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Anchor Resources to issue up to S$10m in convertible notes to repay bonds, fund working capital

MALAYSIAN goldmine operator Anchor Resources Limited is proposing to issue up to S$10 million in unsecured redeemable equity-linked notes (RELN) to repay existing bonds when due and to fund working capital, it said in a regulatory filing on Tuesday night.

The company said Advance Opportunities Fund (AOF) and Advance Opportunities Fund I have agreed to subscribe for the notes which are due 2022 and carry interest of one per cent per annum, payable semi-annually.

The notes can be converted into shares of the company at a 10 per cent discount to the stock's volume weighted average price (VWAP) for the business day before the date of the company’s receipt of the conversion notice, subject to a minimum initial conversion price of S$0.015 per share and a certain maximum number of shares.

They will be issued in three tranches. The first, with a principal amount of S$3 million, will be drawn down in one single tranche, with the net proceeds of approximately S$2.41 million used to repay existing guaranteed non-convertible bonds maturing on  April 3, 2019. The maximum number of conversion shares for this tranche will be 200 million shares.

The subscription of the second and third tranches are at Anchor Resources' option. They will be issued in principal amounts of S$3.5 million each and comprise seven sub-tranches of S$500,000 each. The proceeds will be used to repay up to S$3.91 million in guaranteed bonds due on September 2021 - if the company does not have other funding options - with the balance going to defray expenses and fund the group’s general working capital. The maximum number of conversion shares that may be issued for each of the second and third tranches is 233.3 million shares.

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Based on the minimum conversion price of S$0.015 per share and assuming all three tranches are issued and fully converted, the maximum number of conversion shares is 666,666,666. This would represent approximately 61 per cent of the company's existing share capital and about 38 per cent of its enlarged share capital. 

Anchor Resources said AOF and AOF I are subscribing to the RELN for “investment purposes only” and have no intention of influencing the management of, or exercising control over the company. They will also not be entitled to conversion rights if the conversion shares exceed 15 per cent of the enlarged share capital of the company, unless the company's written consent has been obtained.

The company said net proceeds from the issue will come to approximately S$9.29 million, 68 per cent of which will be used to repay all of the group’s outstanding bonds when due, with the balance going to defray issue expenses and fund general working capital.

Lim Chiau Woei, managing director of Anchor Resources, said: “We are on the path of turning around where our gold and granite business segments are progressing well. The financing will allow the group to fully repay its outstanding bonds as well as provide fresh funding to finance working capital for our gold mining, granite stone mining and aggregates quarrying businesses."

The company's shares last traded at 2.3 Singapore cents apiece, down 0.2 cent on Tuesday.

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