PAL.L Regulatory News (PAL)

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF ARTICLE 7 OF EU REGULATION 596/2014 ("MAR"). UPON PUBLICATION OF THIS ANNOUNCEMENT, THIS INFORMATION IS NOW CONSIDERED TO BE IN THE PUBLIC DOMAIN.

 21 October 2020 

The issuer advises that the following replaces the "Proposed Reverse Takeover Transaction and Suspension of Trading" announcement released on 21 October 2020 at 7.00 under RNS number 7613C.

In the seventh paragraph, the issue price of the Consideration Shares is clarified to be 12 pence per share (following the 20:1 share consolidation) which is equivalent to 0.6 pence per Ordinary Share ("Issue Price").

In "The Strategy" section, wording to clarify that the Company's strategy is to undertake the placing at the Issue Price.

The announcement should have stated that aggregate total consideration of £15.84 million by the issue of up to 132,000,000 new Ordinary Shares in the Company equates to a price of 0.6 pence / 12 pence per Ordinary Share ("Acquisition Price").

The announcement should have also stated that the proposed raise of £2m+ to further the Project will be completed at this Acquisition Price.

All other details remain unchanged and the full amended text is shown below.

EQUATORIAL PALM OIL PLC

("EPO" or the "Company")

Proposed Reverse Takeover Transaction and Suspension of Trading

Signing of conditional Acquisition Agreement to acquire up to 100% of Capital Metals Limited

Equatorial Palm Oil plc (AIM: PAL), the Rule 15 cash shell, is pleased to announce that it has reached conditional agreement with parties holding a majority of the shares (51.4 per cent.) ("CML Majority") of Capital Metals Limited ("CML"), a company developing a mineral sands project in Sri Lanka, to acquire their shares in CML ("CML Shares") in exchange for ordinary shares ("Ordinary Shares") in the Company.

Capital Metals Limited ("CML") was incorporated in 2015 to acquire licenses prospective for mineral sands in Sri Lanka ("Project"). Since acquiring the Project, CML has developed it by undertaking drilling and exploration, establishing a JORC Resource and undertaking detailed metallurgical test work to establish the quality of the mineral sands' products in the Project. CML has spent more than £5.5m on the Project and has built an international shareholder base.

The Project has a JORC resource estimate of 17.2Mt at 17.6% Total Heavy Minerals ("THM") including ilmenite, zircon, rutile & garnet ("Resource") and 84% of the Resource is Measured & Indicated. The JORC resource estimate indicates that the THM of the Project is amongst the highest grade of mineral sands projects globally and the metallurgical work provides the Project with the information for offtake discussions. Also, there is scope to increase the Resource given the current Resource is only at 3m from surface and recent drilling confirms mineralisation extends at depth and drilling has only taken place over less than 5% of the Project.

Key infrastructure is already in place including facilities at Oluvil port, located a short distance from the Project, which include grid power, scheme water, sealed roads and up to 10,000 tonnes shipping capacity. The proposed Board and in-country management have substantial listed company, heavy minerals & Sri Lankan experience.

CML are looking to complete industrial mining licence approvals in 2021 and to update its development plan as the Project moves closer to mine development and revenues.

The proposed acquisition ("Proposed Acquisition") will constitute a reverse takeover transaction pursuant to the AIM Rules for Companies (the "AIM Rules"). Following the Proposed Acquisition, the CML business will constitute all of the Company's business.

An acquisition agreement has today been signed with the CML Majority. The Company has now issued the same offer to the remaining shareholders in CML ("CML Minority") which, if accepted, will result in the acquisition of up to 100 per cent. of the entire issued share capital of CML ("CML Shares") for an aggregate total consideration of £15.84 million by the issue of up to 132,000,000 new Ordinary Shares in the Company ("Consideration Shares"). This equates to a price of 12 pence per Consideration Share ("Issue Price") to be issued following the proposed 20:1 share consolidation (equivalent to 0.6 pence per existing Ordinary Share).

The Opportunity for EPO

By acquiring shares in CML, the Company will be acquiring up to a 100% interest in a high grade project which has been developed with substantial investment to date and which the directors believe represents a low capex, high margin opportunity with attractive economics.

The Strategy

· raise £2m+ at the Issue Price to further the Project (EPO has approximately £800,000 in the bank)

· finalise mining license approvals

· undertake Development Study which includes an economic analysis

· secure product offtake agreements

· commitment to best practice ESG

· construct mine and process plant to commence commercial production

· continue exploration to increase Resources

· provide employment and skills training to local people as part of a community engagement programme

Principal Terms of the Proposed Acquisition

On 16 October 2020, the Company sent a letter to Capital Metals Limited communicating the offer from the Company to acquire the issued share capital of Capital Metals Limited (the "Offer"). Upon receipt of the Offer, CML communicated the Offer by sending an offer letter ("Offer Letter") to certain of its shareholders ("the CML Majority"). The CML Majority hold between them 51.4 per cent. of the current issued CML Shares. The Offer specified, inter alia, the following terms:

• In consideration for the acquisition of the CML Shares, the Company proposed to issue 1 Consideration Share for every 1.235 CML Shares sold.

