25th Nov 2009 07:52
For immediate release
25 November 2009
African Minerals Limited
("African Minerals", "AML" or "the Company")
Amendment to Marampa Agreements with Cape Lambert Iron Ore Limited
Highlights:
African Minerals amends agreement with Cape Lambert Iron Ore Limited ("CLIO") re Marampa project
Under the agreement, AML disposes of up to 100% interest in Marampa Iron Ore Limited in return for up to 19.9% of CLIO's issued share capital
Enables AML to focus fully its human and financial resources on its flagship 5.1bn tonne JORC compliant resource at Tonkolili and its associated infrastructure projects
Enables African Minerals to benefit further from additional exposure to CLIO's diverse portfolio of high quality resource assets and consolidates the relationship with CLIO
Allows AML to maintain and benefit from an indirect exposure to Marampa without requiring it to fund the construction and development of the Marampa project
African Minerals Limited (AIM:AMI), the mineral exploration and development company with significant iron ore and base metal interests in Sierra Leone, West Africa, announces that it has amended its agreements with Cape Lambert Iron Ore Limited ("CLIO") (ASX:CFE) in respect of the Marampa iron ore project, previously announced on 1 October 2008 (the "First Marampa Agreement") and 22 January 2009 (the "Second Marampa Agreement").
Under the terms of the amendment agreement ("Amendment Agreement"), AML has agreed to transfer to CLIO a further 28% of the ordinary shares in Marampa Iron Ore Limited ("MIO"), which holds the Marampa exploration licence approximately 150kms northeast of Freetown, in return for 24,569,934 ordinary shares in CLIO (the "Initial Transfer"). This increases CLIO's stake in MIO to 63% and AML's stake in CLIO to 15.2%.
In addition, under the terms of the Amendment Agreement, AML and CLIO have amended the terms of CLIO's existing option to acquire up to 100% of Marampa. Under the revised option terms, AML has granted CLIO the right to acquire the remaining 37% of MIO's ordinary shares in consideration for issuing to AML 32,592,789 ordinary CLIO shares (the "Second Transfer"). CLIO has, at the same time, elected to exercise that option. The Second Transfer is subject to the approval of CLIO shareholders at a General Meeting which must be convened by CLIO within 45 days from 25 November 2009. If approved, the issue of shares will increase AML's stake in CLIO from 15.2% to 19.9% and CLIO's stake in Marampa to 100%.
At CLIO's closing share price yesterday of A$0.57 (US$0.53) the value of AML's stake in CLIO after the Initial Transfer is US$44.8m. Upon the Second Transfer, AML's stake in CLIO at the same closing price of A$0.57 (US$0.53) would be valued at US$62.0m.
Background to the First and Second Marampa Agreements
The First Marampa Agreement gave CLIO a 30% interest in Marampa for US$25m (of which only $5m needed to be committed at the time of signing) and 44m CLIO shares with a then market value of $13.2m. Under the First Marampa Agreement AML also granted CLIO an option to acquire all the outstanding shares in MIO for US$200M less the aggregate of US$25M and US$13.2M.
By the Second Marampa Agreement CLIO increased its shareholding in Marampa from 30% to 35% in return for a further 17m CLIO ordinary shares with a then value of US$3.4m. CLIO retained the option to acquire the 65% balance of MIO's shares for US$200M less the aggregate of US$25M, US$13.2m and US$3.4m.
Under both the First and Second Marampa Agreements CLIO's option was exercisable entirely at its discretion. In the event that CLIO chose not to exercise the option, the First and Second Marampa Agreements provided for a pro-rata reduction in CLIO's shareholding in MIO by reference to the consideration paid to date and for AML to retain its shareholding in CLIO.
Benefits of the transaction to AML
The Amendment Agreement, assuming the Second Transfer occurs, holds a number of key benefits to African Minerals:
It allows AML to focus its human and financial resources fully on the development of the much larger, 5.1bn tonne resource at Tonkolili and its related infrastructure projects
It allows AML to maintain and benefit from an indirect exposure to Marampa without requiring it to fund the construction and development of the Marampa project
It reduces AML's illiquid, direct interest in Marampa and increases the liquid, indirect interest in the project via CLIO's listed equity.
The increase in AML's shareholding in CLIO to 19.9% increases AML's exposure to the diverse portfolio of high quality resource assets held by CLIO.
It confirms the development of the project will be fully controlled by a highly respected CLIO team who have been on site since October 2008.
As at 31 August 2009, MIO had net assets of US$24.7 million and there was a negligible loss for the year to date associated with the project. AML currently intends to retain the shares in CLIO.
By virtue of its status, before this transaction, as a 35% shareholder of an African Minerals subsidiary, CLIO is deemed to be a related party for the purposes of AIM Rule 13. In accordance with the AIM Rules, the directors consider, having consulted with the Company's nominated adviser, that the terms of the transaction are fair and reasonable insofar as its shareholders are concerned.
Frank Timis, Executive Chairman of AML commented:
"We are extremely pleased with the terms of the amended agreement. Not only is this a major step forward in consolidating the relationship between CLIO and AML, but it also provides AML with the necessary operational and financial flexibility to intensify our focus on our core project at Tonkolili. CLIO has a strong management team with a proven iron ore industry track record and I am confident in CLIO's ability to realise the full potential of Marampa, demonstrating the attraction of Sierra Leone to mining companies.
With the increased shareholding in CLIO, AML is well-positioned to benefit from CLIO's strong portfolio of assets whilst remaining fully focused on fast tracking the development of our world-class iron ore project at Tonkolili and the related infrastructure projects."
Enquiries:
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African Minerals Limited |
Tel: +44 (0) 1481 726833 |
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Frank Timis Alan Watling |
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Canaccord Adams Limited |
Tel: +44 (0) 20 7050 6500 |
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Mike Jones Robert Finlay |
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Mirabaud Securities Limited |
Tel: +44 (0) 20 7878 3360 |
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Rory Scott Pav Sanghara |
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Pelham Public Relations Limited |
Tel: +44 (0) 20 7337 1500 |
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Charles Vivian |
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Klara Kaczmarek |
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James Macfarlane |
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Related Shares:
AMI.L