30th Sep 2011 07:00
African Potash First Day of Dealings on AIM RNS Number : 2341P African Potash Ltd 30 September 2011 African Potash Limited / Index: AIM / Epic: AFPO / Sector: Mining 30 September 2011 African Potash Limited ('African Potash' or 'the Company') First Day of Dealings on AIM African Potash Limited, an investing company focussed on potash assets within sub-SaharanAfrica, is listing on AIM today. The Company has raised £4.185 million before expensesby way of a placing of 83,700,000 million new Ordinary Shares at 5 pence per share('the Placing'), giving it a market capitalisation of approximately £7.935 millionon Admission. The money raised will be used to acquire potash assets or projectsin sub-Saharan Africa and advance these through the exploration and development cycle. Seymour Pierce Limited is Nominated Adviser to the Company who, along with GMP SecuritiesEurope LLP, are acting as Joint Brokers. Overview: · Listing on AIM having raised £4.185 million before expenses to facilitate theacquisition and development of one or more potash projects and provide access toequity capital markets · Strong global market fundamentals supporting long term fertiliser-feed growth · Sub-Saharan Africa hosts sizeable, undeveloped potash deposits · Highly skilled Board and Management team - extensive experience developing resourceprojects in Africa · Assessing a number of potash projects in sub-Saharan Africa with the aim ofrapidly delivering on strategy African Potash Chairman and CEO, Edward Marlow, said, "The Board sees a huge opportunityfor a dedicated pan-African, London listed vehicle, focussed on potash given thebackdrop of attractive global potash market fundamentals. We have a highly experiencedBoard who have a successful track record of identifying, acquiring and advancingresource assets and we are already assessing a number of potential projects thatfit our stringent investment criteria. "Potash is primarily used as a source of potassium fertiliser. A combination ofrising demographics and growing affluence in the developing world has led to a structuralshift resulting in higher global demand for agricultural produce. Accommodatingthe increase in demand for foodstuffs will require a greater use of fertilisers,which in turn creates an opportunity for a vehicle such as ours." For further information and the full Admission document visit www.africanpotash.comor contact the following: Ed Marlow African Potash Limited +44 (0) 20 7408 9200 Jonathan Wright Seymour Pierce Limited +44 (0) 20 7107 8000 David Foreman Seymour Pierce Limited +44 (0) 20 7107 8000 Richard Greenfield GMP Securities Europe LLP +44 (0) 20 7647 2836 Hugo de Salis St Brides Media and Finance Ltd +44 (0) 20 7236 1177 Susie Geliher St Brides Media and Finance Ltd +44 (0) 20 7236 1177 Full Details The Company African Potash has been recently formed to acquire potash (and associated minerals)assets and/or acquire or invest in one or more businesses with potash (and associatedminerals) assets or projects in sub-Saharan Africa. The Directors have well establishedbusiness contacts and connections in sub-Saharan Africa and intend to use their experienceof working within companies focussed on operating in sub-Saharan Africa to enablethem to identify prospective acquisition and/or investment targets with scope forgrowth. The Company is a newly incorporated Guernsey registered company and an applicationhas been made for the Ordinary Shares to be admitted to trading on AIM. The Companyis raising £4.185 million in the Placing and intends to pursue appropriate acquisitionsand/or investments which meet the investing policy described below after the OrdinaryShares have been admitted to AIM. The Directors expect that they will need to raise additional finance in the future,either through raising debt and/or through the issue of further equity, to completeany acquisitions and/or investments that the Company may agree and to develop theassets or business acquired and/or invested in. Potash Potash is the common name for various potassium-bearing materials and compounds.The term is widely applied to naturally occurring potassium salts, as well as thecommercial products derived from them. The majority of the world's potassium reserveswere deposited when ancient inland oceans evaporated, crystallising potassium saltsinto beds of potash ore. The resultant deposits are a naturally-occurring mixtureof potassium chloride and sodium chloride (better known as common table salt). Potassium is the seventh most abundant element in the Earth's crust and is the thirdmajor plant and crop nutrient after nitrogen and phosphorus. Its primary use is asa soil fertilizer (which represents about 90 per cent. of current use) but potassiumhas a