Proposed Reverse Takeover, Placing and GM

THIS ANNOUNCEMENT (INCLUDING THE APPENDIX) AND THE INFORMATION CONTAINED HEREIN IS RESTRICTED AND IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN, INTO OR FROM THE UNITED STATES, AUSTRALIA, CANADA, THE REPUBLIC OF SOUTH AFRICA, NEW ZEALAND OR JAPAN OR ANY OTHER JURISDICTION IN WHICH SUCH RELEASE, PUBLICATION OR DISTRIBUTION WOULD BREACH ANY APPLICABLE LAW OR REGULATION.

THIS ANNOUNCEMENT IS NOT AN ADMISSION DOCUMENT OR A PROSPECTUS AND DOES NOT CONSTITUTE OR FORM PART OF AN OFFER TO SELL OR ISSUE OR A SOLICITATION OF AN OFFER TO SUBSCRIBE FOR OR BUY ANY SECURITIES WHERE SUCH OFFER WOULD BREACH ANY APPLICABLE LAW OR REGULATION. INVESTORS SHOULD NOT PURCHASE OR SUBSCRIBE FOR ANY TRANSFERRABLE SECURITIES REFERRED TO IN THIS ANNOUNCEMENT EXCEPT IN COMPLIANCE WITH APPLICABLE SECURITIES LAWS. BEFORE ANY PURCHASE OR SUBSCRIPTION OF SHARES, PERSONS VIEWING THIS ANNOUNCEMENT SHOULD ENSURE THAT THEY FULLY UNDERSTAND AND ACCEPT THE RISKS WHICH ARE SET OUT HEREIN AND WILL BE SET OUT IN THE ADMISSION DOCUMENT WHEN PUBLISHED.

COPIES OF THE ADMISSION DOCUMENT WILL, FOLLOWING PUBLICATION, BE AVAILABLE DURING NORMAL BUSINESS HOURS ON ANY DAY (EXCEPT SATURDAYS, SUNDAYS AND PUBLIC HOLIDAYS) FROM THE REGISTERED OFFICE OF THE COMPANY AND ON THE COMPANY'S WEBSITE.

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF THE MARKET ABUSE REGULATION (EU) NO. 596/2014.

 

15 July 2021

 

SIGMAROC PLC

("SigmaRoc", the "Company" and, together with its subsidiaries, the "Existing Group")

 

Proposed Acquisition of Nordkalk Oy Ab

Reverse Takeover

Proposed Placing of up to 305,882,352 new Ordinary Shares at 85 pence per share

Admission of the Enlarged Share Capital to trading on AIM

and

Notice of General Meeting

 

SigmaRoc, the AIM quoted buy-and-build construction materials group, is pleased to announce that it has conditionally agreed to acquire the entire issued capital of Nordkalk Oy Ab ("Nordkalk"), a wholly-owned subsidiary of Rettig Group Oy Ab ("Rettig Group"), for a total consideration of approximately €470 million subject to certain adjustments including in respect of cash, debt and working capital (approximately £402 million) (the "Consideration") (the "Acquisition").

 

The Company intends to raise approximately £260 million (before expenses) via the issue of up to 305,882,352 new ordinary shares of £0.01 each in the capital of the Company ("Ordinary Shares") at a price of 85 pence per share (the "Placing Price") (the "Placing"). The Consideration will be satisfied by a combination of €270 million (approximately £231 million) from the proceeds of the Placing, the drawdown of €150 million (approximately £128 million) under a new £305 million banking facility (the "New Facility"), and the issue of the €50 million (approximately £43 million) new Ordinary Shares to Rettig Group at the Placing Price (the "Consideration Shares"). Rettig Group has undertaken not to dispose of the Consideration Shares for a period of 12 months from the date of Admission and for the following 12 month period, they will only dispose of their holdings through Peel Hunt LLP and Liberum Capital Limited.

 

The Acquisition comprises a reverse takeover for the purposes of Rule 14 of the AIM Rules for Companies and as such is conditional upon, inter alia, Shareholder approval.

 

The Company values its retail investor base and will therefore be providing private and other investors the opportunity to participate on the same terms as other subscribers in the Placing, via the PrimaryBid platform (the "Retail Offer"). The Retail Offer is a separate offer and will launch shortly hereafter, pursuant to a separate announcement.

 

Nordkalk was established in 1898 as a limestone developer in Finland and has since expanded across Northern Europe to become the leading limestone company in the region. Nordkalk develops limestone-based solutions for agricultural, construction and chemical industries and its main products are crushed limestone, limestone powder, quicklime and hydrated lime. Nordkalk delivers raw materials to numerous industries, and its solutions contribute to clean air and water, as well as the productivity of agricultural land. Nordkalk is a self-sustaining profitable business, with a long-term track record, operating in stable and developed jurisdictions such as Finland, Sweden, and Poland. Nordkalk generated €67 million underlying EBITDA and €61 million net operating cash flow for the year ended 31 December 2020 and has achieved EBITDA margins in excess of 15 per cent. for the last 15 years, with an underlying FY2020 EBITDA margin of 24.2 per cent.

 

Further information on Nordkalk is set out in the Further Information section below.

Transaction Highlights:

·         The Acquisition is expected to be significantly earnings enhancing in its first full year of ownership and the Consideration represents a purchase price of 7x underlying FY20 EBITDA.

·         The Placing is being conducted through an accelerated bookbuild process which will be launched immediately following this announcement in accordance with the terms of conditions set out in Appendix III to this announcement. Peel Hunt LLP, Liberum Capital Limited and Numis Securities Limited are acting as joint bookrunners (the "Joint Bookrunners") to the Placing. Strand Hanson Limited is acting as Nominated and Financial Adviser to the Company.

·         Use of proceeds from the Placing:

·         £231 million will be used to part fund the Acquisition;

·         £29 million will be utilised to provide additional working capital for the Enlarged Group and fund, inter alia, costs incurred pursuant to the Acquisition and Admission.

·         Certain Directors of SigmaRoc intend to subscribe for approximately £0.64 million in aggregate of new Ordinary Shares in the Placing at the Placing Price.

·         The Company has received irrevocable commitments from the Directors and irrevocable commitments or letters of intent from certain existing Shareholders in respect of, in aggregate, 171,365,452 Ordinary Shares, representing approximately 61.23 per cent. of the existing share capital, to vote in favour of Resolutions 1 and 2, and in certain cases, Resolution 5, at the General Meeting.

 

Benefits of the Acquisition for the Enlarged Group:

·         The Board believes the Acquisition will represent the cornerstone for a new Northern Europe business platform, offering immediate scale and revenue diversification.

·         Through a number of strategies, including improving Nordkalk's sales mix to focus on higher-value products and efficiency gains from planned improvement programmes, the Enlarged Group will be targeting organic revenue growth of approximately 5 per cent. per annum, EBITDA margins in excess of 20 per cent. and return on invested capital of approximately 15 per cent.

·         The Enlarged Group would have a strong balance sheet with net debt expected to be less than 2x FY2021 pro forma EBITDA, with a New Facility on commercially attractive rates being provided to refinance existing debt and part fund the Acquisition led by the Company's existing supportive lender, Santander. The Company will amortise £75 million of this debt in the first four years following the Acquisition.

·         The Enlarged Group would be a market-leading quarried materials group in Northern Europe, operating across six platforms, with 37 quarries and 76 operations across 13 countries, pro forma total assets of £740 million, over 1 billion tonnes of Reserves and Resources, and approximately 1,760 employees.

·         The Enlarged Group would provide a diversified mix of products, supplying over 17.8Mt of material per year to customers, with 15.2Mt of both aggregates and specialist, higher value products, being supplied to mainstream applications such as construction, and 2.6Mt being supplied to specialist high margin tailored operations, such as the metals, pulp & paper and chemical industries.

·         SigmaRoc has built a solid track record of acquiring and improving asset-and-reserves-backed businesses, successfully delivering both organic and external growth. This has been shown through the 10 acquisitions made over the course of the last five years, with an increase of in excess of 450 per cent. in market capitalisation and an increase in EPS of in excess of 300 per cent.

·         A retained, committed Board and management team, with proven experience in the construction materials sector, including the acquisition and integration of businesses on scale, contributing significant existing knowledge to enhance Nordkalk's operations.

·         Significant operational experience via the retention of Nordkalk's management team, bringing over 60 years' experience in operating and maintaining assets in the sector. Given their specialised experience, Nordkalk's management team is expected to be involved in appraising future acquisition opportunities and SigmaRoc's management will work with them to drive increased operational efficiencies which the Directors believe can be achieved.

·         The Company is seeking shareholder approval to implement a Long Term Incentive Plan to ensure alignment of management and shareholders' interests. The plan will be subject to meeting EPS growth and total shareholder return criteria, with first vesting attainable following the financial year end 31 December 2023. Further information on the LTIP is set out below.

·         The Enlarged Group is expected to be significantly cash generative with a targeted cash conversion ratio of approximately 95 per cent. delivered from a continued disciplined approach to working capital management, with CAPEX expected to be below depreciation, resulting in a free cash flow target for the Enlarged Group of £60 million per annum.

·         The Company estimates that there are approximately 9,000 minerals producers and over 15,000 production sites located in the key countries that the Company is targeting, where there is currently a significant opportunity for consolidation and expansion of the Enlarged Group's European footprint and mineral resource base.

·         The Board intends to use the free cash flow generated from the combined operations to fund further acquisitions, where the Board expects the Company to: (i) develop potential further transactions that may arise from divestments or disposals at major cement and heavy building materials companies; and (ii) pursue the acquisition of quality and niche market assets.

 

The Acquisition constitutes a reverse takeover of the Company pursuant to Rule 14 of the AIM Rules for Companies and completion is therefore conditional on, inter alia, the approval of Shareholders at the General Meeting and the passing of the Resolutions numbered 1 and 2 as set out in the Admission Document. It is currently anticipated that an Admission Document, including a Notice of General Meeting, will be published tomorrow on the Company's website and will be posted to Shareholders. The General Meeting will be held at 11.00 a.m. on 2 August 2021 at the offices of the Company at 56 Queen Anne Street, London W1G 8LA, United Kingdom.

 

In addition to shareholder approval, the Acquisition is conditional on the Company receiving the Polish Competition Office Clearance, which the Board expects to take approximately four to six weeks from filing. Consequently, investors should note that this will result in an extended settlement period with admission to trading of the of the new Ordinary Shares only occurring once the Polish Competition Office Clearance has been obtained and Acquisition completes.

 

The Placing Shares are not being made available to the public. The Bookbuild will be closed at the discretion of the Bookrunners. 

 

The issue of Placing Shares to the Directors and directors of SigmaRoc's subsidiary companies will constitute a related party transaction pursuant to Rule 13 of the AIM Rules for Companies by virtue of their status as Directors of the Company.

 

Defined and technical terms used throughout this announcement have the meanings set out in Appendix I to this announcement unless the context requires otherwise.  Appendix II to this announcement contains certain Risk Factors in relation to the Acquisition and the Enlarged Group which should be carefully considered.

 

 

Commenting on the Acquisition, Max Vermorken, CEO of SigmaRoc, said:

"The Acquisition of Nordkalk, Northern Europe's leading limestone products company, is a great stepping stone in the evolution of our group, expanding our footprint across Northern European markets. We have agreed to purchase a high-quality business at what we believe is the right point in the cycle and at an attractive valuation. The Acquisition meets all of our stringent investment criteria as a self-contained and asset-backed business, which will bring the Group significant earnings growth and cash generation. We look forward to helping Nordkalk and its experienced management team on its path to continued success, as we seek to perpetuate its 120-year history, name and success."

 

Commenting on the Acquisition, David Barrett, Executive Chairman of SigmaRoc, said:

"Nordkalk is a great business with a substantial asset footprint spanning across Northern Europe. It is a business with a long history of success and much future potential. This Acquisition would create numerous new opportunities for SigmaRoc to capitalise on in the months and years ahead. I am delighted with the Rettig family's commitment, agreeing to become a shareholder of SigmaRoc. This is a strong sign of confidence in the future of our Group."

 

Information on SigmaRoc is available on the Company's website at: www.sigmaroc.com.

For further information, please contact:

SigmaRoc plc Max Vermorken	Tel: +44 (0) 207 002 1080
Strand Hanson Limited (Nominated and Financial Adviser) James Spinney / James Dance / Rob Patrick	Tel: +44(0) 207 409 3494
Peel Hunt (Joint Bookrunner and Co-Broker) Investment Banking Mike Bell / Ed Allsopp / Charlie Batten Syndicate & Broking Jock Maxwell Macdonald / Sohail Akbar / John Welch	Tel: +44 (0) 20 7418 8900
Liberum Capital (Joint Bookrunner and Co-Broker) Neil Patel / Jamie Richards / Benjamin Cryer William Hall / Cara Murphy	Tel: +44 (0) 203 100 2000
Numis Securities (Joint Bookrunner)	Tel: +44 (0) 20 7260 1000
Richard Thomas / Jamie Loughborough Howard Seymour / Hannah Boros
Investor Relations Florian Werner	Tel: +44 (0) 207 002 1080 [email protected]

 

IMPORTANT INFORMATION

 

This announcement does not constitute, or form part of, any offer or invitation to sell or issue, or any solicitation of any offer to purchase or subscribe for any securities in the United States, Canada, Australia, Japan or the Republic of South Africa or in any other jurisdiction in which such offer or solicitation is unlawful, prior to registration, exemption from registration or qualification under the securities laws of any jurisdiction. The distribution of this announcement and other information in connection with the Placing and Admission in certain jurisdictions may be restricted by law and persons into whose possession this announcement, any document or other information referred to herein comes should inform themselves about and observe any such restriction. Any failure to comply with these restrictions may constitute a violation of the securities laws of any such jurisdiction. Neither this announcement nor any part of it nor the fact of its distribution shall form the basis of or be relied on in connection with or act as an inducement to enter into any contract or commitment whatsoever.

 

Strand Hanson Limited (the "Nominated Adviser"), which is authorised and regulated by the FCA in the United Kingdom, is acting as Nominated Adviser and Financial Adviser to the Company. The Nominated Adviser has not authorised the contents of, or any part of, this announcement, and no liability whatsoever is accepted by the Nominated Adviser for the accuracy of any information or opinions contained in this announcement or for the omission of any material information. The responsibilities of the Nominated Adviser as the Company's Nominated Adviser under the AIM Rules for Companies and the AIM Rules for Nominated Advisers are owed solely to London Stock Exchange plc and are not owed to the Company or to any director or shareholder of the Company or any other person, in respect of its decision to acquire shares in the capital of the Company in reliance on any part of this announcement, or otherwise

 

Peel Hunt LLP is authorised and regulated by the FCA in the United Kingdom and is acting exclusively for the Company and no one else in connection with the Placing, and Peel Hunt LLP will not be responsible to anyone other than the Company for providing the protections afforded to its clients or for providing advice in relation to the Placing or any other matters referred to in this announcement.

 

Liberum Capital Limited is authorised and regulated by the FCA in the United Kingdom and is acting exclusively for the Company and no one else in connection with the Placing, Liberum Capital Limited will not be responsible to anyone other than the Company for providing the protections afforded to its clients or for providing advice in relation to the Placing or any other matters referred to in this announcement.

 

Numis Securities Limited is authorised and regulated by the FCA in the United Kingdom and is acting exclusively for the Company and no one else in connection with the Placing, and Numis Securities Limited will not be responsible to anyone other than the Company for providing the protections afforded to its clients or for providing advice in relation to the Placing or any other matters referred to in this announcement.

 

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 law by virtue of the European Union Withdrawal Act 2018 ("MAR"), encompassing information relating to the Proposals described above, and is disclosed in accordance with the Company's obligations under Article 17 of MAR. In addition, market soundings (as defined in MAR) were taken in respect of the Placing with the result that certain persons became aware of inside information (as defined in MAR), as permitted by MAR.  This inside information is set out in this Announcement. Therefore, upon publication of this announcement, those persons that received such inside information in a market sounding are no longer in possession of such inside information relating to the Company and its securities.

 

 

This Announcement does not constitute a recommendation concerning any investor's option with respect to the Placing. Each investor or prospective investor should conduct his, her or its own investigation, analysis and evaluation of the business and data described in this Announcement and publicly available information. The price and value of securities can go down as well as up. Past performance is not a guide to future performance.   

 

 

No representation or warranty, express or implied, is or will be made as to, or in relation to, and no responsibility or liability is or will be accepted by the Nominated Adviser or Joint Bookrunners or by any of their respective affiliates or agents as to, or in relation to, the accuracy or completeness of this announcement or any other written or oral information made available to or publicly available to any interested party or its advisers, and any liability therefor is expressly disclaimed.

 

This announcement may include statements that are, or may be deemed to be, "forward-looking statements". These forward-looking statements can be identified by the use of forward-looking terminology, including the terms "believes", "estimates", "plans", "projects", "anticipates", "expects", "intends", "may", "will", or "should" or, in each case, their negative or other variations or comparable terminology. These forward-looking statements include matters that are not historical facts. They appear in a number of places throughout this announcement and include statements regarding the directors' current intentions, beliefs or expectations concerning, among other things, the Company's results of operations, financial condition, liquidity, prospects, growth, strategies and the Company's markets. By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances. Actual results and developments could differ materially from those expressed or implied by the forward-looking statements. Forward-looking statements may and often do differ materially from actual results. Any forward-looking statements in this announcement are based on certain factors and assumptions, including the directors' current view with respect to future events and are subject to risks relating to future events and other risks, uncertainties and assumptions relating to the Company's operations, results of operations, growth strategy and liquidity. Whilst the directors consider these assumptions to be reasonable based upon information currently available, they may prove to be incorrect. Save as required by applicable law or regulation, the Company undertakes no obligation to release publicly the results of any revisions to any forward-looking statements in this announcement that may occur due to any change in the directors' expectations or to reflect events or circumstances after the date of this announcement.

 

Neither the content of the Company's website nor any website accessible by hyperlinks on the Company's website is incorporated in, or forms part of, this announcement.

Information to Distributors

UK Product Governance Requirements

Solely for the purposes of the UK's implementation of Articles 9 and 10 of Commission Delegated Directive (EU) 2017/593 supplementing MiFID II, and in particular paragraph 3.2.7R regarding the responsibilities of UK Manufacturers under the Product Governance requirements contained within Chapter 3 of the FCA Handbook Product Intervention and Product Governance Sourcebook (the "UK Product Governance Requirements") and disclaiming all and any liability, whether arising in tort, contract or otherwise, which any "manufacturer" (for the purposes of the UK Product Governance Requirements) may otherwise have with respect thereto, the Placing Shares have been subject to a product approval process, which has determined that the Placing Shares are: (i) compatible with an end target market of (a) retail investors, (b) investors who meet the criteria of professional clients and (c) eligible counterparties, each as defined in UK Product Governance Requirements; and (ii) eligible for distribution through all distribution channels as are permitted by UK Product Governance Requirements (the "UK Target Market Assessment"). Notwithstanding the UK Target Market Assessment, distributors should note that: the price of the Placing Shares may decline and investors could lose all or part of their investment; the Placing Shares offer no guaranteed income and no capital protection; and an investment in the Placing Shares is compatible only with investors who do not need a guaranteed income or capital protection, who (either alone or in conjunction with an appropriate financial or other adviser) are capable of evaluating the merits and risks of such an investment and who have sufficient resources to be able to bear any losses that may result therefrom.

The UK Target Market Assessment is without prejudice to the requirements of any contractual, legal or regulatory selling restrictions in relation to the Placing.

For the avoidance of doubt, the UK Target Market Assessment does not constitute: (a) an assessment of suitability or appropriateness for the purposes of MiFID II; or (b) a recommendation to any investor or group of investors to invest in, or purchase, or take any other action whatsoever with respect to, the Placing Shares.

Each distributor is responsible for undertaking its own target market assessment in respect of the Placing Shares and determining appropriate distribution channels.

 

EU Product Governance Requirements

Solely for the purposes of the product governance requirements contained within MiFID II and Articles 9 and 10 of Commission Delegated Directive (EU) 2017/593 supplementing MiFID II (the "EU Product Governance Requirements") and disclaiming all and any liability, whether arising in tort, contract or otherwise, which any "manufacturer" (for the purposes of the EU Product Governance Requirements) may otherwise have with respect thereto, the Placing Shares have been subject to product approval process, which has determined that the Placing Shares are: (i) compatible with an end target market of (a) retail investors, (b) investors who meet the criteria of professional clients and (c) eligible counterparties, each as defined in EU Product Governance Requirements; and (ii) eligible for distribution through all distribution channels as are permitted by EU Product Governance Requirements (the "EU Target Market Assessment"). Notwithstanding the EU Target Market Assessment, distributors should note that: the price of the Placing Shares may decline and investors could lose all or part of their investment; the Placing Shares offer no guaranteed income and no capital protection; and an investment in the Placing Shares is compatible only with investors who do not need a guaranteed income or capital protection, who (either alone or in conjunction with an appropriate financial or other adviser) are capable of evaluating the merits and risks of such an investment and who have sufficient resources to be able to bear any losses that may result therefrom.

The EU Target Market Assessment is without prejudice to the requirements of any contractual, legal or regulatory selling restrictions in relation to the Placing.

Furthermore, it is noted that, notwithstanding the UK Target Market Assessment and the EU Target Market Assessment, the Joint Bookrunners will only procure investors who meet the criteria of professional clients and eligible counterparties. For the avoidance of doubt, the EU Target Market Assessment does not constitute: (a) an assessment of suitability or appropriateness for the purposes of MiFID II; or (b) a recommendation to any investor or group of investors to invest in, or purchase, or take any other action whatsoever with respect to the Placing Shares.

Each distributor is responsible for undertaking its own target market assessment in respect of the Placing Shares and determining appropriate distribution channels.

This announcement is not for publication or distribution, directly or indirectly, in or into the United States of America.  This announcement is not an offer of securities for sale into the United States.  The securities referred to herein have not been and will not be registered under the U.S. Securities Act of 1933, as amended, and may not be offered or sold in the United States, except pursuant to an applicable exemption from registration.  No public offering of securities is being made in the United States.

 

EXPECTED TIMETABLE OF PRINCIPAL EVENTS

Publication of the Admission Document                                                                            16 July 2021

Latest time for receipt of proxy forms for the General Meeting                   11.00 a.m. on 29 July 2021

General Meeting                                                                                       11.00 a.m. on 2 August 2021

Polish Competition Office Clearance expected by                                                     Late August 2021

Expected timing for completion of the Acquisition                                                      Late August 2021

Issue of New Ordinary Shares                                                                                   Late August 2021

Admission and dealings commence in the Enlarged Share Capital on AIM              Late August 2021

CREST accounts credited by                                                                                     Late August 2021

Despatch of definitive share certificates, where applicable, by                                 within 10 business

days of Admission

Notes:

Each of these times and dates is subject to change, particularly depending on the timing of the Polish Competition Office Clearance and are at the absolute discretion of the Company, the Nominated Adviser and the Joint Bookrunners. Any changes to the expected timetable will be notified by the Company through an RIS. References to times are to London, UK times.

 

FURTHER INFORMATION

BACKGROUND TO, AND REASONS FOR, THE PROPOSALS

At its inception in 2016, the Company set out its buy and build strategy in the construction materials sector, seeking to build a diversified stream of income, sourcing stability and growth from niche markets and sectors, presenting what the Board believed was the opportunity to build a significant Northern Europe focused construction materials business in less than five years. To date, the Company has delivered on this buy and build strategy by making 10 acquisitions over the last five years, applying a decentralised operating model, to allow maximal autonomy to its platforms, which are focused on serving the needs of niche and localised markets.

Since Admission in early 2017, the Company has delivered growth through a combination of identifying and executing suitable acquisitions at attractive valuations, generating further value through improvements in operational efficiency, synergies and cross-selling, whilst ensuring the Existing Group's gearing level was maintained at reasonable levels, thereby delivering an increase in earnings per share of over 300 per cent. over the last five years.

The Directors believe that the Acquisition represents a continuation of this model and a transformational step change for SigmaRoc, adding a new platform to create a market leading Northern European quarried materials group, providing a major entry point to attractive new end-user markets, with high value add characteristics, supplying the construction, environmental, agricultural, metals, pulp and chemical industries.

The Acquisition is expected to be significantly earnings enhancing in its first full year of ownership by SigmaRoc and the Directors believe that there is the potential for increased efficiencies in the existing Nordkalk business to further drive earnings growth as well as the opportunity to sell its products via the Existing Group's existing sales channels.

The Directors further believe that the Acquisition represents an opportunity to acquire high quality and well-managed assets, providing the Company with an additional strong operating platform and stable cash flows, from which SigmaRoc can further execute its growth strategy, both organically and via further acquisitions. This strategy is intended to see the Company grow a diversified stream of income, sourcing a combination of growth acquisitions and stable cash flows from local markets across Europe and is consistent with the Company's 'Invest, Improve, Integrate, Innovate' strategy.

INFORMATION ON NORDKALK

Nordkalk was established in 1898 as a limestone developer in Finland and has since expanded across Northern Europe to become the leading limestone company in the region. In 2020, Nordkalk employed approximately 817 people and operated 23 quarrying sites (of which four are currently dormant) in six countries. Nordkalk operates at more than 30 different locations across Finland, Sweden, Norway, Poland, Estonia, Germany and Turkey, with its main sites and the majority of its €276 million revenue in 2020 being derived from markets in Finland (49 per cent.), Sweden (23 per cent.) and Poland (22 per cent.). Nordkalk's main products are crushed limestone, limestone powder, quicklime, hydrated lime and Wollastonite.

History of Nordkalk

Nordkalk was incorporated in 1898 as a joint-stock company under the laws of Finland. Nordkalk was registered in the Finnish Trade Register on 27 November 2002.

A summary timeline of key events in Nordkalk's development is set out below:

DATE        ACTIVITY/EVENT

1898          Incorporation of joint-stock company, Pargas Kalkbergs Aktiebolag ('PKA'), established in Pargas. The name was later changed to Partek. Nordkalk remained part of the Partek group until February 2003.

1907          Rettig Group acquires shares in PKA

1910          Operations begin in Lappeenranta, Finland

1980s        Leading producer in the Nordic region - expansion into Sweden

1990s        Leading producer around the Baltic Sea - expansion into Estonia and Poland

2000s        Leading producer in Northern Europe

2003          Nordkalk becomes an independent company, owned by private equity led Capman and Ahlström Capital (26 per cent. each), with Rettig Group retaining a minority stake

2006          Capman sold its 26 per cent. stake in Nordkalk to Rettig Group and Ahlström Capital

2007          Commencement of operations at NorFraKalk joint venture in Norway

2009          Ahlström Capital sells its shareholding, with Rettig Group becoming the largest shareholder, holding approximately 49 per cent. of Nordkalk's equity alongside a group of industrial and institutional investors

2010          In August 2010, Rettig Group acquired full ownership of Nordkalk

2017          Nordkalk expands operations through Nordeka Maden joint venture in Eskibalikli, Turkey

2019              Paul Gustavsson appointed CEO, reorganisation and efficiency enhancement programme initiated

Operational History

Nordkalk has demonstrated a consistent record of profitability throughout industry and economic cycles, having achieved EBITDA margins in excess of 15 per cent. for the last 15 years, with an underlying FY2020 EBITDA margin of 24.2 per cent.  In 2019, Nordkalk's CEO, Paul Gustavsson joined the Nordkalk Group and implemented the NICO programme alongside longstanding CFO and Deputy CEO, Marcel Gestranius. NICO ran from Q1 2019 to Q4 2020 and was an internal performance improvement programme, driving significant improvements in efficiency and played a key role in EBITDA margin improvements from approximately 17 per cent. over 2016 to 2018, to 24.2 per cent. underlying EBITDA in 2020. Following NICO, management have introduced the '3P Programme', which focusses on improvements in Price, Production and Procurement, which is an ongoing initiative.

Summary of Nordkalk's assets

Nordkalk currently operates 19 active quarries across Finland, Sweden, Poland, Norway, Estonia and Turkey, as well as multiple associated and downstream businesses, including kilns, grinding, slaking and granulation plants (Table 1 below provides a summary of the Nordkalk Group's active operating sites by country). There are further sites that are either dormant or identified for development to expand reserves. The Nordkalk Group has estimated total Reserves of 262Mt and Resources of 577Mt across its quarrying assets and land.

Nordkalk's operations in Finland and Sweden include a series of downstream activities that utilise both raw material extracted from Nordkalk's quarries in-country and imported materials via its port and wharf infrastructure from both within and outside the Nordkalk Group. Nordkalk owns 12 wharves in Finland and Sweden and has access to over 20 ports or wharves across its operations, of which several can accommodate over 30kt DWT vessels. While the majority of product is sold in the country of production, this network enables it to transport product and materials between its operations, allowing the Nordkalk Group to provide a diverse range of products, which are tailored to a customer's quality and grading specifications and requirements. The Nordkalk Group also operates eight offices across 10 countries, including Russia, Ukraine and Lithuania, to coordinate sales and marketing.

Nordkalk also operates specialist processing facilities that produce value added products and ensure maximum use of all waste materials and flotation plants, which allow for impurity removal, leaving concentrated high value calcite products. Where possible, Nordkalk seeks to support local communities through providing water and heat derived from its operations, as well as minimising local water use by recycling process water from operations.

					Ports /
Country	Quarries	Kilns	Slaking	Grinding	Wharves
Finland	7	4	1	8	7
Sweden	4	2	3	3	5
Poland	3	-	-	3	-
Estonia	3	1	-	1	-
Norway (JV)	1	2	-	1	-
Germany (JV)	-	2	-	-	-
Turkey (JV)	1	-	-	-	-

 

Table 1: summary of Nordkalk's active operating sites by country

Finland

Finland represents Nordkalk's largest country of operations, extracting over 4Mtpa of limestone and generating 49 per cent. of the Nordkalk Group's revenue in 2020. Nordkalk operates a combination of integrated and standalone sites in Finland, with two active underground and six active open pit quarries, where production levels in 2020 ranged from circa 50kt per year at its smallest quarries, up to approximately 2Mt per year at its largest sites, Lappeenranta and Parainen.

In Finland, Nordkalk's product portfolio and customer base is predominately geared towards construction, paper, agriculture, industrial and environmental applications. In 2020, sales to the construction sector accounted for approximately 65 per cent. by volume, with sales of higher margin product, predominantly to the pulp and paper industry, representing approximately 15 per cent. by volume.

Nearly all volumes produced are sold locally in Finland with an additional approximate 5 per cent. of revenues being derived via imports from other group businesses. One of the Nordkalk Group's largest customers in Finland is CRH, which is the sole producer of cement in Finland, where Nordkalk supplies its Finnsementti cement plants. Finnsementti has plant located near Nordkalk's Parainen and Lappeenranta quarries and Nordkalk supplies the raw limestone materials for cement manufacturing.

At the Nordkalk Group's sites in Finland, it operates a variety of kilns, including parallel flow regenerative kilns, long rotary kilns and shaft kilns, which are used to heat raw crushed limestone to produce quicklime, and one slaking plant (for more information on limestone processing see paragraph entitled "Limestone and the Limestone Market" below).

Nordkalk's internal estimates indicate that its quarries in Finland have total mineral Reserves of 88Mt with 223Mt of Resources subject, inter alia, to permitting. Summaries of Nordkalk's largest extractive assets in-country are set out below.

Lappeenranta

Operations at the Lappeenranta quarry commenced in 1910 and it is Nordkalk's largest production site in Finland. The site is located in the southeast of Finland and hosts deposits of the rare limestone mineral, Wollastonite, a naturally occurring white, needle-like calcium silicate mineral, which is used as a raw material in a number of applications, including producing plastics, paints and coatings, and in certain ceramic and friction materials. The operations on site include a grinding plant, two auxiliary flotation plants and a sales office. The site predominantly serves the paper industry through its SKOY joint venture and also supplies CRH's Finnsementti cement plants.

Nordkalk estimates that the mineral Reserves at Lappeenranta are 30Mt with an additional 100Mt of Resources. Lappeenranta's key products are Wollastonite, quicklime, and calcite, with the existing estimated Reserves indicating a life of quarry of approximately 15 years.

