20 Jan Zambia projects option agreement
African Pioneer Plc
(“African Pioneer” or “the Company”)
Zambia projects option agreement
African Pioneer plc (“APP” or the “Company”), the exploration and resource development company with projects in Namibia, Zambia and Botswana announces that on 19 January 2022 it and its 80% owned subsidiary African Pioneer Zambia Ltd (“African Pioneer Zambia”) entered into an option agreement with First Quantum Minerals Ltd (“First Quantum”) (listed on the Toronto Stock Exchange FM.TO) in relation to 4 of the 5 Zambian exploration licences held by African Pioneer Zambia (the “Option Agreement”).
· The four exploration licences the subject of the Option Agreement are in the highly prospective Central Africa Copperbelt in northwest Zambia which is the largest and most prolific mineralized sediment- hosted copper province in the world and are located less than 100km from First Quantum’s giant Sentinel copper mine.
· The exploration licenses include geological formations similar in age and rock type to that hosting the major copper deposits of the Copperbelt
· During the initial 18 month option period First Quantum has the right but not the obligation to spend US500,000 on each of the exploration licences 27767-HQ-LEL, 27768-HQ-LEL, 27770-HQ-LEL, and 27771-HQ-LEL (the “Zambian Projects”). At this stage First Quantum will not have earned any shares in African Pioneer Zambia, just the right to proceed to take one or more of the properties into the First Earn In Period by issuing an Option Exercise Notice.
· During the First Earn In Period, First Quantum then has 2 years when it has the right but not the obligation to prepare a Technical Report in respect of the Zambian Projects demonstrating an Indicated Mineral Resource of at least 300,000 tonnes of contained copper (the “Technical Report Requirement”). First Quantum is to fund the Technical Report. Once the Technical Report is issued First Quantum has the right to be issued shares equal to a 51% shareholding in African Pioneer Zambia. This will also trigger the Second Earn-In Period.
· In the Second Earn-In Period First Quantum shall have the right but not the obligation to complete all necessary mining, metallurgical and development studies to establish a mine at the Property and make a public announcement that it intends to proceed towards commercial development of a Mine on the Property (a “Decision to Mine”). First Quantum is to fund all costs related to the Decision to Mine. Once First Quantum announces a Decision to Mine First Quantum has the right to be issued shares in African Pioneer Zambia to increase their 51% shareholding in African Pioneer Zambia to 75%.
Executive Chairman, Colin Bird said:
“We are very pleased that we have entered into this agreement with First Quantum, which has one of the world’s largest copper mines nearby and has a wealth of exploration, mining and technical expertise built up over the last 25 years. The exploration areas are large and are highly prospective not only for copper but also cobalt in association.
Myself and the team have previous good working experience of the First Quantum Group and on that basis know that the exploration of the project will be approached in a highly technical and commercial way. We will keep the market informed on progress as it happens.”
First Quantum: is one of the world’s top 10 copper producers operating in several countries including Zambia where it owns the Sentinel and Kansanshi mines in North West Zambia and is known for its specialist technical engineering construction and operational skills which have allowed it to develop and successfully run complex mines and processing plants. Colin Bird, the chairman of African Pioneer, was a founder of and floated Kiwara Plc in around 2008 which discovered copper in northwest Zambia and was sold to First Quantum in 2009 for U$260 million. First Quantum then developed the Kiwara Plc projects into the Sentinel mine which is the world’s 14th largest copper mine.
Zambian Projects: The licence package covers part of the north-western extension of the Zambian Copperbelt. The properties are located within 80-100km of First Quantum’s giant Sentinel copper mine, one of the largest copper mines in Africa, with current Measured and Indicated Resources of 891Mt @ 0.45% Cu. They also lie close to the Enterprise nickel deposit (37.7Mt @ 1.03% Ni) which is being reportedly moved towards development. This link is to a map of the Zambian Projects.
The Zambian Projects lie on the Lufilian Fold Belt in the Domes region of the Central African Copperbelt, straddling the western boundary of the Kabompo Dome, underlain principally by rocks of the Lower and Upper Roan, as well as the stratigraphically higher Kundelungu and Nguba Groups. This geological package is similar in age and rock type to that hosting the major copper deposits of the Copperbelt, including Sentinel. Therefore, the licence areas are considered to be strongly prospective for Copperbelt-type copper/cobalt and/or nickel deposits. They are historically underexplored, representing the westerly extension of the Copperbelt which has not been investigated in detail, as previous work focussed primarily on the central part of the zone.
On the Luamata South licence (27771-HQ-LEL), African Pioneer has acquired a valuable exploration package arising from recent work by MMG Zambia Ltd (‘MMG’) which highlights strong soil/airborne magnetic targets that were not drill tested, as MMG pulled out of Zambia. The Samuteba East licence (27770-HQ-LEL) was recently held by Anglo American which also carried out airborne magnetic surveying and reconnaissance soil sampling before exiting the Copperbelt. The soil data highlights several copper anomalies of considerable interest.
