REG - Capital Metals PLC - Strategic Investment & Project Funding Updates

Capital MetalsAnnouncement

15/03/2024 08:15

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RNS Number : 0304H  Capital Metals PLC  15 March 2024

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.

 

15 March 2024

 

Capital Metals PLC

 

("Capital Metals" or the "Company")

 

Strategic Investment by Mineral Sands Producer

&

Project Funding Updates

 

Capital Metals (AIM: CMET), a mineral sands company approaching mine
development stage at the high-grade Eastern Minerals Project in Sri Lanka (the
"Project"), is pleased to announce the strategic acquisition of 10% of the
Company by Sheffield Resources Limited (ASX: SFX) ("Sheffield"), the 50% owner
of the Thunderbird mineral sands mine in Western Australia ("Sheffield
Investment").

 

Pursuant to the Sheffield Investment, Capital Metals has granted Sheffield
co-exclusivity with LB Group (002601:SHENZHEN) for either party to conclude a
transaction within 60 days to provide funding to support the development of
the Project into production in exchange for up to a 50% interest in the
Project.

 

Highlights

 

·        Sheffield Investment of £1.25 million for 10% of the
Company's issued share capital at 3.623p per share

 

·        12-month option for Sheffield to invest a further £0.844
million at 4.891p per share

 

·        Outline terms agreed with Sheffield to contribute funding to
support the Project into production in exchange for up to a 50% interest in
the Project subject to, inter alia, due diligence over a 60-day period

 

·        Continued positive engagement with LB Group in parallel with
Sheffield - either party may individually conclude a funding transaction with
the Company within 60 days

 

Sheffield Investment

 

Sheffield has entered into an agreement with the Company to subscribe for
34,500,000 new ordinary shares at an issue price of 3.623p per ordinary share,
representing a premium of approximately 25% to the 30-day volume-weighted
average price ("VWAP") and approximately 11.5% to the closing price on 14
March 2024), raising £1.25 million ("Subscription").

 

Following the Subscription, Sheffield will own approximately 10% of the issued
share capital of the Company (as enlarged by the Subscription). In addition,
the Company and Sheffield have entered into an Option Deed under which
Sheffield has been granted a 12-month option to subscribe for a further
17,250,000 ordinary shares at 4.891p per share, representing a premium of
approximately 69% to the 30-day VWAP ("Subscription Option").

 

The Company has also agreed outline terms with Sheffield to contribute funding
to support the Project into production in exchange for up to a 50% interest in
the Project subject to conditions outlined under 'Project Funding' below.

 

The Subscription and the Subscription Option are not dependent on the outcome
of the Project funding decision.

 

Pursuant to the Sheffield Investment, Sheffield may, for so long as it holds
an interest of at least 10% of the issued shares of the Company, appoint one
nominee director to the board of the Company, subject to satisfactory
completion of customary due diligence and nominated adviser checks.
Additionally, for so long as Sheffield holds an interest of at least 10% of
the issued shares of the Company, it shall have a right to participate in any
share issuance of the Company on the same terms as other investors subscribing
for shares in order to maintain its percentage shareholding in the Company.
This right shall apply in respect of all share issuances other than existing
options and warrants and the issue of securities pursuant to any management
incentivisation arrangements and shall not be impacted by any disapplication
of pre-emption rights approved by shareholders from time to time.

 

Sheffield is listed on the Australian Securities Exchange and recently
commissioned into production its A$484 million Thunderbird mineral sands mine
in Western Australia ("Thunderbird"), one of the largest and highest-grade
mineral sands discoveries in the last 30 years. Product sales from Thunderbird
commenced in January 2024.

 

Project Funding

 

Capital Metals has conditionally granted Sheffield the right to acquire up to
a 50% interest in the Project in consideration for Sheffield contributing
development capital by way of joint venture equity ("Project Funding"). The
maximum final Project Funding amount will be negotiated during the due
diligence period based on the agreed forecast to production, and will comprise
two stages:

 

(i)            an amount of funding to be provided at the Project
level which is sufficient to reach a Final Investment Decision; and

(ii)           the balance of funding to be contributed at the
project level to support the Project into production.

 

The final terms and structure, and the relevant funding mechanisms, will be
subject to further tax and financial due diligence being undertaken by
Sheffield over the next 60-days to ensure the optimal outcome.  The
conditions to the Project Funding include, inter alia, completion of
satisfactory technical, tax, commercial and legal due diligence over a 60-day
period during which time either Sheffield or LB Group may conclude a funding
transaction with the Company. Other conditions include Sheffield satisfying
any UK or Sri Lankan foreign investment or other regulatory requirements that
might be triggered by the investment generally, satisfactory fulsome documents
being agreed, and approval of the Company's shareholders as may be required
pursuant to the AIM Rules for Companies ("AIM Rules"). It is expected that
such a transaction would also be conditional upon approval by the Company's
shareholders at a general meeting pursuant to the AIM Rules. Such a
transaction with Sheffield would also fall to be treated under AIM Rule 13
(Related Party Transactions) of the AIM Rules, as Sheffield will be treated as
a "related party" following completion of the Subscription.

 

LB Group

 

Discussions have continued positively with LB Group in parallel with
Sheffield, albeit more slowly than the Company would have liked. The Board
considered it was in the best interests of all stakeholders to entertain an
alternative offer of funding which could either be complementary to a
transaction with LB Group or stand on its own. LB Group has therefore been
offered co-exclusivity with Sheffield for 60 days to conclude a funding
transaction with the Company substantially on the same terms as the Memorandum
of Understanding announced on 9 May 2023 ("MoU"). Further announcements will
be made as required and until such time as a definitive agreement is entered
into there can be no guarantee or certainty that a transaction with either
Sheffield or LB Group with respect to the Project will be completed.

