TIDMMKA
RNS Number : 6764H
Mkango Resources Limited
05 August 2021
MKANGO RESOURCES LTD.
550 Burrard Street
Suite 2900
Vancouver
BC V6C 0A3
Canada
MKANGO TO ACQUIRE 100% OF BOTH THE SONGWE HILL RARE EARTHS
PROJECT AND MAGINITO, AND RAISES GBP5.52M TO ACCELERATE ITS
INTEGRATED MINE, REFINE, RECYCLE STRATEGY
Highlights
-- Restructuring of Mkango and Talaxis' interests in both the
Songwe Hill Rare Earths Project and Maginito simplifies and
optimises the Company's ownership structure prior to delivery of
the Songwe Hill Feasibility Study, and significantly enhances its
growth potential:
o Mkango to increase ownership of the Songwe Hill Rare Earths
Project and of Maginito to 100% in a GBP13m share transaction with
Talaxis
o Mkango retains all offtake rights relating to Songwe Hill,
Maginito and the 100% owned Pulawy Separation Plant project in
Poland
-- Complementary GBP5.52m fundraising at a 2.9 % premium to its
five-day VWAP, including a GBP700,000 investment by Non-Executive
Chairman Derek Linfield
-- Mkango is fully funded to complete the Feasibility Study for
the Songwe Hill Rare Earths Project, targeted for completion in Q1
2022
-- Mkango now positioned to accelerate its integrated Mine,
Refine, Recycle strategy with a simplified and vertically aligned
ownership structure and enhanced financial flexibility
-- Strong market backdrop with accelerating demand for rare
earths permanent magnets and increased focus on security of supply
and recycling of rare earths
London / Vancouver: 5 August, 2021 - Mkango Resources Ltd.
(AIM/TSX-V: MKA) (the "Company" or "Mkango") is pleased to announce
that Mkango and Talaxis Limited ("Talaxis"), a subsidiary of Noble
Group, have entered into an agreement (the "Agreement") whereby
Mkango will acquire Talaxis' 49% interest in Lancaster Exploration
Limited ("Lancaster"), which owns the Songwe Hill Rare Earths
Project in Malawi ("Songwe Hill"), and Talaxis' 24.5% interest in
Maginito Limited ("Maginito"), which holds a 25% interest in rare
earths magnet recycler HyProMag Limited ("HyProMag"), for
54,166,666 Mkango shares (the "Transaction"), equivalent to GBP13m
at the Placing Price (as defined below).
Complementary to the Transaction, Mkango has conditionally
raised GBP5.52m (GBP5.29m net of fees) (the "Placing") from new and
existing shareholders at a price of GBP0.24 (approx. C$0.42) per
share (the "Placing Price"), including a proposed GBP700,000
investment by Non-Executive Chairman Derek Linfield.
Completion of the Placing and Transaction are subject to
customary closing conditions and the approval of the TSX Venture
Exchange ("TSX-V"). Completion of the Transaction and the
investments proposed by Mr Linfield and Resource Early Stage
Opportunities Company ("RESOC"), another related party proposing to
participate in the Placing, are also subject to the approval of the
independent shareholders of the Company. One additional investor
has also made its participation in the Placing conditional on
shareholder approval of the Transaction. Mkango has scheduled its
Annual General and Special Meeting of Shareholders (the "Meeting")
to approve, amongst other things, the Transaction and the
investments by Mr Linfield and RESOC, on 6 October 2021. See
"Related Party Transaction, Control Person Approvals and Other
Regulatory Matters" below for further discussion.
On completion of the Transaction, Mkango will own 100% of
Lancaster and Maginito, in addition to its existing wholly owned
interests in Mkango Polska (which is developing a rare earth
separation plant in Poland) and three other exploration licences in
Malawi, which includes the exciting Mchinji exploration
project.
