t
| Date | 23 Nov 2022 |
| Time | 07:00:07 |
| Category | Acquisitions and alliances |
| ID | 2812H |
This announcement contains inside information for the purposes of Article 7 of Regulation (EU) No 596/2014 which is part of UK law by virtue of the European Union (Withdrawal) Act 2018. Upon publication of this announcement, such information is now considered to be in the public domain.
23 November 2022
PROPOSED ACQUISITION OF GLENCORE'S SHAREHOLDING IN THE ZANAGA IRON ORE PROJECT
Zanaga Iron Ore Company Limited ("ZIOC" or the "Company") (AIM: ZIOC) is pleased to announce that an agreement has been reached with Glencore Projects, for the acquisition of Glencore Projects' controlling shareholding in the Project, located in the Republic of Congo through the purchase of Glencore Projects' 50% plus one share interest in Jumelles, an entity which indirectly holds the benefit of the Project's mining licence, for a minority shareholding in ZIOC. ZIOC and MPD, an indirect wholly owned subsidiary of Jumelles which holds the benefit of the Project's mining licence, have also entered into a Marketing Agreement with Glencore International, which will take effect immediately prior to Completion, for the sale and purchase of all future iron ore production from the Project or any other of their or their Affiliates' assets using similar infrastructure in the Republic of Congo.
Highlights
· Proposed acquisition by ZIOC of Glencore Projects' controlling shareholding in Jumelles, indirect owner of the Project
o Subject to ZIOC shareholder approval, the Acquisition will be concluded through the issuance of 286,340,379 new Shares to Glencore Projects, which are expected to represent a shareholding of 48.26% in ZIOC on Completion.
o Relationship Agreement to be entered into between Glencore Projects and ZIOC with effect from Completion to ensure that the Company can carry on its business independently of Glencore Projects.
o Glencore Projects will have the right with effect from Completion to appoint two non-executive directors to the Board of ZIOC.
o Glencore Projects has agreed that it will not dispose of any of the Consideration Shares in the Company in the six months following Admission without the consent of the Company (not to be unreasonably withheld or delayed) other than in certain limited circumstances and to comply with orderly market provisions in the following six months.
· Marketing Agreement entered into between Glencore International, the Company and MPD which will take effect immediately prior to Completion
o Life-of-mine marketing agreement granting Glencore International the exclusive marketing right for all iron ore conforming to certain specifications produced by MPD, ZIOC or their respective Affiliates from the Project or in the Republic of Congo using similar infrastructure that is not subject to existing sales arrangements.
o Agreement by Glencore Projects to purchase from MPD or the Company the Product, or sell the Product on behalf of the Company on arm's length terms.
o Glencore International to be entitled to receive a marketing fee in accordance with the detailed provisions of the Marketing Agreement.
· Funding agreement
o In order to fund the Project's continuing work programme and budget, as well as the working capital requirements of ZIOC, until 31 December 2023, Glencore Projects has agreed to amend the terms of the Loan Agreement as follows:
§ increase in loan quantum from US$1.2 million to US$1.8 million;
§ extension of loan repayment date to 31 December 2023.
§ Jumelles may utilise up to US$200,000 of the loan facility to advance loans to ZIOC to fund its working capital.
· General Meeting
o A notice of a general meeting to be convened for on or around 13 December 2022 will be sent to Shareholders shortly to seek authority for the directors to: (i) issue 286,340,379 Shares pursuant to the Acquisition; and (ii) not require Glencore Projects to make a takeover offer in accordance with Regulation 33 of the Articles in connection with the Acquisition.
Clifford Elphick, Non-Executive Chairman of ZIOC, commented:
"The acquisition of Glencore Projects' shareholding in the Project is a key milestone for ZIOC's shareholders, demonstrating to third party investors that the Project is now represented by a single entity and management strategy. The Acquisition is value accretive to Shareholders and increases effective equity ownership of the Project by existing Shareholders, enhancing their look-through ownership of the Project and securing control of the Project without paying any premium for such interest.
Furthermore, entering into the Marketing Agreement with Glencore International now provides comfort to investors and financiers that the Project's future production is underpinned by one of the largest iron ore traders globally."
For further information, please contact:
Zanaga Iron Ore Company Limited
Corporate Development and Andrew Trahar
Investor Relations Manager +44 20 7399 1105
Liberum Capital Limited
Nominated Adviser, Financial Scott Mathieson, Edward Thomas
Adviser and Corporate Broker +44 20 3100 2000
About us:
Zanaga Iron Ore Company Limited ("ZIOC" or the "Company") (AIM ticker: ZIOC) is the owner of 50% less one share in the Zanaga Iron Ore Project based in the Republic of Congo through its investment in its associate Jumelles Limited. The Zanaga Iron Ore Project is one of the largest iron ore deposits in Africa and has the potential to become a world-class iron ore producer.
