PERE.L Regulatory News (PERE)

China Africa Resources PLC

8 February 2017

China Africa Resources plc

("China Africa" or "the Company" or "CAF")

Investment Agreement - USA Lithium

China Africa Resources plc (LON:CAF) the London Stock Exchange AIM listed natural resource exploration and development company is pleased to announce it has signed an Investment Agreement with US Lithium (Pty) Ltd ("USL"), a private Australian company, to acquire up to a 47.5% shareholding in USL.

USL has interests in lithium exploration licences in Arizona and New Mexico held through a 100% owned subsidiary company registered in the United States of America ("USA"). Further details in respect of USL and specifically its USA lithium interests are provided below.

Shareholders should note that this transaction does not constitute a reverse takeover under the AIM Rules and consequently China Africa must continue to seek to complete a reverse takeover or face suspension from trading on AIM.

Paul Johnson, Chief Executive Officer of China Africa Resources plc commented "I am pleased to announce this second investment which continues to build the China Africa business model, this time with the addition of lithium exploration and development interests in the secure operating environment of the United States.

I would encourage readers to review the project information provided below in respect of both Arizona and New Mexico lithium projects.

The funds from the initial investment by CAF will be used directly to fund a follow-up exploration programme which the US Lithium team are currently finalising. This planned work will generate systematic exploration data to further the knowledge of the four projects and will seek to qualify the exploration targets in advance of any future drilling programme.

The historic exploration data from all four projects is encouraging and the presence of the historical lithium and tantalum workings in the New Mexico Project are particularly interesting. We look forward to relaying the findings from the US Lithium programme and related material developments as they occur.

China Africa will continue to investigate further opportunities and has a number under advanced review. There of course can be no certainty that any commercial transactions will be undertaken until crystallised and published via regulatory announcement."

Investment Agreement - Key Financial Terms

Initial 25%:

CAF to is to acquire a 25% holding in USL with consideration to comprise cash and CAF equity as follows:

USD$100,000 payable in cash (£79,707) to USL to be applied to cover the costs of USL's next stage exploration work programme, commencing shortly.

AUD$150,000 payable in new ordinary shares of 1p each in the Company ("Ordinary Shares") at 3p per share being the mid-market price of CAF stock on the date that the Investment Agreement was prepared. The sterling equivalent at the date of agreement is £90,220 equating to 3,007,333 CAF shares or 3.7% of CAF issued share capital post transaction.

FURTHER 22.5%:

At the discretion of CAF and dependent on the results achieved during the aforementioned CAF funded exploration work programme, CAF has the right to acquire an additional 22.5% of USL again with consideration to comprise cash and CAF equity as follows:

AUD$150,000 payable in cash (£90,220) to USL to be applied to cover the auditable historic costs incurred to date.

AUD$225,000 payable in new ordinary shares of 1p each in the Company ("Ordinary Shares") at 3.25p per share. The sterling equivalent at the date of agreement is £135,330 equating to 4,164,000 CAF shares.

Upon acquisition of the 47.5% total holding the Investment Agreement provides for certain amendments to the Articles of Association of USL to ensure CAF's proportionate holding in USL is protected, notably the application of 75% shareholder approval for any issue of new equity or alteration to the capital structure of USL.

Further Summary Information

US Lithium Pty Limited ("USL")

USL is an Australian private limited company which has a 100% owned subsidiary company, registered in the United States of America ("USA"), that holds 100% of four exploration properties; three in the State of Arizona and one in the State of New Mexico.

Lithium Interests of USL

The current US Lithium exploration portfolio consists of four distinct projects; two focussed on lithium bearing pegmatites; and two predominantly focussed on lithium bearing volcanogenic altered hectorite clays. Hectorite is a lithium and magnesium containing bentonite (smectite) clay.

The New Mexico Pegmatite Project, is centred on a cluster of subparallel lithium bearing pegmatite dikes. The amphibole-schist hosted dikes are steeply dipping and individually range up to 7m wide at outcrop. The main lithium mineral present is lepidolite with subordinate microlite providing tantalum and columbite providing niobium. Historically parts of the project area have been worked on a small-scale, for both lithium and tantalum. Recent limited surficial sampling in the project area has yielded grades of up to 1.2% Li (or 6.39% Lithium Carbonate Equivalent LCE).

