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African Potash Ltd.: Conditional Agreement to Farm-Out Interests in Lac Dinga Project

Dow Jones received a payment from EQS/DGAP to publish this press release.

African Potash Ltd. (AFPO) 
African Potash Ltd.: Conditional Agreement to Farm-Out Interests in Lac 
Dinga Project 
 
19-Jul-2017 / 10:50 GMT/BST 
Dissemination of a Regulatory Announcement that contains inside information 
according to REGULATION (EU) No 596/2014 (MAR), transmitted by EQS Group. 
The issuer is solely responsible for the content of this announcement. 
 
     The information communicated within this announcement is deemed to 
     constitute inside information as stipulated under the Market Abuse 
 Regulations (EU) No. 596/2014. Upon the publication of this announcement, 
   this inside information is now considered to be in the public domain. 
 
19 July 2017 
 
     AFRICAN POTASH LIMITED 
 
     ("African Potash" or the "Company") 
 
     African Potash Limited / Epic: AFPO / Sector: Mining 
 
     Conditional Agreement to Farm-Out Interests in Lac Dinga Project 
 
   African Potash Limited is pleased to announce that it has entered into an 
agreement with African Agronomix Limited ("AAX") pursuant to which AAX will, 
 subject to the satisfaction of certain conditions precedent, have the right 
 to acquire up to 100% of the Company's interest in Lac Dinga project in the 
 Republic of Congo (the "Project") structured over four distinct phases (the 
    "Earn-In"). As shareholders will be aware, the Company's interest in the 
  Project is held via a 70% interest in La Société des Potasses et des Mines 
S.A. ("SPM"), a Congolese company which holds the exclusive right to conduct 
    exploration activities for potash salts over the Lac Dinga project area. 
 
          Conditions Precedent 
 
 Completion of the Earn-In is subject to the satisfaction various conditions 
          including: 
 
      - establishment of a newly incorporated holding company ("HoldCo") and 
   completion of the transfer to HoldCo of the Company's interest in the Lac 
   Dinga Project to HoldCo (with the consent of the Ministry of Mines in the 
Republic of Congo and in compliance with all relevant provisions of the laws 
         of the Republic of Congo) and restructuring of existing inter-group 
          borrowings; 
 
  - completion of renegotiation and execution of certain existing agreements 
          relating to the Project; 
 
- AAX having completed and being satisfied with its due diligence (legal and 
          technical) on all aspects of the Earn-in; and 
 
      - all necessary and applicable third party, shareholder and similar or 
  equivalent approvals having been obtained in all relevant jurisdictions to 
      enable the Parties to complete the Transaction as contemplated by this 
          Agreement. 
 
          Consideration 
 
     On the date of satisfaction of the Conditions Precedent (the "Effective 
          Date"), AAX will: 
 
          - issue to the Company 5 million new ordinary shares in AAX (the 
          "Consideration Shares"); and 
 
    - issue a 3-year warrant to the Company (subject to extension in certain 
  circumstances), granting the right for the Company to purchase 2.5 million 
          AAX ordinary shares at a price per share of 5p per share, 
 
       (together, the "Consideration") each of which shall be held in escrow 
pending the earlier of completion of the Phase 1 undertakings, completion of 
  an initial public offering of AAX and the date falling 18 months after the 
 Effective Date. During the course of the Earn-In the Company will retain an 
    interest in the Project through the Consideration Shares issued to it as 
          well as a reducing direct shareholding in SPM. 
 
          Earn-In Phases 
 
        During each phase AAX will have funding and performance obligations, 
       completion of which result in AAX acquiring a greater interest in the 
          Project. 
 
  The material aspects of phases 1 and 2 of the Earn-In are described below: 
 
                                    Phase 1              Phase 2 
               Duration           18 months 18 months commencing 
                                              upon completion of 
                                            Phase 1 or 18 months 
                                            and one day from the 
                                                 Effective Date, 
                                              which ever date is 
                                                       the later 
 
 Interest earned by AAX 51% upon completion  14% upon completion 
                        of Phase 1                    of Phase 2 
 
 Mandatory Funding into        No less than         No less than 
                Project            GBP450,000    GBP600,000 less any 
                                                amounts expended 
                                              over and above the 
                                                 minimum Phase 1 
                                               Mandatory Funding 
 
            Performance             Conduct Conduct professional 
         Requirements &        professional          exploration 
                                exploration activities to obtain 
                                activities.   certification of a 
                                                  JORC-compliant 
           Use of Funds                             Resource and 
                                             (subject to Phase 1 
                                                results yielding 
                                              evidence of likely 
                                            economic viability), 
                                            conduct at least one 
                                             bulk sampling of at 
                                              least 10 tonnes of 
                                                       material. 
 
  Upon completion of Phase 2 and Phase 3 respectively, the Company may elect 
 in writing to participate in co-funding Phase 3 and/or Phase 4 respectively 
     alongside AAX by providing the proportion of total funding required for 
     Phase 3 and/or Phase 4 (as applicable) equal to the Company's remaining 
          interest in the Project at the relevant time. 
 
