Investment in Kalahari Key Mineral Exploration

14 September 2017

BLENHEIM NATURAL RESOURCES PLC

("Blenheim" or the "Company")

Investment in Kalahari Key Mineral Exploration (Pty) Ltd

Blenheim is pleased to announce that it has conditionally agreed to subscribe for 2,500 ordinary shares in the capital of Kalahari Key Mineral Exploration (Pty) Ltd ("KKME"), ("KKME Shares"), representing 20 per cent. of the issued share capital of KKME, at a price of US$52 per KKME Share, for a total cash subscription of $130,000 (the "Subscription").

KKME, a company incorporated in Botswana, was founded by Dr Roger Key MBE to explore for base and precious metals, notably nickel and platinum group elements, in a feeder/shear zone through the centre of the Molopo Farms Complex in southern Botswana.

Blenheim's Chairman, Chris Ells, commented: "KKME is applying a new exploration model to the Molopo Farms Complex, which has tremendous potential for nickel and platinum group elements. Early work by KKME in reinterpreting existing data over KKME's licences in the interpreted feeder/shear zone of the complex has been very positive. Dr Roger Key is a well-respected geologist in Africa and we are pleased to be making this strategic investment. The funds invested by Blenheim will be used to carry out ground geophysical and geochemical surveys over the priority targets and to design an initial drill programme."

Investment Agreement

Blenheim has entered into an investment agreement with KKME (the "Investment Agreement"), under which the Company has agreed to subscribe for 2,500 KKME Shares representing 20 per cent. of the issued share capital of KKME, subject to certain conditions precedent.

The Investment Agreement also gives Blenheim the right, within two years, to subscribe for 2,500 additional new KKME Shares at the same subscription price of US$52 per KKME Share ("Additional KKME Subscription Shares"). If Blenheim takes up its right to subscribe for the Additional KKME Subscription Shares, and assuming that no further KKME Shares are issued prior to that date, then Blenheim's enlarged shareholding in KKME would represent 33.33 per cent. of the then issued share capital of KKME.

The Investment Agreement gives Blenheim the right to appoint up to two directors to the board of KKME as long as it holds more than 15 per cent. of the issued share capital of KKME. Should Blenheim's interest fall to below 15 per cent. but remain above 5 per cent. of the issued share capital of KKME, the Company will be entitled to appoint one representative director to the board of KKME. KKME has agreed that its board will not exceed five members at any time, unless agreed in advance with Blenheim.

Completion of the Subscription is conditional, inter alia, upon (i) KKME providing Blenheim with an exploration plan, a legal opinion on KKME's good standing and a due diligence report to a satisfactory standard concerning its prospecting licences; (ii) receipt of any necessary approvals for the Subscription from the regulatory authorities of the Republic of Botswana; and (iii) a shareholders agreement between the existing shareholders of KKME and Blenheim being delivered in agreed form, by 15 October 2017, unless the conditions are waived by Blenheim. The Investment Agreement also stipulates certain reserved KKME corporate matters which will require Blenheim's agreement.

The Molopo Farms Complex

The Molopo Farms Complex ("MFC") is a large, layered ultrabasic/basic intrusion covering more than 13,000 km2 in southern Botswana and adjacent parts of the Republic of South Africa. The MFC is completely covered by up to 200 m of Kalahari Formation superficial sediments which obscure the underlying Proterozoic geology. Geological interpretation of the MFC was initially based on the results from a UK-Botswana cooperation project (Gould et al., 1987), which included the drilling of 46 boreholes, and on information submitted by exploration companies to the Botswana Geological Survey (recently renamed as the Botswana Geoscience Institute). However, a regional high resolution airborne magnetic survey in the 1990s together with geological information from several hundred water boreholes provided more detail on the MFC'S geology including the identification of a probable feeder zone.

The MFC is related in age and geological setting to the Bushveld Complex of South Africa. Previous mineral exploration of the MFC focused primarily on finding platinum-group element ("PGE") mineralisation comparable to that found in the Bushveld Complex. However, KKME's recent re-interpretation of existing data has indicated that the best targets may be nickel-PGE mineralisation in the feeder/shear zone, as at the Voisey's Bay complex in Canada or the Fraser Range complex in Australia. 

KKME

KKME holds two prospecting licences (PL310/2016 and PL311/2016), granted on 30 November 2016, within the MFC which cover a large part of the targeted feeder/shear zone through the middle of the MFC area. The prospecting licences grant the holder exclusive rights for an initial period of three years to prospect for all metals within the licence areas, and may be renewed for a further two periods of two years each, provided a reduction by 50% of the licence area is made at each renewal. When prospecting yields positive results, the Botswanan mining regime allows the licence holder to apply for a mining lease, which allows a company to carry out mining activities. Mining leases can be issued only to a prospecting license holder.

The mining fiscal regime in Botswana comprises a combination of corporate income taxes and a royalty-based tax. Current royalty rates are 10% for precious stones, 5% for precious metals and 3% for other minerals, calculated on the gross market value of mine gate sales. In 2016, Botswana was ranked 12 out of 104 countries in the Fraser Institute's global mining survey and 70 out of 190 countries in the World Bank's 'Ease of Doing Business' survey.

KKME has already completed some re-logging and re-analysis of existing data from previous exploration work. KKME intends to use the proceeds of the subscription for the purposes of ground geophysics and geochemistry surveys, detailed modelling of the feeder/sheer zone and to design an initial drill programme. KKME reported a loss before and after tax of approximately BWP 337k (approximately £25k) for the 30 months to 30 April 2017 and it had net assets at 30 April 2017 of approximately BWP 424k (approximately £32k).

KKME's CEO Dr Roger Key has a wealth of relevant exploration experience. After taking a BSc and PhD in geology and geochemistry from the University of Liverpool, Dr Key worked in Botswana and then joined the British Geological Survey in 1974, working for 40 years in scientific and management roles on projects in Scotland and throughout Africa. Dr Key is the author of important geoscientific papers on the Central African Copperbelt in Zambia and the geology of Botswana, Kenya, Mauritania, Madagascar, Mozambique, Nigeria and Tanzania, as well as giving advice to mineral exploration companies working in some of these countries and in Liberia. He founded KKME in November 2014.

Ends

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The information contained within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014. Upon the publication of this announcement, this inside information is now considered to be in the public domain.