REG - Cadence Minerals PLC - Amapa Iron Ore Project Update

Cadence MineralsAnnouncement

29/12/2021 07:00

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RNS Number : 8149W  Cadence Minerals PLC  29 December 2021

Cadence Minerals Plc

 

("Cadence Minerals", "Cadence")

 

Execution of Settlement Agreement and Vesting of Initial US$2.5m for 20% of
the Amapa Iron Ore Project

 

Cadence Minerals (AIM/AQX: KDNC; OTC: KDNCY) is pleased to announce that it
has entered into a binding settlement agreement ("Settlement Agreement") with
the secured bank creditors of DEV Mineração S.A. ("DEV"), the owner of the
Amapa iron ore project in Brazil.

 

The execution of the Settlement Agreement represents the last major
precondition for Cadence to vest its initial US$2.5m for 20% of the
large-scale Amapa iron ore mine, beneficiation plant, railway and private port
("Amapa Project", "Amapa") . Anglo American, a previous owner  had  valued
its 70% stake in the Amapa Project in  date at US$ 866 million (100% US$ 1.2
billion). It impaired the asset in its 2012 Annual Accounts to US$ 462 million
(100% US$ 660 million).

 

Highlights:

·      Execution of the Settlement Agreement with the Secured Bank
Creditors of the Amapa Project allows Cadence's (20%) and Indo Sino's (80%)
joint venture to secure 100% ownership of the Amapa Project.

·      The restructuring of the secured and unsecured creditors achieved
by this Settlement Agreement and the Judicial Restructuring Process ("JRP")
has more than halved registered creditors balances.

·      Cadence has already commenced its next stage of investment in the
Amapa Project to increase its stake to 27%.

·      Pre-feasibilty studies are ongoing on the project

 

Next Steps

The parties to the agreement are now completing and filing the required
contractual and regulatory documentation which will crystallise the Cadence
and Indo Sino Trade Pte. Ltd. ("Indo Sino") joint venture company's 100%
ownership of DEV and the Amapa Project.

 

Cadence has already begun work on the next investment phase to earn an
additional 7% of Amapa for US$3.5 million. These funds will be primarily used
to progress the pre-feasibility studies on the asset.

 

Details of the Settlement Agreement

Cadence alongside Indo Sino entered into a Settlement Agreement with DEV and
the Secured Bank Creditors on 24 December 2021.

 

The original credit facility provided to DEV has a principle amount
outstanding of US$135 million ("Credit Facility"). The Settlement Agreement
settles all of the principle amount plus all interest, default interest,
outstanding costs and fees ("Settlement Amount"). The Credit Facility is
secured over all of DEV's equity and assets.

 

As a result of the Settlement Agreement and the JRP approved in August 2019,
the total principle amounts owed to the secured and unsecured creditors in
classes I to IV of DEV have been reduced from  approximately US$231 million
to approximately US$103 million or approximately 45% of the original value.

 

The Settlement Amount will be paid over two years from the effective date of
the Settlement Agreement, and It is to be be satisfied by the net profits from
the sale of DEV's iron ore stockpiles. As agreed in the JRP in August 2019 the
unsecured creditors will be paid from DEV's free cash flow over a period of
nine years.

 

Under the Settlement Agreement, DEV remains the obligor with the Secured
Creditors having no recourse of repayment of the Settlement Amount to either
Cadence or Indo Sino. The Settlement Agreement will remain secured over all of
DEV's equity and assets.

 

Cadence CEO, Kiran Morzaria, commented: "When Cadence first announced Heads
of Terms for Amapa back in May 2019, we knew that while a tremendous amount of
work lay ahead, the investment and terms, if secured would represent our
greatest achievement to date as a mining investment company."

 

"We are at this point today is entirely due to the team at Cadence, Indo Sino
and DEV sharing a common vision and working together to achieve it. I am proud
that together we have overcome some considerable challenges, including the
impact of COVID on the Amapa region, to reach this moment."

 

"We have already embarked on Phase 2, where Cadence will vest an additional
US$3.5m to take our holding to 27%. Given the rate of progessthat I saw on
visiting Amapa in October, I have every confidence that the day when our
newly recommissioned mine re-commences production will come, at which point
the nascent value in the project will be realised for the benefit of all our
investors and shareholders."

 

Cadence Non-Executive Chairman, Andrew Suckling, commented; "This is indeed a
momentous day for Cadence, Indo Sino, DEV, the Government of Amapa, the legal
teams and bank committees and administrators who have worked tirelessly, COVID
notwithstanding, to finalise the final and perhaps the most lengthy part of
the judicial restructuring plan agreed back in 2019."

 

"I would also like to put on record my heartfelt thanks to everyone involved
in making this happen, and in particular to Kiran and the team for realising
what is an absolutely transformational transaction for Cadence and its
shareholders."