Nordkalk's Resources in the north-western corner of the Lappeenranta quarry require capital investment to strip overburden and remove storage silos. South-eastern resources are readily accessible with the possibility immediately to push back the pit rim by 100m or more, sufficient to sustain the operation for an additional five to six years and provide time to prepare the north-western corner for production. There is long-term potential indicated by the planned exploitation of 93Mt of mineral by underground mining. Whilst no feasibility engineering has been completed and permits have not yet been obtained, the Directors do not expect such underground expansion to be required for several decades given the current Reserves and more accessible Resources available at the quarry.

The average annual extraction rate at Lappeenranta is between 1.6Mtpa and 2Mtpa, which is processed through an underground crusher operation. The quarry employs approximately 65 people and generally leases its machinery with service contracts, thereby reducing capital costs and the requirement to maintain specialist mechanics and electricians for maintenance.

Nordkalk holds a 51 per cent. interest in the SKOY joint venture with Omya, which is based at Lappeenranta and uses limestone extracted from the quarrying operations to produce high specification ground calcium carbonate (GCC) material for pulp and paper, with Omya being responsible for sales, marketing, technology and research & development.

Parainen

The Parainen quarry is located in the small town of Pargas on an island in the Baltic Sea to the southwest of Finland, about 15km south of Turku. The quarry commenced operations in 1898 and is a mature operation, with 10 benches having been excavated to a depth of approximately 130m below sea level. In 2020, over 2Mt quarried rock was extracted from the Parainen quarry and Nordkalk's estimated life of quarry is 18 years from estimated Reserves of 38Mt, with 7.5Mt of Resources.

The operations employ approximately 51 people and include a grinding plant and a long rotary kiln, which produce limestone, limestone powder, quicklime and aggregates for the construction, water treatment and agricultural industries. There is a port located near to site which is owned and operated by Nordkalk and Pargas is also the location of Nordkalk's headquarters, which employs approximately 66 non-operational staff and include a research and development team. Nordkalk primarily leases the operating equipment on-site with service contacts.

Tytyri

The Tytyri quarry is an underground operation located in the south-central town of Lohja, which is 50km west of Helsinki on the shore of Lake Lohjan. The processing facilities also draw material from the nearby Mustio quarry operated by the Nordkalk Group. The Tytyri quarry has two zones; Torma, from which rock powders for the paper industry and fillers and fertilizers are extracted, and Solhelm, where quicklime, hydrated lime and rock powders are extracted. Nordkalk estimates Tytyri and Mustio have an estimated life of quarry of 10 years from a combined 2.6Mt of Reserves, and the quarries have Resources estimated at 9.5Mt.

Other Quarries

Nordkalk operates several other active quarries including; Vimpeli, Sipoo, and Vampula, which deliver in aggregate approximately 0.15Mtpa to local customers and operate on campaigns lasting approximately 1-2 months at a time to satisfy local demands.

The Louhi underground quarry was put into care and maintenance in 2018 due to poor profitability and would require renewal of the relevant permits to enable recommencement of operations. The Nordkalk Group also owns the Kolari and Siikainen quarries, which are non-operational.

Sweden

In Sweden, Nordkalk operates a total of four active open pit mines, a quarry that is currently on care and maintenance, and two greenfield sites. The Nordkalk Group's most significant asset in Sweden is the Gotland site, which produced approximately 1.4Mt of limestone in 2020, with the other quarrying operations being relatively small. Nordkalk estimates that there are a total of 31Mt of Reserves and approximately 127Mt of Resources attributable to its Swedish operations.

Of the limestone production from Nordkalk's Swedish operations in 2020 approximately 75 per cent. of the volume is sold into the local Swedish market, with the majority of exported product being shipped to Finland from Nordkalk's network of six wharves in-country. Approximately 80 per cent. of the Nordkalk Group's produced limestone product in Sweden is sold to construction, mining, agricultural and chemical industries, with the remaining higher-margin product being supplied to industries such as pulp & paper or energy & water.

Nordkalk has a joint venture in place with Movab in which Nordkalk has a 19.5 per cent. equity stake. Movab is a market leader in Sweden for lime softening of lakes, rivers, streams and wetland, including the restoration of environments that have been historically polluted from industrial activity.

Gotland (Klinthagen and Storugns)

Nordkalk's primary extraction site in Sweden is the Klinthagen limestone open cast quarry, which is located on the north of the Swedish island of Gotland, in the Baltic Sea. The quarry is located adjacent to a processing plant and the Storugns seaport, which is also owned by Nordkalk. The operations employ approximately 66 staff (including joint venture operations) and delivers a variety of products to market, primarily segmented by size fractions.

The Klinthagen quarry has been historically extracting various grade material at approximately 1.4-1.6Mtpa, but the extraction rate is expected to reduce to approximately 0.8Mtpa from 2022 onwards, with additional volume being derived from other Nordkalk sites and sources. The Klinthagen quarry is located adjacent to the port of Storugns, which is owned and operated by Nordkalk, as well as the Kalkproduktion Storugns AB (KPAB) operations, which is a joint venture between Nordkalk (67 per cent.) and Lhoist Group (33 per cent.). KPAB produces quicklime from raw crushed limestone extracted from the Klinthagen quarry through calcination in a parallel flow regenerative kiln, which has a capacity of 500 tonnes quicklime production per day and which is predominantly sold into the steel making industry.

Following approvals being obtained in March 2021, there are currently sufficient Reserves to continue producing limestone at Gotland until 2026, with Nordkalk estimating a total of 4.85Mt limestone Reserves and 13.7Mt of limestone Resources at Klinthagen. Nordkalk has an expansion plan to obtain additional permits required to increase its Reserves and extend the life of the Klinthagen quarry to 2033-34, producing at a rate of 0.8Mtpa, which is an ongoing process. Nordkalk has also acquired greenfield sites which have Resources of 100Mt, which could materially increase Reserves on the island, however, certain environmental and technical challenges relating to use of these sites have been identified (including species protection and transport logistics).

There is currently a limited supply of the high quality (low sulphur) material required by Nordkalk's customers using its product in the steel manufacturing process, with 1.8Mt of limestone material being steel grade and the permit to access this limestone material is currently pending. In the short term, Nordkalk is sourcing steel grade product from the Verdalskalk joint venture operations in Norway (see Norway section below for more information), to supply one of KPAB's major customers in the steel industry, which has alleviated the supply pressure at the Klinthagen site while permitting is obtained. In addition, in the medium term, given its high value, steel grade limestone material can be shipped to the Storugns port from other sites to be processed, both within and outside of the Nordkalk Group's operations, such as Nordkalk's joint venture operations in Verdalskalk in Norway.

Forsby and Köping

The Forsby quarry and Köping processing operations are located in central Sweden, to the west of Stockholm on the Köping river. Nordkalk employs approximately 45 staff across its Forsby and Köping operations, operating a quarry, a grinding plant, a kiln, a slaking plant, a sales office and a wharf.

The Köping operations extract limestone from the Forsby quarry and its estimated life of quarry from 12Mt of Reserves is 78 years. The operations' end products include limestone, limestone powder, quicklime and slaked lime, which are sold primarily to the steel and paper & pulp industries, with nearly all of its products being sold locally into the Swedish market from its on-site wharf infrastructure. The limestone calcinated in the kiln is predominantly limestone derived from Nordkalk's Klinthagen quarry on Gotland and the Verdalskalk joint venture quarry in Norway. The majority of the Forsby derived limestone is used to produce aggregates and powder for local consumption.

Uddagården

The Uddagården quarry is located approximately 4km northeast of the town of Falköping which itself is 110km northeast of Gothenburg in southern Sweden. Nordkalk estimates a Reserve of 12Mt at the Uddagården quarry defined by the permit area, which is estimated to be sufficient for at least 90 years of production.

Other Quarries

Nordkalk also operates the Ignaberga quarry, which employs eight people and primarily produces limestone and limestone powder, and the Orsa quarry, which is not currently operational.

Poland

In Poland, Nordkalk operates three quarries, where the primary site is the Miedzianka quarry, producing approximately 6.0Mtpa of limestone per annum, along with two smaller operations, Slawno and Wolica.

Miedzianka is located approximately 20km to the west of the city of Kielce in Poland and is comprised of the mature Ostrówka quarry and a relatively new quarry to the west, Ołowianka. Nordkalk employs approximately 162 staff at its Miedzianka operations. The Ostrówka pit has 26.3Mt fully permitted Reserves, including 6.0Mt that were recently added on the south wall following the recent relocation of the dewatering system. The Ołowianka pit has recently secured permits over an additional 8.5Mt of Reserves, providing the operation with a total of 34.8Mt of Reserves, or nearly six years of production at current rates. Nordkalk has identified several possible routes for expansion to increase Reserves and the lives of its quarrying operations at Miedzianka by accessing up to an estimated 67Mt of Resources and a total long term potential of a combined 147Mt of mineral, which are subject to obtaining the relevant permits and in some cases the acquisition of additional land and local residences, or potentially infrastructure relocation.

The limestone and aggregates products produced from the Miedzianka quarries are used in the construction, steel, glass and sugar, agriculture, and environmental industries. Miedzianka is well connected to local infrastructure, including a direct rail connection. In 2019, Nordkalk entered into a long-term partnership agreement with ArcelorMittal in Germany, whereby Nordkalk exports raw limestone material by rail from Miedzianka to one of ArcelorMittal's steel production plants, located in Eisenhüttenstadt, where Nordkalk produces high quality quicklime products for use in the steel making process through two Nordkalk operated kilns located on-site.

Wolica has Reserves of 14Mt, providing an estimated life of quarry in excess of 50 years, with 114Mt of Resources for expansion. Slawno has Reserves of 3Mt, with an estimated 10 year life of quarry and Resources of 4Mt. Wolica and Slawno employ approximately 25 and 53 staff respectively. The quarries also have downstream business activities including grinding and specialised value-added production for lime granulation, which is a specialised process that produces product suitable for sale into the fertiliser and fodder agricultural industries.

Nordkalk's operations in Poland are connected to customers and other Nordkalk operations via rail links which connect to port infrastructure at Szczecin, where Nordkalk operates a grinding plant. Over 60 per cent. of sales by volume in Poland are to the construction industry, with higher-margin sales to the agricultural industry representing approximately 7 per cent. by volume.

Estonia

Nordkalk operates three quarries in Estonia, with total average extraction rates of 0.7Mtpa.

Nordkalk has an office and a production plant with grinding and a shaft kiln located in the village of Rakke in central Estonia, which processes limestone extracted from its quarry in the nearby village of Karinu. The Karinu quarry has estimated Reserves of 1.8Mt and a further 2.3Mt identified as greenfield Resources. Rakke produces ground limestone products and quicklime, with its products being sold into the agricultural, construction and environmental sectors. Nordkalk employs approximately 49 people across its Rakke and Karinu operations.

The Vasalemma quarry is located approximately 30km southwest of the capital Tallinn on a property covering approximately 355 hectares. Nordkalk estimates permitted Reserves of 12Mt with 14Mt of Resources potentially being accessible via expansion onto state owned land, which will require operating permits to be granted. The current estimated Reserves are expected to provide approximately 50 years of production.

The Kurevere quarry is located on the western side of Estonia and produces limestone. The mineralogy at the Kurevere site includes dolomite, which is typically used in refractory brisk, as a fluxing agent in blast furnaces and in pH control and gasification cleaning, due to its high magnesium content.

Kurevere's Reserves are estimated to be 8Mt within the limits of the current permits, with an additional 16Mt of Resources requiring permits to exploit. The life of quarry of the permitted open pit is estimated at 32 years with a possible expansion of an additional 99 years. The quarry employs approximately 15 people.

Norway

Norway provides Nordkalk with access to high grade and extensive minerals via the Verdal quarry, which has port side infrastructure. Nordkalk holds a 10 per cent. equity interest in the Verdalskalk joint venture, with Lhoist holding 35 per cent. and Franzefoss holding 55 per cent. The quality of the limestone material extracted from the Verdal quarry is such that it can be used in the production of high quality PCC. The quarrying operations provide Nordkalk with access to approximately 3,000Mt minerals, which can be shipped to other Nordkalk sites and is currently being transported to its Köping site for processing.

Nordkalk has a 50 per cent. interest in Norwegian joint venture company, NorFraKalk, which is 50 per cent. owned by Franzefoss, and built a circular parallel flow regenerative kiln at the Verdal site in 2007. The NorFraKalk operations process materials extracted from the Verdal quarry and produce quicklime, which is predominately used in the paper industry.

Turkey

In Turkey, Nordkalk operates through a joint venture company, Nordeka Maden A.Ş., which was set up in 2017 with local company Dereli Maden Granit Maden A.Ş. The JV owns the Eskibaliki quarry in the Biga district of Çanakkale, in the province of Marmara, located in the northwest of Turkey. Since the commission of a new crushing line at the end of 2018, the quarry is able to produce up to 2.5Mtpa. Nordkalk estimates the Reserves at Eskibaliki at 75Mt with 14Mt of Resources. The quarry has historically produced approximately 0.8Mtpa which has been sold to local markets, being situated within trucking distance of a number of municipalities and only 8km from the Sea of Marmora.

Other countries of operation

Nordkalk operates small sales offices in Germany, Ukraine, Lithuania and Russia, across which it employs a total of approximately 10 staff.

The change of control of Nordkalk's Russian Subsidiary, is subject to FAS Competition Clearance, for which the Existing Group will shortly make the appropriate filings. On account of both Nordkalk's Russian Subsidiary and Nordkalk's Ukrainian Subsidiaries being wholly-owned by NK East Oy, NK East Oy will be carved out of the companies in the Nordkalk Group being acquired pursuant to the Nordkalk Share Purchase Agreement and shall instead be acquired pursuant to the NK East Share Purchase Agreement. The acquisition of NK East Oy is conditional upon receipt of the FAS Competition Clearance and shall be for a consideration of €1.

Nordkalk's Reserves and Resources

The Existing Group classifies its mineral Reserves and Resources using the PERC classification system where practicable, which follows the CRIRSCO international reporting template classification categories. Nordkalk's mineral Resources and Reserves, which are set out in Table 2 below, are classified using the United Nations Framework Classification for Resources.

UNFC is a classification tool that can be applied to the sustainable development of mineral resources, including limestone. UNFC is a principles-based system in which the products of a resource project are classified on the basis of the three fundamental criteria of environmental-socio-economic viability (E), technical feasibility (F), and degree of confidence in the estimate (G), using a numerical coding system. Combinations of these criteria create a three-dimensional system. Categories (e.g. E1, E2, E3) and, in some cases, sub-categories (e.g. E1.1) are defined for each of the three criteria.

 

	Minerals			Estimated Mineral Duration*
	Reserves	Resources	Average 3-year production	Reserves	Reserves and Resources
Site	(Mt)	(Mt)	(Mt)	(years)	(years)
Finland	88	223	4.20	21	74
Estonia	21	29	0.70	29	71
Sweden	31	127	1.92	16	82
Poland	47	185	6.70	7	35
Turkey	75	14	0.82	92	109
NORDKALK TOTAL	262	577	14.34	18	59

 

Note (*): estimated mineral duration is calculated, in the first column, using the average production from the last three years applied to the aggregate Reserves and, in the second column, the sum of the Reserves and the Resources divided by the average three year production rate. These estimates are indicative only and comprise an average per country, each of which has a diverse composition of underlying sites.

Table 2: summary of Nordkalk's Reserves, Resources and estimated mineral duration of its quarries as at 31 December 2020.

CO₂ Emissions, Environmental, Social and Governance

Nordkalk's kilns produce CO₂ emissions predominantly through the calcination reaction. Whilst a substantial amount of CO₂ produced is ultimately reabsorbed during a product's life through the process of re-carbonation, Nordkalk is required to balance its CO₂ emissions from its kilns via the European Trading System. The ETS was established by the European Commission in 2005 to aide with the global decarbonisation drive. The system provides a financial incentive for companies to keep their CO₂ emissions to a minimum, whereby companies are assigned Emission Unit Allowances which limit the amount of greenhouse gases they can emit. In 2020, Nordkalk's operations incurred a EUA deficit of 92kt, and this deficit is expected to increase to approximately 221kt in 2021, with Nordkalk having previously accrued credits to balance the deficit each year until 2024 based on Nordkalk's current operations. A large number of contracts with customers include a price adjustment mechanism relating to CO₂ costs.

