Moneyextra Sharedealing



28 January 2009

Zambezi Resources Limited

Placing and Convertible Note

Zambezi Resources Limited ('Zambezi' or the 'Company') (AIM:ZRL; ASX:ZRL) today announces that it has received an application from Astron Limited ('Astron') for a share placement of 29 million shares, at a price of A$0.02 per share to raise A$580,000 ('Tranche 1'). The Zambezi Board has approved the issue and allotment of the Tranche 1 shares to Astron under the 15% capacity available for the issue of securities of ASX Listing Rule 7.1. 

Further to the issue of these shares, application will be made to the London Stock Exchange for these new Ordinary Shares to be admitted to trading on AIM ('Admission'). It is expected that Admission will become effective on 4 February 2009. The new ordinary shares will rank pari passu with the existing ordinary shares of the Company. Following the issue of these shares the Company will have 226,876,174 fully paid ordinary shares in issue and Astron Limited will have a relevant interest in 29,000,000 Ordinary Shares in the Company, representing 12.78% of the Company's total voting rights.

Tranche 1 is the first part of a proposed three stage transaction (the 'Transaction') to raise approximately AUD$13m, subject to various conditions including shareholder approval.  

Zambezi has today entered into a Share Subscription Agreement and a Convertible Note Agreement with Astron. 

Under the terms of the Share Subscription Agreement, Astron has agreed to subscribe for a further 171 million shares at a price of A$0.02 per share to raise a further A$3.42m ('Tranche 2'). Tranche 2 is conditional upon Zambezi shareholder approval, requisite regulatory approvals in Zambia, the execution of a voluntary escrow agreement and the execution of the Convertible Note agreement (below). Completion of Tranche 2 is scheduled for early March 2009.

Under the terms of the Convertible Note Agreement (Tranche 3), Zambezi has agreed to issue an unsecured convertible note in the Company to Astron at a Face Value of US$6,000,000 (the 'Note'). The Note does not carry an interest charge and has a maturity date of 31 December 2010 ('Maturity Date'). The Note is convertible, at the option of Astron, to shares in the Company up to the Maturity Date at a conversion price of the lower of A$0.02 per share or a 20% discount to the volume weighted average price of the Company's shares on the ASX in the 30 trading days immediately prior to the conversion of the Note. The issue of the Note is conditional upon Zambezi shareholder approval and completion of the Tranche 2 share placement. Astron has an absolute discretion to elect to subscribe for the Note, to be exercised within three months after Zambezi shareholder approval

A notice of meeting for a shareholder meeting to consider the ratification of Tranche 1 and approval for Tranche 2 and the Note will be published in due course.

The board of Zambezi believes that the Transaction will secure necessary funding for the foreseeable future and at the same time provides the Company with a strategic investor. The Transaction will allow the Company to continue work on the exploration portfolio in Zambia. 

Astron is listed on the ASX and located in Sydney, Australia, but also has a strong presence in China with an office in Shenyang. Astron's interest in Zambezi is principally as a strategic opportunity to ultimately supply copper from Zambia into China leveraging off Zambezi's copper/gold projects and facilitating Zambezi's entry into Chinese markets. The transaction will ensure the survival of the Company and add longevity to its existing projects.

The Company's shares were suspended from trading on ASX on 31 October 2008 and AIM on 3 November 2008 pending clarification of the Company's financial position. The Company's shares will only be restored to trading following this clarification and a further announcement on this will be made following the general meeting to be held as detailed above.

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