Galileo Resourc Regulatory News (GLR)

US$400K in Initial JV Period and 5M Galileo shares to earn 75% JV Interest

The JV Agreement provides Galileo the right to earn an initial 75% interest in a special purpose joint venture company (the "JV Company") to be established under Zambia law to, with Ministerial Consent, acquire the Licence, and the technical information and other information and assets related to the Luansobe Project by making an initial payment of US$200,000 and a second payment of US$200,000 in the initial period from the date of the JV Agreement by 20 February 2022 (the "Initial JV Period") and issuing 5,000,000 Galileo shares to the Vendor. Based on the closing price share price of 0.98 pence on 29 December 2021 the last practicable date prior to this issue of this announcement, the aggregate consideration will be approximately £350,000.

Further project assessment during Initial JV Period

During the Initial JV Period Galileo will conduct further due diligence in relation to the Luansobe Project and may at its sole discretion at any time prior to the end of the Initial JV Period give notice to the Vendor that it has decided not to proceed with the Joint Venture.

Technical management of JV

Galileo has undertaken to commence raw data investigation of the technical information available in relation to the Project and devise an exploration programme for the Luansobe Project, which in their opinion maximise the value of the Luansobe Project with a view to completing a Project Feasibility Study within 18 months of 20 February 2022.

Project near giant Mufulira copper mine

The Luansobe prospect is situated some 15km to the northwest of the Mufulira Mine site, with mineralisation occurring as stratabound layers and lenses dipping at 30 degrees to the northwest along the same stratigraphic horizon as the giant Mufulira copper mine, which produced well over 9Mt of copper metal during its operation.

Very prospective historic studies

The Company has access to historic non JORC compliant reports provided by the Vendor based on previous exploration on the Project.

Copper mineralisation is reported to occur over about 3km of strike and to at least 1,250m depth. A 1974 report suggests the potential for a non-JORC compliant global resource of over 20Mt @ 2.51% Cu, with a significant proportion of oxide mineralisation occurring in the upper 70m, below the leached cap. Based on these reports the deposit appears open and relatively untested at depth

Project Plan

Galileo plans to review past exploration data to develop a significant drilling programme focussed on testing the tenor and extent of the copper mineralisation indicated by previous drilling and nearby mining. The programme will incorporate twinning of selected holes from the most recent 2007 drilling programme to bring the project up to JORC 2012 status, with a particular focus on the early-mining potential of the shallower oxide copper and the development of a larger-scale copper sulphide mine.

To this end, the Company aims to undertake a Project Feasibility Study by August 2023

1) Parties

Statunga Investments Limited (hereinafter referred to as "Vendor") and Galileo Resources Plc entered into the JV Agreement on [29] December 2021

2) Luansobe Project

The Luansobe Project's location in Zambia relative to the Mufulira Copper Mine in Zambia is situated approximately 15 kilometres to the North West of Mufulira Mine site as per a 27 February 2008 report ( "2008 Report") provided by the Vendor. The western limit is bounded by the international border with the Democratic Republic of the Congo (DRC). The Luansobe Project forms part of the western limb of the northwest - southeast trending Mufulira syncline and has an estimated non-JORC compliant mineral resource totalling 5.5 million tonnes at 1.6%TCu, 0.5%ASCu and covers the full area of the shallow oxide zone, down-dip to include the mixed oxide-sulphide zone and the deeper sulphide zones as delineated by drilling in 2006-07 and reported in the 2008 Report. The Luansobe (Insato, Kasaria) Technical report also provided by the Vendor refers to an Indicated Mineral Resource of 14.2 million tonnes at 2% Cu and the project being 10 kilometres north-west of Mufulira in the Copperbelt Province and contained within ZCCM's Licence "Mufulira ML 15)

(hereinafter the foregoing are collectively referred to as either the "Project" or the "Luansobe Project")

3) Initial JV period

(a) By entering into the JV Agreement the parties agreed on an exclusive basis to enter into a joint venture in relation to the Luansobe Project. The initial period is from the date of the JV Agreement to 20 February 2022 (the "Initial JV Period").