 

"Having achieved what we set out to do, the work really starts in earnest.
Bringing Amapa back to life has created a raft of new opportunities for the
region and its community, with improved prospects for employment, health and
education. The opportunity is simply huge: Amapa was once owned Anglo
American, and we fully intend to restore the mine and infrastructure to its
former glory, and more besides given that we intend to produce a higher
quality product mix. Even now, the value of this transaction is only starting
to register with the markets, something I truly believe will change
dramatically in the coming years."

 

About the Amapa Project

The Amapa Project commenced operations in December 2007 with the first
production of iron ore concentrate product of 712 kt in 2008.  In 2008 Anglo
American (70%) and Cliffs (30%) acquired the Amapa Project in 2008 as part of
a larger package of mining assets in Brazil.

 

Production steadily increased to 4.8 Mt and 6.1 Mt of iron ore concentrate
product in 2011 and 2012.  During this period, Anglo American reported
operating profits from its 70% ownership in the Amapa Project of US$ 120
million (100% US$ 171 million) and US$ 54 million (100% US$ 77 million).
Before its sale in 2012, Anglo American valued its 70% stake in the Amapa
Project at US$ 866 million (100% US$ 1.2 billion). It impaired the asset in
its 2012 Annual Accounts to US$ 462 million (100% US$ 660 million.

 

DEV filed for judicial protection in August 2015 in Brazil, and mining ceased
at the Amapa Project. A judicial order in early 2019 offered investors and
creditors the opportunity to file a revised JRP. Cadence and Indo Sino filed a
conditional JRP, which creditors approved in August 2019. Cadence, Indo Sino
and DEV have continued to develop the Amapa Project and satisfy the conditions
of the JRP.

 

Cadence updated the Mineral Resource Estimate on 2 November 2020, increasing
the MRE by 21%. The current MRE contains an Mineral Resource of 176.7 million
tonnes grading 39.7% Fe in the Indicated category and Mineral Resource of
8.7Mt at 36.9% in the Inferred category, both reported within an optimised pit
shell and using a cut-off grade of 25% Fe.

 

Details of the Joint Venture Agreement

The agreement with our joint venture partner, Indo Sino Pty Ltd, is to invest
in and acquire up to a 27% of a joint venture company Pedra Branca Alliance
Pte. Ltd. ("JV Co").  On Completion and registration of the Settlement
Agreement the equity of DEV Mineração S.A. ("DEV") will be transferred to
the JV Co, at which point it will own 99.9% of the Amapa Project. Should Indo
Sino seek further investors or an investment in the JV Co, the agreement also
provides Cadence with a first right of refusal to increase its stake to 49% in
the JV Co.

 

To acquire its 27% interest Cadence will invest US$ 6 million over two stages
in JV Co. The first stage is for 20% of the JV Co the consideration for which
is US$2.5 million. The second stage of investment is for a further 7% of JV Co
for a consideration of US$3.5 million. If Cadence is unable to complete the
second stage of the investment or not exercise its right of first refusal
under the terms of the Agreement, Indo Sino will have a twelve-month option to
buy the shares in JV Co held by Cadence for 1.5 (1 ½) times the price paid by
Cadence for such shares.

 

Cadence's investment was conditional on several material preconditions, which
as of the date of this announcement have been satisfied. On completion of
Cadence's investment (not including the first right of refusal), our joint
venture partner Indo Sino will own 73% of JV Co. The Agreement also contains
security and default clauses which if triggered causes an upwards adjustment
mechanism to allow Cadence to either receive cash from JV Co or receive
additional shares in JV Co. In the latter case, Cadence's shareholding in the
JV Co will not go above 49.9%.

 

On completion of the US$ 6 million investment, Cadence will have the right to
appoint two members to a five-member board, with the remaining three
comprising of one member jointly appointed by Cadence and Indo Sino and two
appointed by Indo Sino.

 

- Ends -

 

 For further information:

Cadence Minerals plc
                      +44 (0) 7879 584153
 Andrew Suckling
 Kiran Morzaria

 WH Ireland Limited (NOMAD & Broker)                                      +44 (0) 207 220
                      1666
 James Joyce
 Darshan Patel

 Novum Securities Limited (Joint Broker)                                  +44 (0) 207 399
                      9400
 Jon Belliss

 

 

 

Qualified Person

Kiran Morzaria B.Eng. (ACSM), MBA, has reviewed and approved the information
contained in this announcement. Kiran holds a Bachelor of Engineering
(Industrial Geology) from the Camborne School of Mines and an MBA (Finance)
from CASS Business School.

 

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 Cadence Minerals Plc'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.  Many 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 Cadence Minerals Plc. Although any
forward-looking statements contained in this announcement are based upon what
the Directors believe to be reasonable assumptions. Cadence Minerals Plc
cannot assure investors that actual results will be consistent with such
forward-looking statements.

 

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