Castillo Coppe. Regulatory News (CCZ)

22 June 2022

CASTILLO COPPER LIMITED("Castillo", or the "Company")

Option granted to sell Zambia Copper Projects for £2.25m

Castillo Copper Limited (LSE and ASX: CCZ), a base metal explorer primarily focused on copper across Australia and Zambia, is pleased to announce that it has granted London-based Hyperion Copper ("Hyperion") a 12-month option to acquire 100%-owned subsidiary, Zed Copper ("Zed"), which owns four projects in Zambia's copper-belt - including the prime Luanshya and Mkushi Projects1,2 for a total consideration of £3.75m (~A$6.7m) in a value creating transaction.

HIGHLIGHTS

· Under the terms of the Option Agreement, Hyperion will pay a non-refundable US$100,000 fee (~A$142,000) to secure a 12 month exclusive option and, if exercised, issue £2.25m (~A$4m) in Hyperion shares to acquire 100% of the issued capital of Zed

· Further, Castillo will receive £1.5m (~A$2.7m) in Hyperion shares upon a global Mineral Resource Estimate ("MRE") of 200,000t contained copper metal being delineated

· Hyperion, which owns a gold mining project located in Burkina Faso, intends to list on the AIM market of the London Stock Exchange in H2 2022 and raise funds to fully develop its African projects

o  Under the terms of the agreement, Castillo's shareholding will be no less than 25% post Hyperion's AIM-listing with the right to nominate one director to the Board

· The Board believes this is an excellent outcome for all stakeholders, as it ensures the Zambia copper assets exploration potential will be fully developed, whilst any benefits will accrue to Castillo via retaining its shareholding in Hyperion 

Dr Dennis Jensen, Managing Director of Castillo Copper, commented: "Securing a development partner for our Zambia Projects has been a strategic priority to ensure optimal value creation. As such, the Board is delighted to have granted London-based, Hyperion Copper, the option to acquire the Zambia Projects. From the Board's perspective, we now have a partner who will fund all future development work, whilst benefits accrue to Castillo via retaining the shareholding in Hyperion Copper post its AIM listing."

Zambia copper projects under option

The Board believes this is an excellent outcome for all stakeholders since it secures a strategic partner that is committed to fully develop the exploration potential of the Zambia projects. Moreover, with Hyperion planning to list on the LSE's AIM market in H2 2022, Castillo is set to accrue benefits via retaining its shareholding in Hyperion post listing.

Hyperion is positioning itself as an Africa-focused, copper-gold explorer as it owns 100% of the Yansse Gold Project in Burkina Faso. Notably, the Yansse Gold Project is located in the highly prolific West African Birimian Terrane, which is host to some of the world's largest gold deposits3.

FIGURE 1: JORC RESOURCE TONNAGES BHA EAST ZONE PROSPECTS (Available to view on pdf version of the announcement)

Transaction terms 

Under the Option Agreement, Hyperion will pay Castillo a US$100,000 (~A$142,000) option fee granting Hyperion an exclusive 12 month right to acquire 100% of the issued share capital of Zed, which owns four Zambia Projects (refer Appendix A). 

At the conclusion of due diligence and upon exercise of the option, the consideration payable to Castillo is £2.25m (~A$4m) in Hyperion shares, subject to certain conditions precedent being satisfied or waived (see below). The consideration shares must represent no less than 25% of the enlarged share capital of Hyperion upon its listing on the LSE's AIM market which is expected to occur in H2 2022.

The parties are currently preparing a Definitive Acquisition Agreement ("Definitive Agreement").

Within five years from executing the Definitive Agreement and delineating a global MRE of 200,000t contained copper metal on the Zambia Projects, Hyperion will issue Castillo £1.5m in Hyperion shares based on a 10-day VWAP.

