TIDMGLR
RNS Number : 1586R
Galileo Resources PLC
04 March 2021
This announcement contains inside information for the purposes
of Article 7 of the Market Abuse Regulation (EU) 596/2014 as it
forms part of UK domestic law by virtue of the European Union
(Withdrawal) Act 2018 ("MAR"), and is disclosed in accordance with
the C ompany's obligations under Article 17 of MAR.
For immediate release
4 March 2021
Galileo Resources Plc
("Galileo" or "the Company")
Sale of Star Zinc project
Ongoing Strategy Update
Galileo Resources plc ("Galileo" or the "Company") announces
that on 3 March 2021 it entered into a conditional agreement with
Siege Mining Limited ("Siege") in relation to the ceding of
ownership and operation of the Star Zinc Project (the "Star Zinc
Project") for US$750,000 (being US$200,000 in relation to the
large-scale exploration licence 19653-HQ-LEL (the "Star Zinc
Project Licence") (the "Licence Consideration") and US$550,000 for
Galileo ceding its participation in the Star Zinc Project and all
exploration information which it has in relation to the Star Zinc
Project (the "Project Assets") (the "Project Consideration").
Galileo will also be paid a royalty (proportion share) based on
future sales of zinc from the Star Zinc Project for Galileo
allowing Siege to use Galileo's information, know-how and
commercial experience in relation to the Star Zinc Project (the
"Agreement") .
Reason for Agreement: The Company has entered into the Agreement
following a period in which it has with stakeholders reviewed the
options for putting the Star Zinc Project into operation taking
into consideration operational , community and regulatory issues
associated with mining a project that is in the outskirts of
Lusaka, and allowing ownership and operational responsibilities to
be assumed by a Zambian mining company, whilst the Company can
still participate in the future success of the Star Zinc
Project.
Highlights of the Agreement:
Project to be operated by a Zambian Mining Company: The
conclusion of the review was that the project is best operated by a
local Zambian Mining Company. Siege is a Zambian owned mining
company and it and its principals including Joakim Chewe Chelelwa
have applied for / are in the process of being granted the
requisite licences within the Star Zinc Project area to allow them
to conduct mining activities. Under the Agreement the Star Zinc
project will be operated by Siege , as a Zambian community focussed
project, appropriate to a project located near an expanding urban
area near Lusaka.
Payment of Consideration: US$50,000 will be paid on Completion
and US$700,000 paid at the later of 90 days from i) the signing of
the Agreement and ii) Completion. Completion will occur once the
Star Zinc Project Licence has been assigned to Siege.
Royalty Payable to Galileo: Galileo will be paid a royalty on
any future sales of zinc from the Star Zinc Project based on the
zinc grade. The minimum royalty rate is 3% and increasing by 1% for
each US$250 increase in the zinc price above US$2,500 per tonne up
to a maximum of 10%. The current LME price for zinc is US$2,786 per
tonne based on the London Metals Exchange closing cash price on 3
March 2021 being the last practical date before this announcement.
If the Zinc concentrate grade is 25% for a sale at a zinc price of
US$2,500 per tonne this would result in a royalty of US$18.75 / dmt
whereas if the Zinc concentrate grade were 30% a sale at a zinc
price of US$2,500 per tonne would result in a royalty of US$22.50 /
dmt.
Strategy Update:
Kalahari Exploration: Following the completion of the sale of
its interest in the Star Zinc Project, the Company's immediate
focus will be exploration activities in Botswana where the Company
has 15 licences in the Kalahari Copper Belt in highly prospective
areas, two of which were the subject of the Heliborne-EM
geophysical surveying announced on 23 November 2020. The results of
the Heliborne-EM geophysical surveying are sufficiently robust that
the Company expects to announce the commissioning of initial
reconnaissance drilling program within the month. The Company has
also identified two further areas for Heliborne-EM geophysical
surveying.
Ferber Project: The Company has maintained its licences at its
Ferber project in Nevada in the United States and in view of the
prospectivity is finalising a reconnaissance drilling / exploration
program to be undertaken prior to renewal in August 2021.
