US$2 million share subscription into Brazilian Nickel to accelerate development of Piauí Nickel Project

By December 29, 2020 Uncategorized No Comments

Anglo Pacific Group PLC (“Anglo Pacific” or the “Company”) (LSE: APF, TSX: APY), is pleased to announce that it is acquiring an approximately 2.1% equity stake in Brazilian Nickel Limited (“BRN”) at an investment cost of US$2 million (approximately £1.5 million). Each BRN share is valued at £0.45.

The investment is part of a wider US$27.5 million funding led by TechMet Limited (“TechMet”), with funds they have received as part of a significant equity investment from the U.S. International Development Finance Corporation (“DFC”), as part of the anticipated acceleration of the development of Brazilian Nickel’s Piauí Project (the “Project”).

Highlights

  • The investment underlines Anglo Pacific’s confidence in the growth potential of the Project, over which the Company has a 1.25% gross revenue royalty (“GRR”) with the option to acquire an incremental 3.0% GRR for US$70 million (total royalty entitlement of 4.25%) (the “Upsize Option”) at the time of PNP24k Project construction decision.
  • The involvement of a highly regarded investor such as TechMet (with the backing of the DFC), is a very positive signal of the technical viability of the Project and a recognition of the robustness of Anglo Pacific’s original royalty investment thesis.
  • BRN will accelerate the Project’s development by directing substantially all of the proceeds to completing a definitive feasibility study for the full scale Piauí Project as well as expanding its demonstration plant to provide early small scale production from the PNP1000 project.
  • Under Anglo Pacific’s existing 1.25% GRR, the investment which cost US$2 million in 2017 is expected to contribute US$4.3 million per annum once fully ramped up, and US$67.2 million over the life of mine assuming a long term nickel price of 17,848 per tonne.
  • If the Company decides to exercise its Upsize Option, the royalty on the Project is expected to initially contribute US$14.5 million per annum once fully ramped up, and US$228.0 million over the life of mine assuming a long term nickel price of 17,848 per tonne.
  • The investment is part of the Company’s continuing strategy to invest in commodities which form part of new technologies which contribute to reducing the world’s carbon footprint and supporting a more sustainable world.

Julian Treger, Chief Executive Officer of the Company, commented:

“We are very pleased to invest a further ~US$2 million into BRN which will help to accelerate the Piauí Project which, if the Company decides to exercise its option to increase the GRR to 4.25%, has the potential to generate US$14.5 million per annum of GRR once fully ramped up in the middle of the decade, providing meaningful income to the portfolio as we continue on the path of portfolio diversification. The involvement of TechMet, in whom the US Government recently became a significant shareholder, is a very positive signal of the technical viability of the Project and a recognition of the robustness of Anglo Pacific’s original royalty investment thesis.

This share subscription is part of our continuing strategy of investing in commodities that support a more sustainable world and which form part of new technologies which contribute to reducing the world’s carbon footprint including vehicle electrification. BRN’s anticipated nickel and cobalt products are aligned with this strategy as the Project is expected to produce high purity nickel and cobalt hydroxide intermediates which can be used in lithium ion batteries as well as traditional nickel end user markets.”

Further Details

Nickel prices have rebounded strongly since March, rising ~53% and second only to copper in performance amongst the base metals. The recovery trend has been fuelled by strong investor buying focused on the medium-term EV-related demand story and the predicted role of nickel in the transition towards renewable energy resources. The valuation of £0.45 per share was agreed between the Company, TechMet and BRN earlier this year, prior to the recent strong rise in the nickel price.

TechMet is a private investment firm focussed on building, controlling or taking significant minority positions in projects across the technology metal supply chain including nickel, cobalt, lithium, rare earths and other strategic metals. TechMet’s largest shareholder is the DFC, a development agency of the United States federal government, which was established in 2019 through the passage of the BUILD Act, combining the capabilities of OPIC and USAID’s Development Credit Authority. The DFC is focussed on investing alongside private sector companies in sectors including critical infrastructure and technology.

The US$25 million TechMet investment will be funded in three tranches with the first tranche of US$13 million closing simultaneously with Anglo Pacific’s US$2 million investment. A further US$7 million and US$5 million is payable by TechMet upon completion of certain conditions precedent including the execution of a debt financing facility for the PNP1000 Project. The second and third tranches are expected to be funded during the first half of 2021.

BRN is required to deploy the funds from TechMet and Anglo Pacific investment on the development of a Definitive Feasibility Study (“DFS”) on the “PNP24k Project”, Certain early works towards the construction of the “PNP1000″, and for general corporate working capital purposes.

For more information on Anglo Pacific’s initial investment in the Piauí Project, please refer to the announcement of 14 September 2017: www.anglopacificgroup.com/acquisition-of-a-royalty-on-the-piaui-nickel-cobalt-project.

Total Anglo Pacific equity stake including a previous convertible loan note transaction with BRN is expected to amount to 2.47%. Expected shareholding is expressed on a fully diluted basis following funding of all three tranches by TechMet

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