REG - Firering Strategic - Updated agreement to acquire Quicklime Project

Firering Strategic MineralsAnnouncement

28/05/2024 16:45

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RNS Number : 1475Q  Firering Strategic Minerals PLC  28 May 2024

THE INFORMATION CONTAINED WITHIN THIS ANNOUNCEMENT IS DEEMED BY THE COMPANY TO
CONSTITUTE INSIDE INFORMATION AS STIPULATED UNDER THE MARKET ABUSE REGULATION
(EU) NO. 596/2014 AS IT FORMS PART OF UK DOMESTIC LAW PURSUANT TO THE EUROPEAN
UNION (WITHDRAWAL) ACT 2018, AS AMENDED. UPON THE PUBLICATION OF THIS
ANNOUNCEMENT VIA A REGULATORY INFORMATION SERVICE, THIS INFORMATION IS
CONSIDERED TO BE IN THE PUBLIC DOMAIN.

 

Firering Strategic Minerals plc / EPIC: FRG / Market: AIM / Sector: Mining

28 May 2024

Firering Strategic Minerals Plc

("Firering", the "Company" or the "Group")

 

Updated agreement to acquire up to 45% interest in Advanced Quicklime Project

 

Expected to be delivering operating cashflow within 12-24 months

 

Firering Strategic Minerals plc, an exploration company focusing on critical
minerals, is pleased to announce that, further to the announcement dated 17
August 2023, it has entered into a share purchase agreement dated 28 May 2024
("SPA") to acquire an initial 20.5% of Limeco Resources Limited ("Limeco"),
the owner of an advanced limestone project ("the Project") located 22km west
of Lusaka in Zambia for an aggregate consideration of US$3,550,000. Pursuant
to the SPA, Firering shall also be granted an option to acquire an additional
24.5% interest in Limeco for an aggregate consideration of US$4,650,000 ("New
Option").

 

The Project, formerly owned by Glencore plc, has an historical spend of
c.$US104m and comprises of a limestone quarry with an estimated mineral
resource of more than 73 million tonnes ("Mt") (source: Golder Associates,
October 2017) and a quicklime production facility with the potential to
produce 600-800 tonnes of quicklime per day. Notably, Limeco is expected to be
delivering operating cashflow within 12-24 months with the view of paying
dividends to shareholders as soon as possible.

 

HIGHLIGHTS

·    The SPA replaces the option agreement entered into by the Company in
respect of Limeco on 16 August 2023 ("Prior Option") and has been entered into
by Firering, Clearglass Investments Limited ("Clearglass") and Kai Group Ltd,
the current sole shareholder of Limeco ("Vendor").

·    The consideration pursuant to the SPA for the 20.5% interest to be
acquired shall be payable to the Vendor in 3 instalments over the next 12
months as follows:

o  US$1,500,000 being payable no later than 30 June 2024 to acquire an
initial 10% interest;

o  US$1,016,667 payable no later than 31 December 2024 to acquire a further
6.7% interest; and

o  US$1,033,333 payable no later than 30 April 2025 to acquire an additional
3.9% interest.

·    Clearglass will receive 2.5% of the issued shares of Limeco upon
completion of the final payment due under the SPA, as a result of the previous
non-refundable US$500k fee paid under the Prior Option.

·    The New Option over 24.5% of Limeco shall be exercisable in 5
tranches between July 2025 and July 2026 as follows:

o  an option to acquire a 6.4% interest no later than 31 July 2025 for a
payment of US$1,033,333;

o  an option to acquire a 3.8% interest no later than 30 October 2025 for a
payment of US$620,000;

o  an option to acquire a 5.5% interest no later than 30 January 2026 for a
payment of  US$981,667;

o  an option to acquire a 5.5% interest no later than 30 April 2026 for a
payment of US$981,667; and

o  an option to acquire a 3.3% interest no later than 31 July 2026 for a
payment of US$1,033,333.

·    Exercises of each tranche of the New Option will fall to be assessed
under the "class tests" of the AIM Rules for Companies.