(b) During the Initial Period Galileo will conduct due diligence in relation to the Luansobe Project and may at its sole discretion at any time prior to the end of the Initial Period give notice to the Vendor that it has decided not to proceed with the Joint Venture ("Notice Not To Proceed"). In the event of Galileo giving Notice Not To Proceed (i) Galileo will not be liable to pay the Second JV Payment (ii) Galileo will only be entitled to a refund of the Initial JV Payment in the event of a title defect of the Licence or material misrepresentation under the Vendor's warranties ("Refund Entitlement") ; and (iii) The JV Agreement will be terminated and the parties will have no further obligations or liabilities under this agreement save if Galileo is due a Refund Entitlement.

4) Payments by Galileo

(a) Galileo has to pay the initial payment of US$200,000 by 31 December 2021 (the "Initial JV Payment").

(b) Galileo has to pay the second payment of US$200,000 by no later than 20 February 2022 but may elect to make the payment early (the "Second JV Payment").

1) Issue of Galileo Shares & lock up

Upon payment of the Second JV Payment Galileo is to issue 5,000,000 (Five Million) Galileo Resources PLC shares to the Vendor which shall be subject to a three month lock up arrangement and thereafter a further three months orderly market arrangement. Under the orderly market arrangement the shares can be sold via Galileo's broker at a price determined by the Vendor (the "Nominated Sale Price") which shall not be less than the lower of i) 10 day VWAP and ii) Galileo closing bid price on the day before the fixing of the Nominated Sale Price and Galileo's broker will have 10 business days to sell the shares at the Nominated Sale Price.

2) Joint Venture

The JV Agreement established a joint venture in relation to the Luansobe Project (the "Joint Venture") and once Galileo has paid the Second JV Payment (referred to above); Galileo or its nominee will be issued 75% of the shares in a to be established Zambian joint venture company (the "JV Company") to own the Licence, technical information and other information and assets related to the Luansobe Project and the Vendor will be issued 25% of the shares in the JV Company

3) Warranties by Vendor

The Vendor has made warranties in relation to it being the registered legal and beneficial owners of the Licence; the Licence is in good standing and covers the whole of the Luansobe Project; and other customary warranties

4) Technical management of JV

(a) Galileo is to undertake to commence a raw data investigation of the technical information available in relation to the Project and devise an exploration programme for the Luansobe Project, which in Galileo's opinion will maximise the value of the Luansobe Project and conduct a feasibility study, which in their opinion will identify the most economic and practical way of advancing the project.

(b) The parties have agreed that a benchmark expenditure for the raw data investigation and exploration to complete a project feasibility study (the "Project Feasibility Study Work") is US$4,000,000 (the "Benchmark Expenditure"). In the event that the actual expenditure incurred on the Project Feasibility Study Work prior to a sale is;

1. less than the Benchmark Expenditure then the shortfall (the "Benchmark Expenditure Shortfall") shall be added to the Vendor's share of the gross sale proceeds as per point 8 (a) below; and

2. more than the Benchmark Expenditure then the excess (the "Excess Benchmark Expenditure ") shall be deducted from the Vendor's share of the gross sale proceeds as per point 8 (a) below.

(c) The Project Feasibility Study is to be concluded within 18 months from 20th February, 2022 and may be extended by a further 6 months if during the initial 18 months there is a JORC resource for the Project (the "Feasibility Study Period") . 

5) Decision to Mine and funding

(a) If a decision to mine is made by Galileo (a "Decision to Mine"), then the parties will be entitled to fund pro rata to their beneficial interest in the JV Company and will seek funding for a mine.

(b) Should the Vendor elect not to fund their 25%, then their interest will be assumed on a carried basis ("Vendor Funding") to be borne by a specific purpose vehicle to be formed to raise the funding amount as debt for the project construction ("SPV FundingCo") and the SPV FundingCo will recover the Vendor Funding from future cashflows on terms and conditions to be agreed upon by the parties to the Vendor Funding.

