REG - Central Asia Metals - Proposed acquisition of Lynx Resources Limited <Origin Href="QuoteRef">CAML.L</Origin> - Part 3

Central Asia MetalsAnnouncement

22/09/2017 07:08

- Part 3: For the preceding part double click  ID:nRSV5104Rb 

affecting the Enlarged Group's reserve estimates and its financial condition,
declining commodity prices can impact operations by requiring a reassessment of the feasibility of a particular project.
Such a reassessment may be the result of a management decision or may be required under financing arrangements related to a
particular project. Even if the project is ultimately determined to be economically viable, the need to conduct such a
reassessment may cause substantial delays or may interrupt operations until the reassessment can be completed. 
 
Competition 
 
Mines have finite lives and, as a result, one of the ways the Group seeks to replace and expand its reserves is through the
acquisition of new mining concessions and properties. There is a limited supply of desirable mining concessions and
properties with potential mineralisation available in Kazakhstan and Macedonia, which is where the Group would consider
conducting further exploration and/or production activities. Because: (i) the Group faces competition for new mining
concessions and properties from other mining companies, some of which may have greater financial resources than the Group;
and (ii) the current owners of desirable properties may be unwilling to sell the property to the Group, the Group may be
unable to acquire attractive new mining concessions and/or properties on terms that it considers acceptable or at all. As a
result, the Group's revenues may decline over time, thereby materially and adversely affecting its results of operations
and financial condition. 
 
Future financing and commercial viability of future projects 
 
The capital expenditure plans of the Group and the further development and exploration of mineral properties in which the
Group holds interests or which the Group may acquire may depend upon the Group's ability to obtain financing through joint
ventures, debt financing, equity financing or other means. The turmoil caused by the global financial crisis has resulted
in major financial institutions consolidating or going out of business, the tightening of credit market, significantly
lower liquidity in most financial markets and extreme volatility in fixed income, credit, currency and equity markets. No
assurance can be given that the Group will be successful in obtaining any required financing as and when needed on
acceptable terms or at all, which could prevent the Group from further development and exploration or additional
acquisitions. 
 
The Enlarged Group's operations will be located in Kazakhstan and Macedonia, areas that have experienced economic and
political difficulties in the past and which may be perceived as unstable. This may make it more difficult for the Group to
obtain debt financing from projects or other lenders if it should determine that debt financing is the appropriate method
of funding in the future. Failure to obtain additional financing on a commercial and timely basis may cause the Group to
postpone its capital expenditure plans, forfeit its rights in properties or reduce or terminate operations. Reduced
liquidity or difficulty in obtaining future financing could have a material adverse effect on the Group's business,
financial condition, results of operations and prospects. 
 
The Group's growth projects may require greater investment than currently expected or suffer delays or interruptions, which
could cause cost overruns. Any such delay, interruption or cost overruns in implementing the Group's planned capital
investments could result in the Group failing to complete the projects and a reduction in future production volumes, which
could have a material adverse effect on the Group's business, financial condition, results of operations and prospects. In
addition, projects may not prove to be commercially viable upon completion. 
 
Infrastructure 
 
Mining, processing, development and exploration activities depend, to a significant degree, on adequate infrastructure. In
the course of developing future mines the Group, may need to construct and support the construction of infrastructure,
which includes permanent water supplies, tailings storage facilities, power, rail and maintenance facilities and logistics
services and access roads. Reliable rail facilities, roads, bridges, power sources and water supply are important
determinants, which affect capital and operating costs. Unusual or infrequent weather phenomena, sabotage, government or
other interference in the maintenance or provision of such infrastructure could materially adversely affect the Group's
operations, financial condition and results of operations. Any such issues arising in respect of the supporting
infrastructure or on the Group's sites could materially adversely affect the Group's results of operations or financial
condition. Furthermore, any failure or unavailability of the Group's operational infrastructure (for example, through
equipment failure or disruption to its transportation arrangements) could materially adversely affect the production output
from its mines or impact its exploration activities or development of a mine or project. 
 
Uninsured hazards 
 
The Group may be subject to substantial liability claims due to the inherently hazardous nature of its business or for acts
and omissions of contractors, sub-contractors or operators. Any indemnities the Group may receive from such parties may be
limited or may be difficult to enforce if such contractors, sub-contractors or operators lack adequate resources. The
Company believes that the level of the Group's insurance cover (and that of the operators of assets it does not itself
operate) is reasonable based on the costs of cover, the risks associated with its business and industry practice. The
Company can give no assurance that the proceeds of insurance applicable to covered risks will be adequate to cover expenses
relating to losses or liabilities. Accordingly, the Group may suffer material losses from uninsurable or uninsured risks or
insufficient insurance coverage. The Group will also be subject to the risk of unavailability, increased premiums or
deductibles, reduced cover and additional or expanded exclusions in connection with its insurance policies and those of
operators of assets it does not itself operate. 
 
Decline in reserves, resources and production over time 
 
To realise future production growth, extend the lives of its mines and ensure the continued operation of the business, the
Group must continue to produce from its existing identified reserves, convert resources into reserves, develop its resource
base through the realisation of identified mineral potential, undertake successful exploration and/or acquire new reserves
and resources. The Group's reserves and resources decline as copper, zinc, lead and silver are produced by the Group.
Mineral Resources may be increased when the Group discovers or acquires rights to new deposits or operations or increases
reserves of operating mines via additional exploration. Once mineral deposits are discovered or acquired, it may take a
number of years to complete geological surveys to assess whether these deposits are in such form, grade and quantity that
there are reasonable prospects for eventual economic extraction and therefore qualify as Mineral Resources. Following
technical studies to assess whether production is technically feasible, the economic viability of production may change
during that time, which will determine whether or not the Mineral Resources can be converted to Ore Reserves. 
 
