TIDMAMC
RNS Number : 1126V
Amur Minerals Corporation
05 August 2022
05 August 2022
AMUR MINERALS CORPORATION
(AIM: AMC)
Proposed disposal of the Kun-Manie Project for US$ 35
Million
Amur Minerals Corporation ("Amur" or the "Company"), the
nickel-copper sulphide mineral exploration and resource development
company focused on the far east of Russia, announces that it,
together with its wholly owned subsidiary Irosta Trading Limited
("Irosta"), has entered into a Share Purchase Agreement (the "SPA")
for the sale of 100% of its interest in Irosta's wholly owned
subsidiary, AO Kun-Manie ("AO KM" or "Kun-Manie"). For a total
consideration of US$ 35 million, Bering Metals LLC (the "Buyer" or
"Bering") will purchase AO KM and the benefit of all amounts owed
by AO KM to Amur under intra-group loans (the "Transaction"). AO KM
is an exploration and mining company which holds the Detailed
Exploration and Mine Production mineral licence for the Kun-Manie
nickel-copper sulphide project located in Amur Oblast of the
Russian Federation.
Highlights:
-- The total consideration for the Transaction is US$ 35 million
to be paid upon completion of the Transaction. The Transaction
consideration is payable in US$.
-- The divesture price represents a premium of 119% to the
Company's market capitalisation of 3 August 2022 ( GBP13.2 million)
and 44% to the current Kun-Manie book value of US$24.3 million as
at 31 December 2021 in Amur's latest annual report. The closing
share price on 3 August 2022 was 0.89 pence per share.
-- In addition to shareholder approval of the Transaction at a
General Meeting scheduled for 24 August 2022 ("General Meeting"),
completion of the Transaction requires the approval by a newly
created Russian Federation government commission per the
Presidential Decree No. 81 dated 1 March 2022 (which specifically
addresses change of control of western held assets) and the consent
of the Federal Antimonopoly Service of Russia.
-- If the Transaction receives approval at the General Meeting
and all other consents and approvals, following receipt of the
consideration of US$ 35 million, the Company intends to pay a
special dividend of 1.8 pence per share to Shareholders within 90
days of Completion.
Robin Young, CEO of Amur, commented:
"The US$ 35 million offer for the purchase of our Kun-Manie
asset is a last and final offer from Bering Metals LLC, a Russian
incorporated company controlled by Vladislav Sviblov. Economic
sanctions and Russian foreign currency exchange controls
implemented with regard to the 'Special Military Operation' have
adversely impacted our ability to advance, develop and place
Kun-Manie into production in the foreseeable future,
Given the geopolitical situation, we highly recommend that
shareholders approve the offer which at completion and receipt of a
single payment of US$ 35 million, a special dividend of 1.8 pence
will be paid to shareholders within 90 days of receipt of
funds.
Should shareholders reject the sale of Kun-Manie, there are
virtually no alternatives available to our advancing development of
the project. This includes a sale to non-Russian entities or to the
ever increasing list of Russian sanctioned mining companies,
funding institutions and banks. The majority of international
resource associated entities within Russia have or are also
withdrawing from Russian activities and operations.
The Company does not foresee that another offer to purchase
Kun-Manie would be forthcoming in the event that the current offer
is rejected."
Order 81 and Company Approvals
The Transaction is subject to certain conditions occurring
within 90 days of the signing of the SPA ("Completion")
including:
-- the dispatch of a shareholder circular ("Circular") and
approval of a resolution to complete the Transaction at a general
meeting of the Company ("General Meeting") scheduled for 24 August
2022;
-- the approval under the commission created with regard to the
Presidential Decree No. 81 dated 1 March 2022 having been granted
on the terms required by applicable law, and not having been
subsequently revoked, and such approval not being conditional upon
any further actions or omissions by any party; and
-- the consent of the Federal Antimonopoly Service of Russia or
its relevant territorial department to the Transaction being
granted and such consent not being conditional upon any further
actions or omissions by any of the parties to the SPA.
Background to and evaluation of the Disposal Price
In 2020, Amur developed a shortlist of potential partners or
purchasers to whom a Russia-based project would be of interest. The
list included Russian and internationally based mining companies,
investment groups, financial institutions, metal trading groups and
electric vehicle battery manufacturers. Discussions were held with
potential partners and confidentiality agreements were signed with
interested parties.
During 2021, three parties (one western and two Russian)
demonstrated bona fide interest in funding or purchasing Kun-Manie.