General
All statements, other than statements of historical facts, included in this announcement, including, without limitation, those regarding the Company's financial position, business strategy, plans and objectives of management for future operations or statements relating to expectations in relation to dividends or any statements preceded by, followed by or that include the words "targets", "believes", "expects", "aims", "intends", "plans", "will", "may", "anticipates", "would", "could" or similar expressions or the negative thereof, are forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other important factors beyond the Company's control that could cause the actual results, performance, achievements of or dividends paid by the Company to be materially different from actual results, performance or achievements, or dividend payments expressed or implied by such forward-looking statements. Such forward-looking statements are based on numerous assumptions regarding the Company's net asset value, present and future business strategies and income flows and the environment in which the Company will operate in the future.
These forward-looking statements speak only as of the date of this announcement. The Company expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained herein to reflect any change in the Company's expectations with regard thereto, any new information or any change in events, conditions or circumstances on which any such statements are based, unless required to do so by law or any appropriate regulatory authority.
Shareholders should read the risk factors set out in the Company's annual report and accounts that could affect the Company's future performance and the industry in which it operates. In light of these risks, uncertainties and assumptions, the events described in the forward-looking statements in this announcement may not occur.
DETAILS OF THE ACQUISITION
Transaction overview
The Company and Glencore Projects' ownership of the Project is managed through a joint venture agreement in respect of Jumelles. The Company currently holds 50% less one share of the entire issued share capital of Jumelles, whilst Glencore Projects owns 50% plus one share of the entire issued share capital of Jumelles. The Company is proposing to purchase Glencore Projects' entire holding in the Project (comprising 50% plus one share interest in Jumelles) in consideration for issuing new Consideration Shares in the Company to Glencore Projects.
Transaction rationale
The Project is one of the largest iron ore deposits in Africa and the Company expects that the Project has the potential to become a world-class iron ore producer. Based on 2014 FS, the quality of the Project's iron ore resource indicates the potential to produce premium iron ore product with prospective premium pricing. It is expected that new strategic investors are required to enable the development and construction of the Project.
The Acquisition will:
(a) consolidate the Company's ownership of Jumelles to provide a clear ownership structure and direction in respect of the development and management of the Project;
(b) provide Glencore Projects with the right to appoint up to two non-executive directors of the Company (comprising of a minority within the Board) whilst still also requiring Glencore Projects to observe the terms of the Relationship Agreement;
(c) provide a new structure that is expected to facilitate capital raising and enhance liquidity for Shareholders; and
(d) remove the complexities of the current joint venture structure.
The Company expects that the factors mentioned above will enhance the attractiveness of the Project as a potential investment for large strategic investors.
Project
The Project is planned to be a large scale iron ore mine, processing and infrastructure operation to produce 30Mtpa of high grade iron ore (pellet feed) concentrate over a 30 year life of mine and developed in two stages.
· Stage One - 12Mtpa of pellet feed
· Stage Two - 18Mtpa expansion to 30Mtpa of pellet feed
The primary facilities for the Project are currently proposed to include:
· An open pit mining operation and associated process plant and mine infrastructure.
· Slurry pipeline for transport of iron ore concentrate from the mine to the port facilities.
· Port facilities and infrastructure for dewatering and handling of the iron ore products for export to the global sea-borne iron ore market located within a proposed third party constructed port facility.
Total Stage One capital expenditures are estimated to be US$2.2 billion, with US$1.2 billion of direct costs and US$1 billion of indirect costs and contingency.
Total Stage Two capital expenditures are estimated to be US$2.5 billion, with US$1.5 billion of direct costs and US$1 billion of indirect costs and contingency.
Stage One capital costs have been estimated to a 2014 FS level of definition. The Stage Two costs are supported by a lower level of engineering (PFS level) but significantly leverages the work completed for the Stage One development. Cost escalation is excluded from the capital cost estimate. The capital cost estimate assumes the use of a third party port facility at Pointe-Indienne.
Expenditure and Financing
The Company had cash reserves of US$90,000 as at 22 November 2022 and is expected to have cash reserves of US$80,000 as at Completion and the Company continues to take a prudent approach to managing these funds which are required to cover corporate head office costs. To assist with this, each of the Directors has agreed to defer their fees until such time as is resolved by the Board.
Whether or not Completion occurs, the Project's work programme and budget is currently funded until 30 June 2023 under the terms of the Loan Agreement from Glencore Projects, which is then repayable on that date.