Glenover Project: The Glenover project is for phosphate and rare
earths. Glenover has engaged with parties interested in acquiring
part or all of its projects with one party having incurred
significant expenditure in testing the ore, but no commercial terms
have yet been agreed and there is no certainty that an agreement
will be reached.
Kashitu Project: The Kashitu zinc project in Zambia has similar
characteristics to the Star Zinc project but is considered to be
larger and the Company plan an exploration program for 2021 with
the primary objective of developing a resource for the supply to a
nearby refinery and / or the raw ore export market. The Kashitu
area is in open land the topography of which does not suit itself
to urbanisation.
The Company will provide further updates in due course.
Colin Bird Chairman & CEO said:
" The Star Zinc project is a small but high-grade deposit
situated in the expanding outskirts of Lusaka in Zambia in relative
close proximity to housing, schooling and social amenities. The
project lends itself to highly selective mining in a small area and
as such is suitable for a small-scale community project involving
artisanal mining operations and sorting of ore off-site. Galileo
has interreacted with stakeholders to develop a solution for the
mining and operation of the project which will benefit all
stakeholders with Siege a local Zambian mining company taking on
the operation of the project whilst having access to Galileo's
information, know-how and commercial experience "
Financial Affects of the Transaction
The Company acquired its interest in the Star Zinc Project in
2017 and as at 30 September 2020 its carrying value under
exploration and evaluation assets in Zambia in the Galileo
unaudited interims to 30 September 2020 was GBP1,608,230, no income
has to date been generated from the Star Zinc Project. The Star
Zinc Project costs to date have been capitalised as exploration and
evaluation assets as the Project has been in the pre-production and
pre-sales phase.
Timing of the completion of the Agreement, payment of the
Consideration and the actual and projected royalty payments arising
from the Agreement as at the time of signing of the Company
accounts will be considered when finalising the Company's accounts
for the year ended 31 March 2021.
Royalties payable under the Agreement are dependent upon the
zinc concentrate in ore sold, future price of Zinc and ore produced
at the Star Zinc project. For information but not as a forecast of
future production at the Star Zinc Project on 14 November 2018 the
Company announced that following a second phase of drilling the
tonnage target was between 600,000 to 900,000 tonnes with an
estimated average grade of 10-12% zinc at above 3% cut off
grade.
Use of proceeds
The Company intends to use the consideration and any future
royalty payments arising from the Agreement for general group
working capital purposes and for additional work on its current and
future projects.
Purchaser's intentions:
Production and Processing: Siege have under the Agreement
assumed all responsibility for regulatory and operational matters
in relation to the operation and mining of the Star Zinc Project.
Siege have indicated their intention to commence mining imminently,
producing in the range of 6,000 to 15,000 tons a month of saleable
ore but it is recognised the initial production may be lower.
Processing of ore mined, to seek to enhance its grade above 20% and
the saleability of the ore will be conducted at a site
approximately 4 Km from the Star Zinc project site.
Marketing: Galileo will at Siege's request be novating its
agreement with Zopco S.A. announced on 25 November 2020 to Siege
and initial shipments will be test shipments to prospective
purchasers for them to assess the grade and quality of the
product.
The key terms of the Agreement are:
Parties On the one part the Company and Enviro Processing
Ltd and on the other part Siege Mining Limited.
The Company will receive the benefits of the Licence
Consideration under its historic agreements with
BMR Group plc in relation to the Star Zinc Project.
------------------ ----------------------------------------------------------------------
Signing and The agreement signed on [. ]. March 2021 has an
effective effective date of 26 February 2021
Date
------------------ ----------------------------------------------------------------------
Consideration US$200,000 in relation to the Star Zinc Licence
(the "Licence Consideration") and US$550,000 for
Galileo's interest in the Star Zinc Project including
all exploration information which it has in relation
to the Star Zinc Project (the "Project Consideration").
------------------ ----------------------------------------------------------------------
Conditions Completion is conditional on Zambian regulatory
Precedent approval to the assignment of the Star Zinc Project
Licence to Siege
------------------ ----------------------------------------------------------------------
Completion Completion is to occur when the condition precedent
is met and at completion:
1. Siege are to be provided with all the exploration
information in relation to the Star Zinc Project
(defined below); and 2. All license transfer documentation
in relation to the star zinc project license duly
signed by Enviro Processing Ltd.
------------------ ----------------------------------------------------------------------
Payment of US$50,000 is payable upon completion and the balance
Consideration of US$700,000 due at the later of i) 90 days after
the date of the Agreement and b) Completion.
------------------ ----------------------------------------------------------------------
Ownership The rights and obligations of ownership of the
and risk Project Assets and the Company's interest in the
Star Zinc Project shall pass to Siege from the
date of the Agreement.
------------------ ----------------------------------------------------------------------
Regulatory Siege is responsible for all necessary regulatory
Responsibility approvals, permits and licenses in relation to
its acquisition of the Project Assets and the Star
Zinc Project license, the conduct of exploration
and mining activities at the Stars Zinc Project
and the export of ores mined at the Star Zinc Project.
------------------ ----------------------------------------------------------------------
Siege Indemnity Siege are indemnifying the Company and Enviro Processing
Ltd in full for any current or future liability
or loss they may suffer for whatsoever reason in
relation to the Star Zinc Project or the Project
Assets or the Star Zinc Project licence
------------------ ----------------------------------------------------------------------
Mining Operations Siege intends to commence mining 6,000 to 15,000
tons a month of saleable ore at the Star Zinc Project
but it is recognised the initial production may
be lower.
------------------ ----------------------------------------------------------------------
Royalty In consideration for the company providing the
exploration information and allowing Siege to use
the Company's information know-how and commercial
experience in relation to the Stars Zinc Project
Siege shall on a monthly basis commencing from
the signing of the Agreement pay the Company a
royalty on the future sales of zinc from the Star
Zinc project.
The royalty will be payable by the end of the third
calendar month following the month in which the
processed material was exported or sold.
The royalty will vary based on the contained zinc
percentage of the ore sold (the "Contained Zinc
Percentage") and the LME Zinc price at which the
ore is sold (the "LME Zinc Price")
The base royalty rate is 3% and will increase by
1% for each US$250 increase in the Zinc sale price
over US$2,500 per tonne up to a maximum of 10%
(the "Royalty Rate")
The royalty will be calculated by multiplying the
Contained Zinc Percentage * the LME Zinc price
* Royalty Rate.
------------------ ----------------------------------------------------------------------
Novation of The company is to novate its marketing agreement
Zopco Agreement with Zopco S.A. to Siege and Siege is responsible
for obtaining Zopco S.A.'s consent to this novation.
------------------ ----------------------------------------------------------------------
Dispute In the event of a dispute, each party shall nominate
one person to represent them to resolve the dispute
and such person shall be empowered by its own board
to negotiate terms and any agreement made shall
be binding. If after 30 days the nominated persons
have been unable to reach an agreement, then the
dispute shall be submitted to the London Court
of international arbitration under the laws of
England and Wales.
------------------ ----------------------------------------------------------------------
Governing The agreement is governed by and construed under
Law the laws of England and Wales.
------------------ ----------------------------------------------------------------------
Representations The parties have given customary representations
& Warranties and warranties for an agreement of this nature.
------------------ ----------------------------------------------------------------------
You can also follow Galileo on Twitter: @GalileoResource
For further information, please contact: Galileo Resources
PLC
Colin Bird, Chairman Tel +44 (0) 20 7581
4477
---------------------------------- ----------------------
Beaumont Cornish Limited - Nomad Tel +44 (0) 20 7628
Roland Cornish/James Biddle 3396
---------------------------------- ----------------------
Novum Securities Limited - Joint
Broker
Colin Rowbury /Jon Belliss +44 (0) 20 7399 9400
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Shard Capital Partners LLP - Tel +44 (0) 20 7186
J oint Broker 9952
Damon Heath
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Technical Glossary:
dmt dry metric tonne
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