Negotiations advanced with all three parties and funding
alternatives and purchase options were tabled. Of the three, a
proposed outright purchase of Kun-Manie was selected as it offered
the highest consideration available to the Company, approaching
fair market value. Work on negotiating transaction documentation
was initiated and neared completion in late February 2022.
On 24 February 2022, Russia initiated a special military
operation ("SMO") in Ukraine. The action resulted in the immediate
implementation of sanctions and counter-measure responses by the
Russian Government on 28 February, 1 March and 8 March 2022. The
combined actions had an immediate impact on the terms of the
proposed sale of Kun-Manie. The buyer and Amur agreed to monitor
the situation and revisit the acquisition once the full impact of
the sanctions and orders were understood.
Upon completion of a sanction and order review period,
negotiations were resumed to modify the terms of the Disposal
allowing for all constraints to be considered. Specific
considerations and impacts on the transaction were as follows:
-- A transaction with a Russian entity or individual can be
implemented provided they are not subject to sanctions.
-- Russian Government implemented orders restricting foreign
currency flow out of Russia have a considerable impact. Foreign
exchange payments may only be made with the approval of a newly
formed Currency Control Committee and this committee has final
approval on the quantity and timing of currency flow from
Russia.
-- For the transaction, the Company requires legal support using
Russian solicitors to ensure that the transaction will meet all
regulatory and statutory considerations. Many legal entities have
exited Russia, including the Company's former Russian solicitors
who were involved in negotiations. Amur had anticipated that this
might occur and have already engaged a highly regarded, experienced
Russian law firm, Birch Legal.
From late March through early May 2022, a revised share purchase
agreement was negotiated and executed. All necessary associated
documentation was completed, including a circular for shareholder
approval of the offer. Stanmix Holding Limited offered to purchase
Kun-Manie on the following terms.
-- US$ 15 million upon Completion of the Transaction (to occur
within 60 days of signing the SPA)
-- US$ 10 million within 12 months of the date of the SPA
-- US$ 50 million within 48 months of the date of the SPA
-- US$ 30 million, payable in ten annual instalments of US$3 million commencing in 2027
Requiring shareholder approval, a general meeting was held on 25
May 2022. At the request of attending shareholders, Amur's Chief
Executive Officer, Robin Young conducted a Q&A session related
to the transaction. Subsequent to the Q&A session, the offer
from Stanmix was rejected. The primary reasons from Shareholders
attending were:
-- the payment terms extended over too long a period i.e. up to 15 years;
-- there was no absolute guarantee that all payments would be forthcoming;
-- the initial payment of US$ 15 million was regarded as too low; and
-- specific dividends to shareholders or other uses of proceeds were not identified.
Since 26 February 2022, the continuation of and responses to the
SMO have substantially and further adversely impacted the
opportunity to sell and/or develop Kun-Manie. Sanctions have and
continue to eliminate many companies' interests, including mining
entities, off-take metal marketers and all sanctioned Russian
companies, as potential business counterparties. Additionally, the
larger and well-funded Russian resource banks and fund sources are
predominantly now sanctioned. International funding sources are
avoiding participation in Russian based projects making it
extremely difficult if not impossible to continue operations in
Russia let alone develop and fund the future development of
Kun-Manie.
Following the shareholder vote on 25 May 2022, the Board
re-engaged with the buyer team and sought to negotiate a package
which addresses the concerns of Shareholders raised at the meeting.
At the same time, the situation in Ukraine has only deteriorated
and it is increasingly clear that the SMO will be ongoing and its
effects will be widespread and protracted. The Board has negotiated
a consideration structure in which the initial payment has been
increased and all of the consideration will be paid at the outset
in conjunction with the transfer of shares in Kun-Manie. At the
same time, the total purchase price proposed by the Buyer has been
significantly reduced.
Given the worsening situation the Board has considered the
revised Disposal price of US$ 35 million, which is a substantial
decrease in price compared to the US$ 105 million of the original
transaction which was rejected by Shareholders, and has ultimately
concluded that this is now the final opportunity to recoup the
Company's sunk costs in Russia when taking into account a number of
internal and external factors that have affected the Kun-Manie
Project:
-- The geopolitical situation between Russia and Western
countries has deteriorated since the announcement of 9 May 2022
detailing the original proposed sale, both in terms of market
sentiment towards Russia and within Russia to Western
companies.
-- Market conditions have deteriorated in the months since the
original transaction, driven by rising inflation, supply chain
disruption and the threat of a recession, which has put downward
pressure on UK small cap stocks.
