GCM Resources Regulatory News (GCM)

22 August 2022

GCM Resources plc

("GCM" or the "Company")

(AIM:GCM) 

Project Update and Extension of Consultancy Agreement

GCM Resources plc, an AIM quoted mining and energy company, provides a project update and, announces that, further to its announcement of 4 September 2019, it has agreed a further extension of the consultancy agreement (the "Consultancy Agreement") with DG Infratech Pte Ltd, a Bangladeshi controlled company ("DGI" or the "Consultant"), for an additional two years, on similar terms as previously announced. Details of the key terms of the extended Agreement are set out at the conclusion of this announcement.

Principal terms of the Consultancy Agreement:

Under the terms of the Consultancy Agreement, the Consultant shall continue to provide the Company with advisory, management, lobbying and consultancy services in relation to the Company's business, namely to achieve the approval for and development of the Coal Project and the Power Projects, and in thus doing so to deliver approvals and the necessary cooperation from all stakeholders to develop the Coal Project and the Power Projects.

In return for its services, the Consultant shall receive the following fees:

- A monthly retainer of £15,000 from 1 January 2022, payable quarterly in arrears by the issuance of 363,636 new ordinary shares of 1 pence each in the capital of the Company ("New Ordinary Shares") at 4.125 pence per share, with no other financial payments nor reimbursement of expenses, unless agreed by the Company in advance.

- Upon completion of certain key milestones, the Consultant will receive share-based success fees in lieu of any cash payment. The milestones and related payments are as follows:

o receipt of the written approval of the Coal Project's Scheme of Development, for which the Consultant shall receive a success fee equal to 5% of the issued capital of the Company at the time of issue;

o receipt of the written approval in respect of each group of the Power Plants, for which the Consultant shall receive a success fee equal to 2% of the issued capital of the Company at the time of issue (i.e., up to 6% in total); and

o commencement of development of the Coal Project, for which the Consultant shall receive a success fee equal to 4% of the issued capital of the Company at the time of issue.

With the exception of the monthly retainer, the Consultant will be restricted from disposing of any New Ordinary Shares received under the consulting agreement for a period of six months from issue.

Each milestone specified in the Consultancy Agreement represents a significant step towards developing the proposed multi-billion dollar Coal Project and Power Project.

The Board is acutely aware of the potential dilution arising from the Consultancy Agreement. However, in the opinion of the Company, the value of the services provided by the Consultant is expected to significantly exceed the fees incurred if successful. Accordingly, the Board has concluded that entering into the Consultancy Agreement is beneficial for GCM and in the best interests of the Company's shareholders as a whole.

Project Update: 

Developing countries that are largely dependent on imported fuels began to experience financial strain brought on by the vagaries of the international energy market as the industrial world recovered from the COVID Pandemic. The Ukraine situation has dramatically escalated energy supply and cost problems and the situation is likely to remain protracted. GCM's proposed Phulbari Coal and Power Project would, in the view of the Board, enable the Government and People of Bangladesh the opportunity to circumvent some of the impacts of the world energy market turmoil by utilising its own energy resource in the Phulbari Coal Basin. The annual savings for Bangladesh in terms of coal price compared to imported options and Foreign Exchange Reserves would in the view of the Board be very significant. Additional benefits may include large scale solar power development in parallel with coal mining and potentially a reduction in greenhouse gases due to Phulbari coal being higher energy than imported coal, meaning less coal being consumed per kilowatt-hour of electrical energy production and the need to ship coal thousands of kilometres from overseas mines is avoided. The Bangladesh Government is reporting difficulties, particularly with cost, in importing coal and gas for power plants. GCM has opened up discussions with Government representatives to establish a modality for progressing the Project.

GCM's Chief Executive Officer, Datuk Michael Tang PJN, stated: 

"I am delighted to continue to engage the services of DG Infratech and look forward to working with them to drive significant progress in pursuit of our goals."

"Our primary objective remains to deliver an impact project for the people of Bangladesh, providing low cost and sustainable electricity in the country. We have explored options with our international development partners and believe the entire Phulbari Geologic Basin should be declared an "Energy Park" of national significance for Bangladesh. It is rich in natural energy resources and power generating potentials, capable of supporting over 4,500MW Solar Power and over 6,600MW thermal power, and in parallel potentially producing significant volumes of valuable industrial mineral co-products from the overburden material removed to access the coal."

"The Company's economic interests and DG Infratech's are aligned: to achieve successful progression of the proposed Phulbari Coal and Power Project with its enabled Energy Park. I am confident that the Consultancy Agreement will assist the Company unlock significant value for our shareholders in time to come."

About GCM Resources

GCM Resources plc (LON:GCM), the AIM listed mining and energy company, has identified a high-quality coal resource of 572 million tonnes (JORC 2004 compliant) at the Phulbari Coal and Power Project (the "Project") in north-west Bangladesh.

Utilising the latest highly energy efficient power generating technology, the Phulbari coal mine is capable of supporting over 6,000MW power generation. GCM is awaiting approval from the Government of Bangladesh to develop the Project. The Company, together with credible, internationally recognised strategic partners, has a strategy of positioning its proposed coal to supply power plants at the mine-mouth and other coal-fired power projects in Bangladesh. GCM aims to deliver a practical power solution to provide the cheapest electricity in the country, in a manner amenable to the Government of Bangladesh.