Paragon Resources PLC Strategy Change and Issue of Convertible Loan Note (1947S)

TIDMPAR

RNS Number : 1947S

Paragon Resources PLC

22 September 2014

Paragon Resources PLC

("Paragon" or the "Company")

(AIM: PAR)

Update on the Company's investing strategy, issue of convertible loan notes and potential transaction

Update on the Company's investing strategy

Over the past 15 months and in accordance with the Company's investing policy approved by Shareholders on 19 June 2013, the board of Directors (the "Board") has investigated multiple investment opportunities in the agricultural sector that have absorbed a significant amount of management time. Despite many potentially attractive projects having been identified and assessed by the Board, none was considered to be sufficiently attractive to progress. In the course of these investigations, the Board identified a project and has now entered into a Memorandum of Understanding ("MOU") in relation to its acquisition (the "Potential Transaction") as more fully described below which, while subject to Shareholder consent, involves the Company re-focusing its operations on the minerals and natural resources sector. The project is particularly attractive because it requires a relatively modest capital outlay but is expected to generate positive cash flows rapidly. Due to this, it is the Board's view that the project will deliver greater value to Shareholders than continuing to seek investment opportunities in the agricultural sector.

The Company's Ordinary Shares of 0.05 pence each ("Ordinary Shares") will remain suspended on AIM until 26 September 2014 whereupon trading on AIM will be cancelled . Subject to the completion of the Potential Transaction, it is the Board's intention to apply for the admission of the Company's Ordinary Shares to trading on AIM as soon as possible thereafter.

Issue of convertible loan notes

In connection with the Potential Transaction, the Company is pleased to announce that it has agreed a new convertible loan note financing facility with various parties (the "Noteholders"), to provide working capital funding (the "Facility"). The terms of the Facility are as follows:

   --     A total facility amount of up to GBP150,000, GBP20,000 of which has been drawn down; 
   --     Interest payable at 8% per annum on all drawn balances; 
   --     Unsecured.

The outstanding balance of the Facility will automatically be converted into Ordinary Shares at a conversion price equal to 83.33% of the price (the "Conversion Price") that any new Ordinary Shares are issued for cash and conditional on admission to trading on AIM of the Company's Ordinary Shares ("Conversion on Admission"). It is agreed that the Facility will not be repayable in cash. If Conversion on Admission has not occurred before 30 June 2015, then on that date the outstanding balance of the Facility will be converted into Ordinary Shares at a conversion price of GBP0.0015 pence per Ordinary Share (the "Alternative Conversion").

On Conversion on Admission, the Noteholders will receive warrants to subscribe for new Ordinary Shares on the basis of 1 warrant for every 1.25 new shares received by way of Conversion on Admission, such warrants to be exercisable within 5 years from the date of grant at the Conversion Price (the "Warrants"). On Alternative Conversion, the Noteholders will receive warrants to subscribe for new Ordinary Shares on the basis of 1 warrant for every 1.25 new Ordinary Shares received by way of the Alternative Conversion, such warrants to be exercisable within 5 years from the date of grant at a price of GBP0.0015 pence per Ordinary Share.

Interest is payable in cash on the earlier of Conversion on Admission or Alternative Conversion.

Potential Transaction

The Company is delighted to announce that it has entered into the MOU relating to the Potential Transaction.

The MOU is between Paragon Resources plc and Tana Minerals Pty Limited ("Tana"). Tana management has been involved for several years with a potentially high grade rare earth (REE) project in central Madagascar which it wholly owns through its subsidiary MRE Mining (Mauritius) Limited ("MRE"). It has a long history of artisanal mining of bastnaesite, a major rare earth mineral, which outcrops over an extensive area and occurs as coarse grained crystals. There are several REE deposits associated with carbonatite and microsyenite intrusives along kilometre-scale regional structures. This style of geological setting elsewhere has hosted world class producing mines.

The project covers a large area with the potential for bulk tonnage, high grade rare earth mineral deposits as well as evidence of several other styles of mineral deposits including base metals and dimension stone that have excellent potential for securing early cashflows. The widespread occurrence at surface and coarse nature of the rare earth mineralisation suggests that relatively early production of concentrates could be achievable.

The Potential Transaction will involve Paragon acquiring MRE in exchange for the issue of new Ordinary Shares in Paragon and raising new equity capital to develop the project.

The Board of Paragon intends to send a notice of a general meeting of the Company to shareholders during the final quarter of 2014, and complete the transaction as soon as possible.

Simon Hunt, Executive Chairman of Paragon said "whilst the Potential Transaction involves the Company reverting to its previous operational sector, the Board has concluded that this is the best way forward for the Company through the acquisition of a potentially very valuable project with follow on projects to look at in the near future. I am pleased to have found a solution which we hope will deliver significant value to Shareholders".

ENDS

For further information, please contact:

 
Paragon Resources PLC       Allenby Capital Limited 
 Simon Hunt                  (Nominated Adviser and Broker) 
 (Chairman)                  Nick Harriss/David Hart/James Reeve 
 +44 (0)7733 337 755         +44 (0)20 3328 5656 
 www.paragon-resources.com   www.allenbycapital.com

This information is provided by RNS

The company news service from the London Stock Exchange

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