REG - Savannah Resources - Strategic Partnership with AMG Critical Materials

Savannah ResourcesAnnouncement

20/06/2024 07:00

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RNS Number : 1378T  Savannah Resources PLC  20 June 2024

 

20 June 2024

 

Savannah Resources Plc

(AIM: SAV, FWB: SAV and SWB: SAV) ('Savannah', or the 'Company')

 

Comprehensive Strategic Partnership with AMG Fulfills Near Term Funding
Requirements and Offers Potential Full Project Financing Solution for the
Barroso Lithium Project

 

Savannah Resources Plc, the developer of the Barroso Lithium Project (the
'Project') in Portugal, Europe's largest spodumene lithium deposit, has
entered a strategic partnership with the AMG Critical Materials N.V. Group
('AMG'), the Amsterdam-listed, global critical materials business. AMG's
wholly owned German subsidiary, AMG Lithium B.V., an established spodumene
concentrate producer and, in the second half of 2024, the first major European
lithium chemical producer, has invested GBP16m in Savannah through a
subscription for 342,612,420 new ordinary shares of 1 pence each in the
Company ("Ordinary Shares") at a price of 4.67p (representing a 35% premium to
the 30-day VWAP) to become the Company's largest shareholder.

 

This investment will allow Savannah to reach a Final Investment Decision
('FID') point on the Project. The partnership also includes an offtake heads
of terms agreement (the 'Offtake HoT') through which, once final agreements
are negotiated and signed, AMG can purchase 45ktpa of spodumene concentrate
from the Project (approximately 25% of total) for 5 years based on prevailing
market prices at the time. In addition, AMG will take a lead role in the
partnership in securing a 'full project financing solution' for the Project's
development. If such financing is successful, the Offtake HoT anticipates the
increase and extension of the offtake arrangements to 90ktpa for 10 years.

 

Highlights:

·      First outcome from Savannah's Strategic Partnership Process: The
process has delivered an agreement with AMG, a global critical materials
business and established operator in the lithium sector, which is targeting
100ktpa of battery grade lithium chemical production from its new lithium
hydroxide production facility in Germany.

·    Initial funding finances Savannah's Project through to an FID:
Savannah is now fully funded to complete its planned workstreams including,
the Project's Definitive Feasibility Study, the Environmental Licencing
process, team expansion, and relevant land acquisitions following AMG's equity
investment in Savannah of GBP 16m at 4.67p/share (a 35% premium to 30-day VWAP
and matching the placing price of Savannah's July 2023 fundraise).

·   Offtake HoT: Once the Project is in production, AMG can purchase
45ktpa of a target 5.5% Li(2)O spodumene concentrate from the Project for 5
years at a European-equivalent spodumene concentrate price. Through this
agreement, Savannah and AMG will be contributing towards the 2030 domestic
extraction and processing targets for battery grade lithium raw material set
in the 2023 European Critical Raw Materials Act.

·      Full funding solution: Under the Offtake HoT AMG shall be able to
increase its offtake to 90ktpa for 10 years if it provides Savannah with a
full funding solution for the Project's construction which is accepted by
Savannah. The June 2023 Scoping Study estimated the initial capital
expenditure for the Project including a 19% contingency at USD 280m.

·      Corporate and technical input: As part of the strategic
partnership and investment, AMG also receives the right to nominate one
director to sit on Savannah's Board. This is expected to be taken by one of
AMG Lithium's senior directors, who can provide technical input into the
Project's ongoing development and construction. AMG is expected and prepared
to provide further, regular, technical input to the Project through a working
group.

·      AMG becomes Savannah's largest shareholder: Through its
investment AMG becomes Savannah's largest shareholder with a 15.77% stake in
the enlarged issued share capital of Savannah on Admission.

·      Co-operation agreement opportunities: AMG and Savannah have also
entered into a co-operation agreement whereby they have agreed to work
together on a number of mutually beneficial opportunities including a study
for joint construction of a feldspar/spodumene pilot plant in Portugal and a
study for the construction of a Spodumene-to-Lithium Carbonate refinery in
Portugal or Spain. Both endeavours could potentially help to further develop
Portugal's lithium industry as it looks to become an integral part in the
European lithium battery value chain.

·      Significant unallocated offtake remains: This agreement leaves
Savannah with most of its future spodumene concentrate production unallocated.
This could be sold to an additional partner or on to the open market.

