Metalnrg Plc Regulatory News (MNRG)

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11th June 2020

MetalNRG plc

(The "Company" or "MetalNRG")

BUSINESS UPDATE

MetalNRG plc (LON:MNRG) the natural resource investing and exploration company gives an update on its business and prospects.

Highlights:

· Oil & Gas potential acquisitions:

o Romania: MetalNRG revised the terms of its initial offer to the vendor of the Romanian assets, as previously reported; however, in light of the current environment, the revised terms are substantially different from the previous terms and therefore the vendor is considering its position.

o United Kingdom: following screening and preliminary appraisal, the Company, has identified a number of onshore Oil & Gas assets in the UK and has entered into a heads of terms agreement ("HofT Agreement") with the owners ("Vendors") of a small portfolio of onshore, conventional, Oil & Gas producing licences, with the aim of acquiring the portfolio within a three month timeframe, subject to successful due diligence and finalisation of the sale and purchase agreement ("Purchase Agreement") .

· Gold Ridge: The Company is working on development plans for its Gold Ridge Gold Mine in Arizona, which will help minimise risk and create a sustainable path to revenues from the waste resources left behind from previous operators and resource from new unexplored areas.

UK Oil & Gas - HofT Agreement:

MetalNRG has entered into an agreement, the HofT Agreement, with a UK based, privately owned Oil & Gas operator. The transaction has the objective of transferring 100% of the equity capital from the Vendors to a Joint Venture (JV) composed of MetalNRG and a number of Private Investors ("PIs"), who will become the management team of the operating company. MetalNRG will retain control over the operations of the Joint Venture with the PI's.

MetalNRG has spent over two months on the initial appraisal and negotiation of this transaction and has to date completed: i) desk based research, ii) site visit (within the constraints and in full accordance with lockdown restrictions), iii) review of available technical, financial and operational data, iv) preparation of preliminary operation and development plans.

As a result of the initial appraisal, the Company has entered into the HofT Agreement with the Vendors which also provides exclusivity terms. The HofT Agreement outlines the commercial elements of the transaction, including the relevant warranty and indemnity conditions to be satisfied by the Vendors. The key terms of the envisaged transaction are as follows:

Partnership:

The acquisition will be made by Special Purpose Vehicle ("SPV"), a newly incorporated company which will eventually be jointly owned (50/50) by MetalNRG and the PIs (together, the "Purchasers"). MetalNRG will have two Board representatives, as will the PIs, with MetalNRG having a casting vote in the event of impasse.

Consideration:

In consideration for 100% of the equity of the Oil & Gas operator, at conclusion the SPV will pay to the Vendors an all-inclusive price with appropriately deferred consideration to suit the agreed warranty and indemnity arrangements.

Funding:

MetalNRG is finalising the required funding for the acquisition to be made by the SPV supported by a loan supplied from MNRG to the SPV. The assets are cash generative and cover their operating costs at current oil prices.

Structure:

Pierpaolo Rocco has been appointed to the Board of the SPV as executive director and CEO, while Rolf Gerritsen will be appointed to the Board as a Non-Executive Director. Both will maintain their current roles within MetalNRG.

The PIs will take up certain management positions and will work closely with the CEO to secure the upside potential of the portfolio and delivery of the corporate objectives.

Operations:

The operational handover will be carried out in a phased and continuous manner starting immediately.

The necessary discussions with the Oil & Gas Authority ("OGA"), in relation to change of control over the assets, will commence as soon as possible and within the framework of the HofT Agreement's exclusivity arrangements, with the aim of defining, together with the key stakeholders, an agreed and workable action plan for the continuation of the operations and further economic development of the assets.

Furthermore, the Company will be finalising the terms of the Purchase Agreement with the Vendors with a view to completing the transaction well within the term of the exclusivity arrangements.

Further information on the progress on the transaction will be provided in due course.

Romania Oil & Gas Transaction:

As previously reported, the due diligence process on the potential Oil & Gas acquisition in Romania was completed last March. The oil price crisis resulting from the current Covid-19 pandemic and the price war within the sector, have required us to propose to the vendor alternative commercial terms, which are significantly different from those initially proposed. The new commercial terms are being considered by the vendor.

In view of the significant constraints and travel restrictions imposed by governments due to Covid-19, the Company has not levied a specific timeline on the vendor for its response and the Company remains comfortable with the current open-ended, non-binding offer.

Meanwhile the Company is screening other potential opportunities in the UK and Romania, in pursuance of our strategy to create a balanced portfolio of low-risk Oil & Gas producing assets.

Arizona Gold Ridge Gold Mine:

As reported on 2nd March the required permits have been granted to enable the Company to operate the Gold Ridge mine. During the lockdown period the Company has carefully reviewed available data and has reviewed proposals from US based contractors to carry out exploration work on un-worked ground, between levels 4 and 6 of the Gold Prince Mine.

These proposals are being pursued and Christian Schaffalitzky, one of the Company's Non-Executive Directors, and Rolf Gerritsen are working on establishing and implementing steps to help MetalNRG de-risk the operations and bring the Gold Prince Mine back into long term sustainable production.

Rolf Gerritsen, CEO of MetalNRG commented "I am pleased with the progress we have made on the UK Oil & Gas transaction. I look forward to providing more news on this transaction and the Romanian opportunities. We are working hard at de-risking the Gold Ridge operations further and we are continuously reviewing other opportunities, which is an ongoing process. I believe we have an extremely bright future in front of us and look forward to reporting on our progress over the next few months."

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