·    Firering shall be entitled to accelerate any payment/acquisition
under the SPA and New Option, in which circumstance the applicable payment
shall be reduced by reference to a discount rate of 10% per annum, calculated
daily, up to a maximum discount equal to what would be applied if a payment is
made 4 months early.

·    Clearglass will receive a further 2.5% of the issued shares of Limeco
upon completion of the final payment due under the New Option as a result of
the previous non-refundable US$500k fee paid under the Prior Option (in
addition to the 2.5% settled on completion of the final payment under the
SPA).

·    In the event that Firering does not complete any payment due under
the SPA, or otherwise fails to exercise any tranche of the New Option,
Clearglass has agreed that it shall be responsible for making the relevant
payment due to the Vendor, or if applicable exercise the New Option. If this
occurs Clearglass will acquire the applicable Limeco shares in respect of each
respective payment.

·    Strong market dynamics are driven by the versatility of Quicklime,
which has multiple uses and is an essential reagent widely used during
flotation of copper sulphide minerals.

·    Limeco is in the process of commissioning a Lime Plant in Zambia of
which over US$100m has been invested to date.  The Lime Plant is ready for
immediate commission and includes:

o  Existing limestone quarry with an estimated resource* of 73.7Mt @ 95.3%
CaCO3.

o  Two stage crushing circuit with an installed primary throughput of 500tph
of limestone, and a lime plant comprising of eight kilns for burning crushed
limestone to produce between 600 and 800 tonnes of quicklime per day.

o  A limestone stockpile of 150,000 tonnes to be used for immediate
production.

o  Existing infrastructure of main access roads, power and water.

o  Advanced discussions ongoing for lime offtake with major copper producers.

·    Vendor to make up to US$4 million of the consideration paid to it
under the SPA and New Option available to Limeco as a shareholder loan to
renovate the 8 kilns at the Project.

·    Limeco is expected to be profitable and delivering operating cashflow
within 12-24 months with the view of paying dividends to shareholders as soon
as possible.

·    A new shareholders' agreement will be entered into between Firering,
Clearglass and the Vendor over the coming weeks to replace the existing
shareholders' agreement (as previously notified by Firering on 17 August
2023).

 

Yuval Cohen, Chief Executive Officer of Firering, said: "We are delighted to
announce the updated agreement to acquire an initial 20.5% stake in Limeco
Resources Limited, with an option to acquire an additional 24.5%. This
acquisition marks a significant step forward in our strategic plan to enhance
our portfolio with high-value assets. The Project, with its vast limestone
resources and quicklime production capabilities, positions Firering to
capitalise on the growing demand for quicklime, particularly within the copper
mining industry.

 

"With the first payment due by the end of June 2024, we aim to expedite the
ramp-up to production quickly. The existing infrastructure, including eight
kilns and a substantial limestone stockpile, allows for immediate commencement
of quicklime production, enabling us to take advantage of the extremely strong
market dynamics given quicklime's essential role during the flotation of
copper sulphide minerals. We are confident that our phased investment
strategy, supported by robust market fundamentals and the Vendor's commitment
to reinvest up to US$4 million of the consideration into Limeco for kiln
renovations, will generate significant cash flow and, ultimately, shareholder
value.

 

"We look forward to updating the market on our progress and the exciting
developments at Limeco as we continue to execute our growth strategy."

 

DETAILS

Proposed Transaction and main terms of the SPA

Firering has entered into the SPA alongside Clearglass with the Vendor (Kai
Group Ltd), pursuant to which Firering will acquire a 20.5% interest in Limeco
for US$3,550,000. The consideration pursuant to the SPA for the 20.5% interest
to be acquired shall be payable to the Vendor in 3 instalments over the next
12 months as follows:

·    US$1,500,000 being payable no later than 30 June 2024 to acquire an
initial 10% interest;

·    US$1,016,667 payable no later than 31 December 2024 to acquire a
further 6.7% interest; and

·    US$1,033,333 payable no later than 30 April 2025 to acquire an
additional 3.9% interest.

 

Clearglass will receive 2.5% of the issued shares of Limeco upon completion of
the final payment due under the SPA as a result of the previous non-refundable
US$500k fee paid under the Prior Option.

 

The SPA includes the terms of the New Option, pursuant to which Firering will
be granted an option to acquire up to 24.5% of Limeco for an aggregate
consideration of US$4,650,000 shall be exercisable in 5 tranches between July
2025 and July 2026 as follows:

·    an option to acquire a 6.4% interest no later than 31 July 2025 for a
consideration of US$1,033,333;

·    an option to acquire a 3.8% interest no later than 30 October 2025
for a consideration  of US$620,000;

·    an option to acquire a 5.5% interest no later than 30 January 2026
for a  consideration  of US$981,667;

·    an option to acquire a 5.5% interest no later than 30 April 2026 for
a consideration of US$981,667; and

·    an option to acquire a 3.3% interest no later than 31 July 2026 for a
consideration of US$1,033,333.

 

Clearglass will receive 2.5% of the issued shares of Limeco upon completion of
the final payment due under the New Option as a result of the previous
non-refundable US$500k fee paid under the Prior Option.

 

The New Option shall not be exercisable prior to the date falling 12 months
after the date of the SPA.

 

Firering shall be entitled to accelerate any payment/acquisition under the SPA
and New Option, in which circumstance the applicable payment shall be reduced
by reference to a discount rate of 10% per annum, calculated daily, up to a
maximum discount equal to what would be applied if a payment is made 4 months
early.

 

In the event that Firering does not complete any payment due under the SPA, or
otherwise fails to exercise any tranche of the New Option, Clearglass has
agreed that it shall be responsible for making the relevant payment due to the
Vendor, or, if applicable, exercise the New Option, and acquire the applicable
Limeco shares in respect of that payment.

 

The Vendor will make up to US$4 million of the consideration paid to it under
the SPA and New Option available to Limeco as a shareholder loan to renovate
the 8 kilns at the Project.

 

Upon completion of the SPA and New Option and assuming Firering settles all
the consideration under the SPA and the New Option, Firering will hold a 45%
interest in Limeco, Clearglass will hold a 5% interest and the Vendor will
hold a 50% interest. However, if any payment is not paid when due under the
SPA (or under the terms of the New Option for the latest date by which the
various tranches are exercisable), there shall be a 21-day cure period to
remedy the missed payment, or the Vendor shall be entitled to terminate the
SPA and the New Option. Additionally, in such circumstance the Vendor shall
have the option to buy Limeco shares from Clearglass, up to a limit of a 5%
interest in Limeco (to the extent that such Limeco shares are held by
Clearglass). Additionally, in the event of a change of control of both
Firering and Clearglass, Clearglass will transfer 1 of the issued shares of
the Company to the Vendor such that upon completion of the SPA and New Option,
the Vendor holds a majority interest in Limeco.

 

Main terms of the shareholders' agreement

In August 2023, as previous notified, Firering, Clearglass and the vendors
(which at that point comprised Kai Group Ltd and Samfuel Limited) entered into
a shareholders' agreement (the "Shareholders' Agreement") to regulate the
operation of the business and affairs of the Company and each of the parties'
rights in relation to Limeco. The main terms of the Shareholders' Agreement,
which remain extant, are:

·    Each of the vendors and Firering (the "Major Shareholders") are
entitled to appoint one director to the board of directors of Limeco with
effect from the date of the Prior Option;

·    the board of directors of Limeco shall determine the overall
policies, objectives, operations, business and management of Limeco. However,
certain critical business matters require the consent of either (i) whilst any
part of the Prior Option remains to be exercised, all of the Major
Shareholders, or after exercise of the Prior Option in full, shareholder
approval of shareholders holding at least 70% of Limeco Shares, or (ii)
approval of at least one director appointed by Firering and one director
appointed by the vendors;

·    Firering shall have the right to nominate either the Chief Executive
Officer or Chief Financial Officer to the Limeco board with effect from the
grant of the Prior Option;

·    the Shareholders' Agreement contains other standard provisions such
as pre-emption rights in respect of the issue and transfer of shares, drag
along and tag along rights, and restrictive covenants relating to competing
businesses and solicitation of staff and customers.