Nordkalk has prepared a roadmap to transition towards a fossil fuel free group by 2035 and achieve carbon neutral production within Nordkalk's kilns by 2045, with several measures being planned to reduce Nordkalk's carbon footprint over time. Nordkalk is ISO14001 compliant and approximately 10 per cent. of Nordkalk's products are used in sustainable and environmentally friendly applications, including environmental lime for water purification, soil decontamination and depollution, and fertiliser products. Nordkalk has allocated 145 hectares of land for protection and restoration. In addition, the residual process heat from kiln operations is applied in several installations to heating networks, providing approximately 59,000MWh in 2020, replacing the requirement for approximately 5.9 million litres of heating oil, having saved 80GWh of energy since 2015.

Nordkalk has a focus on the safety and wellbeing of its staff and are ISO18001 and 45001 accredited. Nordkalk also employs a relatively diverse workforce for the industry, with a female employee ratio of up to 23 per cent. in its various countries of operation. Wherever possible, it seeks to support local communities, with up to 76 per cent. of purchasing being conducted locally and the remainder of products being sourced as nearby as possible. Nordkalk has various facilities in place at a quarry site to produce clean ground water from quarrying operations that is then supplied to the local municipality as drinking water.

Nordkalk has established and documented structured and clear governance procedures that and are controlled through certified management systems, which are subject to external audit. The Company also is a key participating member of regional and global professional associations, including EuLA and uses a Global Reporting Initiative and United Nations Sustainable Development Group based framework, which is publicly disclosed and reviewed independently by KPMG.

LIMESTONE AND THE LIMESTONE MARKET
Limestone

Limestone is a sedimentary rock composed primarily of the calcite and aragonite minerals, both of which are formed from calcium carbonate with a chemical composition of CaCO₃. Calcium carbonate is a key raw material in the production of cement, concrete aggregates, quicklime and several other products. In 2020, the primary applications of limestone products in the European industries included, iron and steel (33 per cent.), construction and engineering (22 per cent.), metals and mining (12 per cent.), environmental protection (11 per cent.) and agriculture (6 per cent.).

Limestone, a carbonate rock, is predominantly a product of deposits from seawater, where it is formed by layers of minerals, fine sediment and skeletons of marine organisms being transformed through lithification. Carbonate rocks are found across every continent, having formed throughout geologic history and continuing to form through coral reefs and at the base of shallow seas. Limestone products come in the form of unprocessed limestone (crushed rocks and powder), quicklime (calcium oxide produced through calcination), slaked lime (calcium hydroxide, in powder and granulated form through hydration of lime), and other naturally occurring minerals, such as Wollastonite (calcium silicate). Following extraction from quarries, limestone ore (CaCO₃) undergoes crushing and screening in order to separate the ore into different size fractions. The crushed ore can then be further treated by calcination, which comprises the thermal decomposition of the raw limestone in a kiln, leading to the removal of carbon dioxide (CO₂), to produce a quicklime (CaO) product (also known as lime). Quicklime can then be hydrated (or 'slaked') by adding water and producing a calcium hydroxide or slaked lime product (Ca(OH)₂).

Lime can go through a further processing stage of re-carbonation, whereby CO₂ released from the calcination process is injected back into the process to create PCC. In addition, re-carbonation naturally occurs in end use quicklime products, with the level of reabsorption varying by the industry application. Quicklime used in pulp and paper reabsorbs 93 per cent. within five years and 85 per cent. in the first year following the calcination process. The construction, steel and environmental industries reabsorb approximately 92 per cent., 56 per cent. and 66 per cent. of process emitted CO₂, respectively within the first five years following calcination.

Limestone is a versatile commodity, used across a broad range of industries including paper & pulp, plastics, agriculture, water treatment, construction and steel manufacturing. The construction industry, including steel making, represents the largest proportion of the use of limestone. Its use in the construction industry is vital, playing a key role in road construction, infrastructure, concrete and other building materials. Some of the key characteristics of limestone include durability, weather resistance, heat conductivity and low cost, making it an ideal base material for the construction sector.

In the iron and steel industry, limestone products are used in various forms and applications, including as a fluxing material (to promote fluidity in smelting of ores and to remove impurities), as a de-sulphurising agent (limestone reacts with sulphur to form calcium sulphide which goes into slag), coating of moulds of pig casting machines, neutralizing of acidic water, water treatment, waste water (effluent) treatment, flue gas treatment, and sludge and sewage treatment. The European iron and steel limestone industry is forecasted to grow significantly over the short to medium term, with European market volume set to increase from 195 million tonnes in 2021 to 240 million tonnes in 2026.

In the paper & pulp industry, limestone is a vital product used in the causticising cycle and paper pigmentation processes. Quicklime is used in the closed chemical circulation of a modern pulp mill, with approximately 250kg of quicklime being required to produce one tonne of pulp. The pulp industry also uses lime products (quicklime, slaked lime and limestone powder) in effluent treatment. In the paper and cardboard industries, lime-based coating pigments and fillers such as GCC (ground calcium carbonate), which is made from concentrated and fine-ground calcium carbonate, and PCC (precipitated calcium carbonate), which is made from quicklime and predominantly used as filler in fine paper such as copy paper, where brightness and opacity are important qualities. The European pulp & paper limestone industry market volume is forecasted to increase from 41 million tonnes in 2021 to 51 million tonnes in 2026.

In agriculture, limestone products are used in fertilisers to increase fertility, improving a plant's ability to absorb nutrients, and also for soil stabilisation by quickly raising pH levels in soil. Limestone fodder products, containing the high purity limestone, are used to provide a source of calcium to livestock.

Limestone has many varied applications in the treatment of water, including processing drinking water, purification of waste water and the neutralisation of industrial waste water. In drinking water and waste water treatment, lime products are used to raise the pH level of the water and to adjust alkalinity. In waste water treatment, lime is also used to precipitate phosphorus and metals and to stabilise the sludge build up. The European chemical limestone industry is forecasted to grow from 7 million tonnes in 2021 to over 9 million tonnes in 2026.

In 2020, the key product segments in the limestone market by turnover in Europe were: limestone (24 per cent.), slaked lime (21 per cent.), aggregates (20 per cent.), limestone powder (14 per cent.) and fodder (13 per cent.).

Market Dynamics

Demand for limestone is largely influenced by construction activity, most prominently in cement, building and steel manufacturing which, prior to COVID-19, was on an upward trajectory globally, predominantly due to developing countries driving to invest in their infrastructure. However, the significant supply chain disruption, labour shortages and country-wide closures of construction sites as COVID-19 restrictions were imposed to varying degrees across the world, meant that global activity in the construction industry was materially reduced.

The global limestone market is expected to grow at a CAGR of 4.4 per cent. from 2020 to 2027, reaching a market size of US$102.7 billion in 2027. This is anticipated to be driven by the economic rebound following the COVID-19 pandemic and the resumption of the trend of developing countries investing into infrastructure that was seen prior to the pandemic. The increasing urbanisation, growing disposable incomes, expanded government investment into infrastructure and improving technological advancements, are all likely to support market growth.

Over the medium term, the primary driver of demand in the limestone market is the growing need for the material in the construction industry. Rising infrastructure developments globally are expected to fuel the market. In Europe, where the value of the limestone market is forecast to expand, construction output is expected to grow 3 per cent. per annum until 2023. More specifically, the Eastern European market has a positive outlook owing to infrastructure investments aided by the provision of EU subsidies while in Germany the construction industry is expected to be worth circa US$500 billion by 2024, with projects such as the construction of the Fehmarn underwater tunnel between Germany and Denmark likely to contribute to the growth of the limestone market.

Other industries within Europe are also expecting to experience growth such as steel production which is expected to grow 4 per cent. per annum until 2025, partly because of a relaxation of restrictions on the steel market, contributing to an anticipated increased demand for limestone over the medium term. Industries such as environmental protection are anticipating CAGR of 4.8 per cent. between 2021 and 2026, driven by the environmentally friendly nature of the material which requires no toxic chemicals or glues used when producing stones made from limestone.

On the supply-side, the European market is fragmented with four lead suppliers, Lhoist, Nordkalk, Carmeuse and CRH, which supply in aggregate 8.3 per cent. of limestone products by value. The market is highly competitive with the presence of established players with recognised brand names. This combined with the current abundance of the material suggest that there should be a steady supply of the material in the medium term. However, supply in the short term is expected to be restricted as rising economic instability, surging unemployment and potential future COVID-19 related travel restrictions, which are expected to hinder the supply chain in the post-pandemic period.

Limestone prices have been relatively stable in recent years, but with limestone being a non-renewable resource as well as the gradual reduction in its storage capacity over time, it is expected that raw materials prices are likely to rise in the long term. This potential price rise over time is enhanced by the growing average haul distances and therefore associated costs as quarries, near to the large consumers of limestone such as the US, are depleted, leading to imports coming from further afield. Additional detail on the specific limestone markets in the countries and markets where Nordkalk is active are set out below.

Sweden

Sweden is the largest country in Northern Europe with a land area of approximately 450,000km². In 2020, Sweden's population was recorded at 10.3 million and the country had a GDP of US$537.61 billion. Sweden has a current credit rating of AAA, as issued by both S&P and DBRS Morningstar, which ranks it amongst the lowest risk jurisdictions for investment globally. Sweden is a member of the EU and, according to the World Bank's "Doing Business" report for 2020, the country ranked 10th out of 190 economies for ease of doing business. Sweden has an open economy, a record of facilitation of innovation and an efficient business environment coupled with one of the lowest corporate tax rates in the EU at 20.6 per cent. from 2021 onwards.

The limestone market in Sweden shows promising signs with limestone consumption expected to increase by 5.46 per cent. in 2021, with a forecast CAGR of 5.3 per cent. between 2021-2026 to €1.9 billion. The market is expected to promptly return to pre-COVID-19 levels by 2022, with a market value of US$1.6 billion.

Finland

Finland is one of the world's northernmost countries, bordering Sweden and Russia. The country is one of the most sparsely populated countries in Europe, with a population of 5.5 million in 2020 and a size of approximately 390,909km². In 2020, Finland's GDP was US$271 billion and the country currently has a credit rating of AA+, as issued by both S&P and Fitch Ratings, illustrating a very low credit risk. Finland is a member of the EU and, according to the Global Innovation Index, Finland ranked number one out of 131 economies for the third year in a row for its business environment and, according to the World Bank's "Doing Business" report for 2020, ranked 20th out of 190 economies for ease of doing business. Finland has a transparent regulatory environment, skilled workforce and welcoming approach to foreign investment.

The limestone market's output in Finland is expected to grow at a CAGR of 4.74 per cent. between 2021 and 2026, to reach a market size of US$824 million in 2021 to 2026. This growth is significantly aided by the implementation of the Main Grid Development Plan which includes an investment of €1.2 billion and the construction of 30 new substations, 3,000km of transmission and distribution lines, and the installation of power transformers, cable towers and safety systems expected to be installed by 2025.

Poland

Poland is a country in central Europe, sharing its maritime borders with Denmark and Sweden. It is approximately 313,000km². In 2020, Poland's population was recorded at 37.9 million, with a GDP of US$594.18 billion. Poland has a current credit rating of A-, as issued by Fitch Ratings denoting low credit risk. Poland is a member of the EU and, according to the World Bank's "Doing Business" report for 2020, the country ranked 40th out of 190 economies for ease of doing business.

As with many countries in Europe, the Polish limestone market, which experienced a CAGR of 4.3 per cent. between 2017 and 2019, was on an upward trajectory prior to COVID-19. In 2021, the limestone market, is estimated to be worth €1.7 billion. This growth was led by the construction industry, where specific sectors within construction such as the residential construction sector were seeing CAGR of 6.7 per cent. from 2015 to 2019 and the infrastructure construction sector which was estimated to be worth €13.6 billion in 2019 and had posted a CAGR of 4 per cent. from 2016 to 2019. The post-pandemic recovery is forecast to return to this positive trajectory, with Poland's construction industry projected to record a CAGR of 6.6 per cent., reaching €59.9 billion by 2024.

The Baltics

The Baltics comprise Estonia, Latvia and Lithuania and are bounded on the west and north by the Baltic Sea. The three countries cover an area of approximately 175,000km² and, in 2020, had a combined population of 5.94 million. S&P's credit ratings are as follows: Estonia: AA-; Lativia: A+; Lithuania: A+.

The limestone market, although negatively impacted due to COVID-19, as much of Europe was, is not expected to suffer to the same extent as other markets in Europe. This is based on the positive underlying growth momentum prior to the pandemic as well as the less drastic lockdowns imposed by their governments. The Baltics' limestone market growth is powered by the civil engineering industry which expanded in Estonia and Lithuania by 20.2 per cent. and 23.4 per cent. in Q1 2020, respectively.

Norway

Norway has coastlines at the North Sea and the North Atlantic Ocean. It is approximately 385,208km². In 2020, Norway's population was recorded at 5 million, with a GDP of US$363.09 billion. Norway has a current credit rating of AAA, as issued by both S&P and DBRS Morningstar, which ranks it amongst the lowest risk jurisdictions for investment globally. Norway is a member of the EEA and NATO and according to the World Bank's "Doing Business" report for 2020, the country ranked 9^th out of 190 economies for ease of doing business.

Prior to the COVID-19 pandemic, Norway's limestone market was growing at a significant rate, much of which was being driven by the construction industry, which saw sales of limestone products grow at a CAGR of 4.59 per cent. from 2016 to 2019. Despite the dip in 2020 due to the COVID-19 pandemic, this growth trajectory is expected to return, with the 2021 forecasted consumption value of limestone to be US$307.54 million, an increase of 4.34 per cent. from the previous year. The need for limestone in Norway is expected to increase from 2021 onwards, facilitated by the government's focus on upgrading the country's transport infrastructure as well as their focus on renewable energy through the "green transition package" under which the government plans to spend US$7.7 billion on transport infrastructure and US$384.5 million on renewable energy infrastructure.

Summary of Nordkalk's competition

Nordkalk is a diversified and vertically integrated business operating in 10 countries in Northern Europe, with a focus on Finland, Sweden and Poland, which accounted for, in aggregate, 94 per cent. of its 2020 revenue. Nordkalk is ranked the number one limestone products producer in Finland, Norway, Poland and Sweden and is ranked in the top three for quicklime products in Estonia, Finland and Sweden. Nordkalk is estimated to have a 1.6 per cent. market share in the European limestone market.

A European Commission report notes that the majority of European limestone manufacturing enterprises are small, family-owned and operate at a local level, save for a few large companies, including Carmeuse and CRH, Lhoist and Nordkalk which are regarded as industry leaders in Europe. These four businesses were estimated in 2021 to retain an aggregate market share of 8.3 per cent., with the next eight largest companies by market share holding an aggregate 2.3 per cent. It has been reported that there is significant price competition in the limestone market.

In recent years, the European limestone industry has become more concentrated, due to an increase in mergers and acquisitions, and businesses exiting the marketplace. Furthermore, operators have noted tightening environmental protections increasing costs and administrative burden for quarrying has resulted in smaller companies struggling to operate lime production facilities competitively in the market.

Including Nordkalk, which has a market share of 1.6 per cent., the largest four companies in the European limestone market accounted for 8.3 per cent. of limestone products by value. Brief descriptions of its four largest competitors are set out below:

·      Carmeuse is a family-owned company, operating primarily in the limestone and quicklime markets, which Nordkalk competes with primarily in the quicklime sector. However, its operations are more focused in Southern European countries. Carmeuse is estimated to have a 1.5 per cent. market share in the European limestone market.

·      Lhoist is an international family-owned company developing limestone, dolomitic limestone and other minerals. Lhoist achieved revenue from European operations of approximately €1 billion and global revenue of €2.4 billion in 2019. Lhoist retains the largest market share (4.3 per cent.) in the European limestone market. Lhoist is Nordkalk's most significant competitor in Finland, which represents approximately half of Nordkalk's revenues.