The Transaction is expected to bring significant benefits to the
Mkango group, including:
-- Consolidation of assets and offtake under Mkango's control,
increasing financial flexibility and underpinning the Company's
future growth strategy
o Simplification of ownership structure enhances optionality for
Songwe Hill development funding, including the potential
introduction of additional strategic investors and development
partners
-- Restoring 100% ownership over Songwe Hill brings Mkango's
structure in line with peers, providing greater transparency for
investors
-- Increasing ownership of Maginito to 100% provides greater
exposure to HyProMag and the rare earth recycling market, which the
board expects to have substantial growth potential
-- Greater integration between the mining, separation and
recycling businesses, increasing synergies along the value
chain
The new structure is expected to enable Talaxis to participate
in any share price upside as Mkango advances its projects and gives
Talaxis exposure to Mkango's other assets, which include the Pulawy
Separation Plant (the "Separation Plant") currently undergoing
feasibility studies in Poland and Mkango's other exploration
licences in Malawi.
Derek Linfield, Non-Executive Chairman of Mkango, stated: "This
transaction brings material benefits to both Mkango and Talaxis and
strengthens Mkango's position as a future integrated supplier of
rare earths.
Talaxis has strongly supported the advancement of Songwe Hill
and Maginito since its initial investments in 2017, subsequent to
which Mkango has grown downstream, adding investments in recycling
(via HyProMag) and the Separation Plant in Poland. At the same
time, market conditions for rare earths have improved markedly.
We believe this transaction delivers a better platform to create
value and a structure more aligned with the strategies of both
companies. We look forward to Talaxis' continued support as we
progress towards development of Songwe Hill and our other projects.
"
Stephen Motteram, Head of Corporate Development for Noble Group,
stated: "Talaxis is excited to support this reorganisation and
simplification of Mkango's corporate structure. With the increasing
electrification of the global economy, Talaxis sees significant
growth in the permanent magnet market, especially from EVs and wind
power. This corporate reorganisation allows Talaxis to better share
in the upside from Mkango's integrated Mine, Refine, Recycle
strategy, which includes the recently announced and highly
attractive Pulawy Separation Plant project in Poland and Mkango's
strategic interest in rare earths magnet recycler, HyProMag. It
also increases Talaxis' exposure to Mkango's other assets, such as
the highly prospective Mchinji rutile exploration project in
Malawi. We look forward to working with management as the
Feasibility Study for Songwe Hill and other work streams move
towards completion."
The Transaction
Under the terms of the Transaction, on completion, Mkango will
issue to Talaxis 54,166,666 common shares in Mkango (the
"Consideration Shares") at the Placing Price, comprising a total
consideration of GBP13m. The Transaction is subject to approval by
Mkango shareholders, as discussed in more detail below under
"Related Party Transaction, Control Person Approvals and Other
Regulatory Matters". The Company has scheduled its Annual General
and Special Meeting of Shareholders for 6 October 2021, to, amongst
other things, seek such approval. In connection with and upon
completion of the Transaction, existing agreements between Mkango
and Talaxis will be terminated. On completion of the Transaction,
amongst other things, Talaxis will no longer be required to finance
the completion of a Feasibility Study for Mkango's Songwe Hill.
Talaxis' funding obligations are currently suspended until the
earlier of completion of the Transaction or the Transaction
termination date of 29 October 2021.
Upon completion of the Transaction, Mkango will enter into a
lock-in deed with Talaxis ("Lock-in Deed") which will provide,
amongst other things, that for so long as the Noble Group owns 10%
or more of Mkango's shares, Talaxis will be entitled to appoint a
nominee to the board of the Company. Talaxis has indicated to the
Company that it intends to nominate Stephen Motteram as a director
to the Mkango board. Mr Motteram has 25 years' experience in
financial institutions and trading houses, specialising in project
development, commodities trading, M&A, and corporate
restructuring with transaction experience in Australia, China, SE
Asia, Africa, South America, Russia and the Middle East. He has
worked for Noble since 2011 and is currently Head of Corporate
Development. Mr Motteram holds a B. Agricultural Science (Honours)
from the University of Melbourne and an MBA from the Melbourne
Business School and Ivey Business School. He is a Member of CPA
Australia and a Graduate and Member of the Australian Institute of
Company Directors. The appointment of Mr Motteram will be subject
to the approval of the TSX-V and the normal due diligence exercise
by the Company's nominated adviser.