Substantial capital expenditure is required to identify and delineate Mineral Resources and Ore Reserves through geological
surveying, drilling and sampling to determine the appropriate metallurgical processes to extract the metals from the ore
and, in the case of new properties, to construct mining and processing facilities. 
 
Any acquisition that the Group may choose to complete may change the scale of the Group's business and operations and may
expose the Group to geographical, political, operating, financial and geological risks. The Group's success in its
acquisition activities depends on its ability to identify suitable acquisition candidates, negotiate acceptable terms and
integrate the acquired entity successfully into the Group's operations. The volume of production from properties generally
declines as reserves are depleted. The Group's future production growth is dependent upon its success in finding or
acquiring and developing additional reserves. There can be no assurance that the Group will be able to identify future
reserves or continue to extend the mine life of its existing operations. If the Group is unsuccessful in locating and/or
securing new reserves, the Group's total reserves and production will decline, which would materially adversely affect the
Group's business and the results of its operations. 
 
Processes and chemicals 
 
Mining activities are generally subject to environmental and safety hazards as a result of the processes and chemicals used
in extraction and production. In particular, the Group transports, uses and disposes of cyanide and other hazardous
substances at its mines, which gives rise to the risk of spillage or seepage in areas where there could be damage or harm
caused to the environment and/or to the public. The Group's operations also involve the discharge of materials and
contaminates into the environment, the disturbance of land and other potential harm to the environment. Furthermore, the
storage of tailings may present a risk to the environment, property and persons. There remains a risk of leakage from, or
failure of, the Group's tailings dams during the operating life of the mines or after their closure. 
 
The Group may be liable for losses associated with environmental hazards and rehabilitation, have its licences and permits
withdrawn or suspended, face negative reputational consequences or be forced to undertake extensive remedial clean-up
action or to pay for government-ordered remedial clean-up actions, even in cases where such hazards have been caused by any
previous or subsequent owners or operators of the property, by any past or present owners of adjacent properties or by acts
of vandalism by trespassers. Any such losses, withdrawals, suspensions, reputational consequences, actions or payments may
have a material adverse effect on the Group's business, results of operations and financial condition and the price of its
shares. 
 
Appropriation of land 
 
The Group's operations depend on obtaining rights to access and develop mineral resources, which may require that land be
appropriated from land owners and/or users, potentially resulting in their displacement. This may result in opposition to
the Group's future plans or pressure from governmental bodies, regional authorities, local community groups or other
parties for the Group to amend or cease its land appropriation projects or activities. 
 
The Group may also face negative publicity or law suits as a result of its land appropriation activities, projects or
plans. There can be no guarantee that the Group will be able to adequately meet the demands of, or come to a suitable
agreement with, these third parties. 
 
Furthermore, the Group cannot rule out the possibility that such opposition may result in the Group being unable to carry
out future exploration and/or development projects, or that future applications by the Group for exploration, development
or mining permits and licences may be refused as a result of such opposition. If any of these events were to occur, they
could have a material adverse effect on the Group's business, results of operations and financial condition and the price
of its shares. 
 
Employees 
 
Although the Company believes that the Group's relations with its employees are good, there can be no assurance that a work
slowdown or stoppage will not occur at any of the Group's operating units or exploration prospects. Any future work
slowdowns, stoppages, disputes with employee unions or other employment-related developments or disputes, including the
entry into or renegotiation of collective bargaining agreements, could result in a decrease in the Group's production
levels and adverse publicity and/or increase costs, which could have a material adverse effect on the Group's business,
results of operations and financial condition and the price of its shares. 
 
Financial, accounting, marketing and other data processing information systems 
 
The Group's operations are dependent on information systems and technology. The cost of maintaining the Group's information
systems may increase from its current level. The Group has taken precautions through disaster recovery sites to limit the
impact that a disruption to these key offices could cause. Although precautions have been taken and plans are in place, a
disaster or a disruption in the infrastructure at a main site and its disaster recovery site that supports the Group's
business, including a disruption involving electronic communications or other services used by it or third parties with
whom it conducts business, or directly affecting its headquarters or other key offices, could have a material adverse
impact on its ability to continue to operate its business without interruption. 
 
In addition, insurance and other safeguards might only partially reimburse the Group for its losses, if at all. Although
the Group performs and backs up all key functions of its business internally, it relies on third party products and
services providers widely used in the industry for certain aspects of its business, including for certain information
systems and technology. Severe interruptions or deteriorations in the performance of these third parties or failures of
their information systems and technology could impair the Group's operations. 
 
Limited Diversification 
 
The Group's revenues will be derived from the sale of copper cathode and lead and zinc concentrate produced by the Enlarged
Group's facilities in Kazakhstan and Macedonia. Consequently, if there were any change in law or policy or other
circumstances arising in Kazakhstan or Macedonia which materially reduced or interrupted or halted mining or processing
operations at Kounrad or the SASA Mine then the Enlarged Group's results of operations and financial condition could be
materially and adversely affected. 
 
RISKS RELATING TO THE GROUP'S BUSINESS 
 
The Group's mining licences and contracts 
 
No assurance can be given that the governments of Kazakhstan, Macedonia (if the Acquisition is completed) or Chile will not
revoke, refuse to transfer, or significantly alter, the conditions of the exploration and development authorisations held
by the Group. There can be no assurances that claims by third parties against the Group's title to its mining rights in
those jurisdictions or other rights will not be asserted at a future date. 
 
The operations of the Group will in some cases also require renewals of existing concessions, licences and permits from the
relevant governmental authority or authorities. The Group's ability to obtain, sustain or renew such concessions, licences
and permits or to obtain, sustain or renew such concessions, licences or permits on acceptable terms, including the amount
of any associated costs and fees, may be subject to changes in laws, regulations and policies or the interpretation of
them, and to the discretion of the applicable government authorities. Licensing authorities in these countries have a high
degree of discretion in determining the validity of a licence or whether or not licence holders are in compliance with
their legal obligations. The Group's subsoil use rights and licences will also be subject to termination if the Group does
not comply with its contractual obligations or legal requirements. There can be no assurance that the Group will be able to
achieve compliance with all applicable regulations at all times. If, in any year the Group is unable to meet the minimum
required expenditure, it may lose its right to apply for a mining licence, or have an exploration licence revoked. If the
Group was unable to obtain a mining licence, or an exploration licence was revoked, this could materially adversely affect
the financial performance of the Group. 
 
