I think you're still working on the assumption he cares. Didn't...

I think you're still working on the assumption he cares. Didn't most of his shares came in the IPO where he was already paid for them when SWE bought Swala BVI? I think he reached into his pocket for about $35k worth over the years. Irrelevant when you've also been paid about $300k pa since inception.


Anyone want to interpret the following? To me it makes sense why someone wouldn't want to raise capital with a large dilution to save the company at the end, or strangely go after a large bond issuance.


Tanzanian tax implications
As indicated above, Swala BVI holds a 65.13% interest in SOGTL, a company incorporated in
Tanzania and which is considered to be tax resident in Tanzania.

Section 56 of the Tanzanian Income Tax Act (ITA) deals with the Tanzanian income tax
consequences of a change in the underlying ownership of a Tanzanian-resident entity (such as
SOGTL) by more than 50%. Section 56(1) of the ITA provides that “where the underlying
ownership of an entity changes by more than fifty percent as compared with the ownership at
any time during the previous three years, the entity shall be treated as realizing any assets
owned and any liabilities owed by it immediately before the change”. This applies whether or
not there is continuity in the business activities carried on by the Tanzanian entity.

The income tax liability which arises on a deemed disposal triggered by section 56 of the ITA is
attached to the Tanzanian company (i.e. in this case, SOGTL). This is not the tax liability of the
direct or indirect owners of the shares.

Section 56 of the ITA does not prescribe the value at which assets and liabilities would be
deemed to be disposed. However, section 39(h) of the ITA deals with deemed disposals under
section 56 and section 42 of the ITA prescribes that the value to be attributed to the deemed
disposal of assets and liabilities should be the fair market value. The assets and liabilities in
question are treated as immediately reacquired by the company at that value.

The capital gains arising from the deemed disposal will be calculated as the difference between
the deemed disposal value (i.e. the market value) and the cost of the assets and liabilities
(balance sheet value of the assets and liabilities). The capital gains tax will be computed at the
rate of 30% of the capital gain.

If, for example, the value of the licence interests reflected in the balance sheet is at a nominal
value and there is subsequently significant success in exploration activities, the market value of
the licence interests is likely to be substantially higher, and this may give rise to substantial
capital gains. The new balance sheet cost of the assets and liabilities post the section 56 event
will be the market value of the assets at the point of the deemed disposal. Therefore, although
the transaction will have capital gains tax implications on the entity, the base cost of its assets
and liabilities will be “stepped up” to the market value after the deemed realisation.

There are no exemptions available in respect of the implications of section 56(1) of the ITA.
Accordingly, a change in the shareholding of Swala BVI or the Company could trigger tax
consequences for SOGTL under section 56 of the ITA.

Implications of section 56 of the ITA on the Acquisition
Completion of the Acquisition under the Share Sale Agreement will not trigger the provisions of
section 56 of the ITA, as the underlying ownership of SOGTL will not change by more than 50%
(i.e. the Swala BVI Shareholders will own more than 50% of the Company upon completion of
the Acquisition).

Implications of section 56 of the ITA on the issue of Shares under the Offer and Convertible
Note Deeds

However, if the shareholding of the Company was to change such that new investors acquire
more than 77% of the Company’s issued capital, there would be a change of more than 50% of
the underlying ownership of SOGTL and section 56 of the ITA could be triggered. Upon
completion of the Offer, the underlying ownership of SOGTL will not change by more than 50%
and accordingly, the issue of Shares pursuant to the Offer and the Convertible Note Deeds will
not trigger the provisions of section 56 of the ITA.

Implications of section 56 of the ITA on future capital raisings by the Company
Depending on the Company’s exploration success and future capital requirements, the
Company may undertake equity capital raisings in the future.

If such equity capital raisings result in the direct or indirect ownership of SOGTL changing by
more than 50% as compared with that ownership at any time during the previous three years,
SOGTL could, on a technical reading of section 56 of the ITA, be treated as realizing any
assets owned and any liabilities owed by it immediately before the change under section 56(1)
of the ITA. As at the date of this Prospectus, the Tanzanian Revenue Authority has not applied
this broad interpretation of section 56 of the ITA and it is unclear whether or how it would apply
such an interpretation in the future.