Katoro Gold PLC (KAT.L) Seeking admission for Blyvoor JV to be Listed

Katoro to Seek Admission to the Standard List of the London Stock Exchange for the Blyvoor Joint Venture (the “Project”)

Katoro Gold plc (AIM: KAT), the AIM listed gold and nickel exploration and development company, is pleased to announce that the Company and Target Mine Consulting (Pty) Ltd (“TMC”) (collectively, the “Blyvoor Joint Venture Parties”) have agreed to seek admission for 100% of the Blyvoor Joint Venture project (“BV”) by vending each of their separate interests into a new company to be listed on the Standard List of the London Stock Exchange plc (“London Stock Exchange” or “LSE”) (‘Admission’). Admission will be accompanied by an IPO which will seek to raise sufficient funds to complete the equity requirements for financial close of the project and the cash requirements provided for in the agreement between the parties.

Highlights

· Katoro’s South African Blyvoor Joint Venture project to be listed on the Standard List of the London Stock Exchange as a new company ” BV ListCo” incorporating the whole project;

· Application process for listing on the Standard List of the London Stock Exchange to commence immediately;

· The Blyvoor Joint Venture Parties have agreed to vend their interests in the Blyvoor Joint Venture (see RNS dated 30 January 2020) in exchange for shares and cash in BV ListCo, including TMC’s 100% equity interest in the project’s corporate entity, Blyvoor Gold Operations (Proprietary) Limited (“BGO”) ;

· Pre-Admission, and before settlement of any cash obligations to other parties, Katoro will hold 45% and TMC 55% of BV ListCo based on the parties’ respective project development contributions to date ;

· Katoro intends to maintain a strategic interest in BV ListCo post admission, which it estimates to be approximately 30%, subject to the IPO raise, with c.40% in public hands, ensuring continued upside from future developments;

· Katoro will look to recover its total cash expense to date of c. GBP 1.5 million in Project development, from the IPO;

· Admission planned to capitalise and complete financial close of the project with production commencing within 12 to 18 months from IPO; and

· River Group appointed as advisor to manage the Admission and the associated IPO.

Katoro CEO, Louis Coetzee, said, “We are extremely excited about this dynamic development of Katoro’s largest business venture to date. The Blyvoor project CPR indicates healthy returns and amidst an indicative cyclical longer-term upswing in the raw commodities sector we remain very optimistic about this project.

“In light of the foregoing, we believe it is an opportune and highly strategic time to list the Project as a standalone company on the LSE. As a separate standalone entity with a clear corporate strategy, the Project has more readily available access to both equity and debt funding opportunities.

“Crucially, Katoro will retain a significant strategic interest in the vehicle to hold this robust project, which we expect would result in a value uplift for Katoro shareholders once it is listing and funding is complete.”

ADDITIONAL INFORMATION

Admission Overview

The respective participation interests of the Joint Venture Parties will be restructured as equity interests consolidated in BV ListCo for listing on the LSE. Based on development contributions in the Project to date, Katoro will, prior to Admission, hold a 45% interest in BV ListCo. A capital raising of GBP15,000,000 (“IPO Placing”) would also be conducted as a condition precedent to the restructure (see further below).

The proposed restructure would complete on the Closing Date, defined as the third business day after the date on which the last of the Conditions Precedent (summarised below) are fulfilled or waived as permissible, and consists of:

· The vending into BV ListCo of:

o 100% of the equity in BGO and all amounts of any nature whatsoever owing by BGO to TMC; and

o Katoro’s interest in the BV, including all amounts owed to Katoro through the loan account of c. GBP1.5 million

· In consideration for the vend, BV ListCo paying, on the Closing Date;

o ZAR140,000,000 to Blyvoor Gold Capital (Proprietary) Limited (“BGC”) (a company separate from TMC, and the previous owner of BGO) in respect of claims of BGC against the TMC (notionally payable by TMC)

o ZAR283,096,000 to TMC as follows:

  • ZAR 80,000,000 in cash; and
  • ZAR 203,096,000 by means of the allotment and issue of shares in the capital of BV ListCo at an issue price equal to a 10% discount to the price of the IPO Placing

o ZAR294,624,000 to Katoro by means of the allotment and issue of shares in the capital of BV ListCo at an issue price equal to a 10% discount to the price of the IPO Placing.

Following the IPO Placing, Admission, and associated cash payment offsets, it is intended that Katoro will hold approximately 30 % of BV ListCo, with new shareholders in the IPO Placing holding approximately 40% in BV ListCo. Katoro has no present intentions to sell the interest in BV ListCo that it would receive under the restructure .

