BAOBAB RESOURCES PLC
Baobab Resources plc (AIM: BAO) ('Baobab' or the 'Company') is pleased to announce that it has entered into a £700,000 funding agreement with Topaz EX B.V. ('Topaz'), a company indirectly controlled by Baobab's cornerstone shareholder, the African Mineral Exploration & Development Fund ('AMED') (the 'Financing') to advance both the Company's Monte Muande Joint Venture (the 'JV' or the 'Project') and the Company's flagship Tete pig iron and ferro-‐vanadium project.
Monte Muande JV: focus on developing Direct Shipping Ore ('DSO') Deposit
§ Estimated 3 million tonnes ('Mt') to 5 Mt soil horizon (eluvium) overlying the magnetite/phosphate mineralisation can be easily upgraded to a premium 65% iron ('Fe') product through simple dry screening.
§ No blasting or crushing is required in the mining process, resulting in a very low mining cost.
§ Minimal capital expenditure will be required to bring the four to six year operation into
production at 300,000 tonnes per annum ('tpa') to 450,000 tpa DSO.
§ Baobab is completing an in-‐house feasibility study and environmental impact assessment of
the DSO project.
§ Discussions are underway with potential customers, including local Tete based off-‐take.
Financing
§ Under the terms of the agreement, Topaz will:
§ advance an amount of up to £200,000 to progress the Monte Muande JV (the
'Exploration Funds'); and
§ provide an unsecured and unsubordinated loan for £500,000 (the 'Convertible Loan') to be used at Baobab's discretion to advance its flagship Tete Project.
§ Topaz may elect to convert the Loan into a 65% share of the Company's interest in the JV. Topaz may then earn an additional 15% share through an investment of not less than US$2m.
§ If government approval is received for the conversion and Topaz elect not to convert, the Convertible Loan and 50% of Exploration Funds are to be repaid, if approval is not received then 100% of the Exploration funds are to be repaid.
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THE JOINT VENTURE
The Company has earned an effective interest of 60% in the JV with North River Resources plc ('North River') through exploration expenditure of US$1 million. The JV is incorporated and conducted through the Mozambican registered special purpose vehicle, North River (Marapula) Limitada under a Joint Venture Agreement ('JVA') that replaces the Heads of Agreement of 15 November 2010 ('HOA'). The transfer of the Company's 60% effective interest, is subject to Central Bank and Ministry of Mines approval.
The JVA the detailed operation of the venture with the original investment terms of the HOA remaining essentially the same. The agreement outlines a three stage investment to earn an increasing participatory interest in the Project. Stage 1 has now been completed and North River has the option to participate pro-‐rata at both Stage 2 and 3 to maintain their 40% interest in the Project.
• Stage 1 -‐ Baobab committed to funding a First Work Programme at a cost of not less than US$625,000 over a period of not less than 12 months to earn its current 60% interest. The work programme included 2,000m of diamond drilling.
• Stage 2 -‐ a Pre-‐Feasibility Study over a period of not less than 18 months. Against Baobab having completed the Pre-‐Feasibility Study, its participatory interest in the Project shall increase to 75% (if North River elects not to participate).
• Stage 3 -‐ a Definitive Feasibility Study over a period of not less than 18 months. Against Baobab having completed the Feasibility Study, its participatory interest in the Project shall increase to 90% (if North River elects not to participate).
The eluvial horizon (in situ remnant soil and weathered bedrock) overlying Monte Muande's hard rock magnetite/phosphate deposit is considered by the Company to represent DSO which could be brought into production at a low capital and operational cost.
A total of 76 vertical trench samples have been collected from various locations across the Monte Muande deposit and a 496 hole auger programme covering the surface extent of the eluvials in the Monte Muande area has been completed. The data from this exploration work will, in conjunction of surface mapping and the re-‐opening of the GIB trenches, will form the basis of a DSO resource estimation.
Baobab, in collaboration with North River, intends to complete a feasibility study assessing the economic viability of the DSO resource. Should the study prove positive, a mining title application is expected to be lodged during Q2 2015.
Further details regarding the Monte Muande Project are available on the Company's website, www.baobabresources.com.
The Company has entered into a £700,000 funding agreement with Topaz, a company indirectly controlled by Baobab's cornerstone shareholder, AMED. Under the terms of this agreement Topaz will provide £200,000 to fund exploration work (the "Exploration Funds") at the Company's JV with North River and a £500,000 convertible loan note, which gives Topaz the right to convert the loan into a 65% share of the Company's interest in the Monte Muande Joint Venture (the "Convertible Loan").
The Convertible Loan is convertible at any time up to 18 months following the effective date of the Convertible Loan, being 11 December 2014 (the "Effective Date"). In the event that Topaz notifies the Company in writing of their decision not to convert the Convertible Loan within a period of 12 to 18 months after the Effective Date and Government approval fro the conversion has been received, the Company has a period of 10 business days from the date of the non-‐conversion notice to repay the
AIM ANNOUNCEMENT | 11 DECEMBER 2014 Page 2 of 3
Convertible Loan plus any accrued interest together with 50% of the Exploration Funds, if government approval for the conversion has not been received then 100% of the Exploration Funds are repayable. If the Company is unable to repay the loan after 10 business days, interest at a rate of 5% accrued monthly since the Effective Date will be added to the principal.
The funds from the Convertible Loan will be utilised to advance the Company's flagship pig iron and ferro-‐vanadium project in the Tete province, one of Africa's fastest growing mining and industrial centres.
Following the conversion of the Convertible Loan Note, Topaz may then earn an additional 15% share of Baobab's interest in the JV through an investment of not less than US$2m in the JV, which should enable the DSO project to be brought in to production.
The Financing is deemed to be a related party transaction under the AIM Rules for Companies. The independent directors of the Company consider, having consulted with its nominated adviser, Canaccord Genuity Limited, that the terms of the proposed transaction are fair and reasonable insofar as its shareholders are concerned.
Ben James: Managing Director +258 21 486 404
Jeremy Dowler: Chairman +44 1372 450529
Frank Eagar: Finance Director
Canaccord Genuity LimitedNeil Elliot
Chris Fincken
+44 207 523 8308
Tavistock +44 207 920 3150Financial Public Relations
Emily Fenton / Nuala Gallagher
participatory interest. The Company has been listed on the AIM of the London Stock Exchange (ticker
BAO) since 2007.
The information in this release that relates to Exploration Results is based on information compiled by Managing Director Ben James (BSc). Mr James is a Member of the Australasian Institute of Mining and Metallurgy, is a Competent Person as defined in the Australasian Code for Reporting of exploration results and Mineral Resources and Ore Reserves, and consents to the inclusion in the report of the matters based on the information in the form and context in which it appears.
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