(c) The Vendor is not obligated to obtain the Vendor Funding from the SPV FundingCo and is at liberty to engage and obtain funding from a commercial lending institution creating security only to the extent of the Vendor's interest in the JV company

(d) In the event that Galileo makes a decision not to mine, the parties agree to seek to sell the Project on the terms of point 8 below and /or obtain a new investor.

6) No commitmentto Mine

Galileo makes no representation or commitment to develop a mine and will only progress to the development of a mine if in their opinion the in-situ or primary material fulfil their requirements for investment.

7) Distribution of cashflows

Upon commercial production the agreed and disclosed debt ( indicative of the principal sum, interest per annum, instalments and duration/period) shall be deducted out of the daily of cashflow for debt servicing. The remaining amount available shall be paid 75% to Galileo and 25% to the Vendor net of operational costs.

8) Consequence

of sale

In the event of a third party sale of the Luansobe project and / or the JV Company after the Second JV payment the gross sale proceeds will be distributed as follows;

(a) First Priority: The Vendor will be entitled to US$6,000,000 (the "Base Vendor Sale Consideration") plus the Benchmark Expenditure Shortfall less the Excess Benchmark Expenditure (the "Vendor's Priority Return"). By way of example in the event that prior to a sale no money has been spent by Galileo on the Project Feasibility Study Work then the Vendor's Priority Return would equal U$10,000,000 (US$6,000,000 of Base Vendor Sale Consideration + US$4,000,000 of Benchmark Expenditure Shortfall); and

(b) Second Priority: After the Vendor has been paid the Vendor's Priority Return the balance of the sale proceeds shall be paid 75% to Galileo and 25% to the Vendor.

The Vendor will have come along rights so Galileo cannot sell without giving the Vendor the opportunity to sell on the same terms on a pro rata basis.

9) Maintenanceof Licence

Vendor to assist on an ongoing basis in maintaining the Licence in good standing with government agencies and local communities.

10) JV Committee

A joint venture committee shall be formed, comprising three representatives from Galileo and two from the Vendor. The chairman shall be a representative and appointee of Galileo.

11) JV Agreement on establishment of JV Company

It is agreed by the parties that upon establishment of the JV Company the parties will enter into a joint venture agreement in relation to the JV Company which shall encompass all of the commercial terms contained in the JV Agreement (the "JV Company Agreement"). The JV Company Agreement matters will consist of the following, but not be limited to the commercial terms outlined in the JV Agreement, grievance procedures, arbitration procedures, notices, joint venture committee functions, licence maintenance, SPV construction.

12) Information rights

Both parties shall from the signing of this agreement be afforded full access rights to all information in relation to the Luansobe Project.

13) Zambia law

This agreement shall be governed by the laws of Zambia.

14) Assignment

Neither party shall assign the rights of this agreement to a third party without the permission of the other party.

15) Termination

This agreement will only be terminated if;

(a) The parties jointly agree in writing to terminate the agreement; or

(b) If Galileo has given Notice Not to Proceed; or

(c) If Galileo fails to meet any conditions precedent.

Colin Bird, Chairman

Tel +44 (0) 20 7581 4477

Beaumont Cornish Limited - Nomad

Roland Cornish/James Biddle

Tel +44 (0) 20 7628 3396

Novum Securities Limited - Joint Broker

Colin Rowbury /Jon Belliss

+44 (0) 20 7399 9400

Shard Capital Partners LLP - Joint Broker

Damon Heath

Tel +44 (0) 20 7186 9952

"ASCu"

Acid soluble (oxide) copper

"Indicated Mineral Resource"

That part of a Mineral Resource for which quantity, grade (or quality), densities, shape and physical characteristics are estimated with sufficient confidence to allow the application of Modifying Factors in sufficient detail to support mine planning and evaluation of the economic viability of the deposit. Geological evidence is derived from adequately detailed and reliable exploration, sampling and testing gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes, and is sufficient to assume geological and grade (or quality) continuity between points of observation where data and samples are gathered. (JORC 2012)

"JORC Code"

Australasian Institute of Mining and Metallurgy Joint Ore Reserves Committee code on mineral resources and ore reserves

"syncline"

An upwardly concave fold of a rock formation

"TCu"

Total copper