Proactive Investors - Rockfire Resources PLC (LON:ROCKR) has agreed a pair of acquisitions, in effect a reverse takeover, of one of the largest gold refineries in the Middle East and an associated precious metals trader for a total of US$20 million.
It plans to raise an immediate £3.5 million from a share subscription at 0.5p, above its last closing price of 0.37p yesterday, and up to £14.7 million to complete the deal.
The deal to purchase an initial 10% of Dubai-based gold refinery, smelter and mint, Emirates Gold DMCC and 10% of smaller sister company Emperesse Bullion DMCC has been struck by the AIM-listed company with its largest shareholder, Paloma Precious DMCC, and has resulted in the company requesting its shares to be suspended from trading until it publishes a prospectus.
Paloma, which owns a 21.7% stake in Rockfire, owns 100% of both Emirates Gold and Emperesse Bullion, has conditionally agreed to sell the remaining 90% of both businesses to Rockfire on completion of the transaction.
Rockfire will pay US$2 million in cash for the initial 10% of both companies using its existing cash resources and the proceeds of a £14.7 million share subscription also priced at 0.5p per share.
The net proceeds of the subscription will be used to pay the initial consideration, as well as contribute towards the costs associated with the full transaction, cover continued drilling at the company's Molaoi project in Greece and provide working capital.
With a long history operating a gold and silver refinery and trading in precious metals and jewellery in Dubai's DMCC multi commodities centre free-trade zone, Emirates Gold made an underlying profit (EBITDA) of 11.1 million UAE dirham (£2.4 million) on revenue of AED17.8 billion (£3.9 billion).
However, as it was removed in July from the UAE's approved "good delivery list" of approved refineries, which must meet anti-money laundering and responsible sourcing standards, and so has been prevented from delivering into Dubai's bullion market while also triggering the suspension of its affiliate membership of the London Bullion Market Association, one of the conditions of the deal is that Emirates is restored to the list.
It said later that this was "merely a temporary suspension" and that management were working with the managing committee to resolve their concerns.
Much smaller, Emperesse operates a gold, silver and platinum trading shop under lease in the 'Dubai Gold Souk' market, which last year made a profit of US$81,000 (£65,000) on revenue of roughly US$770,000.