REG - Premier African Min - Share Exchange of Circum Interest to Vortex

Premier African MineralsAnnouncement

10/02/2022 11:05

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RNS Number : 3183B  Premier African Minerals Limited  10 February 2022

10 February 2022

Premier African Minerals Limited

 

Share Exchange of Circum Interest to Vortex

 

Premier African Minerals Limited ("Premier" or the "Company") is pleased to
announce that it has accepted a share offer by Vortex Limited ("Vortex") for
the exchange of Premier's entire 4.8% interest in Circum Minerals
Limited ("Circum"), the owners of the Danakil Potash Project in Ethiopia,
for 5,010,333 new shares in the capital of Vortex ("Share Exchange")
representing an interest of approximately 13.1% of the enlarged share capital
of Vortex.

Neil Herbert, Chairman commented, "This Vortex offer consolidates a
substantial percentage of minority shareholders representing 36.7% of Circum.
The three other major shareholders in Circum are African focussed private
equity mining group AMED Funds, CE Mining headed by Brad Mills and a private
mine investment group, Angstrom. Circum is the owner of a world class potash
project in the Danakil Basin and has recently completed a revised DFS with a
first phase production of 375Ktpa of SOP, an associated capex of approximately
US$430m and positive economic outputs which have further de-risked the project
from a financing perspective. The initial production is planned to be doubled
as and when market conditions allow, with engineering completed for 750Ktpa of
SOP.

With current potash prices at all-time highs this project has significant
potential value which is only constrained by the current conflict in Ethiopia.
On settlement of the conflict, Circum believes it will be well placed with an
approved DFS and corresponding extension of Circum's Mining Licence to
finalise project financing and the commencement of construction."

Background to the Share Exchange and Information on Vortex

Since the formation of Circum in September 2011, Circum has invested
significant funds in its development (approximately US$70m) to bring the
project to the stage where it is ready to be financed and constructed. Premier
believes that there is significant global interest in fertilizer projects such
as Circum, with recent announcements of substantial investments into
fertilizer projects demonstrating the attractiveness of potash as an
investment opportunity. In addition, sanctions against Belarus and Russia
should continue to sustain a tight and robust market for potash.

Vortex is a newly formed unquoted special purpose company founded by Regent
Mercantile Holdings Limited ("Regent"). Regent proposed a share exchange to
the minority shareholders in Circum, including Premier, for new shares in
Vortex. Accepting shareholders would have an indirect interest in Circum
through their holding in Vortex, and their Vortex interest would mirror their
current ownership of Circum.

Premier has agreed to accept Vortex's Share Exchange offer. In addition to
Premier, a number of other minority shareholders in Circum have also agreed to
accept the Share Exchange offer. On completion, Premier's interest in Vortex
is expected to amount to approximately 13.1% and Vortex is expected to hold in
aggregate approximately 36.7% of the shares in issue of Circum. Vortex has not
traded to date nor prepared any accounts and has no other assets or business
activities other than its interest in Circum.

Principal terms of the Share Exchange

Premier has executed a Share Exchange Agreement ("Agreement") with Vortex for
the sale by Premier of its entire holding of 5,010,333 Circum shares to
Vortex. The consideration will be satisfied through the issue of 5,010,333
shares in Vortex (being the same number as the number of ordinary shares held
in Circum by Premier) to Premier.

Vortex has agreed to provide Premier with observer rights to its day-to-day
operations, including without limitation, access to any information updates
from Circum. Premier will also have certain pre-emptive rights to ensure that
Premier is able to protect and maintain its interest in Vortex.

The Board of Circum has given its consent to the transfer of Circum shares to
Vortex pursuant to the Share Exchange leaving no further conditions precedent
for completion of the Agreement apart from the procedural aspects of the
transfer.

Financial effects on Premier

The Agreement is not expected to have any impact on Premier's accounting
treatment nor the balance sheet value of its interest in Circum which will now
be held through Vortex. As disclosed in Premier's published results for the
six months ended 30 June 2021, the fair value of its holding of Circum shares
was derived using the last Circum ordinary share issue price and was valued in
total at US$6.263 million.

Further information on Circum

The information on Circum set out below has been extracted from previously
reported public disclosures in respect of Circum.

Circum is a privately-owned potash development company which is developing the
Danakil Potash Project in Ethiopia. The project has a NI 43-101 compliant
resource of approximately 4.9 billion tonnes of potassium in the prolific
Danakil potash basin. In October 2021, the updated Definitive Feasibility
Study ("DFS") was completed and aside from the mineral reserve estimate, which
is currently being updated, has been completed to a standard that adheres to
the Canadian National Instrument (NI) 43-101. Circum's deposit has the
potential to produce both SOP and MOP, although initial production as
envisioned in the DFS will focus on high value SOP production. The updated DFS
sets an initial production level at 375ktpa of SOP across three products -
standard, granular and water soluble and has been engineered in a modular
fashion allowing a ramp up to 750ktpa of SOP as and when market conditions
allow.

Under Phase 1 of the DFS, capital expenditure is estimated to be approximately
US$430m and the project is modelled to deliver a post royalty, pretax, real
NPV at a 10% discount rate of US$576 million and an internal rate of return of
23.6%.

Due to the shallow nature of the deposit, the Danakil Potash Project will be
amenable to low-cost, low-risk, solution mining. In addition, the extremely
hot surface temperatures and high evaporation rates will allow the use of
solar evaporation all year round, this along with the provision of
hydro-electric power to the plant ensures Circum has one of the lowest carbon
footprints in the industry. As a result, mine gate cash costs are projected to
be among the lowest in the potash industry, estimated at US$124 per tonne of
SOP. Total operating costs (FOB Tadjoura Port, Djibouti) are forecast at
US$183 per tonne of SOP (before the inclusion of the royalty payable to the
Ethiopian government which is levied at 4 per cent of the Djibouti FOB
price).

