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First Day of Dealings on AIM

African Potash
First Day of Dealings on AIM
RNS Number : 2341P
African Potash Ltd
30 September 2011
 



African Potash Limited / Index: AIM / Epic: AFPO / Sector: Mining

30 September 2011

African Potash Limited ('African Potash' or 'the Company')

First Day of Dealings on AIM

 

African Potash Limited, an investing company focussed on potash assets within sub-Saharan
Africa, is listing on AIM today.  The Company has raised £4.185 million before expenses
by way of a placing of 83,700,000 million new Ordinary Shares at 5 pence per share
('the Placing'), giving it a market capitalisation of approximately £7.935 million
on Admission.  The money raised will be used to acquire potash assets or projects
in sub-Saharan Africa and advance these through the exploration and development cycle.
 Seymour Pierce Limited is Nominated Adviser to the Company who, along with GMP Securities
Europe LLP, are acting as Joint Brokers.

 

Overview:

·    Listing on AIM having raised £4.185 million before expenses to facilitate the
acquisition and development of one or more potash projects and provide access to
equity capital markets

·    Strong global market fundamentals supporting long term fertiliser-feed growth

·    Sub-Saharan Africa hosts sizeable, undeveloped potash deposits

·    Highly skilled Board and Management team - extensive experience developing resource
projects in Africa

·    Assessing a number of potash projects in sub-Saharan Africa with the aim of
rapidly delivering on strategy

 

African Potash Chairman and CEO, Edward Marlow, said, "The Board sees a huge opportunity
for a dedicated pan-African, London listed vehicle, focussed on potash given the
backdrop of attractive global potash market fundamentals.  We have a highly experienced
Board who have a successful track record of identifying, acquiring and advancing
resource assets and we are already assessing a number of potential projects that
fit our stringent investment criteria.

 

"Potash is primarily used as a source of potassium fertiliser.  A combination of
rising demographics and growing affluence in the developing world has led to a structural
shift resulting in higher global demand for agricultural produce.  Accommodating
the increase in demand for foodstuffs will require a greater use of fertilisers,
which in turn creates an opportunity for a vehicle such as ours."

 

For further information and the full Admission document visit www.africanpotash.com
or contact the following:

 

Ed Marlow
	

African Potash Limited
	

+44 (0) 20 7408 9200

Jonathan Wright
	

Seymour Pierce Limited
	

+44 (0) 20 7107 8000

David Foreman
	

Seymour Pierce Limited
	

+44 (0) 20 7107 8000

Richard Greenfield
	

GMP Securities Europe LLP
	

+44 (0) 20 7647 2836

Hugo de Salis
	

St Brides Media and Finance Ltd
	

+44 (0) 20 7236 1177

Susie Geliher
	

St Brides Media and Finance Ltd
	

+44 (0) 20 7236 1177

 

Full Details

 

The Company

 

African Potash has been recently formed to acquire potash (and associated minerals)
assets and/or acquire or invest in one or more businesses with potash (and associated
minerals) assets or projects in sub-Saharan Africa. The Directors have well established
business contacts and connections in sub-Saharan Africa and intend to use their experience
of working within companies focussed on operating in sub-Saharan Africa to enable
them to identify prospective acquisition and/or investment targets with scope for
growth.

 

The Company is a newly incorporated Guernsey registered company and an application
has been made for the Ordinary Shares to be admitted to trading on AIM. The Company
is raising £4.185 million in the Placing and intends to pursue appropriate acquisitions
and/or investments which meet the investing policy described below after the Ordinary
Shares have been admitted to AIM.

 

The Directors expect that they will need to raise additional finance in the future,
either through raising debt and/or through the issue of further equity, to complete
any acquisitions and/or investments that the Company may agree and to develop the
assets or business acquired and/or invested in.

 

Potash

 

Potash is the common name for various potassium-bearing materials and compounds.
The term is widely applied to naturally occurring potassium salts, as well as the
commercial products derived from them. The majority of the world's potassium reserves
were deposited when ancient inland oceans evaporated, crystallising potassium salts
into beds of potash ore. The resultant deposits are a naturally-occurring mixture
of potassium chloride and sodium chloride (better known as common table salt).

