24 May 2024

Shuka Minerals Plc

("Shuka", the "Company" or the "Group")

Update on potential Acquisition, £2 million Convertible Loan Note, Warrant Extensions and Board Changes

Shuka Minerals Plc (AIM: SKA), an African-focused mine operator and developer, is pleased to announce the following updates with respect to a potential acquisition in line with the Company's growth strategy, together with Group funding through a £2 million convertible loan note from an existing strategic investor, certain existing warrant extensions and a Board change.

Potential Acquisition

As noted in the Company's announcement of 18 March 2024, the Company has over the past several months been undertaking a detailed legal and technical due diligence review of a major brownfield base metals project located in East Africa.

The Company can confirm that it has now completed this work, and is proposing to proceed with the acquisition. This work, which has included independent technical and legal reports, has demonstrated a technically robust and attractive acquisition opportunity of a brownfield mining operation which has a long history of mining and processing operations of base and precious metals (the "Project").

The Project's historical non-JORC compliant resources have been independently verified by the Company's retained technical experts and which have an in-situ value of approx. US$1.98 billion based on current London Metal Exchange prices, and where preliminary economic analyses has estimated pre-tax cashflow of US$1.84 billion, NPV10 US$0.56 billion and an IRR of 112% based on the development of two of the five existing non-JORC compliant historical resources. Further information included to below.

If the Company proceeds with the acquisition, the Company will likely propose completing a 3-phase exploration and development program, as part of its plans to re-commence both open-pit and underground mining and associated processing operations.

Negotiations are at an advanced stage with the shareholders of the locally incorporated company, with key commercial and legal terms agreed for the Company to proceed with its planned acquisition of a 100% interest in the locally incorporated company which holds the Project (the "Potential Acquisition").

US$150,000 has already been paid by the Company to the counterparty, which is non-refundable, and if the Potential Acquisition is completed, further consideration of US$5.85m would be payable through a combination of cash and equity in the Company, with the majority expected to be in equity. The transaction remains subject certain regulatory approvals and customary closing conditions.

While the Board remains excited by the Potential Acquisition there can be no certainty that the requisite regulatory approvals and customary closing conditions will be satisfied (or waived) and that definitive documentation will be concluded, or as to the eventual detailed terms or timing of the transaction.

A further announcement will made as and when appropriate.

Convertible Loan Note

The Company is pleased to announce that it has entered into a £2 million unsecured convertible loan note agreement ("CLN") with AUO Commercial Brokerage LLC ("AUO"), a wholly-owned subsidiary of Q Global Commodities Group ("QGC"), one of South Africa's leading independent commodity, mining, logistics and investment funds, which is led by Quinton Van Den Burgh, the Company's Chairman. AUO has a current interest in 29.2% of the Company's issued shares.

Details of the CLN are as follows:

·    The principal amount of the convertible loan notes to be issued under the CLN ("Notes") in aggregate is £2 million

·    The Notes are unsecured

·    The Notes have a 3 per cent. annual coupon, redeemable in cash or Company shares, at the election of the Noteholder  

·    The Notes have a final redemption date of 31 March 2026

·    The Notes each have a conversion price of 15 pence per share, a substantial premium to the Company current share price of 10p

·    The Notes are immediately available for subscription in a single amount at AUO's election or, at the Company's election, in instalments which instalments shall not be drawn down before August 2024 or such earlier date as both parties agree provided that AUO must subscribe for the entire principal amount of the Notes, being £2 million, by 31 March 2025

·    The Notes may not be converted if such conversion results in AUO, and any person acting in concert with it, owning more than 30% of the voting rights of the Company, unless such conversion is effected a) as part of a sale of the entire issued share capital of the Company, b) with the requisite Takeover Panel and shareholder approvals or c) is part of a mandatory offer for the remaining shares in the Company pursuant to Rule 9 of the City Code on Takeovers and Mergers ("Code")

·    The principal amount of the Notes is repayable immediately following an event of default, with any accrued interest converted into Company shares

·    The Notes may not otherwise be redeemed by the Company in advance of the final redemption date of 31 March 2026

The proceeds of the Notes, when drawn, will be applied towards the cash element of the Potential Acquisition, should it proceed or other future acquisition opportunities, and for general working capital purposes.

Board Changes

The Company announces that it is proposed that Mr Edward Ruheni is to be appointed as a non-executive director of the Company, subject to the satisfactory completion of customary due diligence by the Company's Nominated Adviser. A further announcement in that regard will be made in due course.

Mr Ruheni is currently a director of the Company's Tanzanian subsidiary and is also General Manager Operations East Africa for Aquis-listed mining company  Marula Mining plc. He holds a bachelor's degree in Commerce and Finance from Strathmore University in Kenya and possesses a strong regional network and presence that the Company believes will assist in supporting the Company's activities and operations in the region.

Mr Jason Brewer has stepped down from the Board of Directors with immediate effect to avoid any potential conflicts of interest with his current or possible future business roles.  

The Company values Mr Brewer's experience and expertise and is therefore pleased to have entered into a consultancy contract (the "Consultancy Agreement") with Gathoni Muchai Investments Limited ("GMI"), which is headed up by Mr Brewer, for the provision of his services as a strategic adviser to the Company on an ongoing basis. The Consultancy Agreement will replace Mr Brewer's existing service contract on similar financial terms, being an annual fee of £120,000,  and includes the ongoing retention of his current entitlement to 1,200,000 warrants which would otherwise have lapsed on his cessation of employment, half of which have vested with the balance vesting on 3 August 2024 (the "Warrant Retention"), notified on 3 August 2023. The Consultancy Agreement has a notice period of one month on either side.

JSE Listing

The Company also notifies that is advancing discussions on a dual-listing of Shuka on the Johannesberg Stock Exchange, and looks forward to updating shareholders on progress in due course.

Extension of Warrants

The Company is extending the exercise period for a total of 15,846,691 warrants, originally issued in May 2021 and August 2023, which have an exercise price of 25 pence each, (the "Extended Warrants"), that would otherwise expire on 25 May 2024, for a period of 12 months, until 25 May 2025 (the "Warrant Extension"). All other terms of the Extended Warrants remain unchanged.

GMI and AUO hold 2,186,136 and 3,265,555 of the Extended Warrants, respectively.

Related Party Transactions

Consultancy Agreement

The Consultancy Agreement including the Warrant Retention, as set out above, constitutes a related party transaction pursuant to Rule 13 of the AIM Rules for Companies, by virtue of Jason Brewer being a former director of the Company within the last 12 months and director and substantial shareholder of GMI, who are a substantial shareholder in the Company.

The directors of the Company, which does not include Mr Brewer who has now stepped down from the Board, consider, having consulted with the Company's Nominated Adviser, Strand Hanson Limited, that the terms of the Consultancy Agreement and Warrant Retention are fair and reasonable in so far as the Company's shareholders are concerned.

Convertible Loan Note

The Convertible Loan Note, as set out above, constitutes a related party transaction pursuant to Rule 13 of the AIM Rules for Companies, given Mr van der Burgh's Board role and association with AUO as set out above.

The directors of the Company, other than Mr van der Burgh, consider, having consulted with the Company's Nominated Adviser, Strand Hanson Limited, that the terms of the Convertible Loan Note are fair and reasonable in so far as the Company's shareholders are concerned.

Warrant Extension

The Warrant Extension constitutes a related party transaction pursuant to Rule 13 of the AIM Rules for Companies, by virtue of Jason Brewer, being a director of the Company within the last 12 months and a director and shareholder of GMI, and Quinton van der Burgh, Non-Executive Chairman of the Company, being Chief Executive Officer of QGC, the parent of AUO.

The directors of the Company, other than Mr van der Burgh, consider, having consulted with the Company's Nominated Adviser, Strand Hanson Limited, that the terms of the Warrant Extension are fair and reasonable in so far as the Company's shareholders are concerned.

Additional information on the Project

The project area has been successfully mined in the past and has historic resource data that does not meet those required for a JORC -compliant or other CRIRSCO defined resource statement. To be JORC-compliant the resource will require further drilling and geochemical analysis to confirm grades and tonnages. Furthermore, reserve qualification also entails details of extraction process, metallurgy and markets to up-grade the resource into a reserve.

In situ value is calculated by multiplying a resource of known grade and tonnage by the current metal price of the contained metals. It does not imply that the ore body can be extracted in total or that economic recovery is proven.  Shuka has estimated a valuation of US$1.98 billion based on current London Metal Exchange prices, and where preliminary economic analyses has estimated pre-tax cashflow of US$1.84 billion, NPV10 US$0.56 billion and an IRR of 112% based on the development of two of the five existing non-JORC compliant historical resources.  This valuation will be modified by further drilling, analyses and detailed test work. In addition to confirm possible cash flow a detailed mining plan will be required.  However, as the project is based on brownfield resources this clarification will have the advantage of data that may be brought to JORC standards.

 Noel Lyons, Chief Executive Officer of Shuka, commented:

"It is encouraging that the Company has been able to advance this acquisition to this stage and I look forward to progressing it to completion. We are pleased that our Chairman Quinton van der Burgh has shown his continued confidence in our future strategy and plans sufficient to advance a further GBP2m by way of the Convertible Loan Note. In addition, I am pleased to have retained the services of Jason Brewer as a Consultant as he has been instrumental in the Company's development since he joined."

Competent Person Statements

The technical information in this announcement relating to the Project has been compiled by D. Brandt, Ph.D., SACNASP, of Behre Dolbear International Ltd, a Fellow of the Geology Society of South Africa (FGSSA), who is the Qualified Person and who has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity that he is undertaking, to qualify as a Competent Person as defined in the 2012 Edition of the 'Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves' (JORC Code). Dr. Brandt consents to the inclusion in the document of the information in the form and context in which it appears.

This announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) 596/2014 as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018 ("MAR") and is disclosed in accordance with the Company's obligations under Article 17 of MAR.

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