·      CRH is a public company, listed on the London and Irish Stock Exchanges. CRH is a diversified conglomerate, which achieved total revenue of US$28 billion in 2020 (of which US$9 billion was derived from Europe), and employs 76,600 people across 29 countries. It produces materials which support the manufacture and supply of aggregates, lime, cement, ready-mixed concrete, concrete products and asphalt. CRH is estimated to have a 1.0 per cent. market share in the European Limestone market and competes with Nordkalk primarily in the Polish market.

·    In Sweden, Nordkalk competes primarily with SMA Mineral, a Swedish family-owned company with limestone and quicklime operations, which does not have a significant presence in the wider European market.

In the construction materials and aggregates sector more generally, the major operators, including LafargeHolcim, HeidelbergCement AG, CRH and Cemex S.A.B. de C.V., dominate the southern and western European economies, however retain significantly less presence in the Nordic and Baltic regions. There is, therefore, opportunity for the Enlarged Group to increase its wider footprint in the construction materials and aggregates sector in the Nordic and Baltic region, in markets with relatively less competition from majors.

 

SUMMARY FINANCIAL INFORMATION AND CURRENT TRADING OF NORDKALK

The following financial information has been extracted from the audited company accounts of Nordkalk and has been included to provide an overview of the recent trading history of Nordkalk:

Nordkalk's consolidated (IFRS) €m	Dec 2018	Dec 2019	Dec 2020
Turnover	300.1	290.0	275.9
YoY change		(3.4%)	(4.9%)
Sales margin	100.3	100.9	105.5
% of revenue	33.4%	34.8%	38.2%
Operating expenses	(53.9)	(47.6)	(42.1)
Other incomes / expenses	3.8	3.1	2.9
Share of results, EAI	0.5	0.5	0.7
Recurring EBITDA	50.6	56.9	67.0
EBITDA margin	16.9%	19.6%	24.2%
Depreciation & amortisation	(23.4)	(25.5)	(24.3)
Recurring EBIT	27.2	31.4	42.7
EBIT margin	9.1%	10.8%	15.5%
Capex	(22.8)	(17.7)	(12.2)
Net working capital	33.2	32.5	29.8

 

In the first half of 2021, Nordkalk generated revenues of £126.5 million (€144.6 million) and EBITDA of £31.3 million (€36.0 million), representing an increase of 8 per cent. and 17 per cent. respectively over the same first half period in 2020. Nordkalk management have confirmed that the revenues and EBITDA trend remain encouraging and in-line with expectations and that margins remain strong and in-line with budgets.

 

PRINCIPAL TERMS AND CONDITIONS OF THE ACQUISITION

The Company has conditionally agreed to acquire the entire issued share capital of Nordkalk pursuant to the Nordkalk Share Purchase Agreement.

The Nordkalk Share Purchase Agreement is conditional upon, inter alia: (i) the passing of Resolutions 1 and 2 at the General Meeting; (ii) the Company having received the Polish Competition Office Clearance; and (iii) Admission (of both the Placing Shares and the Consideration Shares).

The Nordkalk Group which shall be transferred pursuant to the Nordkalk Share Purchase Agreement shall not include NK East Oy, which is the holding company of Nordkalk's Russian Subsidiary and Nordkalk's Ukrainian Subsidiaries.

Those subsidiaries shall be acquired by the Company pursuant to the separate NK East Share Purchase Agreement. The NK East Share Purchase Agreement shall be conditional upon the receipt of FAS Competition Clearance. Once such condition is fulfilled, the Company may purchase NK East Oy for a consideration of €1.

Accordingly, the transfer of NK East Oy (and, accordingly, Nordkalk's Russian Subsidiary and Nordkalk's Ukrainian Subsidiaries) to the Company is expected to occur following Admission.

 

POLISH COMPETITION OFFICE CLEARANCE AND FAS COMPETITION CLEARANCE

In addition to shareholder approval, the Acquisition is conditional on the Company receiving the Polish Competition Office Clearance, for which the Company will shortly make the necessary filings with the Polish Competition Office. The Polish Competition Office will have one month to issue a decision concerning the Company's initial filings, however the Polish Competition Authority usually asks questions in respect of submitted documentation (generally twice or more - depending on the scope of information provided and on the person who is the case handler) and such questions suspend the deadline to issue the decision. The Company has not identified any overlapping markets in Poland, therefore, the Board would expect competition clearance in Poland to take approximately four to six weeks from filing.

Furthermore, the acquisition of NK East Oy (which owns the entire issued share capital of Nordkalk's Russian Subsidiary and Nordkalk's Ukrainian Subsidiaries) pursuant to the NK East Share Purchase Agreement is conditional upon receipt by the Company of FAS Competition Clearance. The Board expects this to take up to three months, which is the maximum statutory time for FAS review.

 

CURRENT TRADING AND FUTURE PROSPECTS

SigmaRoc generated revenues of £84.8 million and underlying EBITDA of £14.9 million in the first half of 2021, representing a like-for-like (adjusted to include pre-acquisition results of subsequently acquired businesses) increase of 13 per cent. and 14 per cent. respectively over the same period in 2020.

Nordkalk generated revenues of £126.5 million (€144.6 million) and EBITDA of £31.3 million (€36.0 million), representing an increase of 8 per cent. and 17 per cent. respectively over the same first half period in 2020.

SigmaRoc earnings per share for the 6 month period ended 30 June 2021 is expected to be approximately 2.5 pence. Revenues and EBITDA trends remain in-line with management's expectations and the Existing Group recorded strong margins and cash generation in H1 2021.

The Directors are confident in the current business activities and future prospects of the Enlarged Group and believe that, following Acquisition, with the assistance of SigmaRoc, the existing management of Nordkalk will be able to continue their focus on maximising profitability through sales growth into higher margin value added products, production efficiencies and cost savings. The free cash flow generated from the Enlarged Group will be prioritised as follows:

(i)   maintaining Adjusted Leverage Ratio at or below 2.0x on an annual basis;

(ii)   de-leveraging the New Facilities; and

(iii)  investing in growth CAPEX and earnings accretive M&A to increase revenue and improve EBITDA margins.

FINANCING OF THE ACQUISITION

The total Consideration payable to the Seller under the Acquisition Agreements is approximately €470 million subject to certain adjustments including in respect of cash, debt and working capital (approximately £402 million).

The Consideration will be satisfied by the Company by:

·      the application of €270 million (approximately £231 million) from the proceeds of the Placing;

·      the drawdown of €150 million (approximately £128 million) under the New Facility; and

·      the issue of the €50 million (approximately £43 million) Consideration Shares to Rettig Group at the Placing Price.

The New Facility is being provided to the Company by several major UK and European banks, led by Banco Santander S.A. London and BNP Paribas (as arrangers), and comprises: (i) the Term Loan, which is a five year term loan of £205 million to part finance the Acquisition, refinance the Existing Facility and to pay the financing costs; and (ii) the RCF, which is a revolving credit facility of £100 million for general corporate purposes. A £100 million uncommitted accordion is applied to the RCF.

The Term Loan has a 12 month capital repayment holiday and then £4 million is repayable by the Company per quarter from September 2022, which increases to £6 million per quarter from September 2023 and £8.75 million per quarter from September 2024.

Interest will be applied on amounts drawn down under the New Facility at a rate of 2.35 per cent. over SONIA at a 1.5x to 2.0x Adjusted Leverage Ratio and 2.60 per cent. over SONIA at a 2.0x to 2.5x Adjusted Leverage Ratio.

In consideration for the New Facility, the Company and a number of its key trading entities incorporated in England and Wales, including SigmaFin Limited, shall grant first ranking debentures to Santander. A security interest agreement (which is a Jersey law equivalent of a share pledge) shall be granted over the shares that SigmaFin Limited holds in Ronez. A Belgian law-governed first ranking share pledge will be granted over the shares of the Company's various Belgian subsidiaries (including CDH) in addition to a moveable assets pledge and a mortgage over Belgian real estate, each granted by CDH Développement SA. Following completion of the Acquisition, security shall also be taken from key members of the Nordkalk Group (including, but not limited to, a Polish law governed mortgage deed over Polish real estate and a Finnish law governed security agreement over the shares in the Finnish subsidiaries).

Pursuant to the New Facility, the Company has also given certain covenants to Santander that its maximum Adjusted Leverage Ratio shall not exceed 3.5x, reducing to 3.25x in December 2022 and 3.0x in December 2023 and minimum interest cover ratio of 4.0x. It also includes a customary suite of corporate activities which would require Santander's consent.

 

THE RETAIL OFFER

The Retail Offer is being arranged by PrimaryBid through the PrimaryBid platform (https://primarybid.com) and the other terms and conditions of the Retail Offer will be made available to Retail Offerees on the PrimaryBid platform. The maximum amount (before expenses) which may be raised pursuant to the Retail Offer will be £6.5 million (before expenses).

The Retail Offer is conditional on the Acquisition, the Placing and Admission (and accordingly, is also conditional upon the receipt of the Polish Competition Office Clearance) and is being undertaken to facilitate potential retail participation in the Company. The Retail Shares will be issued credited as fully paid and will, when issued, rank pari passu in all respects with the Existing Ordinary Shares, including the right to receive all dividends and other distributions declared paid or made after Admission.

The Retail Offer Shares will be issued pursuant to separate share authorities which will be requested at the General Meeting.

The proceeds of the Retail Offer will be used for general working capital purposes by the Company.

 

ADOPTION OF THE LTIP

To cater for discretionary share based incentive awards to selected employees, the Company will be seeking shareholder approval (pursuant to Resolution 5 at the General Meeting) to implement the LTIP, which shall be referred to as the "SigmaRoc PLC Performance Share Plan".

Pursuant to the LTIP, the Remuneration Committee may grant awards to acquire Ordinary Shares as conditional share awards or as nil (or nominal) cost options. The Remuneration Committee may also decide to grant cash-based awards of an equivalent value to share-based awards or to satisfy share-based awards in cash, although it does not currently intend to do so.  Awards shall comprise a single part unless the Remuneration Committee determines that an award shall comprise a number of distinct parts in which case each part shall be treated as if it were a separate award for the purposes of the LTIP.

Subject to Admission and shareholder approval for the LTIP, the first awards under the LTIP (the "Initial Awards") would be granted at or shortly following Admission. The Initial Awards would be granted to the Company's Executive Directors and to no fewer than three other senior employees. The Initial Awards would in aggregate be granted over up to 25,620,000 Ordinary Shares including in respect of a proposed Initial Award at the Placing Price to the Chief Executive equating to a total of 9,581,880 Ordinary Shares.

The performance vesting of 75 per cent. of each Initial Award (the "EPS Part") will be dependent on the Company's adjusted earnings per share performance for the Company's financial year ending 31 December 2023 ("EPS 2023"). No portion of the EPS Part would performance vest unless EPS 2023 is at least 6.0 pence, rising on a straight-line basis to full performance vesting of the EPS Part if the EPS 2023 is 8.0 pence or higher.

The performance vesting of the remaining 25 per cent. of each Initial Award (the "TSR Part") will be dependent on the Company's total shareholder return ("TSR") performance over a three year period commencing on Admission relative to the TSR performance over the same period of the constituents of the AIM 100 Index as at Admission. No portion of the TSR Part would performance vest unless the Company's relative TSR performance was median ranking performance for which one quarter of the TSR Part would performance vest rising on a straight line basis to full performance vesting of the TSR Part for the Company's relative TSR performance ranking upper quartile or better. The Company's starting TSR for such purposes would be determined by reference to the Placing Price and in the case of the comparator group members the three months preceding. The end TSRs for such purposes would be determined by reference to a three month averaging period ending on the last day of the three year measurement period.

Awards shall ordinarily vest on such normal vesting date specified for the award or, if later, when the Remuneration Committee determines the extent to which any performance conditions and/or additional conditions have been satisfied.  The normal vesting date in respect of awards to Executive Directors shall not be earlier than the third anniversary of the grant of the award.

The Initial Awards will be granted on terms that they comprise three equal distinct parts, which would face the same performance conditions as described above but the normal vesting dates set for the Initial Awards would be that the first part had a normal vesting date of the third anniversary of Admission, the second part on the fourth anniversary of Admission and the third part on the fifth anniversary of Admission.

The extent of vesting of awards for Executive Directors will be subject to performance conditions set by the Remuneration Committee. Performance conditions may also apply in the case of awards to others but need not do so.

The Remuneration Committee may grant subsequent awards within six weeks following the Company's announcement of its financial results for any annual or six month period. The Remuneration Committee may also grant awards at any other time when it considers there to be exceptional circumstances which justify the granting of awards (for example, in the case of recruitment). An employee may not receive such subsequent awards in any financial year in respect of Ordinary Shares having a market value in excess of 150 per cent. of their annual base salary in that financial year.

In addition to the above the LTIP will also include customary terms and conditions for a performance scheme of this nature. A summary of the principal terms of the LTIP will be set out in the Admission Document. 

The adoption of the LTIP and the grants thereunder will constitute a related party transaction pursuant to Rule 13 of the AIM Rules.

BOARD CHANGES

Conditional on Admission, Garth Palmer will be appointed to the Board as an Executive Director and he will act as Chief Financial Officer for the Enlarged Group. Dean Masefield will simultaneously step down from his position on the Board as Finance Director, but will remain with the Enlarged Group, assuming responsibility for the Existing Group's operations as Deputy CFO, covering the Enlarged Group's UK and Belgium platforms.

The Company has also commenced a search and selection process to identify an additional Non-Executive Board member and will make such an appointment within twelve months of Admission.

IRREVOCABLE UNDERTAKINGS AND LETTERS OF INTENT

The Company has received irrevocable undertakings from the Directors that they will, or will procure that the legal Shareholders will, vote in favour of the Resolutions 1 and 2 at the General Meeting in respect of 3,954,494 Ordinary Shares, representing, in aggregate, approximately 1.41 per cent. of the Existing Ordinary Shares.

In addition, the Company has also received the following irrevocable undertakings and letters of intent from certain other Shareholders to vote in favour of Resolutions 1 and 2 in respect of the following number of Ordinary Shares:

Irrevocable or letter of intent	Name of holder	Number of Ordinary Shares	Percentage of voting rights over Existing Ordinary Shares
Irrevocable	BGF Investments LP*	21,792,872	7.79%
Irrevocable	Hermco Property Limited*	18,502,502	6.61%
Letter of intent	Hargreave Hale Limited*	14,745,400	5.27%
Letter of intent	Hanover Catalyst Fund	5,681,372	2.03%
Letter of intent	M&G Investment Management*	24,152,918	8.63%
Letter of intent	MI Chelverton UK Equity Growth Fund	17,952,460	6.41%
Irrevocable	James Woodyer*	2,439,024	0.87%
Letter of intent	Slater Investments Ltd*	14,582,422	5.21%
Irrevocable	Huntress Nominees Limited*	47,561,988	16.99%
Total		167,410,958	59.82%

 

Notes:

* - denotes Shareholders that provided to the Company irrevocable undertakings or letters of intent to vote in favour of Resolution 5.

Accordingly, in aggregate, the Company has received irrevocable undertakings and letters of intent to vote in favour of Resolutions 1 and 2 in respect of 171,365,452 Ordinary Shares representing approximately 61.23 per cent. of the Existing Ordinary Shares in issue as at the date of this announcement. The Company has also received irrevocable undertakings and letters of intent to vote in favour of Resolution 5 in respect of 143,777,126 Ordinary Shares representing approximately 51.37 per cent. of the Existing Ordinary Shares in issue as at the date of this announcement.

 

LOCK-INS AND ORDERLY MARKET ARRANGEMENTS

The Seller has undertaken to the Company in the Nordkalk Share Purchase Agreement that it will not dispose of any interest in the Ordinary Shares held by them for a period of 12 months from the date of Admission and, for the 12 months following that period, that they will only dispose of their holdings through Peel Hunt and Liberum Capital and in such manner as they may direct so as to maintain an orderly market in the Ordinary Shares. The Company has undertaken to the Nominated Adviser and Joint Bookrunners not to give any consent or waiver, or to modify the terms of the lock-in provisions in the Nordkalk Share Purchase Agreement, without the prior consent of the Nominated Adviser and Joint Bookrunners.

In total, 50,276,521 Ordinary Shares representing 7.81 per cent. of the Enlarged Share Capital at Admission (assuming full take-up of the Retail Offer by Retail Offerees) are subject to the restrictions on disposals described in this paragraph.

 

 

APPENDIX I - DEFINITIONS AND GLOSSARY OF TECHNICAL TERMS

"Acquisition"                                    the proposed acquisition by the Company of the entire issued share capital of Nordkalk and certain of its outstanding shareholder loans pursuant to the Acquisition Agreements, which constitutes a reverse takeover pursuant to Rule 14 of the AIM Rules for Companies

"Acquisition Agreements"                both (i) the Nordkalk Share Purchase Agreement; and (ii) the NK East Share Purchase Agreement

"Admission"                                     the re-admission of the Enlarged Share Capital to trading on AIM becoming effective in accordance with Rule 6 of the AIM Rules for Companies

"Admission Document"                    the admission document which is expected to be published by SigmaRoc tomorrow in respect of the Acquisition and the Enlarged Group, pursuant to Rule 14 of the AIM Rules for Companies

"Adjusted Leverage Ratio"                net debt divided by underlying EBITDA

"AIM"                                               AIM, a market operated by the London Stock Exchange

"AIM Rules for Companies"              the AIM rules for companies published by the London Stock Exchange from time to time

"Baltics"                                           a geographical area compromising Estonia, Latvia and Lithuania and is bounded on the west and north by the Baltic Sea

"Benelux"                                         a collective name for Belgium, the Netherlands and Luxembourg

"B-Mix"                                             collectively, B-Mix Beton NV, J&G Overslag en Kraanbedrijf BV and Top Pomping NV

"Board"                                            the directors of the Company

"CAGR"                                            compound annual growth rate

"Calcinor"                                        Calcinor, S.A.

"Carmeuse"                                      Carmeuse Holding S.A.

"Carrières du Boulonnais" or            SAS Carrières du Boulonnais, part of Groupe Carrières du

"CdB"                                               Boulonnais (Groupe CB)

"Casters"                                          Casters Beton NV

"CCP"                                               CCP Building Products Limited

"CDH" or "Carrières du Hainaut"        CDH Développement SA together with its wholly owned subsidiaries Carrières du Hainaut SCA and CDH International SCA

"Company" or "SigmaRoc"                SigmaRoc plc, a public limited company incorporated under the laws of England and Wales with registered number 05204176, whose registered office is at 7-9 Swallow Street, London W1B 4DE, United Kingdom

"Consideration"                                the approximate €470 million subject to certain adjustments including in respect of cash, debt and working capital aggregate consideration for the Acquisition pursuant to the Share Purchase Agreement

"Consideration Shares"                    the 50,276,521 new Ordinary Shares to be issued by the Company to the Seller as part of the consideration due pursuant to the Nordkalk Share Purchase Agreement

"COVID-19"                                       the disease caused by SARS-CoV-2, the coronavirus that emerged in December 2019

"CREST"                                          the relevant system (as defined in the CREST Regulations) for paperless settlement of share transfers and holding shares in uncertificated form which is administered by Euroclear

"CREST Regulations"                       the Uncertificated Securities Regulations 2001 (S.I. 2001 No. 3755) (as amended)

"CRH"                                               CRH plc (LON: CRH) (ISE:CRG) is an international group of diversified building materials businesses headquartered in Dublin, Ireland

"CRIRSCO"                                       Committee for Mineral Reserves International Reporting Standards

"Directors"                                       the directors of the Company

"EBITDA"                                         earnings before interest, tax, depreciation and amortisation

"EEA"                                               European Economic Area

"Enlarged Group"                             the Existing Group on Admission, i.e. as enlarged by the Acquisition and having acquired the Nordkalk Group

"Enlarged Share Capital"                  the issued Ordinary Shares upon Admission, comprising the Existing Ordinary Shares and the New Ordinary Shares

"EPS"                                               Earnings Per Share

"ESG"                                              environmental, social and governance

"ETS"                                               European Trading Systems

"EU"                                                 the European Union

"EUA"                                               Emission Unit Allowances

"EuLA"                                             European Lime Association

"EUWA"                                            The European Union (Withdrawal) Act 2018

"Executive Directors"                       the executive Directors of the Company, who are currently David Barrett, Max Vermorken and Dean Masefield and who, as at Admission, will be David Barrett, Max Vermorken and Garth Palmer

"Existing Facility"                            the Syndicated Senior credit facility of up to £125 million, provided by several major UK and European banks, led by Santander UK

"Existing Group"                              the Company and its subsidiary undertakings

"Existing Ordinary Shares"              the 279,876,576 Ordinary Shares in issue

"FAS"                                               Federal Antimonopoly Service of the Russian Federation

"FAS Competition Clearance"           the approval by the FAS of the change of control of Nordkalk's Russian Subsidiary

"FCA"                                               the Financial Conduct Authority

"Finnsementti"                                 Finnsementti Oy, a subsidiary company of CRH

"Franzefoss"                                    Franzefoss AS, a Norwegian construction materials group

"GD Harries"                                     GDH (Holdings) Limited, or a subsidiary of

"GDH"                                              Granulat du Hainaut SA

"GDP"                                              Gross Domestic Product

"General Meeting"                            the general meeting of the Company to be held on 2 August 2021 at 11 a.m. at the offices of the Company at 56 Queen Anne Street, London W1G 8LA United Kingdom, the notice of which will be set out in the Admission Document

"Greenbloc"                                     the Existing Group's cement free ultra-low carbon precast product range

"HMRC"                                            Her Majesty's Revenue and Customs

"ISO14001"                                       the international standard for environmental management systems, designed by the International Organisation for Standardisation (ISO)to help businesses and other organisations to reduce their environmental impact

"ISO 18001 and 45001"                     the international standards for health and safety management systems designed by the ISO

"Joint Bookrunners"                         each of Peel Hunt, Liberum Capital and Numis Securities

"KPAB"                                            Kalkproduktion Storugns AB, a joint venture between Nordkalk (67 per cent.) and Lhoist (33 per cent.), which produces quicklime from raw crushed limestone extracted from the Klinthagen quarry

"LafargeHolcim"                               Holcim Ltd (SIX: HOLN) (XPAR: HOLN), operating as LafargeHolcim, a multinational producer of construction materials

"Lenders"                                         several major UK and European banks, led by Banco Santander S.A. London and BNP Paribas (as arrangers)

"LH Agreement"                               the agreement between LafargeHolcim and the Company pursuant to which the Company assumed control of LafargeHolcim's quarrying operations at the Carrières du Hainaut's Belgian site

"Lhoist"                                            Lhoist S.A., a family-owned lime, dolomite and mineral products business, headquartered in Belgium

"Liberum Capital"                             Liberum Capital Limited of Ropemaker Place, Level 12, 25 Ropemaker Street, London EC2Y 9LY, United Kingdom

"London Stock Exchange"               London Stock Exchange plc

"LTIP"                                              the long term incentive plan which is proposed to be adopted by the Company subject to shareholder approval, to be known as the SigmaRoc Performance Share Plan

"NATO"                                            North Atlantic Treaty Organization

"New Facility"                                   the new syndicated senior secured credit facilities of up to £305 million, provided by the Lenders, which comprises the Term Loan and RCF and which will replace the Existing Facility

"New Ordinary Shares"                     together, the Placing Shares, and the Consideration Shares and the Retail Offer Shares (if any)

"NICO programme"                          the "New, Inspiring, Cooperative and Open" internal performance improvement programme launched by Nordkalk in early 2019

"NK East Oy"                                    a company in the Nordkalk Group incorporated and registered in Finland, which is the holding company of Nordkalk's Russian Subsidiary and Nordkalk's Ukrainian Subsidiaries

"Nominated Adviser"                        Strand Hanson Limited of 26 Mount Row London W1K 3SQ, United Kingdom

"Non-Executive Directors"                the Non-Executive Directors, currently being Simon Chisholm, Jacques Emsens, Tim Hall and Garth Palmer and who, on Admission, shall be Simon Chisholm, Jacques Emsens and Tim Hall

"Nordkalk Group"                             Nordkalk and its subsidiary undertakings

"Nordkalk's Russian Subsidiary"      OOO Nordkalk

 

"Nordkalk Share Purchase Agreement"

the agreement dated 15 July 2021 made between the Company and the Seller pursuant to which the Company has conditionally agreed to purchase from the Seller the entire issued share capital of Nordkalk

 

"Nordkalk's Ukrainian Subsidiaries" Nordkalk Ukraine TOV and NK Prykarpattya TOV

"Numis Securities"                           Numis Securities Limited of 10 Paternoster Square, London, EC4M 7LT, United Kingdom

"NorFraKalk"                                    NorFraKalk SA, a Norway incorporated joint venture company equally owned by Nordkalk and Franzefoss

"Nordic"                                           a region comprising Finland, Iceland, Norway, Denmark, Sweden, and the Faroe Islands

"Nordkalk"                                        Nordkalk Oy Ab

"Nordkalk Group"                             Nordkalk and its subsidiary companies and undertakings

"Omya"                                            Omya AG

"NK East Share Purchase Agreement"   the conditional agreement between the Company and Nordkalk dated 15 July 2021, pursuant to which the Company may acquire NK East Oy for €1

"Option Plan"                                   the option plan adopted by the Company in 2016

"Ordinary Shares"                            ordinary shares of £0.01 each in the capital of the Company

"Panel"                                             the Panel on Takeovers and Mergers

"Peel Hunt"                                      Peel Hunt LLP of 7th Floor 100 Liverpool Street, London, EC2M 2AT, United Kingdom

"PERC"                                            Pan European Reserves and Resources Reporting Committee which administers the PERC Code

"PERC Code"                                   the code of that name for the reporting of exploration results, mineral resources and mineral reserves and which sets out minimum standards, recommendations and guidelines for the United Kingdom, Ireland and Europe, as administered by PERC

"Placing"                                          the conditional placing of the Placing Shares by the Joint Bookrunners at the Placing Price pursuant to the Placing Agreement

"Placing Agreement"                        the conditional agreement dated 15 July 2021 and made between the Company, the Nominated Adviser and the Joint Bookrunners relating to the Placing

"Placing Price"                                 85 pence per Placing Share or Retail Offer Share

"Placing Shares"                              the up to 305,882,352 new Ordinary Shares to be issued by the Company pursuant to the Placing

"Polish Competition Office"             the Office of Competition and Consumer Protection in Poland

"Polish Competition Office Clearance"              the clearances that SigmaRoc is required to obtain from the Polish Competition Office in order to complete the Acquisition and for Admission to occur

"Poundfield Precast"                        Poundfield Precast Limited

"PPG"                                              the Existing Group's Precast Products Group platform based in the UK

"PrimaryBid"                                    PrimaryBid Limited, a company incorporated in England and Wales with registered number 08092575

"Proposals"                                      together, the Acquisition, the Placing and Admission

"QCA Code"                                     the QCA Corporate Governance Code published by the Quoted Companies Alliance from time to time

"RCF"                                               a revolving credit facility of £100 million provided by the Lenders to the Company

"Resolutions"                                   the resolutions to be proposed at the General Meeting

"Retail Offer"                                    the separate PrimaryBid offer of up to 7,650,000 Retail Offer Shares to be issued to Retail Offerees at the Placing Price

"Retail Offerees"                               PrimaryBid's clients who are resident in the UK, from whom PrimaryBid may determine to accept applications in the Retail Offer

"Retail Offer Shares"                        up to 7,650,000 new Ordinary Shares to be issued under the Retail Offer

"Rettig Group"                                  Rettig Group Oy Ab

"ROIC"                                             return on invested capital, a profitability or performance ratio that aims to measure the percentage return that a company earns on invested capital

"Ronez"                                            Ronez Limited, the Existing Group's Channel Islands based business

"RTO Option Plan"                           the option plan adopted by the Company in 2016, which was conditional upon the acquisition of Ronez

"S&P"                                               S&P Global Inc. (NYSE:SPGI)

"Santander"                                      Banco Santander, S.A. (LON: BNC), a multinational banking group operating as Santander Group

"Santander UK"                                the UK branch of the Santander business

"Shareholder"                                  a holder of Ordinary Shares

"SEDOL"                                          Stock Exchange Daily Official List

"Seller"                                            the sole shareholder of Nordkalk, being Rettig Group

"SigmaGSY"                                    SigmaGSY Limited, the Existing Group's shipping business

"SKOY"                                            Suomen Karbonaatti Oy, a joint venture company between Nordkalk (51 per cent.) and Omya Oy (49 per cent.), a subsidiary of Switzerland-based industrial minerals company Omya

"SMA Mineral"                                  SMA Mineral AB

"SONIA"                                           Sterling Overnight Index Average

"Stone Holdings"                             Stone Holdings S.A.

"Term Loan"                                     a five year term loan of £205 million provided by the Lenders to the Company to part finance the Acquisition and to pay financing costs

"UK"                                                 the United Kingdom of Great Britain and Northern Ireland

"UK MAR"                                         the UK version of the EU Market Abuse Regulation (596/2014) as it forms part of the retained EU law as defined in the EUWA

"UK Prospectus Regulation"             the UK version of the Prospectus Regulation as it forms part of EU retained law by virtue of the EUWA

"underlying"                                     in relation to stated financial figures, such as EBITDA, earnings per share and profit before tax, underlying figures are stated before acquisition related expenses, certain finance costs, redundancy and reorganisation costs, impairments, amortisation of acquisition intangibles and share option expense

"UNFC"                                             United Nations Framework Classification for Resources

"Verdalskalk"                                   Verdalskalk AS, a joint venture company incorporated in Norway, in which Nordkalk holds a 10 per cent. equity interest

"World Bank"                                   the World Bank Group

 

GLOSSARY OF TECHNICAL TERMS

°C                                                   degrees Celsius

°F                                                    degrees Fahrenheit

aggregate                                      aggregates are small rock fragments (typically 0.08mm to 80mm in diameter) of mineral origin. Aggregates come in different types: maritime, fluvial and terrestrial. They may be sand, gravel or crushed gravel. Aggregates, mixed with water and cement, are essential for the production of concrete

aragonite                                       a carbonate mineral, one of the three most common naturally occurring crystal forms of calcium carbonate

asphalt                                           a mixture of bitumen and mineral aggregates used in the construction of road and car park surfaces

Bluestone                                      a high value blue coloured decorative limestone extracted from the Existing Group's CDH quarry, which has distinct characteristics and is a Global Heritage Resource

Ca(OH)₂                                          calcium hydroxide or slaked lime, produced by adding water to quicklime

CaCO₃ or calcium carbonate        calcium carbonate, a substance found in sedimentary rocks such as limestone, predominately in the crystalline forms of calcite and aragonite

calcination                                    a heating process whereby a substance is purified and, as used specifically in this announcement, the transformation of limestone to lime

calcite                                            is a carbonate mineral and the most stable polymorph of calcium carbonate

calcium silicate                             a lightweight, porous, chalky material, which is used for insulation, being suitable for temperatures up to 1200°F (649°C), as an anticaking agent in food production and as an antacid

CaO or calcium oxide                   calcium oxide, otherwise known as quicklime or lime

CAPEX                                            capital expenditure

CaS or calcium sulphide              calcium sulphide, a substance produced in steel manufacturing when limestone reacts with sulphur, which goes into slag

causticising                                  a reaction in which sodium carbonate in green liquor reacts with calcium hydroxide from the slaker to form sodium hydroxide and calcium carbonate

cement                                           cement is a hydraulic bonding agent which is obtained by heating, then grinding, a mixture of limestone and clay. Most cements are made from clinker and additives and are usually used in the form of a powder. Cement sets when mixed with water. Combined with sand and aggregates (sand or gravel), it turns into rock-hard concrete or mortar

CO₂                                                 carbon dioxide

concrete                                          concrete is a building material made by mixing water, aggregates and sand with a binding agent (usually cement) and, if necessary, with additives. This mixture is made on building sites and in factories

DWT                                                deadweight tonnage, a measure of how much weight a ship can carry. It is the sum of the weights of cargo, fuel, fresh water, ballast water, provisions, passengers and crew

dolomite                                          an anhydrous calcium magnesium carbonate mineral with a chemical composition of CaMg(CO3)2

