29th Dec 2021 12:55
(Alliance News) - Cadence Minerals PLC was the top performer on AIM on Wednesday as it cleared away the last big obstacle to its investment in the Amapa iron ore project in Brazil, calling this its "greatest achievement" as a company.
Shares in the London-based investor in mineral resources were 26% higher in London around midday Wednesday at 24.65 pence, easing a bit after jumping by more than 40% in morning trade. Cadence shares are up 70% so far in 2021.
Cadence said it has entered into a binding settlement agreement with the secured bank creditors of Dev Mineracao SA, the owner of the Amapa project. The agreement is the last major precondition for Cadence to vest its initial USD2.5 million for 20% of the Amapa iron ore mine, beneficiation plant, railway and private port.
As a result, Cadence and Indo Sino's joint venture has now secured 100% ownership of Amapa. Cadence has already begun work on the next investment phase to earn an additional 7% of Amapa for USD3.5 million.
Chief Executive Kiran Morzaria said the deal represents its "greatest achievement to date as a mining investment company".
The original credit facility provided to Dev Mineracao had a principle amount outstanding of USD135 million. The agreement settles all of the principle amount plus all interest, default interest, outstanding costs and fees, Cadence said. The new facility is secured over all of Dev Mineracao's equity and assets.
The agreement will see the total principle amounts owed to the creditors reduced to USD103 million from about USD231 million. This will be paid over two years and will come from the net profits from the sale of Dev Mineracao's iron ore stockpiles.
"We have already embarked on Phase 2, where Cadence will vest an additional USD3.5 million to take our holding to 27%. Given the rate of progress that I saw on visiting Amapa in October, I have every confidence that the day when our newly recommissioned mine re-commences production will come, at which point the nascent value in the project will be realised for the benefit of all our investors and shareholders," Morzaria added.
Non-Executive Chair Andrew Suckling said: "The opportunity is simply huge. Amapa was once owned by Anglo American PLC, and we fully intend to restore the mine and infrastructure to its former glory, and more besides given that we intend to produce a higher quality product mix. Even now, the value of this transaction is only starting to register with the markets, something I truly believe will change dramatically in the coming years."
Anglo impaired the asset in its 2012 accounts to USD462 million, holding a 70% stake in the mine at the time.
The project started operations in 2007, with production ramping up from 712,000 tonnes in 2008 to 6.1 million tonnes in 2012. Anglo sold out in 2012, and mining stopped in 2015. The current mineral resource estimate is 176.7 million tonnes at 39.7% iron in the indicated category and 8.7 million tonnes at 36.9% in the inferred category.
By Paul McGowan; [email protected]; and Tom Waite; [email protected]
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