Sundance Resources Limited (ASX: SDL) has provided company chairman David Porter’s address to shareholders, and its latest corporate presentation ahead of the company’s Annual General Meeting (AGM).
In his letter to shareholders, Mr Porter said:
It has been an extraordinary year for all of us not just due to COVID 19 – which has impacted every aspect of our lives.
This address is substantially different to the Chairman and CEOs letter which was included in our 2020 Annual Report as there have been significant changes in the past few weeks.
I believe it is worthwhile to briefly cover some recent history to put the events of the past few weeks into context for you.
In July 2018 we signed a legally binding agreement with our Noteholders. This agreement was to convert our debt, which had a redemption value of approximately $132 million, into equity in Sundance as well as a production royalty for the Noteholders.
Before we could finalise this agreement, we were approached by AustSino Resources Group Ltd and agreed with them in September 2018 that AustSino would inject $58 million into Sundance, of which $50 million plus Sundance shares and options would be used to eliminate our debt to our Noteholders. Completion of the deal would have left Sundance debt free and with $8 million cash for working capital. We would then progress the Mbalam-Nabeba Iron Ore Project together with AustSino, our new largest shareholder with a 51% stake, and a consortium of China parties which AustSino believed they could get together to fund, build and operate our Project.
Discussions with AustSino had progressed well and in good faith on both sides so we placed our agreement with the Sundance Noteholders in suspension – but extended the end date of that agreement to keep the Noteholder deal alive and valid as a backup if the AustSino agreement did not come to a conclusion.
The ASX placed AustSino and Sundance into suspension on 7 September 2018 on the grounds that it wanted to more confidence that the funds promised by AustSino in the agreement with us were available in Australia.
After a slow, frustrating start, the consortium of potential Chinese partners for Mbalam-Nabeba was put together by AustSino and we all visited Cameroon in February 2019. Sundance and the consortium were well received and the Cameroon Government gave its commitment that the Mining Convention covering the Mbalam part of our project would likely be reinstated once the agreement between Sundance and AustSino was concluded.
After a number of deadline extensions to give AustSino the requisite time to secure the funding for its Sundance deal, a new agreement was negotiated between us and AustSino and announced in July 2019.
This was necessary because the Cameroon mining convention had not been issued – because the original agreement with AustSino had not been concluded due to AustSino being unable to demonstrate it had the funds to complete its investment in Sundance. This resulted in the original agreement being renegotiated and as part of that the funding into Sundance was reduced from $58 million to $29 million but the requirement of a Cameroon Mining Convention was also removed from the Conditions Precedent.
This new agreement was again extended a number of times while we waited for the funding required from AustSino to be secured by AustSino.
Finally, on 11 November 2020 – less than a month before the ASX was going to delist Sundance shares – your Board decided to terminate the AustSino agreement as AustSino still had not secured the required funding and was yet to provide any reason why it felt it could still satisfy the terms of our Agreement.
At the time of this termination, Sundance had net cash of approximately $700,000. Following discussions with the ASX, we are hopeful they will extend – or, effectively, postpone – the delisting date until after we conclude the original agreement with our Noteholders to eliminate our debt of $132 million. The ASX will likely place other conditions on us including the need to have a minimum working capital amount, and we will advise shareholders of these conditions when it becomes clearer what is required.
The Noteholder Agreement is subject to a Notice of Meeting and an Extraordinary General Meeting so that our shareholders can vote on this agreement. You should all receive this Notice of Meeting in the coming weeks, and the meeting should be held sometime in January 2021.
Even though we are all frustrated and disappointed that AustSino could not complete its side of our agreement, we look forward to 2021 with a degree of confidence – subject to your approval, Sundance will be able to complete the agreement with our Noteholders which will leave us debt free, trading on the ASX again and in a position to re-engage with the Government of Cameroon to work towards a renewal of the Mbalam Mining Convention. And we will be in a strong position to seek new equity and project partners to develop what we still consider is a globally competitive iron ore project – at a time when there is renewed interest in undeveloped high-grade iron ore projects in West Africa.