TIDMGLR

RNS Number : 0426V

Galileo Resources PLC

09 December 2021

For immediate release

9 December 2021

Galileo Resources Plc

("Galileo" or "the Company")

Glenover Assets Sale and

Option to sell shares in Glenover

Galileo Resources plc ("Galileo "or the "Company") is pleased to provide details regarding;

a. Asset sale agreements entered into between Glenover Phosphate Proprietary Limited ("Glenover") in which Galileo has a 29% direct and 4.99% indirect investment held via Galagen Proprietary Limited who are the BEE partner in Glenover, and JSE Limited listed Afrimat Limited (JSE : AFT) ("Afrimat") on 8 December 2021 (the "Asset Sale Agreement"). The Asset Sale Agreements relate to the sale for ZAR 250M (approx. GBP11.64M) of certain deposits of phosphate rock located at the Glenover Mine ("Inventory Deposits") ("Glenover Unconditional Asset Sale") and mining rights to mine the Vermiculite Deposit at the Glenover Mine ("Vermiculite Mining Rights") ("Glenover Conditional Asset Sale").

b. A conditional sale of shares agreement between Afrimat, Glenover and the shareholders of Glenover under which Glenover has the option (the "Afrimat Option") to acquire the sale of shares in and shareholders loans made to Glenover for ZAR300M ( approx. GBP14M ) (the "Sale of Shares Agreement") which is expected to complete by 15 June 2023 if the option is exercised.

The agreements hereinafter being referred to as the ("Glenover Agreements").

Colin Bird Chairman & CEO said:

"Galileo originally invested in Glenover in 2012 and this agreement is testament to the hard work of the Glenover management, our local shareholder Ferminore Proprietary Limited, and BEE partner Galagen. The Acquirer Afrimat, is a well respected South African mining group, who have carried out extensive critical testwork and due diligence, before proposing this acquisition. We wish them well with this. The succesfull completion of this transaction is a good example of how local South African groups can successfully work with an experienced international partner creating value for all parties and an asset that can be taken on for further development by an established South African mining group. I would also like to thank the Galileo shareholders for their patience and support."

As further detailed below on completion of the;

a. Asset Sale Agreement the value to Glenover will be ZAR250 million (approx.. GBP11.64M) which after taxes, costs and working capital requirements it intends to distribute to to the Glenover shareholders; and

b. Sale of Shares Agreement the value to the Glenover shareholder will be a further ZAR300M (approx. GBP14M).

Galileo has a 29% direct shareholding in Glenover and a 4.99% indirect shareholding held via Galagen Proprietary Limited who are the BEE partner in Glenover.

Highlights of Glenover Unconditional Asset Sale

 
 Consideration               i) ZAR 215.1M for the ("Inventory Deposits") 
  payable                     the ("Inventory Consideration"). 
  to Glenover 
==========================  ====================================================== 
 Payment of Unconditional    Inventory Consideration to be paid by Afrimat 
  Asset Sale Consideration    in cash to Glenover within 15 business days 
                              of the signature date of the Asset Sale Agreement. 
==========================  ====================================================== 
 Effective Date              The effective date is the signature date of 
                              Asset Sale Agreement. 
==========================  ====================================================== 
 Distribution                Glenover intends to make a cash distribution 
  of Unconditional            to its shareholders from the Inventory Consideration 
  Asset Sale Consideration    and the IP Consideration having made provision 
  to Glenover shareholders    for South African Income Tax @ 28%, transaction 
                              costs and bonuses and having retained sufficient 
                              funds for 12 months working capital requirements 
                              at the time of the distribution to meet South 
                              African companies law solvency requirements 
                              ("Provisions Prior to Paying Dividend") . The 
                              final amount and timing of this distribution 
                              has not been finalised but is expected, subject 
                              to advice, to be around ZAR145M (approx. GBP6.8M) 
                              before 28 February 2022 of which Galileo's 
                              29% share would be approximately ZAR42M (approx. 
                              GBP1.97M). Any proceeds received in respect 
                              of Galileo indirect 4.99% interest are subject 
                              to agreement with Galagen Proprietary Limited 
                              and will be notified at the time, as applicable. 
==========================  ====================================================== 
 

