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African Potash Ltd.: Conditional Agreement to Farm-Out Interests in Lac Dinga Project

African Potash Ltd.: Conditional Agreement to Farm-Out Interests in Lac Dinga Project

Wed, 19 Jul 2017 10:50:01
: African Potash Ltd.: Conditional Agreement to Farm-Out Interests in Lac Dinga Project

African Potash Ltd. (AFPO)

19-Jul-2017 / 10:50 GMT/BST
Dissemination of a Regulatory Announcement that contains inside information according to REGULATION (EU) No 596/2014 (MAR), transmitted by EQS Group.
The issuer is solely responsible for the content of this announcement.


The information communicated within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014. Upon the publication of this announcement, this inside information is now considered to be in the public domain.

 

19 July 2017

 

AFRICAN POTASH LIMITED

("African Potash" or the "Company")

 

African Potash Limited / Epic: AFPO / Sector: Mining

 

Conditional Agreement to Farm-Out Interests in Lac Dinga Project

 

African Potash Limited is pleased to announce that it has entered into an agreement with African Agronomix Limited ("AAX") pursuant to which AAX will, subject to the satisfaction of certain conditions precedent, have the right to acquire up to 100% of the Company's interest in Lac Dinga project in the Republic of Congo (the "Project") structured over four distinct phases (the "Earn-In"). As shareholders will be aware, the Company's interest in the Project is held via a 70% interest in La Société des Potasses et des Mines S.A. ("SPM"), a Congolese company which holds the exclusive right to conduct exploration activities for potash salts over the Lac Dinga project area.

 

Conditions Precedent

 

Completion of the Earn-In is subject to the satisfaction various conditions including:

 

-          establishment of a newly incorporated holding company ("HoldCo") and completion of the transfer to HoldCo of the Company's interest in the Lac Dinga Project to HoldCo (with the consent of the Ministry of Mines in the Republic of Congo and in compliance with all relevant provisions of the laws of the Republic of Congo) and restructuring of existing inter-group borrowings;

 

-          completion of renegotiation and execution of certain existing agreements relating to the Project;

 

-          AAX having completed and being satisfied with its due diligence (legal and technical) on all aspects of the Earn-in; and

 

-          all necessary and applicable third party, shareholder and similar or equivalent approvals having been obtained in all relevant jurisdictions to enable the Parties to complete the Transaction as contemplated by this Agreement. 

 

Consideration

 

On the date of satisfaction of the Conditions Precedent (the "Effective Date"), AAX will:

 

-          issue to the Company 5 million new ordinary shares in AAX (the "Consideration Shares"); and

 

-          issue a 3-year warrant to the Company (subject to extension in certain circumstances), granting the right for the Company to purchase 2.5 million AAX ordinary shares at a price per share of 5p per share, 

 

(together, the "Consideration") each of which shall be held in escrow pending the earlier of completion of the Phase 1 undertakings, completion of an initial public offering of AAX and the date falling 18 months after the Effective Date. During the course of the Earn-In the Company will retain an interest in the Project through the Consideration Shares issued to it as well as a reducing direct shareholding in SPM.

Earn-In Phases

 

During each phase AAX will have funding and performance obligations, completion of which result in AAX acquiring a greater interest in the Project.

 

The material aspects of phases 1 and 2 of the Earn-In are described below:

 

 

Phase 1

Phase 2

Duration

18 months

18 months commencing upon completion of Phase 1 or 18 months and one day from the Effective Date, which ever date is the later

 

Interest earned by AAX

51% upon completion of Phase 1

 

14% upon completion of Phase 2

Mandatory Funding into Project

No less than £450,000

No less than £600,000 less any amounts expended over and above the minimum Phase 1 Mandatory Funding

 

Performance Requirements &

Use of Funds

Conduct professional exploration activities.

Conduct professional exploration activities to obtain certification of a JORC-compliant Resource and (subject to Phase 1 results yielding evidence of likely economic viability), conduct at least one bulk sampling of at least 10 tonnes of material.

