TIDMBMR
RNS Number : 2590U
BMR Group PLC
23 October 2017
BMR Group PLC
("BMR", the "Group" or the "Company")
Proposed financing of Kabwe Zinc-Lead tailings re-processing
operation
and
Corporate update
This announcement contains inside information for the purposes
of Article 7 of Regulation 596/2014.
Highlights
-- The Company has entered into a new arrangement for the
proposed funding, construction and operation of the Kabwe zinc-lead
tailings re-processing plant ("Kabwe Plant") with Jubilee Platinum
Plc ("Jubilee");
-- The arrangement is subject to technical review by Jubilee and
final agreement of work programme and legal documentation by no
later than 28 February 2018;
-- Under the proposed arrangement, Jubilee would provide up to
GBP2.3m for construction of the Kabwe Plant;
-- BMR would retain 100% ownership of the Kabwe Large Scale
Mining Licence, tailings and infrastructure (the "Kabwe Assets"),
and a minimum of 60% of the economic interest in the long term
post-tax profits of Kabwe operations;
-- BMR and Jubilee targeting completion of the construction and
commissioning of the Kabwe Plant by 30 June 2018 and commencement
of operations and revenue generation thereafter;
-- BMR has undertaken to terminate the financing arrangements
with African Compass International Limited ("ACI") by 28 February
2018.
Alex Borrelli, Chairman of BMR, commented:
"I am delighted to reach this agreement with Jubilee after an
extended period of negotiation with a number of groups. BMR has
chosen to advance the Kabwe operation with Jubilee given its strong
credentials and high degree of technical, operational and
managerial experience. We believe that we have secured a strong
partner to co-develop Kabwe and despite the recent disappointments
the Company is now in a good position especially at a time when
both lead and zinc commodity prices are performing strongly.
"Our principal objective is to ensure that, subject to Jubilee's
review, we can complete the construction, and start commissioning,
of the Kabwe Plant by 30 June 2018 with revenue generation
commencing thereafter. BMR is confident that Kabwe is a robust and
feasible operation and we look forward to co-developing this
project with Jubilee.
"Also, in addition to the work at Kabwe, we expect that BMR and
Jubilee will work towards integrating the treatment of high grade
zinc ore from the Star Zinc mine, in which BMR has a 49% interest,
at an early stage at the Kabwe Plant which should lead to enhanced
returns."
Summary of arrangement with Jubilee
The Board is delighted to report that BMR has executed a binding
term sheet (the "Binding Term Sheet") with Jubilee with the
potential to provide financing for the completion of the
construction of the Kabwe Plant subject to a review and further
negotiations that will then determine a Joint Venture Agreement to
be entered into by no later than 28 February 2018.
Background on Jubilee
Jubilee is admitted to trading on AIM with a market
capitalisation of c.GBP48 million. It is a mining exploration and
development company with a strategy to create an integrated
mine-to-metals company with a primary focus on platinum. This is
based on modern and thoroughly proven smelting technology to
process the Company's own and others' high-chrome PGE concentrates
and, importantly, to improve mining environments by reprocessing
mine tailings dumped by other miners. Jubilee is developing and has
successfully completed a number of joint venture projects in Africa
and elsewhere.
Further details regarding Jubilee are available on its website
at www.jubileeplatinum.com.
Overview of the Binding Term Sheet
-- Jubilee to immediately make available a GBP300,000 facility
to a subsidiary of BMR (that holds the Kabwe Assets) by way of a
non-interest bearing unsecured limited recourse loan facility;
-- New joint venture operating company to be incorporated and
appointed as operator of the Kabwe Plant;
-- Jubilee to be issued with preference shares ("Preference
Shares") representing 15% of the voting rights in the joint venture
company;
-- Jubilee will determine by no later than 28 February 2018
whether to enter into a definitive joint venture agreement (the
"Joint Venture Agreement") with the Group, following a review of
the Kabwe operations;
-- Jubilee, subject to entering into the Joint Venture
Agreement, to advance up to a further GBP2.0 million of debt
finance, to be granted security on the total debt and earn up to
40% interest in the enlarged voting rights of the joint venture
company; and
-- The Preferred Shares would have preferred right to receive
100% of distributed profits from Kabwe Operations until preferred
shareholders have received distributions equal to a 30 per cent.
premium on the debts then advanced by Jubilee (the "Jubilee
Distribution"), whereupon the Preferred Shares will convert into
ordinary shares of the joint venture operating company.
