LONDON (ShareCast) - (Sharecast News) - Zanaga Iron Ore Company has entered into a subscription agreement with institutional investor Shard Merchant Capital (SMC), it announced on Friday.
The AIM-traded firm said that, under the agreement, it would issue and SMC would subscribe for up to 21 million ordinary shares in up to three tranches of up to seven million shares each.

In the event the maximum number of subscription shares are issued by Zanaga and subscribed for by SMC, the share capital of Zanaga would increase around 6.8% on a fully-diluted basis, based on the 286,034,367 ordinary shares in issue as of Friday.

Zanaga said that, under the subscription agreement, SMC had undertaken to use its reasonable endeavours to place the relevant subscription shares that it has subscribed for, and to pay Zanaga 95% of the gross proceeds of those sales.

The board said the agreement provided a number of "attractive advantages" to the company, including a "relatively low level" of dilution to its other shareholders, as well as the ability to repurchase any unsold subscription shares from SMC, subject to legal requirements, which the board described as "an important element of flexibility".

Any subscription shares repurchased would be cancelled, limiting dilution further, with the board adding that the agreement carried a low cost of capital, given SMC would retain just 5% of the gross proceeds of any sale of the subscription shares.

"Following entry into of the subscription agreement, Zanaga is pleased that a financing structure has been put in place which will give the company access to funding through a relatively low cost structure which minimises dilution to shareholders," said chairman Clifford Elphick.

"This transaction enables Zanaga to secure capital in the future as the project progresses and further milestones are achieved."

At 0907 BST, shares in Zanaga Iron Ore Company were up 9.2% at 6.84p.

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