REG - Ironveld PLC - Terms Agreed for Smelter Acquisition

IronveldAnnouncement

24/05/2022 07:16

For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20220524:nRSX5172Ma&default-theme=true

RNS Number : 5172M  Ironveld PLC  24 May 2022

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION AS DEFINED IN ARTICLE 7 OF THE
MARKET ABUSE REGULATION NO. 596/2014 ("MAR"). UPON THE PUBLICATION OF THIS
ANNOUNCEMENT, THIS INSIDE INFORMATION IS NOW CONSIDERED TO BE IN THE PUBLIC
DOMAIN.

Ironveld Plc

("Ironveld" or the "Company")

Terms Agreed for Smelter Acquisition

Ironveld (AIM: IRON) is pleased to announce that it has signed Heads of Terms
to acquire 100 per cent of the share capital of Ferrochrome Furnaces (Pty)
Limited ("FCF") (the "Acquisition") which will provide Ironveld with an
existing smelting facility and the opportunity to commence mining and
processing in the short term.

Highlights

·    FCF, which is in Business Rescue, owns a mothballed smelter complex
in Rustenburg, South Africa;

·    Ironveld has agreed with the Business Rescue Practitioners, Tayfin
Forensic and Investigative Auditors ("Tayfin"), to acquire the share capital
of FCF for a nominal fee and to purchase outstanding debt from the sole
creditor on the following terms:

o  ZAR 15 million (approximately £0.75 million) payable upon completion; and

o  ZAR 100 million (approximately £5.0 million) over 10 years calculated as
a percentage of profits from the smelter, capped at 13.5 per cent per annum;

·    The Acquisition remains subject to final contract and certain other
conditions precedent;

·    Ironveld retains deal exclusivity until 19 August 2022 (the
"Exclusivity Period");

·    Ironveld has planned a refurbishment work programme for the smelter
facility of up to nine months, costing ZAR 40 - 65 million (approximately
£2.0 - 3.2 million);

·    The smelter complex comprises four 2.5 MW Electric Arc Furnaces
("EAFs") and associated converters, of which Ironveld plans to refurbish three
during the upgrade works thereby allowing for 7.5 MW capacity, capable of
processing approximately 40,000 tonnes of ore per annum. The fourth EAF will
be held in reserve for future refurbishment, with the potential of increasing
total processing capacity or for outsourcing;

·    Ironveld has signed a Letter of Intent with Enernet Global Inc. to
build, own, operate and maintain a hybrid power plant using renewable energy
which will provide Ironveld with security of power supply on a Capex-free
basis;

·    Ironveld has worked closely with Grosvenor Resources (Pty) Limited
("Grosvenor") regarding the Acquisition, which has formed a key part of
Grosvenor's own ongoing funding applications;

·    In the event that Grosvenor is unable to complete its financing
during the Exclusivity Period, Ironveld will arrange, and is already
considering, alternative ways to finance the Acquisition and refurbishment of
the plant;

·    In anticipation of completion of the transactions in the coming
months Ironveld has entered into Bridge Funding agreements totalling
£300,000; and

·    Following refurbishment of the smelter facility, Ironveld will be
able to produce and sell its key products (high purity iron, vanadium in slag
and titanium in slag), through its existing offtake contracts or marketing
agreements. First sales are anticipated within 12 months of completion of the
Acquisition.

 

Martin Eales, Chief Executive Officer of Ironveld, said:

"The acquisition of the smelter is a major development and milestone for the
Company. We have a refurbishment plan ready to execute, which we estimate will
take nine months, and thereafter we anticipate first sales within 12 months of
the Acquisition. Our existing offtake contracts and marketing agreements, as
well as all the necessary environmental and operational permits that are
already in place, provide us with the ability to accelerate the Company's
pathway to production and cash flow far more quickly and for less cost than if
we were to construct a new smelter

"As part of our refurbishment plan, it is exciting to have the opportunity to
build and supply our operation with renewable energy via a hybrid power plant,
reducing risks to the project and enhancing its Environmental Social
Governance credentials.

"Our final products; high purity iron, vanadium in slag and titanium in slag,
are required for the green economy and will therefore supply growing markets.
End products include vanadium redox and other batteries and 3D printing in
industries such as transport and renewable energy.

"I am pleased that we maintain a positive working relationship with Grosvenor
and we have been working closely with its principals over the past few months
regarding the Acquisition.

"I look forward to keeping shareholders updated on the Acquisition and as we
come closer to breaking ground."

 

Acquisition of FCF

Ironveld, through its subsidiary company Ironveld Smelting Proprietary
Limited, has agreed with Tayfin to purchase 100 per cent of FCF. The purchase
price of the share capital is ZAR 980 (approximately £50) and in addition
Ironveld has agreed to purchase a total of ZAR 115 million (approximately
£5.75 million) of outstanding debt from the sole creditor, payable as ZAR 15
million (approximately £0.75 million) upon completion and ZAR 100 million
(approximately £5.0 million) over 10 years based on a share of profits from
the smelter facility capped at 13.5 per cent per annum.

The transaction is subject to contract and other standard conditions precedent
and the parties have agreed a three month Exclusivity Period for completion.

FCF owns a mothballed smelter complex in Rustenburg, South Africa which is
approximately 400 kilometres from Ironveld's Bushveld mining project.  The
complex consists of four 2.5 MW tilting EAF furnaces and four convertors with
ladles, cranes and associated buildings and equipment. Ironveld, in
conjunction with technical experts, has carried out a comprehensive due
diligence on FCF over the past eight months.  This has included a detailed
costing for the refurbishment of the facility and quotations for the necessary
equipment and upgrades.

