Zagora Cobalt Project Agreement

Critical Mineral Resources PLC

02 October 2023

 

2 October 2023

Critical Mineral Resources PLC

('CMR' or the 'Company')

Zagora Cobalt Project Agreement

Critical Mineral Resources plc ('CMR' or the 'Company), the exploration and development company focused on clean energy metals, is pleased to announce the signing of a binding heads of terms to earn-in to the Zagora Cobalt Project ('Zagora' or the 'Project') in Morocco.

Highlights

·    Binding heads of terms signed to earn-in to the Zagora Cobalt Project.

·   Cobalt mineralisation at surface with samples taken during technical due diligence including G03 which assayed 1.15% Cobalt at SGS-certified AFRILAB. This cobalt grade is equivalent to approximately 6.5g/t gold or 4.7% copper at current metal prices. The near-surface cobalt structure provides the potential for a shallow discovery.

·    Strategic location in Morocco, approximately 90km south of the Bou Azzer district where cobalt is mined by mid-sized miner Managem Group that has agreements to supply cobalt to BMW Group and Renault Group.

·    Bou Azzer's operations have operated since the late 1920's, and there's pressure for new discoveries to help meet rising cobalt demand. This dynamic, coupled with the demand for transparent and sustainable battery raw materials supply chains and Morocco's increasing position as a global battery materials supply chain hub, will likely drive interest in all new Moroccan cobalt projects and discoveries.

Project details

The Zagora Project is located approximately 25km southwest of Zagora City and 90km south of the Bou Azzer mining district (Figure 1). A sealed road is being constructed through the property, and this has reached a point approximately 10km to the northeast of the Project's border. There is water on site due to the existence of sedimentary rocks, mainly Cambrian aged sandstones (Figure 3). Whilst it is too early to make confident statements about this deposit's depth, geometry or size, the near-surface cobalt mineralised structure that has been identified provides the potential for a shallow discovery.

Transaction summary

CMR and its subsidiary Atlantic Research Minerals SARL ('ARM') have signed a binding term sheet with the shareholders of S.A Strategy SARL ('SAS'), the owner of the Zagora Cobalt Project, to earn-in on delivery of certain milestones.

ARM will invest sufficient funds into the Project to produce a JORC standard Scoping Study before progressing to a Pre-Feasibility Study and Definitive Feasibility Study assuming positive results. ARM's interest will start at 20-25% (subject to the Formal Agreement) and increase on delivery of these project development milestones. Earning 70% on delivery of a Definitive Feasibility Study. The term sheet protects CMR should the Project be acquired by a third party before CMR has produced a Scoping Study and reached 50% ownership.

Figure 1: Map showing Zagora Cobalt Project licenses relative to Bou Azzer area [Source: Company]

Global cobalt outlook

Demand for high-performance Nickel Manganese Cobalt (NMC) batteries is expected to grow despite competing technologies including Lithium Iron Phosphate (LFP). This is mainly due to the rapid growth of electric vehicles and battery storage. These drivers should ensure strong cobalt demand growth over 10 to 15 years. The International Energy Agency forecasts cobalt demand of between 6 to 30 times higher in 2040 than 2020*, with the range mainly depending on whether world leaders introduce sufficient policies to meet the sustainable development goals of the Paris Agreement i.e. a "well below 2°C global temperature rise" versus pre-industrial levels (1850-1900).

* the IEA has two main scenarios (1) STEPS - Stated Policies Scenario / the policies already announced (2) SDS -  Sustainable Development Scenario / what is required to keep temperature rise below 2°C

Morocco's cobalt opportunity and position as a battery materials hub

Due to Morocco's stability and status as a favoured trading partner of the EU and the US, there is extremely good demand for Moroccan-produced exports including cobalt and soon battery materials. Morocco's cobalt production is currently only being mined in the Bou Azzer district, where Managem Group, a mid-scale Moroccan mining group, operates a series of mature underground mines from which BMW and Renault have supply agreements. Accordingly, Managem Group is known to be rigorously exploring the country to meet future demand.

Morocco has continued to gain significant recognition from global organisations as a battery commodity and materials hub with, in recent months, commitments from China's CNGR Advanced Material Ltd to build a cathode materials plant in Morocco to supply the US and European battery markets. As well as South Korea's LG Chem committing to build a cathode materials plant in the country.

Charlie Long, Chief Executive Officer of CMR PLC, commented:

"We are pleased to have signed this binding heads of terms to earn-in to the Zagora cobalt Project, which represents another milestone in our Morrocan journey. This agreement strengthens our position in the critical minerals sector. Morocco's cobalt industry and associated demand dynamics, combined with its position as a fast-growing battery materials hub, means there is clear demand for new cobalt projects. The near surface mineralisation at Zagora is exciting and the team will now progress with the development of the Project, providing further updates in the near future."

Figure 2: Committed mine production and primary demand for cobalt, 2020-2040 [Source: IEA 2023 ; License: CC BY 4.0 ; IEA website address]

Figure 3: Zagora Cobalt Project site showing water [Source: Company]

Figure 4: Samples being taken near surface [Source: Company]

Global regulation and European Battery Passports

At the global level, the market for batteries is an increasingly strategic space and protectionism, environmental (including low carbon) and social regulation are the major themes. The European Union has been at the forefront, and in recent years introduced various related acts, regulation and directives. These include the Ecodesign for Sustainable Products Regulation (ESPR, March 2022) (2) the EU Corporate Sustainability Due Diligence Directive (EU CSDDD, February 2022) (3) the EU Critical Raw Materials Act, and (4) the Batteries and Waste Batteries Regulation - recently announced on 10 July 2023.