 

Kai Group Ltd has acquired Samfuel Ltd's shareholding in Limeco since the
Prior Option was granted to Firering and is the sole Vendor under the SPA. It
is expected that the shareholders' agreement will be updated in the coming
weeks, primarily to reflect the fact that Samfuel is not a counterparty. This
aside, it is not expected that there will be any material changes to the
original agreement.

 

Limeco

Limeco was initially established by Glencore plc due to the shortage of
quicklime in Zambia and the need for quicklime at its Mopane operations in
Zambia. In total, over $US100m has been invested in establishing the limestone
quarry and constructing the current lime plant.  The lime plant consists of a
two stage crushing circuit with an installed primary throughput of 500tph of
limestone, and a quicklime production unit comprising eight kilns for burning
crushed limestone to produce between 500 and 600 tonnes of quicklime per day.

 

In October 2017, Golder Associates visited Limeco and produced an in-situ
mineral resource estimate of 73.7Mt @ 95.3% CaCO(3) (Source: Golder
Associates, report 1776596-002-R-Rev0, 05 October 2017).

 

First geological mapping and diamond drilling were completed in 2012 when 37
drill holes were drilled with an average depth of 66m for a total of 2,517m.
This was followed by the development of a resource model in 2013.  A further
drilling programme (23 drillholes totalling 1,610m) was then completed
southeast of the drilling done in 2012.  This was followed in 2017 with an
infill drilling programme comprising another 65 drillholes totalling 4,022m.

 

Limestone production from the quarry commenced in March 2016 and ceased in
January 2017.  Crushed limestone (-90mm +60mm) was fed to only two kilns
during that time.  The majority of the blasted limestone was stockpiled
adjacent to the primary crusher and will serve as initial feedstock when the
kilns are being commissioned.  The circa US$100 million investment was made
via a shareholders' loan into Limeco. This loan (see Limeco Financials section
below) remains outstanding to the current Vendors of Limeco, in proportion to
their shareholdings.

 

Pictures of the project from May 2023

 

Figure 1: View of plant from primary crusher

 

Figure 2: View of kilns

 

Quicklime Market

Global quicklime
(https://www.databridgemarketresearch.com/reports/global-quicklime-market)
 market is forecast to gain significant growth for the period 2022 to 2029.
According to a report by Data Bridge Market Research, the market would grow at
a CAGR of 4.2% in the forecast period from 2022 to 2029 is and expected to
reach US$9.8 billion by 2029.

 

Quicklime, or CaO, is a white powder with a high melting point of 2,600
degrees Celsius. It forms slaked lime when it interacts with water. Quicklime
high calcium
(https://www.databridgemarketresearch.com/reports/global-calcium-propionate-market)
 and dolomitic, which are extensively used as a flux in purifying steel. It
provides durable mortar and plaster and soil stabilization. It also improves
water quality, especially for water softening and arsenic removal. Quicklime
can be applied on various applications, such as building and construction
materials, metallurgy, chemicals, mining, paper, and pulp production among
others.

 

The major drivers contributing to the growth of the quicklime market include
growing usage of precipitated calcium carbonate and high adoption of quicklime
in building and construction industry. The major restraints which may impact
the global quicklime market growth are volatility in the prices of quicklime
raw materials and complicated process for producing quicklime.

 

Several opportunities associated with the quicklime market include increasing
demand for iron and steel from different industries and rising mining
activities. In order to fulfil the growing demand for quicklime products in
building and construction
(https://www.databridgemarketresearch.com/reports/u-s-joint-reconstruction-market)
 and water treatment industry, some companies are expanding their production
capacities and entering in agreement across different regions. Besides, strict
government regulations for manufacturing and commercializing of quicklime is
challenging the growth of the market.

