African Potash Ltd Final Results (2332K)

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RNS Number : 2332K

African Potash Ltd

29 December 2015

African Potash Limited / Index: AIM / Epic: AFPO / Sector: Mining

29 December 2015

African Potash Limited ('African Potash' or 'the Company')

Final Results

African Potash Limited, the AIM listed exploration company focussed on the vertical integration of fertiliser operations in Africa and sub-Saharan potash assets, is pleased to announce its final results for the year ended 30 June 2015.

Copies of the Annual Report and Accounts for the year ended 30 June 2015 will be posted to shareholders on 30 December 2015 and will also be available on the Company's website at www.africanpotash.com.

HIGHLIGHTS:

-- Defined strategy to create a vertical platform for the mining, production and distribution of fertiliser

-- Established portfolio providing exposure to both the exploration & extraction and trading sectors of the fertiliser industry

-- Maiden sale agreement achieved for the purchase of 3,000 tonnes of UREA fertiliser stock - expected to generate a net revenue of US$300,000

-- Trading agreement with the Common Market for Eastern and Southern Africa to supply and deliver at least 500,000 metric tonnes of fertilisers on an annual basis for an initial three year period - multiple supply agreements identified

-- Agreement with Beryl Holdings Pty Limited to collaborate and strengthen fertiliser trading and delivery capabilities utilising Beryl Holdings' established trading, logistics and financing network

-- Planning underway for drilling campaign at Lac Dinga Potash Project in the Republic of Congo - targeting issue of a maiden resource statement

-- Trade finance facility of up to US$50m in negotiation to enable the delivery and roll-out of fertiliser operations

-- Strengthened board with experience in commodities and African operations to support active growth strategy

-- Loss for the year of US$8.8m (2014: US$1.0m) and net asset value of US$9.5m (2014: US$16.1m) - follows an impairment charge in respect of Lac Dinga of $7.5m (2014: $nil) due to a fall in valuations

African Potash Executive Chairman Chris Cleverly said, "Since taking the helm at African Potash in March this year, my mandate has been to transform the Company into a dynamic new business capable of capitalising on the highly attractive inherent demand fundamentals for fertiliser and fertiliser constituents across the African continent. In tandem with this, I have listened to the demands of shareholders as to how we can enhance the value of our business in the near term, and this centres on the need for revenue generation. Using this as a basis for our future growth, within nine months of taking stewardship of African Potash, I was delighted to announce earlier this month our maiden fertiliser trade and revenue generation. Although a relatively small step in terms of volume and revenue, this deal is transformational as it demonstrates our ability to generate healthy margins as a fertiliser trader, which will support our future development as a vertically integrated fertiliser business and potash developer/miner as we look to deliver tangible value for shareholders in the near term."

Chairman's Statement:

I joined the Board of African Potash in March this year, having been drawn to the Company for two reasons. Firstly, as a veteran of business across Africa it is clear to me that a key requirement for this rapidly developing continent is the ability to feed itself. Africa does not lack land suitable for agricultural deployment, but shortages of fertiliser, and pricing which make fertiliser prohibitively expensive, mean that land is not being effectively utilised; accordingly much of Africa remains reliant on external sources of food when this great continent could become the world's breadbasket. By investing in potash related projects or businesses, with potash remaining an important constituent of fertiliser, African Potash has the potential to be an important player in Africa's green revolution - benefitting the continent and in the process, the Company's shareholders. Secondly, and at this point I owe a huge debt of thanks to the previous leadership team of Ed Marlow and Jean-Pierre Conrad, African Potash has a majority interest in what we believe to be a potentially world class potash asset of its own, the Lac Dinga Potash Project in the Republic of Congo ('the Project' or 'Lac Dinga') . Taking account of these two factors and by implementing a new dual strategy, focussed on unlocking both the short term fundamentals of the African fertiliser market and the longer term value of a domestic potash project, I believe we have a compelling proposition which should benefit our current shareholders and attract new investors to the evolving African Potash story.