Following completion of the Transaction and the Placing,
Talaxis' shareholding in Mkango will have increased from 11.3% to
32.6%.
The Placing
Complementary to the Agreement, Mkango has conditionally raised
GBP5.52m (GBP5.29m net of fees) from existing shareholders,
including Derek Linfield, the Non-Executive Chairman of Mkango and
new institutional investors, through the subscription for 23.0m
common shares ("New Shares") at GBP0.24per Mkango common share
("Share").
The issue price equates to premiums of 2.9% and 4.8% relative to
the trailing five-day volume weighted average price ("VWAP") of
Mkango's shares on the AIM and TSX-V, respectively.
The use of proceeds is intended to be used for the completion of
the Feasibility Study for Songwe Hill and general corporate
purposes, including for feasibility studies at Mkango Polska.
Mkango's cash position after the Placing is expected to be
approximately GBP5.23m, with an expected additional GBP1.03m of
funds to be received following approval of the Transaction and the
placing to related parties at the Meeting.
The Placing was unanimously approved by the directors of the
Company (other than Mr Linfield who was required to abstain from
the vote given his participation in the Placing). Other than with
respect to subscriptions being made by related parties, being RESOC
and Mr Linfield, as described in more detail below, and an
additional investor, the Placing is expected to close on or around
16 August, 2021 and is subject to the receipt of all necessary
approvals including the approval of the TSX-V. The placing to
related parties will not close until disinterested shareholder
approval of such participation is obtained at the Meeting. A
subscription for 350,000 New Shares as part of the Placing by an
investor who has made its investment conditional on the completion
of the Transaction will also not close until after, and dependent
on, the approval of the Transaction at the Meeting.
The New Shares will rank pari passu with the existing Shares and
application has been made for the New Shares (other than 59.6m New
Shares expected to be issued after the Meeting) to be admitted to
trading on AIM ("Admission"). It is expected that Admission will
become effective and dealings in the New Shares (other than New
Shares expected to be issued after the Meeting) will commence at
8:00am on or around 17 August, 2021. The New Shares will be subject
to a statutory hold period in Canada expiring on the date that is
four (4) months and one day from issuance of the New Shares, and
will also be listed for trading on the TSX-V, provided that
approval of such listing from the TSX-V is obtained.
In accordance with the Disclosure Guidance and Transparency
Rules (DTR 5.6.1R) the Company hereby notifies the market that
immediately following Admission, its issued share capital will
consist of 153.6m Shares (excluding any New Shares expected to be
issued after the Meeting). The Company does not hold any Shares in
treasury. Shareholders may use this figure as the denominator for
the calculations by which they will determine if they are required
to notify their interest in, or a change to their interest in, the
Company under the FCA's Disclosure and Transparency Rules.
In connection with the Transaction, Mkango has agreed to pay, at
completion of the Transaction, commissions to Bacchus Capital
Advisers Limited ("BCA") of 2% of the purchase price payable to
Talaxis, equivalent to GBP260,000, of which half will be satisfied
in Shares (issued at the Placing Price) and the other half in cash,
subject to the approval of the TSX-V. In addition, Mkango has
agreed to pay BCA a fee of GBP30,000 in connection with BCA's
review of the Transaction and advice to the board. In connection
with the Placing, Mkango has agreed to pay, at completion of the
Placing, commissions of up to 5% in cash and 2% in non-transferable
broker warrants, in each case with reference to cash raised by each
of BCA, Shard Capital Partners LLP, Alternative Resource Capital,
Merlin Partners LLP and Jub Capital Management LLP. In addition,
Shard Capital and Alternative Resource Capital will be entitled to
a shared corporate finance fee of GBP5,000. The broker warrants
will have a term of 12 months from issue and an exercise price of
GBP0.24. The total number of broker warrants to be issued on
completion of the Placing is 239,315. Payment of the commissions
(and issuance of the warrants) to the brokers is subject to
acceptance of the TSX-V. The Shares issuable pursuant to exercise
of the broker warrants will be subject to a statutory hold period
in Canada expiring on the date that is four (4) months and one day
from issuance of the warrants. SP Angel Corporate Finance LLP, the
Company's nominated advisor, will be paid a fee of GBP7,500 for
corporate finance advice to the Board in relation to the
Transaction and the Placing.
