Royalty Acquisition on Nickel-Cobalt Project

 

News Release

 

14 September, 2017

 

 

Anglo Pacific Group PLC

Acquisition of a royalty on the Piauí Nickel - Cobalt Project

 

Anglo Pacific Group PLC ("Anglo Pacific", the "Company") (LSE: APF, TSX: APY) is pleased to announce that it has entered into an agreement with Brazilian Nickel Limited, ("BRN") to acquire a Gross Revenue Royalty ("GRR", the "Royalty") interest for the development of its Piauí Nickel - Cobalt Project (the "Project"), located in north eastern Brazil. This is in line with the Company's strategy to invest in development opportunities with significant growth potential to complement its existing portfolio of income producing assets.

 

The Piauí Nickel - Cobalt Project has a JORC compliant Measured Resource ⁽¹⁾ of 52.9 Mt at 1.03% Nickel ("Ni") and 0.05% Cobalt ("Co"), plus Indicated Resources of 19.3 Mt at 0.92% Ni and 0.05% Co at a 0.6% nickel cut-of-grade.

 

Anglo Pacific will provide BRN with an initial US$2 million (£1.5 million) cash payment payable immediately, in exchange for a 1% GRR over the Project. The Tranche 1 consideration and associated expenses will be funded from internal sources.

 

This consideration will be used by BRN for further Project assessment and/or the development of the "PNP1000", a Ni and Co pilot plant with a nameplate production capacity of 1,000 tonnes per annum ("tpa") of Ni contained in a saleable product.

 

Upon achievement of certain development milestones and Anglo Pacific board approval for each specific tranche, the Company has the right to acquire up to a total of US$70m (~£53m) in additional GRRs, namely:

 

·      Under a staged ramp-up development scenario: US$20m for an incremental 2.0% GRR when plans for the construction of a processing plant with a nameplate capacity of up to 10,000 tonnes of Ni and 450 tonnes of Co per annum (the "PNP10k") are implemented, and an additional US$50m for an incremental 2.5% GRR when plans for the construction of a processing plant with a nameplate capacity of 24,000 tonnes of Ni and 1,000 tonnes of Co per annum (the "PNP24k") are implemented, OR:

·      US$70m for an incremental 3.0% GRR at the point when plans for the construction of a processing plant with a nameplate capacity of up to 24,000 tonnes of Ni and 1,000 tonnes of Co per annum  are implemented.

Highlights of the transaction:

 

·      Attractive end market fundamentals - high quality nickel and cobalt products expected for use in technologies such as lithium ion battery manufacturing, as well as for traditional markets;

·      Low cost operation - current BRN estimates indicate that the Project will be a large, low cost nickel and cobalt operation with operating costs after refining charges and cobalt credits of less than US$3 per pound of Ni;

·      Established mining jurisdiction - the Project is located close to water, power, and transport infrastructure;

·      Partnering with an experienced management team - the BRN management team has an established track record in mining and nickel heap leach operations;

·      Lower risk royalty acquisition structure - the innovative staged structure of this transaction allows Anglo Pacific to increase its exposure as the project is advanced; and,

·      Further diversifies the Anglo Pacific royalty portfolio - the expected royalty income profile has the potential to significantly increase the Company's revenue stream and exposure to base metals if fully invested.

Commenting on the investment, Julian Treger, Chief Executive Officer of Anglo Pacific, said:

 

"The Piauí royalty reflects the Company's strategy of investing into earlier stage, high growth potential royalties. Combined with our Maracás Menchen vanadium royalty, this investment also represents a continuing strategic pivot into metals which are exposed to the burgeoning electric vehicle story.

 

The royalty will deliver further diversification for the Company's asset base and commodity exposure in a lower risk manner through the incremental structure of the investment, and has the potential to deliver very high returns once in production. This investment also has the potential to contribute significantly to our cash flows in the coming years as the Project ramps up through the expanded production phases.

 

The Acquisition is consistent with Anglo Pacific's strategy to acquire royalties on mining assets that are competitively positioned on the cost curve and located in established mining jurisdictions."

 

Overview of the Piauí Nickel Cobalt Project

 

Brazilian Nickel Ltd is a private UK company which was formed in 2013 to develop the 100% owned Piauí Nickel Cobalt Project in north eastern Brazil. The Project was acquired from Vale S.A. ("Vale") in January 2014, who extensively drilled the deposit. To date over US$75 million has been spent on the Project.

 

The Project is being envisaged as a nickel laterite heap leaching project. It boasts a JORC compliant ⁽¹⁾ Measured Resources of 52.9 Mt at 1.03% Ni and 0.05% Co, plus Indicated Resources of 19.3 Mt at 0.92% Ni and 0.05% Co at a 0.6% nickel cut-of-grade with upside potential in adjacent exploration areas.