Termination of Subsoil Use Contract and Concession Agreement 
 
The mining sector and activities in Kazakhstan are principally regulated by the Subsoil Law, a summary of which is set out
in section 22.2 of this announcement. The rights to operate the Kounrad mine are contained in the Kounrad Contract. Sary
Kazna's subsoil use right shall terminate in case of termination of the Kounrad Contract, adoption by the Kazakhstan
Government of a decision to prohibit use of a subsoil use plot on which the operations are carried out or upon liquidation
of Sary Kazna. The Kounrad Contract shall terminate upon expiry of its term or may be prematurely terminated by mutual
agreement of the parties. In addition, the Kazakh government has the right to unilaterally terminate the Kounrad Contract
following the occurrence of certain events, including, inter alia, where: (i) Sary Kazna fails to rectify more than two
violations of the obligations under the Kounrad Contract within the time specified by the government; (ii) there is a
transfer of a subsoil use right and/or of any Objects without the government's prior consent, where such consent is
required; or (iii) Sary Kazna performs less than 30 per cent. of its financial obligations under the Kounrad Contract for a
period of two consecutive years. Any termination of the Kounrad Contract, or a material variation of it, may have a
material adverse effect on the Enlarged Group's business, financial condition and results of operations. 
 
The mining sector and activities in the Republic of Macedonia are principally regulated by the Law on Mineral Resources, a
summary of which is set out in section 23 of this announcement. The rights to operate the SASA Mine are contained in the
SASA Concession Agreement. This concession agreement is terminable by the Republic of Macedonia following the occurrence of
certain events, including, inter alia, where: (i) prior approval from the Government of Macedonia is not granted, or the
payment of the related applicable fee is not made, upon a transfer of the exploitation concession granted to Rudnik SASA
DOOEL or a change of ownership in Rudnik SASA DOOEL's shares; (ii) Rudnik SASA DOOEL loses the economical, technical or
operative capacities necessary to operation the concession in accordance with law; (iii) applicable environmental permits
are withdrawn or terminated; or (iv) there has been an interruption of mining activities for a period exceeding one year.
Any termination of the SASA Concession Agreement, or material variation of it, may have a material adverse effect on the
Enlarged Group's business, financial condition and results of operations. 
 
Environmental compliance 
 
All phases of the Group's operations in Kazakhstan, Macedonia (if the Acquisition completes) and Chile are subject to
environmental regulation in these jurisdictions. Environmental legislation is evolving in a manner that may have a greater
impact on the Group's operations. Compliance with environmental laws will require ongoing expenditure and considerable
capital commitments from the Group, and non-compliance may subject the Group to significant penalties, including the
suspension or revocation of its rights in respect of its licences, concession agreements or assets. The Directors are aware
of a number of instances of environmental non- compliance at the SASA Mine. There can be no assurance that the Group will
be able to implement the necessary remedial actions without material cost or other adverse consequences. There is no
assurance that existing or future environmental regulation will not materially adversely affect the Group's business,
results of operations and financial condition and the price of its shares. 
 
Environmental hazards may also exist on the properties on which the Enlarged Group hold interests that are unknown to the
Group at present and that have been caused by previous or existing licence holders or operators. The Directors are aware of
certain areas of historic contamination at the SASA Mine prior to the Sellers period of ownership. While the Company has
been advised that the Group will not inherit liability under applicable law for these historic issues, there can be no
assurance that the Group will not suffer losses, liabilities or penalties as a result of this, whether because of a
different interpretation of the law, because of difficulties in identifying when the issues arose, or otherwise. 
 
Environmental approvals and permits are currently, or may in the future be, required in connection with the Group's
operations. To the extent such approvals are required and not obtained, the Group may be curtailed or prohibited from
proceeding with planned exploration or development of mineral properties. Failure to comply with applicable environmental
laws, regulations and permitting requirements may result in enforcement actions thereunder, including orders issued by
regulatory or judicial authorities causing operations to cease or be curtailed, and may include corrective measures
requiring capital expenditures, installation of additional equipment, or remedial actions. Parties engaged in mining
operations, including the Company, may be required to compensate those suffering loss or damage by reason of the mining
activities and may have civil, administrative or criminal fines or penalties imposed for violations of applicable
environmental laws or regulations. 
 
Amendments to current laws, regulations and permits governing operations and activities of mining companies, or more
stringent implementations thereof could have a material adverse impact on the Group and cause increases in exploration
expenses, capital expenditures or production costs, reduction in levels of production at producing properties, or
abandonment or delays in development of new mining properties. 
 
Health and safety 
 
Certain of the operations of the Group are carried out under potentially hazardous conditions. While the Directors intend
to continue to operate in accordance with relevant health and safety regulations and requirements, the Group remains
susceptible to the possibility that liabilities might arise as a result of the breaches of these requirements, accidents,
fatalities or other workforce-related misfortunes, some of which may be beyond the Group's control. The occurrence of any
accidents or any of these situations could delay production, increase production costs and/or result in material liability
for the Group. 
 
Internal Controls 
 
The financial reporting processes, audit processes, internal controls and risk management systems that the Group will
employ may not be as robust as those that a company of a similar size would employ in a more developed economy. This could
harm the Group's operating results and cause investors to lose confidence in reported financial information, which could
have a negative effect on the value of the shares. Notwithstanding anything in this paragraph, the risk described should
not be taken as implying that the Company will be unable to comply with its obligations as a company with securities
admitted to AIM. 
 