diverse range of uses and can be found in ceramics, pharmaceuticals and detergents.Potash improves the water retention, yield, nutrient value, taste, colour and textureof crops and is commonly applied to a wide range of fruits and vegetables, as wellas rice, wheat, corn and other grains, sugar, soybeans, palm oil and cotton, allof which benefit from the nutrient's quality enhancing properties. A deficiency in potassium makes plants less resistant to disease and pests and thiscan impact the size, shelf life and taste of the crop. Continuous growing and harvestingof crops also removes potassium, nitrogen and phosphate from soil, all of which needto be added back in consistent ratios to maintain the fertility of the soil. Historically,it was standard practice in the agricultural industry to leave land fallow for anumber of years so that the soil could be replenished. However, as demand for foodhas risen, in line with global population growth, leaving fields fallow is becomingless practical. Higher demand for food is having to be satisfied by obtaining higheryields from existing acreage, which in turn requires the increased use of fertilizerssuch as potash to maintain the balance of nutrients found in soil. Crucially, potassium'srole cannot be replicated by other nutrients and currently there is no commerciallyviable alternative to potash as a source of potassium fertilizer. Most existing potash mines are deep shaft mines that can be as much as 4,400 feetbelow ground. Other deposits were formed in horizontal layers as sedimentary rockand are mined as strip mines. Potash can be extracted by employing one of four miningtechniques: underground, solution mining, open pit or solar evaporation. The methodused depends on the characteristics of the specific deposit such as depth, geometryand mineralisation. The majority of potash is recovered from buried deposits usingconventional, mechanised mining methods. Solution mining involves injecting undergroundseams bearing the potash with a brine solution which dissolves the potash from theseams. The solution is then brought to the surface for processing where potassiumchloride is separated from the mixture to produce a granular potassium fertilizer. Existing Commercial Potash Operations Potash is commercially mined in a number of countries around the world. Canada andRussia are, by some distance, the top two producing nations, accounting for 49 percent. of world production in 2010. Of the two, Canada has the largest reserves with46 per cent. of the global total, while Russia has 34 per cent. Global reserves areestimated at 9,500 million tonnes. In Africa, large potash deposits have been foundin Congo (Brazzaville) and Ethiopia. Potash Prices The main potash miners of Canada, Russia and Belarus have each formed consortia thatnegotiate fixed term contracts with major customers. In Canada, the Canadian PotashExporters (Canpotex), which is jointly owned by three Canadian fertilizer producers,exports and markets potash produced in the province of Saskatchewan. The BelarussianPotash Co is another consortium performing a similar function for Russian and Belarussianproducers. The price agreed by the consortia and the customers acts as a benchmarkfor global spot prices. For years, Vancouver potash prices were stable at just over US$100 a tonne. Growingconsumption of food over the last decade led to a demand/supply in-balance, whichsaw prices rise to almost US$900 a tonne in 2008 before dropping back as the worldeconomy slipped into recession. By the end of July 2011, spot potash prices at thePort of Vancouver had climbed to US$490/t. PotashCorp, a major Canadian producer, forecasts 2011 global potash demand will bein the region of 55-60 million tonnes with China expected to account for a fifthof the total. In recent years, growth in potash consumption has been greatest indeveloping countries. In 2010, over 60 per cent. of world potash exports went toAsian and Latin American countries with China and India alone accounting for almosthalf of that amount. Over the past 20 years, Asian and Latin American imports havemore than doubled as developing nations address the need to improve crop yields. Investing Policy The Company's investing policy is to acquire potash (and associated minerals) assetsand/or acquire or invest in one or more businesses with potash (and associated minerals)assets or projects in sub-Saharan Africa. The Company's investment objective isto provide Shareholders with an attractive return on their investment predominantlythrough capital appreciation generated by the growth of any acquired assets and/orbusinesses. The Company proposes to adopt the following investing policy: · the Company will consider acquiring potash (and associated