TIDMPAL
RNS Number : 7613C
Equatorial Palm Oil plc
21 October 2020
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES
OF ARTICLE 7 OF EU REGULATION 596/2014 ("MAR"). UPON PUBLICATION OF
THIS ANNOUNCEMENT, THIS INFORMATION IS NOW CONSIDERED TO BE IN THE
PUBLIC DOMAIN.
21 October 2020
EQUATORIAL PALM OIL PLC
("EPO" or the "Company")
Proposed Reverse Takeover Transaction and Suspension of
Trading
Signing of conditional Acquisition Agreement to acquire up to
100% of Capital Metals Limited
Equatorial Palm Oil plc (AIM: PAL), the Rule 15 cash shell, is
pleased to announce that it has reached conditional agreement with
parties holding a majority of the shares (51.4 per cent.) ("CML
Majority") of Capital Metals Limited ("CML"), a company developing
a mineral sands project in Sri Lanka, to acquire their shares in
CML ("CML Shares") in exchange for ordinary shares ("Ordinary
Shares") in the Company.
Capital Metals Limited ("CML") was incorporated in 2015 to
acquire licenses prospective for mineral sands in Sri Lanka
("Project"). Since acquiring the Project, CML has developed it by
undertaking drilling and exploration, establishing a JORC Resource
and completing detailed metallurgical test work to establish the
quality of the mineral sands' products in the Project. CML has
spent more than GBP5.5m on the Project and has built an
international shareholder base.
The Project has a JORC resource estimate of 17.2Mt at 17.6%
Total Heavy Minerals ("THM") including ilmenite, zircon, rutile
& garnet ("Resource") and 84% of the Resource is Measured &
Indicated. The JORC resource estimate indicates that the THM of the
Project is amongst the highest grade of mineral sands projects
globally and the metallurgical work provides the Project with the
information for offtake discussions. Also, there is scope to
increase the Resource given the current Resource only measures the
first 3m from surface, recent drilling confirms mineralisation
extends at depth and drilling has taken place over less than 5% of
the Project.
Key infrastructure is already in place including facilities at
Oluvil port, located a short distance from the Project, which
include grid power, scheme water, sealed roads and up to 10,000
tonnes shipping capacity. The proposed Board and in-country
management have substantial listed company, heavy minerals &
Sri Lankan experience.
CML are looking to complete industrial mining licence approvals
in 2021 and to update its development plan as the Project moves
closer to mine development and revenues.
The proposed acquisition ("Proposed Acquisition") will
constitute a reverse takeover transaction pursuant to the AIM Rules
for Companies (the "AIM Rules"). Following the Proposed
Acquisition, the CML business will constitute all of the Company's
business.
An acquisition agreement has today been signed with the CML
Majority. The Company has now issued the same offer to the
remaining shareholders in CML ("CML Minority") which, if accepted,
will result in the acquisition of up to 100 per cent. of the entire
issued share capital of CML ("CML Shares") for an aggregate total
consideration of GBP15.84 million by the issue of up to 132,000,000
new Ordinary Shares in the Company ("Consideration Shares").
The Opportunity for EPO
By acquiring shares in CML, the Company will be acquiring up to
a 100% interest in a high grade project which has been developed
with substantial investment to date and which the directors believe
represents a low capex, high margin opportunity with attractive
economics.
The Strategy
-- raise GBP2m+ to further the Project (EPO has approximately GBP800,000 in the bank)
-- finalise mining license approvals
-- undertake Development Study which includes an economic analysis
-- secure product offtake agreements
-- commitment to best practice ESG
-- construct mine and process plant to commence commercial production
-- continue exploration to increase Resources
-- provide employment and skills training to local people as
part of a community engagement programme
Principal Terms of the Proposed Acquisition
On 16 October 2020, the Company sent a letter to Capital Metals
Limited communicating the offer from the Company to acquire the
issued share capital of Capital Metals Limited (the "Offer"). Upon
receipt of the Offer, CML communicated the Offer by sending an
offer letter ("Offer Letter") to certain of its shareholders ("the
CML Majority"). The CML Majority hold between them 51.4 per cent.
of the current issued CML Shares. The Offer specified, inter alia,
the following terms:
-- In consideration for the acquisition of the CML Shares, the
Company proposed to issue 1 Consideration Share for every 1.235 CML
Shares sold.
-- That completion of the Proposed Acquisition is conditional,
amongst other things, on (i) the passing of resolutions at a
general meeting to be convened by the Company, to approve : the
Proposed Acquisition, a 20:1 share consolidation, and a placing of
new ordinary shares ("Placing Shares") in the Company ("the
Placing"); and (ii) admission of the Placing Shares and
Consideration Shares to trading on AIM ("Admission") becoming
effective on or before 31 March 2021 (although the Directors
anticipate this will occur in or before December 2020).
