MERGER WITH AMUR ZOLOTO

GOLD PRICE:

Not for release, publication or distribution, in whole or in part, in or into the United States, Australia, Canada, Hong Kong, Japan, New Zealand, South Africa, South Korea, Switzerland or in any other jurisdiction where it may constitute a violation of the relevant laws of such jurisdiction

Kopy Goldfields AB (publ) (“Kopy Goldfields” or the “Company”) has entered into a conditional agreement (the “Agreement”) with HC Alliance Mining Group Ltd. (“HCAM”) and Lexor Group SA (“Lexor” and together with HCAM, the “AZ Shareholders”) where Kopy Goldfields acquires 100 percent of the shares of Amur Gold Company Limited (“Amur Zoloto”), a mid-sized gold producing company based in Russia, through a reverse takeover (the “Transaction”).

Transaction summary

  • The total consideration for 100 percent of the shares of Amur Zoloto is 782,179,706 shares in Kopy Goldfields. The number of new shares to be issued is based on a negotiated Equity Value of Amur Zoloto of SEK 1.1 billion (US$119.61 million);
  • The implied subscription price of SEK 1.46 per share implies a transaction premium of 54 percent to the three month volume weighted average price of Kopy Goldfields’ share at Nasdaq First North Growth Market in Stockholm, Sweden (“Nasdaq First North”) to the closing price on the day preceding this announcement;
  • The Transaction is structured as a contribution in kind where the AZ Shareholders contribute 100 percent of the shares in Amur Zoloto in exchange for a total of 782,179,706 shares in Kopy Goldfields, whereby the AZ Shareholders will hold approximately in total 88 percent of Kopy Goldfields after the completion of the Transaction;
  • Shareholders representing approximately 30 percent of Kopy Goldfields’ current outstanding share capital have undertaken to vote in favour of the proposed Transaction;
  • The Transaction is subject to (i) shareholder approval at the annual general meeting of Kopy Goldfields on 30 June 2020 (the “AGM”) resolving to issue shares to the AZ Shareholders required for the Transaction (including changes to Kopy Goldfields’ articles of association), (ii) that Kopy Goldfields is approved to continue trading on Nasdaq First North and (iii) certain regulatory approvals such as merger control clearance;
  • Continuity of independent board, management and relevant committees is intended to be maintained post-closing. Eric Forss and Arsen Idrisov nominated as new directors to the Board;
  • The Transaction is expected to be completed in August 2020.

1) consideration has been established based on an exchange ratio USD/SEK of 9,52 as of 28 May 2020

 

Transaction rationale

Kopy Goldfields and Amur Zoloto believe that the Transaction represents a unique opportunity for shareholders of Kopy Goldfields and Amur Zoloto to benefit from the significant value accretion arising from their combined asset and project portfolios. The combined company will be positioned to deliver a strong production growth profile and exploration opportunities making it one of the leading Stockholm-listed gold exploration and production companies. The Transaction would further strengthen the development of Kopy Goldfields’ projects, including the Krasny Project (“Krasny”).

In addition, the shareholders of Kopy Goldfields would benefit from attractive value accretion with pro-forma EBITDA of the combined business being approximately SEK 229 million (or US$242million) in 2019.

The improved organic growth outlook of the combined business may be further enhanced by selective value-accretive mining asset acquisitions (if identified as beneficial for the Company) as well as delivering on a strategy to create a leading low-cost mid-cap Gold Exploration and Production group.

2) Aggregated EBITDA was calculated based on the Aggregated Statements in SEK and using the average FX rate for the period 01/01/2019-31/12/2019, with USD/SEK average at c.9.46.

EBITDA was calculated based on profit after tax, adjusted for financial items and depletion, depreciation and amortisation included in cost of sales, G&A and other operating expenses.

 

Structure and Conditions of the proposed Transaction

On 29 May 2020, Kopy Goldfields entered into a conditional agreement with the AZ Shareholders where Kopy Goldfields acquires 100 percent of the shares of Amur Zoloto for a total consideration of 782,179,706 new shares in Kopy Goldfields. The number of new shares to be issued is based on a negotiated Equity Value of Amur Zoloto of SEK 1.1   billion (US$119.6 million). The implied subscription price of SEK 1.46 per share implies a transaction premium of 54 percent to the three month volume weighted average price of Kopy Goldfields’ share at Nasdaq First North to the closing price on the day preceding this announcement.  The Transaction is structured as a reverse takeover whereby the AZ Shareholders, through a contribution in kind, contribute 100 percent of the shares in Amur Zoloto in exchange for a total of 782,179,706 shares in Kopy Goldfields at the subscription price of SEK 1.46 per share.

Kopy Goldfields will today issue a notice to the AGM where it is proposed that the AGM would resolve to issue the shares to the AZ Shareholders in exchange for the contribution of 100 percent of Amur Zoloto.