E1, E2, etc.                                      a resource product classification tool of environmental-social-economic viability, as administered by UNFC (see Mineral Reserves and Potential Reserves of Part I of the Admission Document)

F1, F2, etc.                                      a resource product classification tool of technical viability, as administered by UNFC (see Mineral Reserves and Potential Reserves of Part I of the Admission Document)

G1, G2, etc.                                     a resource product classification tool of confidence in an estimate, as administered by UNFC (see Mineral Reserves and Potential Reserves of Part I of the Admission Document)

GCC                                                ground calcium carbonate

Ha                                                   a hectare is a non-SI metric unit of area equal to a square with 100-metre sides (1hm²), or 10,000m², and is primarily used in the measurement of land

H2O                                                 the chemical formula for water

igneous rock                                   a rock that has formed through the cooling and solidification of magma or lava

kg                                                    kilogram

kt                                                     thousand tonnes

ktpa                                                 thousand tonnes per annum

licence, lease or permit                   any form of licence, permit, lease or other entitlement granted by the relevant Government department in accordance with its mining legislation that confers on the holder certain rights to explore for and/or extract minerals that might be contained in the land, or ownership title that may prove ownership of the minerals

lime or quicklime                            a limestone product with the chemical formula CaO, produced by heating limestone at high temperatures in kilns, which has a range of uses, including in the production of iron and steel, paper and pulp production, treatment of water and flue gases and in the mining industry

limestone                                        is a sedimentary rock composed primarily of the calcite and aragonite minerals, both of which are formed from calcium carbonate

Mt                                                    million tonnes

Mtpa                                                million tonnes per annum

MWh                                                megawatt-hour, a unit for measuring power that is equal to 1,000 kilowatts of electricity being used continuously for one hour

PCC                                                 precipitated calcium carbonate

pH                                                   a logarithmic scale used to measure of how acidic/basic a solution is. The pH scale ranges from 0 to 14, with 7 being neutral. pHs of less than 7 indicate acidity, whereas a pH of greater than 7 indicates a base

slag                                                 the silicon dioxide and metal oxide mixture left over as a by-product of extracting metal from its ore during the smelting process

slaking                                            the process of adding water to calcium oxide (quicklime) to produce calcium hydroxide (slaked lime or hydrated lime)

Reserves                                         in the case of Nordkalk, the estimate of reserves which represents a 'commercial project' pursuant to the UNFC classification system, where the relevant permitting has been approved and the E1, F1 and G1 or G2 criteria under UNFC are met. In the case of the Existing Group, Reserves represent the estimate of the part of a Resource that has more certainty and considers non geological factors such as permitting, feasibility assessments, social and environmental factors, and also factors diluting materials and allowances for losses, which may occur when the material is mined or extracted

Resources                                       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 are known, estimated or interpreted from specific geological evidence and knowledge, including sampling. In the case of Nordkalk, Resource estimates represent the estimate of potential reserves where the E2, F2 and G1, G2 or G3 criteria under UNFC classification are met. In the case of the Existing Group, Resources represent the estimate of the potentially viable mineable minerals

tpa                                                   tonnes per annum

tph                                                  tonnes per hour

wharves                                           plural of wharf, a structure on the shore of a harbour or on the bank of a river or canal where ships may dock to load and unload cargo or passengers

Wollastonite                                    a naturally occurring mineral which is a chemical combination of calcium, silicon and oxygen. It is formed when limestone, or other high-calcium rocks, undergo high temperature and pressure changes sometimes in the presence of silica-bearing fluids such as in skarns or contact metamorphic rocks

 

APPENDIX II - RISK FACTORS

Investing in and holding Ordinary Shares involves financial risk. Prospective investors in the Ordinary Shares should carefully review all of the information contained in the Admission Document and should pay particular attention to the following risks associated with an investment in the Ordinary Shares, the Enlarged Group's business and the industry in which it participates prior to making an investment decision.

The risk factors set out below, which are not set out in any order of priority, apply to the Enlarged Group as at the date of this announcement.

The risks and uncertainties described below are not an exhaustive list, are not set out in any order of priority and do not necessarily comprise all, or explain all, of the risks associated with the Enlarged Group and the industry in which it participates or an investment in the Ordinary Shares. They comprise the material risks and uncertainties in this regard that are known to the Existing Group and should be used as guidance only. Additional risks and uncertainties relating to the Enlarged Group and/or the Ordinary Shares that are not currently known to the Existing Group, or which the Existing Group currently deems immaterial, may arise or become (individually or collectively) material in the future, and may have a material adverse effect on the Enlarged Group's business, results of operations, financial condition and prospects. If any such risk or risks should occur, the price of the Ordinary Shares may decline and investors could lose part or all of their investment. There can be no certainty that the Enlarged Group will be able to implement successfully its growth strategy as is detailed in this document. No representation is or can be made as to the future performance of the Enlarged Group and there can be no assurance that the Enlarged Group will achieve its objectives.

Prospective investors should consider carefully whether an investment in the Ordinary Shares is suitable for them in the light of the information in the Admission Document and their personal circumstances. Prospective investors should consult a legal adviser, an independent financial adviser or a tax adviser for legal, financial or tax advice if they do not understand any part of the Admission Document.

RISKS RELATING TO THE ACQUISITION

Conditions to the Acquisition Agreements, including the Polish Competition Office Clearance and FAS Competition Clearance

The Acquisition as a whole is conditional upon, amongst other things, the successful completion of the Placing, the Resolutions numbered 1 and 2 being passed at the General Meeting, the Polish Competition Office Clearance and Admission. There can be no assurance that this condition and the other conditions to the Nordkalk Share Purchase Agreement (summarised in Part II of the Admission Document) will be satisfied and that the Acquisition will complete by the long stop date, or at all.

In addition to Shareholder approval, the Acquisition is conditional on the Company receiving the Polish Competition Office Clearance, for which the Company will shortly make the necessary filings with the Polish Competition Office. The Polish Competition Office will have four weeks to issue a decision concerning the Company's initial filings, however as the Polish Competition Authority usually asks questions in relation to the submitted documentation and such questions suspend the deadline to issue the decision, the Board has received advice and would expect competition clearance in Poland to take approximately four to six weeks from filing (in the event that there are no overlapping markets). There is no guarantee that the Polish Competition Office Clearance will be forthcoming or be granted.

Furthermore, the acquisition by the Company of NK East Oy (which owns the entire issued share capital of Nordkalk's Russian Subsidiary and Nordkalk's Ukrainian Subsidiaries) pursuant to the NK East Share Purchase Agreement is subject to and conditional upon FAS Competition Clearance being granted. If it is not granted, the Company will have the right to ask for a carve-out of Nordkalk's Russian Subsidiary form NK East Oy to complete the transaction. If any of the conditions to the Nordkalk Share Purchase Agreement are not satisfied by the Long Stop Date being 31 December 2021, the Acquisition will lapse, neither the Acquisition nor the Placing will complete and Admission of the Enlarged Share Capital will not occur.

If any of the conditions to the NK East Share Purchase Agreement are not satisfied by the Long Stop Date being 30 June 2022 the Company will not acquire NK East Oy.

The Company will have spent significant amount of time and money on fees which will not be recoverable.

There are limitations to the protection afforded to the Company pursuant to the warranties and indemnities contained in the Acquisition Agreements

Warranties and indemnities under the Nordkalk Share Purchase Agreement are subject to stringent limitations and are limited in scope (as will be described in detail in Part II of the Admission Document). Warranty and indemnity insurance has been obtained by the Company from RiskPoint in order to minimise the risks associated with as many of the aforementioned limitations as can be covered. The warranty and indemnity policy is subject to certain limitations including an overall limitation of liability of €125,000,000, a retention of €1,500,000 and individual claims limitations of €500,000 in respect of general warranties, other than tax warranties which are subject to an individual limitation of €250,000. The policy also contains time limitations of 36 months to bring a claim in respect of general warranties and 84 months for tax and fundamental warranties. Fundamental warranties are capped at the sale price with the first €125,000,000 covered under the W&I policy and the remainder being given by the Rettig group for 84 months. However, the warranty and indemnity policy includes certain exclusions in respect of warranties and areas that the Company will not be insured against, including pensions underfunding and the pensions indemnity (save in respect of the Nordkalk defined contribution scheme, further details of which are summarised below). As a result, the Company and may be exposed under certain circumstances.

Should all relevant breaches fall below the retention amount for the insurance or should individual claims fall beneath the de minimis levels noted above or should such breaches be excluded from the coverage in the policy, the liability in relation to such breaches will sit with the Existing Group. Accordingly, the Company may incur substantial losses if a warranty breach occurs or a matter arises which is subject to indemnity and which is not fully covered by insurance or due to the occurrence of other matters not protected by warranties and indemnities under the Acquisition Agreement, which could have a material adverse effect on the Enlarged Group's business results of operations and financial condition.

As stated above, the terms of the insurance will not cover pension underfunding or a claim under the pensions indemnity contained in the Nordkalk Share Purchase Agreement (save in respect of the Nordkalk defined contribution scheme). The Company has investigated Nordkalk's pension arrangements as part of its due diligence. The Company is not aware of any short falls or additional liabilities, although it cannot guarantee that this is the case and the Company is reliant on the accuracy of the information provided to it by Nordkalk. Information on Nordkalk's arrangements in Norway have not been provided. The arrangements vary depending on jurisdiction and a brief overview is as follows:

Estonia

Nordkalk has no pension plan in Estonia and therefore, the public health and pension insurance scheme applies. Social tax of 33 per cent. must be paid by an employer on all salary related payments the employer makes to its employees. An amount of social tax of 33 per cent consists of a public pension scheme contribution of 20 per cent. and of a public health insurance contribution of 13 per cent. There is also an additional public pension scheme available. The additional public scheme is funded by two contributions: a contribution of 2 per cent is withheld from all salary related payments the employer makes to the employee and a contribution of 4 per cent is provided by the state. The contribution of 4 per cent by the state decreases the public pension scheme contribution of 20 per cent to 16 per cent. An employer is not required to separately to contribute to the additional public pension scheme. Individuals may substitute accession to the additional public pension scheme with investments at the specific bank account with the purpose of pension investments.

Finland

All employees are covered by statutory pension insurance in accordance with the Employees Pensions Act (395/2006, as amended), which is a defined benefit scheme. The contribution percentages are defined yearly. In 2021, employees were required to contribute 7.15 per cent. of their salary (under 53 and over 62 years) or 8.65 per cent. (between 53 and 62 years). Nordkalk's contribution is approximately 17 per cent. in accordance with the law.

Nordkalk also operates a defined contribution scheme for approximately 5 persons, being current and former management based in Finland. The employees' contributions are decided yearly, being approximately one month's salary and Nordkalk's contribution is approximately 20 per cent. of the employee's contribution.

Poland

Nordkalk Sp maintains two pension schemes for its employees: (1) an Employee Capital Plan (PPK), which is a mandatory scheme allowing additional retirement savings; Nordkalk Sp maintains the plan under statutory rules, providing a minimum statutory contribution financed by the employer (1.5 per cent. of gross remuneration) and contribution financed by the participant (2 per cent. of gross remuneration). No additional contributions are financed by the employer; (2) an Employee Pension Plans (PPE) which is an additional scheme allowing additional retirement savings; Nordkalk Sp contributes PLN 100 (approximately €22) per month per each employee.

Sweden

In Sweden, pensions are defined through collective agreements. The ITP pension plan (for white-collar workers) and the SAF-LO pension plan (for blue-collar workers) apply to Nordkalk AB, pursuant to the collective bargaining agreements in place. All employees are covered by these pension plans except the CEO who has a separate, defined contributions plan where he receives pension contributions of 15 per cent. of his salary.

Norway

No information on pensions in Norway have been provided by Nordkalk.

The due diligence carried out in respect of Nordkalk and the Enlarged Group may not have revealed all relevant facts or uncovered significant liabilities

While the Company conducted due diligence, such as legal, tax, financial and technical, in respect of the Acquisition with the objective of identifying any material issues that may affect its decision to proceed with the Acquisition, there can be no assurance that all such issues have been identified. The Company also used information revealed during the due diligence process to formulate its business and operational planning. During the due diligence process, the Company is only able to rely on the information that was made available to it. Any information that was provided or obtained from available sources may not have been accurate at the time of delivery and/or remained accurate during the due diligence process and in the run-up to the Acquisition. Whilst the Company is of the opinion that sufficient information has been made available for its purposes based upon its current knowledge of the Nordkalk Group, there can be no assurance that the due diligence undertaken was adequate or accurate or revealed all relevant facts or uncovered all significant liabilities. If the due diligence investigation failed to identify key information in respect of the Nordkalk Group, or if the Company considered certain material risks to be commercially acceptable, the Company may be forced to write-down or write-off assets in respect of the Nordkalk Group, which may have a material adverse effect on the Enlarged Group's business, financial condition or results of operations. In addition, following the Acquisition, the Company may be subject to significant, previously undisclosed liabilities in respect of the Nordkalk Group that were not known or identified during due diligence and which could have a material adverse effect on the Enlarged Group's business, financial condition and results of operations. In addition, whilst the Company's technical advisers were able to visit Nordkalk's major sites of operation, given COVID-19 related restrictions, it was not possible to complete site visits to all of Nordkalk's assets.

In particular, information relating to the joint ventures to which members of the Nordkalk Group are a party has been difficult to ascertain, due to restricted information rights and existing confidentiality restrictions in the joint venture arrangements which the relevant Nordkalk entity is subject to. The Board considers the risks in relation to this relatively minor in the context of the Enlarged Group.

Furthermore, as is customary when investigating companies for the purposes of an acquisition, as part of its due diligence the Company has uncovered a variety of matters in the Nordkalk Group which could be improved upon (which span a variety of areas including but not limited to employment, property, land title registration, competition, data protection and IP protection). The Company and the Board assess these matters as minor in the context of the Acquisition and their intention is to address these post Admission to the extent it is considered prudent to do so in the context of the Enlarged Group.

Whilst the Company has received a form of contractual comfort pursuant to the warranties and indemnities contained in the Nordkalk Share Purchase Agreement and has certain protections under the warranty and indemnity insurance, there is no guarantee that such arrangements will provide adequate compensation for the Company for any loss or liability arising from any undisclosed liabilities, issues or defects that may arise in relation to Nordkalk. Further the warranty and indemnity insurance does not cover any issues in relation to the title to shares of Nordkalk. Nor is there any guarantee that any loss or liability incurred is capable of being recovered in full under the terms of the insurance policy. This could have a material adverse effect on the financial position of the Enlarged Group.

Nordkalk's results may not match the Board's expectations

If the results and cash flows generated by Nordkalk are not in line with the Company's expectations, it may materially impact on the financial performance of the Enlarged Group which could have an adverse effect on the Enlarged Group's financial position and share price. In addition, any goodwill that arises on the Acquisition may be required to be written down, which, while having no cash impact, could have an adverse effect on the Enlarged Group's financial position and share price.

There can be no assurance that the Enlarged Group will realise the anticipated benefits of the Acquisition

The Enlarged Group may not realise the anticipated benefits from the Acquisition or may encounter difficulties in achieving the anticipated benefits. The Enlarged Group is subject to all of the risks set forth in this "Risk Factors" section which may impact the Enlarged Group's ability to realise the benefits its Directors believe will result from the Acquisition. In addition, if the future financial performance and cash flows generated by the Enlarged Group are not in line with the Directors' expectations, or the mineral resource is not of the quality, or is not present in the volumes that the Directors expect, it may significantly affect the financial performance of the Enlarged Group. This could reduce the potential benefits arising from the Acquisition, adversely affect the market price of the Ordinary Shares, or have a material adverse effect on the Enlarged Group's business, financial condition, operating results and prospects.

