REG - Capital Metals PLC - Update re Temporary Suspension of IMLs

Capital MetalsAnnouncement

20/02/2023 07:00

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RNS Number : 4148Q  Capital Metals PLC  20 February 2023

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.

 

20 February 2023

 

Capital Metals plc

 

("Capital Metals", the "Company" or the "Group")

 

Update re Temporary Suspension of Industrial Mining Licences; Group
Restructuring

 

Capital Metals (AIM: CMET), a mineral sands company approaching mine
development stage at the high-grade Eastern Minerals Project in Sri Lanka (the
"Project"), provides the following update regarding the temporary suspension
of the Company's Industrial Mining Licences ("IML") announced on 12 December
2022.

 

As notified on 10 February 2023, following receipt of the notice from Sri
Lanka's Geological Survey and Mines Bureau ("GSMB") to the Company's Sri
Lankan IML-holding subsidiary Damsila Exports Pvt Limited ("Damsila"), the
Company has been in frequent and productive dialogue with senior GSMB and
other officials in Colombo seeking to resolve concerns around the ownership
structure of Damsila. While the Company's legal position remains that the
ownership structure conformed with the relevant requirements, the Board's
objective has been to derive a pragmatic solution to satisfy the GSMB that the
spirit of the law requiring local ownership of mining and primary processing
activities is reflected. This has resulted in a restructuring of the Group
(the "Restructuring") as set out below.

 

Under the Restructuring, an effective 60 percent of the ownership of Damsila
has been issued to a Sri Lankan national who is known to, and who has worked
with, the Company since 2015. The shareholder agreements governing Damsila
provide protections to the Company principally by requiring a 75 percent vote
on all key decisions to be made by Damsila. A new secondary processing company
("ProcessCo") is in the process of being formed as a Section 17 Board of
Investment of Sri Lanka ("BOI") company which is allowed to be wholly foreign
owned by Capital Metals, enabling it to apply through the BOI for such
benefits as customs duty concessions, accelerated depreciation, and protection
from nationalisation enshrined in the constitution. Damsila and a wholly owned
subsidiary of the Company, Redgate Lanka (Pvt) Limited ("Redgate"), have
entered into an exclusive commercial offtake agreement which will be assigned
by Redgate to ProcessCo as soon as ProcessCo is formed according to the BOI
process. The offtake agreement will enable ProcessCo to acquire all material
from Damsila after it has been mined and screened, whereby it will then
undertake secondary processing to produce various Heavy Mineral Sands
products. The agreement runs for the life of the Project. As the Company will
continue to fund the capital and operations of the Project, the Restructuring
has been completed without materially impacting the Company's economic value
in the Project.

 

The Company has provided evidence to the GSMB of the Restructuring having
taken place and requested that the temporary suspension of the IMLs be lifted
by the GSMB as soon as possible. The Company will provide further updates as
required.

 

Michael Frayne, Chief Executive Officer, commented:

 

"While we were advised that our ownership structure was legally correct, the
Restructuring has been completed to satisfy the GSMB that the spirit of the
law is reflected in our ownership structure, whilst ensuring the Company
retains the vast majority of the economic value in the Project. We look
forward to having the temporary suspension lifted and to the completion of our
advanced negotiations with prospective local strategic partners and offtake
partners, which have continued positively."

 

Additional Information Related to the Restructuring

 

Damsila currently has 26,354,812 shares in issue. The Restructuring involves
Damsila issuing 39,548,694 new shares to Keynes Investment (Pvt) Limited
("Keynes"), which is 99.98% owned by a Sri Lankan national,  Mr Dinal Peiris,
who is well known to the Company, with the remaining 0.02% owned by an
existing Capital Metals shareholder, giving Keynes a 60.01 percent interest in
Damsila and the Sri Lankan national an effective 60.0 percent of Damsila. The
consideration for the above issue of ordinary shares in Damsila to Keynes is 1
Sri Lankan rupee per share (equivalent to US$108,353 at 365 SLR: 1 USD).

 

As at 31 March 2022, Damsila recorded a loss of US$151,000 on turnover of
US$0. At that date its net assets amounted to US$480,000 (including
intercompany debt owed to the Group of US$604,000). As at 30 September 2022,
the net asset value of Damsila was US$363,000 (unaudited).

 

 For further information, please visit www.capitalmetals.com
(http://www.capitalmetals.com) or contact:

 Capital Metals plc                           Via Vigo Consulting

 Michael Frayne (CEO)

 James Mahony (CFO)
 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

 

Market Abuse Regulation (MAR) Disclosure

Certain information contained in this announcement would have been deemed
inside information for the purposes of Article 7 of Regulation (EU) No
596/2014 until the release of this announcement.

 

 

 

 

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