Mkango Resources Ltd. (AIM/TSX-V: MKA) (the "Company" or "Mkango")
is pleased to announce that Mkango and Talaxis Limited (“Talaxis”),
a subsidiary of Noble Group, have entered into an agreement (the
“Agreement”) whereby Mkango will acquire Talaxis’ 49% interest in
Lancaster Exploration Limited (“Lancaster”), which owns the Songwe
Hill Rare Earths Project in Malawi (“Songwe Hill”), and Talaxis’
24.5% interest in Maginito Limited (“Maginito”), which holds a 25%
interest in rare earths magnet recycler HyProMag Limited
(“HyProMag”), for 54,166,666 Mkango shares (the “Transaction”),
equivalent to £13m at the Placing Price (as defined below).
Complementary to the Transaction, Mkango has
conditionally raised £5.52m (£5.29m net of fees) (the “Placing”)
from new and existing shareholders at a price of £0.24 (approx.
C$0.42) per share (the “Placing Price”), including a proposed
£700,000 investment by Non-Executive Chairman Derek Linfield.
Completion of the Placing and Transaction are
subject to customary closing conditions and the approval of the TSX
Venture Exchange (“TSX-V”). Completion of the Transaction and the
investments proposed by Mr Linfield and Resource Early Stage
Opportunities Company (“RESOC”), another related party proposing to
participate in the Placing, are also subject to the approval of the
independent shareholders of the Company. One additional investor
has also made its participation in the Placing conditional on
shareholder approval of the Transaction. Mkango has scheduled its
Annual General and Special Meeting of Shareholders (the “Meeting”)
to approve, amongst other things, the Transaction and the
investments by Mr Linfield and RESOC, on 6 October 2021. See
“Related Party Transaction, Control Person Approvals and Other
Regulatory Matters” below for further discussion.
On completion of the Transaction, Mkango will
own 100% of Lancaster and Maginito, in addition to its existing
wholly owned interests in Mkango Polska (which is developing a rare
earth separation plant in Poland) and three other exploration
licences in Malawi, which includes the exciting Mchinji exploration
project.
The Transaction is expected to bring significant
benefits to the Mkango group, including:
- Consolidation of
assets and offtake under Mkango’s control, increasing financial
flexibility and underpinning the Company’s future growth strategy
- Simplification
of ownership structure enhances optionality for Songwe Hill
development funding, including the potential introduction of
additional strategic investors and development partners
- Restoring 100%
ownership over Songwe Hill brings Mkango’s structure in line with
peers, providing greater transparency for investors
- Increasing
ownership of Maginito to 100% provides greater exposure to HyProMag
and the rare earth recycling market, which the board expects to
have substantial growth potential
- Greater
integration between the mining, separation and recycling
businesses, increasing synergies along the value chain
The new structure is expected to enable Talaxis
to participate in any share price upside as Mkango advances its
projects and gives Talaxis exposure to Mkango’s other assets, which
include the Pulawy Separation Plant (the “Separation Plant”)
currently undergoing feasibility studies in Poland and Mkango’s
other exploration licences in Malawi.
Derek Linfield, Non-Executive Chairman
of Mkango, stated: “This transaction brings material
benefits to both Mkango and Talaxis and strengthens Mkango’s
position as a future integrated supplier of rare earths.
Talaxis has strongly supported the advancement
of Songwe Hill and Maginito since its initial investments in 2017,
subsequent to which Mkango has grown downstream, adding investments
in recycling (via HyProMag) and the Separation Plant in Poland. At
the same time, market conditions for rare earths have improved
markedly.
We believe this transaction delivers a better
platform to create value and a structure more aligned with the
strategies of both companies. We look forward to Talaxis’ continued
support as we progress towards development of Songwe Hill and our
other projects.”
Stephen Motteram, Head of Corporate
Development for Noble Group, stated: “Talaxis is excited
to support this reorganisation and simplification of Mkango’s
corporate structure. With the increasing electrification of
the global economy, Talaxis sees significant growth in the
permanent magnet market, especially from EVs and wind
power. This corporate reorganisation allows Talaxis to better
share in the upside from Mkango’s integrated Mine, Refine, Recycle
strategy, which includes the recently announced and highly
attractive Pulawy Separation Plant project in Poland and Mkango’s
strategic interest in rare earths magnet recycler, HyProMag. It
also increases Talaxis’ exposure to Mkango’s other assets, such as
the highly prospective Mchinji rutile exploration project in
Malawi. We look forward to working with management as the
Feasibility Study for Songwe Hill and other work streams move
towards completion.”
