Share Exchange of Circum Interest to Vortex

RNS Number : 3183B

Premier African Minerals Limited

10 February 2022

 

10 February 2022  

Premier African Minerals Limited

Share Exchange of Circum Interest to Vortex

Premier African Minerals Limited ("Premier" or the "Company") is pleased to announce that it has accepted a share offer by Vortex Limited ("Vortex") for the exchange of Premier's entire 4.8% interest in Circum Minerals Limited ("Circum"),   the owners of the Danakil Potash Project in Ethiopia, for 5,010,333 new shares in the capital of Vortex ("Share Exchange") representing an interest of approximately 13.1% of the enlarged share capital of Vortex.

Neil Herbert, Chairman commented , "This Vortex offer consolidates a substantial percentage of minority shareholders representing 36.7% of Circum. The three other major shareholders in Circum are African focussed private equity mining group AMED Funds, CE Mining headed by Brad Mills and a private mine investment group, Angstrom. Circum is the owner of a world class potash project in the Danakil Basin and has recently completed a revised DFS with a first phase production of 375Ktpa of SOP, an associated capex of approximately US$430m and positive economic outputs which have further de-risked the project from a financing perspective. The initial production is planned to be doubled as and when market conditions allow, with engineering completed for 750Ktpa of SOP.

With current potash prices at all-time highs this project has significant potential value which is only constrained by the current conflict in Ethiopia. On settlement of the conflict, Circum believes it will be well placed with an approved DFS and corresponding extension of Circum's Mining Licence to finalise project financing and the commencement of construction."

Background to the Share Exchange and Information on Vortex

Since the formation of Circum in September 2011, Circum has invested significant funds in its development (approximately US$70m) to bring the project to the stage where it is ready to be financed and constructed. Premier believes that there is significant global interest in fertilizer projects such as Circum, with recent announcements of substantial investments into fertilizer projects demonstrating the attractiveness of potash as an investment opportunity. In addition, sanctions against Belarus and Russia should continue to sustain a tight and robust market for potash.

Vortex is a newly formed unquoted special purpose company founded by Regent Mercantile Holdings Limited ("Regent"). Regent proposed a share exchange to the minority shareholders in Circum, including Premier, for new shares in Vortex. Accepting shareholders would have an indirect interest in Circum through their holding in Vortex, and their Vortex interest would mirror their current ownership of Circum.

Premier has agreed to accept Vortex's Share Exchange offer. In addition to Premier, a number of other minority shareholders in Circum have also agreed to accept the Share Exchange offer. On completion, Premier's interest in Vortex is expected to amount to approximately 13.1% and Vortex is expected to hold in aggregate approximately 36.7% of the shares in issue of Circum. Vortex has not traded to date nor prepared any accounts and has no other assets or business activities other than its interest in Circum.

Principal terms of the Share Exchange

Premier has executed a Share Exchange Agreement ("Agreement") with Vortex for the sale by Premier of its entire holding of 5,010,333 Circum shares to Vortex. The consideration will be satisfied through the issue of 5,010,333 shares in Vortex (being the same number as the number of ordinary shares held in Circum by Premier) to Premier.

Vortex has agreed to provide Premier with observer rights to its day-to-day operations, including without limitation, access to any information updates from Circum. Premier will also have certain pre-emptive rights to ensure that Premier is able to protect and maintain its interest in Vortex.

The Board of Circum has given its consent to the transfer of Circum shares to Vortex pursuant to the Share Exchange leaving no further conditions precedent for completion of the Agreement apart from the procedural aspects of the transfer.

Financial effects on Premier

The Agreement is not expected to have any impact on Premier's accounting treatment nor the balance sheet value of its interest in Circum which will now be held through Vortex. As disclosed in Premier's published results for the six months ended 30 June 2021, the fair value of its holding of Circum shares was derived using the last Circum ordinary share issue price and was valued in total at US$6.263 million.

Further information on Circum

The information on Circum set out below has been extracted from previously reported public disclosures in respect of Circum.

Circum is a privately-owned potash development company which is developing the Danakil Potash Project in Ethiopia. The project has a NI 43-101 compliant resource of approximately 4.9 billion tonnes of potassium in the prolific Danakil potash basin. In October 2021, the updated Definitive Feasibility Study ("DFS") was completed and aside from the mineral reserve estimate, which is currently being updated, has been completed to a standard that adheres to the Canadian National Instrument (NI) 43-101. Circum's deposit has the potential to produce both SOP and MOP, although initial production as envisioned in the DFS will focus on high value SOP production. The updated DFS sets an initial production level at 375ktpa of SOP across three products - standard, granular and water soluble and has been engineered in a modular fashion allowing a ramp up to 750ktpa of SOP as and when market conditions allow.

Under Phase 1 of the DFS, capital expenditure is estimated to be approximately US$430m and the project is modelled to deliver a post royalty, pretax, real NPV at a 10% discount rate of US$576 million and an internal rate of return of 23.6%.

Due to the shallow nature of the deposit, the Danakil Potash Project will be amenable to low-cost, low-risk, solution mining. In addition, the extremely hot surface temperatures and high evaporation rates will allow the use of solar evaporation all year round, this along with the provision of hydro-electric power to the plant ensures Circum has one of the lowest carbon footprints in the industry. As a result, mine gate cash costs are projected to be among the lowest in the potash industry, estimated at US$124 per tonne of SOP. Total operating costs (FOB Tadjoura Port, Djibouti) are forecast at US$183 per tonne of SOP (before the inclusion of the royalty payable to the Ethiopian government which is levied at 4 per cent of the Djibouti FOB price). 

Circum Policy

As announced on 30 August 2019, the Board of Premier will ensure that its agreed Circum policy (which is reproduced in the Appendix to this announcement) is applied to any potential liquidity event in respect of the Company's shares in Vortex.

Board recommendation

George Roach has also accepted the Vortex offer in respect of his own indirect interest in Circum and, on completion of the Vortex Share Exchange offer, George Roach will have an indirect interest of 6.8% in Vortex. While the transaction is not a related party transaction for the purposes of the AIM Rules, given the interest of George Roach in Vortex on completion, the independent directors of the Company, being Neil Herbert, Wolfgang Hampel and Godfrey Manhambara (the "Independent Directors") have considered and approved Premier's acceptance of the Share Exchange offer and the proposed Agreement with Vortex. The Independent Directors believe that that the terms of the Share Exchange offer and Agreement are fair and reasonable insofar as the Company's shareholders are concerned. In particular, the Independent Directors have taken into account that the Share Exchange offer will result in Premier having improved oversight over the strategic direction of Circum through its observer rights to Vortex's day-to-day operations, and including without limitation, access to any information updates from Circum. Furthermore, the offer of pre-emptive rights will also enhance Premier's ability to protect and maintain its interest in Vortex.

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014 as it forms part of UK Domestic Law by virtue of the European Union (Withdrawal) Act 2018.

The person who arranged the release of this announcement on behalf of the Company was Neil Herbert.

Forward Looking Statements:

Certain statements in this announcement are or may be deemed to be forward looking statements. Forward looking statements are identified by their use of terms and phrases such as ''believe'' ''could'' "should" ''envisage'' ''estimate'' ''intend'' ''may'' ''plan'' ''will'' or the negative of those variations or comparable expressions including references to assumptions. These forward-looking statements are not based on historical facts but rather on the Directors' current expectations and assumptions regarding the Company's future growth results of operations performance future capital and other expenditures (including the amount. Nature and sources of funding thereof) competitive advantages business prospects and opportunities. Such forward looking statements reflect the Directors' current beliefs and assumptions and are based on information currently available to the Directors. A number of factors could cause actual results to differ materially from the results discussed in the forward-looking statements including risks associated with vulnerability to general economic and business conditions competition environmental and other regulatory changes actions by governmental authorities the availability of capital markets reliance on key personnel uninsured and underinsured losses and other factors many of which are beyond the control of the Company. Although any forward-looking statements contained in this announcement are based upon what the Directors believe to be reasonable assumptions. The Company cannot assure investors that actual results will be consistent with such forward looking statements.

Notes to Editors:

Premier African Minerals Limited (AIM: PREM) is a multi-commodity mining and natural resource development company focused on Southern Africa with its RHA Tungsten and Zulu Lithium projects in Zimbabwe.

The Company has a diverse portfolio of projects, which include tungsten, rare earth elements, lithium and tantalum in Zimbabwe and lithium and gold in Mozambique, encompassing brownfield projects with near-term production potential to grass-roots exploration. The Company currently holds 5,010,333 shares in Circum Minerals Limited, the owners of the Danakil Potash Project in Ethiopia, which has the potential to be a world class asset.   This holding represents 4.8% of Circum shares in issue.

In addition, the Company holds a 19% interest in MN Holdings Limited, the operator of the Otjozondu Manganese Mining Project in Namibia.

Glossary
"DFS"	Definitive Feasibility Study.
"KCI"	Potassium Chloride.
"MOP"	Muriate of Potash.
"TPA"	Tonnes per annum.
"SOP"	Sulphate of Potash.

Enquiries:

George Roach	Premier African Minerals Limited	Tel: [phone]
Michael Cornish / Roland Cornish	Beaumont Cornish Limited (Nominated Adviser)	Tel: [phone]
John More/Toby Gibbs	Shore Capital Stockbrokers Limited	Tel: [phone]
Matthew Bonner	EAS Advisors LLC	Tel: [phone]

Appendix

Premier African Circum Policy as announced 30 August 2019

In anticipation of a liquidity event, on 30 August 2019 the Premier Board adopted a formal policy setting out how the Board would apply the proceeds ("Circum Policy"). Under the Circum Policy, providing the proceeds of the liquidity event is greater than US$6,262,916 in respect of the Company's entire current holding in Circum ("Circum Interest"), then:

1. The Board of Directors would convene a general meeting at which shareholders will be asked to approve the disposal of the Circum Interest ("Circum Disposal").

2.   Conditional on the approval of the Circum Disposal, Premier will first repay all existing debts and liabilities incurred in the ordinary course of business as at the date of the liquidity event of the Circum Interest.

3. Shareholders will be further asked to approve either of the following options to facilitate a fair and equitable distribution to Premier's shareholders of its Circum Interest:​

-  Direct distribution to existing shareholders by way of either a share dividend, share buyback scheme or such other scheme of arrangement that would be the most reasonably tax efficient for shareholders; or

-  The retention by the Company of the disposal proceeds to allow Premier to investment into existing or new projects of Premier.

ENDS

 

END

 

 

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