Pathfinder Minerals Plc Company Strategy Update (8395D)

TIDMPFP

RNS Number : 8395D

Pathfinder Minerals Plc

02 November 2020

2 November 2020

Pathfinder Minerals Plc

("Pathfinder" or the "Company")

Company Strategy Update

Highlights

-- Pathfinder asserts that the Government of Mozambique has acted improperly in allowing the Licences to be taken away from the Company in 2011, without the Company's knowledge or consent, through a transfer which had no legal validity

-- Pathfinder will seek to engage further with the Government of Mozambique and attempt to recover the Licences and advance their development alongside a strategic partner

-- Should the Company be unable to resolve the matter amicably with the Government of Mozambique, the Board intends to seek recourse to the Mozambique - United Kingdom Bilateral Investment Treaty (2004) with the support of litigation funders

-- Pathfinder was advised by independent legal counsel in 2014 that the likely remedy from successful treaty litigation would be not less than the return of the Licences to the Company's control

Background

In 2011, Pathfinder was subjected to the unlawful transfer of areas previously licensed to the Company in Mozambique under mining concessions 760C and 4623C (the "Licences") to an unconnected company, Pathfinder Moçambique S.A., without the Company's knowledge or consent. The Licences were held by the Company's 99.99%-owned subsidiary Companhia Mineira de Naburi ("CMdN"). Pathfinder has since pursued a multichannel strategy to attempt to recover the Licences, including a successful action through the English High Court to confirm the validity of the Company's ownership of CMdN and through attempts to negotiate a settlement with the shareholders of Pathfinder Moçambique S.A., who were Pathfinder's former local partners ("Former Local Partners"). In 2020, the Mozambique Supreme Court rejected the Company's application to recognise the English High Court judgment and the Company has to date been unable to conclude a negotiated settlement with the Former Local Partners.

Strategic update - Bilateral Investment Treaty claim against the Government of Mozambique

Following a strategic review of options available to the Company with respect to regaining an interest in the Licences, the Board has concluded that the prospects of a negotiated settlement with the Former Local Partners have diminished and that the Company should seek recourse against the Government of Mozambique.

Pathfinder asserts that the Government of Mozambique has acted improperly in allowing the Licences to be taken away from the Company in 2011 through a transfer which had no legal validity.

The Company was advised in 2014 that it has a valid claim under the terms of the Mozambique - United Kingdom Bilateral Investment Treaty (2004) (the "BIT") that would most likely succeed; and that the most likely remedy from successful treaty litigation would be not less than the return of the Licences to the Company's control and a cost award in its favour.

In 2015, Pathfinder served a Notice of Dispute under the BIT on the Government of Mozambique. The Company is required to demonstrate that all legal avenues in the UK and Mozambique have been exhausted prior to initiating proceedings. Following the Mozambique Supreme Court's rejection of the Company's application to recognise the English High Court judgment (which remains in force) earlier this year, the Board now considers that all such avenues have been exhausted.

The Board is currently in the process of getting the 2014 legal advice in respect of the BIT updated and an analysis undertaken to estimate the chance of success.

The Board has commenced discussions with prospective litigation funders for cost-effective funding and is considering a range of valuation benchmarks for the purposes of a claim. These benchmarks include the revised Scoping Study report on the Licences prepared by independent technical consultants in 2019, as announced, which resulted in an estimated pre-tax net present value at a 10 per cent discount rate of US$1.05 billion; with projected annual revenues of US$323 million over a mine life of 30 years; and a project internal rate of return of approximately 25 per cent.

Diplomatic resolution with the Government of Mozambique - development of the Licences

The BIT advocates that parties attempt to resolve disputes through diplomatic channels in advance of formal proceedings. Accordingly, Pathfinder will seek further engagement with the Government of Mozambique in an attempt to secure a return of the Licences without recourse to the BIT and advance their development alongside a strategic partner.

Members of the Board have met with the UK Government to inform it of the Company's intended course of action and to solicit its support in attempting to reach a diplomatic resolution with the Government of Mozambique.

In anticipation of a return of the Licences to Pathfinder's control, the Board continues to engage with several prospective strategic partners which operate existing mining assets within and outside of Africa and which have the financial and technical capabilities to accelerate the development of the Licences.

Peter Taylor, Chief Executive Officer of Pathfinder, commented:

"Having satisfied all conditions prior to initiation of BIT proceedings, and exhausted attempts to negotiate an amicable resolution with the Former Local Partners, Pathfinder has no option but to look to the Government of Mozambique to put right the transfer of the Licences which we believe was unlawful.

It remains our preference to avoid treaty litigation by resolving the dispute through constructive dialogue with the Government of Mozambique and to conclude such resolution swiftly. Such a timely resolution would allow us to resume development of the Licences which, in turn, is expected to deliver substantial associated social and economic benefits to the region through employment, infrastructure, royalties and taxation."

Enquiries:

Pathfinder Minerals Plc

Peter Taylor, Chief Executive Officer

Tel. +44 [phone]

Strand Hanson Limited (Nominated & Financial Adviser and Broker)

James Spinney / Ritchie Balmer / Jack Botros

Tel. [phone]

Vigo Communications (Public Relations)

Ben Simons / Simon Woods

Tel. [phone]

Email. [e-mail]

Novum Securities Limited (Broker)

Colin Rowbury / Jon Belliss

Tel. [phone]

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014 ("MAR").

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November 02, 2020 02:00 ET (07:00 GMT)