Social programmes for, and relations with, local communities 
 
As a condition of certain of its subsoil use licences and contracts, the Group is obliged to maintain certain social
programmes for the benefit of local communities. Furthermore, the Group has an obligation under its Kazakhstan subsoil use
licences and contracts to invest in training the local workforce. These obligations may increase or become more burdensome
in the future and may have a negative impact on the Group's profitability. While the Directors believe that the Group
enjoys good relations with local communities, there can be no assurance that these relations will not deteriorate, which
could have adverse consequences for the Group. 
 
Taxation and Fee Regulations 
 
The taxation and fee regulations in Kazakhstan and Macedonia are constantly developing. The interpretation and application
of tax laws, fee laws and regulations are evolving, which significantly increases the risks with respect to mining and
subsoil use operations, and investments in Kazakhstan and Macedonia in comparison with more developed tax systems. 
 
Tax and fee legislation is subject to different and changing interpretations, as well as inconsistent enforcement. Tax and
fee regulation and compliance is subject to review and investigation by the authorities who may impose extremely severe
fines, penalties and interest charges. 
 
The fact that the tax authorities have conducted an audit of a particular period does not prevent them from revisiting that
period and raising an additional assessment. In addition, both Kazakhstan and Macedonia's tax and fee systems do not
recognise the concept of tax and fee authorities giving legally binding rulings on tax and fee issues that are put before
them. 
 
Moreover, the new Macedonian government's electoral programme provides for many reforms, including changes in the tax
system and minimum salary. Macedonia currently has a flat tax system with a 10 per cent. personal income tax rate and a 10
per cent. corporate income tax rate. The new government plans to introduce a reform of the tax system by introducing a
progressive tax rate for personal income tax. The new rates would amount 10 per cent. and 18 per cent. The idea is to keep
the existing rate of 10 per cent. for the majority of the population, while the 18 per cent. rate will be imposed only on
people with a monthly income of over EUR 1,000. Additionally the new government plans remove the maximum upper limit for
the payment of salary contributions. The regulations currently in place limit the payment of salary contributions to 12
average monthly salaries (roughly EUR 6,250), whereas all salaries beyond such amount are only taxed in line with the
personal income tax rate. By the end of its four year term the new Macedonian government also plans to raise the monthly
minimum salary from the currently applicable approximately EUR 160 to approximately EUR 260. 
 
The inconsistent enforcement and the evolution of Kazakh and Macedonian tax and fee laws create a risk of excessive payment
of tax or penalties by the subsoil users if they fail to comply with tax and fee legislation. Failure to comply with tax
and fee legislation may also result in criminal penalties and/or a termination of the Group's licences and/or concession
agreements. 
 
The Lynx Group is currently appealing a tax ruling alleging improper tax practices with respect to historic shareholder
loans. Although the Company has been advised that this would be unlikely, there can be no guarantee that the authorities
will not initiate a criminal investigation with respect to these allegations, which (if sustained) could have material
adverse consequences for the Group's business. Further information on this dispute is set out below. 
 
Further, tax stability arrangements for subsoil users in Kazakhstan have been eliminated. In addition, there can be no
assurance that the tax planning implemented by the Lynx Group will not be challenged, and any successful challenge could
have adverse consequences for the Group. While the Group has received certain limited tax warranties and indemnities, there
is no assurance that the Group would be able to recover the losses incurred by it in such circumstances in full, or at
all. 
 
Political and Economic Climate in Kazakhstan and Macedonia 
 
The political and economic environments in Kazakhstan and Macedonia present a number of risks, including: 
 
●    invalidation or rescission of governmental orders, permits or agreements; 
 
●    the effects of local political, labour and economic developments, instability and unrest; 
 
●    (in Kazakhstan) currency fluctuations; 
 
●    significant or abrupt changes in the applicable regulatory or legal climate, limitations on mineral exports, exchange
controls and export or sale restrictions, currency fluctuations and repatriation restrictions; and 
 
●    new regulations on taxation, mining, environmental and social issues. 
 
The Group's Kazakh and Macedonian subsidiaries will have entered into contracts with the governments of Kazakhstan and
Macedonia or obtained permits or concessions from these governments that enable them to conduct operations or development
and exploration activities. Notwithstanding these arrangements, the Group's ability to conduct operations or development
and exploration activities is subject to changes in government regulations or shifts in political attitudes over which the
Group has no control. Macedonia has experienced political instability in recent years as detailed above which could
continue in the future. Future political instability in the region could affect the political or economic stability of
Kazakhstan and Macedonia, and could have a material adverse effect on the Group's business, financial condition, results of
operations or prospects. 
 
Legal Systems and Legislation Risks 
 
The legal systems in Kazakhstan and Macedonia are not fully developed and have inherent uncertainties that could limit the
legal protections available to the Group. The following risks relating to the Kazakh and the Macedonian legal systems
create uncertainties, many of which do not exist in countries with more developed market economies: 
 
●    inconsistencies among, and ambiguities in: (a) laws (including mining laws in Kazakhstan and Macedonia); (b) decrees,
orders and regulations issued by the Government and ministries; and (c) local rules and regulations; 
 
●    substantial gaps in the regulatory structure due to delay or absence of implementing regulations; 
 
●    the relative inexperience of judges and courts in interpreting new principles of legislation, particularly those
relating to business, corporate and securities laws; 
 
●    some lack of judicial independence from political, social and commercial forces; 
 
●    a high degree of discretion on the part of governmental authorities; and 
 
●    bankruptcy procedures that are not well developed and are subject to abuse. 
 
In both Kazakhstan and Macedonia, although the judicial systems can be described as independent, judges have little
experience in dealing with complex commercial law issues, which leads to unpredictability as to the outcome of any
litigation. Further, it may be difficult to obtain swift and equitable enforcement. 
 