Pursuant to the terms of the Loan Amendment (summarised further below) which will become effective on Completion, Glencore Projects has agreed to provide Jumelles with a line of credit to finance the Project's continuing work programme and budget of approximately US$1.2 million for the twelve months to 31 December 2023, US$200,000 of which can be advanced as an intragroup loan by Jumelles to the Company to meet the Company's working capital requirements from Completion until 31 December 2023. The Company's working capital requirement from Completion until 31 December 2023 have been budgeted at approximately US$200,000.
Whilst the Loan Amendment provides Jumelles and the Company with the funding necessary to maintain the Project from Completion, the development of the Project remains dependent on the Company securing additional finance. The Directors believe that the Acquisition will assist the Company when seeking such finance as the Acquisition will consolidate the Company's sole ownership and control of Jumelles providing a clear ownership structure and direction in respect of the development and management of the Project.
Conditions to Completion
Subject to the passing of the Resolutions, it is anticipated that Completion will occur on or before 16 December 2022. Completion is conditional upon (amongst other matters):
(a) the Resolutions being duly passed at the General Meeting;
(b) Admission of the Consideration Shares;
(c) entry into certain transaction documents by various parties; and
(d) other matters which are customary for an acquisition of this nature.
In addition to the conditions, each of the parties has limited termination rights prior to Completion. Accordingly, if the Resolutions are not passed at the General Meeting, the Sale and Purchase Agreement will terminate and the Acquisition will not proceed.
If the Acquisition does not complete, the Loan Amendment will not become effective and whilst the Loan Agreement will meet the Project's work programme and budget until 30 June 2023, the Company will remain responsible for funding its share of the work programme. The Company will therefore need to raise additional funding for this and to also repay the loan facility under the Loan Agreement which will, in those circumstances, become due on 30 June 2023. If the Company is unable to fund its share of the work programme, then ultimately its interest in the Project may be diluted.
Shareholder approval
The Company is acquiring the Sale Shares (in connection with the Project) in exchange for issuing the Consideration Shares. The Company has also entered into the Marketing Agreement pursuant to which it will grant an offtake over 100% of all future iron ore produced by MPD, ZIOC or their respective Affiliates in the Republic of Congo. By virtue of the fact that the Company is acquiring the half of the Project that it does not currently own, the total consideration for the Acquisition is estimated to be around the same value as 100% of the Company's issued share capital on Completion as at the date of the Sale and Purchase Agreement.
The Directors believe that the Acquisition is akin to a corporate restructuring, with Glencore Projects moving its approximate 50% interest in the Project from the joint venture level in Jumelles to a holding in the Company, rather than a commercial acquisition or disposal.
Whilst the Acquisition is not a reverse takeover under the AIM Rules for Companies requiring shareholder approval, pursuant to the Resolutions, the Company is seeking Shareholder approvals required in connection with the issue of the Consideration Shares pursuant to the Acquisition. Therefore, existing Shareholders have the right to consider the merits of the Acquisition and to decide whether to vote in favour of the Resolutions, approvals of which are necessary for the Acquisition to proceed.
IMPACT OF THE TRANSACTION ON THE COMPANY
Business of the Company
The business of the Company will remain the same, the development of the Project. Following Completion, the Company intends to continue to progress the Project and the Loan Amendment will provide the Company with a line of credit to enable the Company to fund the work programme of the Company until 31 December 2023. During this time, the Company will also seek to engage with potential funders for the development of the Project. The acquisition of Glencore Projects' interest in Jumelles simply enables the Company to have more direct control over the Project and a simplified ownership structure which should assist in attracting funding.
Board composition
Following Completion and on the assumption that Glencore Projects chooses to exercise its right to appoint directors to the Board as provided for in the Relationship Agreement, the new Board will comprise five directors. Glencore Projects will have the right to nominate two directors and the remaining three directors will comprise the three directors currently serving on the Board, who are all non-executive directors. The existing directors will therefore remain a majority on the Board.
A further announcement will be made when the Glencore Projects appointees are appointed and as required by applicable rules and regulations, including the information required by the AIM Rules for Companies.
Employees and consultants
The Company does not expect any material changes to its current employees and / or consultants following Completion and to the delivery of the work programme in 2023. During this time, the Company will also seek to initiate discussions regarding the funding required for the development of the Project. Once funding has been secured and work on the development of the Project has commenced, the Company expects to recruit an executive team to meet the demands of the Company and the Project.
Corporate governance
The Company remains committed to maintaining high standards of corporate governance throughout its operations and to ensuring that all of its practices are conducted transparently and efficiently. The Company believes that scrutinising all aspects of its business and reflecting, analysing and improving its procedures will result in the continued success of the Company and improve Shareholder value.