Following the Acquisition, Ironveld has a planned refurbishment programme of
up to nine months at a cost of approximately ZAR 40 - 65 million
(approximately £2.0 - 3.2 million), to bring three of the four EAFs into
production on a phased basis. Processing can commence from the first furnace
whilst the others are being brought back into production, thereby accelerating
cash flow from sales, the first receipts of which Ironveld expects to secure
within 12 months of the Acquisition.

Once three furnaces are fully operational, the complex will be capable of
processing approximately 40,000 tonnes of Ironveld's magnetite ore per annum
which, in turn, will provide the following approximate quantities of finished
products per annum: 20,000 tonnes of high purity iron; 190 tonnes of vanadium
in slag; and 3,800 tonnes of titanium in slag.

The smelter complex is currently supplied with electricity from the national
grid. Ironveld has however signed a Letter of Intent with Enernet Global Inc.
to build, own, operate and maintain a hybrid power plant using renewable
energy which will provide Ironveld with security of power supply on a
Capex-free basis.

All necessary environmental and other operational permits are in place for the
smelter complex to enable Ironveld to commence production.

Mining of ore can commence within six weeks of completion of the Acquisition
and ore will be stockpiled at the smelter complex whilst the furnace
refurbishment is taking place. Ironveld intends to use mining contractors on
site to minimise capital expenditure and will also use community-based
transportation companies to transport ore from the mine to the smelter
complex.

In the last published accounts of FCF, dated 28 February 2020, the value of
Total Assets was stated as ZAR 98.3 million (approximately £5.0 million) and
the net loss recorded for the year was ZAR 798.4 million (approximately £40.0
million), which principally comprised finance costs and foreign exchange
adjustments as FCF did not trade in the year.

 

Status of Grosvenor Transactions and Financing of the Acquisition

In October and December 2021 Ironveld and Grosvenor announced two investment
transactions totalling approximately ZAR 161 million (approximately £8.0
million), being an equity subscription for 561,505,950 new ordinary shares at
1p each and for the purchase of 51 per cent of Ironveld's subsidiary company,
Luge Prospecting and Mining Company Pty Limited ("Luge").

Discussions following the signing of the agreements highlighted that
Grosvenor's funding providers had a preference for physical asset-backed
security and therefore the potential acquisition of the FCF smelter complex
has formed a key part of discussions. Ironveld and Grosvenor have worked
closely together in support of these funding proposals and Grosvenor has
provided considerable support to Ironveld in advancing the Acquisition. It is
anticipated that Grosvenor's transaction funding, when received, will enable
the completion of the Acquisition and refurbishment. However, the Acquisition
is subject to a relatively short Exclusivity Period and, despite the ongoing
talks with its funders, the Company cannot assume that Grosvenor will complete
in the Exclusivity Period.

Consequently, in order to minimise any risk of the Acquisition not being
completed within the Exclusivity Period, Ironveld is considering alternative
routes to finance the transaction. In the event that alternative financing is
secured the Board would seek to continue the productive relationship it has
with the Grosvenor principals and would expect to continue open dialogue in
order to facilitate an alternative basis for Grosvenor to invest in the
Company when it has secured funds.  The Company has received indicative
proposals from existing shareholders holding approximately 9.0 per cent. of
the issued share capital willing to subscribe for their pro rata holding
("hold their corner") in an alternative equity fundraising of up to £5.0
million at a price of up to 1.25p per new ordinary share and an offer of
alternative loan capital.

 

Bridge Funding Agreements

In order to finance the Company's continued low level of operational costs
prior to the envisaged completion of the above transactions Ironveld has
entered into loans totalling £300,000 comprising of £260,000 from existing
investors (the "Bridge Loan") and £40,000 from Martin Eales, Chief Executive
Officer (the "Director's Loan").

The key terms of the Bridge Loan are as follows:

·    Interest on funds drawn down at eight per cent per annum;

·    Arrangement fee of 1.5 per cent of the Bridge Loan value;

·    Six month term;

·    Repayment of any funds drawn down plus interest immediately upon
receipt of Grsovenor funding or from the proceeds of an alternative source of
financing at any time during the Bridge Loan term;

·    A grant of 13,000,000 warrants exercisable at 1p, subject to
adjustment to the Placing price of any Placing undertaken during the Bridge
Loan Term.

The terms of the Director's Loan mirror those advanced to the Company by Giles
Clarke and Nick Harrison signed in December 2021:

·    Interest on funds drawn at seven per cent per annum;

·    Arrangement fee of 2.5 per cent of the Facility value;

·    Repayment of any funds drawn down plus interest immediately upon
receipt of Grosvenor funding or conversion at Placing Price in the event of
any future Placing; and

·    Conditional upon the Grosvenor transactions completing, 2,666,667
warrants (in total) exercisable at 1.5p per share.

The loan participation by Martin Eales, Chief Executive Officer of the
Company, constitutes a related party transaction pursuant to Rule 13 of the
AIM Rules for Companies. The Company's independent Directors (being Giles
Clarke, Nick Harrison and Peter Cox) consider, having consulted with the
Company's nominated adviser, finnCap, that the terms of the Facility are fair
and reasonable insofar as the Company's shareholders are concerned.

 

 

For further information, please contact:

 

 Ironveld plc                            c/o BlytheRay

 Martin Eales, Chief Executive Officer   020 7138 3204

 finnCap (Nomad and Broker)              020 7220 0500

 Christopher Raggett

 Charlie Beeson

 Turner Pope (Joint Broker)              020 3657 0050

 Andy Thacker

 James Pope

 BlytheRay                               020 7138 3204

 Megan Ray

 Tim Blythe

 

Note: An exchange rate of ZAR19.90=GBP1.00 is assumed in this RNS

 

 

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
 or visit
www.rns.com (http://www.rns.com/)
.

RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
.   END  MSCEANSDAFEAEFA