Last checked at 25 Jul 2012 07:00
For immediate release 25 July 2012
Galileo Resources Plc ("Galileo" or the "Company") Galileo Signs a Heads of Agreement with Rare Earth International to Earn-in to Rare Earth Opportunities in Zambia and Mozambique.
The Board of Galileo Resources Plc ("Galileo"), the AIM-quoted emerging African Rare Earth exploration company, is pleased to announce that it has signed a Heads of Agreement (HoA) with Rare Earth International (REI) to earn-in to interests in three rare earth projects (the Earn-In) in Zambia, Mozambique and Spain (the Projects). REI holds certain rights to explore and to acquire interests in these Projects which are outlined in separate agreements with various holders of the projects' prospecting licence or mining concessions.
The AIM-quoted African Consolidated Resources plc ("ACR") is the 100% holder through its Zambian subsidiary of the prospecting licence to the rare earth project in Zambia.
Under the terms of this HoA, the Company has been granted 30 days to conduct title due diligence on the Projects; this being the only condition on which this HoA may be terminated. Should the Company receive sufficient results to this due diligence the HoA will be unconditional and the Farm-In will come into force.
Highlights:
* Galileo enters into an agreement with REI to earn-in to three rare earth projects located in Zambia, Mozambique and Spain. * Two boreholes historically drilled on Zambia's "Nkombwa" project (Nkombwa) intersected 4 to 6 metres thick intervals, with elevated REEs, which on re-assaying by REI (2010) revealed 5% and 8% total rare earth oxides (TREO). * Drill targets identified on Nkombwa following extensive surface sampling during 2011: the highest priority being a 25 to 50 metre wide zonewhere samples consistently reported more than 3% TREO,including a high proportion assaying 5% to 10% TREO over a sampling strike length of 350 metres. * Further samples scattered along a broad zone south east of the main rare earth mineralisiation assayed greater than 5% TREOincluding one outcrop sample assaying 23.6% TREO. * "Xiluvo" project in Mozambique has a gross amount of 1.1 million tonnesJORC compliant indicated resource (mainly soils) assaying 2.05% TREO(@ cut off 1% TREO) and 4.4% phosphate (P2O5). * "Galineiro" project in Spain is a potential greenfield exploration target with heavy rare earth element ("HREE") potential.
The Nkombwa project shows significant potential for development as a large easily extractable deposit while the Xiluvo project of lower priority has a defined resource estimate, which although relatively small, is largely in the form of soils and so potentially easily mined and processed.
Colin Bird, Chairman and Chief Executive Officer of Galileo, commented: "This earn-in agreement is a significant step in the consolidation and the development of Galileo. Should this complete, the Company will have an attractive portfolio of REE projects at varying stages of development. We are pleased to be partnering with REI and ACR. ACR has an enviable record of acquiring potentially world-class exploration projects in southern Africa and we look forward to our working association."
Andrew Cranswick, Chief Executive Officer of ACR, said: "We are pleased to have Galileo Resources earning into our highly prospective Rare Earth Project in the new and dynamic Muchinga Province of Zambia. The Galileo team brings additional specialist REE expertise, coupled with Colin Bird's individual reputation for fast tracking exploration success stories in Zambian projects such as Kalumbila through Kiwara Resources. This is good news for all, especially the people of Muchinga, considering what it means for employment, community participation, economic growth and infrastructural development."
REI holds the right to:
* earn up to a 50% interest in the Nkombwa project in accordance with the terms of an agreement between REI and ACR and its wholly owned Zambian subsidiary Fisherman Mining Limited, which holds the prospecting licence in accordance with the terms outlined below; * earn in an 85% interest in the Xiluvo project by spending a total US$1 million in terms of a joint venture agreement with Promac, a Mozambique-registered construction company, which holds a 100% mining concession to mine aggregate over some or all of the licence, which has rare earth potential and for which it has the option to apply for an exploration licence or mining concession for rare earths; and * 100% of the Galineiro project, for which the owners are in the process of acquiring exploration rights.