Written agreements between Nordkalk and key customers and key suppliers are lacking and several material agreements between Nordkalk and key suppliers have expired

Certain material suppliers of Nordkalk, including those in the top 20 suppliers for 2020 and 2021 to date, are supplying Nordkalk without legally binding written agreements. Whilst these suppliers have been operating in this way for some time, there is a risk that in the absence of written terms there may be disagreements as to the terms of supply or the supply may be terminated or discontinued without notice. In addition, certain agreements with key suppliers and customers have expired. It has been confirmed by Nordkalk that deliveries have continued on the basis of the customer's or supplier's terms under the expired agreements and that extension negotiations would usually take place approximately three months before the end of the contractual term. However, there is a risk that any such extension may not be capable of being agreed and as such the relevant supplier or customer may no longer be legally bound to perform their obligations under the relevant agreement. Following completion of the Acquisition, the Company will be taking steps to seek to ensure that all key suppliers and customers are legally bound by written agreements.

Nordkalk AB is involved in a major dispute with the Swedish state

Nordkalk AB, Nordkalk's main operating subsidiary in Sweden, is involved in a dispute with the Swedish state as claimant, in which Nordkalk AB has claimed damages from the Swedish state in the amount of SEK 2,368,379,000 (approximately £198 million).

On 1 April 2020, Nordkalk AB filed a claim for compensation for economic loss due to land use restrictions as a result of the Swedish government's designation of a piece of land as environmentally protected pursuant to a Natura 2000 decision (Nacka District Court case no. M2296-20). The counterparty is the Swedish State, which is represented by the Legal, Financial and Public Procurement Agency.

In June 2014, Nordkalk AB was granted a permit for limestone quarrying on the company-owned property known as Bunge Ducker 1:64 (case no. M 366-13) by the Land and Environmental Court. The permit allowed a maximum quarrying of 2.5Mtpa of limestone until the limestone deposit on the property ends, which was expected to take about 25 years. The permit decision was appealed. On 31 August 2015, before the Land and Environmental Court of Appeal had ruled in the appealed case, the Government designated Bunge Ducker 1:64 (including the limestone deposit) as a Natura 2000 area. Within a Natura 2000 area, biodiversity is considered worthy of protection and no environmentally damaging interventions can be made. In a judgment on 11 September 2018, the Land and Environment Court of Appeal revoked the June 2014 permit with direct reference to the fact that the alleged limestone quarry now was designated as a Natura 2000 area according to the Government decision. Nordkalk AB appealed to the Supreme Court which, in a decision on 1 April 2019, refused leave to appeal and the Land and Environmental Court of Appeal's judgment gained legal force. The case is ongoing. Depending on the duration and outcome, legal costs may be incurred in making the claim. Although it is usual for each party in litigation to bear its own costs, Swedish case law has precedent to support that in cases such as this, the State may be responsible for Nordkalk's costs, albeit this is at the determination of the court. Notwithstanding this, it is a term of the Nordkalk Share Purchase Agreement that the costs of the litigation will be split 30:70 (SigmaRoc : the Seller) and any award or damages granted by the court will be split in the same proportions. In the event that the Company wishes to withdraw from the claim it is agreed that the Company shall have no right to any awards or damages which will be for the Seller only. In the event that the Company wishes to withdraw from the claim and does not grant the Seller consent to continue with proceedings on its own, the Company shall pay to Seller a fee equal to €3,500,000 (from which amount any proceeds already paid to the Seller from divestments of Idle Gotland Plots shall be deducted).

There are inherent environmental risks in the sector that the Enlarged Group operates

Quarrying operations have inherent risks and liabilities associated with damage to the environment and the disposal of waste products occurring as a result of exploration and production. Environmental and safety legislation and regulation (e.g. in relation to reclamation, disposal of waste products, pollution and protection of the environment, protection of wildlife and otherwise relating to environmental protection) is frequently changing and is generally becoming more restrictive with a heightened degree of responsibility for companies and their directors and employees and more stringent enforcement of existing laws and regulations. Future changes (which may include additional areas being protected pursuant to a Natura 2000 designation) could impose significant costs and burdens on the Enlarged Group (the extent of which cannot be predicted) both in terms of compliance and potential penalties, liabilities and remediation. Investor sentiment may also change and there is a risk that investors turn away from sectors which have potentially negative environmental impacts. Breach of any environmental obligations could result in penalties and civil liabilities and/or suspension of operations, any of which could adversely affect the Enlarged Group. Further, approval may be required for any material plant modifications or additional land clearing and for ground disturbing activities. Delays in obtaining such approvals could result in the delay to anticipated exploration programmes or mining activities.

The Enlarged Group will need to apply for new permits to maintain or increase the level of future production at several of its sites of operation, where the permitting application processes may be adversely affected or ultimately fail due to environmental concerns, including protected species and complaints from local inhabitants. Any environmental issues encountered will likely increase the expense and timeline for the permitting process and decrease the ultimate likelihood of success. In particular, the Klinthagen mine (located on Gotland, Sweden) is nearing the end of its current Reserves, and Nordkalk has already encountered difficulties obtaining permits for land on Gotland due to environmental issues.

There may also be unforeseen environmental liabilities resulting from quarrying activities, which may be costly to remedy. If the Enlarged Group is unable to fully remedy an environmental problem, it may be required to stop or suspend relevant operations or enter into interim compliance measures pending completion of the required remedy. The potential exposure may be significant and could have a material adverse effect on the Enlarged Group. The Enlarged Group is currently evaluating the costs of insurance for environmental risks (including potential liability for pollution or other hazards as a result of the disposal of waste products occurring from production).

Whilst the Company has carried out appropriate legal, financial and technical due diligence on Nordkalk, it has not been able to fully assess certain aspects of the Nordkalk business, or visit every site of operation, including a full assessment of Nordkalk's compliance with applicable environmental laws and regulations or visit every site of operation. Whilst appropriate warranties and other comfort, where possible, has been sought from the Sellers in the Acquisition Agreement, there can be no guarantee that Nordkalk is not later found to be in breach of applicable law and regulation and may be requested to remedy any such breaches at its own cost or else may incur additional liabilities (including fines and censures) in respect of the same.

In particular, a number of sites in Sweden have been registered as contaminated properties in the national register of contaminated properties, including the Storugns and Köping ports and there is therefore a potential financial liability attached to this registration. In Sweden, registration is automatic for any site with operations that contaminate or could potentially contaminate the land.

Environmental hazards may exist on the properties in which the Enlarged Group holds interests that are unknown to the Company and that have been caused by previous or existing owners or operators of the properties. To the extent the Enlarged Group is subject to environmental liabilities, the payment of any liabilities or the costs that may be incurred to remedy environmental impacts would reduce funds otherwise available for operations. However, compensation can often be claimed from previous landowners if they were the polluters.

Certain financing arrangements are subject to change of control provisions

Certain of the financing arrangements which have been entered into by members of the Nordkalk Group contain change of control clauses which will require the consent of the third party or otherwise permit unilateral termination. To the extent that the Company wishes to keep these financing arrangements in place following completion of the Acquisition, the Company will require the consent of third parties, which may not be forthcoming.

There is a put option in NKD Holding Oy's Shareholders' Agreement

The shareholders' agreement relating to NKD Holding Oy, details of which are contained in paragraph 16.2(b) of Part VI of this document contain a put option on Nordkalk. At any time after 12 October 2032 (being the fifteenth anniversary of the agreement's effective date of 12 October 2017) NKD Holding Oy's other shareholder, an Estonian company named Debalma OÜ (which holds 49 per cent. of the issued share capital of NKD Holding Oy) has the right to demand that Nordkalk acquires the shares in NKD Holding Oy owned by Debalma OÜ, at an option price which will be calculated based on the mechanism included in the NKD Holding Oy's Shareholders' Agreement.

Land owned by the Nordkalk Group may be adversely impacted by the construction of a motorway in Poland

The Polish government is planning to construct a motorway in Poland (the S12 motorway) which may impact the northern part of the Slawno deposit. The Company has been able to ascertain from due diligence that Nordkalk owns two plots of land and is intending to buy further plots (and extend a mining permit), which may be impacted by the construction of the S12 motorway. The construction of the motorway may involve the expropriation of Nordkalk's land, thereby impacting the ability of this site to operate. The construction may also provide an opportunity for the Enlarged Group to provide the materials for the construction.

Nordkalk is currently in a dispute with a third party regarding certain patents

Nordkalk is currently in a dispute with a third party relating to the use of a number of patents relating to machinery used to produce a specific product. The third party alleges that the patents are based upon technology derived from the third party and is willing to file for an invalidation of the patents in question. The Company understands that Nordkalk disputes this claim and the use of the patent is subject to ongoing negotiations between the parties. Whilst the Company assesses this to be a minor matter, it may be forced to spend fees and resources on defending any claim (should a formal claim be instigated) and there can be no guarantee that it would be successful in doing so. Should the patents in question be invalidated, competitors and other third parties would be able to use the technology freely and therefore manufacture or produce similar or competing products.

RISKS RELATING TO THE ENLARGED GROUP AND ITS BUSINESS

Mineral Resource and Mineral Reserve estimates and Nordkalk's use of the United Nations Framework Classification (UNFC) Mineral Resource and Mineral Reserve categorisation

In addition to the above, the Enlarged Group's reported Resources are estimates based on external geologist review of sites and geological data and consider a range of assumptions. In addition, Resource estimates can be based on limited sampling and consequently may be uncertain because the samples may not be representative. There are numerous uncertainties inherent in estimating Resources and Reserves, including factors beyond the control of the Enlarged Group. The estimation of Resources is a subjective process and the accuracy of any such estimates is a function of the quality of available data and of engineering and geological interpretation and judgment. Results of drilling, material testing, production, evaluation of mine plans and exploration activities subsequent to the date of any estimate may justify revision (up or down) of such estimates. There is no assurance that the entirety of the Resources can be economically quarried. Mineral Reserves have more certainty and consider non geological factors such as permitting, feasibility assessments, yield, social and environmental factors. Lower market prices, increased production costs, reduced recovery rates and other factors may render parts of the Enlarged Group's Resources unviable to exploit and may result in revision of its estimates from time to time. Reserve data is not indicative of future results of operations. If in the future, the Enlarged Group's actual Resources and Reserves prove to be less than the current estimates, other than as a result of depletion through production, the Enlarged Group's results of operations and financial condition may be materially and adversely affected. The Company and the Directors cannot give any assurance that the estimated Reserves will be recovered as the Enlarged Group proceeds through production or that they will be recovered at the volume, grade and rates estimated.

Furthermore, Nordkalk uses the United Nations Framework Classification (UNFC) mineral Resource and mineral Reserve categorisation and reporting standard over the more commonly-used Committee for Mineral Reserves International Reporting Standards (CRIRSCO) based disclosure standard for mineral Resource and mineral Reserve estimates. The UNFC is a public domain standard that has gained traction with European governments. The UNFC is typically used for public reporting of national mineral inventories and as a generic classification framework. If estimates of mineral Reserves and mineral Resources are to be re-classified using the more technically detailed CRIRSCO standard in the future, revised modelling and planning will be required and may affect the assessment of the minerals which may result in the downward adjustment of available mineral Reserves. Nordkalk is reliant on mineral Reserves to extract limestone and any reduction to Reserves is likely to reduce the economic life of a quarry until such time as additional Reserves can be accessed, which could materially impact the longevity of the Enlarged Group's operations at quarrying sites where there is a low level of Reserves and significant planned extraction rates.

The operations of the Enlarged Group require planning permission permits and licences

The operations of the Enlarged Group require licences, permits and in some cases renewals of existing licences and permits from various governmental authorities. They also require appropriate planning permissions to apply to the area of the Enlarged Group's operations. Planning consents are required in order to extract the Enlarged Group's mineral reserves and build and update the construction and operation of concrete and asphalt plants. Planning applications can take years to be determined and, consequently, planning permissions can be costly to obtain and may ultimately not be successful. The granting of planning permissions normally attaches conditions on operating hours, emissions, discharges, restoration etc. They can be subject to appeal from both national and local lobby groups and ultimately to the public enquiry. There are risks that applications are unsuccessful or are delayed at sites where reserves become critical. Further the Enlarged Group's ability to obtain, sustain or renew licences and permits and other licences and permits that are required by it on applicable terms is subject to changes in regulations and policies and to the discretion of the applicable governmental authorities.

In particular, the Klinthagen quarry is nearing the end of its current Reserves and its proposed continuing operation and/or expansion is subject to receiving requisite permits and consents. The Miedzianka site, which represents the vast majority of extraction in Poland and generates the most revenues in country, currently has Reserves that are estimated to last six years following recently acquired additional permitting but requires ongoing work for further permitting and expansion.

There is no guarantee that the Enlarged Group will obtain or be granted or retain the requisite planning or permits to carry on its planned operations, which failure could have a material adverse effect on parts of the Enlarged Group's business.

The Enlarged Group is subject to a broad range of laws, regulations and standards

The Enlarged Group will be subject to a broad range of laws, regulations and standards, including those relating to employment, pensions, data protection, land and water use pollution, protection of the public, protection of the environment and the handling of waste materials, mineral production, exports, taxes and other matters.

Future changes in applicable laws, regulations, standards and changes in their enforcement or regulatory interpretation could result in changes in legal requirements or in the terms of existing permits or agreements applicable to the Enlarged Group or its properties, which could have a material adverse impact on the Enlarged Group's current operations and future projects. In particular, environmental regulations and standards are becoming increasingly stringent. Existing and possible future environmental legislation, regulations and actions could cause significant expense, capital expenditures, restrictions and delays in the Enlarged Group's activities, the extent of which cannot be predicted and which may well be beyond the capacity of the Enlarged Group to fund.

It is the Enlarged Group's policy to require that all of its subsidiary undertakings, employees, suppliers and sub-contractors comply with applicable laws, regulations and standards. However, violations of such laws, regulations and standards, in particular environmental laws, could result in restrictions on the operations of the Enlarged Group's sites, damages, fines or other sanctions, increased costs of compliance with potential reputational damage and potential loss of future contracts.

The enlarged Group may assume responsibility for restoration costs

Upon cessation of any quarrying operations, the Enlarged Group may assume responsibility for costs associated with restoring the operational sites by taking reasonable and necessary steps in accordance with generally accepted environmental practices. Any environmental permits held by the Enlarged Group may also specify commitments to specific restoration activities on a site. However, some restoration provisions can be advantages to the company, such as restoring excavations as inert landfill sites or tourist/commercial attractions such as water parks or nature reserves.

There is uncertainty as to the impact on the Enlarged Group of government spending

The Enlarged Group will be largely dependent on government spending on improving public infrastructure, buildings and services. Governments may decide to reduce present or future investment in transport, health or other construction projects or other areas in which the Enlarged Group can compete for work to supply building materials to contractors. Any reduction in such investment and funding may have an adverse effect on the Enlarged Group's future revenues and profitability, however the Enlarged group has a diverse portfolio of products, services and customers.

Nordkalk's customers may cease to continue trading with Nordkalk or may reduce their level of demand

Several customers of Nordkalk have contracts which are set to expire, can be terminated, or can be renegotiated in 2021 or 2022. This could impact Nordkalk's revenues and its profitability levels. However, contracts are typically concluded for one or two years and renewed thereafter. Moreover, Nordkalk's top ten customers in terms of turnover only represented 32.7 per cent. of Nordkalk's total revenues in 2019, and this has not changed materially since then. The risk of impact on the Enlarged Group's profitability is therefore fairly low.

The Enlarged Group is active in a competitive industry

The industry in which the Enlarged Group operates is intensely competitive. The Enlarged Group will compete with numerous other local and international companies, including potentially larger competitors with access to greater financial, technical and other resources than the Company, which may give them a competitive advantage. In addition, actual or potential competitors may be strengthened through the acquisition of additional assets and interests and competition could adversely affect the Company's ability to acquire suitable additional assets in the future. The Company's success will depend on its ability to develop the assets of the Enlarged Group and in addition, select and acquire additional targets in accordance with its acquisition strategy and there can be no assurance that the Company will continue to be able to compete successfully with its rivals.

The Enlarged Group is subject to competition law

As part of its due diligence, the Company has become aware that certain clauses which are contained in a very small selection of contracts which members of the Nordkalk Group have entered into may be considered to be anti-competitive. In the event that the relevant Nordkalk entities were found to be in breach of local competition laws, it could result in damages and fines. The Company intends to address the clauses in question following completion of the Acquisition to ensure proper compliance with local law and regulation.