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 
----------------------------------  ---------------------- 
 Shard Capital Partners LLP -         Tel +44 (0) 20 7186 
  J oint Broker                        9952 
  Damon Heath 
----------------------------------  ---------------------- 
 

Technical Glossary:

   dmt        dry metric tonne 

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