Lock-In Deed
Under the Lock-In Deed, Talaxis will agree that for so long as
it holds 10% or more of the Company's Shares, it will not, during
the first 12 months following completion of the Transaction, sell
or transfer any of its Shares, other than pursuant to certain
limited exceptions. For the second 12 months following Completion,
Talaxis will agree to an orderly market arrangement. Also, under
the Lock-in Deed, Mkango will agree that for so long as Talaxis
holds 10% or more of the Company's Shares, it will not issue,
transfer or pledge any new Shares in Lancaster or Maginito to any
party who is not an affiliate of the Company without the consent of
Talaxis, provided that Mkango will be permitted to pledge the
Shares held by it in Lancaster and/or Maginito where the Company,
Lancaster, Maginito or any other subsidiary of the Company wishes
to raise project or other forms of debt finance.
Related Party Transaction, Control Person Approvals and Other
Regulatory Matters
Talaxis is currently the holder of approximately 11.3% of the
issued and outstanding Shares of Mkango. As such, Talaxis is a
Non-Arm's Length Party pursuant to applicable rules of the TSX-V,
as well as a "related party" pursuant to Multilateral Instrument
61-101 - Protection of Minority Security Holders in Special
Transactions ("MI 61-101"). Pursuant to MI 61-101, the Transaction
is subject to disinterested shareholder approval (i.e., approval by
a majority of votes cast at the Meeting, excluding any Shares held
by Talaxis, its affiliates and joint actors).
The Company is exempt from the formal valuation requirement of
MI 61-101 in respect of the Transaction pursuant to section 5.5(b)
of MI 61-101 - Issuer not Listed on Specified Markets, as no
securities of the Company are listed or quoted on the Toronto Stock
Exchange, the New York Stock Exchange, the American Stock Exchange,
the NASDAQ Stock Market, or a stock exchange outside of Canada and
the United States other than the AIM market of the London Stock
Exchange.
Following the issuance to Talaxis of the Consideration Shares,
Talaxis will own 69.5m Shares, representing an interest of
approximately 32.6% of the issued and outstanding Shares of the
Company. As a result of it owning 20% or more of Mkango's Shares,
Talaxis will constitute a "Control Person" (as defined in the TSXV
Corporate Finance Manual). The issuance of the Consideration Shares
therefore requires disinterested shareholder approval (i.e.,
approval by a majority of votes cast at the Meeting, excluding any
Shares held by Talaxis, its affiliates and joint actors), which
will be sought at the Meeting.
The Placing is integral to the Transaction and therefore the
Company intends to rely on the "part and parcel pricing exception"
provided for in the policies of the TSX-V.
RESOC has agreed to subscribe for 1,666,666 Shares pursuant to
the Placing ("RESOC Investment"). As of the date hereof, and prior
to completion of the Placing, RESOC owns 14,333,081 Shares,
representing approximately 10.6% of the issued and outstanding
Shares. As a result of owning 10% or more of the Shares, RESOC
constitutes a "related party" of Mkango (as defined in MI 61-101)
and is a Non Arm's Length Party pursuant to applicable rules of the
TSX-V. Pursuant to MI 61-101, the RESOC Investment is subject to
disinterested shareholder approval (i.e., approval by a majority of
votes cast at the Meeting, excluding any Shares held by RESOC, its
affiliates and joint actors). This approval will be sought at the
Meeting.