Shareholders representing approximately 30 percent of Kopy Goldfields’ current outstanding share capital have irrevocably agreed to vote in favour of the proposed Transaction at the upcoming AGM.

The Transaction is subject to the following conditions:

  • The AGM resolving to issue the consideration shares to the AZ Shareholders and amending Kopy Goldfields’ articles of association;
  • Nasdaq First North approving the combined company for listing and that a company description is announced by Kopy Goldfields;
  • Regulatory approvals such as merger control clearance;
  • Completion of confirmatory due diligence

When the final number of consideration shares have been registered with the Swedish Companies Registration Office , the total number of shares in Kopy Goldfields will increase from 103,825,869 to 886,005,575 and the share capital will increase from SEK 39,476,805.02 to SEK 336,878,175.62. As a result of the Transaction and the shares which will be issued as stated above, Kopy Goldfields’ existing shareholders will own 12 percent of the total number of shares .

 

Listing on Nasdaq First North Growth Market

Due to the Transaction, a new listing process of the combined entity on Nasdaq First North Growth Market is necessary. Kopy Goldfields’ has received information that its shares will be listed on the observation list until completion of the Transaction.

Listing on Nasdaq First North Growth Market

Exemption from the Mandatory Bid Requirement

The Swedish Securities Council has granted an exemption for HCAM from the mandatory bid obligation that otherwise would arise in connection with the completion of the Transaction.

More information about the transaction the can be found in the announcement press release.

Amur Zoloto is a mid-sized gold producing company based in Russia with assets in the Ayano-Maisjky District of the Khabarovsk region and is wholly owned by the AZ Shareholders. The mineral assets base of Amur Zoloto consists of a number of operating gold mines and assets under development (both hard rock and alluvial) with Proved and Probable Reserves of 0.98 Moz and M,I&I Resources of 1.42 Moz . Gold production in 2019 amounted to 52 koz at total cash costs of US$802/oz, and all-sustaining cash cost of US$1,030. Over January-April 2020,

Amur Zoloto produced 422 kg of gold (equivalent of 13.6 koz).

Over 2015-2019, the Company successfully developed a number of mines leading to an increase in production from 21 koz of gold in 2015 to 52 koz in 2019 with a gradual expansion of its reserve base. Most recently, the company commissioned a new processing line with 130 kt of ore annual capacity at the Yubileiny plant and plans to commission heap leaching plant within its Perevalnoye mine to process low-grade ore.

Given the portfolio of company’s exploration and development projects, Amur Zoloto is set to increase gold production organically.

Read more about Amur Zoloto here.

Q: What conditions are there for the transaction?

A: Firstly, continued listing of the combined business on Nasdaq First North Growth Market, secondly Kopy’s shareholders approving of the transaction on the AGM on 30 June 2020 and finally regulatory approvals. Exemption from mandatory bid requirement has been received from the Swedish Securities Council. And clearance from Russian antimonopoly service.

 

Q: Why should Kopy’s shareholders accept this transaction

A: Kopy’s extensive exploration portfolio and recognized competences in the Russian Eastern Siberia will benefit from joining efforts with AZ’s significant Russian Far East regional expertise, positive credit and investment track record, significant reserve base and strong cash generation. The transaction values Kopy at a premium of 54 percent to the three month volume weighted average price of Kopy Goldfields’ share at Nasdaq First North Growth Market in Stockholm, Sweden (“Nasdaq First North”) to the closing price on the day preceding the announcement, making it an attractive proposal.

Importantly, it transforms the revenue profile of the business and provides strong EBITDA and cash generation ability, which is to the benefit of all Kopy shareholders.

 

Q: Will you need any regulatory approval?

A: Yes, regulatory approvals, such as merger control clearance, are needed in Sweden. Currently, it is anticipated that the Regulatory submissions will be of an ordinary course of nature and that the transaction will complete in Q3.

For more information, please see the announcement press release.

 

29 May 2020

Notice to AGM

 

29 May 2020, 10.00 CEST

Conference Call for Investors, Analysts and Media

 

Prior to the AGM

Conditional approval of the combined company on Nasdaq First North and publication of company description

 

30 June 2020

AGM

 

In or around August

Completion of the Transaction

All dates are preliminary and may be subject to change

Mikhail Damrin, CEO Kopy Goldfields AB

Phone: +7 916 808 1217

E-mail : mikhail.damrin@kopygoldfields.com

 

Tim Carlsson, CFO Kopy Goldfields AB

Tel: + 46 702 31 87 01

E-mail: tim.carlsson@kopygoldfields.com

 

Andrey Roumiantsev, Head of PR Amur Zoloto

Phone: +7 909 644 60 54

E-mail : anr@ga.ru