 

Limeco Financials

In its most recent published accounts (financial year ended 31 December 2022)
Limeco posted a loss before and after tax of US$828,052 on turnover of US$0.
As at 31 December 2022 Limeco had net liabilities of US$104,535,988.
Liabilities include US$104,509,835 due to shareholders ("Shareholders Debt").
Following the execution of the SPA, and if Firering exercises the New Option
in its entirety, Firering will acquire the right to 20.5% (cUS$21.4m) and
24.5% (cUS$25.6m) respectively of this Shareholder Debt.

 

Funding of SPA consideration and New Option exercise

In order to fund the consideration due under the SPA for the initial 20.5%
interest to be acquired, Firering intends to shortly complete an equity
fundraise and further announcements in respect of this will follow shortly.

 

Limeco is expected to be profitable and generating cashflow within 24
months.  Given the expected cashflow and associated flow of dividends FRG
will be assessing debt financing options to fund the New Option exercise.

 

Effect of the Acquisition on Firering

The Acquisition allows Firering to diversify its investments and secure a
stake in an advanced project which is commission ready with the potential to
be in production within 12-24 months. Limeco will continue to manage its
operations and the continued investment by Firering will allow it to advance
its existing plans to progress to production. If Limeco generates profits,
Firering will be entitled to receive a dividend pro rata to its shareholding
in Limeco.

 

Firering will continue to develop its existing portfolio of mines producing
critical metals. The Acquisition complements the existing portfolio and is in
line with Firering's existing strategy to become a significant global and
ethically sourced supplier.

 

Related Party Transaction

Clearglass is a party to the SPA and, under the terms of the SPA, will acquire
up to 5% of the Shares and 5% of the Shareholder Debt (assuming completion of
the SPA and the New Option by Firering). Additionally, in the event that
Firering does not complete any payment due under the SPA, or otherwise fails
to exercise any tranche of the New Option, Clearglass has agreed that it shall
be responsible for making the relevant payment due to the Vendor, or, if
applicable, exercise the New Option, and acquire the applicable Limeco shares
in respect of that payment.

 

Clearglass is also party to the Shareholders' Agreement with Firering.

 

Clearglass is a Cypriot company (Company number HE351995).  Firering's
Chairman and a substantial shareholder, Youval Rasin, is a director and 40%
shareholder in Clearglass.  Clearglass's majority shareholder, Eli Rasin, is
the uncle of Youval Rasin. Eli Rasin is also the legal and beneficial owner of
Rompartner Limited which is a shareholder holding 8.44% of the Company's
issued share capital..

 

Therefore, the proposed transactions - entering into the SPA and the New
Option - constitute related party transactions under the AIM Rules.
Accordingly, the directors of the Company (other than Youval Rasin), who are
independent for the purposes of the transaction, consider, having consulted
with the Company's nominated adviser, SPARK Advisory Partners Limited, that
the terms of the SPA and the New Option are fair and reasonable insofar as the
Company's shareholders are concerned.

 

For the sake of clarity, given his involvement with Clearglass, Youval Rasin
will not participate in the Board decision to exercise the New Option. The
updated shareholders' agreement referred to above will fall to be assessed as
a related party transaction at the point its new terms are agreed.

 

*** ENDS ***

 

For further information on the Company, please visit www.fireringplc.com
(http://www.fireringplc.com)  or contact:

 Firering Strategic Minerals                          Tel: +44 20 7236 1177

 Yuval Cohen

 SPARK Advisory Partners Limited (Nominated Adviser)  T: +44 20 3368 3550

 Neil Baldwin / James Keeshan / Adam Dawes
 Optiva Securities Limited (Joint Broker)             T: +44 20 3137 1903

 Christian Dennis / Daniel Ingram
 Shard Capital Partners LLP (Joint Broker)            T: 020 7186 9950

 Damon Heath / Erik Woolgar
 St Brides Partners Limited (Financial PR)            E:firering@stbridespartners.co.uk (mailto:E:firering@stbridespartners.co.uk)

 Isabel de Salis / Susie Geliher / Isabelle Morris

 

 

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