Summary of the key terms of the HoA include:
Nkombwa Project
a. Galileo to provide funding to REI of a minimum amount of US$1.2 million and
to complete the Nkombwa Exploration to earn an effective 35% interest in
the Project.
b. Further funding in respect of the Project, including funding to acquire a
further interest in the Project in excess of the effective 35% to be provided by the Parties pro rata to their interest, REI to have the option to elect that the Company funds REI's pro rata share (the "Election"), including and up to the construction of a mine at the project, on a loan basis (the Loan).
c. The Loan will bear interest at a rate of LIBOR plus 2%, and will be
repayable by REI to Galileo from future cash flows by applying a minimum of
80% of any dividends earned by REI from the Project.
d. Following the completion of the earn in, REI will have the option to sell
its remaining interest in the Project to Galileo for a further US$2 million
to be paid in cash or Galileo shares. Such option is to expire on 31
December 2013.
e. Following the completion of a bankable feasibility study ("BFS") in respect
of the Project, Galileo will have the option to acquire REI's remaining
interest at a price determined as follows:
f.
i. In the event that REI has made the Election, at a valuation of the Project of the net present value of the project as determined by the BFS less 40%, subject to a minimum purchase price of US$2 million; or ii. In the event that REI has not made the Election, at a valuation of the Project of the net present value of the project as determined by the BFS.
Xiluvo Project
a. Galileo undertakes to do such work as is in their opinion necessary to
define the project's ongoing rare earth potential.
b. If Galileo elects to advance the project then it will be granted an 80%
interest in the Xiluvo Interest and REI a 20% interest which is free
carried by Galileo to the completion of a bankable feasibility study.
c. If the project were to be developed then REI would carry its pro rata
portion of ongoing expenditure or be financed by Galileo on a loan basis (the "Xiluvo Loan"). The Xiluvo Loan will bear interest at a rate of LIBOR plus 2% and will be repaid by REI to Galileo from future cash flows by applying a minimum of 80% of any dividends earned by REI from the Xiluvo Project.
d. REI can elect to have the 20% carry converted to a Net Smelter Return ("NSR
") of 2% of which 50% could be compulsorily purchased by the Company at
US$100,000 per 0.1% of NSR.
e. Galileo will be the operator of the Xiluvo Project.
f. If Galileo has not committed to a reasonable expenditure programme to
advance this project by 30 June 2013, then REI will have the option to
elect to cancel Galileo's interest at no cost to REI.
g. Should Galileo elect to cease further advancement of the Xiluvo Project at
a time when it has already incurred cost to do so, then:
h.
i. In the event that Galileo has spent less than US$200,000 on the development of the project, then REI will have the option to purchase Galileo's full interest in the Xiluvo Project at 1.2 times the cost incurred up to that point in time; or ii. In the event that Galileo has spent more than US$200,000 on the development of the Project, then REI willl have the option to purchase Galileo's full interest in the Project in exchange for 1% NSR, 50% of which could be compulsorily purchased by REI at US$100,000 per 0.1% NSR.
Galineiro Project
a. A shareholder in REI is actively pursuing acquisition of exploration rights
in the area (Galineiro Rights). Should this acqusition succeed, REI agrees
that that these rights shall form part of the HoA.
b. On signing the HoA Galileo will assume responsibility for further
acquisition and technical control of the Project should it be advanced.
c. Should Galileo elect to explore and possibly develop the project, it will
be granted an 80% interest in the Galineiro rights with REI retaining a 20%
interest.
d. If the project were to be developed then REI would either carry its pro
rata portion of ongoing expenditure or be financed by Galileo on a loan basis. The loan will bear interest at a rate of LIBOR plus 2% and will be repaid by REI to Galileo from future cash flows by applying a minimum of 80% of any dividends earned by REI from the Project.
e. REI can elect to have the 20% carry converted to a Nets Smelter Return
(NSR) royalty of 2%, of which 50% could be compulsory purchased by Galileo
at US$100,000 per 0.1% of NSR royalty.
General
a. The consideration for the Earn-In is the issue of 5.25 million Ordinary
Shares in Galileo (the "Settlement Shares") to REI at the price at the date
of signing the HoA. Should the Company complete the Earn-In the Settlement
Shares will be issued and a separate announcement made at that time.
b. Under the terms of the HoA, no placement will be permitted of any of the
Settlement Shares for a period of six months from signing the HoA and
limited by the following lock in arrangement.
* After six months REI may sell 2 million Settlement Shares.
* After one year REI may sell a further 2 million Settlement Shares.
* After eighteen months REI may sell the remainder of the Settlement Shares.
*
a. Galileo will have 30 days to conduct title due diligence, which will be
the only condition on which the HoA may be terminated.