In order to execute this strategy, it is of paramount importance to have a team in place with the knowledge and influence to push aggressive growth objectives forward. With this in mind, I am proud to say that we have built a Board with exemplary commodities and African business experience, and perhaps more importantly, a deep and intimate knowledge of doing business in Africa. In October 2015, the Company announced the appointment of four new directors; Mr Elias Pungong, Rt Hon Mark Simmonds, Mr Declan O'Brien and Rt Hon Lord Peter Hain; providing us with a Board comprising pre-eminent figures in the worlds of politics, finance, business and development. I will expand on each of the appointments in greater detail below.

With a new strategy in place, and an exceptional Board pushing this forward, the Company has delivered numerous notable achievements during the period and in the months post period end, all of which create a foundation for the growth of a potentially significant operator in the African fertiliser industry.

Commercial Agreements

In August 2015 African Potash entered into a trading agreement with the Common Market for Eastern and Southern Africa ('COMESA') and the Mask Africa Crowd Farm Fund Limited ('MACFF'), with a view to creating a vertical platform for the mining, production and distribution of fertiliser, focussed on the COMESA region and beyond. This agreement marked a milestone development in the establishment of the Company's fertiliser operations, giving the Company an entry into the trading sectors of the fertiliser industry to complement its established exploration interests thereby implementing part of its strategy to create a vertical platform for the mining, production and distribution of fertiliser.

Under the terms of the deal, African Potash has agreed to supply and deliver at least 500,000 metric tonnes ('MT') of fertilisers on an annual basis for an initial three year period to off-takers identified and introduced by COMESA. With this secured, the Company wasted no time in identifying supply opportunities and entered into a number of Memorandum of Understanding ('MOU') agreements for the supply of 50,000MT in Zambia, 50,000MT in Malawi, 150,000MT in Zimbabwe and 150,000MT in the Democratic Republic of Congo between August and September, underpinning its active growth strategy.

The Company's current focus is now on securing the necessary financing to enable the delivery and roll-out of its fertiliser operations. In line with this a trade finance facility of up to US$50m (the 'Finance Facility') is currently being arranged through African Potash's exclusive banking adviser Loita Capital Partners International Limited ('Loita'). The Finance Facility will be required until the Company's fertiliser trading operations become self-funding.

Whilst the Finance Facility has taken longer to conclude than initially expected, discussions continue to progress well. Indeed, in October 2015 Loita arranged an off-taker finance facility term sheet (the 'Term Sheet') with Ecobank Malawi (the 'Bank'), to support the conclusion of trading operations. The Term Sheet indicates that the Bank will engage with the Company's off-take partners with a view to providing off-takers finance by way of letters of credit, issued by the Bank on behalf of off-takers. Any letters of credit granted by the Bank in this context will in effect provide a guarantee of payments to African Potash, thereby enabling the Company to finalise its own trade finance facilities.

Importantly, whilst the Company continues to conclude the larger Finance Facility, it has secured a bridge loan of $1,125,000 to cover short term working capital requirements. This loan has a term of nine months (from December 2015).

African Potash continues to identify means through which it can accelerate its roll-out strategy and in line with this, in December 2015 the Company entered into an agreement with Beryl Holdings Pty Limited ('Beryl Holdings'), a South African investment firm, to collaborate and strengthen its fertiliser trading and delivery capabilities.

Under the terms of this agreement, Beryl Holdings' main fertiliser trading activities (which include trading, logistics and financing) will be restructured and operated via a newly formed Mauritian company, which will become a wholly owned subsidiary of African Potash ("Trading Co"). Beryl Holdings' current shareholding in logistics company, Bollore Logistics South Africa, which forms part of Bollore Africa Logistics, is expected to further enhance the intrinsic value of this partnership, as it is anticipated that this logistics company will enter into a trading relationship with Trading Co.

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