Sale of 9 Licences for US$3m & Subscription

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.

For immediate release

26 January 2021

Galileo Resources Plc

("Galileo" or "the Company")

Sale of 9 Kalahari Copper Belt Licences for US$3 million

to Sandfire Resources Ltd ("Sandfire") and

US$1.5 million subscription into Galileo by Sandfire

Galileo Resources plc ("Galileo" or the "Company") is pleased to announce that on 25 January 2021 it entered into two legally binding agreements with ASX listed Sandfire Resources Limited ( ASX:SFR) ("Sandfire"). 

The first agreement is a conditional licence sale agreement (the "Licence Sale Agreement") which provides for;

i)    The Sale of licences and right of first refusal: the sale to Sandfire of 9 of the Company's Kalahari Copper Belt Licences (the "Included Licences") which the Company acquired in May and October 2020. Sandfire to have a first right of refusal in relation to the acquisition of the 15 Kalahari Copper Belt Licences being retained by the Company (the "Excluded Licences") ("ROFR: Excluded Licences") for an aggregate consideration of US$3 million payable on the Settlement Date of which US$1.5 million will be paid in cash and US$1.5 million by the issue of 370,477 Sandfire ordinary shares to the Company (the "Consideration Shares") at an issue price of A$5.227 per share, being the VWAP of the Sandfire share price for the 10 trading days prior to the date of signing the Licence Sale Agreement;

ii)   An Exploration Commitment: Sandfire to spend US$4 million on the Included Licences (the "Exploration Commitment") within two years of settlement (the "Exploration Period") and if the US$4 million is not spent, any shortfall will be paid to the Company; and

iii)  A Success Payment: a one-off success payment to be paid to the Company for the first ore reserve reported under JORC Code 2012 edition on the Included Licences which exceeds 200,000 tonnes of contained copper (the "First Ore Reserve") in the range of US$10 million to US$80 million depending on the amount of contained copper in the First Ore Reserve (the "Success Payment"). US$2 million of the Success Payment will be held in escrow for up to three years pending any claim by Sandfire under the Licence Sale Agreement. Note: given the limited exploration conducted on the Included Licences to date and the many years that it could take to establish an Ore Reserve, there can be no guarantee that any such Success Payment will be forthcoming. 

The second agreement is a share subscription agreement (the "Share Subscription Agreement") which provides for;

i)    Sandfire's Share Subscription: Sandfire to acquire US$1.5 million 41,100,124 ordinary shares of 0.1 p in the Company ("Galileo Shares") ("Sandfire's Shares") at a subscription price of 2.68 pence per Galileo Share, being a 25% premium to the 10 day VWAP of the Company's share price as at  22 January 2021, being the day before the signing of the Share Subscription Agreement. Sandfire's Shares will be issued at a premium of 17% to the closing mid-price of the Galileo Shares on 25 January 2021, being the last practical date before the issue of this announcement. This will represent a 4.62% interest in Galileo.

ii)   Sandfire to have participation rights: Sandfire's Shares will represent 4.62% of the Company's issued shares as enlarged by the issue of Sandfire's Shares ("Initial Voting Power"). Whilst Sandfire's shareholding percentage is equal to or greater than the Initial Voting Power, Sandfire will have participation rights (the "Participation Rights") to participate in new Galileo share issues / issues of rights to acquire Galileo shares by the Company on the same terms as other participants in a new Galileo share issue / issues of rights to acquire Galileo shares to at least maintain Sandfire's shareholding save that the Participation Rights cannot increase Sandfire's shareholding over 20%; and

iii)  Sandfire to have a right to nominate a director: If Sandfire's percentage Galileo shareholding increases to 15% then it will have the right to nominate a director to the Board of Galileo, whose appointment would be subject to customary due diligence on them prior to their appointment.   

Colin Bird Chairman & CEO said:

"This transaction with Sandfire represents a major step forward for Galileo in its Kalahari Copper Belt endeavours. 

We are pleased to be working with Sandfire Resources, who are an Australian listed company and have an enviable track record of copper/gold discovery, development execution and operation.  They have a commanding position in the Kalahari Copper Belt and hence we feel that this arrangement will benefit both parties to further enhance their positions.  The transaction allows Sandfire to explore the Included Licences, which are in close proximity to their major mine build, and also allows Galileo to carry out exploration on the Excluded Licences.

We look forward to implementing the transaction and working alongside Sandfire in a region, where in my opinion, discovery and mine build has only just started."

