African Pioneer PLC Update on potential sale of Licences in Botswana (9031N)

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RNS Number : 9031N

African Pioneer PLC

04 October 2021

4 October 2021

African Pioneer Plc

("African Pioneer" or "the Company")

Revised arrangements for exploration

and potential Sale of Kalahari Copper Belt Licences

African Pioneer plc ("APP" or the "Company") announces that, in place of the existing arrangements, it has on 2 October 2021 entered into a two year option agreement with ASX listed Sandfire Resources Limited ( ASX:SFR) ("Sandfire") in relation to 4 of its 8 Botswana prospecting licences for a cash payment of US$500,000 and the issue of 107,272 Sandfire shares and a 24 months exploration expenditure commitment of US$1,000,000 (the "Option Agreement"). The Company has entered into the Option Agreement to allow an acceleration of exploration activities on the 4 Kalahari Copper Belt prospecting licences the subject of the Option Agreement (the "Included Licences") funded by Sandfire. Funds received will also allow the Company to accelerate exploration activities on the Company's 4 other prospecting licences in Botswana and its projects in Namibia and Zambia.

Highlights of Option Agreement:

Option Agreement Payments to APP: Sandfire will on 8 October 2021:

1) pay to the Group US$500K in cash in relation to the cash component of the option fee for the right to acquire the Included Licences; and

2) issue 107,272 Sandfire ordinary shares ("Sandfire Shares") to the Company with a current market value A$565K (approx. US$407K) based on the closing Sandfire share price of A$5.27 per Sandfire share on 1 October 2021 (being the last trading date before the date of this announcement) to settle the share component of the option fee and a guarantee fee due to the Company. The Sandfire Shares do not have any trading restrictions.

Exercise and Option Period: The option can then be exercised within 2 years of the Option Agreement (the "Option Period") to acquire the Included Licences for US$1. Sandfire has the right to extend the Option Period by 1 year by the payment of a US$500,000 option extension fee.

Exploration Commitment: Sandfire to fund US$1 million of exploration expenditure by the Company on the Included Licences (the "Exploration Commitment") within the Option Period and if the US$1 million is not spent, any shortfall will be paid to African Pioneer. Sandfire can withdraw from the Option Agreement at any time after meeting the Exploration Commitment.

A Success Payment: a one-off success payment to be paid to the Company for the first ore reserve reported under JORC Code 2012 edition on the Included Licences which exceeds 200,000 tonnes of contained copper (the "First Ore Reserve") in the range of US$10 million to US$80 million depending on the amount of contained copper in the First Ore Reserve (the "Success Payment").

Termination of Conditional Licence Sale Agreement: As a result of entering into the Option Agreement the parties have terminated the Conditional Licence Sale Agreement dated 12 March 2021 under which Sandfire was due to acquire all 8 of the Company's 8 Botswana prospecting licences for a cash payment of US$500,000 and the issue of 107,272 Sandfire shares to the Company (the "Conditional Licence Sale Agreement").

Colin Bird Chairman & CEO commented:

"This Option Agreement with Sandfire allows an acceleration of exploration activities on the 4 prospecting licences the subject of the Option Agreement and provides the Company with US$500,000 to invest in its remaining 4 prospecting licences in Botswana and its projects in Namibia and Zambia.

We are pleased to be working with our 15% shareholder Sandfire Resources, who is a successful Australian copper and gold producing company with a large copper silver mine development programme in Botswana where it has recently been awarded a mining licence and who has recently announced the US$1.8 billion acquisition of the MATSA copper mine in Spain. The transaction allows Sandfire to fund the exploration of the Included Licences, which are in close proximity to their major mine build, and also allows the Company to carry out exploration on its 4 other Botswana Prospecting Licences."

Further Information on Assets the subject of the Option Agreement

The Company acquired its Botswanan Projects comprising 8 prospecting licences for GBP350,000 by aquiring Resources Capital Partner Pty Ltd on 1 June 2021. Although unexplored, these licences are located in an highly prospective area for copper projects and it was the Company's original intention to conduct an initial 18 month exploration work programme to assess the prospectively of the Botswanan Projects and assess the best way of developing them and had earmarked US$176,000 in the Group's 18 month budget for this purpose. The Option Agreement provides for Sandfire to fund US$1,000,000 of exploration expenditure within 24 months on the Included Licences which are the subject of the Option Agreement which will significantly accelerate and increase the exploration work undertaken on the Botswanan Projects.

 
 Included Licences the subject of the Option Agreement     Retained Licences not the subject 
                                                                     of the Option Agreement 
------------------------------------------------------    ---------------------------------- 
                                           PL 100/2020                           PL 096/2020 
                                           PL 101/2020                           PL 097/2020 
                                           PL 102/2020                           PL 098/2020 
                                           PL 103/2020                           PL 099/2020 
 

Use of Option Payments: The payments from Sandfire under the Option Agreement will allow the Group to concentrate its increased financial resources and its management capabilities on its remaining two projects in Namibia and Zambia and the 4 Botswana prospecting licences that are not the subject of the Option Agreement.

Summary of Option Agreement:

 
 Parties             On the one part the Company and its wholly owned 
                      subsidiary Resources Capital Partners (Pty) Ltd 
                      and on the other part Sandfire Resources Ltd and 
                      its wholly owned subsidiary Tshukudu Metals Botswana 
                      (Pty) Ltd. 
------------------  ------------------------------------------------------------------------- 
 Option Payments     The payments due under the option are i) the fee 
                      for the option over the Included Licences comprising 
                      US$500K payable in cash and the issue of 53,635 
                      Sandfire shares (the " Option Fee ") and ii) the 
                      issue of 53,636 Sandfire Shares as a guarantee fee 
                      to the Company (the " Guarantee Fee ") both to be 
                      settled on 8 October 2021. The Sandfire shares are 
                      not subject to any sale restrictions. 
------------------  ------------------------------------------------------------------------- 
 Exploration         Sandfire, through its 100% owned Botswana subsidiary 
  Commitment          Tshukudu Metals Botswana (Pty) Ltd, to fund US$1 
                      million on exploration activities to be undertaken 
                      by an independent geological manager on advice from 
                      the technical committee within the Option Period, 
                      with a minimum of 60% on drilling and assay costs 
                      on the Included Licences. 
 
                      If Sandfire fails to meet the Exploration Commitment 
                      within the Option Period, it will pay any remaining 
                      shortfall amount of the Exploration Commitment to 
                      the Company at the expiry of the Option Period. 
------------------  ------------------------------------------------------------------------- 
 Technical           During the Option Period there will be a technical 
  Committee           committee with two representatives from Sandfire 
                      and two from the Company to provide advice on the 
                      exploration of the Included Licences and collaboratively 
                      review technical data at quarterly technical meetings, 
                      or more frequently as decided by the technical committee. 
                      This will provide the Company with the benefit of 
                      Sandfire's participation in the exploration strategy 
                      for the Included Licences. Sandfire is very experienced 
                      in the Kalahari Copper Belt where it has two projects: 
                      i) the T3 (Motheo) Copper-Silver Project, which 
                      announced a Definitive Feasibility Study (DFS) in 
                      December 2020 on an initial Base Case 3.2Mtpa processing 
                      capacity and open pit development of the T3 Deposit; 
                      and ii) the A4 discovery, for which Sandfire has 
                      announced a maiden Inferred Mineral Resource containing 
                      100,000 tonnes of copper at an average grade of 
                      1.5% Cu. 
------------------  ------------------------------------------------------------------------- 
 Option Period       2 years which Sandfire has the right to extend by 
                      1 year by the payment of a US$500,000 option extension 
                      fee in cash. 
------------------  ------------------------------------------------------------------------- 
 Withdrawal          Sandfire can withdraw from the Option Agreement 
                      by giving 30 days notice at any time after meeting 
                      the Exploration Commitment. 
------------------  ------------------------------------------------------------------------- 
 Purchase Price      The purchase price following exercise of the Option 
                      is US$1 with settlement being conditional on the 