The Company adheres to the following objectives of the Corporate Governance Code:
• it is led by an effective and entrepreneurial Board which is collectively responsible for the long-term success of the Company;
• the role of the Board is to promote the long-term sustainable success of the Company;
• the Board has the appropriate balance of skills, experience, independence, and knowledge of the Company to enable it to discharge its duties and responsibilities effectively;
• the Board establishes a formal and transparent arrangement for considering how it applies the corporate reporting, risk management, and internal control principles and for maintaining an appropriate relationship with the Company's auditors; and
• there is a dialogue with Shareholders based on the mutual understanding of objectives.
In view of the constraints on the Company, the Board currently operates on a streamlined basis and is expected to continue to do so following Completion until financing is secured to develop the Project.
The Board currently consists of only three directors although this will increase to up to five directors following Completion on the assumption that Glencore Projects chooses to exercise its right to appoint directors to the Board as provided for in the Relationship Agreement. As part of such streamlined approach the audit committee, the remuneration committee and the Health, Safety, Social and Environment Committee have been discontinued and the duties and responsibilities which were delegated to them have reverted to the Board and this will continue to be the case immediately following Completion. As previously announced, responsibility for nominations to the Board continues to be reserved to the Board; consequently no nominations committee has been put in place (Corporate Governance Code Provisions 17 and 23). The Board is also responsible for monitoring the activities of the executive management team, as and when one is appointed.
Following Completion, the Company expects to continue to depart from the following provisions of the Corporate Governance Code for the reasons stated below:
• The division of powers between the non-executive chairman and a chief executive officer. In addition, the Company departs from the Corporate Governance Code by only having non-executive directors (Corporate Governance Code Principle G and Corporate Governance Code Provisions 9 and 13).
• In view of the small size of the Company and the limited number of directors, the establishment of a nomination committee and the formal appointment of a senior independent director are regarded as unnecessary. Where new directors are to be appointed, the non-executive chairman conducts an informal consultation process with the other directors. Consequently, Corporate Governance Code Principles J and Corporate Governance Code Provisions 12, 17 and 23 are departed from.
• In view of the small size of the Company and the limited number of directors, there is no fixed requirement for the chairman to stand down after a period of years or for all directors to seek annual re-election, thereby departing from Corporate Governance Code Provisions 18 and 19.
• As explained above, the Board has decided not to appoint an audit committee or a remuneration committee, thereby departing from the following Corporate Governance Code Provisions: 24 to 26 inclusive, 32 and 33.
• In view of the small size of the Company, a streamlined approach for the Board's role in relation to the remuneration of directors and staff and the establishment and implementation of share incentive schemes has been adopted. Consequently there is a degree of departure from Corporate Governance Code Provisions 36 and 37.
• As mentioned and for the reasons stated above, no internal audit function has been set up, thereby departing from Corporate Governance Code Provisions 24 to 26 inclusive.
The Company will continue to assess its corporate governance approach including if and when it secures additional financing and intends to incorporate additional corporate governance procedures and policies to reflect the Company's expected growth and future changes when appropriate.
Working capital
The Directors believe, taking account of the monies available for drawdown pursuant to the Loan Amendment and a loan agreement between Jumelles Limited and the Company, that the working capital available to the Group is sufficient for the Group's current requirements that is for at least the next 12 months from Completion.
Substantial share interests
As at 21 November 2022, the percentage of Shares not in public hands was 26.42%. This reflects the Shares and share options in which non-executive directors of the Company are interested. Following Completion and assuming that there are no further issues of shares or acquisitions or disposals of shares other than pursuant to the Acquisition, the percentage of Shares not in public hands is expected to be 61.78%.
Following Completion, the following Shareholders are expected to be interested, directly or indirectly, in 3 per cent. or more of the Company's issued share capital, assuming that they do not make any acquisitions or disposal prior to Completion and no options are exercised prior to Completion:
Shareholder Number of Shares % of share capital
Glencore Projects 286,340,379 48.26%
Guava Minerals Limited* 80,252,592 13.52%
*Clifford Elphick, the non-executive chairman of the Company, is indirectly interested in these Shares, currently representing 26.14% of the issued share capital of the Company, by virtue of his interest as a potential beneficiary in a discretionary trust which has an indirect interest in these Shares.
UK City Code / Articles
Whilst, as a company incorporated under the laws of BVI, the Company is not subject to the UK City Code, the Company has included provisions in its Articles which reflect, in substance, the requirements of Rule 9 of the UK City Code (Regulation 33). Whilst it is in power of the Directors to waive these provisions, given Shareholder approval is in any event needed to issue the Consideration Shares, the Directors believe that Shareholders should be asked to authorise the directors to formally waive compliance with this provision in the Articles. The resolution authorising the directors to waive the takeover provisions in the Articles in respect of the issue of the Consideration Shares is a condition to the Acquisition and if Shareholders do not approve this resolution, the Acquisition will not proceed.