• That completion of the Proposed Acquisition is conditional, amongst other things, on (i) the passing of resolutions at a general meeting to be convened by the Company, to approve : the Proposed Acquisition, a 20:1 share consolidation, and a placing of new ordinary shares ("Placing Shares") in the Company ("the Placing"); and (ii) admission of the Placing Shares and Consideration Shares to trading on AIM ("Admission") becoming effective on or before 31 March 2021.

• Completion of the Offer is conditional on acceptances being received from the holders of CML Shares holding more than 75 per cent. of the issued CML Shares (unless otherwise agreed between CML and the Company, with the approval of the Company's Nominated Adviser).

• If a CML shareholder wishes to accept the Offer they should return a signed acceptance form which is sent to them with the Offer Letter ("Acceptance Form"). Contained within the Offer Letter is a power of attorney pursuant to which a CML Shareholder will appoint Capital Metals Limited as their attorney to take all reasonable and necessary actions on their behalf in order to give effect to the Offer and to complete the transaction. This includes authority to execute a conditional sale and purchase agreement ("Acquisition Agreement") and all necessary instruments of transfer.

• The CML Directors recommended that all CML Shareholders accept the Offer.

In the event that the Offer is accepted by all CML Shareholders, the Company will acquire all the CML Shares and will in turn issue 132,000,000 Consideration Shares to satisfy a total consideration of £15.84 million. In the event that the Offer is not accepted by all CML Shareholders, the number of Consideration Shares to be issued shall be reduced accordingly.

As CML has not been independent and earning revenue for at least 2 years, its related parties and applicable employees shall be subject to the lock-in restrictions as required by Rule 7 of the AIM Rules.

About CML

The Project

CML (via its subsidiaries) owns, directly or indirectly 100 per cent. of the Sri Lankan subsidiary companies holding the licenses being Damsila Exports (Pvt) Limited ("DEL") and Eastern Minerals (Pvt) Limited ("EML") that comprise the Project.

The Project is located in the Ampara District of the Eastern Province of Sri Lanka, approximately 220 km east of Colombo. The Project comprises the project licenses ("Project Licenses") which cover 84 sq. km. An additional nine applications have also been made in respect of new licenses covering a further 623 sq. km.

The Project is divided into two sub-project areas:

· the northern area (Eastern North) is held by DEL through its exploration license EL168/R/4 (which expires on 31 October 2020) (the "DEL License"), and which is now subject to Industrial Mining License ("IML") applications by DEL; and

· the southern area (Eastern South) is held by EML through its granted exploration license EL199/R/3 (the "EML License") which is due to be renewed for a further two year period shortly.

In relation to the first IML application over the area covered by the DEL License which was lodged in 2014, DEL is finalising its Environmental Impact Assessment ("EIA") with the Sri Lankan authorities. The EIA review and approval process was delayed earlier this year due to COVID-19. The EIA is intended to be made available for its 30-business day public comment consultation in late October 2020.

Board changes

It is proposed that the following highly experienced individuals will be appointed to the Board, conditional upon Admission:

Gregory Martyr, Non-Executive Chairman (aged 56)

Greg is an experienced resource industry banker, advisor and corporate executive. He has over 30 years' experience in resources investment banking and corporate finance, as well as the management of international mining companies. He is also on the board of Euro Manganese Inc. and Carbon Dynamics Group P/L. From 2011 to 2016, Greg was a Managing Director with Standard Chartered Bank ultimately as the Global Head of Advisory, Mining and Metals. From 2005 until its 2011 acquisition by Standard Chartered Bank, he was a partner with Gryphon Partners, a boutique resource advisory firm and from 1994 to 2003, he was employed in several executive roles by Normandy Mining Ltd., including President, Americas. Prior to that he held positions with Deutsche Bank and Morgan Grenfell. Greg obtained a Bachelor of Economics and a Bachelor of Laws from the University of Sydney, Australia. Mr Martyr will enter into a letter of appointment with the Company to act as a non-executive chairman of the Company from and subject to Admission. Mr Martyr's appointment will commence on the Admission Date and will be terminable at any time on three months' written notice on either side. Mr Martyr will be entitled to a fee of £38,400 per annum and will be required to devote such of his time, attention and ability to his duties as may be necessary or desirable for the proper and effective discharge of all of his functions and responsibilities.

Anthony Samaha, Finance Director (aged 52)

Anthony Samaha is a Chartered Accountant who has over 25 years' experience in accounting and corporate finance, including resources development. Anthony worked for over 10 years with international accounting firms, including Ernst & Young, principally in corporate finance, gaining significant experience in valuations, IPOs, independent expert reports, and mergers and acquisitions.

