided toShareholders in relation to Resolution 5: a) Adrian Griffin is a Director of the Company; b) the maximum number of Shares that may be issued to Adrian Griffin underResolution 5 is 1,000,000 Shares; c) No person referred to in Listing Rule 10.14 received any securities under theShare Plan since the date of the last approval; d) directors, full-time and part-time employees of, and consultants to, theCompany or any of its subsidiaries, may participate in the Share Plan; e) it is proposed that the Shares will be issued on one date within 12 monthsfrom the date of the Meeting, but the Company reserves its right to issue theShares progressively; f) the issue price of the shares being issued under the Share Plan is $1.00,being greater than the weighted average price of Shares on ASX over the 5trading days prior to 22 December 2005, which was $0.61; g) subject to compliance with the AIM Rules and Listing Rules, the Shares to beissued to Adrian Griffin pursuant to Resolution 5 will not be quoted on theRelevant Stock Market and may not be transferred or otherwise dealt with untilthe later to occur of the following: (i) the loan in respect of those Shares has been repaid; and (ii) in respect of: A. one third of the Shares issued under the offer, 12 months after the date ofissue of the Shares; B. another one third of the Shares issued under the offer, 24 months after thedate of issue of the Shares; and C. the remaining one third of the Shares issued under the offer, 36 months afterthe date of issue of the Shares; h) other than the restriction on trading referred to above, the Shares issuedpursuant to Resolution 5 will rank equally with all other Shares on issue; i) the Company will provide a loan to Adrian Griffin in relation to acquisitionof the Shares under the Share Plan. The loan is repayable within 4 years fromthe date of issue of the Shares. The other terms of the loan are set out inSchedule 1 to this Explanatory Memorandum; j) a summary of the terms of the Share Plan is set out in Schedule 1 of thisExplanatory Memorandum; and k) initially no funds will be raised by the issue of Shares due to the provisionof the Loan to the Recipient Director. However, when the Loan has been repaid,the funds raised by the issue of the Shares will be used for working capitalpurposes of the Company as the Board thinks fit. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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