 

Resources Category	Tonnes ('000t)	Ni (%)	Co (%)
Measured	52,887	1.03	0.048
Indicated	19,324	0.92	0.048
Total Measured plus Indicated	72,211	1.00	0.048

 

Mining will be conventional open pit extraction. Metallurgically, the ore is characterised by favourable geological conditions in that it is rocky in texture to aid heap percolation, and has fast leaching kinetics, high nickel extraction, and most importantly, low acid consumption. The ore is amenable to sulphuric acid heap leaching which produces a Pregnant Leach Solution ("PLS") containing nickel and cobalt. The PLS is then treated in a simple precipitation circuit where limestone is added to remove iron and other impurities from the PLS. The remaining solution is then passed through an ion exchange process which separates and concentrates the nickel and cobalt solutions which are then precipitated as high purity nickel and cobalt hydroxide for packaging and sale.

 

The project is close to grid power and road infrastructure which connects the project to a choice of ports. There is a large source of water nearby, for which BRN already has an extraction permit. Social and environmental work continues in order to obtain the main environmental licence.

 

In 2015, BRN started the next phase of development with the refurbishment of an on-site demonstration plant and camp facilities originally built by Vale. The construction and operation of three commercial height demonstration heaps commenced in May 2016 with the leach solutions feeding the downstream plant by July, and first nickel and cobalt hydroxide products produced in August of the same year. Target extractions of 80% nickel have been achieved and data have been collected from the demonstration plant showing low consumption of acid. In December 2016, BRN successfully exported and sold nickel and cobalt hydroxide trial products.

 

BRN has used the data from the demonstration plant to simulate the two different production scenarios, a 24,000 tpa Ni and 1,000 tpa Co nameplate operation ("PNP24k") or a smaller capex requirement 10,000 tpa Ni and 450 tpa Co nameplate operation ("PNP10k"). BRN will undertake a detailed study to further assess the parameters of the two separate production scenarios.

 

BRN may also expand the existing demonstration plant to a production capacity to 1,000t of Ni a year ("PNP1000") for an estimated capital cost of US$15 million. This expansion would use existing environmental permissions and could be implemented within a year of full financing.

 

Nickel and cobalt production are targeted to be sold into new growth markets, such as lithium ion battery cathodes for use in electric vehicles, but can also serve conventional industrial needs (nickel to stainless steel, cobalt for refining to metal).

 

For more information, please visit www.braziliannickel.com.

 

1) The Piauí Resources have been reported under the JORC Code (2012). The Mineral Resource estimate was completed by Rory Devlin under the direction of Mick Elias. Rory Devlin and Mick Elias are employees of CSA Global. Mick Elias FAusIMM is a Competent Person as defined by the Australasian Code for the Reporting of Exploration Results, Mineral Resources or Ore Reserves (JORC Code 2012 Edition) and consents to the inclusion in the JORC report of the matters based on the information in the form and context in which it appears. All figures in the tables are rounded, and therefore the total sums might not be the direct sum of the input figures.

 

The defined terms used in the Canadian Institute of Mining, Metallurgy and Petroleum (CIM) Definition Standards for Mineral Resources and Mineral Reserves, 2014 are referenced in NI 43-101. The definition of the terms Mineral Resource and the categories (Measured, Indicated and Inferred) are identical to those defined in the JORC Code (2012 Edition). CIM definitions of Mineral Reserves, and the sub categories Proven and Probable Mineral Reserves, align with the JORC Code definitions for Ore Reserves and the subcategories Proven and Probable Ore Reserves. No material differences exist between the two codes.

 

For further information:

 

Anglo Pacific Group PLC Julian Treger - Chief Executive Officer Kevin Flynn - Chief Financial Officer and Company Secretary Juan Alvarez - Head of Investments	+44 (0) 20 3435 7400
Website:	www.anglopacificgroup.com
BMO Capital Markets Limited	+44 (0) 20 7664 8020
Jeffrey Couch/Neil Haycock/Tom Rider
Macquarie Capital (Europe) Limited	+44 (0) 20 3037 2000
Raj Khatri/Nicholas Harland/Ariel Tepperman
Peel Hunt LLP	+44 (0) 20 7418 8900
Matthew Armitt/Ross Allister/Chris Burrows
Redleaf Communications	+44 (0) 20 7382 4769
Charlie Geller/Elisabeth Cowell/Fiona Norman

 

About the Company

 

Anglo Pacific Group PLC is a global natural resources royalty and streaming company. The Company's strategy is to develop a leading international diversified royalty and streaming company with a portfolio centred on base metals and bulk materials, focusing on accelerating income growth through acquiring royalties on projects that are in the main currently cash flow generating or are expected to be within the next 24 months, as well as investment in earlier stage royalties. It is a continuing policy of the Company to pay a substantial portion of these royalties and streams to shareholders as dividends.