31
October
2023
THIS
ANNOUNCEMENT
CONTAINS
INSIDE
INFORMATION
Pensana
Plc ("Pensana" or
the
"Company")
Update on Finance for the Longonjo and Saltend
Projects
The Company is pleased to
provide the following update on the financing of both the Longonjo
and Saltend projects.
Highlights
-
The
engineering team has successfully completed a modular redesign of
the Longonjo mine and processing facility, with a total Capex of
US$200 million.
-
The
technical and economic due diligence review of the redesign by
South African mining consultants, The Mineral Corporation, on
behalf of ABSA Bank, is scheduled for completion in
November.
-
ABSA which
has been mandated as the lead arranger for a US$120 million loan facility has provided high
level commercial debt terms which include South African export
credit agency support.
-
FSDEA and
a
pan-African Multilateral Development Financial Institution
are
working to provide the US$80 million
equity investment required to support the debt
facility.
-
FSDEA has
provided a $15 million bridging loan
facility towards the US$80 million
investment, which is available to meet operating cash flow
requirements to facilitate early-stage development and the route to
main finance.
-
The
Company is aiming to fully-fund the Longonjo project at the
subsidiary level, Ozango Minerais (84%
Pensana), which
owns 100% of the Longonjo project and as a result the Company's
holding in Ozango Minerais is expected to reduce from 84% to ~64%
at a read-through valuation of 66
pence per share.
-
An updated
MIC is currently being worked on, which could potentially include
various additional tax incentives as a result of amendments to the
private investment legislation in Angola, including a reduction in the rate and
deferral in the payment of Corporate Income Tax rate along with a
reduction in the tax applicable to the distribution of profits and
dividends.
-
The
Company is in advanced discussion with a number of parties for the
offtake of the highly marketable, radionuclide-free mixed rare
earth carbonate (MREC) and expects to be in a position to sign up
to 100% of the production of the high value, clean MREC from the
Longonjo Processing facility.
-
The
proposed funding arrangements for the Saltend rare earth separation
facility remain largely as previously advised, with ABG Sundal
Collier recently confirming that it will place a bond for circa
US$150 million and are independent of
the Longonjo financing.
-
The
Company is in early discussions with the UKIB and with other
potential equity partners for the balance of the funding, namely
circa US$100 million equity
requirement at the subsidiary level and has received a UK
Government grant of up to £4,000,000 towards the funding
requirement.
Paul Atherley Chairman commented:
"The
completion of the engineering redesign together with the technical
and economic sign off by The Mineral Corporation during November is
a very important step towards the execution of the
financing.
We are
grateful for the ongoing support from FSDEA which is working
closely with us and the team at ABSA to secure the funding to allow
the commencement of construction at Longonjo in the first quarter
of next year.
We have
been pleased with the strong interest in the high value
radionuclide-free MREC product from Longonjo and are advancing a
number of offtake agreements as part of the
financing.
We
continue to progress the financing for the Saltend project which
will be independent of the Longonjo financing and as previously
advised will be a bond finance, however now with support from the
UK Government."
Longonjo
The engineering team has
successfully completed a modular redesign of the processing
facility, with a total Capex of US$200
million.
The redesign has been led
by Project Manager Kevin Botha
working with a team of contractors including ADP, part of
Lycopodium group and specialist in modular minerals processing unit
installation, with extensive experience in Angola, ProProcess a hydrometallurgical
specialist with extensive expertise in modular processing plants
throughout Africa and mining
consultant Practara which has completed the detailed mine redesign
and scheduling.
South African mining
consultants, The Mineral Corporation, is undertaking a technical
and economic review of the redesign on behalf of ABSA, which is
scheduled to be completed in November.
As previously announced
ABSA Bank, the South African based multinational banking and
financial services conglomerate has been mandated as the lead
arranger for a US$120 million loan
facility.
ABSA which has existing
exposure to Angola's oil and gas
sector and is looking to expand its interest in the country has
identified the Longonjo project as an opportunity to gain exposure
to the green energy sector.
High level commercial debt
terms have been drafted which include South African export credit
agency support. These terms are expected to be finalised once the
sign off from independent consultants The Minerals Corporation has
been received.
The Company continues to
work closely with major shareholder, the Angola Sovereign Wealth
Fund FSDEA. FSDEA is working with a
pan-African Multilateral Development Financial Institution
to provide the
US$80 million equity investment
required to support the debt facility.
FSDEA has provided a
$15 million bridging loan facility
towards the US$80 million investment,
which is available to meet operating cash flow requirements to
facilitate early-stage development and route to main
finance.
The Company is aiming to
fully-fund the Longonjo project at the subsidiary level Ozango
Minerais (84%
PRE) which owns 100% of the
Longonjo project.
It is intended that the
US$80 million
equity will be invested
at the Ozango Minerais level
by FSDEA and an African
multilateral agency and as a result
Pensana's holding in Ozango Minerais will reduce from 84% to ~64%
at a read-through valuation of 66 p per share at the Pensana
level.
The valuation has been
based on the independent third-party valuation prepared in March of
this year at the time of the proposed US$220
million strategic equity investment by a multinational
mining company.
Further tax
incentives
The current Fiscal Terms
currently in place under the Mining Investment Contract (MIC)
include:
·
2% royalty on
revenue;
·
20% Corporate
Income Tax rate and a 5% municipal tax on taxable net profits
following an initial six-year tax holiday;
·
Custom duties
exemption on imported equipment;
·
Full 5-year
capital repayment allowance;
·
Dividend tax
exemption for 3 years.
An updated MIC is
currently being worked on, which is potentially expected to include
various additional tax incentives as a result of amendments to the
private investment legislation in Angola most notably:
·
Reduction in
the Corporate Income Tax rate, applicable for a period of up to
fifteen years;
·
Deferral of
the payment of taxes for a period of up to six
years;
·
Investment Tax
reduction applicable to the distribution of profits and dividends,
for a period of fifteen years;
·
An Investment
premium (uplift) corresponding to the cost recoverable and tax
deductible in terms of the investment to be made for mining and
product marketing.
Offtake
The global market for
radionuclide-free mixed rare earth carbonate (MREC) is increasing.
Demand from the rest of the world ex China is increasing due to the expansion plans
of existing downstream facilities in Europe, India
and Asia and the establishment of
new separation capacity in the US and Australia.
To meet this increased
demand the Company is in advanced discussion with a number of
parties for the offtake of the highly marketable, radionuclide-free
mixed rare earth carbonate (MREC) and has signed letters of intent
for up to 100% of the Longonjo offtake.
Site based
activities
Approximately 25% of the
US$15 million FSDEA loan has been
deployed over the past three months on the following site-based
activities:
-
the continuation of onsite
activities with earthworks contractors Grupo Nov and electrical
contractor, Elektra in preparation of commencement
of
main
construction;
-
finalization of the
preferred vendor re-pricing
for
the
revised
equipment
schedule;
-
finalization of redesign
of the monthly mine schedule and Run-of-Mine blending strategy for
years 1-5 to meet the redesign throughput
rates;
-
finalization of
the
optimized
Tailings
Storage
Facility
re-design;
-
finalization of execution
of the Livelihood Restoration Programme with the local community
under the Relocation Action Plan.
Saltend
Update
Whilst the immediate focus
is on the financing of the Longonjo project, progress continues
with the financing for the Saltend rare earth separation facility.
Rather than financing both projects contemporaneously as previously
proposed the Saltend financing will follow the Longonjo financing.
The financings are independent of each other with no financier in
common between the two projects.
The capital cost for the
Saltend facility has been revised up to US$250 million from the previous estimate of
US$195 million in May 2022. The increase in the estimate is
primarily due to the impact of inflation and a number of design
changes.
The engineering design has
been completed, the site cleared, the preparatory infrastructure
works completed and the early-works contractors identified. The
project is ready to commence construction once the finance has been
arranged.
The proposed funding
arrangements remain largely as previously advised, with ABG Sundal
Collier recently confirming that it will place a bond for circa
US$150 million with its institutional
investor clients for which the Company has received green bond
accreditation by Shades of Green (formerly part of CICERO, now a
part of S&P Global).
The Company is in early
discussions with UKIB and with other potential equity partners for
the balance of the funding, namely circa US$
100 million equity requirement.
As with the Longonjo
financing, it is intended to finance the Saltend project at the
subsidiary level as a stand-alone business with its own feedstock
and offtake arrangements rather than at the Pensana corporate
level.
To this end and as
previously announced Pensana has entered into an MOU with offtake
partners for 30% of the Saltend NdPr oxide production. These
arrangements recognize that Longonjo will initially be producing
MREC and allow for the ability to convert MREC offtake to oxide
offtake in the future. The Company is also in direct discussions
with OEM's in the automotive and wind sectors including Siemens,
JLR, Volvo, Mercedes, GE and tier 1 suppliers to the automotive
sectors.
UK Government
Support
By 2030 the UK is expected
to transition from a being a major producer of internal combustion
engines to a world leader in electric drive units (EDUs),
producing three million EDUs annually, with a large proportion for
export. Without a secure magnet metal supply chain this is under
threat.
As recently announced
Nusrat Ghani, Minister of State at
the Department for Business and Trade and Cabinet Office,
highlighted that the Saltend project would be an important step in
supporting the UK automotive industry which employs 780,000 people
and has offered the Company a Grant of up to £4,000,000 towards the
funding required to build a rare earth oxide separation facility in
the `Humber Freeport' at Saltend.
Pensana has been nominated
by the UK Government as a partner under the Minerals Security
Partnership (MSP) between the US and its international
allies.
The information
contained within this announcement is considered by the Company to
constitute inside information as
stipulated
under
the
Market
Abuse
Regulations
(EU)
No.596/2014.
Upon
the
publication
of
this
announcement via a Regulatory Information Service, this inside
information will be considered to be in the public domain. The
person responsible for arranging for the release of this
announcement on behalf of the Company is
Paul Atherley,
Chairman.
-
ENDS
-
For
further
information,
please
contact:
Shareholder/analyst enquiries:
Pensana
Plc
Paul Atherley, Chairman
IR@pensana.co.uk
Tim George, Chief Executive
Officer
Rob Kaplan,
Chief
Financial
Officer