The Chairman of the Company, Derek Linfield, has agreed to
subscribe for 2,916,666 Shares pursuant to the Placing. As of the
date hereof, and prior to completion of the Placing, Mr Linfield
owns 5,139,561 Shares, representing approximately 3.8% of the
issued and outstanding Mkango shares. As a result of being a
director of Mkango, Mr Linfield is a "related party" of Mkango (as
defined in MI 61-101) and a Non-Arm's Length Party pursuant to
applicable rules of the TSX-V (as defined in MI 61-101). Pursuant
to MI 61-101, the investment by Mr Linfield is subject to
disinterested shareholder approval (i.e., approval by a majority of
votes cast at the Meeting, excluding any Shares held by Mr
Linfield, his affiliates and joint actors). This approval will be
sought at the Meeting.
Related party transactions under the AIM Rules for Companies
(the "AIM Rules")
Talaxis is a substantial shareholder in Mkango under the AIM
Rules and is therefore regarded as a related party under the AIM
Rules. As a result, the Transaction is a related party transaction
for the purposes of Rule 13 of the AIM Rules. The directors of
Mkango, consider, having consulted with SP Angel Corporate Finance
LLP, the Company's nominated adviser, that the terms of the
Transaction are fair and reasonable insofar as the Company's
shareholders are concerned.
As Derek Linfield is a director of the Company, his
participation in the Placing also constitutes a related party
transaction pursuant to Rule 13 of the AIM Rules. The directors of
Mkango, other than Derek Linfield, consider, having consulted with
SP Angel Corporate Finance LLP, the Company's nominated adviser,
that the terms of Mr Linfield's participation in the Placing are
fair and reasonable insofar as the Company's shareholders are
concerned.
RESOC is also a substantial shareholder in Mkango and therefore
a related party under the AIM Rules and its participation in the
Placing is a related party transaction under Rule 13 of the AIM
Rules. The directors of Mkango, other than Derek Linfield who is
participating in the Placing, consider, having consulted with SP
Angel Corporate Finance LLP, the Company's nominated adviser, that
the terms of RESOC's participation in the Placing are fair and
reasonable insofar as the Company's shareholders are concerned.
About Mkango
Mkango's corporate strategy is to develop new sustainable
primary and secondary sources of neodymium, praseodymium,
dysprosium and terbium to supply accelerating demand from electric
vehicles, wind turbines and other clean technologies. This
integrated Mine, Refine, Recycle strategy differentiates Mkango
from its peers, uniquely positioning the Company in the rare earths
sector.
Mkango is developing Songwe Hill in Malawi with a Feasibility
Study targeted for completion in Q1 2022. Malawi is known as "The
Warm Heart of Africa", a stable democracy with existing road, rail
and power infrastructure, and new infrastructure developments
underway.
In parallel, Mkango recently announced that Mkango and Grupa
Azoty PULAWY, Poland's leading chemical company and the second
largest manufacturer of nitrogen and compound fertilizers in the
European Union, have agreed to work together towards development of
a rare earth Separation Plant at Pulawy in Poland. The Separation
Plant will process the purified mixed rare earth carbonate produced
at Songwe.
Through its ownership of Maginito ( www.maginito.com ), Mkango
is also developing green technology opportunities in the rare
earths supply chain, encompassing neodymium (NdFeB) magnet
recycling as well as innovative rare earth alloy, magnet, and
separation technologies. Maginito holds a 25% interest in UK rare
earth (NdFeB) magnet recycler, HyProMag ( www.hypromag.com ) with
an option to increase its interest to 49%.
Mkango also has an extensive exploration portfolio in Malawi,
including the Mchinji rutile discovery, for which assay results are
pending, in addition to the Thambani
uranium-tantalum-niobium-zircon project and Chimimbe nickel-cobalt
project.
For more information, please visit www.mkango.ca .
