US$400 Million Equity Subscription in Highland Gold by Millhouse LLC
Highland Gold Mining Limited ("Highland Gold") announces that it has today signed a subscription agreement with Millhouse LLC whereby Millhouse LLC will subscribe in cash for 65,050,000 new ordinary shares in Highland Gold at a price of 151 pence per new ordinary share (the "First Subscription") and a further 65,050,000 new ordinary shares at the same price, following the passing of the requisite shareholder resolutions (the "Second Subscription").
The aggregate proceeds of these subscriptions will amount to approximately US$400 million. These proceeds will form an essential component of Highland Gold's funding, allowing it to proceed with its development programme and will reduce the Company's reliance on debt financing.
Completion of the First Subscription, which will be made pursuant to existing shareholder authorities, is expected to take place around 11 December 2007. The Second Subscription is conditional, inter alia, on the passing of the appropriate shareholder resolutions at an Extraordinary General Meeting of Highland Gold to be convened as soon as possible and completion of the Second Subscription is expected to take place shortly thereafter. Following completion of the First Subscription, Millhouse LLC's shareholding will be 25.0% of the then increased issued share capital and will become 40.0% of the enlarged issued share capital following completion of the Second Subscription.
Millhouse LLC is a Moscow-based asset management company overseeing investments in a variety of industries including mining and metallurgy, real estate, pharmaceuticals, consumer products and media. Assets under management include a significant stake in steel and mining major Evraz Group and a majority interest in the Dvoinoe gold project.
James Cross, Chairman of Highland Gold, said, "This transaction provides us with significant funding to enable the progress of our very active development programme at a number of key sites in our portfolio. Highland Gold now has a shareholder of notable standing in Russia. This supplements our existing relationship with Barrick and creates a strong platform for exploiting our attractive asset base."
Eugene Shvidler, Chairman of Millhouse LLC, said, "This investment in Highland Gold fits perfectly with our approach of taking strategic stakes in businesses with strong growth potential. We believe our investment and management input will help Highland to obtain maximum returns on a world-class set of assets."
Alex Davidson, executive vice president, exploration and corporate development for Barrick, commented, "Barrick welcomes the investment by Millhouse LLC in Highland Gold. This investment greatly strengthens Highland Gold's presence in Russia and positions Highland Gold to move forward with its exciting pipeline of development assets for the benefit of all stakeholders."
Highland Gold has been advised by JPMorgan Cazenove and Rothschild. JPMorgan Cazenove acts as the Nominated Adviser for Highland Gold.
Terms of the Subscription Agreement and Relationship Agreement
Highland Gold has today entered into a Subscription Agreement setting out the terms and conditions of the subscriptions. The new ordinary shares issued under both subscriptions will be credited as fully paid and will rank pari passu in all respects with the existing shares in issue. Applications will be made to the London Stock Exchange for the new shares to be issued under both subscriptions to be admitted to trading on the AIM market. Admission is expected to be effective around 11 December 2007 in respect of the First Subscription and in the first half of January in respect of the Second Subscription.
Highland Gold and Millhouse LLC have also entered into a Relationship Agreement which ensures that Highland Gold carries on business independently of, and at arm's length to, Millhouse LLC. The existing cooperation agreement between Highland Gold and Barrick will remain in effect subject to certain consequential amendments, including a reduction in the number of directors it has the right to appoint from 3 to 2.
Under the Relationship Agreement, Millhouse LLC will have the right to appoint a number of directors to the Board of Highland Gold depending on the size of its shareholding. Following completion of the First Subscription, it will be entitled to appoint 3 directors out of 9 and this will remain the case following completion of the Second Subscription. Millhouse LLC will also have the right to appoint a chief executive officer who will not serve on the Board. Further details of the Relationship Agreement and the composition of the Board will be set out in a circular to shareholders at the time of calling the EGM. James Cross will remain as Chairman.
Although Highland Gold has its registered office in Jersey, the Panel has previously confirmed that Highland Gold is not subject to the Takeover Code and shareholders will not be afforded any protections under the Takeover Code. It is not expected that this position will change as a result of this transaction.
As Highland Gold is not currently a company subject to the Takeover Code, investors should be aware that shareholders (including Barrick, and, in due course, Millhouse LLC) are able to increase their interests in voting rights in Highland Gold to any level without having to make a mandatory offer under the Takeover Code.
Extraordinary General Meeting
An Extraordinary General Meeting, at which requisite shareholder resolutions will be proposed, will be held in the first half of January 2008. Barrick, Ivan Koulakov and Millhouse LLC will undertake to vote their respective shareholdings in favour of these shareholder resolutions.
Henry Horne, Managing Director, Moscow - +7 495 777 5529
Dmitry Yakushkin, Director of Communications - +7 495 777 3155
Duncan Baxter, Executive Director - +44 (0) 1534 814202
Dominic Palmer-Tomkinson - +44 207 7239 0140
JPMorgan Cazenove (Nominated Adviser)
Michael Wentworth-Stanley, Managing Director - +44 (0) 207 588 2828
Roger Ewart Smith, Managing Director - +44 (0) 207 280 5424
Fin Public Relations
Alex Glover - +44 (0) 207 608 2280
Each of JPMorgan Cazenove and Rothschild, which is authorised and regulated in the United Kingdom by the Financial Services Authority, is acting as financial adviser to Highland Gold and no-one else in connection with the transaction and will not be responsible to anyone other than Highland Gold for providing the protections afforded to its clients or for providing advice in relation to the transaction or in relation to the contents of this announcement, or for any other transaction, arrangement or matters referred to in this announcement.