 

Greg Martyr, Executive Chairman of Capital Metals, commented:

 

"I am delighted to welcome Sheffield as a material and strategic investor in
the Company. In addition to injecting capital, they bring world-class industry
expertise in the development of mineral sands projects as evidenced at
Thunderbird in Western Australia. Their acquisition of a 10% stake in the
Company and interest in potentially earning 50% at the project level by
contributing Project Funding to support the operations into production and
cashflow is a reflection of the quality of the Project.

 

At the same time, we remain in regular and constructive dialogue with LB Group
which has continued to express its interest in partnering in the Project as
per the terms of the MoU.

 

Today's announcement with Sheffield is significant as we now have two well
capitalised and specialist industrial groups expressing an interest in
supporting the Project into production. The Project has highly attractive
economics with post tax NPVs based on the 2022 Preliminary Economic
Assessment* ranging from US$155-235 million, capex of US$81 million and Base
Case total revenues of US$645 million over an initial 10-year Project life
(with clear optimisation potential and further resource growth).

 

In the context of our current market capitalisation (being approximately £10
million), with a post-Subscription cash balance of approximately £2.5
million, we are now both well-funded and in the best position to unlock
material shareholder value by closing Project funding with either Sheffield or
LB Group. I look forward to providing further updates as appropriate."

 

Bruce Griffin, CEO of Sheffield, commented:

 

"Our decision to make an initial strategic investment in Capital Metals,
potentially ahead of a larger project level investment to support the Project
into production, is in keeping with Sheffield's stated objectives of building
a portfolio of mineral sands production and development assets. I have
followed the Project for some time, including site visits, and consider the
Eastern Minerals Project to be one of best high grade mineral sands deposits
globally."

 

Admission and Total Voting Rights

 

Application will be made to the London Stock Exchange for admission of the
Subscription shares to trading on AIM ("Admission"). It is expected that
Admission will become effective and dealings in the Subscription Shares will
commence at 8.00 a.m. on or around 21 March 2024.

 

The Subscription shares will be issued fully paid and will rank pari
passu in all respects with the Company's existing Ordinary Shares.

 

Following Admission, the total number of Ordinary Shares in the capital of the
Company in issue will be 344,806,209 with voting rights. This figure may be
used by shareholders as the denominator for the calculations by which they
will determine if they are required to notify their interest in, or a change
to their interest in, the Company's share capital pursuant to (i) the
Company's Articles, (ii) the Financial Conduct Authority's Disclosure Guidance
and Transparency Rules and/or (iii) the AIM Rules for Companies issued by the
London Stock Exchange plc as amended from time to time.

 

*RNS - 12 May 2022 - Results of Development Study and Project Economics
(https://ir.q4europe.com/Tools/newsArticleHTML.aspx?solutionID=2182&customerKey=capitalmetals&storyID=15423815&language=en)

 

For further information, please contact:

 Capital Metals plc                           Via Vigo Consulting

 Greg Martyr (Executive Chairman)
 Vigo Consulting (Investor Relations)         +44 (0)20 7390 0234

 Ben Simons / Peter Jacob                     capitalmetals@vigoconsulting.com (mailto:capitalmetals@vigoconsulting.com)
 SPARK Advisory Partners (Nominated Adviser)  +44 (0)20 3368 3554

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

 Jonathan Evans / Oliver Stansfield

 

About Capital Metals

 

Capital Metals is a UK company listed on the London Stock Exchange (AIM:
CMET). We are developing the Eastern Minerals Project in Sri Lanka,
approximately 220km east of Colombo, containing industrial minerals including
ilmenite, rutile, zircon, and garnet. The Project is one of the highest-grade
mineral sands projects globally, with potential for further grade and resource
expansion. In 2022, a third-party Preliminary Economic Assessment provided a
Project NPV of US$155-235m based on existing resources, with further
identified optimisation potential. We are committed to applying modern mining
practices and bringing significant positive benefits to Sri Lanka and the
local community. We expect over 300 direct new jobs to be created and over
US$130m in direct government royalties and taxes to be paid.

 

Visit our website:

www.capitalmetals.com (http://www.capitalmetals.com)

 

Follow us on social media:

 

X (formerly Twitter): @MetalsCapital (https://twitter.com/MetalsCapital)

LinkedIn: @Capital Metals plc (https://uk.linkedin.com/company/capitalmetals)

 

About Sheffield Resources

Sheffield Resources is listed on the Australian Securities Exchange with a
market capitalisation of approximately A$218 million. Sheffield recently
commissioned its flagship A$484 million Thunderbird Mineral Sands Project.
Thunderbird is a 50/50 joint venture between Sheffield and Yansteel and is one
of the largest and highest-grade mineral sands discoveries in the last 30
years. Thunderbird has recently achieved practical completion and made its
maiden shipment of product in January 2024.

In February 2023, Sheffield executed a binding agreement with an option to
acquire up to 20% of Rio Grande Mineração S/A, which owns and operates the
South Atlantic Project in Southeast Brazil.

For more information on Sheffield Resources, visit
www.sheffieldresources.com.au (http://www.sheffieldresources.com.au)

 

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