Another risk is that the introduction of new laws and regulations, or changes in legislation and the interpretation or
application of legislation, in particular changes having retrospective effect, may have an adverse effect on the Group's
business, financial condition, results of operations and future prospects. Policy changes reflecting domestic political or
social changes may be reflected in changing legislation and regulation, or their application or interpretation, including
with respect to the regulation of mining in Kazakhstan and Macedonia. 
 
As the legal systems develop, there can be no assurance that changes in legislation or interpretation thereof will not have
a material adverse effect on the Group's business, financial condition, results of operations and future prospects. 
 
Corruption 
 
In Kazakhstan and Macedonia, the bribery of officials remains at a high level relative to more economically developed
markets. The Group's business, results of operations and financial condition could be adversely affected by corruption or
by claims, even if groundless, implicating the Group in illegal activities. Social instability caused by corruption could
increase support for renewed centralised authority, nationalism or violence and thus materially adversely affect the
Group's ability to conduct its business effectively, including as a result of restrictions on foreign involvement in the
economy of the countries in which the Group operates. Any of these could restrict the Group's operations and lead to a loss
of revenue, which could have a materially adverse effect on the Group's business, result of operations and financial
condition. 
 
Governmental approvals, permits and licences 
 
The Group's operations in Kazakhstan and Macedonia require various governmental approvals, licences and permits, and delays
or a failure to obtain, maintain or comply with the terms of any such property rights, permits and licenses could result in
substantial fines and penalties, interruption or closure of operations, exploration or development on the mines, or
revocation of concessions. 
 
Many of the mineral rights, concessions, interests and agreements of the Group are subject to government approvals,
licences and permits. In particular the Group's mining operations in Kazakhstan and Macedonia are dependent on the
continuing grant of rights to explore and mine the relevant locations, and such continuing grant is dependent on continuing
compliance with the terms of the applicable licences, concessions and permits. Such licences and permits are subject to
change in various circumstances. In addition, the granting, renewal and continued effectiveness of such approvals, licences
and permits are, as a practical matter, subject to the discretion of the applicable government and government officials and
may require the payment of fees. No assurance can be given that the Group will be successful in maintaining any or all of
the various approvals, agreements, licences and permits in full force and effect without modification or revocation. Any
such modification or revocation may have an adverse effect on the Group's business, prospects, results of operations and
financial condition. To the extent such approvals are required and not obtained, the Group may incur fines, penalties, be
curtailed or prohibited from continuing or proceeding with planned exploration or development of mineral properties, which
could have a material adverse effect on the Group's related income, business, result of operations, financial condition and
ability to pay a dividend. 
 
The Lynx Group is in the process of constructing a tailings storage facility, and is in the process of applying for the
necessary construction permits. There can be no assurance that such permits will be obtained on schedule, or at all, and
any resulting delay in construction could have adverse consequences for the Group. 
 
Adverse sovereign action 
 
The Group is exposed to the risk of adverse sovereign action by the Kazakh and Macedonian governments. The mining industry
is important to the economies of both Kazakhstan and Macedonia and thus can be expected to be the focus of continuing
attention and debate. In similar circumstances in other developing countries, mining companies have faced the risks of
expropriation and/or renationalisation, breach or abrogation of project agreements, application to such companies of laws
and regulations from which they were intended to be exempt, denials of required permits and approvals, increases in royalty
rates and taxes that were intended to be stable, application of exchange or capital controls, and other risks. 
 
Deposits of strategic importance 
 
There can be no assurance that industries deemed of national or strategic importance to Kazakhstan such as mineral
production will not be nationalised. Government policy may change to discourage foreign investment, re-nationalisation of
mining industries may occur and other government limitations, restrictions or requirements not currently foreseen may be
implemented. There can be no assurance that the Group's assets in Kazakhstan will not be subject to nationalisation,
requisition or confiscation, whether legitimate or not, by any authority or body. Similarly the Group's operations may be
affected in varying degrees by government regulations with respect to restrictions on production, price controls, export
controls, income taxes, expropriation of property, environmental legislation, mine safety and annual payments to maintain
mineral properties in good standing. There can be no assurance that the laws of Kazakhstan or Macedonia protecting foreign
investments will not be amended or abolished or that these existing laws will be enforced or interpreted to provide
adequate protection against any or all of the risks detailed above. There can be no assurance that any agreements with the
governments of Kazakhstan or Macedonia will prove to be enforceable or provide adequate protection against any or all of
the risks described above. 
 
Currency fluctuations 
 
Currency fluctuations may affect the costs that the Group incurs in its operations. A proportion of the Group's capital and
operating expenditure is incurred in currencies other than the US Dollar. The Group does not currently hedge its foreign
exchange risk and, in future, the opportunities to hedge any foreign exchange exposure in these currencies may be limited
and currency fluctuations may result in unrealised foreign exchange gains or losses that materially adversely affect the
financial results of the Group. See also "Fluctuations in the Kazakhstan Tenge". 
 
Exchange control risks 
 
The Group will operate in countries that may impose foreign exchange controls, which may prevent local companies from
paying dividends or repatriating profits to their foreign shareholders. Additional administrative procedures and
requirements, such as the retention of a portion of foreign currency holdings in local banks, may also be imposed on local
companies. 
 
GENERAL RISKS RELATING TO THE ORDINARY SHARES 
 
Suitability 
 
An investment in the Company is only suitable for investors capable of evaluating the risks and merits of such investment
and who have sufficient resources to bear any loss which may result. A prospective investor should consider with care
whether an investment in the Company is suitable for him in the light of his personal circumstances and the financial
resources available to him. Readers are accordingly advised to consult a person authorised under FSMA who specialises in
investments of this nature before making any investment decisions. 
 
Emerging markets risk 
 
Investors in emerging markets, such as Kazakhstan and Macedonia, should be aware that these markets are subject to greater
risk than more developed markets, including, in some cases, significant legal, fiscal, economic and political risks.
Accordingly, investors should exercise particular care in evaluating the risks involved in an investment in the Company and
must decide for themselves whether, in the light of those risks, their investment is appropriate. Generally, investment in
emerging and developing markets is suitable only for sophisticated investors who fully appreciate the significance of the
risks involved. 
 
Readmission may not occur when expected 
 
As the Acquisition is classified as a reverse takeover under the AIM Rules, it will result in the cancellation of Existing
Ordinary Shares from trading on AIM (the "Cancellation") and a new application will be made for the Enlarged Share Capital
to be admitted to trading on AIM, which is intended to take effect simultaneously with the cancellation becoming effective.
There is no assurance that such admission will take place when anticipated. 
 
Share price volatility and liquidity 
 
The share price of quoted companies can be highly volatile and shareholdings can be illiquid. There can be no assurance
that an active or liquid trading market for the Ordinary Shares will develop or, if developed, that it will be maintained.
The Placing Price may not be indicative of prices that will prevail in the trading market, and investors may not be able to
resell the Placing Shares at or above the price they paid for them. The price of the Ordinary Shares may fall in response
to market appraisal of the Group's, or, if the Acquisition completes, the Enlarged Group's business, financial condition,
operating results and prospects, or in response to regulatory changes affecting its operations. The price at which the
Ordinary Shares are quoted and the price which investors may realise for their Ordinary Shares will be influenced by a
large number of factors, some specific to the Group, or, if the Acquisition completes, the Enlarged Group and its
operations and others which may affect quoted companies generally. These factors could include the performance of the
Group, or, if the Acquisition completes, the Enlarged Group, large purchases or sales of the Ordinary Shares, currency
fluctuations, legislative changes and general economic, political, regulatory or social conditions including, for example,
interest rates, rates of inflation, industry conditions, competition, political and diplomatic events and trends and tax
laws. Shareholders should therefore be aware that the value of the Ordinary Shares can go down as well as up. Past
performance is not necessarily a guide to the future. The market value of the Ordinary Shares can fluctuate and may not
always reflect the underlying net asset value or the prospects of the Group, or, if the Acquisition completes, the Enlarged
Group. Investment in the Company should not be regarded as short-term in nature. There can be no guarantee that any
appreciation in the value of the Company's investments will occur or that the investment objectives of the Company will be
achieved. Investors may not get back the full or any amount initially invested. 
 
Dilution 
 
On the completion of the Acquisition and the Company Placing, the holders of the Existing Ordinary Shares will experience
significant dilution in their proportionate ownership and voting interests in the Group, or, if the Acquisition completes,
the Enlarged Group. The Company will need to raise further capital in the future to be able to achieve its stated goals
which could potentially be through public or private equity financings or by raising debt securities convertible into
Ordinary Shares, or rights to acquire these securities. Any such issues may exclude pre-emption rights pertaining to the
then outstanding shares. If the Company raises significant amounts of capital by these or other means, it will likely cause
dilution for the Company's existing Shareholders. Moreover, the further issue of Ordinary Shares could have a negative
impact on the trading price and increase the volatility of the market price of the Ordinary Shares. The Company may also
issue further Ordinary Shares, or issue options over Ordinary Shares under the share option plan or any other scheme put in
place by the Company, as part of its employee remuneration policy, or issue further Ordinary Shares or warrants over
Ordinary Shares to third parties in respect of services provided to the Company, which could in aggregate create a
substantial dilution in the value of the Ordinary Shares and the proportion of the Company's share capital in which
investors are interested. 
 
Dividends 
 
There can be no assurance as to the level of future dividends, if any. Subject to compliance with the Act and the Articles,
the declaration, payment and amount of any future dividends are subject to the discretion of the Directors, and will depend
on, inter alia, the Company's earnings, financial position, cash requirements, availability of profits and the Company's
ability to access, and repatriate within the Group, or, if the Acquisition completes, the Enlarged Group, cash flow and
profits generated outside of the UK. In addition, the Company is reliant on receiving dividends from its subsidiaries in
order to generate future distributable reserves and to enable it to pay dividends. In forming their dividend policy, the
Directors have taken into account, inter alia, the trading outlook for the foreseeable future, recent operating results,
budgets for the following financial year, financial gearing, banking covenants and current capital requirements of the
Group, or, if the Acquisition completes, the Enlarged Group. Any material change or combination of changes to these factors
may require a revision of this policy, including curtailing or cessation of dividends. The Company can give no assurance
that it will be able to pay a dividend on its Ordinary Shares in the future. 
 
Expiry of lock-in arrangements 
 
Subject to or following the expiry of any undertakings given pursuant to lock-in agreements or similar arrangements with
significant shareholders, such shareholders could sell a substantial number of Ordinary Shares in the public market
following Admission. Such sales, or the perception that such sales could occur, may materially adversely affect the market
price of the Ordinary Shares. This may make it more difficult for Shareholders to sell the Ordinary Shares at a time and
price that they deem appropriate and could also impede the Company's ability to issue equity securities in the future. 
 
19.           Summary of the Terms of the Acquisition 
 
Under the terms of the Acquisition Agreement, CAML MK Limited, a wholly owned subsidiary of CAML, (the "Purchaser") will
purchase 100 per cent. of the issued share capital of Lynx Resources from the Sellers. Lynx Resources owns 100 per cent. of
Lynx Mining, which in turn owns 100 per cent. of Lynx Europe, which in turn owns 100 per cent. of Rudnik SASA DOOEL. Rudnik
SASA DOOEL is the concessionaire under the SASA Concession Agreement. CAML incorporated CAML MK Limited on 5 September 2017
to act as the purchaser under the Acquisition Agreement. The Company will guarantee the Purchaser's obligations under the
Acquisition Agreement and Orion Fund JV Limited shall guarantee the Sellers' obligations under the Acquisition Agreement. 
 
The value attributed to the Lynx Group under the Acquisition Agreement is a total of US$402.5 million on a debt-free
cash-free basis. This is comprised of a cash sum of US$340.5 million payable on Completion which is subject to a net debt
and net working capital adjustment and US$50 million to be applied by Orion in subscribing for the Consideration Shares on
Completion. The Purchaser is also required to pay deferred consideration of US$12 million plus a debt prepayment adjustment
(the "Deferred Consideration"). The Deferred Consideration is payable by the Purchaser in six equal monthly installments
beginning on the first anniversary of Completion. The net debt and net working capital adjustments will be determined by
reference to an effective date of 30 September 2017 and, subject to certain exceptions, the Sellers have agreed to
indemnify the Company for any distributions to them from 1 October 2017. As a result, the Group will have the benefit of
Lynx Group's trading from 1 October 2017. Interest from 1 October 2017 to Completion is payable at a rate of 9 per cent. of
the equity value, estimated to be approximately US$335.5 million, as approximately US$67 million of existing Lynx Group net
debt is expected to remain in place following Completion. 
 
Completion of the Acquisition is conditional on satisfaction of the following conditions, among others: 
 
(a)  certain regulatory approvals, including from the Macedonian Competition Commission; 
 
(b) unless (in the opinion of the Purchaser) no approval is required under the Minerals Law for the Acquisition (and
accordingly, no associated fee is payable), the Republic of Macedonia granting an unqualified approval for the transfer of
the Sale Shares and the amount of the related transfer fee being agreed; 
 
(c)  the Placing Agreement and Debt Financing Agreement having become unconditional in all respects (save for any condition
relating to Completion); 
 
(d)  the passing of the Resolutions at the Extraordinary General Meeting; and 
 
(e)  no authority having jurisdiction over the Company or the Acquisition having commenced any proceedings for the purpose
of prohibiting the Acquisition on the terms contemplated. 
 
The Group shall be entitled to take any action relating to the transfer approval referred to above (if any) including but
not limited to responding to any assertion that such an approval is required, and agreeing or disputing the terms of any
approval or fee. 
 
The Purchaser has agreed to use all reasonable endeavours to procure the satisfaction of conditions (a) to (e). If the
conditions to Completion are not satisfied by 15 December 2017 (or such later date as the parties may agree) then the
Acquisition Agreement will lapse. 
 
The Sellers have provided certain warranties and indemnities in relation to, inter alia, the SASA Mine and the transfer of
the shares being sold under the Acquisition Agreement, subject to customary limitations and disclosure. The Acquisition
Agreement contains customary warranties relating to the Sellers' ownership and title to their shares, as well as limited
business and commercial warranties as well as a tax covenant given by the Sellers in respect of certain tax liabilities,
principally in relation to their period of ownership only, and certain specific indemnities from the Sellers. The
Acquisition Agreement also contains customary limitations on the Sellers' liability under the Acquisition Agreement,
including time and financial limitations. Claims for breach of warranty must be brought within 12 months of Completion,
save in respect of tax claims which must be brought within five years of Completion and claims relating to certain
fundamental warranties which must be brought prior to expiry of the applicable statute of limitations. The aggregate
maximum cap on the Sellers' liability is the final amount of the consideration that they receive under the Acquisition
Agreement. Within this overall cap, the Sellers' liability is limited to 10 per cent. for warranty claims, a separate 10
per cent. for tax claims and a separate 10 per cent. for claims for breach of certain operational, interim period
covenants. 
 
Pursuant to the Acquisition Agreement, the Sellers have also agreed to enter into certain documents on Completion
including, amongst others, deeds of novation in respect of the Third Party Offtake Agreements pursuant to which Lynx Metals
will transfer its rights and obligations to Lynx Mining. In the event that such deeds of novation are unlikely to be
executed prior to Completion, Lynx Metals will continue to be the counterparty but all payments received by Lynx Metals
pursuant to the Third Party Offtake Agreements will be held on trust for the Purchaser and such payment shall be
transferred to the Purchaser. 
 
The Acquisition Agreement is governed by the laws of England and Wales. 
 
Orion has also entered into the Shareholder Participation Agreement with the Company pursuant to which it has undertaken,
for a period of 12 months from Completion, not to: 
 
●    acquire shares in the Company, such that their shareholding amounts to 30 per cent. or more of the Company; 
 
●    influence the voting of the Ordinary Shares; 
 
●    seek to control or influence the Company's management or obtain representation on the Board; or 
 
●    engage in any discussions which may result in Orion gaining control over CAML 
 
Orion has also undertaken until the earlier of (i) 18 months from Readmission, or (ii) the date on which they hold in
aggregate less than 4 per cent. of the issued Ordinary Shares to vote, or cause to be voted at all meetings of the
Company's shareholders, in a manner consistent with the recommendation made by management of the Company or the Board in
relation to a number of matters, including the election or re-election of directors and auditors, the renewal of, or
adoption of certain new, share incentive plans, executive remuneration and certain acquisitions. 
 
In addition, subject to certain exceptions, the Shareholder Participation Agreement requires Orion not to sell any
Consideration Shares for the first six months following Completion, and not to sell more than 50 per cent. of the
Consideration Shares between six months from Completion and the first anniversary of Completion (without the prior consent
of the Company). Any Consideration Shares forming part of the 50 per cent. referred to above that are sold in the second
six months must be sold via the Joint Bookrunners in order to maintain orderly markets. 
 
In connection with the Acquisition and conditional on Completion, the Company has also entered into a Transitional Services
Agreement with Fusion Capital pursuant to which it will have limited access to Chris James, Stefan Peschke, Florian Dax and
Patrick Henze for the provision of transitional consultancy services for a period of three months following Completion. 
 