The Transaction
Under the terms of the Transaction, on
completion, Mkango will issue to Talaxis 54,166,666 common shares
in Mkango (the “Consideration Shares”) at the Placing Price,
comprising a total consideration of £13m. The Transaction is
subject to approval by Mkango shareholders, as discussed in more
detail below under “Related Party Transaction, Control Person
Approvals and Other Regulatory Matters”. The Company has scheduled
its Annual General and Special Meeting of Shareholders for 6
October 2021, to, amongst other things, seek such approval. In
connection with and upon completion of the Transaction, existing
agreements between Mkango and Talaxis will be terminated. On
completion of the Transaction, amongst other things, Talaxis will
no longer be required to finance the completion of a Feasibility
Study for Mkango’s Songwe Hill. Talaxis’ funding obligations are
currently suspended until the earlier of completion of the
Transaction or the Transaction termination date of
29 October 2021.
Upon completion of the Transaction, Mkango will
enter into a lock-in deed with Talaxis (“Lock-in Deed”) which will
provide, amongst other things, that for so long as the Noble Group
owns 10% or more of Mkango’s shares, Talaxis will be entitled to
appoint a nominee to the board of the Company. Talaxis has
indicated to the Company that it intends to nominate Stephen
Motteram as a director to the Mkango board. Mr Motteram has 25
years’ experience in financial institutions and trading houses,
specialising in project development, commodities trading, M&A,
and corporate restructuring with transaction experience in
Australia, China, SE Asia, Africa, South America, Russia and the
Middle East. He has worked for Noble since 2011 and is currently
Head of Corporate Development. Mr Motteram holds a B. Agricultural
Science (Honours) from the University of Melbourne and an MBA from
the Melbourne Business School and Ivey Business School. He is a
Member of CPA Australia and a Graduate and Member of the Australian
Institute of Company Directors. The appointment of Mr Motteram will
be subject to the approval of the TSX-V and the normal due
diligence exercise by the Company’s nominated adviser.
Following completion of the Transaction and the
Placing, Talaxis’ shareholding in Mkango will have increased from
11.3% to 32.6%.
The Placing
Complementary to the Agreement, Mkango has
conditionally raised £5.52m (£5.29m net of fees) from existing
shareholders, including Derek Linfield, the Non-Executive Chairman
of Mkango and new institutional investors, through the subscription
for 23.0m common shares (“New Shares”) at £0.24per Mkango common
share ("Share").
The issue price equates to premiums of 2.9% and
4.8% relative to the trailing five-day volume weighted average
price (“VWAP”) of Mkango’s shares on the AIM and TSX-V,
respectively.
The use of proceeds is intended to be used for
the completion of the Feasibility Study for Songwe Hill and general
corporate purposes, including for feasibility studies at Mkango
Polska. Mkango’s cash position after the Placing is expected to be
approximately £5.23m, with an expected additional £1.03m of funds
to be received following approval of the Transaction and the
placing to related parties at the Meeting.
The Placing was unanimously approved by the
directors of the Company (other than Mr Linfield who was required
to abstain from the vote given his participation in the Placing).
Other than with respect to subscriptions being made by related
parties, being RESOC and Mr Linfield, as described in more detail
below, and an additional investor, the Placing is expected to close
on or around 16 August, 2021 and is subject to the receipt of all
necessary approvals including the approval of the TSX-V. The
placing to related parties will not close until disinterested
shareholder approval of such participation is obtained at the
Meeting. A subscription for 350,000 New Shares as part of the
Placing by an investor who has made its investment conditional on
the completion of the Transaction will also not close until after,
and dependent on, the approval of the Transaction at the
Meeting.
The New Shares will rank pari passu with the
existing Shares and application has been made for the New Shares
(other than 59.6m New Shares expected to be issued after the
Meeting) to be admitted to trading on AIM ("Admission"). It is
expected that Admission will become effective and dealings in the
New Shares (other than New Shares expected to be issued after the
Meeting) will commence at 8:00am on or around 17 August, 2021. The
New Shares will be subject to a statutory hold period in Canada
expiring on the date that is four (4) months and one day from
issuance of the New Shares, and will also be listed for trading on
the TSX-V, provided that approval of such listing from the TSX-V is
obtained.
