Ironveld PLC Planned acquisition of smelting business (1300C)
11 April 2017 - 4:01PM
UK Regulatory
TIDMIRON
RNS Number : 1300C
Ironveld PLC
11 April 2017
11 April 2017
Ironveld plc ("Ironveld" or the "Company")
Planned acquisition of smelting business
Ironveld plc, the owner of a High Purity Iron ("HPI"), Vanadium
and Titanium project ("the Project") located on the Northern Limb
of the Bushveld Complex in Limpopo Province, South Africa, is
pleased to announce that it has signed two non-binding Memoranda of
Understanding ("MOUs") with, inter alia, Siyanda Inkwali Smelting
Services (Pty) Ltd ("Siyanda") to subscribe for shares to acquire a
100 per cent interest in Siyanda Smelting and Refining (Pty) Ltd
("Siyanda Smelting") and a purchase agreement to acquire 70 per
cent of Power Alt (Pty) Ltd ("Power Alt").
Siyanda Smelting currently owns a smelting plant comprising
three arc furnaces and two induction furnaces, a convertor and
associated equipment with a smelting capacity of 7.5 MW (the
"Smelting Plant"). Power Alt is the direct owner of an Independent
Power Producing Plant ("IPP") that generates 10.6 MW of electricity
through 4 natural gas powered turbines.
The transactions will enable early production of HPI, Vanadium
and Titanium from the Project and will facilitate supply into the
Company's offtake agreements. The transactions will provide the
Company with a readymade smelter that is expected to deliver highly
attractive economic returns and early free cash flow whilst
providing the platform for organic growth. The Smelting Plant and
IPP are located in Middleburg, South Africa, c. 300 kilometres from
the Project.
Key Acquisition Highlights
-- Projected annual production from the 7.5
MW smelter from Q1 2018 of:
o 21,000 tons of HPI Powder
o 190.5 tons of Vanadium in slag grading
36% V
o 4,134.5 tons of Titanium in slag grading
65% TiO2
-- The MoUs envisage payment of an initial consideration
of R50m (approx. GBP2.9m*) payable as to
R20m (approx. GBP1.16m) in cash (supported
by warrants granted by the Company) and R30m
(approx. GBP1.74m) in new ordinary shares
in the Company
-- Two further payments each of R69m (approx.
GBP4.0m) in cash due on the first and second
anniversaries of signing of the MOUs, such
payments anticipated by the Company to be
funded by way of free cash flow from the
Smelting Plant
-- The refurbishment and installation of the
necessary equipment to produce HPI, Vanadium
and Titanium products to Ironveld's specifications
is anticipated to take up to 6 months with
production commencing in Q1 2018
-- Once in operation the Smelting Plant is anticipated
to generate significant profit before tax
and free cash flow
-- Allows the Company to ensure certification
of products which will reduce commissioning
time of the 15 MW when this is later developed
-- All the Environmental Permissions are in
place
-- Due diligence has been completed. The aim
is to agree legally binding purchase agreements
by the end of April 2017, with the final
transaction being subject to shareholder
approval with the necessary shareholder circular
to be posted in due course. There can be
no certainty that the transactions will occur,
further announcements will be made in due
course
* All conversion from South African Rand to GBP at an assumed
rate of 17.25
Peter Cox, CEO of Ironveld, said:
"This potential acquisition is a unique opportunity for the
Company to produce HPI, vanadium and titanium significantly earlier
than previously envisaged and begin selling this to our offtake
partners and receiving revenues. As the smelter and convertor only
require refurbishment there is no construction risk and operating
the facility will significantly de-risk the Project by ensuring
early validation of our high quality products. Furthermore the
anticipated profits and free cash flow from the Smelting Plant will
place the Company in a considerable position of strength."
"The strategy for the Company has always been to bring this
strategically important project for South Africa in to production,
benefiting our shareholders, the local communities and the country.
With this acquisition we will gain earlier entry to production, and
establish a de-risked platform to execute our initial plan of
developing a 15 MW smelter as we sell the smelters output to our
offtake partners. This is an excellent opportunity for the Company
to advance the Project."
Since acquiring the Project, Ironveld has obtained the necessary
permits to begin construction and is awaiting the land lease
agreement. In addition, the company has secured financial support
from the South African Government via the Industrial Development
Corporation. Ironveld continues actively working towards financial
closure of the 15MW smelter as the long term objective remains to
operate a 15 MW smelter followed by four 75 MW smelters to process
the large Vanadiferous Titaniferous Magnetite resource at the
Project.
About Siyanda and the Smelting Plant
Siyanda is a private South African company that owns Siyanda
Smelting which will be the direct owner of five furnaces and the
registered owner of the immovable property on which the furnaces
are situated. Siyanda also owns 70% of Power Alt, the owner of the
immovable property on which an associated Independent Power
Producing Plant that generates 10.6 MW of electricity through 4
natural gas powered Jenbacher turbines (J620 GS - manufactured by
General Electric) are situated. it is envisaged will serve as the
supplement and backup power to the Smelting Plant.
Ends
For further information, please contact:
Ironveld plc c/o Camarco
Peter Cox, Chief Executive 020 3757 4980
Shore Capital and Corporate Limited
Stephane Auton / Toby Gibbs (corporate
finance)
Jerry Keen (corporate broking) 020 7408 4090
Camarco
Gordon Poole / Billy Clegg / Kimberley
Taylor 020 3757 4980
This information is provided by RNS
The company news service from the London Stock Exchange
END
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