TIDMGLR
RNS Number : 6156A
Galileo Resources PLC
13 September 2018
For immediate release
13 September 2018
Galileo Resources Plc
("Galileo" or "the Company")
Proposed acquisition of Kabwe Residual Rights and increased
stake to 95% in Star Zinc Project
Galileo is pleased to announce it has executed a binding and
exclusive conditional Heads of Agreement ("Agreement"), to acquire
from BMR Group plc, ("BMR") the Kabwe Residual Rights, which
includes Kabwe Mining Licence (6990-HQ-LML) ("Kabwe ML") but
excludes BMR's small scale licence 7081-HQ-SML ("Kabwe Tailings
Recovery Project") situated within Kabwe ML. The acquisition also
includes the remaining 15% of the shares, that Galileo currently
does not hold in Enviro Zambia Ltd, ("Sale Shares"), which entity
indirectly owns 95% of the Star Zinc Project (collectively
"Proposed Transaction"). The Kabwe Residual Rights include the
Kashitu Zinc willemite exploration prospect ("Kashitu").
It should be noted that the Agreement is subject inter alia to
due diligence, definitive documentation, necessary approvals and
regulatory compliance.
Highlights and Main Terms of the Agreement
-- Proposal for Galileo to acquire the Kabwe Residual Rights and
Sale Shares for a consideration of GBP50,000 cash up-front as an
option fee for exclusivity to conduct due diligence and negotiate
the Proposed Transaction and a further GBP50,000 cash and the
allotment to BMR of 15,000,000 ordinary Galileo shares of 0.1 pence
on completion of the Proposed Transaction (Consideration Shares) at
a price of 1.15p per share. Based upon the latest closing price per
Galileo share on AIM, the consideration is valued at approximately
GBP275,000 in aggregate.
-- As a result Galileo could acquire 100% of Enviro Zambia Ltd
(i.e an increase from the currently proposed 85%), thereby
increasing its interest in the Star Zinc Project to 95% (given the
5% interest held by the government of Zambia).
-- Kabwe Residual Rights includes the prospective Kashitu zinc
willemite (zinc silicate ore mineral) prospect.
-- The Kabwe Residual Rights is in a historically large
productive Zn mining area that hosted the 80-year old Kabwe Zn-Pb
mine ("Kabwe").
-- Auger sampling (183 holes) of the Kashitu prospect to 2m
depths by BMR in 2016(1) delineated three open ended (S E and W)
distinct surficial (unconsolidated surface) mineralised zones,),
samples assaying up to 21% Zn and a 400m x 130m high-grade zone
consistently assaying >2.5% Zn in every sample; this being
worthy of follow up.
-- This acquisition includes access to a very large exploration
data base, including all historic exploration drilling by Zamanglo,
Billiton and others (2) , which has identified a central 300m x
400m mineralised core in the south-east corner of Kashitu with
grades of up 40% Zn and 17g/t silver
-- The exclusivity period runs to 28 February 2019 with
completion of the agreements required ti give effect to the
Proposed Transaction (Transaction Documents) to follow as soon as
practicable thereafter and in any event by 30 June 2019.
Andrew Sarosi, Director said: "This proposed acquisition would
complete the purchase of 100% of Enviro Zambia, giving Galileo an
increased stake to 95% in the Star Zinc project near Lusaka. The
Kashitu prospect is near the Kabwe zinc-lead-vanadium tailings
recovery project. Initial exploration will focus on identifying
large zinc oxide and willemite -mineralised deposits and thereafter
explore the possibility for further zinc mineralisation with
sulphide potential. The proposed acquisition of the Kabwe Residual
Rights would complement the Star Zinc project and the Board
considers this to be a valuable transaction relative to its mission
to build a significant zinc resource in Zambia".
