TIDMBAO
RNS Number : 4499Z
Baobab Resources PLC
11 December 2014
BAOBAB RESOURCES PLC
MONTE MUANDE DSO PROJECT FINANCING
11 DECEMBER 2014
Baobab Resources plc (AIM: BAO) ('Baobab' or the 'Company') is
pleased to announce that it has entered into a GBP700,000 funding
agreement with Topaz EX B.V. ('Topaz'), a company indirectly
controlled by Baobab's cornerstone shareholder, the African Mineral
Exploration & Development Fund ('AMED') (the 'Financing') to
advance both the Company's Monte Muande Joint Venture (the 'JV' or
the 'Project') and the Company's flagship Tete pig iron and
ferro-vanadium project.
Highlights:
Monte Muande JV: focus on developing Direct Shipping Ore ('DSO')
Deposit
-- Estimated 3 million tonnes ('Mt') to 5 Mt soil horizon
(eluvium) overlying the magnetite/phosphate mineralisation can be
easily upgraded to a premium 65% iron ('Fe') product through simple
dry screening.
-- No blasting or crushing is required in the mining process,
resulting in a very low mining cost.
-- Minimal capital expenditure will be required to bring the
four to six year operation into production at 300,000 tonnes per
annum ('tpa') to 450,000 tpa DSO.
-- Baobab is completing an in-house feasibility study and
environmental impact assessment of the DSO project.
-- Discussions are underway with potential customers, including local Tete based off-take.
Financing
-- Under the terms of the agreement, Topaz will:
-- advance an amount of up to GBP200,000 to progress the Monte
Muande JV (the 'Exploration Funds'); and
-- provide an unsecured and unsubordinated loan for GBP500,000
(the 'Convertible Loan') to be used at Baobab's discretion to
advance its flagship Tete Project.
-- Topaz may elect to convert the Loan into a 65% share of the
Company's interest in the JV. Topaz may then earn an additional 15%
share through an investment of not less than US$2m.
-- If government approval is received for the conversion and
Topaz elect not to convert, the Convertible Loan and 50% of
Exploration Funds are to be repaid, if approval is not received
then 100% of the Exploration funds are to be repaid.
Commenting today, Ben James, Baobab's Managing Director, said:
"The loan agreement with Topaz enables Baobab to develop its
interest in the Muande JV by providing the funding required to
continue exploration at Monte Muande. The agreement will also
generate working capital for the Company's core responsibilities at
its flagship asset, the Tete pig iron and ferro-vanadium project,
where management is focused on concluding a Definitive Feasibility
Study".
THE JOINT VENTURE
The Company has earned an effective interest of 60% in the JV
with North River Resources plc ('North River') through exploration
expenditure of US$1 million. The JV is incorporated and conducted
through the Mozambican registered special purpose vehicle, North
River (Marapula) Limitada under a Joint Venture Agreement ('JVA')
that replaces the Heads of Agreement of 15 November 2010 ('HOA').
The transfer of the Company's 60% effective interest, is subject to
Central Bank and Ministry of Mines approval.
The JVA the detailed operation of the venture with the original
investment terms of the HOA remaining essentially the same. The
agreement outlines a three stage investment to earn an increasing
participatory interest in the Project. Stage 1 has now been
completed and North River has the option to participate pro-rata at
both Stage 2 and 3 to maintain their 40% interest in the
Project.
-- Stage 1 - Baobab committed to funding a First Work Programme
at a cost of not less than US$625,000 over a period of not less
than 12 months to earn its current 60% interest. The work programme
included 2,000m of diamond drilling.
-- Stage 2 - a Pre-Feasibility Study over a period of not less
than 18 months. Against Baobab having completed the Pre-Feasibility
Study, its participatory interest in the Project shall increase to
75% (if North River elects not to participate).
-- Stage 3 - a Definitive Feasibility Study over a period of not
less than 18 months. Against Baobab having completed the
Feasibility Study, its participatory interest in the Project shall
increase to 90% (if North River elects not to participate).
DIRECT SHIPPING ORE DEPOSIT
The eluvial horizon (in situ remnant soil and weathered bedrock)
overlying Monte Muande's hard rock magnetite/phosphate deposit is
considered by the Company to represent DSO which could be brought
into production at a low capital and operational cost.
A total of 76 vertical trench samples have been collected from
various locations across the Monte Muande deposit and a 496 hole
auger programme covering the surface extent of the eluvials in the
Monte Muande area has been completed. The data from this
exploration work will, in conjunction of surface mapping and the
re-opening of the GIB trenches, will form the basis of a DSO
resource estimation.
Baobab, in collaboration with North River, intends to complete a
feasibility study assessing the economic viability of the DSO
resource. Should the study prove positive, a mining title
application is expected to be lodged during Q2 2015.
Further details regarding the Monte Muande Project are available
on the Company's website, www.baobabresources.com.
FINANCING
The Company has entered into a GBP700,000 funding agreement with
Topaz, a company indirectly controlled by Baobab's cornerstone
shareholder, AMED. Under the terms of this agreement Topaz will
provide GBP200,000 to fund exploration work (the "Exploration
Funds") at the Company's JV with North River and a GBP500,000
convertible loan note, which gives Topaz the right to convert the
loan into a 65% share of the Company's interest in the Monte Muande
Joint Venture (the "Convertible Loan").
The Convertible Loan is convertible at any time up to 18 months
following the effective date of the Convertible Loan, being 11
December 2014 (the "Effective Date"). In the event that Topaz
notifies the Company in writing of their decision not to convert
the Convertible Loan within a period of 12 to 18 months after the
Effective Date and Government approval fro the conversion has been
received, the Company has a period of 10 business days from the
date of the non-conversion notice to repay the Convertible Loan
plus any accrued interest together with 50% of the Exploration
Funds, if government approval for the conversion has not been
received then 100% of the Exploration Funds are repayable. If the
Company is unable to repay the loan after 10 business days,
interest at a rate of 5% accrued monthly since the Effective Date
will be added to the principal.
The funds from the Convertible Loan will be utilised to advance
the Company's flagship pig iron and ferro-vanadium project in the
Tete province, one of Africa's fastest growing mining and
industrial centres.
Following the conversion of the Convertible Loan Note, Topaz may
then earn an additional 15% share of Baobab's interest in the JV
through an investment of not less than US$2m in the JV, which
should enable the DSO project to be brought in to production.
The Financing is deemed to be a related party transaction under
the AIM Rules for Companies. The independent directors of the
Company consider, having consulted with its nominated adviser,
Canaccord Genuity Limited, that the terms of the proposed
transaction are fair and reasonable insofar as its shareholders are
concerned.
ENQUIRIES
Baobab Resources
Ben James: Managing
Director +258 21 486 404
Jeremy Dowler:
Chairman +44 1372 450529
Frank Eagar:
Finance Director +27 76 753 5377
Canaccord Genuity
Limited
Neil Elliot +44 207 523 8000
Chris Fincken
Tavistock +44 207 920 3150
Financial Public
Relations
Emily Fenton
/ Nuala Gallagher
ABOUT BAOBAB RESOURCES PLC
Baobab Resources is an exploration and development company
focused on the Tete pig iron and ferro-vanadium project in
Mozambique, in which the International Finance Corporation holds a
15% participatory interest. The Company has been listed on the AIM
of the London Stock Exchange (ticker BAO) since 2007.
The information in this release that relates to Exploration
Results is based on information compiled by Managing Director Ben
James (BSc). Mr James is a Member of the Australasian Institute of
Mining and Metallurgy, is a Competent Person as defined in the
Australasian Code for Reporting of exploration results and Mineral
Resources and Ore Reserves, and consents to the inclusion in the
report of the matters based on the information in the form and
context in which it appears.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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