("Gunsynd" or the "Company")
Quarterly Investor Update
Gunsynd Plc (AIM: GUN, AQSE: GUN) is pleased to announce the following investor update for the quarter ending 31 July 2020 regarding its current holdings in investee companies and activities acquired and managed as per its investing policy.
Rincon Resources Pty Ltd
The Company advised in late June 2020 that it had invested A$250,000 (approximately £138,000) in Rincon Resources Pty Ltd ("Rincon"), an Australian gold and base metals exploration company. At the time the Company investment represented approximately 28% of Rincon.
Rincon Resources is a Western Australian ("WA") focused gold and base metals and holds the rights to three highly prospective projects in WA, with a main focus on the South Telfer Project, covering 50,000-hectares in the Paterson province. The South Telfer Project is approximately 12km south of Newcrest Limited's Telfer mine. Rincon's Laverton and Kiwirrkurra Projects are also highly prospective gold and base metals projects.
The funds raised by Rincon are being used to progress activities including acquisition of a valuable historical magnetic database, commence Heritage clearance activities, and final preparations for initial drill programs at the South Telfer Project, WA.
Further detailed updates will be provided accordingly as the Company is advised by the Rincon board and management. We anticipate exciting progress during the remainder of 2020.
Eagle Mountain Mining Limited
The Company announced on 22 July 2020 that it had invested A$200,000 (approximately £110,000) in Eagle Mountain Mining Limited ("Eagle Mountain"), an ASX listed copper-gold exploration and development company (ASX: EM2). This investment provides Gunsynd with exposure to copper exploration which compliments the Company's recent investment in gold explorer Rincon Resources.
The Eagle Mountain investment was part of a A$3.0 million capital raising at A$0.13 supported by institutional investors. The intended use of funds will include a surface diamond drilling program of approximately 2,000 metres at the Eagle Mountain's high-grade Oracle Ridge Copper Mine Project ("Oracle Ridge") scheduled to commence Q3 2020, for the potential acquisition of prospective ground in the vicinity and to provide additional working capital for the company.
The Company further announced on 11 August 2020 an update from Eagle Mountain regarding the commencement of its maiden drilling program which marked an exciting milestone for Eagle Mountain since it finalised the acquisition of the Oracle Ridge Copper project. Eagle Mountain had appointed Boart Longyear Limited ("Boart Longyear") to undertake a maiden surface diamond drilling program. Boart Longyear is a global drilling company which has previously undertaken exploration programs at Oracle Ridge and was chosen for its experience onsite and safety management program which includes stringent procedures for the management of COVID-19, with drilling equipment and crews planned to be onsite before the end of August.
The drilling program will target extensions to high-grade portions of the existing Mineral Resource Estimate ("MRE") in three priority zones. The zones are supported by a combination of:
• previous drilling outside the existing MRE which has intersected mineralisation
• unconstrained mineral resources; and
• a magnetic anomaly.
The current share price of Eagle Mountain is approximately A$0.24 representing an attractive uplift on our investment via the capital raising.
Human Brands International ("Human Brands") and Rogue Baron Limited ("Rogue Baron")
The Company announced an update on 2 July 2020 regarding Human Brands, a US-based premium spirits company in which Gunsynd held a convertible loan note.
Share exchange agreement
Human Brands had entered into a share exchange agreement with Rogue Baron to sell the following subsidiaries: Shinju Whiskey LLC; Shinju Spirits Inc; Mazeray Corporation; STI Signature Spirits Group LLC and Legacy Retail Group LLC. These subsidiaries hold the Shinju, Mazeray and Copa Imperial Brands as well as a 52% interest in Bin 1301 wine bar in Washington DC. The consideration for the sale was 36,247,500 ordinary shares in Rogue Baron at a price of 7.8 pence per ordinary share.
Deed of Novation
A deed of novation was entered into which transferred Gunsynd's convertible loan note from Human Brands to Rogue Baron. It will accrue interest at 12% per annum, be unsecured and repayable on 31 March 2021. Gunsynd increased the Loan Note by a further £120,000 and the loan note is currently approximately £500,000 and can be converted at any time at the election of Gunsynd into ordinary shares of Rogue Baron at a price per share determined by dividing GBP 1,616,304 (representing the agreed valuation of the ordinary share capital of Rogue Baron) by the total number of ordinary shares in Rogue Baron in issue immediately prior to conversion. Under the novation, various future capital raising fees payable to Gunsynd have also been transferred to Rogue Baron.
COVID-19 has impacted the US hospitality sector, and closures have affected bars and restaurants including the bar in Washington DC which produces the majority of revenue for Legacy Retail Group LLC (now owned by Rogue Baron). The lockdown has now been partially lifted but there is still an impact on bars in the city due to social distancing. However, offsetting this Rogue Baron is now in negotiations to dramatically reduce the rent on the premises. The bar has also received a substantial low interest loan from the government which should place it in a better financial situation going forward when social distancing measures are relaxed.
Shinju sales, which had been encouraging to the end of February, were heavily impacted in the next three months due to lockdowns in key sales states. With lockdowns gradually being removed sales have started to pick up again. Given the shortage of Japanese whisky with the discontinuation of many labels such as Hibiki 12, Hibiki 17, Hakushu 12, Nikka 12 and Taketsuru Pure Malt 17, 21 and 25, Rogue Baron sees an opportunity in this space in the future if the company can be funded to the extent it can increase not only its marketing but product offering with the potential addition of other expressions (i.e. different ages of the same whisky product) from Japan. The recent sale of Aviation Gin to Diageo for up to USD 610 million once again shows the value spirits brands can achieve in a short space of time (Ryan Reynolds invested in the brand in 2018).
