Capital Metals plc – Offtake MoU Signed

Agreement with the world’s No. 1 manufacturer of high-performance titanium dioxide pigments to fund the Eastern Minerals Project into production

Capital Metals (AIM: CMET), a mineral sands company approaching mine development stage at the high-grade Eastern Minerals Project in Sri Lanka (the “Project”), is pleased to announce that the Company has signed a Memorandum of Understanding (“MoU”) with LB Group (002601:SHENZHEN; Market Cap: US$5.9 billion), the world’s leading manufacturer of high-performance titanium dioxide pigments and sponge, to fund the Project into production.

MoU Highlights

LB Group is seeking to invest in overseas assets to provide ilmenite feedstock for its pigment and sponge operations in China.
Parties to form a 50/50 Joint Venture across all Capital Metals’ interests in the Project for the development and operation of the Project (the “JV”).
LB Group to fully fund the Project as defined by the IHC Mining independent Development Study Report and Preliminary Economic Assessment announced in May 2022 (“PEA”), which is estimated to cost US$81 million. The JV will fund any expansion of the Project beyond the PEA parameters on a 50/50 basis.
All funding to be by way of equity on a staged basis to achieve 1.65 million tonnes per annum mining rate capacity and processing to final products, with LB Group able to apply its share of profits towards its funding commitment until the agreed capacity is achieved.
Capital Metals to start earning its share of JV profits as soon as shipments begin, which could be within 12 months of the start of construction.
LB Group will guarantee 100% of the offtake of heavy mineral concentrate and ilmenite for the entire project life at prevailing international prices at the time of sale – other products to be marketed by the JV to third parties.
LB Group has conducted significant due diligence on the Project with only confirmatory due diligence remaining.
The Project will be managed by a standalone management team reporting to the JV board.
The MoU is non-binding however it provides LB Group with exclusivity until 31 July 2023 to negotiate a definitive JV agreement, unless extended by mutual agreement.
Completion of the JV agreement is expected to require approval of Capital Metals’ shareholders in a general meeting. Further detailed terms of the proposed JV investment and offtake agreement by LB Group will be notified at the time of signing.

Greg Martyr, Chairman of Capital Metals, commented:

“We are delighted to have signed an MoU with LB Group, the world’s leading titanium dioxide pigment manufacturer. This follows several months of discussions and due diligence by LB Group. If concluded, this agreement will not only fund the Project into production but will also see Capital Metals benefitting from its share of free cash flow from the very first shipment. 

This Project will be a first of a kind for Sri Lanka with modern mining practices, knowledge transfer, and significant export income generation. Subject to the lifting of the temporary suspension by the Geological Survey and Mines Bureau of the Company’s Industrial Mining Licences, we look forward to working with LB Group to conclude long form agreements expeditiously and thereafter on the construction, mining, processing, and continued exploration of the Project.”

Capital Metals is being advised by Bruce Griffin of Farview Solutions Limited on the potential transaction with LB Group.

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