African Potash Regulatory News (AFPO)

African Potash Limited | Index: AIM | Epic: AFPO | Sector: Mining

29 January 2013

African Potash Limited ('African Potash' or the 'Company')

Agreement to Acquire Potash Asset in the Republic of Congo

African Potash, the AIM listed investing company focussed on sub-Saharan potash assets, is pleased to announce that it has today re-entered into an agreement to acquire an indirect 70% interest in La Societe des Potasses et des Mines S.A. ('SPM'), which holds the exclusive right to conduct mining research activities for potash salts over the Lake Dinga Project (the 'Project') in the Republic of Congo.

Overview

·; Agreement to acquire the entire issued share capital of Patagonia Capital Limited ('Patagonia'), a Mauritian company which holds a 70% interest in SPM, a company incorporated in the Republic of Congo for the purpose of mineral exploration (the 'Acquisition')

·; The Acquisition follows the grant of a formal Permis de Recherches in respect of the Project to SPM on 3 December 2012 providing exclusive rights to conduct mining research activities for potash salts and related salts

·; The Project is surrounded by numerous potash development projects including the Sintoukola Potash Project, owned by Elemental Minerals Limited and the Mengo Potash Project, owned by Evergreen resources Holdings (BVI) Ltd following its acquisition of MagIndustries Corp 

·; The Project benefits from access to infrastructure and is less than 60km from the port of Pointe-Noire

·; The total maximum consideration payable for the Acquisition is US$15 million which will be satisfied by the issue and allotment of up to US$12 million worth of new ordinary shares in the Company ('Shares') at 10p per Share and by the payment of up to US$3 million in cash

·; Proposed appointment of Mr. Jean-Pierre Conrad as Chairman to the Company - Mr. Conrad has extensive experience in the resources industry in addition to a solid background in the financial markets

·; Completion of the Acquisition and appointment of Mr. Conrad is subject to Shareholder approval in line with the Company's investment strategy

The Acquisition constitutes a reverse takeover under the AIM Rules and is therefore conditional, inter alia, on the approval by Shareholders at a General Meeting to be held on 21 February 2013. Accordingly, an admission document dated 28 January 2013 (the 'Admission Document'), together with notice of said General Meeting have been posted to Shareholders and is also available on the Company's website at www.africanpotash.com.

Background to the Proposed Acquisition

In accordance with the Company's investing strategy, the Board has identified Patagonia as an appropriate acquisition target.

On 3 February 2012, the Company entered into an acquisition agreement pursuant to which the Company agreed to acquire the entire issued share capital of Patagonia, which holds a 70% interest in SPM, for a maximum consideration of US$15 million. The completion of the proposed acquisition of Patagonia was subject to certain conditions precedent including SPM being granted a "permis de recherches" (for potash and related minerals) in respect of the Lake Dinga area of the Republic of Congo. There were significant delays in SPM being granted this permis de recherches and, as a result, the acquisition agreement was terminated as the conditions precedent could not be satisfied prior to the contractual long stop date.

Following the termination of the acquisition agreement referred to above, on 3 December 2012, SPM was granted the formal Permis de Recherches in respect of the Project by the government of the Republic of Congo. Subsequently, the owners of Patagonia re-approached the Board to enquire whether the Company would still be interested in proceeding with the Acquisition.

On 28 January 2013, the Company entered into an acquisition agreement pursuant to which the Company has again agreed to acquire the entire issued share capital of Patagonia for a maximum consideration of US$15 million to be satisfied by:

(a) the issuance of Ordinary Shares, including the Consideration Shares, up to a value of US$12 million at 10p per Share on the terms set out in the acquisition agreement; and

(b) the payment of up to US$3 million in cash

The consideration shall be payable as follows:

i) on Completion by the payment of US$2.2 million cash and the allotment and issuance of the Consideration Shares at a price of 10p per Consideration Share;

ii) as soon as practicable following the commencement of commercial exploration activities on the area covered by the Permis de Recherches, the payment of US$0.8 million in cash and the issuance of Ordinary Shares equivalent to a value of US$3,466,666 at a price of 10p per Ordinary Share;

iii) as soon as practicable following the production by a suitably qualified and recognised competent person in respect of the area covered by the Permis de Recherches of a (minimum) inferred resource statement to an appropriate, internationally recognised standard which confirms the tonnage of commercial grade, economically viable potash in situ on the area covered by the Permis de Recherches, by the issuance of Ordinary Shares equivalent to the value of US$4,266,667 at a price of 10p per Ordinary Share.

African Potash Chairman and CEO, Edward Marlow, said:

"The Board is confident that the Lake Dinga Project is a highly attractive investment opportunity with considerable upside potential. I am therefore delighted to announce our re-entry into an agreement to acquire an indirect 70% interest in the Project, following the formal grant of the Permis de Recherches to SPM. Lake Dinga is located in a region which hosts world class potash projects such as Sintoukola and Mengo, and subject to Shareholder approval on 21 February 2013, I look forward to identifying the resource potential of this exciting asset through a defined exploration programme.

"The outlook for commercial potash exploration remains highly positive, with rising population and growing affluence in developing countries leading to ever increasing demand for agricultural produce. With potash being a key constituent in fertiliser, the pressing need to develop quality potash assets is expected to continue for many years to come, creating a significant opportunity for an investment company such as African Potash to identify and develop projects, and in so doing delivering significant shareholder value."

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For further information visit www.africanpotash.com or contact the following: