REG - Critical Metals PLC - Rental & Proposed Acquisition of Processing Plant

Critical MetalsAnnouncement

10/10/2023 07:00

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RNS Number : 4606P  Critical Metals PLC  10 October 2023

This announcement contains inside information for the purposes of Article 7 of
the Market Abuse Regulation (EU) No. 596/2014, as it forms part of UK Domestic
Law by virtue of the European Union (Withdrawal) Act 2018. Upon the
publication of this announcement, this inside information is now considered to
be in the public domain.

 

 

Critical Metals plc / EPIC: CRTM / Market: Main Market

 

 

10 October 2023

 

Critical Metals plc

("Critical Metals" or the "Company") 

 

Head of Terms Signed

 

Rental and Proposed Acquisition of Processing Plant

 

 

Critical Metals plc, a mining investment company established to acquire mining
opportunities in the critical and strategic metals sector, is pleased to
announce that the Company has entered into a non-binding term sheet (the "Term
Sheet") with inter alia Katanga Strategic Resources and Operations SARL
("Kastro SARL"), pursuant to which Critical Metals will (subject to entering
definitive legal agreements) acquire 100% of the Kastro Plant assets (the
"Kastro Plant"), a hydrometallurgical plant located in Lubumbashi in the
Democratic Republic of the Congo ("DRC") for US$8 million (the "Proposed
Acquisition").

 

Under the Term Sheet, Critical Metals, which owns a 70% interest in the Molulu
copper/cobalt project in the DRC, has in principle agreed (subject to
completing due diligence), to initially rent the Kastro Plant for a period of
six months with the option to extend this lease if required.  Under the lease
arrangement it is anticipated that Critical Metals will operate the Kastro
Plant and use it to process ore from the Molulu Project which is located only
98 kilometers from the Kastro Plant.  This allows Critical Metals to increase
its margins on the ore from the Molulu Project by being able to sell the
higher value-add products that the Kastro Plant produces, as well as giving
the Company a product with a wider global market.

 

The Directors understand that the Kastro Plant has a feed capacity of 12,000
tonnes per month of copper oxide/cobalt ore. The finished goods production
capacity of the Plant is 400 tonnes of LME-grade 99.99% copper cathode and 200
tonnes of LME-grade 30% cobalt hydroxide per month. After a recent visit to
the Kastro Plant by experienced process and electrical consulting engineers
from South Africa, Critical Metals has identified ways to potentially increase
the monthly plant production.

 

For general sales pricing guidance, the LME copper price is about $8000 per
tonne and the LME cobalt price is about $33,000 per tonne.

 

The Board of Critical Metals believe that the Proposed Acquisition of the
Kastro Plant will be transformative for the Company, capable of creating
significant shareholder value.

 

Commenting on the transaction, CEO Russell Fryer said:

 

"I am absolutely thrilled to have signed the heads of terms to acquire the
assets within the Kastro Plant in the DRC.  We believe that the best way to
increase shareholder value is to be in control of our own destiny and I have
signalled to the market several times that Critical Metals was on the cusp of
a major plant transaction that is incredibly value accretive to our
shareholders. The acquisition of the Kastro Plant would mean the Company gets
full value for processing Molulu copper and cobalt ores, thereby ensuring
superior margins.  The Directors appreciate this is a transformational
acquisition which is in line with the Company's aggressive growth strategy of
acquiring high quality assets capable of optimising and adding value to the
Company's current portfolio.

 

"The Company has access to funding via the recently announced US$3 million
loan facility and, if the Proposed Acquisition proceeds, the Company will look
to raise further debt to finance the Kastro Plant transaction, limiting
shareholder dilution. A number of international financial institutions have
already expressed an interest in providing this funding although no definitive
agreements have yet been reached.

 

"To further strengthen our balance sheet, we recently announced the copper ore
sales agreement with a local buyer to purchase all the copper oxide ore that
is ready for sale now, along with copper ore that will be mined between now
and the restart of the Kastro plant."

 

 

Principal Terms include:

 

·    Critical Metals (or one of its subsidiaries) will pay a total
consideration to the Sellers that will equal the amount of US$7.5 million to
be settled in cash or wire upon completion subject to the assumptions and
conditions below (the "Purchase Price") and a hold back of US$500,000 for
claims for 9 months.

 

·    Critical Metals will rent the Kastro Plant for six months (6-months)
from the date of lease ("Initial Period") at US$100,000 per month. This total
rent amount of US$600,000 will be made available when needed to the owner of
the Kastro Plant to meet the cost of refitting and restarting of the plant
within 45 days of first drawdown.  If the cost of refitting the Kastro Plant
exceeds US$600,000, the excess cost will be for the account for the current
owner.

 

·    The underlying controller of the Kastro Plant has agreed to enter a
6-month consultancy agreement with the Buyer to assist with operating the
Kastro Plant during the initial lease period.

 

·    Critical Metals shall have an option to extend the lease of the
Kastro Plant on a rolling monthly basis for up to 6 further months however,
the rental for this period is increased to $115,000 per month.

 

Anticipated Funding and Conditions Precedent

 

To fund the Kastro Plant asset acquisition, Critical Metals intends to raise
debt from a series of financial institutions that have already expressed
interest in this transaction. Further to the Company's announcement of 18
September 2023, Critical Metals' management is highly sensitive about
shareholder dilution and no equity placement is being contemplated.

 

There are several conditions precedent to the Proposed Transaction including
completion of technical, legal, environmental, and financial due diligence,
agreement on definitive legal documentation (including the lease and the asset
purchase agreement), Director and regulatory approvals from the FCA in
connection with the publication of a secondary prospectus if required.

 

 

Timetable

 

A binding Purchase Agreement for the proposed Acquisition is expected to be
entered into on or before 31 December 2023 (the "Closing Date") or such later
date agreed by the parties.

 

Although both parties will use reasonable endeavours to reach agreement on the
terms of the Acquisition as soon as practicable, at this stage, there can be
no guarantee that the Proposed Acquisition will complete, nor as to the final
terms of the Proposed Acquisition.

 

The refitting of the Kastro Plant is forecast to take 45 days once the
US$600,000 is made available to the owner of the Kastro Plant.  The first
copper cathode tonnage is expected to be produced from the Kastro Plant within
30 days of the completion of the refurbishment.

 

Further announcements and updates will be made as appropriate in due course.

 

**ENDS**

 

For further information on the Company please visit www.criticalmetals.co.uk
(http://www.criticalmetals.co.uk/)  or contact:  

 

 Critical Metals plc

 Russell Fryer, CEO                               Tel: +44 (0)20 7236 1177
 Peterhouse Capital Limited

 Corporate Broker

 Lucy William / Charles Goodfellow                Tel: +44 (0)20 7469 0936 / +44 (0)20 7220 9797

 St Brides Partners Ltd

 Financial PR

 Catherine Leftley /Ana Ribeiro/Isabelle Morris   Tel: +44 (0)20 7236 1177

 

About Critical Metals

Critical Metals PLC has acquired a controlling 100% stake in Madini Occidental
Limited, which holds an indirect 70% interest in the Molulu copper/cobalt
project, a producing asset in the Katangan Copperbelt in the Democratic
Republic of Congo.

 

The Company will continue to identify future assets that are in line with its
stated acquisition objective of low CAPEX and OPEX brown-field projects with
near-term production and cash-flow, whilst concentrating on minerals that have
strategic importance to future economic growth thereby generating significant
value for shareholders.

 

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