 

Potassium is the seventh most abundant element in the Earth's crust and is the third
major plant and crop nutrient after nitrogen and phosphorus. Its primary use is as
a soil fertilizer (which represents about 90 per cent. of current use) but potassium
has a diverse range of uses and can be found in ceramics, pharmaceuticals and detergents.
Potash improves the water retention, yield, nutrient value, taste, colour and texture
of crops and is commonly applied to a wide range of fruits and vegetables, as well
as rice, wheat, corn and other grains, sugar, soybeans, palm oil and cotton, all
of which benefit from the nutrient's quality enhancing properties.

 

A deficiency in potassium makes plants less resistant to disease and pests and this
can impact the size, shelf life and taste of the crop. Continuous growing and harvesting
of crops also removes potassium, nitrogen and phosphate from soil, all of which need
to be added back in consistent ratios to maintain the fertility of the soil. Historically,
it was standard practice in the agricultural industry to leave land fallow for a
number of years so that the soil could be replenished. However, as demand for food
has risen, in line with global population growth, leaving fields fallow is becoming
less practical. Higher demand for food is having to be satisfied by obtaining higher
yields from existing acreage, which in turn requires the increased use of fertilizers
such as potash to maintain the balance of nutrients found in soil. Crucially, potassium's
role cannot be replicated by other nutrients and currently there is no commercially
viable alternative to potash as a source of potassium fertilizer.

 

Most existing potash mines are deep shaft mines that can be as much as 4,400 feet
below ground. Other deposits were formed in horizontal layers as sedimentary rock
and are mined as strip mines. Potash can be extracted by employing one of four mining
techniques: underground, solution mining, open pit or solar evaporation. The method
used depends on the characteristics of the specific deposit such as depth, geometry
and mineralisation. The majority of potash is recovered from buried deposits using
conventional, mechanised mining methods. Solution mining involves injecting underground
seams bearing the potash with a brine solution which dissolves the potash from the
seams. The solution is then brought to the surface for processing where potassium
chloride is separated from the mixture to produce a granular potassium fertilizer.

 

Existing Commercial Potash Operations

 

Potash is commercially mined in a number of countries around the world. Canada and
Russia are, by some distance, the top two producing nations, accounting for 49 per
cent. of world production in 2010. Of the two, Canada has the largest reserves with
46 per cent. of the global total, while Russia has 34 per cent. Global reserves are
estimated at 9,500 million tonnes. In Africa, large potash deposits have been found
in Congo (Brazzaville) and Ethiopia.

 

Potash Prices

 

The main potash miners of Canada, Russia and Belarus have each formed consortia that
negotiate fixed term contracts with major customers. In Canada, the Canadian Potash
Exporters (Canpotex), which is jointly owned by three Canadian fertilizer producers,
exports and markets potash produced in the province of Saskatchewan. The Belarussian
Potash Co is another consortium performing a similar function for Russian and Belarussian
producers. The price agreed by the consortia and the customers acts as a benchmark
for global spot prices.

 

For years, Vancouver potash prices were stable at just over US$100 a tonne. Growing
consumption of food over the last decade led to a demand/supply in-balance, which
saw prices rise to almost US$900 a tonne in 2008 before dropping back as the world
economy slipped into recession. By the end of July 2011, spot potash prices at the
Port of Vancouver had climbed to US$490/t.

 

PotashCorp, a major Canadian producer, forecasts 2011 global potash demand will be
in the region of 55-60 million tonnes with China expected to account for a fifth
of the total. In recent years, growth in potash consumption has been greatest in
developing countries. In 2010, over 60 per cent. of world potash exports went to
Asian and Latin American countries with China and India alone accounting for almost
half of that amount. Over the past 20 years, Asian and Latin American imports have
more than doubled as developing nations address the need to improve crop yields.

 

Investing Policy

 

The Company's investing policy is to acquire potash (and associated minerals) assets
and/or acquire or invest in one or more businesses with potash (and associated minerals)
assets or projects in sub-Saharan Africa. The Company's investment objective is
to provide Shareholders with an attractive return on their investment predominantly
through capital appreciation generated by the growth of any acquired assets and/or
businesses.