minerals) assetsor acquiring or investing in businesses with potash (and associated minerals) assetsor projects in sub-Saharan Africa. The investing policy is to acquire or invest inpotash, although the Company will consider complementary mining businesses, assetsand/or projects which focus on other minerals, which in the opinion of the Boardoffer better value to Shareholders; · the Company will focus on potash (and associated minerals) assets and/or businesseswith potash (and associated minerals) assets located in sub-Saharan Africa whichthe Board considers to be businesses, assets and/or projects suitable for an investmentby the Company; and · the Company intends to be an active investor and will seek to add substantialvalue, both operationally and strategically, to the businesses and/or assets acquiredor in which investments are made. The Company does not currently anticipate makingminority investments but intends to focus on owning the whole of or majority interestsin a small number of businesses, assets and/or projects. With reference to the potential acquisitions of businesses with potash (and associatedminerals) assets and/or projects, the Directors will, in particular, seek businesseswith the following criteria: · they have the potential for rapid sustainable growth; · they are at an early stage with scope for utilising the Directors' logisticalexperience and network of contacts to the benefit of Shareholders; and · they already possess a business model which is expected to provide attractivereturns on capital. The Directors have many years experience working with and for companies operatingin sub-Saharan Africa. They will use their extensive business contacts and knowledgeto source the most attractive transactions and assess potential targets for acquisition. The Company has not set any duration on making or holding any investment and is notlimited in time. There is no time limit for the Company to return funds to Shareholdersand the Directors do not anticipate returning funds to Shareholders in the shortto medium term. However, the Directors expect to make one or more acquisitions and/orundertake a reverse takeover transaction within 12 months of Admission. Although the Directors are already appraising and evaluating potential assets foracquisition or investment, no agreements have as yet been entered into. In particular,the Directors have held initial discussions with one potential acquisition targetbut have not received a significant amount of information on it. Directors and Management Edward Marlow, aged 48 (Chairman and CEO) Mr Marlow was until recently a Managing Director at Credit Suisse. Previously hewas Global Head of Coverage for Principal Investments at HSBC. In September 2007,Mr Marlow founded HSBC's Principal Investments Africa team having worked and travelledextensively in Africa for more than 20 years. He has over 9 years of specific investment and advisory experience in sub-SaharanAfrica with a particular emphasis on natural resources. Mr Marlow also has considerable experience of the Canadian resource market and isChairman of Sanatana Resources Inc (TSX). He was formerly on the boards of ESO Uranium(TSX) and Kopane Diamonds (AIM). An ex British Army Officer, he has an MBA from CranfieldUniversity, a PGDipL from the University of Northumbria, is a graduate of the USArmy CGSC and Manchester University and is a member of the UK CFA Society. Duringhis career, Mr Marlow has also worked for Insinger De Beaufort, UBS and Citigroup. Philippe Edmonds (MA Cantab), aged 60 (Non-Executive Director) Mr Edmonds is a director of a number of public and private companies and has considerableexperience introducing African focussed companies to AIM, including African PlatinumPlc (formerly Southern African Resources Plc), Central African Mining & ExplorationCompany Plc, Central African Gold Plc, Agriterra Limited (formerly White Nile Limited),Sable Mining Africa Limited and African Medical Investments plc. Mr Edmonds is currently Chairman of Agriterra Limited, Sable Mining Africa Limitedand African Medical Investments plc. He holds an honours degree in land economy fromCambridge University. Mr Edmonds was born in Lusaka, Zambia, educated in Zambia andEngland and played cricket for England and Middlesex from 1974 to 1987. Andrew Groves, aged 43 (Non-Executive Director) Mr Groves has significant experience in operations management in Southern and CentralAfrica and is a director of a number of public and private companies, including companiesin Zambia and Zimbabwe. Mr Groves also has experience of introducing several Africanfocussed companies to AIM together with Mr Edmonds. Mr Groves' current directorshipsinclude Agriterra Limited, Sable Mining Africa Limited and African Medical