Caerus Mineral Resources PLC (LSE:CMRS) announced that shareholder EV Metals Group PLC (EVM) has entered into a subscription agreement with the company under which it may subscribe for unsecured convertible loan notes for up to £625,000.
The exploration and resource development company, which is focused on developing mineral resources to support the global 'Clean Energy' initiative, said that should it require EVM to subscribe for the total subscription amount, EVM's resulting holding in Caerus would be 29.9%.
The company noted that the funds raised from the convertible loan notes, which have a conversion price of 7.5p, shall be used to support its general working capital requirements and help accelerate opportunities created through its EVM alliance.
As a result of the alliance, the company said it is in ongoing discussions regarding opportunities to enhance its license portfolio, with these opportunities wholly aligned with Caerus' strategic focus of developing mineral resources that support the clean energy transition.
The subscription agreement with EVM provides that at any time during the 12-month period from 29 November 2022, Caerus may require EVM to subscribe for unsecured convertible loan notes. Initially, it may request EVM to subscribe for convertible loan notes with a value of at least £325,000 and up to the total subscription amount of £625,000.
If the initial subscription is less than the total subscription amount, the company will have the right to require EVM to undertake a second subscription for convertible loan notes for the difference.
The convertible loan notes to be issued under the subscription agreement are unsecured and shall not accrue any interest. They are required to be redeemed within 12 months from the date on which any notes are issued. EVM, as the noteholder, may elect at any time up to the maturity date to convert the notes into shares in the company at an agreed conversion price of 7.5p.
EVM is already a significant shareholder of Caerus, holding, as of 28 November 2022, approximately 16.34% of the voting rights of the company.
The independent directors of Caerus have determined that the terms of the proposed transaction are fair and reasonable and in the best interest of its shareholders other than EVM. In particular, they noted that the conversion price of the notes represented a premium to the current share price of Caerus and would provide important funding for the company.
In early trading on Wednesday, Caerus shares were changing hands for 6.50p, up 13% on Tuesday's closing price.