Falgold shareholders approve Scheme to implement New Dawn proposal

Falgold shareholders voted for the Scheme of Arrangement where they will exchange their shares for either cash or New Dawn shares paving way for the delisting of Falgold and listing, by introduction, of New Dawn on the ZSE upon fulfillment of some conditions precedent.
 
These conditions include exchange control approval from the RBZ, approval for the listing of New Dawn on the ZSE and other necessary regulatory approvals as may be required.
 
Shareholders will chose to either receive 1 New Dawn share for every 5 Falgold shares or 20c for every Falgold shares.
 
New Dawn CEO, Ian Saunders said he believes that the ratio is generous considering that Falgold has negative equity and was worth much less relative to New Dawn before it was acquired.
 
"I think we have been very generous as we believe that the perception of value on New Dawn is around 180-200c. The offer of 5 to 1 at fair value of 200c a share, values Falgold at 40c," said Saunders.
 
"That means that from the time New Dawn took over, when price was 4c, we are offering you a piece of paper that at some point in time we think will be valued at 200c, or 40c per share of Falgold. This is a ten-bagger," he added.
 
He also disclosed that New Dawn has been supporting Falgold with both financial and human resources for nearly no cost since they took over and the belief is that more could be gained if the operations are consolidated.
 
"We have come to a point where we believe that it is in the best interest of the greater group to take the New Dawn shares and swap for Falgold shares."
 
He went on to say in order to execute their business strategy and management control strategy, assets and people should be able to be moved unimpeded amongst the 3 operations.
 
He also said to get to a post-100 000 ounces of production (which is a key metric used in the valuation for the transaction by the financial advisors, Imara) $40 million of fresh capital is needed.
 
"That capital is unlikely to come from local sources and in order to facilitate that, we need to get New Dawn into Zimbabwe and get rid of Falgold," he added.
 
He also disclosed that they are making an application to the RBZ for the fungibility of New Dawn shares.
 
Explaining the level of improvement they have brought, Saunders said when New Dawn took over, the Falgold shareholder held shares worth 3-4c in a bankrupt company but since then the operations have improved markedly after injection of capital.
 
He said New Dawn didn't rush to do a transaction earlier because they wanted Falgold minority shareholders to benefit from the revival despite not having paid for it.
 
"A year ago the swap ratio was 11 to 1 but as New Dawn we didn't try to jump in at that ratio because we wanted to get to a stage where we finish phase 1 and 2 of our execution strategies," he said.
 
He ruled out a reverse listing saying, "there is no value in Falgold in terms of the reverse listing because once you have primary listing, the legal and accounting cost and the amount of work needed to do a secondary listing is much less than in a reverse listing".
 
He also said that if they don't raise the $40 million capital there will be undue dilatation because the minority shareholders are unlikely to find that capital in this constrained macro-economic environment.