Investmentsplc. He was born in Harare, Zimbabwe and educated in Zimbabwe and South Africa. There are no other officers or employees of the Company as at the date of this document.It is intended that further directors and employees will be recruited following Admissionand on completion of a suitable acquisition. The Directors intend to retain key members of any target's management team althoughthey expect to supplement this as required with additional experienced management. The Directors are of the opinion that incentivisation of staff and management isa key factor to growing a successful business and therefore incentives will be putin place, which may include cash bonuses and equity participation in the Company.In this regard, the Share Option Scheme has been adopted but no awards have yet beenmade under the Scheme. Details of the Placing The Company is proposing to raise £4.185 (before expenses) pursuant to the Placing.The Placing comprises a total of 83.7 million new Ordinary Shares representing 52.74per cent. of the issued share capital of the Company on Admission. Upon Admission, there will be 158.7 million Ordinary Shares in issue and the marketcapitalisation of the Company at Admission based on the Placing Price will be £7.935million. The Placing Shares will rank in full for all dividends declared, paid or made afterthe date of issue and otherwise pari passu with the existing Ordinary Shares. The Board are also in discussions with several international investors who have expressedan intention to acquire up to 40 million Ordinary Shares at the Placing Price. Thesepotential investments of up to £2 million (in aggregate) will be confirmed within10 working days from Admission. An announcement will be made in due course. Future Prospects and further share issues The Company has not traded since incorporation. There have been no transactions otherthan the share transactions described in paragraph 2.4 of Part III of the AdmissionDocument. Following Admission, the Company will have approximately £4.66 million(after payment of expenses) available for investment. Pending investment, the Companyintends to hold cash in pounds sterling in cash deposit or cash equivalent accounts. Whilst the Directors believe they are well placed to access potential targets inthe African region there is no guarantee that the Company will be able to make anyinvestments which will realise any commercial return. No representation, warranty or guarantee is or can be made as to the future operatingperformance of the Company, which will depend on future events or circumstances,including events and circumstances which cannot be currently predicted and over whichthe Company has no control. Although the Directors have held initial conversationswith a potential acquisition opportunity which may fit the Company's investing policy,there is no guarantee that any negotiations will lead to an investment by the Companyor to the completion of an acquisition. Lock-in arrangements The Directors, who on Admission, will be interested in 45 million Ordinary Sharesare prevented by the AIM Rules from disposing of any interests in Ordinary Sharesheld by them for a period of 12 months from Admission, except in limited circumstances.Accordingly they and Matt Mason, who is interested in 5 million Ordinary Shares haveundertaken to the Company and to Seymour Pierce not to sell or dispose of any oftheir Ordinary Shares for a period of 12 months from Admission except in limitedcircumstances. At Admission, the Directors will be interested in 45 million Ordinary Shares representing28.4 per cent. of the enlarged issued share capital of the Company. Further details of the lock-in undertakings are set out in paragraph 7.5 of PartIII of the Admission Document. Reasons for Admission and Use of Proceeds The proceeds of the Placing will be used to provide the funds needed by the Companyto identify and carry out due diligence on potential target acquisitions and to provideworking capital for the Company's initial operations in line with its acquisitionstrategy. The Directors believe that Admission will have the following benefits: · quoted shares may be an attractive form of consideration to potential vendorsand it will also facilitate acquisitions to be financed by vendor placings; · the status of being a company with shares publicly traded is likely to enhancethe Company's reputation; and · the ability to incentivise staff through the use of share options may be importantin retaining key managers. A full copy of the Company's Admission Document can be found on the Company's websiteat www.africanpotash.com. * * ENDS * * This information is provided by RNS The company news service from the London Stock Exchange ENDRelated Shares:
African Potash