TIDMKRS
RNS Number : 6645U
Keras Resources PLC
30 July 2020
Keras Resources plc / Index: AIM / Epic: KRS / Sector:
Mining
30 July 2020
Keras Resources plc ('Keras' or the 'Company')
Acquisition of 51% Interest in Producing, High Margin, Organic
Phosphate Project and a total cash fundraising of GBP1.73
million
Keras Resources plc, the AIM listed mineral resource company, is
pleased to announce that it has agreed to acquire a 51% interest in
Falcon Isle Holdings LLC ('Falcon Isle') for nominal consideration,
on the basis that Keras provides a US$2.5m loan facility to Falcon
Isle payable in tranches as set out below ('the Acquisition').
Falcon Isle is the 100% owner of the Diamond Creek phosphate mine
('Diamond Creek' or the 'Project') located in in Utah (USA) which
is a fully permitted, high grade direct shipping ore ('DSO'), low
capex organic phosphate operating mine.
The Company has agreed to raise GBP1,728,013.99 (before
expenses) through the placing of 1,440,011,666 new ordinary shares
of 0.01p each ('Ordinary Shares') for cash at a price of 0.12p per
Ordinary Share (the 'Placing Shares').
Overview of the Acquisition
-- Acquisition of a controlling interest in a niche market,
operating organic phosphate mine, supporting Keras' strategy of
building cashflow positive mining projects, growing its asset base
and diversifying its revenue streams
-- Diamond Creek benefits from:
o full permitting and location in the mining friendly
jurisdiction of Utah, USA
o current production - 5,000 tons of DSO planned for the North
American market in Year 1 ramping up to 48,000 tons in Year 5
o excellent economics with internally estimated operating costs
of US$229/ton in Year 1 reducing to US$92/ton at peak production in
Year 5
o estimated low capex requirement of US$468,000 including
contingencies
o long resource life*: at a peak production rate of 48ktpa, the
opencast resources alone represent in excess of 60 years of
production
o operationally de-risked - bulk sample completed in November
2019 proving up mining, processing and logistics for the
project
o Diamond Creek is one of the highest grade phosphate projects
in the US and is marketing a 28% Phosphorus pentoxide ('P (2) 0 (5)
') premium product with minimum 14% available phosphorous ('P'),
the available P is significantly higher than the 3% which the
majority of its competitors market
-- Complements existing asset base - together with its interest
in Nayega, Keras holds two quality projects, both with bulk samples
completed, low capex and near-term production with robust cashflow
projected
-- Appointment of Jean du Plessis, who together with Russell
Lamming and Graham Stacey was part of the successful Chromex Plc
executive management team, to advance Diamond Creek and build the
platform required to build a cashflow generative, dividend paying
company
*Mineral resources have not been classified according to any
International Reporting Standard / any Standard defined in the AIM
Rules for Companies.
Russell Lamming, CEO of Keras Resources, commented, "Diamond
Creek meets all our investment criteria as a high grade, low Capex
and cash generative investment and sits well with our existing
project - the Nayega Manganese Project in Togo - in that both
projects are low volume, high margin assets with the initial
investments based on known resources leaving significant upside to
develop long-life assets. This is a significant milestone for Keras
with the Company transforming from developer to producer overnight
with the first commercial production of high grade organic
phosphate taking place at Diamond Creek yesterday.
"Importantly, Diamond Creek has a direct route to market as a
shallow open pit mining operation with a simple crushing and
screening plant minimising the technical risks. The technical
attributes are further underscored, when read in parallel with its
location in the mining friendly jurisdiction of Utah, and the
compelling long-term demand fundamentals for organic
fertilisers.
"We have followed the same route to production at Diamond Creek
as we did in Togo with a bulk sample and the procurement of a local
turn-key contractor to reduce the operational risk. The bulk sample
which included the construction of access roads, the extraction and
processing of 300 tons of DSO, metallurgical testwork for an owner
operated processing plant and the supply of saleable product to key
potential customers.
"The lease area has a long history of small scale mining but the
receipt of organic certification by all three official
certification agencies; Organic Materials Review Institute
('OMRI'), California Department of Food and Agriculture ('CDFA')
and Washington State Department of Agriculture ('WSDA') in June
2016 was the major breakthrough in the Project's advancement and
has played a pivotal role in paving the way for us to develop an
economically viable and operationally robust asset through which to
diversify revenue streams and create tangible value for
shareholders.
"Diamond Creek boasts strong economics which promise to build
value; an internally estimated EBITDA margin in excess of 50%, low
operational gearing, and a significant resource to underpin a long
life-of-mine. Importantly the marketing strategy and ability to
carve out a market share is underpinned by the ability to sell a
premium, higher grade product to our competitors at a competitive
price. This strategy has already been validated by the first order
of 770 tons, representing approximately 15% of projected sales for
the year ahead.
"I would like to welcome Jean du Plessis to the Keras group.
Jean, together with Graham Stacey and I, was part of the successful
Chromex Mining Plc team which built the Stellite chrome mine in
South Africa. He has significant experience in operating mining and
processing operations around the world and has been based in the
United States since October 2011. Jean will be employed by Falcon
Isle and will be highly instrumental in both the operation of
Diamond Creek and identifying other projects in the US as we
continue to diversify our portfolio of assets both operationally
and geographically.
"I look forward to providing updates on both assets as we move
towards commercial production in the coming months."
Transaction Details
Keras will subscribe, at a nominal consideration, for up to a
51% equity interest in Falcon Isle, and will provide a US$2.5m loan
facility ("Loan"), which will be re-paid from the cash flow
generated from the operation of the Project. The Loan will be paid
in a series of tranches as below:
Loans Amount Keras total equity
in Falcon Isle Holdings
LLC %
Tranche 1 $700,000 20%
--------- -------------------------
Tranche 2a $600,000 30%
--------- -------------------------
Tranche 2b $600,000 40%
--------- -------------------------
Tranche 2c $600,000 51%
--------- -------------------------
1. Tranche one of US$700,000 has already been paid (by Dave
Reeves and Russell Lamming personally) to fund the construction of
access roads, the bulk sample and metallurgical testwork. This loan
will be transferred to Keras for consideration payable in new
Ordinary Shares, further details of which are set out below.
2. Tranche two will comprise US$1.8m, which will be paid over
the next seven month period by Keras and will be used to upgrade
the quality of access roads, undertake the phase one mining
campaign of 5,000 tons, commission the Spanish Fork processing
facility and delineate five years of JORC compliant ore
reserves.
3. A finder's fee of 112,491,001 new Ordinary Shares and
US$35,000 cash will be paid to a third party consultant, with 50%
of these shares locked-in until 29 July 2021 and 50% locked-in
until 29 July 2022 ("Finder's Fee").
4. The founder of Falcon Isle will hold an initial equity
interest of 80% in Falcon Isle Holdings LLC, reducing to 49% once
all of the above Loan tranches have been paid by Keras.
5. The board of directors of Falcon Isle Holdings LLC will
comprise two Keras Directors and one from the founder. Voting will
be based on total shareholding with Keras having a controlling
interest post the payment of Tranche 2c.
The Loan will be repaid in two phases:
1. Phase 1 Repayment: 70% of distributable cashflow from the
Project will be repaid to Keras for the first $1.1m of the
Loan.
2. Phase 2 Repayment: 51% of distributable cashflow from the
Project will be repaid to Keras for the remaining $1.4m of the
Loan.
3. During Phase 1 and 2, Falcon Isle Resources will be repaid a
total of $1.82m from the Project, being a repayment of loans
attributable to the shareholders of Falcon Isle Resources.
Post Phase 2 Repayment, distributable cashflow will be paid out
pro rata to shareholders, so that Keras will be entitled to
51%.
Funding
1. The Company has agreed to raise GBP1,728,013.99 (before
expenses) through the placing of 1,440,011,666 Placing Shares at a
price of 0.12 pence per share. A Warrant will be issued for each
two Placing Shares.
2. Directors Russell Lamming (CEO) and Dave Reeves
(Non-Executive Director) have each agreed to convert their loans of
US$350,000 (GBP272,374) each previously advanced to Falcon Isle
into 224,982,001 new ordinary shares of 0.01 pence each in the
Company, at a price of 0.12p per Ordinary Share, (the 'Loan
Conversion Shares'). These loans comprise Tranche 1 of the loan to
Falcon Isle as described above. A Warrant will be issued for each
two Loan Conversion Shares.
3. The Company is currently authorised to issue 1 billion new
Ordinary Shares for cash consideration on a non pre-emptive basis
and the proposed issue of Placing Shares set out above and other
proposed issues of new Ordinary Shares as further set out in this
announcement exceeds the share issuing authorities of the Company.
As such the Company intends to convene a General Meeting to obtain
additional share issuing authorities on or about 24 August 2020.
The new Ordinary Shares to be issued prior to the General Meeting
are being issued pro rata with the balance to be issued under the
new authorities to be obtained at the General Meeting.
4. 78,739,000 new Ordinary Shares are being issued in lieu of
cash to existing creditors of the Company at a price of 0.12p
("Creditors Shares")
5. 112,491,001 new Ordinary Shares for the Finder's Fee.
6. A total of 984,357,334 Warrants will be issued on the basis
of one warrant for every two Placing Shares, Loan Conversion Shares
and Creditors Shares as per 1, 2 and 4 above and each warrant will
entitle that subscriber to acquire one new Ordinary Share at a
price of 0.24 pence per Ordinary Share ("Warrants"). Warrants will
have a subscription period of one year from the 31 August 2020.
Application will be made for admission of the 1,191,230,001 new
Ordinary Shares to trading on the AIM market of the London Stock
Exchange ("AIM") on 13 August 2020 ("First Admission"), with a
further application to be made for admission of 889,975,668 new
Ordinary Shares to trading on AIM on 25 August 2020 ("Second
Admission"). The new Ordinary Shares to be issued pursuant to the
First Admission and Second Admission will rank pari passu with the
existing Ordinary Shares, which are currently traded on AIM.
Following the First Admission, there will be 3,976,032,183
Ordinary Shares in issue with each share carrying the right to one
vote. There are no shares currently held in treasury. The total
number of voting rights in the Company will therefore be
3,976,032,183 and this figure may be used by shareholders as the
denominator for the calculations by which they determine if they
are required to notify their interest in, or a change to their
interest in, the Company under the Financial Conduct Authority's
Disclosure Rules and Transparency Rules.
Following the Second Admission, there will be 4,866,007,851
Ordinary Shares in issue with each share carrying the right to one
vote. There are no shares currently held in treasury. The total
number of voting rights in the Company will therefore be
4,866,007,851 and this figure may be used by shareholders as the
denominator for the calculations by which they determine if they
are required to notify their interest in, or a change to their
interest in, the Company under the Financial Conduct Authority's
Disclosure Rules and Transparency Rules
Related Party
The issue of the Loan Conversion Shares and Warrants to Russell
Lamming and Dave Reeves together with the acquisition of 62,500,000
Placing Shares by Dave Reeves constitutes a related party
transaction pursuant to AIM Rule 13 of the AIM Rules for Companies.
Brian Moritz, being the director independent of the transactions
considers, having consulted with the Company's Nominated Adviser,
that the issue of the Loan Conversion Shares to Russell Lamming and
Dave Reeves and the acquisition of 62,500,000 Placing Shares by
Dave Reeves is fair and reasonable insofar as the shareholders of
the Company are concerned. Following these transactions, the
beneficial interests of the Directors in the issued Ordinary Shares
is as follows:
Director Interest in Ordinary % interest in Warrants held following
Shares following Ordinary Shares Second Admission
Second Admission following Second
Admission
Dave Reeves 780,706,252 16.04 143,741,001
--------------------- ------------------ -----------------------
Russell Lamming 370,916,552 7.62 112,491,001
--------------------- ------------------ -----------------------
Brian Moritz 106,627,178 2.19 Nil
--------------------- ------------------ -----------------------
Total 1,258,249,982 25.85 256,232,002
--------------------- ------------------ -----------------------
Investment Rationale
The acquisition of an interest in Diamond Creek meets all
Keras's investment criteria and finalises the Company's transition
from explorer to producer.
Keras is focused on building a diverse portfolio of near term or
producing, permitted, low capex, high margin, cash generative
assets to maximise shareholder value, utilising the robust track
record of its experienced management team and board of directors in
identifying and developing resource assets. The Company's balance
sheet is now aligned with this strategy and past losses have been
eliminated clearing the path for the potential for profits to be
distributed to shareholders by way of dividends.
The acquisition of a controlling interest in Diamond Creek
complements the Nayega Manganese Project in Togo, West Africa,
which Keras has been developing to commercial production. Keras now
holds two quality projects, both with bulk samples completed, with
low capex and near-term production with robust cashflow
projected.
Nayega hosts a current JORC Compliant Mineral Resource of 13.5Mt
@ 11.1% Mn and an Ore Reserve of 8.44Mt @ 14.0% Mn with additional
upside identified through exploration work. Its current installed
processing capacity is 6,500 saleable tpm, which the Company aims
to increase to 25,000tpm with annual production planned for 300,000
tonnes. On 18 October 2019, the Council of Ministers of the
Republic of Togo adopted a decree to grant a licence for
large-scale exploitation of the manganese deposit at Nayega to SGM.
The Company is still awaiting the formal award of the exploitation
licence to allow production to begin.
Background on Diamond Creek
Approximately 70km SSE of Salt Lake City, Utah and 30km from the
Spanish Fork processing facility, the Project is ideally located to
take advantage of Salt Lake City's rich history in mining and
Utah's mining friendly jurisdiction.
The Project has a significant historical mineral resource
(mineral resources have not been classified according to any
International Reporting Standard) with the first 2.5 years of
production already pre-stripped. The phosphate mineralisation
comprises shale beds in the Meade Peak Member of the Phosphoria
Formation. The mineralised zone is c.3m thick and averages 28% P(2)
O(5) with average available phosphorous of 16%. Historic reports
vary with "surface mineable resources" ranging from 3.10Mt to
4.60Mt. At a peak production rate of 48ktpa, the opencast resources
alone represent in excess of 60 years of production. The
construction of access roads for the 2019 bulk sample has provided
key infrastructure thus reducing time to production. A turn-key
contractor was secured post bulk sample to provide all mining,
logistical and crushing services.
Diamond Creek's most recent mineral resource estimate in 1980
quotes 3.89Mt and 1.17Mt of surface mineable phosphate ore in the
southern and northern sections of the Project area respectively.
Approximately 22Kt of premium ore (28%P(2) O(5) & 16.2%
available P) and 15Kt of medium grade ore (18%P(2) O(5) & 10.1%
available P) has already been pre stripped, representing the first
2.5 years of production. Furthermore, an infill drilling campaign
planned for Q2 2021 is expected to delineate an additional 100Kt
representing five years of JORC compliant ore reserves.
The Project's production profile increases to 48Ktpa by Year 5
and is based on a combination of increased market share with a
well-priced premium product and the sustained growth expected in
the organic market over the next decade.
A key milestone in the Project's history came in June 2016 when
it received Organic Certification by all three key certification
agencies in the USA: Organic Materials Review Institute (OMRI),
California Department of Food & Agriculture (CDFA) and
Washington State Department of Agriculture (WSDA). With organic
certifications, and as a direct shipping ore (DSO) requiring no
chemical upgrade process, with in-situ grade of 28% P2O5, low heavy
metal impurities and significantly higher available phosphate than
any other organic rock phosphate in North America, the Project's
premium product can be priced at a competitive level to gain market
share. Falcon Isle has a modest target of gaining a market share of
c.14% of the North American organic rock phosphate market in five
years.
Diamond Creek Economics
Production of 5,000 tons of DSO in Year 1 ramping up to 48,000
tons in Year 5 is underpinned by excellent economics with
internally estimated operating costs of US$229/ton in Year 1
reducing to US$92/ton at peak production in Year 5. The expected
capex requirement of US$468,000 including contingencies is aligned
with the Company's strategy of targeting near-term, low capex
projects and the long resource life*, which at a peak production
rate of 48ktpa represent in excess of 60 years of production
provides significant upside to the project.
* Mineral resources have not been classified according to any
International Reporting Standard
The Organic Phosphate Market**
The 2019 organic fertiliser industry in North America is
currently a 3Mt industry worth $1.17bn, which over the next decade
is forecast to grow to a 6.3Mt and US$2.5bn industry - with volumes
expected to grow at CAGR of 7%. Phosphate fertilisers make up 22%
of the total organic fertiliser market and 20% of phosphate
fertilisers are sourced form rock phosphate. Phosphate fertilisers
are expected to grow at CAGR of 6.8%.
Diamond Creek is one of the highest grade phosphate projects in
the US and is marketing a 28% P (2) 0 (5) product with minimum 14%
available phosphorous ('P'), the available P is significantly
higher than the 3% which the majority of its competitors market.
The resulting competitive US$/P cost to end-users underpins the
Company's marketing plan to gain a dominant position in the organic
phosphate market.
The Diamond Creek production profile has been designed to build
market share from 2% to 14% over a five year period; this targeted
growth is modest to take into account the barriers to entry but is
underpinned by the superior quality and the very competitive price
per phosphorous unit.
** "Organic Fertilizers Market, North America Industry Analysis,
Size, Share, Growth, Trends, and Forecast, 2019-2030", Transparency
Market Research 2020.
THE INFORMATION CONTAINED WITHIN THIS ANNOUNCEMENT IS DEEMED TO
CONSTITUTE INSIDE INFORMATION FOR THE PURPOSES OF ARTICLE 7 OF THE
MARKET ABUSE REGULATION (EU) NO. 596/2014. UPON THE PUBLICATION OF
THIS ANNOUNCEMENT, THIS INSIDE INFORMATION IS NOW CONSIDERED TO BE
IN THE PUBLIC DOMAIN.
1. Details of the person discharging managerial responsibilities/person
closely associated
a) Name: Dave Reeves
-------------------------------- -------------------------------------
2. Reason for the notification
-----------------------------------------------------------------------
a) Position/status: Non Executive Director
-------------------------------- -------------------------------------
b) Initial notification/amendment: Initial notification
-------------------------------- -------------------------------------
3. Details of the issuer emission allowance market
participant, auction platform, auctioneer or auction
monitor
-----------------------------------------------------------------------
a) Name: Keras Resources plc
-------------------------------- -------------------------------------
b) LEI: 213800OZFKFM2N4R4F47
-------------------------------- -------------------------------------
4. Details of the transaction(s): section to be repeated
for (i) each type of instrument; (ii) each type of
transaction; (iii) each date; and (iv) each place
where transactions have been conducted
-----------------------------------------------------------------------
a) Description of the Ordinary shares of 0.01
financial instrument, pence each
type of instrument:
ISIN: GB00B649J414
Identification code:
-------------------------------- -------------------------------------
b) Nature of the transaction: 1. Issue of Loan Conversion
Shares
2. Grant of Warrants (in
respect of the Loan Conversion
Shares and Placing Shares)
3. Subscription for Placing
Shares
-------------------------------- -------------------------------------
c) Price(s) and volume(s): Prices(s) Volume(s)
1. 0.12p 1. 224,982,001
2. 0.24p 2. 143,741,001
3. 0.12p 3. 62,500,000
----------------
-------------------------------- -------------------------------------
d) Aggregated information: Multiple transactions as
in 4 c) above
Aggregated volume: Prices(s) Volume(s)
1. 0.12p 1. 224,982,001
Price: 2. 0.24p 2. 143,741,001
3. 0.12p 3. 62,500,000
----------------
-------------------------------- -------------------------------------
e) Date of transaction: 30 July 2020
-------------------------------- -------------------------------------
f) Place of transaction outside of a trading venue
-------------------------------- -------------------------------------
1. Details of the person discharging managerial responsibilities/person
closely associated
a) Name: Russell Lamming
----------------------------------- ----------------------------------
2. Reason for the notification
-----------------------------------------------------------------------
a) Position/status: Chief Executive Officer
----------------------------------- ----------------------------------
b) Initial notification/amendment: Initial notification
----------------------------------- ----------------------------------
3. Details of the issuer emission allowance market
participant, auction platform, auctioneer or auction
monitor
-----------------------------------------------------------------------
a) Name: Keras Resources plc
----------------------------------- ----------------------------------
b) LEI: 213800OZFKFM2N4R4F47
----------------------------------- ----------------------------------
4. Details of the transaction(s): section to be repeated
for (i) each type of instrument; (ii) each type of
transaction; (iii) each date; and (iv) each place
where transactions have been conducted
-----------------------------------------------------------------------
a) Description of the Ordinary shares of 0.01
financial instrument, pence each
type of instrument:
ISIN: GB00B649J414
Identification code:
----------------------------------- ----------------------------------
b) Nature of the transaction: 1. Issue of Loan Conversion
Shares
2. Grant of Warrants (in
respect of the Loan Conversion
Shares)
----------------------------------- ----------------------------------
c) Price(s) and volume(s): Prices(s) Volume(s)
1. 0.12p 1. 224,982,001
2. 0.24p 2. 112,491,001
----------------
----------------------------------- ----------------------------------
d) Aggregated information: Multiple transactions as
in 4 c) above
Aggregated volume: Prices(s) Volume(s)
1. 0.12p 1. 224,982,001
Price: 2. 0.24p 2. 112,491,001
----------------
----------------------------------- ----------------------------------
e) Date of transaction: 30 July 2020
----------------------------------- ----------------------------------
f) Place of transaction outside of a trading venue
----------------------------------- ----------------------------------
**ENDS**
For further information please visit www.kerasplc.com , follow
us on Twitter @kerasplc or contact the following:
Russell Lamming Keras Resources plc info@kerasplc.com
Nominated Adviser & Joint
Broker
Ewan Leggat / Charlie SP Angel Corporate Finance +44 (0) 20 3470
Bouverat LLP 0470
Joint Broker Shard Capital Partners +44 (0) 207 186
Damon Heath / Erik Woolgar LLP 9900
Financial PR
Susie Geliher / Cosima +44 (0) 20 7236
Akerman St Brides Partners Ltd 1177
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
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END
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