Details of the Binding Term Sheet
The Binding Term Sheet between BMR and Jubilee provides
unconditionally as follows:
BMR to incorporate Kabwe Operations Limited ("Kabwe
Operations"), a new wholly-owned subsidiary which shall have
immediate access to a GBP300,000 facility from Jubilee ("Initial
Payment") as a non-interest bearing (except as described below)
unsecured limited recourse loan facility repayable out of Kabwe
cash-flow only (the "Jubilee Debt Finance").;
Ø The Initial Payment will be back-to-back advanced by Kabwe
Operations to BMR's wholly owned subsidiary Enviro Processing
Limited ("EPL") to cover the cost of the review by Jubilee of BMR's
technology and engineering plans for the Kabwe Plant and the
projected cost to completion, and its strategy to increase future
plant capacity to treat the Star Zinc ore. Also, the review will
take into account the intended production of vanadium pentoxide for
which additional processing capability will be needed once ZEMA
approval has been obtained;
Ø In light of its review, Jubilee will determine by 28 February
2018 whether to enter into the Joint Venture Agreement and
operating agreement (the "Operating Agreement") with the Group,
both detailed below, and to agree with the Group detailed plans for
completion and commissioning of the Kabwe Plant, targeted by 30
June 2018; and
Ø Jubilee shall immediately be issued with preference shares
("Preference Shares") representing 15% of the enlarged voting share
capital of Kabwe Operations, the joint venture company.
Ø
Upon execution of the proposed Joint Venture Agreement and the
Operating Agreement, the Binding Term Sheet further provides as
follows:
Ø Jubilee would have the right to increase its interest in the
voting share capital of Kabwe Operations up to 40% through the
advance of a further GBP2.0 million of Jubilee Debt Finance as
follows:
i. by no later than 28 February 2018 (or such later date as
agreed between the parties) (the "Long-stop date"), by an advance
of a further GBP1,000,000 of Jubilee Debt Finance to Kabwe
Operations (again advanced by Kabwe Operations to EPL) as a result
of which it will be issued with further Preference Shares such that
its aggregate holding of Preference Shares represents 30% of Kabwe
Operations' enlarged voting share capital; and
ii. by no later than 120 days of the Long-stop date, by an
advance of a further GBP1,000,000 of Jubilee Debt Finance to Kabwe
Operations (again advanced by Kabwe Operations to EPL) as a result
of which it will be issued with further Preference Shares such that
its aggregate holding of Preference Shares represents 40% of Kabwe
Operations' enlarged voting share capital;
Ø As security for the Jubilee Debt Finance, the Group would
grant security over the whole of its shareholding in EPL upon
receipt of the first sum of GBP1,000,000 by the Long-stop date
until repayment of the Jubilee Debt Finance;
Ø Each Preferred Share would have equal voting rights to each
ordinary share of Kabwe Operations but would have preferred rights
as a class of shares to receive 100% of distributed profits from
Kabwe Operations until preferred shareholders have received
distributions equal to a 30 per cent. premium on the Jubilee Debt
Finance then advanced, whereupon the Preferred Shares will convert
into ordinary shares of Kabwe Operations;
Ø Kabwe Operations would be appointed as operator of the Kabwe
project, with responsibility for commissioning, funding and
construction of, and operations at, the Kabwe Plant. Kabwe
Operations may sub-contract responsibilities to Jubilee and/or BMR
on a direct cost plus 10% basis, and would sub-contract operator
responsibilities to Jubilee;
Ø Cash generated by EPL through its Kabwe operations would be
used in the following order (i) to pay off outstanding loans from
Kabwe Operations, (ii) to pay off existing debt of c.GBP5 million
of EPL to other members of the Group (which would be assigned
between the Group and Jubilee pro rata to their holding of voting
shares of Kabwe Operations at the time of loan repayments) and
(iii) as consideration for acting as operator, Kabwe Operations
would receive all of EPL's residual cash generated.
Ø Kabwe Operations would apply funds received from EPL in the
following order:
i. Repayment of Jubilee Debt Finance;
ii. Payment of the Jubilee Distribution; and
iii. Distribution of profits between BMR and Jubilee pro rata to
their holding of voting shares of Kabwe Operations at the time of
such distributions.
Ø Finally, in the event that the Joint Venture Agreement
referred to above is deemed to be a fundamental change of business
in accordance with Rule 15 of the AIM Rules for Companies and is
not approved by shareholders of BMR:
i. Kabwe Operations (guaranteed by BMR) shall immediately repay
(in cash or new ordinary shares of BMR at the prevailing price) the
GBP300,000 Initial Payment together with 100 per cent. interest
thereon (reflecting the costs to be incurred by Jubilee);
ii. Jubilee shall retain its interest in 15% of Kabwe Operations' voting share capital; and
iii. Jubilee shall have a pre-emptive right (by reference to
voting rights) to participate in any future equity issue or joint
venture relating to BMR's Kabwe project and the right to realise
its interest in Kabwe Operations at the future equity issue price
or joint venture implied value, as appropriate.