Highlights of Glenover Conditional Vermiculite Mining Right Sale

 
 Consideration                ZAR 34.9M to acquire the Vermiculite Mining 
  payable                      Right (the "Vermiculite Consideration"). 
  to Glenover 
===========================  ======================================================= 
 Settlement of                The Vermiculite Consideration is at Glenover's 
  Vermiculite Consideration    election to be settled in cash or Afrimat shares 
                               based on the 30 days' volume weighted average 
                               price ("VWAP") at which Afrimat shares traded 
                               on the JSE Limited on the relevant Effective 
                               Date. The Afrimat shares issued to settle the 
                               Vermiculite Consideration will not be subject 
                               to any sale restrictions. 
===========================  ======================================================= 
 Sale of Assets                   a) by no later than 15 June 2022, the mining 
  Outstanding Conditions           right to mine certain minerals on the property 
                                   known as Farm Glenover 371 L.Q. (the "Mining 
                                   Right") has been granted to Glenover; and 
 
                                   b) by no later than 15 June 2022, the Water 
                                   Use License Application ("WULA") has been granted 
                                   and a period of 30 days have lapsed since the 
                                   date of grant of the WULA without any appeal 
                                   having been lodged against the grant thereof. 
                                   "Sale of Assets Outstanding Conditions" 
===========================  ======================================================= 
 Effective Date               The effective date of the sale of the Vermiculite 
                               Mining Right shall be the first day of the 
                               month following the month in which the last 
                               of the Sale of Assets Outstanding Conditions 
                               has been fulfilled, which is anticipated as 
                               being 1 July 2022. 
===========================  ======================================================= 
 Distribution                 Glenover intends to make a distribution in 
  of Vermiculite               specie of Afrimat shares to its shareholders 
  Consideration                from the Vermiculite Consideration having made 
  to Glenover shareholders     provision for South African Income Tax @ 22.4%, 
                               transaction costs and bonuses and having retained 
                               sufficient funds for 12 months working capital 
                               requirements at the time of the distribution 
                               to meet South African companies law solvency 
                               requirements. The final amount and timing of 
                               this distribution has not been finalised but 
                               is expected, subject to advice, to be around 
                               ZAR35M (approx.. GBP1.6M) of which Galileo's 
                               29% share would be approximately ZAR10M (approx. 
                               GBP470K). Any proceeds received in respect 
                               of Galileo indirect 4.99% interest are subject 
                               to agreement with Galagen Proprietary Limited 
                               and will be notified at the time, as applicable. 
===========================  ======================================================= 
 

Highlights of Share Sale Agreement

 
 Consideration          ZAR300M (approx. GBP 14M) to acquire from the 
  payable to Glenover    Glenover shareholders all the shares of and 
  shareholders           sale claims to Glenover (the "Glenover Shares") 
                         (the "Sale Shares Consideration"). Galileo 
                         Resources SA (Pty) Ltd, the Company's wholly 
                         owned South African subsidiary, share of the 
                         Sale Shares Consideration is ZAR102M (approx. 
                         GBP4.78M). 
=====================  ======================================================= 
 Settlement of          a) 50% of the Sale Shares Consideration shall, 
  Consideration          at the election of Afrimat, be split between 
  payable to Glenover    Afrimat shares based on the Afrimat 30 day 
  shareholders           VWAP at which the Afrimat shares traded on 
                         the JSE Limited on the relevant Effective Date 
                         and cash (Afrimat has to make this election 
                         on the relevant Effective Date); and 
 
                         b) 50% of the Sale Shares Consideration shall, 
                         at the election of the Sellers, be split between 
                         Afrimat shares 30 day VWAP at which the Afrimat 
                         shares traded on the JSE Limited on the relevant 
                         Effective Date and cash (the Sellers have to 
                         make this election on the relevant Effective 
                         Date). 
 
                         Any Afrimat shares issued to settle the Sale 
                         Shares Consideration will not be subject to 
                         any sale restrictions. 
=====================  ======================================================= 
 Afrimat Option         Afrimat has at its sole discretion until 15 
  Period                 June 2022 or, if an extension has been granted 
                         by 10 November 2022, to exercise their option 
                         to acquire the Glenover Shares. 
=====================  ======================================================= 
 Conditions Precedent   a) by no later than 15 June 2022 the issue 
                         of a mining licence to Glenover (the " Mining 
                         Right"); 
 
                         b) by no later than 15 June 2022 the Water 
                         Use License Application ("WULA") has been granted 
                         and a period of 30 days have lapsed since the 
                         date of grant of the WULA without any appeal 
                         having been lodged against the grant thereof; 
 