He has over 15 years' experience in the listing and management of AIM quoted companies, including the accounting and financial management, fund raisings, project development and mergers and acquisitions. Anthony has been involved in acquisitions and resource projects in various regions of the world, including Australia, West Africa, North America, Kazakhstan and the People's Republic of China. He holds Bachelor of Commerce and Bachelor of Economics degrees from the University of Western Australia and is a Fellow of the Chartered Accountants Australia and New Zealand and an Associate of the Financial Services Institute of Australasia. He is currently an executive director of AIM-quoted Reabold Resources plc.  Mr Samaha will enter into an executive service agreement with the Company subject to Admission, Mr Samaha will be employed as Finance Director of the Company and will be paid a salary of £50,000 per annum (plus expenses reasonably incurred by him in the course of his duties). Mr Samaha will be required to devote such time, attention and ability as is needed to enable him to carry out his duties to the Company as Finance Director. His appointment shall (unless terminated earlier due to poor performance or gross misconduct or other material breach of duties) continue unless and until terminated by either party on three months' notice in writing. Mr Samaha's service agreement will contain non-compete, non-solicitation and no-conflict restrictions on Mr Samaha commensurate with his position as Finance Director.

James Leahy, Non-Executive Director (aged 59)

Beginning his career at the London Metal Exchange, Mr Leahy has spent the subsequent 34 years involved in stockbroking and commodities in a variety of roles, including research analyst, equity salesman and specialist corporate broker, which covered mining finance, origination and distribution. He has worked on a wide range of projects worldwide, ranging from industrial minerals, coal, iron ore, precious metals, copper, diamonds, lithium, uranium, plantations, forestry and palm oil. Lately, he has employed his corporate governance skills, having gained substantial experience as an independent director on the boards of several quoted and unquoted companies. In addition, Mr Leahy has direct experience in capital markets, having worked at James Capel, Credit Lyonnais, Nedbank, Canaccord and Mirabaud, where he gained invaluable experience with international institutional fund managers, hedge funds, private equity and sector specialist investors. Additionally, Mr Leahy has been involved in many IPOs, as well as primary and secondary placings, and the development of junior mining companies through to production. He is currently a director of the listed fund Geiger Counter Ltd, AIM-quoted Savannah Resources Plc and AEG Plc. Mr Leahy will enter into a letter of appointment with the Company to act as a non-executive director of the Company from and subject to Admission. Mr Leahy's appointment will commence on the date of Admission and will be terminable at any time on three months' written notice on either side. Mr Leahy will be entitled to a fee of £24,000 per annum and is required to devote such of his time, attention and ability to his duties as may be necessary or desirable for the proper and effective discharge of all of his functions and responsibilities

Financial Results of CML

In the year ended 31 March 2020 CML made a loss of $1.024 million before tax on a turnover of £nil. It had net assets of $0.85 million as at 31 March 2020.

Related Party Transaction

Michael Frayne is a director and shareholder of CML, whose beneficial holding is 9.8%, as well as Executive Chairman of the Company. Accordingly, the Proposed Acquisition constitutes a related party transaction under Rule 13 of the AIM Rules. Geoffrey Brown and Teh Kwan Wey, being the Independent Directors for the purposes of AIM Rule 13, having consulted with SPARK Advisory Partners Limited ("SPARK"), the Nominated Adviser, consider that the terms of the Proposed Acquisition are fair and reasonable insofar the Company's shareholders are concerned. In providing such advice to the Independent Directors, SPARK has taken into account the Independent Directors' commercial assessment.

Suspension of Trading

In accordance with Rule 14 of the AIM Rules, the Company's Ordinary Shares will be suspended from trading on AIM with effect from 7.30 a.m. today. Trading in the Company's Ordinary Shares will remain suspended until such time as either an Admission Document is published or an announcement is released confirming that the Proposed Acquisition will not proceed, subject to the provisions of AIM Rule 15.

The Proposed Acquisition remains subject to a number of variables including, but not limited to, agreeing definitive documentation and compliance with all regulatory requirements, completion of a placing to raise funds to undertake a Development Study and work programme, and obtaining the approval of the Company's shareholders in general meeting. As such, there can be no certainty that the Proposed Acquisition will complete.

Share Consolidation

It is proposed that, simultaneously with the other proposed resolutions, the ordinary shares of £0.0001 will be consolidated into new ordinary shares of £0.002 each on the basis of one New Ordinary Share for every 20 ordinary shares of £0.0001 each. The Consideration Shares to be issued in connection with the Proposed Acquisition will be new ordinary shares following the share consolidation.

Further updates will be provided as and when appropriate.

For further information, please visit www.epoil.co.uk or contact: