REG - African Pioneer PLC - Zambia projects option agreement

African PioneerAnnouncement

20/01/2022 07:05

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RNS Number : 9938Y  African Pioneer PLC  20 January 2022

20 January 2022

African Pioneer Plc

("African Pioneer" or "the Company")

 

Zambia projects option agreement

 

African Pioneer plc ("APP" or the "Company"), the exploration and resource
development company with projects in Namibia, Zambia and Botswana announces
that on 19 January 2022 it and its 80% owned subsidiary African Pioneer Zambia
Ltd ("African Pioneer Zambia") entered into an option agreement with First
Quantum Minerals Ltd ("First Quantum") (listed on the Toronto Stock Exchange
FM.TO) in relation to 4 of the 5 Zambian exploration licences held by African
Pioneer Zambia (the "Option Agreement").

 

Highlights:

 

·     The four exploration licences the subject of the Option Agreement
are in the highly prospective Central Africa Copperbelt in northwest Zambia
which is the largest and most prolific mineralized sediment- hosted copper
province in the world and are located less than 100km from First Quantum's
giant Sentinel copper mine.

 

·     The exploration licenses include geological formations similar in
age and rock type to that hosting the major copper deposits of the Copperbelt

 

·     During the initial 18 month option period First Quantum has the
right but not the obligation to spend US500,000 on each of the exploration
licences 27767-HQ-LEL, 27768-HQ-LEL, 27770-HQ-LEL, and 27771-HQ-LEL (the
"Zambian Projects").  At this stage First Quantum will not have earned any
shares in African Pioneer Zambia, just the right to proceed to take one or
more of the properties into the First Earn In Period by issuing an Option
Exercise Notice.

 

·     During the First Earn In Period, First Quantum then has 2 years
when it has the right but not the obligation to prepare a Technical Report in
respect of the Zambian Projects demonstrating an Indicated Mineral Resource of
at least 300,000 tonnes of contained copper (the "Technical Report
Requirement"). First Quantum is to fund the Technical Report. Once the
Technical Report is issued First Quantum has the right to be issued shares
equal to a 51% shareholding in African Pioneer Zambia. This will also trigger
the Second Earn-In Period.

 

·     In the Second Earn-In Period First Quantum shall have the right but
not the obligation to complete all necessary mining, metallurgical and
development studies to establish a mine at the Property and make a public
announcement that it intends to proceed towards commercial development of a
Mine on the Property (a "Decision to Mine"). First Quantum is to fund all
costs related to the Decision to Mine.  Once First Quantum announces a
Decision to Mine First Quantum has the right to be issued shares in African
Pioneer Zambia to increase their 51% shareholding in African Pioneer Zambia to
75%.

 

 

Executive Chairman, Colin Bird said:

 

"We are very pleased that we have entered into this agreement with First
Quantum, which has one of the world's largest copper mines nearby and has a
wealth of exploration, mining and technical expertise built up over the last
25 years.  The exploration areas are large and are highly prospective not
only for copper but also cobalt in association.

 

Myself and the team have previous good working experience of the First Quantum
Group and on that basis know that the exploration of the project will be
approached in a highly technical and commercial way. We will keep the market
informed on progress as it happens."

 

Additional Information

 

First Quantum: is one of the world's top 10 copper producers operating in
several countries including Zambia where it owns the Sentinel and Kansanshi
mines in North West Zambia and is known for its specialist technical
engineering construction and operational skills which have allowed it to
develop and successfully run complex mines and processing plants. Colin Bird,
the chairman of African Pioneer,  was a founder of and floated Kiwara Plc in
around 2008 which discovered copper in northwest Zambia and was sold to First
Quantum in 2009 for U$260 million. First Quantum then developed the Kiwara Plc
projects into the Sentinel mine which is the world's 14(th) largest copper
mine.

 

Zambian Projects: The licence package covers part of the north-western
extension of the Zambian Copperbelt. The properties are located within
80-100km of First Quantum's giant Sentinel copper mine, one of the largest
copper mines in Africa, with current Measured and Indicated Resources of 891Mt
@ 0.45% Cu. They also lie close to the Enterprise nickel deposit (37.7Mt @
1.03% Ni) which is being reportedly moved towards development. This link is to
a map of the Zambian Projects.

 

The Zambian Projects lie on the Lufilian Fold Belt in the Domes region of the
Central African Copperbelt, straddling the western boundary of the Kabompo
Dome, underlain principally by rocks of the Lower and Upper Roan, as well as
the stratigraphically higher Kundelungu and Nguba Groups. This geological
package is similar in age and rock type to that hosting the major copper
deposits of the Copperbelt, including Sentinel. Therefore, the licence areas
are considered to be strongly prospective for Copperbelt-type copper/cobalt
and/or nickel deposits. They are historically underexplored, representing the
westerly extension of the Copperbelt which has not been investigated in
detail, as previous work focussed primarily on the central part of the zone.

 

On the Luamata South licence (27771-HQ-LEL), African Pioneer has acquired a
valuable exploration package arising from recent work by MMG Zambia Ltd
('MMG') which highlights strong soil/airborne magnetic targets that were not
drill tested, as MMG pulled out of Zambia. The Samuteba East licence
(27770-HQ-LEL) was recently held by Anglo American which also carried out
airborne magnetic surveying and reconnaissance soil sampling before exiting
the Copperbelt. The soil data highlights several copper anomalies of
considerable interest.

 

Exploration licence 27769-HQ-LEL owned by African Pioneer Zambia which is not
covered by the Option Agreement is in the Zambezi area located within the
Zambezi belt of southern Zambia that hosts a Lower Katanga supergroups
succession will be transferred from African Pioneer Zambia to a new Zambian
company to be owned 80% by the Company and 20% by its local partners.

 

 

 

 

Summary of main commercial terms of the Option Agreement:

 

 Parties                                                                      First Quantum Minerals Ltd, the Company, African Pioneer Zambia and the
                                                                              minority shareholders of African Pioneer Zambia (the "Minority Shareholders").

 Initial Expenditure                                                          First Quantum has the right but not the obligation to spend US500,000 on each
                                                                              of the exploration licences 27767-HQ-LEL, 27768-HQ-LEL, 27770-HQ-LEL, and
                                                                              27771-HQ-LEL within 18 months.  The 18 months period is extended a further 6
                                                                              months for any of the licences where First Quantum has spent US$350,000 in the
                                                                              first 18 months. At this stage First Quantum will not have earned any shares
                                                                              in African Pioneer Zambia, just the right take one or more of the properties
                                                                              into to the First Earn In Period by issuing an Option Exercise Notice.

 First Earn-In Period - Issue of Technical Report earns First Quantum 51%     After sending the Option Exercise Notice, First Quantum then have 2 years when
                                                                              it has the right but not the obligation to prepare a Technical Report in
                                                                              respect of the Property demonstrating an Indicated Mineral Resource of at
                                                                              least 300,000 tonnes of contained copper (the "Technical Report Requirement").
                                                                              First Quantum is to fund the Technical Report and if it spends US$2M on this
                                                                              in the 2-year period then it has an extra year to complete the Technical
                                                                              Report. Once the Technical Report is issued First Quantum has the right to
                                                                              deliver the First Earn-In Exercise Notice and be issued shares equal to a 51%
                                                                              shareholding in African Pioneer Zambia. This will also trigger the Second
                                                                              Earn-In Period

 Second Earn-In Period - Decision to Mine earns First Quantum further 24% so  In the Second Earn-In Period First Quantum shall have the right but not the
 they own 75%                                                                 obligation to complete all necessary mining, metallurgical and development
                                                                              studies to establish a mine at the Property and make public announcement that
                                                                              it intends to proceed towards commercial development of a Mine on the Property
                                                                              (a "Decision to Mine"). First Quantum is to fund all costs related to the
                                                                              Decision to Mine.  Once First Quantum announces a Decision to Mine First
                                                                              Quantum has the right to be issued shares to increase its 51% shareholding in
                                                                              African Pioneer Zambia to 75%.

 Funding once First Quantum at 75%                                            Once First Quantum is at 75% then the parties have to fund pro-rata and if
                                                                              they do not they will be diluted. If the joint shareholding of the Company and
                                                                              the Minority Shareholders is diluted to 10% then it converts into a 1% royalty
                                                                              which would be paid 0.2% to the Minority Shareholders and 0.8% to the Company.

 Joint Venture after First Earn-In Exercise Notice                            Once First Quantum has delivered the First Earn-In Exercise Notice the parties

                                                                            will be deemed to have established a joint venture.

                                                                              Prior to the making of a Decision to Mine (which announcement shall be in the
                                                                              sole discretion of First Quantum), the allocation of Joint Venture Expenditure
                                                                              shall be made by the Participants in proportion to their respective
                                                                              Participating Interests, provided that First Quantum shall be responsible for
                                                                              Joint Venture Expenditures relating to its completion of all necessary mining,
                                                                              metallurgical and development studies contributing to the Decision to Mine.

 Sale restrictions                                                            The Company needs First Quantum approval to sell and must give First Quantum
                                                                              first refusal rights and First Quantum cannot sell without the consent of the
                                                                              Company.

 Tag along rights                                                             If First Quantum wants to sell their African Pioneer Zambia shares to a third
                                                                              party then the Company and the Minority Shareholders can require that the
                                                                              third party also buys their African Pioneer Zambia shares on the same terms.

 Excluded Licence                                                             Exploration licence 27769-HQ-LEL will be transferred from African Pioneer
                                                                              Zambia to a new Zambian company to be owned 80% by the Company and 20% by the
                                                                              Minority Shareholders.

 Representations & warranties                                                 The parties have made representations & warranties customary for an
                                                                              agreement of this nature

 

 

 African Pioneer Plc

+44 (0)20 7581 4477
 Colin Bird

 Executive Chairman

 Beaumont Cornish (Financial Adviser)    +44 (0) 020 7628 3396

Roland Cornish

 Novum Securities Limited (Broker)

 Jon Belliss                             +44 (0) 20 7399 9400

+44 (0)20 7581 4477

 

Beaumont Cornish (Financial Adviser)

Roland Cornish

 

+44 (0) 020 7628 3396

Novum Securities Limited (Broker)

Jon Belliss

 

 

+44 (0) 20 7399 9400

 

or visit  https://africanpioneerplc.com/ (https://africanpioneerplc.com/)

 

 

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

 

Qualified Person:

Technical information in this announcement has been reviewed by Edward (Ed)
Slowey, BSc, PGeo, a technical adviser to African Pioneer Plc. Mr Slowey is a
graduate geologist with more than 40 years' relevant experience in mineral
exploration and mining, a founder member of the Institute of Geologists of
Ireland and is a Qualified Person under the AIM rules. Mr Slowey has reviewed
and approved this announcement.

 

 

Glossary

 

A 'Mineral Resource' is a concentration or occurrence of solid material of
economic interest in or on the Earth's crust in such form, grade (or quality),
and quantity that there are reasonable prospects for eventual economic
extraction. The location, quantity, grade (or quality), continuity and other
geological characteristics of a Mineral Resource are known, estimated or
interpreted from specific geological evidence and knowledge, including
sampling. Mineral Resources are sub-divided, in order of increasing geological
confidence, into Inferred, Indicated and Measured categories.

 

An 'Indicated Mineral Resource' is that part of a Mineral Resource for which
quantity, grade (or quality), densities, shape and physical characteristics
are estimated with sufficient confidence to allow the application of Modifying
Factors in sufficient detail to support mine planning and evaluation of the
economic viability of the deposit.

 

"Cu"     Copper

"Mt"      million tonnes

"Ni"      Nickel

 

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