 

Emanuel Proença, CEO of Savannah, said, "We are delighted to announce this
partnership with AMG, which represents another huge de-risking step for the
Barroso Lithium Project. The Savannah team and I are really looking forward to
working closely with AMG Lithium's team from now on. With this investment,
which follows a significant due diligence exercise, Savannah is now fully
funded to complete all its current work streams. Pleasingly shareholder
dilution and commitment of offtake have been kept to a minimum, providing
Savannah with opportunities for further partnerships and commercial
arrangements in the future.

 

"AMG is an ideal partner for Savannah. It is a long established, listed and
profitable global metals business with a lithium upstream business that is
probably the best placed to serve the booming battery and EV production sector
in Europe. All stakeholders can now be certain that the first batches of
Savannah's future spodumene concentrate production will be going into lithium
chemical production in Europe, for the European lithium battery value chain.

 

"There remains significant work ahead to take the Project to construction and
production, but with the AMG partnership, Savannah can move forward with
greater confidence and purpose into a very exciting future.

 

"We are excited to partner with Savannah on its development of the Barroso
Lithium Project, Europe's largest spodumene project," said Dr. Schimmelbusch,
Chairman and CEO of AMG. "This partnership with Savannah advances AMG's
lithium expansion strategy and further solidifies our spodumene sourcing."

 

AMG Subscription

The Company has entered into a subscription agreement (the 'Subscription
Agreement') with AMG Lithium B.V., to subscribe for 342,612,420 new Ordinary
Shares at a price of 4.67 pence per new ordinary share, (the 'Subscription
Shares') equating to 15.77% of the enlarged issued share capital of the
Company, following Admission.

 

The Subscription Agreement includes a lock-in period of up to 24 months
followed by a 12-month orderly market provision whereby AMG shall be required,
at least 10 Business Days prior to any sale, to consult with the Company and
its nominated adviser regarding the details of such sale.

 

AMG Relationship Agreement

Following the Subscription, AMG will hold 342,612,420 Ordinary Shares in the
Company, representing approximately 15.77% of the enlarged issued share
capital of the Company. AMG has entered into a relationship agreement (the
"Relationship Agreement") with the Company and SP Angel (the Company's
Nominated Adviser). Under the Relationship Agreement, for so long as it is
interested in Ordinary Shares carrying 10 per cent. or more of the Company's
voting share capital, AMG has undertaken that it will not act to unduly
influence the Company or its Board and will ensure that transactions entered
into with the Company are on an arms' length basis and independently
considered by the Company. The Agreement provides AMG with the right to
maintain its proportional shareholding in future fundraises exceeding 5 per
cent of the Company's issued share capital. The Relationship Agreement
provides that for so long as AMG is interested in Ordinary Shares carrying at
least 10 per cent. of the Company's voting share capital, AMG shall be
entitled to appoint one director to the board of the Company.

 

Admission of Subscription Shares and Total Voting Rights

Application has been made to the London Stock Exchange for Admission of the
342,612,420 Subscription Shares which is expected to become effective and
dealings in the Subscription Shares commence at 8.00 a.m. on 21 June 2024.

 

The issue of the Subscription Shares has been made from the authorities
granted to Directors to issue ordinary shares at the Annual General Meeting of
the Company held on 19 June 2023.

 

On Admission, the total number of Ordinary Shares in issue will be
2,172,774,204 and the total number of voting rights will therefore be
2,172,774,204. This figure may be used by shareholders as the denominator for
the calculations by which they will determine if they are required to notify
their interest in, or a change to their interest in, the share capital of the
Company under the FCA's Disclosure Guidance and Transparency Rules.

 

 

Further Information

 

About AMG Critical Materials N.V. ('AMG')

Established in 2007, AMG is a global critical materials company at the
forefront of CO(2) reduction trends. AMG produces highly engineered specialty
materials and provides vacuum furnace systems and services to the
transportation, infrastructure, energy and specialty metals & chemicals
end markets. AMG has approximately 3,600 employees and operates globally with
production facilities in Germany, the United Kingdom, France, the United
States, China, Mexico, Brazil, India, Sri Lanka, and Mozambique, and has sales
and customer service offices in Japan.

 

AMG Critical Materials operates through three wholly owned subsidiaries, AMG
Lithium, AMG Vanadium, and AMG Technologies. The three new subsidiaries have
different end markets: AMG Lithium is supplying the market for vehicle and
stationary batteries, through cathode producers ("e-mobility" and
"e-storage"). AMG Vanadium is supplying vanadium to the high-performance steel
market and the market for stationary vanadium redox flow batteries ("e-saving"
and "e-storage"). AMG Technologies' primary market is aerospace engines where
high stress materials are at work ("e-saving"). AMG considers the trends
behind these markets to be powerful and persistent, and its aggressive
investment strategy has positioned these companies and AMG as a whole as a
high growth company.