The IPO process is still ongoing and has been impacted by the effects of COVID-19 on the business and markets in general. We hope to provide an update on this shortly.
Sunshine Minerals Limited ("Sunshine")
On 21 August 2020, the Company announced that Malachite Resources Limited, which is listed on the ASX (ASX: MAR; "Malachite"), had made an announcement regarding the acquisition of the 85% of Sunshine Minerals Limited it does not already own ("Sunshine Minerals") (the "Transaction"). Malachite had previously acquired a 15% shareholding in Sunshine, a private company incorporated in the Solomon Islands.
Sunshine owns 80% of Sunshine Nickel Limited (SNL) which holds PL 01/18 located on the south coast of Santa Isabel Island. The remaining 20% of SNL is owned by local landowners. The Jejevo Nickel Project is located within the PL 01/18 project area.
The acquisition of 85% of Sunshine Minerals is for an upfront payment of A$850,000 in shares in Malachite and a further, deferred, payment of A$1,105,000 in shares in Malachite upon valid application for a mining lease for PL 01-18. The acquisition is subject to conditions precedent as set out in the announcement of 21 August 2020.
Gunsynd holds 4,965,850 shares in Sunshine Minerals and will, subject to completion of the Transaction, receive 1,262,967 Upfront Consideration Shares and 1,641,856 Deferred Consideration Shares. Following, and subject to, completion of the Transaction, Gunsynd will have no direct interest in Sunshine Minerals.
Kolosori Nickel Limited ("Kolosori")
The Company advised in late 2019 it had purchased a 7.67% stake in Kolosori Nickel (SI) Limited ("Kolosori"), which owns 80% of the nickel prospecting licence PL05/19 over the Kolosori Prospect in the Solomon Islands, for consideration of £45,000.
Malachite has entered into an MOU with Kolsori. Under the MOU, Malachite has exclusivity until 30 September 2020 to carry out due diligence and consider making an offer for Kolosori.
Oyster Oil and Gas Limited ("Oyster")
The Company announced on 29 November 2019 that it had entered into a binding term sheet with Sajawin Pty Ltd ("Sajawin") to conditionally sell all of its shares in Oyster for a consideration of approximately £260,000. Sajawin continues to undertake the necessary work to meet the conditions precedent to conclude this deal. To date, Gunsynd has received £20,000 of the consideration. The Company further advised in May 2020 it had agreed with Sajawin to extend the deadline for the unmet Conditions Precedent of the Term Sheet, through a share purchase variation agreement term sheet from 30 April 2020 to 30 October 2020. If any of the Conditions Precedent are not satisfied by 30 October 2020, then either Party may terminate the Term Sheet at which time the Parties' rights and obligations under the Term Sheet will immediately cease and Gunsynd will immediately return the initial payment to Sajawin. The Company will provide further updates as they arise.
The Gunsynd board has been able to make progress in a number of areas, not least its new investments in Rincon and Eagle Mountain (the latter of which is already well in the money) and the conditional disposal of its investment in Sunshine Minerals. Following the fundraisings announced on 11 June, 6 July and 7 July 2020 together totalling £1,169,000 before expenses, the Company is now well funded for the foreseeable future. The current situation with respect to COVID-19 has seen global governments smash a walnut with a sledge hammer. The fiscal and monetary stimulus in response to COVID-19, whilst a burden for decades to come, is more than likely to provide strong stimulus to the natural resources sector and in particular gold. The same can be said of the "climate crisis" which has resulted in a big push to electric cars which we believe will prove positive for nickel. Similarly, in addition to the US government loan for its bar in Washington, we believe Rogue Baron is well positioned for the future as commerce returns to something like normal and the supply constraints on Japanese whisky will still remain. Thus, with the possible exception of Oyster and the oil market, we have confidence in the future prospects of our portfolio of investments during a time of extreme economic uncertainty.
This announcement contains inside information for the purposes of Article 7 of EU Regulation 596/2014.
The Directors of Gunsynd accept responsibility for this announcement.
For further information please contact:
Hamish Harris/Peter Ruse
+44 (0) 78 7958 4153
Cairn Financial Advisers LLP
James Caithie / Mark Rodgers / Liam Murray
+44 (0) 20 7213 0880
Peterhouse Capital Limited
+44 (0) 20 7469 0930
Forward Looking Statements
This announcement contains forward-looking statements relating to expected or anticipated future events and anticipated results that are forward-looking in nature and, as a result, are subject to certain risks and uncertainties, such as general economic, market and business conditions, competition for qualified staff, the regulatory process and actions, technical issues, new legislation, uncertainties resulting from potential delays or changes in plans, uncertainties resulting from working in a new political jurisdiction, uncertainties regarding the results of exploration, uncertainties regarding the timing and granting of prospecting rights, uncertainties regarding the Company's or any third party's ability to execute and implement future plans, and the occurrence of unexpected events. Actual results achieved may vary from the information provided herein as a result of numerous known and unknown risks and uncertainties and other factors.