 

Upon completion of Phase 2 and Phase 3 respectively, the Company may elect in writing to participate in co-funding Phase 3 and/or Phase 4 respectively alongside AAX by providing the proportion of total funding required for Phase 3 and/or Phase 4 (as applicable) equal to the Company's remaining interest in the Project at the relevant time.

 

Phase 3

Phase 4

Duration

18 months commencing within 90 days after completion of Phase 2 (provided that it has been determined that the Project includes at least one mineral deposit likely to be mineable at a profit)

 

12 months commencing 90 days after completion of Phase 3 (provided that it has been determined that the Probable Mineral Reserve - as and if successfully defined by Phase 3 - warrants development into a profitable mine)

 

Interest earned by AAX

Up to a maximum of 15% (should the Company elect not co-fund) upon completion of Phase 3

 

Up to a maximum of 10% (should the Company elect not co-fund) upon completion of Phase 3

 

Mandatory Funding into Project

Sufficient to cover the use of funds

 

Sufficient to cover the use of funds

 

Performance Requirements &

Use of Funds

Develop the project to the point of certifying a pre-feasibility study sufficient to declare a Probable Mineral Reserve for an economically viable quantum of ore

 

Develop the project to the point of certifying a JORC compliant Bankable Feasibility Study ("BFS") sufficient to declare a Proven Mineral Reserve of sufficient size for an economically viable mine of at least 10 years' operations.

 

 

Under the terms of the Earn-In, AAX have undertaken to provide minimum levels of mandatory funding (as set out above) and further committed to ensuring that agreed liabilities of SPM are settled from such mandatory funding.

 

From the Effective Date, AAX shall act in the capacity as the operator of the Project on behalf of SPM and shall have freedom to execute on-ground and other work towards the application of funds and agreed milestones, under the direction of a Management Committee composed of 5 members, 3 of whom shall be appointed by AAX, 1 of whom shall be appointed by the Company and 1 of whom shall be appointed by Mr M G Mouanda Makosso, a local partner in the Project.

 

African Potash Executive Chairman, Chris Cleverly, said: "This is a positive move for all concerned and fits in with our long-held ethos of helping the African farmer. The transaction endorses our belief in the long-term viability of the Lac Dinga project. We are excited about working with our new colleagues in moving toward a food secure future for some of the world's poorest people."

 

Conal Bunnett, founder director of AAX said: "We are delighted to embark upon this mutually advantageous arrangement with our project partners, African Potash. The Lac Dinga prospect offers high hopes of a significant potash resource on the African West Coast, the success of which will cement a key strategic component in the ambitious rollout of our plan to create a vertically-integrated, pan-African fertiliser business."

 

Background Information on African Agronomix Limited

 

AAX is a private, multi-national company with a well-defined strategy, conceptually driven by the long-overdue beneficiation of Africa's raw materials.  Currently in the portfolio-building stage, AAX is building a platform of fertiliser-source mineral deposits with potentially profitable agricultural and industrial by-product opportunities.  The portfolio is targeted to control resources through key regions within sub-Saharan Africa, aligned within the west coast, the interior and the east coast geographies.   From this platform, the AAX goal is to create (in the medium term) a widely-distributed manufacturing base for the entire range of plant-nutrient products at optimum distances between raw materials and agricultural consumers.   The over-arching strategy is to out-compete and replace expensive, trade-balance-destroying imports which carry a significant carbon footprint in transport from offshore.  The list of benefits offered to the continent's economies, its food security, poverty reduction, job creation, deforestation control, and other environmental advantages are numerous. AAX already holds several rights and licences with respect to other projects relating to the same industry as the Project (such as Phosphates) and in implementing its business plan has in the past completed, and will in the future remain open to complete, many further partnerships which are or may be similar in nature to the Earn-In. 

 

The Directors of the Company accept responsibility for the content of this announcement.

 

For further information, please contact:

 

African Potash Limited 

Chris Cleverly     +44 (0) 20 7408 9200

 

African Agronomix Limited 

Conal Bunnett     rgsafrica@gmail.com  

 

Alexander David Securities Limited 

James Dewhurst, David Scott   +44 (0) 20 7448 9820

 

 

 




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