Ø BMR and Jubilee would, respectively, initially appoint two
directors and one director to the board of Kabwe Operations.
Update on African Compass International Limited ("ACI")
As announced on 8 June and on 23 June 2017, ACI has not met the
first drawdown request under the facility agreement it entered into
with BMR on 23 September 2016. BMR announced that it had therefore
started looking for alternative sources of finance. In light of the
Binding Term Sheet being entered into with Jubilee, BMR has
undertaken to terminate by 28 February 2018 the facility agreement
and the off-take agreement with ACI, which were announced on 1
August 2016, and seek recovery of the funds amounting to $109,000
transferred to ACI for securing a bank guarantee.
BMR reserves all rights against ACI for its significant breach
of the terms of the facility agreement.
General corporate update
i. Kashitu Exploration, Zambia
Four phases of auger drilling have now been successfully
completed, resulting in a total of 450 soil samples being assayed
primarily for zinc, lead and gold mineralisation in the Kashitu
section of EPL's Large Scale Mining Licence. The soil samples were
recovered using a 100mm diameter powered auger, drilling to a depth
of approximately 1 metre. Samples were analysed by the Company's
XRF analyser with random samples being check assayed independently
at ZCCH-IH Misenge Laboratory in Kabwe.
To assess the potential of Kashitu, EPL has combined these assay
results with the data base compiled from assays from the historic
diamond drilling, reverse circulation and rotary air blast ("RAB")
drilling undertaken by ZCCM and Billiton. This combined data base
of results has enabled EPL to identify a central, mineralised
'core' in the south east of Kashitu, approximately 300 metres x 400
metres with Zn grades between 1% and 40%, Pb between 1% and 18%,
and Ag up to 16.8 grams/tonne.
Based on these encouraging results, the exploration campaign has
now been extended into an area further east designated the 'Dambo',
to investigate any potential accumulated mineralisation from the
central mineralised 'core', into which it drains. Efforts are being
made to complete as much of this campaign before the start of the
rains.
EPL intends now to undertake a RAB drilling programme to
investigate the extent of near surface mineralisation.
ii. Waelz Kiln Slag ("WKS"), Zambia
Following the ZEMA rejection of EPL's Environmental Project
Brief application and a lack of progress with the Company's
subsequent appeal to sell WKS for block making, discussions were
held with ZEMA to explore alternative, acceptable solutions for the
use of WKS. As a result, the Company has now successfully completed
preliminary investigative test work to incorporate WKS into the
production of high performance cement for civil engineering
structures.
Negotiations are currently being held with a major cement
manufacturer in Zambia to undertake a joint engineering study to
pursue this option.
iii. Ester, Portugal
Scoping metallurgical test work carried out by Grinding
Solutions using 80 kgs of samples collected during the first field
campaign has successfully defined a conceptual flow sheet,
recovering WO(3) , Sn, Au and Ag, using a combination of heavy
media separation, gravity separation, flotation and leaching.
BMR intends that fresh samples will now be used to refine the
flow sheet and investigate the effects on recovery of grind size,
extended rate kinetics, open circuit trials and cyanide leach for
the recovery of Au.
iv. Imperial Smelting Furnace ("ISFS"), Zambia
BMR is currently prioritising the construction of the Kabwe
Plant and will finalise its ISFS metallurgical test work designed
to blend with the processing of the LPR following execution of the
Joint Venture Agreement with Jubilee.
v. Working capital
BMR is managed under very tight financial control with minimal
overhead as the focus of management has been to deploy most of its
cash assets to the Kabwe Plant construction. The Company is
currently assessing a number of proposals, including re-imbursement
of the $109,000 provided to ACI referred to above and the
anticipated proceeds of the litigation referred to below, to
address the further financing which is required for completion of
the Star Zinc acquisition and to cover general overheads.
vi. Other matters
BMR continues its litigation pursuit against former associates
and advisers to the Company and believes it is close to achieving a
successful outcome.
For further information:
BMR Group PLC 020 7734 7282
Alex Borrelli, CEO and Chairman
WH Ireland Limited 020 7220 1666
NOMAD and Joint Broker
Chris Fielding/ Alex Bond
Peterhouse Corporate Finance 020 7469 0930
Joint Broker
Lucy Williams/ Duncan Vasey/ Heena Karani
This information is provided by RNS
The company news service from the London Stock Exchange
END
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