Further Information on and Background to the Agreement:
-- BMR owns the entire issued share capital of Enviro Mining
Limited (Enviro Mining), a company incorporated in Mauritius;
-- Enviro Mining owns the entire issued share capital of Enviro
Processing Limited (Enviro Processing), a company incorporated in
Zambia;
-- Enviro Mining owns fifteen per cent (15%) of the issued share
capital of Enviro Zambia Limited (Enviro Zambia), a company
incorporated in Mauritius and the remaining eighty-five per cent
(85%) of the issued share capital of Enviro Zambia is owned by
Galileo;
-- Enviro Zambia owns ninety-five per cent (95%) of the issued
share capital of Enviro Processing Zambia Limited (EPZ), a company
incorporated in Zambia and the remaining five per cent (5%) of the
issued share capital of EPZ is owned by the government of
Zambia;
-- the Large Scale Prospecting Licence 19653 - HQ - LPL (Star
Zinc Licence) in Zambia known as the "Star Zinc Project" is
currently owned by Enviro Processing;
-- the Star Zinc Licence has been renewed, following which the
Star Zinc Licence is being be transferred to EPZ (Star Zinc Licence
Transfer);
-- Enviro Processing owns the Kabwe Mining Licence (Large Scale
Licence 6990-HQ-LML) (Kabwe ML);
-- situated inside the Kabwe ML is the Small Scale Licence
7081-HQ-SML, which is the licence that permits Enviro Processing to
recover metals from the tailings dumps and other surface assets at
Kabwe (Tailings Recovery Project);
-- BMR has entered into certain agreements (Kabwe Agreements)
with Jubilee Metals Group PLC (Jubilee) pursuant to which, amongst
other things :
-- Jubilee is entitled to call for the transfer of the entire
issued share capital of Enviro Mining (Jubilee Option);
-- the joint venture company that Jubilee has formed with BMR
has a right to be offered for processing on agreeable commercial
terms any minerals or resources discovered within the area of the
Kabwe ML; and
-- the exercise by Jubilee of the Jubilee Option would result in
Jubilee acquiring an indirect interest in all of the Kabwe ML, but
of the various assets and rights comprised in the Kabwe ML, Galileo
and BMR understand that Jubilee only wishes to pursue the Tailings
Recovery Project and is therefore willing to permit Galileo to
acquire all assets and rights comprised in the Kabwe ML other than
in relation to the Tailings Recovery Project (Kabwe Residual
Rights).
Condition Precedent - Jubilee's consent and Zambian Regulatory
Approval
Because of the Jubilee Option, Jubilee's consent is required to
the sale of the Kabwe Residual Rights and the Star Zinc Licence to
a third party: it is agreed by Galileo and BMR that the Transaction
Documents will contain a condition precedent that the Proposed
Transaction is conditional on, amongst other things, Jubilee
consenting to the Proposed Transaction on such terms as Jubilee may
determine (Jubilee Consent); and it is anticipated that Jubilee
will only provide the Jubilee Consent on the basis that nothing in
the Transaction Documents will require Jubilee to carry out any
action, make any omission, or incur any cost or expense that is not
required by the Kabwe Agreements or which varies, reduces, limits
or circumvents any of Jubilee's rights under any of the Kabwe
Agreements.
Further, Galileo and BMR have agreed that the acquisition of the
Kabwe Residual Rights and the Proposed Star Zinc Licence Transfer
are subject to approval of the proposed transfer by relevant
Zambian authorities (in relation to a change of control) (Zambian
Consents) and payment of relevant corporate and land taxes and VAT
(as applicable) in relation to the acquisition and transfer.
Other Conditions
Completion of the Proposed Transaction will be conditional on
the following conditions being satisfied or (where possible) waived
by 30 June 2019:
1.1 receipt of the Zambian Consents;
1.2 receipt of the Jubilee Consents;
1.3 Galileo being satisfied with the results of legal,
financial, taxation and commercial due diligence on Kabwe Residual
Rights, the Star Zinc Licence and the Sale Shares, along with any
other such reports as Galileo, in its absolute discretion, consider
necessary or desirable;
1.4 negotiation and entry into of legal documentation
satisfactory to Galileo, BMR and Jubilee with regard to the
Proposed Transaction;
1.5 such shareholder or board approvals as may be required for
each of Galileo, BMR and Jubilee to approve the Proposed
Transaction being received and remaining in full force and
effect;
1.6 any third party, regulatory or taxation consents or
approvals required for the Proposed Transaction being received on
terms satisfactory to us, and such consents and approvals remaining
in full force and effect;
1.7 a report, complying with the requirements of Companies Act
2006, addressed to BMR valuing the Consideration Shares for the
purposes of section 593 of Companies Act 2006 having been delivered
to BMR; and
1.8 the Consideration Shares being admitted to trading on the
AIM market of the London Stock Exchange and such admission becoming
effective.
Lock-in
1.9 BMR is undertaking to Galileo that, without the prior
written consent of Galileo (acting in its absolute discretion), BMR
will not during the restricted period (being 12 months from
completion in respect of 75% of the Consideration Shares and 6
months in respect of the remainder), dispose of the legal or
beneficial ownership of, or any other interest in, the
Consideration Shares.
Indemnity
Galileo has agreed to indemnify BMR from and against all costs
and liabilities (including as to tax and reasonable and
proportionate professional costs and expenses incurred by BMR in
the UK (up to an agreed maximum), Mauritius and Zambia) in relation
to:
-- the transfer of the Sale Shares;
-- the transfer of the Kabwe Residual Rights out of Enviro Processing; and
-- any undertakings provided to Jubilee as a condition of the Jubilee Consent.
The Kashitu Prospect (2)
Kashitu is located in the SE corner of BMR's 100% owned Kabwe ML
site in Zambia. The area is considered prospective, due to elevated
zinc-in-soil values, which could be amenable to zinc extraction via
leaching technologies, similar to that proposed for Kabwe Tailins
Recovery Project. Historical soil sampling by Billiton (now BHP
Billiton) has recorded Zinc values greater than 15,000 ppm Zn (1.5%
Zn) over a 1.2 km by 0.3 km NW verging area, which is in close
proximity to historical workings. Reportedly high-grade surficial
willemite was extracted from the historical workings and fed in to
the main historical Kabwe Mine plant, during its operation.
An interpretation of existing RAB, RC and diamond drilling has
refined the area of potential interest, and is likely associated
with a ENE-trending structure containing steeply dipping,
high-grade willemite veins.
Kashitu Prospect & Mining Potential
There are three targets at Kashitu: 1) Lateritic enrichment at
the soil-rock interface (which may or may not come to surface), 2)
vein-style willemite with possible inclusions of zinc sulphides,
mainly sphalerite and 3 Massive pipe-like orebodies, such as Kabwe
Mine
Lateritic enrichments have been exploited at the project in the
past, at the near-by Airfield prospect, historical open- cut mining
with a pit measuring 235m long x 30m wide x 3m deep exploited a
0.5-2m thick, near-surface, residual accumulation of zinc oxides up
to 15-20% zinc, mainly smithsonite and hemimorphite, at the close
of the Kabwe operation.
Historical Work (2)
Previous exploration by Zamanglo (1958-166), Billiton (now as
BHP Billiton) Zambia Limited (1998 and TEAL (2001-2006) and BMR,
included auger soil sampling and drilling has a established a large
data base. Galileo intends to use this database to focus, initially
amongst others, on developing a geological and mineralisation model
for further exploration
Historical drilling data base includes:
- Billiton's RAB drilling assay results and collars
- Billiton's RC drilling assays, collars and surveys
- Limited Billiton and others Diamond Drilling Results
The historical data have some limitations including: the absence
of geological logs or geological information, much of which have
been inferred; the validity of the assay data cannot be relied
upon; there may be inaccuracies with some collar locations which
will need a compete resurvey and BHP's RAB drilling only assayed
for a sample at refusal (top of bed rock) and is not a complete
dataset.
Notwithstanding the above limitations, BMR's review(2) made a
number of positive conclusions;
- The higher-grade values from the drilling are broadly similar,
but do not 100% coincide with the anomalous zones as indicated by
the soil-geochemistry. The soil chemistry outlines a broad, 1.2 km
long NW-SE trending zone of elevated Zinc-in-soil > 15,000 ppm,
where Zinc-in-drilling results suggested a 1.2km long, ENE-
trending probable structural zone).
- The results of the deeper RC drilling are co-incident with
elevated zinc-at-surface and indicated a number of interpreted,
ENE-trending, high-grade (5-20%), vertical willemite veins and
structures, all forming a high- grade 'pod' or 'lens'.
- The southern portion of the prospect is far more prospective
with zinc values >5% across considerable strike length.
- The northern portion of the prospect is less prospective with grade generally below 1%.
- In the southern portion of the prospect RAB drilling indicates
increased Zinc-enrichment with depth, in the northern portion of
the prospect RAB drilling indicates decreased Zinc with depth. This
would indicate that;
-- the southern portion represents the enrichment within the
supergene enriched zone, where high grades can expected , generally
occurring at depths of between 1 and 6m; and
-- the northern portion represents a lower-grade, surficial enrichment zone at surface
Note:
(1) BMR RNS announcement 10 January 2017
(2) S Wilk BMR geologist " Kabwe Licence- Kashitu Previous Exploration Overview 24/06/2016
Related Party Transaction
Mr. Colin Bird holds Board positions in each of Galileo
(Chairman and CEO), Jubilee (non-executive Chairman) and BMR
(non-executive) and holds shareholdings in each of these companies
of 16.23%, 0.84% and 0.21% respectively. In addition, Jubilee holds
29.0% of BMR and by means of the Jubilee Option holds an option
over the entire Kabwe project, being the main asset of BMR. Mr.
Christopher Molefe is a Non-executive Director of both Galileo and
Jubilee. In addition, whilst Jubilee is not explicitly a party to
the Agreement, its consent is required. Accordingly, the Agreement
is being treated as a related party transaction under the AIM
Rules. Mr. Andrew Sarosi (executive director) and Mr. Richard
Wollenberg (independent non-executive director) of Galileo having
consulted with the Company's Nominated Adviser, consider that the
terms of the Agreement are fair and reasonable insofar as the
Company's Shareholders are concerned.
This announcement contains inside information for the purposes
of Article 7 of Regulation 596/2014.
Technical Sign-Off
Andrew Sarosi, Director of Galileo, who holds a B.Sc. Metallurgy
and M.Sc. Engineering, University of Witwatersrand and is a member
of the Institute of Materials, Minerals and Mining, is a "qualified
person" as defined under the AIM Rules for Companies and a
competent person under the reporting standards. The technical parts
of this announcement have been prepared under Andrew's supervision
and he has approved the release of this announcement.
This announcement contains inside information for the purposes
of Article 7 of Regulation (EU) 596/2014
You can also follow Galileo on Twitter: @GalileoResource
For further information, please contact: Galileo Resources
PLC
Colin Bird, Chairman Tel +44 (0) 20 7581 4477
Andrew Sarosi, Executive Director Tel +44 (0) 1752 221937
Beaumont Cornish Limited - Nomad Tel +44 (0) 20 7628 3396
Roland Cornish/James Biddle
-------------------------
Novum Securities Limited - Broker
Colin Rowbury /Jon Belliss +44 (0) 20 7399 9400
-------------------------
Glossary
Leaching chemical process of solubilising metals in rock into solution
ppm parts per million
RAB (drilling) rotary air blast
RC (drilling) reverse circulation
Supergene pertaining to processes or enrichment that occurs
relatively near surface
Willemite zinc silicate ore mineral
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 or visit www.rns.com.
END
ACQSFDFWEFASEEU
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