20.           Information on CAML 
 
20.1         Introduction 
 
CAML is an AIM quoted copper producer which wholly owns the Kounrad copper operation in central Kazakhstan and, together
with partners, Aksu-Esil, and has begun to explore the 80 per cent. owned Shuak property in the Akmola region of northern
Kazakhstan. The Company also owns a 75 per cent. interest in a private company, Copper Bay Limited, which has a definitive
feasibility study stage project in Chañaral Bay, Chile. The Company's remaining Mongolian asset, Ereen, is fully written
off and is currently held for sale. 
 
CAML was incorporated in England and Wales on 9 September 2005 and is the UK parent company of the Group. 
 
CAML's senior management team has over 100 years of combined mining experience. The team is supported by non-executive
directors who, together, have extensive experience in the natural resources and financial sectors. A detailed resource and
reserve statement and related compliance information on CAML is set out in section 20.3.2 below. 
 
20.2         History and Background on CAML 
 
CAML acquired a 60 per cent. interest in the Kounrad Project in 2007 and in May 2014, the Company completed the acquisition
of the remaining 40 per cent. of the project for a total consideration of 20 per cent. of the Company's shares in issue at
the time of the acquisition. 
 
The Group employs approximately 356 people on site in Kazakhstan, almost all of whom have been recruited locally. This
operational team is supported by the London based headquarters. 
 
In 2010, CAML raised US$60 million at its initial public offering. The proceeds were used to construct a nominal 10,000
tonne per annum SX-EW plant at Kounrad in order to leach copper and produce cathode from the dumps on the eastern and
western sides of the historic Kounrad copper mine located near Balkhash, central Kazakhstan. This construction process was
completed ahead of schedule and US$8 million below budget, and LME quality copper cathode was first produced in Q2 2012. 
 
The Company has been producing copper from Kounrad for over five years and, to 30 June 2017, has produced over 61,000
tonnes of copper cathode, and paid US$96 million in dividends and share buybacks to shareholders. It has also self-funded
two expansions at Kounrad totalling US$26 million, paid US$90 million in taxes in Kazakhstan and funded a number of social
causes in the local community. 
 
When the Company's shares were admitted to trading on AIM in 2010, the Company was active in both Kazakhstan and Mongolia.
However, in 2013 a strategic decision was taken to exit Mongolia and, to that end, all assets in that jurisdiction have
been, or are in the process of being, divested. 
 
In November 2013, CAML invested US$3.2 million to acquire a 50 per cent. interest in private company, Copper Bay Ltd. CAML
subsequently invested a further US$3 million to increase its interest in Copper Bay to 75 per cent. in June 2015. The
Company worked with the Copper Bay management team to complete a definitive feasibility study on its Chañaral Bay tailings
retreatment project in northern Chile in December 2016. While the definitive feasibility study results illustrated a
valuable project (with a net present value of US$34 million at a copper price of US$3.00 per pound), the Board has now
decided to seek to sell the Group's interest in the Copper Bay project. 
 
In November 2016, CAML announced that it had signed a framework agreement to acquire an 80 per cent. interest in the Shuak
copper exploration property in northern Kazakhstan, which completed in August 2017. 
 
20.3         Overview of CAML 
 
20.3.1      Background information on Kounrad 
 
CAML is the sole owner and operator of the SX-EW copper recovery plant at the Kounrad mine site, near the city of Balkhash
in central Kazakhstan. The Kounrad SX-EW plant and associated infrastructure was commissioned in April 2012. More detailed
information on Kounrad can be found in the Kazakh Competent Person's Report available on the Company's website. 
 
CAML also owns the subsoil use contract in respect of the waste rock dumps surrounding the Kazakhmys- owned Kounrad open
pit, which is now closed. These waste rock dumps were generated through over 70 years of mining activity, predominantly
during Soviet times. Over time, waste dumps containing copper oxides and sulphide minerals formed a significant tonnage
deposited at the mine site. Technology has advanced, as has the use of SX-EW chemistry in treating copper ores, and CAML no
longer views these dumps as waste. 
 
CAML has two operating subsidiaries in Kazakhstan, Sary Kazna, which is responsible for leaching activities and Kounrad
Copper Company, which operates the SX-EW facility and produces copper cathode. 
 
Based on the Company's 2017 Wardell Armstrong JORC resource estimate, CAML now estimates that there remain approximately
194,000 tonnes of copper that should be extracted and produced from Kounrad, which should ensure a life of operation past
2030. 
 
Producing Kounrad's copper 
 
Kounrad's production of copper is far less cost intensive than traditional mining, as there is no need to drill, blast or
transport ore - the waste dump rocks can be leached in-situ. This allows the company to produce copper cheaply. 
 
The leaching process consists of delivering the weak sulphuric acid solution (termed "raffinate") to the top of the waste
dumps and irrigating the surface of the dump, through a pump and pipeline system. The solution is distributed evenly and at
a controlled rate via an extensive network of dripper pipes, which are similar to those used by market gardeners for
irrigation purposes. 
 
Copper contained in the rock is dissolved by the raffinate that slowly percolates through the dump until it reaches the
natural ground level, and then flows out from under the dump, following the natural bedrock gradient, into a plastic lined
collector trench which runs along the edge of the dump. 
 
From the collector trench, the solution (termed "pregnant leach solution" or "PLS") is pumped into storage ponds within the
plant's perimeter. These ponds not only act as a large buffer store but also assist with settling out any fine clay or rock
particles, which can adversely affect the solvent extraction phase ("SX") process if not removed. 
 
From the ponds, the copper-bearing PLS is pumped through the SX stage of the process, where it is mixed with an organic
reagent to strip the copper from solution, into a copper-rich organic phase and a low-grade acidic aqueous phase. The
aqueous solution, or raffinate is then recycled back to the dumps to dissolve more copper, whilst the organic reagent is
treated further to increase the copper content in a high-strength acid solution. 
 
This copper-rich organic phase, known as rich electrolyte, is then pumped to the nearby electro winning (EW) building where
it is plated by 

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