 

The Company proposes to adopt the following investing policy:

·    the Company will consider acquiring potash (and associated minerals) assets
or acquiring or investing in businesses with potash (and associated minerals) assets
or projects in sub-Saharan Africa. The investing policy is to acquire or invest in
potash, although the Company will consider complementary mining businesses, assets
and/or projects which focus on other minerals, which in the opinion of the Board
offer better value to Shareholders;

·    the Company will focus on potash (and associated minerals) assets and/or businesses
with potash (and associated minerals) assets located in sub-Saharan Africa which
the Board considers to be businesses, assets and/or projects suitable for an investment
by the Company; and

·    the Company intends to be an active investor and will seek to add substantial
value, both operationally and strategically, to the businesses and/or assets acquired
or in which investments are made. The Company does not currently anticipate making
minority investments but intends to focus on owning the whole of or majority interests
in a small number of businesses, assets and/or projects.

 

With reference to the potential acquisitions of businesses with potash (and associated
minerals) assets and/or projects, the Directors will, in particular, seek businesses
with the following criteria:

·    they have the potential for rapid sustainable growth;

·    they are at an early stage with scope for utilising the Directors' logistical
experience and network of contacts to the benefit of Shareholders; and

·    they already possess a business model which is expected to provide attractive
returns on capital.

 

The Directors have many years experience working with and for companies operating
in sub-Saharan Africa. They will use their extensive business contacts and knowledge
to source the most attractive transactions and assess potential targets for acquisition.

 

The Company has not set any duration on making or holding any investment and is not
limited in time. There is no time limit for the Company to return funds to Shareholders
and the Directors do not anticipate returning funds to Shareholders in the short
to medium term. However, the Directors expect to make one or more acquisitions and/or
undertake a reverse takeover transaction within 12 months of Admission.

 

Although the Directors are already appraising and evaluating potential assets for
acquisition or investment, no agreements have as yet been entered into. In particular,
the Directors have held initial discussions with one potential acquisition target
but have not received a significant amount of information on it.

 

Directors and Management

 

Edward Marlow, aged 48 (Chairman and CEO)

 

Mr Marlow was until recently a Managing Director at Credit Suisse. Previously he
was Global Head of Coverage for Principal Investments at HSBC. In September 2007,
Mr Marlow founded HSBC's Principal Investments Africa team having worked and travelled
extensively in Africa for more than 20 years.

He has over 9 years of specific investment and advisory experience in sub-Saharan
Africa with a particular emphasis on natural resources.

 

Mr Marlow also has considerable experience of the Canadian resource market and is
Chairman of Sanatana Resources Inc (TSX). He was formerly on the boards of ESO Uranium
(TSX) and Kopane Diamonds (AIM). An ex British Army Officer, he has an MBA from Cranfield
University, a PGDipL from the University of Northumbria, is a graduate of the US
Army CGSC and Manchester University and is a member of the UK CFA Society. During
his career, Mr Marlow has also worked for Insinger De Beaufort, UBS and Citigroup.

 

Philippe Edmonds (MA Cantab), aged 60 (Non-Executive Director)

 

Mr Edmonds is a director of a number of public and private companies and has considerable
experience introducing African focussed companies to AIM, including African Platinum
Plc (formerly Southern African Resources Plc), Central African Mining & Exploration
Company Plc, Central African Gold Plc, Agriterra Limited (formerly White Nile Limited),
Sable Mining Africa Limited and African Medical Investments plc.

 

Mr Edmonds is currently Chairman of Agriterra Limited, Sable Mining Africa Limited
and African Medical Investments plc. He holds an honours degree in land economy from
Cambridge University. Mr Edmonds was born in Lusaka, Zambia, educated in Zambia and
England and played cricket for England and Middlesex from 1974 to 1987.