In accordance with the Disclosure Guidance and
Transparency Rules (DTR 5.6.1R) the Company hereby notifies the
market that immediately following Admission, its issued share
capital will consist of 153.6m Shares (excluding any New Shares
expected to be issued after the Meeting). The Company does not hold
any Shares in treasury. Shareholders may use this figure 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 Company under the FCA's Disclosure and
Transparency Rules.
In connection with the Transaction, Mkango has
agreed to pay, at completion of the Transaction, commissions to
Bacchus Capital Advisers Limited (“BCA”) of 2% of the purchase
price payable to Talaxis, equivalent to £260,000, of which half
will be satisfied in Shares (issued at the Placing Price) and the
other half in cash, subject to the approval of the TSX-V. In
addition, Mkango has agreed to pay BCA a fee of £30,000 in
connection with BCA’s review of the Transaction and advice to the
board. In connection with the Placing, Mkango has agreed to pay, at
completion of the Placing, commissions of up to 5% in cash and 2%
in non-transferable broker warrants, in each case with reference to
cash raised by each of BCA, Shard Capital Partners LLP, Alternative
Resource Capital, Merlin Partners LLP and Jub Capital Management
LLP. In addition, Shard Capital and Alternative Resource Capital
will be entitled to a shared corporate finance fee of £5,000. The
broker warrants will have a term of 12 months from issue and an
exercise price of £0.24. The total number of broker warrants to be
issued on completion of the Placing is 239,315. Payment of the
commissions (and issuance of the warrants) to the brokers is
subject to acceptance of the TSX-V. The Shares issuable pursuant to
exercise of the broker warrants will be subject to a statutory hold
period in Canada expiring on the date that is four (4) months and
one day from issuance of the warrants. SP Angel Corporate Finance
LLP, the Company’s nominated advisor, will be paid a fee of £7,500
for corporate finance advice to the Board in relation to the
Transaction and the Placing.
Lock-In Deed
Under the Lock-In Deed, Talaxis will agree that
for so long as it holds 10% or more of the Company’s Shares, it
will not, during the first 12 months following completion of the
Transaction, sell or transfer any of its Shares, other than
pursuant to certain limited exceptions. For the second 12 months
following Completion, Talaxis will agree to an orderly market
arrangement. Also, under the Lock-in Deed, Mkango will agree that
for so long as Talaxis holds 10% or more of the Company’s Shares,
it will not issue, transfer or pledge any new Shares in Lancaster
or Maginito to any party who is not an affiliate of the Company
without the consent of Talaxis, provided that Mkango will be
permitted to pledge the Shares held by it in Lancaster and/or
Maginito where the Company, Lancaster, Maginito or any other
subsidiary of the Company wishes to raise project or other forms of
debt finance.
Related Party Transaction, Control
Person Approvals and Other Regulatory Matters
Talaxis is currently the holder of approximately
11.3% of the issued and outstanding Shares of Mkango. As such,
Talaxis is a Non-Arm’s Length Party pursuant to applicable rules of
the TSX-V, as well as a “related party” pursuant to Multilateral
Instrument 61-101 – Protection of Minority Security Holders in
Special Transactions (“MI 61-101”). Pursuant to MI 61-101, the
Transaction is subject to disinterested shareholder approval (i.e.,
approval by a majority of votes cast at the Meeting, excluding any
Shares held by Talaxis, its affiliates and joint actors).
The Company is exempt from the formal valuation
requirement of MI 61-101 in respect of the Transaction pursuant to
section 5.5(b) of MI 61-101 - Issuer not Listed on Specified
Markets, as no securities of the Company are listed or quoted on
the Toronto Stock Exchange, the New York Stock Exchange, the
American Stock Exchange, the NASDAQ Stock Market, or a stock
exchange outside of Canada and the United States other than the AIM
market of the London Stock Exchange.
Following the issuance to Talaxis of the
Consideration Shares, Talaxis will own 69.5m Shares, representing
an interest of approximately 32.6% of the issued and outstanding
Shares of the Company. As a result of it owning 20% or more of
Mkango’s Shares, Talaxis will constitute a “Control Person” (as
defined in the TSXV Corporate Finance Manual). The issuance of the
Consideration Shares therefore requires disinterested shareholder
approval (i.e., approval by a majority of votes cast at the
Meeting, excluding any Shares held by Talaxis, its affiliates and
joint actors), which will be sought at the Meeting.
The Placing is integral to the Transaction and
therefore the Company intends to rely on the “part and parcel
pricing exception” provided for in the policies of the TSX-V.
RESOC has agreed to subscribe for 1,666,666
Shares pursuant to the Placing (“RESOC Investment”). As of the date
hereof, and prior to completion of the Placing, RESOC owns
14,333,081 Shares, representing approximately 10.6% of the issued
and outstanding Shares. As a result of owning 10% or more of the
Shares, RESOC constitutes a “related party” of Mkango (as defined
in MI 61-101) and is a Non Arm’s Length Party pursuant to
applicable rules of the TSX-V. Pursuant to MI 61-101, the RESOC
Investment is subject to disinterested shareholder approval (i.e.,
approval by a majority of votes cast at the Meeting, excluding any
Shares held by RESOC, its affiliates and joint actors). This
approval will be sought at the Meeting.
The Chairman of the Company, Derek Linfield, has
agreed to subscribe for 2,916,666 Shares pursuant to the Placing.
As of the date hereof, and prior to completion of the Placing, Mr
Linfield owns 5,139,561 Shares, representing approximately 3.8% of
the issued and outstanding Mkango shares. As a result of being a
director of Mkango, Mr Linfield is a “related party” of Mkango (as
defined in MI 61-101) and a Non-Arm’s Length Party pursuant to
applicable rules of the TSX-V (as defined in MI 61-101). Pursuant
to MI 61-101, the investment by Mr Linfield is subject to
disinterested shareholder approval (i.e., approval by a majority of
votes cast at the Meeting, excluding any Shares held by Mr
Linfield, his affiliates and joint actors). This approval will be
sought at the Meeting.
Related party transactions under the AIM
Rules for Companies (the “AIM Rules”)
Talaxis is a substantial shareholder in Mkango
under the AIM Rules and is therefore regarded as a related party
under the AIM Rules. As a result, the Transaction is a related
party transaction for the purposes of Rule 13 of the AIM Rules. The
directors of Mkango, consider, having consulted with SP Angel
Corporate Finance LLP, the Company’s nominated adviser, that the
terms of the Transaction are fair and reasonable insofar as the
Company’s shareholders are concerned.
As Derek Linfield is a director of the Company,
his participation in the Placing also constitutes a related party
transaction pursuant to Rule 13 of the AIM Rules. The directors of
Mkango, other than Derek Linfield, consider, having consulted with
SP Angel Corporate Finance LLP, the Company’s nominated adviser,
that the terms of Mr Linfield’s participation in the Placing are
fair and reasonable insofar as the Company’s shareholders are
concerned.
RESOC is also a substantial shareholder in
Mkango and therefore a related party under the AIM Rules and its
participation in the Placing is a related party transaction under
Rule 13 of the AIM Rules. The directors of Mkango, other than Derek
Linfield who is participating in the Placing, consider, having
consulted with SP Angel Corporate Finance LLP, the Company’s
nominated adviser, that the terms of RESOC’s participation in the
Placing are fair and reasonable insofar as the Company’s
shareholders are concerned.
About
Mkango
Mkango’s corporate strategy is to develop new
sustainable primary and secondary sources of neodymium,
praseodymium, dysprosium and terbium to supply accelerating demand
from electric vehicles, wind turbines and other clean technologies.
This integrated Mine, Refine, Recycle strategy differentiates
Mkango from its peers, uniquely positioning the Company in the rare
earths sector.
Mkango is developing Songwe Hill in Malawi with
a Feasibility Study targeted for completion in Q1 2022. Malawi is
known as “The Warm Heart of Africa”, a stable democracy with
existing road, rail and power infrastructure, and new
infrastructure developments underway.
In parallel, Mkango recently announced that
Mkango and Grupa Azoty PULAWY, Poland’s leading chemical company
and the second largest manufacturer of nitrogen and compound
fertilizers in the European Union, have agreed to work together
towards development of a rare earth Separation Plant at Pulawy in
Poland. The Separation Plant will process the purified mixed rare
earth carbonate produced at Songwe.
Through its ownership of Maginito
(www.maginito.com), Mkango is also developing green technology
opportunities in the rare earths supply chain, encompassing
neodymium (NdFeB) magnet recycling as well as innovative rare earth
alloy, magnet, and separation technologies. Maginito holds a 25%
interest in UK rare earth (NdFeB) magnet recycler, HyProMag
(www.hypromag.com) with an option to increase its interest to
49%.