Following Completion, Regulation 33 of the Articles will continue to provide that if at any time when the Company is not subject to the UK City Code or any successor regime governing the conduct of takeovers and mergers in the United Kingdom or any other regime governing the same in any other country (any of such being the "Takeover Regime"):
(a) any person who, together with persons acting in concert with him, acquires, whether by a series of transactions over a period of time or not, interests in Shares which (taken together with interests in Shares held or acquired by persons acting in concert with him) carry 30 per cent. or more of the voting rights of the Company; or
(b) any person who, together with persons acting in concert with him, holds interests in Shares representing not less than 30 per cent. but not more than 50 per cent. of the voting rights and such person, or any person acting in concert with him, acquires an interest in additional Shares which increase his percentage of the voting rights,
the Board shall be entitled, but not obliged, to require such person (other than Computershare Investor Services plc in its capacity as depository / custodian for Shares issued in uncertificated form) (the "offeror") to extend an offer, on the basis set out in Regulation 33, to all the Shareholders in the Company.
No acquisition of Shares which would give rise to a requirement for any offer under Regulation 33 may be made or registered if the making or implementation of such offer would or might be dependent on the passing of a shareholder resolution of the offeror or upon any other conditions, consents or arrangements. Offers made under Regulation 33 must, in respect of each class of Shares involved, be in cash or be accompanied by a cash alternative at not less than the highest price paid by the offeror or any person acting in concert with it for Shares of that class during the offer period and within 12 months prior to its commencement. Offers made under Regulation 33 must be made in writing and publicly disclosed and must be open for acceptance for a period of not less than 30 days. The cash offer or the cash alternative must remain open after the offer has become or is declared unconditional as to acceptances for not less than 14 days after the date on which it would otherwise have expired.
The offer shall be made on terms that would be required by the UK City Code, save to the extent that the Company's board of directors otherwise determines. Except with the consent of the Company's board of directors, Shareholders shall comply with the requirements of the UK City Code in relation to any dealings in any Shares of the Company and in relation to their dealings with the Company in relation to all other matters. Any matter which under the UK City Code would fall to be determined by the United Kingdom Panel on Takeovers and Mergers (the "Panel") shall be determined by the Company's board of directors in its absolute discretion or by such person appointed by the Company's board of directors to make such determination provided that no infringement is ever made of the general principal of equality between Shareholders. Any notice which under the UK City Code is required to be given to the Panel or any person (other than the Company) shall be given to the Company at its registered office.
If an offer shall be made pursuant to Regulation 33 and:
(a) the offeror (together with persons acting in concert with him) has by virtue of acceptance of the offer acquired or contracted to acquire some (but not all) of the Shares to which the offer relates; and
(b) those Shares, with or without any other Shares which the offeror (together with persons acting in concert with him) holds or has acquired or contracted to acquire,
would result in the offeror (together with persons acting in concert with him) obtaining or holding an interest in Shares conferring in aggregate 90 per cent. or more of the voting rights conferred by all the Shares then in issue then:
(c) the offeror shall be entitled to give a notice (the "Squeeze Out Notice") to all other holders of Shares in respect of all the Shares then in issue and held by them in respect of which the offer has not yet been accepted; and
(d) the Squeeze Out Notice shall be made in writing, be, at the same price and on the same terms as the offer and be capable of acceptance for a period of not less than 30 days after the date of the Squeeze Out Notice.
Upon delivery of the Squeeze Out Notice each of the recipients ("Called Shareholders") (a) shall be deemed to have accepted the offer in respect of all Shares held by it and (b) shall become obliged to deliver to the offeror or as the offeror may direct an executed transfer of such Shares and (if it exists) the certificate(s) in respect of the same. Squeeze Out Notices shall be irrevocable but will lapse if for any reason there is not a sale of the Called Shareholders' Shares within 60 days after the date of service of the Squeeze Out Notice. The offeror shall be entitled to serve further Squeeze Out Notices following the lapse of any particular Squeeze Out Notice.
Joint Venture Agreement
Upon the Company becoming the sole shareholder of Jumelles the existing joint venture agreement in respect of Jumelles will terminate, save in respect of prior breaches and certain general provisions.