Circum Policy

As announced on 30 August 2019, the Board of Premier will ensure that its
agreed Circum policy (which is reproduced in the Appendix to this
announcement) is applied to any potential liquidity event in respect of the
Company's shares in Vortex.

Board recommendation

George Roach has also accepted the Vortex offer in respect of his own indirect
interest in Circum and, on completion of the Vortex Share Exchange offer,
George Roach will have an indirect interest of 6.8% in Vortex. While the
transaction is not a related party transaction for the purposes of the AIM
Rules, given the interest of George Roach in Vortex on completion, the
independent directors of the Company, being Neil Herbert, Wolfgang Hampel and
Godfrey Manhambara (the "Independent Directors") have considered and approved
Premier's acceptance of the Share Exchange offer and the proposed Agreement
with Vortex. The Independent Directors believe that that the terms of the
Share Exchange offer and Agreement are fair and reasonable insofar as the
Company's shareholders are concerned. In particular, the Independent Directors
have taken into account that the Share Exchange offer will result in Premier
having improved oversight over the strategic direction of Circum through its
observer rights to Vortex's day-to-day operations, and including without
limitation, access to any information updates from Circum. Furthermore, the
offer of pre-emptive rights will also enhance Premier's ability to protect and
maintain its interest in Vortex.

The information contained within this announcement is deemed by the Company to
constitute inside information as stipulated under the Market Abuse Regulations
(EU) No. 596/2014 as it forms part of UK Domestic Law by virtue of the
European Union (Withdrawal) Act 2018.

The person who arranged the release of this announcement on behalf of the
Company was Neil Herbert.

Forward Looking Statements:

Certain statements in this announcement are or may be deemed to be forward
looking statements. Forward looking statements are identified by their use of
terms and phrases such as ''believe'' ''could'' "should" ''envisage''
''estimate'' ''intend'' ''may'' ''plan'' ''will'' or the negative of those
variations or comparable expressions including references to assumptions.
These forward-looking statements are not based on historical facts but rather
on the Directors' current expectations and assumptions regarding the Company's
future growth results of operations performance future capital and other
expenditures (including the amount. Nature and sources of funding thereof)
competitive advantages business prospects and opportunities. Such forward
looking statements reflect the Directors' current beliefs and assumptions and
are based on information currently available to the Directors. A number of
factors could cause actual results to differ materially from the results
discussed in the forward-looking statements including risks associated with
vulnerability to general economic and business conditions competition
environmental and other regulatory changes actions by governmental authorities
the availability of capital markets reliance on key personnel uninsured and
underinsured losses and other factors many of which are beyond the control of
the Company. Although any forward-looking statements contained in this
announcement are based upon what the Directors believe to be reasonable
assumptions. The Company cannot assure investors that actual results will be
consistent with such forward looking statements.

Notes to Editors:

Premier African Minerals Limited (AIM: PREM) is a multi-commodity mining and
natural resource development company focused on Southern Africa with its RHA
Tungsten and Zulu Lithium projects in Zimbabwe.

 

The Company has a diverse portfolio of projects, which include tungsten, rare
earth elements, lithium and tantalum in Zimbabwe and lithium and gold in
Mozambique, encompassing brownfield projects with near-term production
potential to grass-roots exploration. The Company currently holds 5,010,333
shares in Circum Minerals Limited, the owners of the Danakil Potash Project in
Ethiopia, which has the potential to be a world class asset. This holding
represents 4.8% of Circum shares in issue.

 

In addition, the Company holds a 19% interest in MN Holdings Limited, the
operator of the Otjozondu Manganese Mining Project in Namibia.

 

 Glossary
 "DFS"     Definitive Feasibility Study.
 "KCI"     Potassium Chloride.
 "MOP"     Muriate of Potash.
 "TPA"     Tonnes per annum.
 "SOP"     Sulphate of Potash.

Enquiries:

 

 George Roach                        Premier African Minerals Limited    Tel: +27 (0) 100 201 281
 Michael Cornish / Roland Cornish    Beaumont Cornish Limited            Tel: +44 (0) 20 7628 3396

                                     (Nominated Adviser)
 John More/Toby Gibbs                Shore Capital Stockbrokers Limited  Tel: +44 (0) 20 7408 4090
 Matthew Bonner                      EAS Advisors LLC                    Tel: +1 646 495 2225

 

Appendix

Premier African Circum Policy as announced 30 August 2019

In anticipation of a liquidity event, on 30 August 2019 the Premier Board
adopted a formal policy setting out how the Board would apply the proceeds
("Circum Policy"). Under the Circum Policy, providing the proceeds of the
liquidity event is greater than US$6,262,916 in respect of the Company's
entire current holding in Circum ("Circum Interest"), then:

1.   The Board of Directors would convene a general meeting at which
shareholders will be asked to approve the disposal of the Circum Interest
("Circum Disposal").

2.   Conditional on the approval of the Circum Disposal, Premier will first
repay all existing debts and liabilities incurred in the ordinary course of
business as at the date of the liquidity event of the Circum Interest.

3.  Shareholders will be further asked to approve either of the following
options to facilitate a fair and equitable distribution to Premier's
shareholders of its Circum Interest:

-      Direct distribution to existing shareholders by way of either a
share dividend, share buyback scheme or such other scheme of arrangement that
would be the most reasonably tax efficient for shareholders; or

-      The retention by the Company of the disposal proceeds to allow
Premier to investment into existing or new projects of Premier.

ENDS

 

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