Agreement with Beryl Holdings (Pty) Ltd

African Potash Limited / Index: AIM / Epic: AFPO / Sector: Mining

1 December 2015

African Potash Limited ('African Potash' or 'the Company')

Agreement with Beryl Holdings (Pty) Ltd

African Potash, the AIM listed exploration company focused on the vertical integration of fertiliser operations in Africa and sub-Saharan potash assets, is pleased to announce that it has entered into an agreement with Beryl Holdings Pty Limited ('Beryl Holdings'), a South African investment firm, to collaborate in terms of its fertiliser trading operations in Southern and Eastern Africa (the 'Fertiliser Business') (the 'Transaction'). This agreement is expected to strengthen African Potash's fertiliser trading and delivery capabilities and accelerate its roll-out strategy to become one of Africa's premier integrated fertiliser companies.

Under the terms of the agreement, African Potash will enter into a long term relationship with Beryl Holdings, whereby Beryl's main fertiliser trading activities (which include trading, logistics and financing) will be restructured and operated via a newly formed Mauritian company, which will become a wholly owned subsidiary of African Potash. Beryl Holdings' current shareholding in logistics company Bollore Logistics Africa, is expected to enhance the value of this partnership, as it is expected that this logistics company will enter into a trading relationship with the Mauritian company. The Mauritian company will not be inheriting or having novated to it, existing revenue generating contracts of Beryl Holdings - instead new contracts will be signed up by the Mauritian company for its trading relationships (and Beryl Holdings will assist in obtaining such contracts through its current presence in the market).

The payment consideration by African Potash to Beryl Holdings (or a person nominated by Beryl Holdings for this project ("the Sellers")) for this agreement is within the following agreed principle terms:

· African Potash either directly or through an associated or related entity or subsidiary will acquire, for a nominal value of GBP 1 the entire issued share capital of the Mauritian Co (Mauritian Co is a newly formed company and has no trading history or historical financial information).

· Payment for actual future earnings achieved will be made on the following basis;

· the Mauritian company needs to achieve a minimum EBITDA of US$4M in either the First Financial Period or the Second Financial Period. Such EBIDTA will be confirmed and certified by an independent accounting firm in Mauritius jointly appointed by both African Potash and the Sellers.

· The first financial period is 12 months from the date of acquisition of the shares of the Mauritian company by African Potash (which should not be more than 45 business days from the date the Mauritian Co is established).

The Second Financial Period = 12 months from the date the First Financial Period ends.

· Benchmarked to this is the value of investment of Beryl Holdings and/or the Sellers - if US$4m EBITDA is achieved within the First Financial Period or Second Financial Period (whichever is relevant), then a value of £8,000,000 of investment is regarded to have been achieved by Beryl Holdings and/or the Sellers ('the Consideration Amount') (with an earnings multiple of three having been applied). This will determine the amount of Consideration Shares the Sellers will receive in satisfaction for the remuneration owing to it for vesting the relationships and contacts in Mauritian company.

· African Potash will satisfy the payment by the issue and allotment to the Sellers of new ordinary shares in the capital of African Potash.

· The number of Consideration Shares is calculated at GBP 2.61p. Should the total expected profit be achieved in either the First Financial Period or Second Financial Period, this will ensure that the number of Consideration Shares (i.e. in such situation £8,000,000 at GBP 2.61p per share) shall not exceed 29.9% of the enlarged issued share capital of African Potash following issue of the Consideration Shares, based on the issued share capital of African Potash on the date of signature of the agreement.

· As a special concession for the Second Financial Period, if US$4m EBITDA has not been achieved by the Mauritian company in the First Financial Period, then for the balance of consideration due to the Sellers in respect of the Second Financial Period, the Sellers can elect to receive that either in shares in the Mauritian company or as further Consideration Shares (in accordance with the above terms) in African Potash. If the election is made to receive shares in the Mauritian company then this should be at the same methodology of valuation as set out above.

· An assessment will be made on the last day of every 3 months period commencing on the date the First Financial Period starts. A calculation will be made and approved by the accounting firm as approved by both parties and a pro rata allocation of the Consideration Shares will be issued on a quarterly basis by African Potash at the ratio to the percentage of the total EBIDTA achieved as highlighted above.

· If the share price of shares in African Potash when the US$4m EBITDA is met (whether in the First Financial Period or the Second Financial Period) is less than GBP 2.61p then that difference in value to what the Consideration Shares would have been at GBP 2.61p will be paid in cash to the Sellers by African Potash (and therefore, for the avoidance of doubt there will not be an obligation to issue further Consideration Shares to make up the difference in value).

