Condor Gold PLC (AIM:CNR, TSX:COG, OTC:CNDGF) has announced plans to raise up to £4.2mln from an issue of loan notes to a company owned by its chairman, Jim Mellon, and by an open offer to qualifying shareholders.
The net proceeds of the fundraise after expenses will principally be used by the company to finance working capital requirements at its operations in Nicaragua, including keeping the concessions and permits in good standing, to pay the balance of US$300,000 for the SAG Mill, to re-register land title and for head office expenses.
The company said it has raised £1mln through the issue of unsecured convertible loan notes with warrants attached to Galloway Limited, an 18.7% shareholder, which is wholly owned by Burnbrae Group Limited, in turn, wholly owned by Jim Mellon, Condor's chairman.
Furthermore, Condor said it intends to launch an open offer providing pre-emptive rights to qualifying shareholders to subscribe for 1 new ordinary share of £0.001 each for every 6 ordinary shares held at the record date at a subscription price of £0.15 per new ordinary share for gross proceeds of up to £3.2mln.
Closing of the open offer is subject to shareholder approval of a sub-division of each of the company's existing ordinary shares of £0.20 into one ordinary share of £0.001 and one deferred share of £0.199.
In a statement, Mellon, commented: "I am pleased to support the fundraise with a commitment of £1 million, which the company has already received. I encourage existing shareholders to take up their pre-emptive rights under the open offer of 1 new share for every 6 shares held.
"The company's La India Project is almost construction ready, with the key permits to construct and operate a mine, a bankable feasibility study completed, a SAG Mill and surface rights purchased. Initial production is targeted at 100,000 oz gold p.a. with an expansion to 150,000 oz gold p.a. The strategy recently announced is for the company to sell the assets. The fundraise allows the company to enter a sale phase sufficiently funded".
The loan notes will automatically convert into new ordinary shares at £0.15 each if at least £1mln is raised under the open offer from shareholders other than Galloway.
The unsecured loan notes have a 17% annual coupon attached, payable in cash or by the issue of further loan notes at Galloway's option and are repayable by the company 12 months after the date of issue assuming they are not converted earlier.
They have a 2.5 for 1 warrant attached, resulting in the issue of warrants over 16,666,666 new ordinary shares and upon full exercise of the warrants a subscription of £2.5mln. The warrants have an exercise price of £0.15 and an 18-month term.
As a condition of the subscription for the loan notes, Denham Eke, will be appointed (subject to normal regulatory approvals) to the Condor board as a non-executive director.