 

The Company is listed on the Amsterdam Stock Exchange (AMS: AMG) with a
current market cap of EUR 527m. In its 2023 Annual Report, AMG reported record
financial results including, revenue of USD 1,626m, Adjusted EBITDA of USD
350m (including a USD 237m contribution from the AMG Lithium subsidiary), and
Cash from Operating Activities of USD223m.

https://amg-nv.com/ (https://amg-nv.com/)

 

AMG Lithium

AMG Lithium is built around a management team which boasts significant prior
experience in the lithium industry. Operationally, the Mibra spodumene mine in
Brazil and the Bitterfeld refinery in Germany are the cornerstones of AMG
Lithium's transatlantic lithium value chain. In 2022, the Company began the
engineering for the expansion of the lithium concentrator at Mibra from
90,000t to 130,000t per annum. In addition to its existing sales of spodumene
concentrate to third party customers, the Mibra project will also provide feed
to the Bitterfeld refinery.

 

At the Bitterfeld refinery, AMG is presently in the process of starting up
with extensive process and product qualifications and audits and expects to be
in full production later this year. The Bitterfeld refinery will be the first
facility of its kind in Europe. The layout of Bitterfeld is designed for 5
modules with an ultimate capacity of 100,000t per annum.

https://amglithium.com (https://amglithium.com)

 

 

Regulatory Information

This Announcement contains inside information for the purposes of the UK
version of the market abuse regulation (EU No. 596/2014) as it forms part of
United Kingdom domestic law by virtue of the European Union (Withdrawal) Act
2018 ("UK MAR").

 

Savannah - Enabling Europe's energy transition.

 

**ENDS**

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For further information please visit www.savannahresources.com
(http://savannahresources.com) or contact:

 

 Savannah Resources PLC                                                 Tel: +44 20 7117 2489

 Emanuel Proença, CEO

 SP Angel Corporate Finance LLP (Nominated Advisor & Joint Broker)      Tel: +44 20 3470 0470

 David Hignell/ Charlie Bouverat (Corporate Finance)

 Grant Barker/Abigail Wayne (Sales & Broking)

 SCP Resource Finance (Joint Broker)                                    Tel: +44 204 548 1765
 Filipe Martins/Chris Tonkin

 Camarco (Financial PR)                                                 Tel: +44 20 3757 4980

 Gordon Poole/ Emily Hall / Nuthara Bandara

 LPM (Portugal Media Relations)                                         Tel: +351 218 508 110

 Herminio Santos/ Jorge Coelho/ Margarida Pinheiro

 

 

About Savannah

Savannah Resources is a mineral resource development company and the sole
owner of the Barroso Lithium Project in northern Portugal, the largest battery
grade spodumene lithium resource outlined to date in Europe.

 

Through the Barroso Lithium Project (the 'Project'), Savannah will help
Portugal to play an important role in providing a long-term, locally sourced,
lithium raw material supply for Europe's rapidly developing lithium battery
value chain. After the Environmental Licence was granted in May 2023 and the
Scoping Study confirmed the economic potential of the Project in June 2023,
production is now targeted and on track to begin in 2026. At that stage,
Savannah will start producing enough lithium (contained in c.190,000tpa of
spodumene concentrate) for approximately half a million vehicle battery packs
per year, equal to a significant portion of the European Commission's Critical
Raw Material Act goal of a minimum 10% of European endogenous lithium
production set for 2030. Savannah is focused on the responsible development
and operation of the Barroso Lithium Project so that its impact on the
environment is minimised and the socio-economic benefits that it can bring to
all its stakeholders are maximised.

 

In June 2024, Savannah entered a strategic partnership with AMG Critical
Materials N.V., the global critical materials business and established lithium
market participant. AMG has invested GBP 16m in Savannah in exchange for a
15.8% stake in the Company and a 5 year, 45ktpa spodumene offtake agreement.
This investment alongside existing cash provides Savannah with the finance
required to take the Project to a Final Investment Decision point. AMG can
increase its offtake to 90ktpa for 10 years if it provides an acceptable full
project funding solution for the Project's construction.

 

The Company is listed and regulated on the London Stock Exchange's Alternative
Investment Market (AIM) and the Company's ordinary shares are also available
on the Quotation Board of the Frankfurt Stock Exchange (FWB) under the symbol
FWB: SAV, and the Börse Stuttgart (SWB) under the ticker "SAV".

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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