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Tower Resources - Proposed Placing and Subscription

Tower Resources plc (the "Company" or "Tower" (TRP.L, TRP LN)), the AIM listed oil and gas company with its focus on Africa, announces the extension and restructuring of its Bridging Loan Facility (the "Facility") of US$750,000, details of which were first announced on 16 April 2019, and an intention to raise gross proceeds of approximately £1,500,000 through a placing and subscription of approximately 461.54 million new ordinary shares of 0.001 penceeach (the "Placing Shares") at a price of 0.325 pence per Placing Share (the "Placing Price") with each participant receiving 1 warrant exercisable for three years at 1p per share for every 3 shares subscribed (the "Placing"). It is intended that Jeremy Asher, Chairman and CEO, will subscribe for £700,000 of new ordinary shares as part of the Placing.


Cameroon Update


The Company has signed Letters Of Intent ("LOIs") regarding the NJOM-3 well on the Njonji structure within the Company's Thali license with both COSL, in respect of its Seeker jack-up drilling rig (as previously notified), and also Geoquip Marine, in respect of its MV Investigator technical services vessel. The MV Investigator, which is now in West Africa, can execute the site survey at Njonji, including boreholes to test the underwater soil consistency, which needs to be done before the drilling rig can be brought onto site. The Company's subsidiary, Tower Resources Cameroon Ltd (the "Operator"), has applied to the Ministry of Mines, Industry and Technological Development for a further extension of the initial exploration period of the license to allow completion of the NJOM-3 well, and the Company expects this extension to be granted on the execution of a firm contract in respect of the site survey.


Restructuring and Extension of the Bridging Loan Facility


As previously noted, the Facility announced on 16 April 2019 had been extended until 31 August 2019 and since this time has continued to accrue interest of 1% per month (to be paid on repayment). The Company has agreed with Pegasus Petroleum Ltd ("Pegasus"), a company beneficially owned by the Company's Chairman Jeremy Asher, that Pegasus will advance further funds to the Company as part of the Facility to allow it to repay the other Facility lenders their US$375,000 principal in full together with accrued interest under the Facility. Pegasus will then hold 100% of the Facility, amounting to US$750,000 and the terms of the Facility will be amended.


The repayment date of the Facility will be extended to 30 June 2020, and although the Facility will continue to have a preferential right of repayment from future financing, the threshold for such repayment will be raised to US$2.5 million in respect of any single fundraising and US$5 million in cumulative fundraising and, in particular, repayment is waived in respect of the current Placing (the "Extension"). The Facility will remain secured with a fixed and floating charge over the Company's assets with interest due of 1% per month (to be accrued and paid on repayment).


In consideration for the Extension, it has been agreed that Pegasus will receive a possible additional consideration from Tower contingent upon Tower itself receiving cash flow arising from the Thali license. The Company is presently seeking to put in place a royalty to be paid to Tower comprising up to 10% of the contractor's share of production from Thali, and such a royalty also forms part of the farm-in terms being discussed with prospective partners. At present, the Company does not have agreements in place to receive any such royalties, but provided such agreements can be put in place, then Pegasus will receive a quarter share of any such royalties. Such an uncertain royalty share is difficult to value but it cannot exceed 2.5% of the value of the contractor's share of production arising from Thali, and if there is no such production then there will be no royalties. The purpose of this is to provide a success-based and profit-related incentive to Pegasus to extend the Facility as required in order to secure financing for the Thali license, that is substantially less than the return which a similar investment in the Company's equity today may be expected to achieve in the case of success at Thali, but which reflects the risk of the extended Facility and without issuing further warrants or incurring any further cost to the Company unless the Thali license can be successfully put into production.


The Extension constitutes a related party transaction in accordance with AIM Rule 13. Accordingly, Peter Taylor and David M Thomas, acting as the independent Directors, consider, having consulted with the Company's Nominated Adviser, SP Angel Corporate Finance LLP, that the terms of the Extension are fair and reasonable insofar as the Company's shareholders are concerned.


The Placing


Whilst financing negotiations continue regarding the Thali license, the Company is proposing to raise approximately £1,500,000 for working capital purposes via the Placing.


In order to provide Pegasus and Jeremy Asher respectively with sufficient time to realise other assets to facilitate the further advance by Pegasus under the Facility and the planned subscription by Jeremy Asher for £700,000 of new ordinary shares in the Placing, and to allow certain of the other Facility Lenders to use some or all of their repayments from the Facility to participate in the Placing, the Placing is expected to comprise two tranches:


● the first tranche of £401,250, comprising a placing and subscription for approximately 123,461,538 new ordinary shares (the "First Tranche") including £100,000 of Jeremy Asher's subscription will be unconditional;


● the second tranche of £1,098,750, comprising a subscription for approximately 338,076,923 new ordinary shares (the "Second Tranche") including £600,000 of Jeremy Asher's subscription is conditional on:


(i) the receipt by the Company of the further advance by Pegasus of US$375,000 plus accrued interest under the Facility; and the repayment by the Company to the other Facility lenders of their US$375,000 principal together with accrued interest; and


(ii) completion of the subscription by Jeremy Asher for the remaining £600,000 of new ordinary shares as part of the Placing.


Completion of the First Tranche is expected on or around 21 October 2019 and completion of the Second Tranche is expected on or around 12 November 2019.

The warrants to be issued in respect of the Placing are contingent on the Company receiving an increase in the authority of the Board to allot shares that is sufficient to cover these warrants at its next AGM or EGM.


The Placing funds will allow the Company to cover ongoing operational costs, pay creditors and also secure the services of Geoquip Marine's MV Investigator to undertake the site survey and drill boreholes, which is the final operational step needed prior to being able to bring the drill rig itself to the site.


In addition to the Placing, the Company expects to issue additional equity, comprising approximately 50,784,000 shares on the same terms and with the same attached warrants as the Placing (the "Fee Shares"), to some service providers in lieu of £165,048 fees either already accrued or to be accrued over the next six months.


Finally, as in previous quarters, the Company has asked certain directors to accept warrants in lieu of a portion of their director fees, totalling £15,000 for the fourth quarter of 2019 (the "Director Warrants"), in order to conserve the Company's cash.


A further announcement is expected to be made shortly in connection with the proposed Placing, Fee Shares and issue of Director Warrants.


Jeremy Asher, Chairman and CEO, commented: "I am pleased to have received the support of new and existing investors in Tower and I hope my personal commitment to the Placing and Facility (including the latter's extension) serves as a demonstration of my own confidence in being able to develop the Thali license, on which we continue to talk with potential financing partners. With this financing being completed and the recent, albeit early-stage, interest being shown by an oil major in our Namibian assets, I remain confident in the future prospects of the Company and look forward to updating the market with progress across our portfolio."

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