                                   Phase 3               Phase 4 
             Duration 18 months commencing  12 months commencing 
                      within 90 days after         90 days after 
                       completion of Phase completion of Phase 3 
                       2 (provided that it (provided that it has 
                       has been determined  been determined that 
                          that the Project  the Probable Mineral 
                         includes at least   Reserve - as and if 
                       one mineral deposit  successfully defined 
                              likely to be by Phase 3 - warrants 
                             mineable at a    development into a 
                                   profit)      profitable mine) 
 
   Interest earned by   Up to a maximum of    Up to a maximum of 
                  AAX      15% (should the       10% (should the 
                         Company elect not     Company elect not 
                             co-fund) upon         co-fund) upon 
                       completion of Phase completion of Phase 3 
                                         3 
 
    Mandatory Funding  Sufficient to cover   Sufficient to cover 
         into Project     the use of funds      the use of funds 
 
          Performance  Develop the project   Develop the project 
       Requirements &      to the point of       to the point of 
                              certifying a     certifying a JORC 
                           pre-feasibility    compliant Bankable 
                       study sufficient to     Feasibility Study 
         Use of Funds   declare a Probable ("BFS") sufficient to 
                       Mineral Reserve for      declare a Proven 
                           an economically    Mineral Reserve of 
                         viable quantum of   sufficient size for 
                                       ore       an economically 
                                               viable mine of at 
                                                 least 10 years' 
                                                     operations. 
 
      Under the terms of the Earn-In, AAX have undertaken to provide minimum 
     levels of mandatory funding (as set out above) and further committed to 
     ensuring that agreed liabilities of SPM are settled from such mandatory 
          funding. 
 
   From the Effective Date, AAX shall act in the capacity as the operator of 
the Project on behalf of SPM and shall have freedom to execute on-ground and 
other work towards the application of funds and agreed milestones, under the 
  direction of a Management Committee composed of 5 members, 3 of whom shall 
   be appointed by AAX, 1 of whom shall be appointed by the Company and 1 of 
   whom shall be appointed by Mr M G Mouanda Makosso, a local partner in the 
          Project. 
 
African Potash Executive Chairman, Chris Cleverly, said: "This is a positive 
  move for all concerned and fits in with our long-held ethos of helping the 
        African farmer. The transaction endorses our belief in the long-term 
   viability of the Lac Dinga project. We are excited about working with our 
new colleagues in moving toward a food secure future for some of the world's 
          poorest people." 
 
    Conal Bunnett, founder director of AAX said: "We are delighted to embark 
      upon this mutually advantageous arrangement with our project partners, 
   African Potash. The Lac Dinga prospect offers high hopes of a significant 
 potash resource on the African West Coast, the success of which will cement 
  a key strategic component in the ambitious rollout of our plan to create a 
          vertically-integrated, pan-African fertiliser business." 
 
          Background Information on African Agronomix Limited 
 
      AAX is a private, multi-national company with a well-defined strategy, 
       conceptually driven by the long-overdue beneficiation of Africa's raw 
     materials. Currently in the portfolio-building stage, AAX is building a 
  platform of fertiliser-source mineral deposits with potentially profitable 
      agricultural and industrial by-product opportunities. The portfolio is 
targeted to control resources through key regions within sub-Saharan Africa, 
 aligned within the west coast, the interior and the east coast geographies. 
        From this platform, the AAX goal is to create (in the medium term) a 
widely-distributed manufacturing base for the entire range of plant-nutrient 
        products at optimum distances between raw materials and agricultural 
          consumers. The over-arching strategy is to out-compete and replace 
expensive, trade-balance-destroying imports which carry a significant carbon 
   footprint in transport from offshore. The list of benefits offered to the 
  continent's economies, its food security, poverty reduction, job creation, 
 deforestation control, and other environmental advantages are numerous. AAX 
    already holds several rights and licences with respect to other projects 
    relating to the same industry as the Project (such as Phosphates) and in 
   implementing its business plan has in the past completed, and will in the 
  future remain open to complete, many further partnerships which are or may 
          be similar in nature to the Earn-In. 
 
  The Directors of the Company accept responsibility for the content of this 
          announcement. 
 
          For further information, please contact: 
 
          African Potash Limited 
 
          Chris Cleverly +44 (0) 20 7408 9200 
 
          African Agronomix Limited 
 
          Conal Bunnett rgsafrica@gmail.com 
 
          Alexander David Securities Limited 
 
          James Dewhurst, David Scott +44 (0) 20 7448 9820 
 
Language:      English 
ISIN:          GG00B4QYTJ50 
Category Code: AGR 
TIDM:          AFPO 
Sequence No.:  4434 
 
End of Announcement EQS News Service 
 
593891 19-Jul-2017 
 
 

(END) Dow Jones Newswires

July 19, 2017 05:51 ET (09:51 GMT)

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