As earlier flagged, the restructure is subject to a series of conditions precedent, as summarised here:

· by no later than 17h00 on 1 November 2021 , irrevocable written confirmation from Blyvoor Gold Capital (Proprietary) Limited (a company separate from TMC, and the previous owner of the Project) that it accepts the payment of ZAR140,000,000 in full and final settlement of any and all claims it may have against TMC or BGO;

· by no later than 17h00 on 30 November 2021 , completion of technical due diligence to the satisfaction of, and procurement of a Competent Person’s report acceptable to, Katoro and BV ListCo;

· by no later than 17h00 on 30 November 2021 , receipt of necessary shareholder approvals from TMC;

· by not later than 17h00 on 30 November 2021 , BV ListCo entering into an agreement to purchase Katoro’s total Participation Interest (as defined in the Blyvoor Joint Venture) in the BV for an amount of no more than ZAR294,624,000 (payable by means of the allotment and issue of shares in the capital of the BV ListCo) at an issue price equal to a 10% discount to the price to the BV ListCo IPO capital raising;

· by not later than 17h00 on 20 January 2022 , the receipt of irrevocable subscriptions for ordinary shares in the capital of the BV ListCo for net proceeds of no less than GBP15,000,000; and

· by not later than 17h00 on 31 January 2022 , the ordinary shares of BV ListCo shall have successfully been admitted for trading on AIM or admitted for trading on the Standard List of the London Stock Exchange; and

· by not later than 17h00 on 31 January 2022 , all regulatory and other approvals required to implement the restructure and complete the listing of the ordinary shares of ListCo as contemplated above be obtained.

River Group has been appointed as advisor to manage the Admission and the associated IPO. A prospectus for the Admission and IPO will be published once it has been approved by the Financial Conduct Authority (the ‘FCA’). An experienced board and management for BV ListCo, comprising directors from Katoro and new appointments, will be announced in due course and in conjunction with publication of the prospectus.

Rationale for Seeking Admission

Based on substantial interest from various funding parties, and having completed a SAMREC compliant Competent Persons and Valuation Report (see RNS of 04 May 2021) that was produced from the results of advanced feasibility work conducted on the Project, and following Katoro’s direct cash contribution of c. £1.5 million, the JV parties came to the conclusion that it would be in the best interest of the Project, shareholders and prospective investors to position the Project as a standalone, independently listed company. The reasons for the conclusion include a very clear preference expressed by interested debt funders and investors, for a single standalone listed gold tailings focused entity that involves no unincorporated joint venture interests.

Upon completion of the restructure , Katoro’s interest in the BV will be indirect through its equity holding in BV ListCo, with the BV’s immediate funding requirements met by the IPO Placing. Katoro will have no future funding obligations with respect to the BV, however in its discretion Katoro will remain free to support future fundraising activities by BV ListCo. There will be no change in its other project interests such as the Haneti nickel joint venture (65%) in Tanzania.

About the Project

The Project is a gold tailings project in South Africa with an NPV of c. £96 million (Note: the NPV value at the time of entering into the BJV in January 2020, was c. USD 40 million) at a discount rate of 7.9% and an IRR of 33% with a payback period of two and a half years (see RNS of 04 May 2021).

The completed CPR reports that the Project contains a SAMREC compliant resource of c.1.4Moz of Au at an average grade of 0.31g/t Au. (RNS 15 Dec) of which c. 868 000 oz is in the measured and indicated (M&I) category and 542 000 oz in the inferred category with an “all-in” production cost of 861 US$/Gold oz. Additional m etallurgical test work also confirmed historical results and the recovery utilized in the CPR of 51% over LoM and 53.5% for the reserve (TSF 6 and 7).

The targeted initial production anticipates up to 500,000 tonnes per month (tpm) of material from the tailings in the first phase and after a 1-year production, a ramp-up phase with a projected 25-year Life-of-Mine (LoM) for the entire resource.

The Project already has the required permitting in place for the reprocessing of the measured and indicated tailings resource, and production could therefore commence immediately upon commissioning of a processing plant.

As at 31 December 2020, Katoro has advanced funding in the amount of £1,201,767 of which 100% relate to expenditure allocated to the Joint Venture operations, carried by Katoro. Furthermore, as disclosed in the 30 June 2021 interim financial accounts, Katoro continued to advance funding in the amount of £97,207 of which 100% relates to expenditure allocated to the Joint Venture operations, carried out by Katoro. All amounts contributed to the joint operation are expensed to exploration and evaluation expenditure on Katoro’s consolidated statement of financial position until such time that commercial viability is reached and the recoverability of the receivable is more certain.

This announcement contains inside information as stipulated under the Market Abuse Regulations (EU) no. 596/2014.

For further information please visit www.katorogold.com or contact:

Louis Coetzee

louisc@katorogold.com

Katoro Gold plc

Executive Chairman


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