Overview of transactions with Sandfire 

Upon completion of the Licence Sale Agreement the Company will have in aggregate an additional US$3.0 million cash (including the Sandfire Share Subscription) to invest in the Excluded Licences which include the highly prospective PL 039/2018 and PL 040/2018, the Company's other projects and other opportunities plus will have secured a US$4 million investment by Sandfire in the Included Licences with the prospect of a very significant Success Payment if the First Ore Reserve is greater than 200,000 tonnes of contained copper.  US$2 million of the Success Payment will be held in escrow for up to three years pending any claim by Sandfire under the Licence Sale Agreement. Note: given the limited exploration conducted on the Included Licences to date and the many years that it could take to establish an Ore Reserve, there can be no guarantee that any such Success Payment will be forthcoming or if it is the amount.

Under the Share Subscription Agreement, Sandfire will make a US$1.5 million strategic equity investment at a 25% premium with participation rights to retain their shareholding but not to increase it beyond 20%, and the right to nominate a director to the Galileo Board were they to increase their shareholding to 15% whose appointment would be subject to customary due diligence on them prior to their appointment.     

Application to trading on AIM: Application will be made to the London Stock Exchange for a total of 41,100,124 new Galileo Shares to be admitted to trading on AIM, being Sandfire's Shares ("Admission") which will rank pari passu to the existing ordinary shares in the Company. It is expected that Admission will become effective and that dealings in the new Galileo Shares will commence at 8.00 a.m. on Tuesday 9 February 2021. The issue of the shares will be made under the Company's existing share authorities.

Total Voting Rights after Share Issue: Following the issue of Sandfire's Shares, the Company's total issued share capital will consist of 889,801,317 Galileo Shares with voting rights.  The Company does not hold any Ordinary Shares in treasury and accordingly there are no voting rights in respect of any treasury shares. 

On Admission, the abovementioned figure of 889,801,317  Galileo Shares (the "Enlarged Share Capital") may be used by shareholders in the Company as the denominator for the calculations by which they will determine if they are required to notify their interest in, or a change to their interest in, Galileo under the Financial Conduct Authority's Disclosure Guidance and Transparency Rules.

Significant Shareholder Notification: Sandfire will on Admission own 41,100,124 Galileo Shares representing 4.62% of the Enlarged Share Capital.

Further Information on Assets being sold and purchaser

The Company acquired all its Kalahari Copper Belt Licences which includes the Included Licences and Excluded Licences (as shown in the tables below) on 21 May 2020 by acquiring Crocus-Serv Resources  Pty Ltd and Virgo Business Solutions Pty Ltd for £173,848 and on 16 October 2020 by acquiring Africibum Co. Pty Ltd ("Africibum") for £290,220, the issue of 10,000,000 2 year warrants with an exercise price of 2 pence and the granting of a 1.5% Net Smelter Royalty (NSR) to the sellers of Africibum to the Company ( the "Sellers") which the Company has the right to acquire from the Sellers at any time for total consideration of £1.5 million, which can be payable in Galileo Shares or cash at the absolute election of the Company. The Company will remain liable to pay the NSR. In the event that the Company chooses to buy back the NSR by the issue of Galileo Shares, it shall do so by issuing Galileo Shares calculated at a price per share equal to the volume weighted average price of Galileo Shares during the period of 30 days prior to the date upon which the Galileo Shares are to be issued.

Approximately £10,000 was spent on the Included Licences in the six months to 30 September 2020 and no income has been generated from the Included Licences. The Company will record a profit on disposal of the Included Licences and this will be reported in the audited accounts for the year ended 31 March 2021.

Sandfire Resources Ltd is an ASX-listed company which, as at 30 June 2020, had net assets of A$750.2 million, declared a final 30 June 2020 dividend of A$14 cents per share, and as at 25 January 2021 had a market capitalisation of approximately A$900 million.

Summary of Licence Sale Agreement:

Further information in relation to the Share Subscription Agreement

The information on Sandfire referred to in this announcement t was sources from its public announcements and website at https://www.sandfire.com.au/site/content/

You can also follow Galileo on Twitter: @GalileoResource

For further information, please contact: Galileo Resources PLC

Technical Glossary:

An 'Ore Reserve' is the economically mineable part of a Measured and/or Indicated Mineral Resource. It includes diluting materials and allowances for losses, which may occur when the material is mined or extracted and is defined by studies at Pre-Feasibility or Feasibility level as appropriate that include application of Modifying Factors. Such studies demonstrate that, at the time of reporting, extraction could reasonably be justified.

A 'Mineral Resource' is a concentration or occurrence of solid material of economic interest in or on the Earth's crust in such form, grade (or quality), and quantity that there are reasonable prospects for eventual economic extraction. The location, quantity, grade (or quality), continuity and other geological characteristics of a Mineral Resource are known, estimated or interpreted from specific geological evidence and knowledge, including sampling. Mineral Resources are sub-divided, in order of increasing geological confidence, into Inferred, Indicated and Measured categories.