                         c) by no later than 28 February 2023 the approval 
                         in terms of the Competition Act No. 89 of 1998, 
                         if required, has been granted, either unconditionally 
                         or subject to conditions which have been approved 
                         in writing by Afrimat; 
 
                         d) by no later than 31 May 2023 the consent 
                         of the Minister of the Department of Mineral 
                         Resources and Energy for the application in 
                         terms of Section 11 of the Mineral and Petroleum 
                         Resources Development Act No. 28 of 2002, has 
                         been granted, either unconditionally or on 
                         terms and conditions which are reasonably acceptable 
                         to Afrimat; 
 
                         e) by no later than 15 June 2022 the shareholders 
                         of the Company (to the extent required by the 
                         AIM Rules) have approved the Share Sale Agreement; 
 
                         f) Afrimat has at its sole discretion have 
                         exercised the Afrimat Option to acquire or 
                         not to acquire 100% of the issued share capital 
                         of Glenover, exercisable at the sole discretion 
                         of Afrimat by 15 June 2022 or, if an extension 
                         has been granted by 10 November 2022; and 
 
                         g) by no later than 15 June 2022, the approval 
                         of the amended Glenover's memorandum of incorporation 
                         by Glenover, Afrimat and the Shareholders is 
                         obtained to be filed with the CIPC; 
 
                         (the "Sale of Shares Outstanding Conditions"). 
=====================  ======================================================= 
 Effective Date         The effective date of the Sale of the Glenover 
                         Shares shall be the first day of the month 
                         following the month in which the last of the 
                         Sale of Shares Outstanding Conditions is fulfilled 
                         or waived, which is anticipated as being 1 
                         July 2023. 
=====================  ======================================================= 
 

Additional Information on Afrimat: Afrimat is a leading black empowered Group with its main business and core competence in open pit mining. It is listed on the 'Construction and Materials' sector of the JSE Main Board since 2006. The group supplies a broad range of products ranging from Construction Materials (aggregates, bricks, blocks, pavers and readymix concrete), Industrial Minerals (lime and lime products) and Bulk Commodities (iron ore and anthracite). Afrimat Afrimat's announcement in relation to the Asset Sale Agreement and the Option Agreement can be found at their website https://www.afrimat.co.za/

Further information on Assets the subject of the Share Sale Agreement: The Company has a 29% direct shareholding in Glenover and an indirect investment of 4.99% in Glenover held through its shareholding in Galagen. The investment in Glenover is treated in the Company's accounts as a minority investment in a joint venture as such the Company recognises in its statement of Comprehensive Incone the net result of Glenover which was a loss of GBP9,088 in its accounts for the year ended 31 March 2021 (the "2021 Accounts"). The carrying value of the Company's investment in Glenover in the 2021 Accounts is GBP1,979,640 and its loan to Glenover is GBP335,390. Accordingly, Galileo anticipates that should the all parts of the disposal proceed as antificpated, it will record a profit on disposal in its accounts for the relevant reporting period, which will be determined at that time.

Use of funds: The Company intends to use the dividends received from Glenover, and if Afrimat exercise their option under the Share Sale Agreement, the sale proceeds from the sale of its Glenover shares, less any associated tax liabilities as working capital of the Company to support expenditure on the Company's existing projects, ongoing corporate costs and / or for further acquisitions in the mining sector.

Intention regarding Afrimat shares: The Company intends to hold any Afrimat shares it receives by way of dividend from Glenover arising from the Vermicilite Consideration and / or the sale of Glenover Shares as a current asset investment.

Decision on settlement of share of Sale of Shares Consideration: The Company will based on market conditions at the time of completion of the Share Sale Agreement make a decision as to whether to receive a portion of 50% of the Sale of Shares Consideration in Afrimat Shares or cash.

Transaction Incentive Award: Further to the approval granted at the Company's AGM on 25 October 2021 the Company intends to make awards in relation to the Glenover Agreements transaction (the "Transaction") based on criteria determined by the remuneration committee. The maximum transaction award payable in relation to the Transaction will be 2% of the Transaction value and be allocated amongst the eligible participants by the remuneration committee. Awards may be paid in cash and/or Company shares and if in Company shares based on the 30-day VWAP following the date the Company announces the Transaction.

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 
  Joint Broker                         9952 
  Damon Heath 
==================================  ====================== 
 

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014 as it forms part of UK Domestic Law by virtue of the European Union (Withdrawal) Act 2018 ("UK MAR").

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