First Day of Dealings and £62.1m (US$100m) Placing of New and Existing Shares
Zanaga Iron Ore Company Limited, the iron ore exploration and development company with operations in the Republic of Congo (Congo Brazzaville), is pleased to announce a placing of new and existing shares which has raised gross proceeds of £62.1m (US$100m) through the placing of 39,815,258 ordinary shares (the “Placing”) at 156p each (the “Placing Price”). The Placing, which was conducted by Liberum Capital Limited, who acted as Nomad, Financial Adviser and Sole Broker to the Placing, comprised the issue by the Company of 19,907,629 new shares and the sale of 19,907,629 sale shares by certain existing shareholders. The placing of the 19,907,629 new shares by the Company will raise £31.06m ($50m), before expenses. Admission of the entire issued share capital of the Company to trading on AIM is expected to commence at 8.00am today.
· Admission to trading on AIM with a market capitalisation of £437m at the Placing Price
· 3.34 billion tonne Mineral Resource (reported in compliance with the terms and definitions of the JORC Code 2004) at an average grade of 32.8% FeT which includes 843 million tonnes of haematitic itabirite at an average grade of 38.5% FeT, and significant resource upside potential
· PFS funded by Xstrata option premium of up to US$106m
· PFS expected to be finalised by the end of Q1 2011 to be followed by a Feasibility Study (“FS”) to bankable standards
· Xstrata have the option (Option 1) to purchase 50% plus 1 share in Jumelles Limited, an operating subsidiary of Zanaga. If Option 1 is exercised, Xstrata will fund the completion of a FS to bankable standards
· Potential to produce a high quality 65% Fe sinter product and a 67% Fe concentrate product
· Experienced Board. Operations team led by Colin Harris, previously project director of Rio Tinto’s Simandou project in Guinea
Overview of Zanaga
Zanaga Iron Ore Company Limited (AIM: ZIOC), a British Virgin Islands registered company, is focused on the management, development and construction of a world class iron ore project, located in the south west of the Republic of Congo (Congo Brazzaville). Zanaga owns, through its 100% owned subsidiary Jumelles Ltd, 100% of Mining Project Development Congo S.A.U. Mining Project Development Congo owns two exclusive exploration licences, each covering 500km², the Zanaga-Madzoumou Exploration Licence and the Zanaga-Bambama Exploration Licence (“Zanaga Exploration Licences”).
The Company has a large scale Mineral Resource of approximately 3.34 billion tonnes at an average grade of 32.8% FeT. This is comprised of 843 million tonnes of haematitic itabirite with an average grade of 38.5% FeT and 2.49 billion tonnes of magnetite with an average grade of 30.82% Fe. This resource has been defined as a result of drilling that has taken place on only 25km of an indicated 47km strike of magnetite mineralisation. Management therefore believes that the Zanaga Project offers significant opportunity to further expand the resource base providing substantial upside potential.
The Company is focused on developing the resource base at the Zanaga Project, with annual output targeted to be 45Mtpa of iron ore concentrate once full capacity is reached. Based on metallurgical test work to date, the Company is targeting production of two high quality products, namely: a 65% Fe sinter product and a 67% Fe concentrate product, both with low deleterious elements. It is expected that the Company’s products will be transported via a 350km railway line the Company plans to construct and then exported from a new port facility the Company plans to build near Pointe Noire.
The Company has reached an advanced stage of exploration with a prefeasibility study (“PFS”) on the Zanaga Project expected to be finalised by the end of Q1 2011. Following completion of the PFS, the Company aims to commence a bankable study (“FS”) to further define the technical and economic viability of the Zanaga Project to international bankable standards, before moving towards construction and production.
Xstrata plc currently holds, through one of its subsidiaries ("Xstrata"), an option to purchase a 50% plus one share interest in Jumelles Ltd (“First Option”). As consideration for this First Option, Xstrata has committed up to US$106m to Jumelles Ltd, which option premium is being used to complete the PFS for the Zanaga Project. On completion of the PFS, Xstrata has 45 business days in which to exercise the First Option, the consideration for which will be to fund a FS, costing a minimum of US$100m, to be delivered in accordance with Xstrata's internal guidelines and to international best practice standards. Within 90 days of completion of the FS, Xstrata has a right to acquire the Company's remaining 49.99% interest in Jumelles Ltd and the Zanaga Project ("Second Option") at a price based on net present value, as determined in accordance with the relevant Second Option agreements. Shareholders should be aware that the exercise of this right on the Second Option is not subject to Shareholder approval.
Should Xstrata elect not to exercise its First Option, the Company intends to use the Placing proceeds to continue development of the Zanaga Project in order to fulfil its agreed work programme expenditure commitments under the Zanaga Exploration Licences and other relevant laws and regulations of the Republic of Congo, although the Company would need to source additional funds in order to complete a FS.
Clifford Elphick, Chairman of Zanaga Iron Ore Company commented:
“We are extremely pleased to have successfully listed on AIM with such a high level of interest from the investment community. This marks an important milestone for Zanaga at a critical point in the Company’s development as we look to advance the project through a feasibility study to bankable standards. We now have a strong financial base and an elevated profile from which to move the world class Zanaga Iron Ore Project forward to production.
We have built an extremely strong management team, with a great depth of expertise in developing large scale iron ore exploration projects in Africa. Together with a potential major mining company partner of Xstrata’s standing that is committed to building an iron ore division, we believe that we are now extremely well placed to create significant value for our shareholders.”