RE: Pros and cons of PLG share convertionHere's what they say in the circular as to the reasons for the split:
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The objective of the Arrangement is to (i) address the discount in our share price, which has not
accurately reflected our holding of 20 million Detour Shares, and (ii) improve the market’s identification
and valuation of Pelangio’s other properties, in particular Pelangio’s interest in its Ghana Properties. As
noted above, due to the significant increase in the trading price of the Detour Shares, the trading price of
our Common Shares is significantly discounted relative to our net asset value. Hence, our other assets
are not being accorded any value in the market. Pelangio expects that the market will value these assets,
including the Ghana Properties, more accurately following the Arrangement. The Arrangement will also
allow Newco, which will hold the Ghana Properties and other properties, to focus on the acquisition and
exploration of under-valued or early stage exploration prospects.
The Arrangement is expected to enhance the ability of each of Pelangio and Newco to pursue
independent corporate objectives and strategies, with a view to maximizing shareholder value. In
addition, we believe that the creation of two separate companies dedicated to the pursuit of their
respective businesses will provide Shareholders with additional investment flexibility, as they will hold a
direct interest in two companies, each of which is focused on different objectives.
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But in the annual report, there is a section which describes the acquisition of the Ghana properties. Basically, Pelangio currently has a 51% interest but can acquire the remaining 49% (subject to 10% overriding interest held by the government) by issuing several million shares.
By splitting Pelangio into Detour and Newco, they can issue Newco shares. That way, the minority partner doesn't get a free interest in Detour.
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1. The AAMC KY2 Option Agreement dated as of May 3, 2006 among AAMC, Pelangio
Mines (B), Pelangio Adansi Asaasi (G) Limited and Pelangio Adansi Asaasi (B) Inc. relating to
the Kyereboso No. 2 prospecting licence. Under the terms of the AAMC KY2 Option
Agreement, the acquisition by Pelangio of a 100% interest in the applicable Ghana Property is
effected by way of exercise by Pelangio Adansi Asaasi (G) Limited of an initial option and the
exercise by Pelangio Adansi Asaasi (B) Inc. of a second option. The AAMC KY2 Option
Agreement is structured in such a way that upon exercise of the initial option Pelangio Adansi
Asaasi (B) Limited is granted a 100% interest (less the right to a carried interest of 10% held by
the Government of Ghana) in the applicable Ghana Property that is the subject of the AAMC
KY2 Option Agreement. However, Pelangio Adansi Asaasi (B) Inc. issues certain shares to
AAMC so that upon exercise of the initial option and prior to exercise of the second option
Pelangio Mines (B) and AAMC shall each hold a 51% and 49% indirect interest, respectively, in
that Ghana Property. On exercise of the second option, the shares issued to AAMC are cancelled
and therefore we would hold a 100% interest in Pelangio Adansi Asaasi (G) Limited which in
turn shall hold a 100% interest (less the right to a carried interest of 10% held by the Government
of Ghana) in that Ghana Property. In order to exercise the initial option, Pelangio Adansi Asaasi
(G) Limited is required to (i) make or cause to be made payments in three unequal instalments in
an aggregate amount of US$240,000, and (ii) deliver or cause to be delivered Common Shares in
an aggregate amount of 2,400,000. In order to exercise the second option, Pelangio Adansi
Asaasi (B) Inc. is required to (i) make or cause to be made payments in three unequal instalments
in an aggregate amount of US$900,000, and (ii) deliver or cause to be delivered Common Shares
in an aggregate amount of 2,400,000. The initial option has been exercised and all required
payments have been made and the Common Shares issued.
2. The AAMC KY3 Option Agreement dated as of May 3, 2006 among AAMC, Pelangio
Mines (B), Pelangio Kyereboso Mining (G) Limited and Pelangio Kyereboso Mining (B) Inc.
relating to the Kyereboso No. 3 prospecting licence. The terms and conditions of the AAMC
KY3 Option Agreement are substantially similar to the AAMC KY2 Option Agreement
discussed above. In order to exercise the initial option under the AAMC KY3 Option
Agreement, Pelangio Kyereboso Mining (G) Limited is required to (i) make or cause to be made
payments in three unequal instalments in an aggregate amount of US$240,000, and (ii) deliver or
cause to be delivered Common Shares in an aggregate amount of 2,400,000. In order to exercise
the second option, Pelangio Kyereboso Mining (B) Inc. is required to (i) make or cause to be
made payments in three unequal instalments in an aggregate amount of US$900,000, and (ii)
deliver or cause to be delivered Common Shares in an aggregate amount of 2,400,000. The
initial option has been exercised and all required payments have been made and the Common
Shares issued.
3. The AGML Option Agreement dated as of May 3, 2006 among AGML, Pelangio Mines
(B), Pelangio Adansi Gold (G) Limited and Pelangio Adansi Gold (B) Inc. The terms and
conditions of the AGML Option Agreement are substantially similar to the AAMC KY2 Option
Agreement discussed above. In order to exercise the initial option under the AGML Option
Agreement, Pelangio Adansi Gold (G) Limited is required to (i) make or cause to be made
payments in three unequal instalments in an aggregate amount of US$120,000, and (ii) deliver or
cause to be delivered Common Shares in an aggregate amount of 1,200,000. In order to exercise
the second option, Pelangio Adansi Gold (B) Inc. is required to (i) make or cause to be made
payments in three unequal instalments in an aggregate amount of US$450,000, and (ii) deliver or
cause to be delivered Common Shares in an aggregate amount of 1,200,000. The initial option
has been exercised and all required payments have been made and the Common Shares issued.
The property which is the subject of the Ghana Option Agreements (Kyereboso 2 and 3 and
Meduma) is referred to herein as the Obuasi Property.
We made the first payments under the Ghana Option Agreements in 2006 and made the second
payments totalling US$225,000 and 2,225,000 Common Shares to only AAMC and AGML on
June 19, 2007 and made the third payments totalling US$150,000 and 1,500,000 Common
Shares to such vendors on March 3, 2008 (which were made early pursuant to the Ghana Option
Amendments, described below). The payments cover the Obuasi Property and satisfy the
requirements to earn a 51% interest on such properties pursuant to the Ghana Option
Agreements. Pursuant to amendments to the Ghana Option Agreements negotiated by Pelangio
prior to the Effective Date, following the Effective Date Newco will be entitled to exercise the
second option to acquire the remaining 49% of the Obuasi Property by issuing Newco Common
Shares, rather than Common Shares, as was the case under the original Ghana Option
Agreements.