Silkroad Nickel enters into placement agreement with Ganfeng Lithium unit

SILKROAD Nickel and its wholly-owned unit FE Resources (FER) has entered into a subscription agreement with GFL International Co - a wholly-owned subsidiary of Ganfeng Lithium Co - that will see GFL subscribing for US$15 million in exchangeable bonds.

The bonds have an interest rate of 7 per cent per year and a maturity date of three years from the date of issuance.

GFL will also have the right to exchange all of the bonds for a 25 per cent stake in FER during a stipulated time frame. In addition, FER has granted GFL an option to purchase newly-alloted shares in FER at an option price of US$15 million, though the option may only be exercised in conjunction with the exchange. If both are exercised, this would result in GFL owning 50 per cent of the total enlarged issued share capital of FER.

Following the signing of the subscription agreement, which was first announced on May 28, GFL has proposed a fresh investment of US$2 million by way of subscription of new shares in the company. "The company was informed by GFL that the relevant authorities in China require GFL, in addition to GFL's investment in the exchangeable bonds, to be a shareholder in the company," Silkroad said in a separate filing to the Singapore Exchange on Tuesday.

Therefore, Silkroad has entered into a supplemental agreement with FER and GFL as well as a placement agreement with GFL, under which GFL has agreed to subscribe for 6 million new shares at an issue price of S$0.44. The placement price represents a premium of about 10.6 per cent to the volume weighted average price of S$0.398 per share based on trades done on the Singapore Exchange on June 21 and up to the signing of the placement agreement on June 22.

The placement shares represent around 2.3 per cent of the existing issued and paid up share capital of the company and will comprise 2.25 per cent of the enlarged capital after the proposed placement.

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The net proceeds from the proposed placement would stand at around S$2.62 million, which will go towards expanding the group's upstream and downstream developments in Indonesia; refinancing existing debt; and funding general working capital requirements.

Shares in Silkroad closed at 40 Singapore cents on Tuesday, up 1.5 cents or 3.9 per cent.