Exploration licence 27769-HQ-LEL owned by African Pioneer Zambia which is not covered by the Option Agreement is in the Zambezi area located within the Zambezi belt of southern Zambia that hosts a Lower Katanga supergroups succession will be transferred from African Pioneer Zambia to a new Zambian company to be owned 80% by the Company and 20% by its local partners.
Summary of main commercial terms of the Option Agreement:
First Quantum Minerals Ltd, the Company, African Pioneer Zambia and the minority shareholders of African Pioneer Zambia (the “Minority Shareholders”).
First Quantum has the right but not the obligation to spend US500,000 on each of the exploration licences 27767-HQ-LEL, 27768-HQ-LEL, 27770-HQ-LEL, and 27771-HQ-LEL within 18 months. The 18 months period is extended a further 6 months for any of the licences where First Quantum has spent US$350,000 in the first 18 months. At this stage First Quantum will not have earned any shares in African Pioneer Zambia, just the right take one or more of the properties into to the First Earn In Period by issuing an Option Exercise Notice.
|First Earn-In Period – Issue of Technical Report earns First Quantum 51%||
After sending the Option Exercise Notice, First Quantum then have 2 years when it has the right but not the obligation to prepare a Technical Report in respect of the Property demonstrating an Indicated Mineral Resource of at least 300,000 tonnes of contained copper (the “Technical Report Requirement”). First Quantum is to fund the Technical Report and if it spends US$2M on this in the 2-year period then it has an extra year to complete the Technical Report. Once the Technical Report is issued First Quantum has the right to deliver the First Earn-In Exercise Notice and be issued shares equal to a 51% shareholding in African Pioneer Zambia. This will also trigger the Second Earn-In Period
|Second Earn-In Period – Decision to Mine earns First Quantum further 24% so they own 75%||
In the Second Earn-In Period First Quantum shall have the right but not the obligation to complete all necessary mining, metallurgical and development studies to establish a mine at the Property and make public announcement that it intends to proceed towards commercial development of a Mine on the Property (a “Decision to Mine”). First Quantum is to fund all costs related to the Decision to Mine. Once First Quantum announces a Decision to Mine First Quantum has the right to be issued shares to increase its 51% shareholding in African Pioneer Zambia to 75%.
|Funding once First Quantum at 75%||
Once First Quantum is at 75% then the parties have to fund pro-rata and if they do not they will be diluted. If the joint shareholding of the Company and the Minority Shareholders is diluted to 10% then it converts into a 1% royalty which would be paid 0.2% to the Minority Shareholders and 0.8% to the Company.
Joint Venture after First Earn-In Exercise Notice
Once First Quantum has delivered the First Earn-In Exercise Notice the parties will be deemed to have established a joint venture.
Prior to the making of a Decision to Mine (which announcement shall be in the sole discretion of First Quantum), the allocation of Joint Venture Expenditure shall be made by the Participants in proportion to their respective Participating Interests, provided that First Quantum shall be responsible for Joint Venture Expenditures relating to its completion of all necessary mining, metallurgical and development studies contributing to the Decision to Mine.
The Company needs First Quantum approval to sell and must give First Quantum first refusal rights and First Quantum cannot sell without the consent of the Company.
|Tag along rights||
If First Quantum wants to sell their African Pioneer Zambia shares to a third party then the Company and the Minority Shareholders can require that the third party also buys their African Pioneer Zambia shares on the same terms.
Exploration licence 27769-HQ-LEL will be transferred from African Pioneer Zambia to a new Zambian company to be owned 80% by the Company and 20% by the Minority Shareholders.
|Representations & warranties||
The parties have made representations & warranties customary for an agreement of this nature
|African Pioneer Plc
+44 (0)20 7581 4477
|Beaumont Cornish (Financial Adviser)
|+44 (0) 020 7628 3396|
|Novum Securities Limited (Broker)
+44 (0) 20 7399 9400
or visit https://africanpioneerplc.com/
The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulation (EU) No. 596/2014 as it forms part of UK Domestic Law by virtue of the European Union (Withdrawal) Act 2018 (“UK MAR”).
Technical information in this announcement has been reviewed by Edward (Ed) Slowey, BSc, PGeo, a technical adviser to African Pioneer Plc. Mr Slowey is a graduate geologist with more than 40 years’ relevant experience in mineral exploration and mining, a founder member of the Institute of Geologists of Ireland and is a Qualified Person under the AIM rules. Mr Slowey has reviewed and approved this announcement.
A ‘Mineral Resource’ is a concentration or occurrence of solid material of economic interest in or on the Earth’s crust in such form, grade (or quality), and quantity that there are reasonable prospects for eventual economic extraction. The location, quantity, grade (or quality), continuity and other geological characteristics of a Mineral Resource are known, estimated or interpreted from specific geological evidence and knowledge, including sampling. Mineral Resources are sub-divided, in order of increasing geological confidence, into Inferred, Indicated and Measured categories.
An ‘Indicated Mineral Resource’ is that part of a Mineral Resource for which quantity, grade (or quality), densities, shape and physical characteristics are estimated with sufficient confidence to allow the application of Modifying Factors in sufficient detail to support mine planning and evaluation of the economic viability of the deposit.
“Mt” million tonnes