The Batteries and Waste Batteries Regulation is a milestone, crytallizing the battery passport vision of the European Council. It requires large European companies to adopt a battery passport and due diligence policy throughout the supply chain, including at the mine level.

As the German Battery Pass project states, the aim is to source "indispensable raw material imports from like-minded countries in a sustainable manner" and to ensure that batteries in the EU have "world-leading standards with respect to climate footprint, social and environmental sustainability".

This new regulation will advantage countries like Morocco that have dominant renewable energy production and high environmental and social standards.

Figure 5: EU battery passport regulation will require labelling [Source: Company]

Morocco - a fast-growing battery commodities and materials hub

Morocco is rapidly gaining recognition as a thriving battery materials hub, making significant strides in the supply chain for the clean energy revolution due to its position as a favoured trading partner of both the US and European Union. Since Morocco is a free trade partner of the US, its critical raw materials count towards sourcing targets required for electric vehicles sold in America to receive subsidies of up to $3,750 per car under the US Inflation Reduction Act.

·    July 2020, BMW Group entered into a substantial supply contract with Managem Group, with a contract value of approximately €100 million over a five year term, from 2020 to 2025.

·   June 2022, Renault Group and Managem Group forged a Memorandum of Understanding (MoU). This strategic agreement was designed to support Renault's sustainable and responsible supply of low-carbon cobalt sulphate from 2025 for seven years.

·   September 2023, Casablanca-based private capital fund Al Mada, in partnership with CNGR Advanced Material Co. Ltd entered into an agreement to establish an integrated battery material facility in Moroco, producing 'zero waste, low carbon, and recyclable battery materials.'

·    September 2023, LG Chem and Huayou Group signed a MOU to construct a 50,000-ton-per-year lithium-phosphate-iron  plant in Morocco, with mass production set to begin in 2026. The LFP cathode materials produced will be supplied to the North American market.

·    Additionally, Glencore and Managem are exploring a partnership to recycle cobalt, nickel, and lithium at Managem's CTT Hydrometallurgical Refinery near Marrakech. This project is at the feasibility study stage.

These collaborations exemplify Morocco's fast-growing position as a leading battery commodities and materials hub recognised by and supported by leading global automotive manufacturers, speciality chemical groups, and mining groups.

Heads of terms

CMR and ARM have entered into a binding term sheet with the owners of the SAS Project, outlining the conditions for CMR and ARM's involvement in the Project based on specific milestones. ARM and SAS have committed to finalising a Formal Agreement promptly, following which ARM will receive between 20% to 25% ownership in the Project, contingent on successful legal due diligence.

ARM will provide funding for the Project to complete a JORC standard (or equivalent) Scoping Study, in exchange for a 50% stake in the Project, representing an additional 30% or 25% of Zagora's shares, depending on CMR's initial shareholding.

Upon ARM's acquisition of 50% of the Project shares, CMR will issue US$250,000 worth of CMR shares to the shareholders of the Project. ARM retains the option to purchase an additional 30% of the Project's shares before the Scoping Study's completion through a payment of US$1.0 million, divided between cash and CMR shares, to the Project's shareholders.

ARM will continue to invest in the Project to facilitate the production of a JORC standard Pre-Feasibility Study, in exchange for an additional 10% ownership in Zagora. Once ARM receives 60% of the Project shares, CMR will pay the Project's shareholders US$500,000 in CMR shares and 3% of the Pre-Feasibility Study's discounted cashflow model NPV₁₀ value in cash.

Further investment by ARM to support the development of a Definitive Feasibility Study will result in ARM gaining an additional 10% ownership in the Project. When ARM achieves 70% ownership, CMR will compensate the Project's shareholders with 4.5% of the Definitive Feasibility Study's discounted cashflow model NPV₁₀ value, divided between cash and CMR shares.

The shareholders will retain a 3.0% Net Smelter Return ('NSR') royalty, based on 90% cobalt payability, with a maximum cap of 5% NSR royalty where payability is lower. ARM also has the option to increase its shareholding from 70% to 85% through a payment of US$2.5 million to the Project's shareholders.

For further information, please contact:

Critical Mineral Resources plc Charles Long, Chief Executive Officer	[e-mail]
Novum Securities Jon Belliss	[phone]
Hudson Sandler (Financial PR) Charlie Jack	[phone]

Notes To Editors

Critical Mineral Resources (CMR) plc is an exploration and development company focused on developing assets that produce key commodities essential for renewable energy, battery storage and electrification to support the clean energy revolution. These commodities are widely recognised as being at the start of a supply and demand supercycle.

CMR is building a diversified portfolio of high-quality metals exploration and development projects in Morocco, focusing on copper, nickel, manganese, cobalt, and potentially rare earths. CMR identified Morocco as an ideal mining-friendly jurisdiction that meets its acquisition and operational criteria. The country is perfectly located to supply raw materials to Europe and possesses excellent prospective geology, infrastructure and attractive permitting, tax and royalty conditions. In 2023, the Company acquired an 80% stake in leading Moroccan exploration and geological services company Atlantic Research Minerals SARL.

Since taking over the CMR in 2022, the current management has completed a comprehensive strategic review and restructuring of the business and implemented its clear strategy to maximise exploration and resource development opportunities for the benefit of all stakeholders. The Company is listed on the London Stock Exchange (CMRS.L). More information regarding the Company can be found at www.cmrplc.com

 

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