The Option and Definitive Agreements will contain the following Conditions Precented, including:

· Hyperion having conducted and being satisfied with legal, technical and financial due diligence on the Project and the Licenses (refer Appendix B);

· All applicable and necessary consents, authorities and/ or approvals required from any applicable statutory or quasi-statutory body regulating the mining industry in Zambia consenting to the transfer of the licenses in accordance with the terms of the Agreement;

· The preparation and publication of an AIM admission document in respect of Hyperion (or the listed vehicle); and

· Castillo obtaining all regulatory approvals in relation to the transaction including but not limited to ASX, ASIC and shareholder approvals, where required.

Hyperion has agreed to assume responsibility for Castillo's obligation to pay Zed vendors a net smelter return royalty of 2% on production of concentrate derived from mining activities on the Zambia Projects.

The following Performance Share obligations will remain with Castillo:

· 46,875,000 performance shares, converting to an equal number of Castillo shares on delineation of a JORC resource of 200,000 tonnes of contained copper at a minimum grade of 0.5% within five years of execution of the Share Sale Agreement, and;

· 46,875,000 performance shares, converting to an equal number of Castillo shares on completion of a prefeasibility study demonstrating an internal rate of return greater than 25% within 5 years of execution of the Share Sale Agreement.

In addition to this release, a PDF version with supplementary information and images can be found on the Company's website: https://castillocopper.com/investors/announcements/ 

For further information, please contact:

About Castillo Copper

Castillo Copper Limited is an Australian-based explorer primarily focused on copper across Australia and Zambia. The group is embarking on a strategic transformation to morph into a mid-tier copper group underpinned by its core projects: 

· A large footprint in the Mt Isa copper-belt district, north-west Queensland, which delivers significant exploration upside through having several high-grade targets and a sizeable untested anomaly within its boundaries in a copper-rich region. 

· Four high-quality prospective assets across Zambia's copper-belt which is the second largest copper producer in Africa. 

· A large tenure footprint proximal to Broken Hill's world-class deposit that is prospective for zinc-silver-lead-copper-gold. 

· Cangai Copper Mine in northern New South Wales, which is one of Australia's highest grading historic copper mines. 

The group is listed on the LSE and ASX under the ticker "CCZ." 

References

1) CCZ ASX Release - 16 September 2019 & 15 April 2020

2) CCZ ASX Release - 21 October 2019 & 23 January 2020

3) Corporate Presentation by Hyperion Group, March 2022

APPENDIX A: LUANSHYA & MKUSHI PROJECTS

The Luanshya Project is 6-10km south of China Nonferrous Mining Corp's ("CNMC") three operating mines with a combined JORC (2012) compliant Proven & Probable Reserves at 52.3mt @ 1.26% Cu1.

Across the region are four NW-SE trendlines, which are ~5-10km wide, that host numerous historic / current operating mines & deposits1.

Notably, two trendlines hosts CNMC's three mines, with one directly intersecting the middle of the project coincident with Lower Roan Formation1.

FIGURE A1: LUANSHYA PROJECT (Available to view on pdf version of the announcement)

At the Mkushi Project, a comprehensive soil sampling campaign completed around Shi Yan Group's operating mining lease2, comprising >1,000 data points2, delivered the following outcomes:

· Five new, well-defined, anomalous areas identified by Portable XRF (coded 1 to 5), with respective strike lengths ranging from 2-7km (20.5km in aggregate)2; and

· Relative to Mushiwemba Copper Mine and artisanal pits along the northern high-grade shear zone, the five anomalous areas are located circa 2-7km SW - NE on the same over-riding system2.

FIGURE A2: MKUSHI PROJECT (Available to view on pdf version of the announcement)

APPENDIX B: ZAMBIA ASSET OWNERSHIP STRUCTURE

FIGURE B1: INTEREST IN ZAMBIAN EXPLORATION TENEMENTS UNDER OPTION

*CCZ can earn up to 80% by meeting previously disclosed milestones

^ Indicates the tenement is still under application

** Funds for the acquisition of the tenements were paid during the quarter, however the actual transfer of the leases was completed after the end of the quarter

Source: CCZ geology team