TRANSACTION DOCUMENTS
Sale and Purchase Agreement
Under the Sale and Purchase Agreement, which was entered into on 22 November 2022, the Company will purchase Glencore Projects' 50% plus one share interest in Jumelles, comprising of the Sale Shares. The total consideration for the Sale Shares is the issue on Completion to Glencore Projects of the Consideration Shares, which are expected to represent 48.26% of the Shares on Completion. Under the Sale and Purchase Agreement, Completion is subject to various conditions, including, amongst others:
(a) Admission;
(b) entry by various parties into each of the Marketing Agreement, the Relationship Agreement, the Director Acceptance Letters and the Loan Amendment (each as described further below);
(c) the appointment of each proposed Nominated Director;
(d) the passing of the Resolutions;
(e) the Project's mining licence remaining unrevoked; and
(f) the adoption by the Company of a revised anti-corruption and bribery policy.
Given the historical nature of the joint venture arrangements and the relationship between each of Glencore Projects and the Company in respect of Jumelles, the parties have provided a limited scope of seller and buyer warranties in relation to the Project. Under the SPA, ZIOC has also agreed not to issue any further Shares or rights over shares prior to Completion other than pursuant to matters previously announced by the Company.
Loan Amendment
In order to fund the Project's approved budget and work programme and the working capital requirements of the Company until 31 December 2023, on 22 November 2022 Glencore Projects agreed to amend the terms of the Loan Agreement, pursuant to the Loan Amendment, with effect from Completion. The Loan Amendment includes the following amendments to the Loan Agreement:
(a) the aggregate sum of the loan facility shall be increased from US$1.2 million to US$1.8 million;
(b) the repayment date shall be extended to 31 December 2023;
(a) Glencore Projects and / or its Associates (as defined in the Relationship Agreement) individually or together cease to be interested in 10% or more of the Shares; or
(b) the Shares cease to be admitted to trading on AIM (which for the avoidance of doubt does not include any period of suspension of trading).
However, if Glencore Projects and / or its Associates (as defined in the Relationship Agreement) individually or together become interested in 10% or more of the Shares within three months of ceasing to hold such interests the Relationship Agreement shall be re-instated and once again be in full force and effect.
The Relationship Agreement also includes various undertakings given by Glencore Projects to ensure that the Company can carry on its business independently of Glencore Projects and provides that any transactions between the parties will be on arm's length terms. Glencore Projects has also agreed to certain restrictions regulating the manner in which Glencore Projects exercises its voting rights in the Company including restricting Glencore Projects from using its shareholding to requisition a general meeting of the Company for the purposes of proposing any resolution to de-list the Shares from trading on AIM. Glencore Projects has also agreed that any non-executive directors appointed to the Board by Glencore Projects, in consultation with the Company's Nominated Adviser, will comply with certain requirements set out in the Relationship Agreement.
Further, under the terms of the Relationship Agreement, Glencore Projects has agreed that it will not dispose of any of the Consideration Shares in the Company in the six months following Admission without the consent of the Company (not to be unreasonably withheld or delayed) other than in certain limited circumstances and to comply with orderly market provisions in the following six months.
Marketing Agreement
MPD and ZIOC have entered into a life-of-mine marketing agreement with Glencore International which will take effect immediately prior to Completion, pursuant to which MPD has granted Glencore International the exclusive marketing right for all iron ore produced from the Zanaga iron ore mine located in the Republic of Congo that is being developed and shall be owned and operated by MPD or one of its Affiliates and any other production of iron ore from assets belonging to MPD, ZIOC or their respective Affiliates in the Republic of Congo using similar infrastructure, subject to the terms and conditions of the Marketing Agreement and in the case of any projects acquired subject to pre-existing marketing rights.
Pursuant to the terms of the Marketing Agreement in respect of the Mine:
(a) The Marketing Agreement shall remain in effect on an evergreen life-of-mine basis, until otherwise terminated in accordance with the terms of the Marketing Agreement by Glenore International or by MPD where there is an unremedied material breach by Glencore International. If Completion has not occurred by 31 December 2022, or if the Sale and Purchase Agreement is terminated in accordance with its terms, the Marketing Agreement will be automatically terminated, unless otherwise agreed in writing by the parties. For these purposes, "life-of-mine" means the time in which, through the employment of the available capital, the iron ore reserves, or such reasonable extension of the iron ore reserves as conservative geological analysis may justify, will be extracted from the Mine.
(b) Glencore International has agreed to purchase all or part of the Product from MPD, and will be entitled to receive a marketing fee in relation to the arrangement.
(c) MPD has agreed to grant Glencore International the exclusive marketing right for all of the Product produced by the Mine during the term of the Marketing Agreement in accordance with the terms and conditions set out in the Marketing Agreement.
