Ore Resources Limited (ASX:OR3) has disclosed that the proposed recipients of Class B and Class C Performance Rights have provided a voluntary undertaking not to convert those rights into fully paid ordinary shares unless the company's shares achieve a volume weighted average price (VWAP) of not less than $0.10 over 20 consecutive trading days, with the rights to be cancelled for nil consideration if that threshold is not met before the expiry of the applicable performance vesting period.

Key Points

  • Proposed recipients of Class B and Class C Performance Rights have undertaken not to convert those rights unless the company achieves a VWAP of at least $0.10 over 20 consecutive trading days.
  • The Class B Performance Rights comprise 5,500,000 rights vesting on an operational milestone — approval of a Mining Development and Closure Proposal — with the undertaking introducing a share price condition not otherwise applicable to that class.
  • The Class C Performance Rights comprise 3,750,000 rights, which already carry a share price condition, with the undertaking fixing the threshold at $0.10.
  • The voluntary undertaking does not amend or vary the existing terms of the Performance Rights as disclosed in the Notice of Meeting, and AGM resolutions will be voted on the original terms.
  • Any variation or release of the undertaking is subject to shareholder approval and the ASX Listing Rules.

Background to the Performance Rights and Share Price Hurdles

According to the filing, the performance hurdles applicable to the proposed Performance Rights were determined having regard to the company's prevailing share price, market conditions and anticipated operational and strategic objectives at the time the terms were formulated. The filing states that market conditions have materially changed since that time, resulting in a decline in the company's share price. The existing share price performance hurdle for the Class C Performance Rights is a 20-day VWAP representing 150% of the VWAP over the five trading days immediately preceding the date of the AGM. The filing notes that, based on the company's recent trading price, the absolute hurdle produced by that calculation is likely to be lower than the level applying when those terms were settled.

Terms of the Voluntary Undertaking by Deed

The filing discloses that each proposed recipient has provided the undertaking by deed in favour of the company, making it binding on them. The undertaking applies notwithstanding that the applicable vesting conditions prescribed under the terms of the Performance Rights may otherwise have been satisfied. The filing states that the Performance Rights will only be issued if Resolutions 5 to 8 are passed at the forthcoming AGM, and the undertaking applies to any Class B and Class C Performance Rights issued following that approval. All four directors are identified as proposed recipients of Performance Rights the subject of Resolutions 5 to 8. The filing was signed by Non-Executive Chairman Neville Power.

Status of AGM Resolutions and Existing Vesting Conditions

The filing states that the existing vesting conditions, performance milestones and expiry dates applicable to the Performance Rights remain unchanged, and the resolutions proposed for consideration at the forthcoming AGM will be voted on the terms set out in the Notice of Meeting. The board noted that any formal amendment to the proposed terms of the directors' Performance Rights may require further shareholder approval and compliance with applicable statutory and ASX Listing Rule requirements. The filing further states that any variation or release of the undertaking given by the proposed recipients is subject to shareholder approval and the ASX Listing Rules.