 

Andrew Groves, aged 43 (Non-Executive Director)

 

Mr Groves has significant experience in operations management in Southern and Central
Africa and is a director of a number of public and private companies, including companies
in Zambia and Zimbabwe. Mr Groves also has experience of introducing several African
focussed companies to AIM together with Mr Edmonds. Mr Groves' current directorships
include Agriterra Limited, Sable Mining Africa Limited and African Medical Investments
plc. He was born in Harare, Zimbabwe and educated in Zimbabwe and South Africa.

 

There are no other officers or employees of the Company as at the date of this document.
It is intended that further directors and employees will be recruited following Admission
and on completion of a suitable acquisition.

 

The Directors intend to retain key members of any target's management team although
they expect to supplement this as required with additional experienced management.

 

The Directors are of the opinion that incentivisation of staff and management is
a key factor to growing a successful business and therefore incentives will be put
in place, which may include cash bonuses and equity participation in the Company.
In this regard, the Share Option Scheme has been adopted but no awards have yet been
made under the Scheme.

 

Details of the Placing

The Company is proposing to raise £4.185 (before expenses) pursuant to the Placing.
The Placing comprises a total of 83.7 million new Ordinary Shares representing 52.74
per cent. of the issued share capital of the Company on Admission.

 

Upon Admission, there will be 158.7 million Ordinary Shares in issue and the market
capitalisation of the Company at Admission based on the Placing Price will be £7.935
million.

 

The Placing Shares will rank in full for all dividends declared, paid or made after
the date of issue and otherwise pari passu with the existing Ordinary Shares.

 

The Board are also in discussions with several international investors who have expressed
an intention to acquire up to 40 million Ordinary Shares at the Placing Price. These
potential investments of up to £2 million (in aggregate) will be confirmed within
10 working days from Admission. An announcement will be made in due course.

 

Future Prospects and further share issues

 

The Company has not traded since incorporation. There have been no transactions other
than the share transactions described in paragraph 2.4 of Part III of the Admission
Document. Following Admission, the Company will have approximately £4.66 million
(after payment of expenses) available for investment. Pending investment, the Company
intends to hold cash in pounds sterling in cash deposit or cash equivalent accounts.

 

Whilst the Directors believe they are well placed to access potential targets in
the African region there is no guarantee that the Company will be able to make any
investments which will realise any commercial return.

 

No representation, warranty or guarantee is or can be made as to the future operating
performance of the Company, which will depend on future events or circumstances,
including events and circumstances which cannot be currently predicted and over which
the Company has no control. Although the Directors have held initial conversations
with a potential acquisition opportunity which may fit the Company's investing policy,
there is no guarantee that any negotiations will lead to an investment by the Company
or to the completion of an acquisition.

Lock-in arrangements

 

The Directors, who on Admission, will be interested in 45 million Ordinary Shares
are prevented by the AIM Rules from disposing of any interests in Ordinary Shares
held by them for a period of 12 months from Admission, except in limited circumstances.
Accordingly they and Matt Mason, who is interested in 5 million Ordinary Shares have
undertaken to the Company and to Seymour Pierce not to sell or dispose of any of
their Ordinary Shares for a period of 12 months from Admission except in limited
circumstances.

 

At Admission, the Directors will be interested in 45 million Ordinary Shares representing
28.4 per cent. of the enlarged issued share capital of the Company.

 

Further details of the lock-in undertakings are set out in paragraph 7.5 of Part
III of the Admission Document.

 

Reasons for Admission and Use of Proceeds

 

The proceeds of the Placing will be used to provide the funds needed by the Company
to identify and carry out due diligence on potential target acquisitions and to provide
working capital for the Company's initial operations in line with its acquisition
strategy.

 

The Directors believe that Admission will have the following benefits:

·    quoted shares may be an attractive form of consideration to potential vendors
and it will also facilitate acquisitions to be financed by vendor placings;

·    the status of being a company with shares publicly traded is likely to enhance
the Company's reputation; and

·    the ability to incentivise staff through the use of share options may be important
in retaining key managers.

 

A full copy of the Company's Admission Document can be found on the Company's website
at www.africanpotash.com.

 

* * ENDS * *

 

This information is provided by RNS
The company news service from the London Stock Exchange
 
END