REG - Capital Metals PLC - Notice received from the GSMB

Capital MetalsAnnouncement

12/12/2022 07:16

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RNS Number : 3490J  Capital Metals PLC  12 December 2022

 

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION AS STIPULATED UNDER THE UK
VERSION OF THE MARKET ABUSE REGULATION NO 596/2014 WHICH IS PART OF ENGLISH
LAW BY VIRTUE OF THE EUROPEAN (WITHDRAWAL) ACT 2018, AS AMENDED.  ON
PUBLICATION OF THIS ANNOUNCEMENT VIA A REGULATORY INFORMATION SERVICE, THIS
INFORMATION IS CONSIDERED TO BE IN THE PUBLIC DOMAIN.

 

12 December 2022

 

Capital Metals plc

("CMET" or the "Company")

Notice received from the GSMB in connection with the shareholding structure of

Sri Lankan Subsidiary

Capital Metals plc (AIM: CMET), a natural resources company focused on the
development of the Eastern Minerals Project located in the Eastern Province in
Sri Lanka (the "Project"), one of the highest-grade mineral sands projects
globally, announces that notice has been provided by the Geological Survey and
Mines Bureau ("GSMB") to the Company's Sri Lankan subsidiary Damsila Exports
Pvt Limited ("Damsila") that they consider it necessary for the current
shareholding structure of Damsila to have been approved by the Board of
Investment of Sri Lanka (BOI) and as Damsila has not obtained such approval
they will be carrying out proper investigations regarding the ownership
structure of Damsila, and that in the meantime the two Industrial Mining
Licences ("IMLs") which were issued to Damsila are temporarily suspended.

CMET has been working with the GSMB to clarify any concerns around the
structure, which was set up in 2016 and has been made clear to the GSMB
throughout its mutual dealings, including the applications and granting of the
Company's exploration licences, environmental permits (EIA) and the IMLs
themselves.  There appears to be some uncertainty within the GSMB (and
perhaps the BOI) around the application of the Foreign Exchange Act of Sri
Lanka that governs investment in shares in companies incorporated in Sri Lanka
by non-residents. Damsila, is a subsidiary company of a Sri Lanka resident
company, Redgate Lanka (Pvt) Limited. The ultimate parent of Redgate is CMET.

The Company has made several submissions to the GSMB and relevant authorities
based on the advice of its well regarded in country legal counsel, Varners,
which has provided its opinion to the Company that the current shareholding
structure of Damsila is in conformity with the Regulations published under the
Foreign Exchange Act and that BOI approval is not required by Damsila for the
issuance of shares to Redgate which is a company incorporated in Sri Lanka
even though its ultimate parent is CMET.

Damsila, after successfully concluding its best practice exploration
activities under the exploration license E1L68 issued by the GSMB, completed
the EIA, which went through several technical assessments and two public
hearings. The company has invested over Sri Lankan Rupees 500 million which
has been remitted to Sri Lanka in foreign currency to date. The extensive EIA
process was supervised by the Department of Coast Conservation and Coastal
Resource Management (CCD) and was finally approved in November 2021 and a
permit to mine was issued after satisfying all the conditions put forward by
the CCD. The company has submitted nine IML applications to the GSMB. The GSMB
in August 2022 issued two IMLs for the land area under the CCD. The Company
has completed a number of mining technical studies over several years and is
now moving towards mine development and operations.  The Development Study
and Preliminary Economic Assessment completed by international consultants,
IHC Mining in May 2022, estimated the Project will have a total capital
investment of US$80 million, which will create significant local employment,
become a new significant export earner of foreign currency for Sri Lanka and
generate direct payments of Sri Lankan Government royalties and taxes of over
US$100 million within the first 10 years of operation.

The Company has also been made aware, and as reported in mainstream media,
that the Chairman of the GSMB has been removed with immediate effect as of 8
December 2022 and the Director General has been sent on compulsory leave.  We
anticipate that this could potentially cause some delay to the resolution of
the matter, but we continue to work closely with the internal departments of
the GSMB including mining, geology, laboratory and the GSMB technical services
group, which have been providing services to the Company.  We have also been
receiving complete cooperation in our dealings with the CCD as well as the Sri
Lankan Port Authority regarding the lease of the port for future operations.

The Company will continue discussions in a cooperative manner with the
relevant Sri Lankan Government authorities to resolve this issue as soon as
possible.

 

For further information, please visit www.capitalmetals.com or contact:

 Capital Metals plc

 Michael Frayne (CEO)                         Michael.frayne@capitalmetals.com

 James Mahony (CFO)                           j (mailto:james.mahony@capitalmetals.com) ames.mahony@capitalmetals.com

                                            (mailto:james.mahony@capitalmetals.com)

 SPARK Advisory Partners (Nominated Adviser)  +44 (0) 20 3368 3554

 Neil Baldwin / James Keeshan
 Tavira Financial (Joint Broker)              +44 (0) 20 7100 5100

 Jonathan Evans / Oliver Stansfield

 

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