Bellzone Mining Regulatory News (BZM)

9 November 2017

Bellzone Mining plc

("Bellzone" or "the Company")

Mining Convention Update Signed

Following previous updates on 8 June and 14 September 2017, Bellzone (AIM: BZM) announces the signing on 9 November 2017, by its wholly-owned subsidiaries OTN Mining Ltd (Jersey) and Bellzone Holding SA and by the Republic of Guinea, represented by the Guinean Minister of Mines and Geology and the Minister of Budget, of the Addendum (L'Avenant n°1 à la Convention de Base) ("Addendum"). The Addendum updates the Mining Convention (Convention de Base) ("Convention") for its Kalia Mine and associated infrastructure, which was originally signed on 26 July 2010 and ratified by Presidential Decree on 2 September 2010.

Subsequent ratification of the Addendum by the National Assembly and promulgation into law by Presidential Decree is expected to follow in accordance with Guinean legal process.

Negotiations on the Addendum commenced in 2015 as part of the national programme undertaken by the Technical Committee for the Review of Mining Titles and Conventions (the "CTRTCM") overseen by the Strategic Committee, both implemented by the Government of Guinea. Negotiations were concluded with the Ministry of Mines and Geology after the closure of the statutory review process in April 2016.

The Addendum reflects the parties' good-faith efforts to comply with Article 52 of the existing Convention to amend it as necessary to restore the balance that initially prevailed at the original signing. Importantly, the Addendum provides the legal framework for detailed commitments by Bellzone to conclusively determine the feasibility of its planned ferronickel ("FeNi") project, implement such project if feasible and to define the path towards the realisation of the world-class iron ore project at Kalia.

Addendum Highlights

The Addendum updates the Convention. The Addendum maintains the existing legal, tax and customs stability provisions such that, other than where specifically provided, the Convention as amended by the Addendum remains under the jurisdiction of the 1995 Mining Code but nevertheless incorporates important aspects of the new Mining Code adopted by Guinea in 2011, as amended ("2011 Mining Code"). In addition, the Addendum recognises particular updates to broader laws and regulations to better align Bellzone's operations with Guinea's on-going economic development. In particular, the Addendum recognises the ability to undertake independently-defined sub-projects (such as the ferronickel sub-project) and thereby provides the economic flexibility to generate new revenue streams as they become viable.

Key Bellzone undertakings:

§ Submit the Kalia Mine Economic & Social Impact Assessment ("ESIA") revised for the impact of the proposed ferronickel smelters by the end of October 2018.

§ Conclude the ferronickel feasibility study by the end of November 2018.

§ If the ferronickel feasibility study is positive, commence development of the ferronickel mine and production facility within 6 months of the approval of the feasibility study by the Ministry of Mines and Geology and achieve commercial production within a further 6 months, such commercial production being deemed achieved when FeNi or NPI (Nickel Pig Iron) production levels, over a period of 90 days, will correspond to 10,000 tons per annum.

§ Commence a ferronickel project expansion study within a period of 2 years from the beginning of commercial production of the FeNi or NPI sub-project.

§ Review and update the 2013 KP1 iron ore Bankable Feasibility Study ("BFS") within four years of the date of signature of the Addendum, other than in respect of bankability status. If this review is positive, commission a full update of the KP1 BFS.

Updated economic conditions:

§ Tax regime highlights:

- Commercial and industrial profit tax ("BIC") exempt until the end of the 8th year after the first commercial production for each sub-project, then the rate of 30% (reduced from 35% in the Convention) applies;

- Export tax (royalty) levied on Free On Board value at 7% for unprocessed iron ore, 3.5% for processed iron ore and 2% for Nickel content of ferronickel or NPI;

- Tax on dividends and investment income levied at 10% for Guinea-resident shareholders and 0% for non-residents;

- Exemption from VAT to the benefit of the Company, its Affiliates and Direct Sub-Contractors on the purchase or lease of goods and services (imported or domestic) tied to mining operations;

- Tax-deductible contribution to Local Development Fund of the greater of US$2 million per annum or 0.5% of turnover for five years from the first commercial production from the main iron ore project, 0.5% of turnover for the following three years and 0.7% thereafter, or, if another sub-project proceeds without the production of iron ore, 0.5% of turnover between the first commercial production of the first sub-project and the 8th anniversary of such date and rising to 0.7% thereafter;

- Local training tax of 1.5% of annual payroll after the first commercial production of the first sub-project, which may be expended directly by the Company on local training programmes and, failing such expenditure, paid to the Guinean Treasury;

- 10% withholding tax on fees paid to foreign service providers as well as the price for the acquisition of goods and services sourced locally from persons not registered for VAT; and

- Expatriate taxes at the rate of 10%.

§ Exemptions throughout the duration of the Convention from certain taxes such as license tax, extraction tax, registration rights and stamp duties and generally any other tax not specifically provided for in the Addendum or the Convention.

§ The tax and customs stability clauses of the Convention were maintained and will apply to the new regime, including the provision allowing Bellzone to benefit from future more favourable tax and customs rates as they are amended by Guinea.

§ The State waives it rights under the 2011 Mining Code to acquire any additional participation in Bellzone Holdings S.A. without prejudice to the possibility for the State to acquire an additional participation if an agreement to that effect is reached between the State and the Company. In return, the State shall have an equity interest in Bellzone Holdings S.A. via a non-dilutable carry amounting to:

- 5% beginning from the first commercial production date for the ferronickel sub-project.

- Increasing to 7.5% after the 7th anniversary of the first commercial production date for the ferronickel sub-project.

- Increasing to 10% on the date of the first commercial production for the main iron ore project, whether this occurs prior to or after the 7th anniversary of the first commercial production date for the first sub-project.

- Any sale, by the State, of the above participation is subject to a right of pre-emption in favour of Bellzone.

Next Steps

Further work on the ferronickel project will be undertaken in line with the agreed timetable, and the Company will in parallel dynamically assess the impact of the recent strengthening of iron ore prices on the overall KP1 project.

Mr. Michael Farrow, Chairman of Bellzone, said: 

"Bellzone is one of the longest established exploration and mining companies in Guinea. Our operating track-record has been based on strong mutual respect with the Government, as well as on our joint efforts to ensure the attractiveness of the country as an investment destination. We are very pleased that we have now agreed a legal framework which updates our existing Convention, by providing improved clarity on the path towards realising Kalia's unique potential and reinforcing competitive investment conditions. Much work has gone into the negotiations and on behalf of the Board and all our shareholders, I would like to express my sincere appreciation to the President and his team for their unwavering support. The respect for due process and the rule of law are vital marks of a thoughtfully progressive nation. As we have said all along, Bellzone is immensely proud to showcase Guinea's world-class mining sector to the international community and we hope to solidify our position as an unrivalled pillar of its future success."

Enquiries:

http://www.bellzone.com/

The information contained within this announcement is deemed by the Company to constitute inside information under the Market Abuse Regulation (EU) No. 596/2014.