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Red Rock Resources - Columbia Update

RNS Number : 8143U
Red Rock Resources plc
23 January 2017
 

Red Rock Resources plc

 

("Red Rock" or the "Company")

 

Colombia Update

 

23 January 2017

 

Further to the announcement of 5 September 2016, Red Rock announces an update in relation to the sale of certain assets including the Company's wholly owned subsidiary American Gold Mines Ltd ("AGM"), the 50.1% shareholder of the El Limon gold mine, Colombia ("Sale").

 

Highlights:

 

·     Red Rock gave Promissory Note Conversion Notice to Colombia Milling Limited ("CML")

·     CML has not acknowledged Promissory Note Conversion Rights

·     Further Dispute exists in relation to Red Rock's Net Smelter Return Royalty ("Royalty")

·     Red Rock has now submitted a Request for Arbitration to the International Chamber of Commerce ("ICC")

·     Red Rock seeks Reliefs including Damages, Declaration of Anticipatory Breach and Realization of Security over AGM Shares

 

Summary:

 

In relation to the US$1,000,000 Promissory Note from CML held by Red Rock (the "Note"), Red Rock has given notice that it wished to exercise its right of conversion of the Note into shares in Para Resources Inc ("PRI") (CVE:PBR) listed in Canada

 

Further, CML/PRI have stated an intention to pay Red Rock's Royalty on gold produced only from gold produced from underground at El Limon and not including gold produced from the mine's processing plant that is derived from material sourced outside the license boundaries. Red Rock is seeking to ensure that the Royalty covers all ores processed by the gold processing plant included in the Sale of the El Limon mine and located at the mine, as originally intended by the parties. 

 

Neither CML nor PRI have acknowledged the existence of and exercise of Red Rock's right of conversion of the Note, and CML/PRI have denied the correctness of the Company's interpretation of the Royalty formula.  Red Rock has therefore submitted a Request for Arbitration to the ICC in order to resolve these issues.

 

Red Rock seeks reliefs including a declaration of anticipatory breach, the realization of its security over the AGM shares by re-registering them into its own name, damages of between CAD3.4m and CAD4.5m, and interest.  As in any proceedings, the making of a claim carries no certainty of a successful outcome, and in the event of success the value claimed may not be the value awarded.      

 

Further updates will be provided in due course.

 

Red Rock Chairman Andrew Bell comments: "As stated at our AGM in December, the Company intends to pursue its rights in relation to the sale of its gold assets at El Limon in Colombia.  The sale agreement signed by CML was intentionally structured in such a way as to allow the new owners to defer a significant amount of the consideration in the form of a Promissory Note and net smelter return royalties, while they immediately invested these savings in the underground mine and in improved gold production capabilities at the plant.  Were CML to succeed in its stated intention to put them into a public vehicle, Red Rock was to share the benefit from this early liquidity event through a right to convert the Note into shares into the listed entity.    

 

CML has completed the plant upgrades taking advantage of the deferred consideration, and PRI, a listed entity in Canada and investor in CML, has acquired the entirety of the assets sold by Red Rock.  CML and PRI are now refusing to adhere to the clause that would allow conversion of the Note into listed shares while simultaneously interpreting the royalty in a way that would stretch the timeline of payments. 

 

This is unacceptable to Red Rock and the Company is now pursuing arbitration on these issues through the ICC in Paris to protect its rights and to obtain for our shareholders the full value of the agreements.  

 

We look forward to an early resolution of these matters and will provide more information as it becomes available."

 

For further information, please contact:

 

Andrew Bell 0207 747 9990                                                       Chairman Red Rock Resources Plc

Scott Kaintz 0207 747 9990                                                        Director 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


This information is provided by RNS
The company news service from the London Stock Exchange
 
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