(d) MPD and ZIOC shall procure that MPD, ZIOC and / or any of Affiliate of ZIOC shall offer to Glencore International for purchase, whether under the terms of the Marketing Agreement or a separate agreement, any other production of iron ore from assets belonging to MPD, ZIOC or their Affiliates, but in each case only to the extent such assets are located in the Republic of Congo and use similar infrastructure that is not subject to existing sales arrangements as at the later of: (i) the Effective Date (as defined in the Marketing Agreement) or (ii) in the case of an Affiliate of MPD or an Affiliate of ZIOC, the date that such Affiliate became an Affiliate (the "Relevant Date") (including any such production that becomes available following the expiry or termination of any sales arrangements following the Relevant Date). MPD and ZIOC shall procure that any such additional production shall be offered to Glencore International under the same pricing terms as established in the Marketing Agreement and on terms and conditions that are materially similar to the terms and conditions set out in the Marketing Agreement. If Glencore International elects to accept such an offer, the parties (and / or such Affiliate of MPD or the Company as applicable) shall enter into an amendment to the Marketing Agreement or a separate agreement (at the election of Glencore International) to implement the sales arrangement.
(e) Glencore International shall be entitled to be paid an arm's length marketing fee as a result of Glencore International's services during the term of the Marketing Agreement.
(j) MPD will receive full payment for each shipment once it has arrived at Glencore Projects' nominated discharge port, in each case subject to the detailed provisions of the Marketing Agreement.
(k) The price payable for each shipment of Product shall be the Final FOB Value (as defined in the Marketing Agreement) of that shipment, which shall be calculated in accordance with the detailed provisions of the Marketing Agreement, based on the price which is achieved by Glencore International in the market when it sells the Product to a final buyer.
(l) The Marketing Agreement contains provisions exempting both parties in certain circumstances from liability for delays in performing or failure to perform any of their obligations (except for failure to pay money when due) due to events of force majeure.
(m) If there is a direct or indirect change in ownership of MPD amounting to 50% + 1 share or more of the issued share capital of the relevant target entity, and, following such change in ownership, MPD notifies Glencore International in accordance with the terms of the Marketing Agreement that it wishes to cancel the Marketing Agreement and enter into a new life-of-mine marketing agreement (a "New Marketing Agreement") in respect of 100% of the production of the Mine with the relevant investor or its Affiliate (a "New Buyer"), then Glencore International may notify MPD, subject to the terms and requirements of the Marketing Agreement, that either:
(i) it shall match the terms of the New Marketing Agreement, in which event the parties shall discuss and agree in good faith such minimum amendments required to the Marketing Agreement to align with the key commercial terms agreed between MPD and the New Buyer under the New Marketing Agreement; or
(ii) it agrees to the termination of the Marketing Agreement, in which event the Marketing Agreement shall be terminated upon execution by MPD of the New Marketing Agreement and thereafter Glencore International shall be entitled, for the term of the New Marketing Agreement and / or any replacement or supplement to such agreement, to receive a fee in each calendar month by way of consideration for the initial marketing role played by Glencore International under the Marketing Agreement ("Royalty"), and
the Marketing Agreement shall be terminated only upon execution of the Royalty by Glencore International and MPD in a form acceptable to Glencore International acting reasonably.
If Glencore International fails to provide a response to MPD in accordance with the requirements of the Marketing Agreement, it shall be deemed to have accepted the termination of the Marketing Agreement, in which event the terms of paragraph (m)(ii) above shall apply.
MPD has also agreed to indemnify Glencore International in respect of any breach by MPD.
Director Acceptance Letter
The Company shall enter into director acceptance letters with each of the non-executive directors of the Company appointed by Glencore Projects pursuant to the Relationship Agreement. The letters are contracts for services on similar terms to the current director acceptance letters that are in force in respect of the Board and set out, amongst other things, the duties and obligations of the Nominated Directors, the term of their appointment, and their annual fee of £57,500 per annum. Annual fees in respect of the Nominated Directors are to be paid by the Company to Glencore International, however payment is to be deferred until such date as is determined by the Board.
details of the general meeting
A notice of a General Meeting to be convened for on or around 13 December 2022 will be sent to Shareholders shortly to seek to authorisation for the directors to issue 286,340,379 Shares pursuant to the Acquisition and to authorise the Directors to not require Glencore Projects to make a takeover offer in accordance with Regulation 33 of the Articles in respect of its acquisition of the Consideration Shares.
Conclusion
· The Company believes that the Acquisition is in the best interests of Shareholders as a whole.
· The Acquisition is expected to have a substantial beneficial impact on future funding discussions and financing negotiations with lenders and infrastructure partners - potentially providing a major catalyst in accelerating the development of the Project and unlocking value to Shareholders.
· The Acquisition is akin to a corporate restructuring and not a commercial acquisition or disposal.
· Following Completion, the Company believes it will be significantly more attractive to a broad range of investors on the AIM market.
DEFINITIONS
The following definitions apply throughout this announcement unless the context otherwise requires:
"Acquisition" means the proposed acquisition of Glencore Projects' 50% + one share interest in Jumelles for a minority shareholding in the Company.
"Admission" means the admission to trading on AIM of the Consideration Shares taking place in accordance with the AIM Rules for Companies.
"Affiliate" means any entity that, directly or indirectly through one or more intermediaries, controls or is controlled by, or is under common control with the entity in question and "Affiliates" shall be construed accordingly. For the purpose of this definition, "control" means the beneficial ownership of 50% or more of the issued equity of any entity (or the whole or majority of the entity's assets), and / or the right or ability to direct or otherwise control the entity or the votes attaching to the entity's issued share capital and "controlled" or "under common control" shall have a similar meaning.
"AIM" means the AIM market operated by the London Stock Exchange.
"AIM Rules for Companies" means the AIM Rules for Companies, as published and amended from time to time by the London Stock Exchange.
"Articles" means the articles of association of the Company as amended from time to time.
"Board" or "Directors" means the directors of the Company from time to time.
"Business Days" means any day (excluding Saturdays and Sundays) on which the major clearing banks are open for business in London, United Kingdom and "Business Day" shall be construed accordingly.
"BVI" means the British Virgin Islands.
"Completion" means completion of the purchase of the Sale Shares by the Company in accordance with the terms of the Sale and Purchase Agreement.
"Consideration Shares" means the 286,340,379 Shares to be issued by the Company to Glencore Projects pursuant to the Acquisition.
"Corporate Governance Code" means the 2018 UK Corporate Governance Code.
"Director Acceptance Letter" means a letter from the Company to each Nominated Director to be entered into regarding the terms of each Nominated Director's appointment as a non-executive director of the Company.
"General Meeting" means the meeting of Shareholders to be held on or around 13 December 2022.
"Glencore International" means Glencore International AG, a company incorporated in Switzerland with the unique enterprise identification number CHE-106.909.694.
"Glencore Projects" means Glencore Projects Pty Limited, a company incorporated in Australia with registered number 128109115.
"Group" means the Company and its subsidiaries.
"Jumelles" means Jumelles Limited, a company incorporated and registered in the British Virgin Islands under company number 1024369.
"Loan Agreement" means the loan agreement dated 29 June 2022 between Jumelles (as borrower) and Glencore Projects (as lender), as amended from time to time.
"Loan Amendment" means the amendment letter dated 22 November 2022 between each of the Company, Jumelles and Glencore Projects amending the terms of the Loan Agreement.
"London Stock Exchange" means London Stock Exchange plc.
"Marketing Agreement" means the marketing agreement dated 22 November 2022 regarding the grant of offtake rights in respect of the supply of high quality iron ore product from the Project entered into between MPD, ZIOC and Glencore International which will take effect immediately prior to Completion.
"Mine" means the Zanaga iron ore mine located in the Republic of Congo that is being developed and shall be owned and operated by MPD or one of its Affiliates.
"MPD" means MPD Congo S.A., the indirect wholly owned subsidiary of Jumelles which holds the benefit of the Project's mining licence.
"Mtpa" means million tonnes per annum.
"Nominated Adviser" means Liberum Capital Limited.
"Nominated Director" means a proposed non-executive director of the Company nominated by Glencore Projects and to be appointed in accordance with the terms of the Relationship Agreement and the Director Acceptance Letter.
"Product" means all iron ore conforming to certain specifications produced by MPD or its Affiliates from the Mine or in the Republic of Congo using similar infrastructure that is not subject to existing sales arrangements.
"Project" means the Zanaga Iron Ore Project located in the Republic of Congo.
"Relationship Agreement" means the relationship agreement to be entered into regarding the relationship between Glencore Projects (as a Shareholder) and the Company, with effect from Completion.
"Resolutions" means the resolutions set out in the notice to the General Meeting.
"Sale and Purchase Agreement" means the sale and purchase agreement dated 22 November 2022 entered into between the Company and Glencore Projects in respect of the Acquisition.
"Sale Shares" means 2,000,001 issued ordinary shares of US$1 par value in the capital of Jumelles to be transferred to the Company pursuant to the Acquisition.
"Shareholders" means registered holders of Shares in the Company and "Shareholder" shall be construed accordingly.
"Shares" means ordinary shares of no par value of the Company.
"UK City Code" means the UK City Code on Takeovers and Mergers.
"2014 FS" means the feasibility study, managed by Glencore Projects, which confirms the project economics for the Project.