-- Completion of the Offer is conditional on acceptances being
received from the holders of CML Shares holding more than 75 per
cent. of the issued CML Shares (unless otherwise agreed between CML
and the Company, with the approval of the Company's Nominated
Adviser).
-- If a CML shareholder wishes to accept the Offer they should
return a signed acceptance form which is sent to them with the
Offer Letter ("Acceptance Form"). Contained within the Offer Letter
is a power of attorney pursuant to which a CML Shareholder will
appoint Capital Metals Limited as their attorney to take all
reasonable and necessary actions on their behalf in order to give
effect to the Offer and to complete the transaction. This includes
authority to execute a conditional sale and purchase agreement
("Acquisition Agreement") and all necessary instruments of
transfer.
-- The CML Directors recommended that all CML Shareholders accept the Offer.
In the event that the Offer is accepted by all CML Shareholders,
the Company will acquire all the CML Shares and will in turn issue
132,000,000 Consideration Shares to satisfy a total consideration
of GBP15.84 million. In the event that the Offer is not accepted by
all CML Shareholders, the number of Consideration Shares to be
issued shall be reduced accordingly.
As CML has not been independent and earning revenue for at least
2 years, its related parties and applicable employees shall be
subject to the lock-in restrictions as required by Rule 7 of the
AIM Rules.
About CML
The Project
CML (via its subsidiaries) owns, directly or indirectly 100 per
cent. of the Sri Lankan subsidiary companies holding the licenses
being Damsila Exports (Pvt) Limited ("DEL") and Eastern Minerals
(Pvt) Limited ("EML") that comprise the Project.
The Project is located in the Ampara District of the Eastern
Province of Sri Lanka, approximately 220 km east of Colombo. The
Project comprises the project licenses ("Project Licenses") which
cover 84 sq. km. An additional nine applications have also been
made in respect of new licenses covering a further 623 sq. km.
The Project is divided into two sub-project areas:
-- the northern area (Eastern North) is held by DEL through its
exploration license EL168/R/4 (which expires on 31 October 2020)
(the "DEL License"), and which is now subject to Industrial Mining
License ("IML") applications by DEL; and
-- the southern area (Eastern South) is held by EML through its
granted exploration license EL199/R/3 (the "EML License") which is
shortly due to be renewed for a further two year period.
In relation to the first IML application over the area covered
by the DEL License which was lodged in 2014, DEL is finalising its
Environmental Impact Assessment ("EIA") with the Sri Lankan
authorities. The EIA review and approval process was delayed
earlier this year due to COVID-19. The EIA is intended to be made
available for its 30-business day public comment consultation in
late October 2020.
Board changes
It is proposed that the following highly experienced individuals
will be appointed to the Board, conditional upon Admission:
Gregory Martyr, Non-Executive Chairman (aged 56)
Greg is an experienced resource industry banker, advisor and
corporate executive. He has over 30 years' experience in resources
investment banking and corporate finance, as well as the management
of international mining companies. He is also on the board of Euro
Manganese Inc. and Carbon Dynamics Group P/L. From 2011 to 2016,
Greg was a Managing Director with Standard Chartered Bank
ultimately as the Global Head of Advisory, Mining and Metals. From
2005 until its 2011 acquisition by Standard Chartered Bank, he was
a partner with Gryphon Partners, a boutique resource advisory firm
and from 1994 to 2003, he was employed in several executive roles
by Normandy Mining Ltd., including President, Americas. Prior to
that he held positions with Deutsche Bank and Morgan Grenfell. Greg
obtained a Bachelor of Economics and a Bachelor of Laws from the
University of Sydney, Australia. Mr Martyr will enter into a letter
of appointment with the Company to act as a non-executive chairman
of the Company from and subject to Admission. Mr Martyr's
appointment will commence on the Admission Date and will be
terminable at any time on three months' written notice on either
side. Mr Martyr will be entitled to a fee of GBP38,400 per annum
and will be required to devote such of his time, attention and
ability to his duties as may be necessary or desirable for the
proper and effective discharge of all of his functions and
responsibilities.
Anthony Samaha, Finance Director (aged 52)
Anthony Samaha is a Chartered Accountant who has over 25 years'
experience in accounting and corporate finance, including resources
development. Anthony worked for over 10 years with international
accounting firms, including Ernst & Young, principally in
corporate finance, gaining significant experience in valuations,
IPOs, independent expert reports, and mergers and acquisitions.