· In addition, the Consideration Shares shall be subject to a rolling contractual lock-in of 12 months and subject to any lock-in or restriction on dealing otherwise applicable or required under the AIM Rules or otherwise.

· Therefore, in the event of no EBITDA being achieved within either the First Financial Period or the Second Financial Period, no consideration shares will be issued.

· Consideration shares (and therefore the Consideration Amount) are therefore not issued upfront, but retroactively towards actual earnings achieved.

The conditions precedent include third party and/or regulatory approvals necessary to complete the transaction. The arrangements described above will also need to be formalised between the parties, in order to complete the transaction.

Additional salient points in respect of the transaction include:

· Beryl Holdings and/or the Sellers and African Potash will have an equal representation to the board of directors of the Mauritian company.

· the Sellers will have the legal capacity to nominate an executive director on the board of African Potash as it deems fit.

· Beryl Holdings and the Sellers will ensure that Mauritian company enters into a logistics contract with one of Beryl Holdings' existing partners in a form and substance satisfactory to African Potash.

· Beryl Holdings and the Sellers will ensure that Mauritian company enters into a sufficient trade finance facility with a financing institution in a form and substance satisfactory to African Potash, for credit worthy buyers.

With established, cash generative fertiliser trading operations and in-country fertiliser inventory, the Fertiliser Business is expected to enhance African Potash's operational capacity and regional contact base and thereby complement and expand African Potash's developing trading platform (which includes its trading agreement with COMESA), and its growth strategy to deliver fertiliser at a price which is both competitive and affordable for farmers. 

Beryl Holdings is a diversified investment company based in Johannesburg, South Africa, with an established presence in the African agricultural and logistics markets. The company has a significant equity stake in a logistics company. The greater group is among the largest freight-forwarding and project-logistics companies in the world and the largest in Africa. Beryl Holdings is also involved in financing of trading lines via well-established banking partners and the transportation of commodities across the African continent, including fertiliser, maize, beans and rice, recognising the significant demand for food commodities supplies in Africa. 

The advisors to the transaction were Butterfly Corporate Finance for African Potash and Safyr Capital Partners for Beryl Holdings.

Chris Cleverly, Executive Chairman of African Potash, said, "This Transaction will strengthen and expedite our vision to become an integrated fertiliser operator within Africa. With Beryl Holdings' fertiliser division, we now have an African business to manage the significant growth opportunity which we have identified through implementation of our COMESA trading agreement. Growth by acquisition as well as organic development is part of our strategy for growth, thereby enhancing shareholder value."

Neverl Kambasha, Chairman of Beryl Holdings, said, "Beryl Holdings as a significant investor in African commodities and African development believes that agriculture has a key role to bring peace to the continent by being the primary economic activity in rural areas. By virtue of our existing fertiliser trading platform and access to credit lines, as well as our partnership with Bollore Logistics Africa, we will be able to enhance and expedite African Potash's landmark COMESA agreement for the benefit of the African farmer."

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For further information visit www.africanpotash.com or contact the following:

About African Potash

African Potash is an AIM quoted company focussed on building a vertically integrated platform for the mining, production and distribution of fertiliser, primarily within Africa.

The Company has a trading agreement with the Common Market for Eastern and Southern Africa ('COMESA'), a free trade union for twenty African member states, to supply and deliver at least 500,000 metric tonnes of fertilisers on an annual basis to off-takers identified and introduced by COMESA. To date a number of supply agreements have been secured in Zambia, Zimbabwe, Malawi and the Democratic Republic of Congo.

The Company also operates the Lac Dinga Project in the Republic of Congo, which is prospective for potash, a key source of potassium fertiliser.

About Beryl Holdings

Beryl Holdings is a diversified investment company based in Johannesburg, South Africa, that focuses on strategic proprietary investments. It holds equity interests in a balanced portfolio of medium capitalised companies spanning five core sectors:

· Agriculture Commodity Trade

· Logistics, Rail and Ports

· Energy and Oil

· Mining and Resources

· ICT

Beryl Holdings is a forward‐looking company with a focus on long‐term value. They select their partner-companies strategically, singling out seasoned players within each sector who share their progressive outlook. In exchange for in‐depth industry knowledge and expert capacity, Beryl Holdings offer their partner-companies access to an expansive network of resources and business relationships, as well as Broad‐Based Black Economic Empowerment accreditation.