                      Conditions Precedent being met by the Condition 
                      Satisfaction Date. 
------------------  ------------------------------------------------------------------------- 
 Success Payment     The Success Payment is only triggered if the First 
                      Ore Reserve is > 200,000 tonnes of contained copper. 
                      Given the Included Licences have had limited exploration 
                      to date, if an Ore Reserve is determined this may 
                      take several years and there is no certainty that 
                      an Ore Reserve would be established or that any 
                      such reserve would exceed 200,000 tonnes of contained 
                      copper. The one-off Success Payment will be calculated 
                      in accordance with the table below. 
                       Contained copper (Cu) in    Success Payment 
                        first Ore Reserve           (USD) 
                        Between the following:      payable 
                       >200Kt Cu and <400Kt Cu       $10,000,000 
                                                  ---------------- 
                       >400Kt Cu and <600Kt Cu       $20,000,000 
                                                  ---------------- 
                       >600Kt Cu and <750Kt Cu       $40,000,000 
                                                  ---------------- 
                       >750Kt Cu                     $80,000,000 
                                                  ---------------- 
 
 
                      The Success Payment is due to be paid in cash within 
                      30 days from the date Sandfire announces an Ore 
                      Reserve which triggers the payment of the Success 
                      Payment (the "Success Payment Completion Date"). 
------------------  ------------------------------------------------------------------------- 
 First Ore                     Means the first ore reserve defined on the Licences, 
  Reserve                       which is compliant with the Australasian Code for 
                                Reporting of Ore Reserves (JORC Code, 2012 edition) 
                                and results in a declared ore reserve for a single 
                                Deposit containing at least 200,000 tonnes of contained 
                                copper. 
------------------  ------------------------------------------------------------------------- 
 Conditions                     After exercise of the Option, settlement is conditional 
  Precedent                      upon: 1. ministerial consent for the transfer of 
                                 the Included Licences by the Botswana Minister of 
                                 the Ministry of Mineral Resources, Green Technology 
                                 and Energy Security ("Ministerial Consent"); 2. 
                                 all ASX regulatory approvals; 3. duly executed transfers 
                                 of the Included Licences in the form required by 
                                 the Mining Act or the Botswana Department of Mines 
                                 under which a 100% interest in the Included Licences 
                                 may be transferred. 
------------------  ------------------------------------------------------------------------- 
 Condition           60 business days after the Option is exercised 
  Satisfaction 
  Date 
------------------  ------------------------------------------------------------------------- 
 Included Licences   PL 100/2020 
                      PL 101/2020 
                      PL 102/2020 
                      PL 103/2020 
------------------  --------------------------------------------------------------------- 
 Included Licences   If Sandfire wishes to transfer or sell part of or 
  Right of First      one or more of the Included Licences other than 
  refusal             to a related body corporate then the Company has 
                      a right of first refusal to buy the Included Licence 
                      (s) on the terms set out in the Included Licence 
                      Right of First Refusal offer which has to be exercised 
                      by the Company within 30 days. 
------------------  ------------------------------------------------------------------------- 
 Governing           The agreement is governed by and construed under 
  Law                 the law in the State of Western Australia. 
------------------  ------------------------------------------------------------------------- 
 Disputes            Where a dispute occurs in relation to the First 
                      Ore Reserve or any other matter the Company and 
                      Sandfire shall within 21 days each nominate one 
                      person (a "Nominated Representative") to represent 
                      them to resolve the dispute and the Nominated Representative 
                      shall be empowered by their own Board to negotiate 
                      terms of a settlement of the dispute which shall 
                      be binding on all the parties. If after 30 days 
                      of their appointment the Nominated Representatives 
                      have been unable to reach an agreement then in relation 
                      to a dispute in respect of the First Ore Reserve 
                      it shall be referred to an expert and a dispute 
                      in respect of any matter other than the First Ore 
                      Reserve the parties are free to direct it to an 
                      expert or take legal or any other action to resolve 
                      the matter. 
------------------  ------------------------------------------------------------------------- 
 Representations               The parties have given customary representations 
  & Warranties                  and warranties for an agreement of this nature. 
------------------  ------------------------------------------------------------------------- 
 

For further information, please contact:

 
African Pioneer Plc 
 
 Colin Bird 
 Executive Chairman                      [phone] 
Beaumont Cornish (Financial Adviser) 
 Roland Cornish                         [phone] 
Novum Securities Limited (Broker) 
 Jon Belliss                           [phone] 
 
   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").

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October 04, 2021 05:00 ET (09:00 GMT)