He has over 15 years' experience in the listing and management
of AIM quoted companies, including the accounting and financial
management, fund raisings, project development and mergers and
acquisitions. Anthony has been involved in acquisitions and
resource projects in various regions of the world, including
Australia, West Africa, North America, Kazakhstan and the People's
Republic of China. He holds Bachelor of Commerce and Bachelor of
Economics degrees from the University of Western Australia and is a
Fellow of the Chartered Accountants Australia and New Zealand and
an Associate of the Financial Services Institute of Australasia. He
is currently an executive director of AIM-quoted Reabold Resources
plc. Mr Samaha will enter into an executive service agreement with
the Company subject to Admission, Mr Samaha will be employed as
Finance Director of the Company and will be paid a salary of
GBP50,000 per annum (plus expenses reasonably incurred by him in
the course of his duties). Mr Samaha will be required to devote
such time, attention and ability as is needed to enable him to
carry out his duties to the Company as Finance Director. His
appointment shall (unless terminated earlier due to poor
performance or gross misconduct or other material breach of duties)
continue unless and until terminated by either party on three
months' notice in writing. Mr Samaha's service agreement will
contain non-compete, non-solicitation and no-conflict restrictions
on Mr Samaha commensurate with his position as Finance
Director.
James Leahy, Non-Executive Director (aged 59)
Beginning his career at the London Metal Exchange, Mr Leahy has
spent the subsequent 34 years involved in stockbroking and
commodities in a variety of roles, including research analyst,
equity salesman and specialist corporate broker, which covered
mining finance, origination and distribution. He has worked on a
wide range of projects worldwide, ranging from industrial minerals,
coal, iron ore, precious metals, copper, diamonds, lithium,
uranium, plantations, forestry and palm oil. Lately, he has
employed his corporate governance skills, having gained substantial
experience as an independent director on the boards of several
quoted and unquoted companies. In addition, Mr Leahy has direct
experience in capital markets, having worked at James Capel, Credit
Lyonnais, Nedbank, Canaccord and Mirabaud, where he gained
invaluable experience with international institutional fund
managers, hedge funds, private equity and sector specialist
investors. Additionally, Mr Leahy has been involved in many IPOs,
as well as primary and secondary placings, and the development of
junior mining companies through to production. He is currently a
director of the listed fund Geiger Counter Ltd, AIM-quoted Savannah
Resources Plc and AEG Plc. Mr Leahy will enter into a letter of
appointment with the Company to act as a non-executive director of
the Company from and subject to Admission. Mr Leahy's appointment
will commence on the date of Admission and will be terminable at
any time on three months' written notice on either side. Mr Leahy
will be entitled to a fee of GBP24,000 per annum and is required to
devote such of his time, attention and ability to his duties as may
be necessary or desirable for the proper and effective discharge of
all of his functions and responsibilities
Financial Results of CML
In the year ended 31 March 2020 CML made a loss of $1.024
million before tax on a turnover of GBPnil. It had net assets of
$0.85 million as at 31 March 2020.
Related Party Transaction
Michael Frayne is a director and shareholder of CML, whose
beneficial holding is 9.8%, as well as Executive Chairman of the
Company. Accordingly, the Proposed Acquisition constitutes a
related party transaction under Rule 13 of the AIM Rules. Geoffrey
Brown and Teh Kwan Wey, being the Independent Directors for the
purposes of AIM Rule 13, having consulted with SPARK Advisory
Partners Limited ("SPARK"), the Nominated Adviser, consider that
the terms of the Proposed Acquisition are fair and reasonable
insofar the Company's shareholders are concerned. In providing such
advice to the Independent Directors, SPARK has taken into account
the Independent Directors' commercial assessment.
Suspension of Trading
In accordance with Rule 14 of the AIM Rules, the Company's
Ordinary Shares will be suspended from trading on AIM with effect
from 7.30 a.m. today. Trading in the Company's Ordinary Shares will
remain suspended until such time as either an Admission Document is
published or an announcement is released confirming that the
Proposed Acquisition will not proceed, subject to the provisions of
AIM Rule 15.
The Proposed Acquisition remains subject to a number of
variables including, but not limited to, agreeing definitive
documentation and compliance with all regulatory requirements,
completion of a placing to raise funds to undertake a Development
Study and work programme, and obtaining the approval of the
Company's shareholders in general meeting. As such, there can be no
certainty that the Proposed Acquisition will complete.
Share Consolidation
It is proposed that, simultaneously with the other proposed
resolutions, the ordinary shares of GBP0.0001 will be consolidated
into new ordinary shares of GBP0.002 each on the basis of one New
Ordinary Share for every 20 ordinary shares of GBP0.0001 each. The
Consideration Shares to be issued in connection with the Proposed
Acquisition will be new ordinary shares following the share
consolidation.
Further updates will be provided as and when appropriate.
For further information, please visit www.epoil.co.uk or
contact:
Equatorial Palm Oil plc
Michael Frayne (Executive Chairman) + 44 (0) 20 7317 6800
SPARK Advisory Partners (Nominated
Adviser)
Neil Baldwin +44 (0) 20 3368 3554
Mirabaud Securities Limited
(Joint Broker)
Peter Krens +44 (0) 20 7484 3510
Brandon Hill Capital Limited
(Joint Broker)
Jonathan Evans/Oliver Stansfield +44 (0) 20 3463 5000
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