Summary Project Descriptions
The Nkombwa project is located in the north-east of Zambia, 22 kilometres
east of the major T2 paved national road. The project includes the
prominent Nkonbwa Hilll REE, niobium, phosphate enriched carbonatite
intrusion.
Documented results from two boreholes drilled in 1968/1969 on the project
reportedly intersected numerous wide mineralised intervals assaying more
than 4% lanthanum and cerium oxides. Recent reassaying of these mineralised
intervals reportedly confirmed high total rare earth oxides (TREO) of 5 to
8% and revealed that some of the intervals intersected stopped in grade
i.e. REE mineralisation potentially continues at depth.
The Xiluvo project is located 100 kilometres noth-west of the major port of
Beira in Mozambique. This project is a prominent hill, which includes a
rare-earth niobium-enriched carbonatite complex intrusion. A 25-year mining
permit is in place for an extant quarry on the project, the REE rights to
which REI has signed farm-in agreements with the mining permit owners.
The project has drill-ready targets: a primary REE-enriched carbonatite and
a secondary light REE (LREE) unconsolidated soil horizon at the base of the
hill.
Technical Sign-Off
Andrew Sarosi, Technical Director of Galileo, who holds a B.Sc. Metallurgy
and M.Sc. Engineering, University of Witwatersrand and is a member of The
Institute of Materials, Minerals and Mining, is a 'qualified person' as
defined under the AIM Rules for Companies and a competent person under the
reporting standards. The technical parts of this announcement have been
prepared under Andrew Sarosi's supervision and he has approved the release
of this announcement.
Editor's Note:
Galileo, is a natural resource exploration company. Its flagship property
is the Glenover Phosphate RE project, a joint venture with Fer-Min-Ore
(Pty) Ltd and Black Economic Empowered entities. The property produced
phosphate for many years. Phosphate however, is now subordinated to Rare
Earth Elements (REEs), which the recent independently commissioned
compliant resource estimate has shown to be present in the stockpiles from
the previous operation and in the defunct open pit.
For further information, please contact:
Colin Bird Tel +44 (0)20 7581 4477 Chairman & CEO Andrew Sarosi Tel +44 (0) 1752 221937
Technical and Financial Director
Beaumont Cornish Limited, Tel +44 (0)20 7628 3396
Nominated Advisor and Broker
Roland Cornish/James Biddle
Shore Capital Stockbrokers Limited Tel +44 (0)20 7408 4090
Joint Broker
Jerry Keen/Toby Gibbs
Bishopsgate Communications Tel +44 (0)20 7562 3350
Nick Rome/Anna Michniewicz/Ivana Petkova
Technical Glossary
Carbonatite: an igneous rock consisting of greater than 50% carbonate
minerals mainly calcium carbonate (limestone) and lesser magnesium
carbonate (dolomite)
Complex: a body of rock forming a discrete and recognisable unit of
reasonable homogeneity, defined solely on the basis of its macroscopic
features such as texture or petrology (study of rocks).
Intrusion: applied to a body of rock usually igneous i.e.derived from
molten or semi molten rock that has intruded or been emplaced within pre
existing rock.
Niobium (Nb2O5): an oxide of Niobium, a metal whose uses include alloying
and coatings with other metals to improve welding properties (stainless
steel), impart resistance to chemical attack (zirconium, molten lithium and
sodium), corrosion resistance in harsh chloride-containing solutions
(coated copper anodes) and corrosion resistance at red hot temperatures
(rocket nozzles)
Phosphate (P2O5): an oxide of phosphorus - also used to describe phosphate
rock
Rare earth elements: a set of fifteen chemical elements in the periodic
table specifically
(REE) the lanthanides and by convention categorised as light REE (the first
seven elements plus yttrium) and heavy REE (the other eight lanthanides)
REO (rare earth oxide): the oxide form of the rare earth element
TREO: total rare earth oxides
Unconsolidated applied to particles that are loose and not cemented
together
Soil horizon a horizontal layer of soil that can be distinguished from the
layers above and below it
Ce: Cerium Uses include cathode ray tube glass to prevent age
discoloration, in auto catalytic converters, rich red colour pigments, low
energy light bulbs, film studio carbon-arc lighting and minor use in self
cleaning ovens
La: Lanthanum Uses include carbon-arc lighting, additive to glass for
lenses and new treatment for bone disease (osteodysrophy). Potential use
for hydrogen (H) storage for H-fuelled vehicles: being able to absorb
hydrogen as much as 400 times its volume