-- The Disposal addresses Shareholder concerns about the initial
transaction, including a more substantial initial consideration
which is all delivered at Completion, and a commitment to the
payment of a special dividend of 1.8 pence per share to be paid to
Shareholders within 90 days of Completion. After Completion of the
Disposal, the Company will become a cash shell and will seek to
complete a reverse takeover which will require Shareholder approval
within 12 months. Should an acceptable reverse takeover opportunity
not be identified and approved by the Shareholders, the remaining
funds from the transaction less costs shall be distributed as a
second special dividend.
-- The Company has been advancing the Project in accordance with
the terms of its Detailed Exploration and Mining Licence and notes
the anticipated life of mine capital cost estimate of US$ 1.92
billion, including US$1.14 billion for preproduction and
construction costs of a 12.4 million open pit ore tonne per annum
operation, as detailed in the TEO Project Russian feasibility
study. The Company does not foresee this financing being readily
available in order to advance the Project to production.
-- The Company has received no other proposals for the
acquisition of Kun-Manie and is not in discussions with any other
parties regarding a disposal of the asset.
-- The Company does not foresee that another offer to purchase
Kun-Manie would be forthcoming in the event that the current offer
is rejected.
The structure of the transaction, the purchase price and payment
terms are consistent with the sale of other Russian assets owned by
Western companies that have been purchased by Russian entities
since the start of the SMO.
Future Strategy and Special Dividend
The Transaction is a fundamental disposal pursuant to Rule 15 of
the AIM Rules for Companies. A Circular containing full details of
the Transaction will be published and notified by RNS and a General
Meeting is expected to be held on 24 August 2022.
Following receipt of the consideration of US$ 35 million, the
Company intends to pay a special dividend of 1.8 pence per share to
be paid to Shareholders within 90 days of Completion and receipt of
funds. The Company has received tax advice that the Disposal is
unlikely to attract capital gains or withholding tax. The Board
proposes that the record date and payment date for the distribution
of the post-Completion dividend shall be no later than 90 days
following receipt of the consideration payment.
The Directors intend to seek to acquire another company or
business in exchange for the issue of Ordinary Shares in a single
transaction (a "reverse takeover"), which will only be able to go
forward with Shareholder approval. In considering the Company's
future strategy, the Board will seek to identify opportunities
offering the potential to deliver value creation and returns to
Shareholders over the medium to long-term in the form of capital
and / or dividends.
The Company will be required to make an acquisition or
acquisitions which constitute(s) a reverse takeover under AIM Rule
14 on or before the date falling six months from the completion of
the Disposal, or be re-admitted to trading on AIM as an investing
company under AIM Rule 8. Failing that, the Company's Ordinary
Shares would then be suspended from trading on AIM pursuant to AIM
Rule 40. If the Company's shares remain suspended for six months,
admission of the Company's shares will be cancelled.
Pursuant to Rule 14 of the AIM Rules, a reverse takeover
transaction would require the publication of an admission document
in respect of the proposed enlarged entity and would be conditional
upon the consent of Shareholders being given at a general
meeting.
Market conditions may have a negative impact on the Company's
ability to make an acquisition or acquisitions which would
constitute a reverse takeover under AIM Rule 14. There is no
guarantee that the Company will be successful in meeting the AIM
Rule 14 deadline as described above.
As at 31 December 2021, the net asset value of the Company was
US$ 31.1 million.
About Bering Metals LLC
Bering Metals LLC is a Russian incorporated company controlled
by Vladislav Sviblov. Mr Sviblov is a Russian entrepreneur and
shareholder in some major mining and industrial assets including
Highland Gold Mining, one of the largest gold miners in Russia
which Mr Sviblov acquired in 2020. Mr Sviblov has previously
completed two additional major M&A transactions, namely the
acquisition of Trans-Siberian Gold in Kamchatka, and the assets of
the Zoloto Kamchatki group. In April 2022, Highland Gold Mining
entered into a definitive agreement to acquire the Russian assets
of New York Stock Exchange-listed Kinross Gold Corporation.
Market Abuse Regulation (MAR) Disclosure)
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 Company's obligations under Article 17 of MAR.
Terms used and not defined in this announcement shall have the
same meanings given to them in the Circular.
Company Nomad and Broker Public Relations
Amur Minerals S.P. Angel Corporate BlytheRay
Corp. Finance LLP
Robin Young CEO Richard Morrison Megan Ray
Adam Cowl Tim Blythe
+44 (0) 7981 126 +44 (0) 20 7138
818 +44 (0) 20 3470 0470 3203
For additional information on the Company, visit the Company's
website, www.amurminerals.com .
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END
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August 05, 2022 06:17 ET (10:17 GMT)
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