Market Abuse Regulation (MAR) Disclosure
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') which has
been incorporated into UK law by the European Union (Withdrawal)
Act 2018. Upon the publication of this announcement via Regulatory
Information Service ('RIS'), this inside information is now
considered to be in the public domain .
Cautionary Note Regarding Forward-Looking Statements
This news release contains forward-looking statements (within
the meaning of that term under applicable securities laws) with
respect to Mkango, its business, the Plant and Songwe. Generally,
forward looking statements can be identified by the use of words
such as "plans", "expects" or "is expected to", "scheduled",
"estimates" "intends", "anticipates", "believes", or variations of
such words and phrases, or statements that certain actions, events
or results "can", "may", "could", "would", "should", "might" or
"will", occur or be achieved, or the negative connotations thereof.
Readers are cautioned not to place undue reliance on
forward-looking statements, as there can be no assurance that the
plans, intentions or expectations upon which they are based will
occur. By their nature, forward-looking statements involve numerous
assumptions, known and unknown risks and uncertainties, both
general and specific, that contribute to the possibility that the
predictions, forecasts, projections and other forward-looking
statements will not occur, which may cause actual performance and
results in future periods to differ materially from any estimates
or projections of future performance or results expressed or
implied by such forward-looking statements. Such factors and risks
include, without limiting the foregoing, Shareholder approval of
the Transaction and the investments by related parties, TSX-V
approval of the Transaction and the Placing, settlement risk with
respect to the Placing, governmental action relating to COVID-19,
COVID-19 and other market effects on global demand and pricing for
the metals and associated downstream products for which Mkango is
exploring, researching and developing, factors relating the
development of the Separation Plant, including the outcome and
timing of the completion of the feasibility studies, cost overruns,
complexities in building and operating the Separation Plant,
changes in economics and government regulation, the positive
results of a feasibility study on Songwe Hill and delays in
obtaining financing or governmental approvals for, and the impact
of environmental and other regulations relating to, Songwe Hill and
the Separation Plant. The forward-looking statements contained in
this news release are made as of the date of this news release.
Except as required by law, the Company disclaims any intention and
assumes no obligation to update or revise any forward-looking
statements, whether as a result of new information, future events
or otherwise, except as required by applicable law. Additionally,
the Company undertakes no obligation to comment on the expectations
of, or statements made by, third parties in respect of the matters
discussed above.
For further information on Mkango, please contact:
Mkango Resources Limited
William Dawes Alexander Lemon
Chief Executive Officer President
will@mkango.ca alex@mkango.ca
Canada: +1 403 444 5979
www.mkango.ca
@MkangoResources
Blytheweigh
Financial Public Relations
Tim Blythe
UK: +44 20 7138 3204
SP Angel Corporate Finance LLP
Nominated Adviser and Joint Broker
Jeff Keating, Caroline Rowe
UK: +44 20 3470 0470
Alternative Resource Capital
Joint Broker
Alex Wood, Keith Dowsing
UK: +44 20 7186 9004/5
Shard Capital Partners LLP
Placing Agent
Damon Heath
UK: +44 20 7186 9952
Bacchus Capital Advisers
Strategic and Financial Adviser
Richard Allan Andrew Krelle
UK: +44 20 3848 1642 UK: +44 79 5636 2903
The TSX Venture Exchange has neither approved nor disapproved
the contents of this press release. Neither the TSX Venture
Exchange nor its Regulation Services Provider (as that term is
defined in the policies of the TSX Venture Exchange) accepts
responsibility for the adequacy or accuracy of this release.
This press release does not constitute an offer to sell or a
solicitation of an offer to buy any equity or other securities of
the Company in the United States. The securities of the Company
will not be registered under the United States Securities Act of
1933, as amended (the "U.S. Securities Act") and may not be offered
or sold within the United States to, or for the account or benefit
of, U.S. persons except in certain transactions exempt from the
registration requirements of the U.S. Securities Act.
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