Mkango also has an extensive exploration
portfolio in Malawi, including the Mchinji rutile discovery, for
which assay results are pending, in addition to the Thambani
uranium-tantalum-niobium-zircon project and Chimimbe nickel-cobalt
project.
For more information, please visit
www.mkango.ca.
Market Abuse Regulation (MAR)
Disclosure
The information contained within this
announcement is deemed by the Company to constitute inside
information as stipulated under the Market Abuse Regulations (EU)
No. 596/2014 ('MAR') which has been incorporated into UK law by the
European Union (Withdrawal) Act 2018. Upon the publication of
this announcement via Regulatory Information Service ('RIS'), this
inside information is now considered to be in the public
domain.
Cautionary Note Regarding
Forward-Looking Statements
This news release contains forward-looking
statements (within the meaning of that term under applicable
securities laws) with respect to Mkango, its business, the Plant
and Songwe. Generally, forward looking statements can be identified
by the use of words such as “plans”, “expects” or “is expected to”,
“scheduled”, “estimates” “intends”, “anticipates”, “believes”, or
variations of such words and phrases, or statements that certain
actions, events or results “can”, “may”, “could”, “would”,
“should”, “might” or “will”, occur or be achieved, or the negative
connotations thereof. Readers are cautioned not to place undue
reliance on forward-looking statements, as there can be no
assurance that the plans, intentions or expectations upon which
they are based will occur. By their nature, forward-looking
statements involve numerous assumptions, known and unknown risks
and uncertainties, both general and specific, that contribute to
the possibility that the predictions, forecasts, projections and
other forward-looking statements will not occur, which may cause
actual performance and results in future periods to differ
materially from any estimates or projections of future performance
or results expressed or implied by such forward-looking statements.
Such factors and risks include, without limiting the foregoing,
Shareholder approval of the Transaction and the investments by
related parties, TSX-V approval of the Transaction and the Placing,
settlement risk with respect to the Placing, governmental action
relating to COVID-19, COVID-19 and other market effects on global
demand and pricing for the metals and associated downstream
products for which Mkango is exploring, researching and developing,
factors relating the development of the Separation Plant, including
the outcome and timing of the completion of the feasibility
studies, cost overruns, complexities in building and operating the
Separation Plant, changes in economics and government regulation,
the positive results of a feasibility study on Songwe Hill and
delays in obtaining financing or governmental approvals for, and
the impact of environmental and other regulations relating to,
Songwe Hill and the Separation Plant. The forward-looking
statements contained in this news release are made as of the date
of this news release. Except as required by law, the Company
disclaims any intention and assumes no obligation to update or
revise any forward-looking statements, whether as a result of new
information, future events or otherwise, except as required by
applicable law. Additionally, the Company undertakes no obligation
to comment on the expectations of, or statements made by, third
parties in respect of the matters discussed above.
For further information on Mkango, please
contact:
Mkango Resources
LimitedWilliam Dawes Chief Executive
Officer will@mkango.ca Canada: +1 403 444 5979 |
Alexander
LemonPresidentalex@mkango.ca |
|
|
www.mkango.ca @MkangoResources |
|
|
BlytheweighFinancial Public RelationsTim BlytheUK:
+44 20 7138 3204 |
|
|
SP Angel Corporate Finance LLPNominated Adviser
and Joint BrokerJeff Keating, Caroline RoweUK: +44 20 3470
0470 |
|
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Alternative Resource CapitalJoint BrokerAlex Wood,
Keith DowsingUK: +44 20 7186 9004/5 |
|
|
Shard Capital Partners LLPPlacing AgentDamon
HeathUK: +44 20 7186 9952 |
|
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Bacchus Capital
AdvisersStrategic and Financial AdviserRichard
AllanUK: +44 20 3848 1642 |
Andrew Krelle UK: +44 79 5636 2903 |
The TSX Venture Exchange has neither
approved nor disapproved the contents of this press release.
Neither the TSX Venture Exchange nor its Regulation Services
Provider (as that term is defined in the policies of the TSX
Venture Exchange) accepts responsibility for the adequacy or
accuracy of this release.
This press release does not constitute an offer
to sell or a solicitation of an offer to buy any equity or other
securities of the Company in the United States. The securities of
the Company will not be registered under the United States
Securities Act of 1933, as amended (the “U.S. Securities Act”) and
may not be offered or sold within the United States to, or for the
account or benefit of, U.S. persons except in certain transactions
exempt from the registration requirements of the U.S. Securities
Act.
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