The Arizona Pegmatite Project is centred on the southern end of the Arizona Pegmatite belt and a historical pegmatite mining area. The pegmatite hosted lithium occurs as spodumene, amblygonite and lepidolite. Recent grab sampling in the project area has yielded results up to 1.97% Li, supporting further systematic exploration work.

The style of lithium pegmatite mineralisation being sought by USL is typified by that being mined at Talison Lithium's Greenbushes Mine in W. Australia (Mineral Resource 2012 Measured & Indicated 118.5Mt @ 2.4% Li) and ASX listed Birimian Ltd's Bougouni Lithium Project, in Mali, where a maiden Mineral Resource (15.5Mt @ 1.48% Li2O) for the Goulamina Deposit was recently announced.

The two Arizona Clay projects are focused on lithium bearing clay deposits. Both are early stage exploration projects targeting low grade, bulk tonnage, lithium clay deposits typified by the Sonora Deposit, Mexico and the Lithium Nevada Project (previously King Valley Project), in Nevada, USA. The Pre-Feasibility Study stage Sonora Project (Mineral Resource Indicated 259Mt @3,200ppm Li & Inferred 160Mt @ 3,200ppm Li) is held by AIM listed Bacanora Minerals whilst the Lithium Nevada Project (Mineral Resource, Measured 50.7Mt @ 0.312% Li & Indicated 164.0Mt @ 0.285% Li) is held by TSX listed Lithium Americas Corp.

USL's work programme at its Arizona clay projects is focused on the evaluation of lithium bearing clays derived from interbedded volcanogenic lacustrine sediments in structurally defined intermountain basins. These clays are currently thought to be derived from the alteration of silicic vitric tuffs. Values from recent sampling range from 211ppm Li to 1,220ppm Li with analysis for Rare Earth Element (REE) content, including Yttrium, ranging 195 to 440 ppm REE and averaging 14% as heavy REEs.

One of the deposits is also known to be uranium bearing, drilling in the late 1970's reportedly noted several uranium occurrences, though these were not fully investigated and represent as yet untested uranium potential.

The second of the clay projects is targeting volcanogenic derived lacustrine clays, with historically reported interbedded thicknesses of over 20m and reported grades between 0.4% and 1.0% Lithium Oxide (Li2O) over a thickness of 12m. Whilst this project is still at an early exploration stage, a small number of surface samples taken from this project have yielded upto 920ppm Li.

Based on a suggested economic cut-off grade of 1,000 ppm Li (5,320ppm LCE) (from the Mineral Resource of Bancanora Mineral's Sonora hectorite deposit) both of the Arizona clay projects are considered by USL to warrant systematic exploration to identify, map and laterally delineate the stratigraphic horizons with elevated lithium.

Total Voting Rights

As a result of this investment, 3,007,333 new Ordinary Shares are expected to be admitted to trading on or around 15 February 2017 ("Admission"). Following Admission the total issued share capital of the Company will consist of 81,843,195 Ordinary Shares. As such the total number of voting rights in the Company will be 81,843,195 Ordinary Shares. This number may be used by shareholders as the denominator for the calculations by which they will determine if they are required to notify their interest in, or a change to their interest in, the Company under the FCA's Disclosure and Transparency Rules.

AIM Rule 15 Cash Shell Status

On 14th December shareholders in CAF approved at General Meeting the distribution of shares in the Company's 100% owned China Africa Namibia Pty Limited to then shareholders. This distribution was completed as announced to market on 11 January 2017. As a result of the distribution China Africa Resources became a Rule 15 Cash Shell with six months to complete a reverse takeover or face suspension from trading on AIM.

Shareholders should note that this transaction, being an investment to secure up to 47.5% holding in USL, does not represent a reverse takeover under the AIM rules. Consequently, China Africa continues to be required to complete a reverse takeover within six months of 11 January 2017 or face suspension from trading on AIM.

Competent Person

The technical information contained in this disclosure has been read and approved by Mr Nick O'Reilly (MSc, DIC, MAusIMM, FGS), a Director of China Africa, who is a qualified geologist who meets the criteria of a qualified person under the AIM Rules - Note for Mining and Oil & Gas Companies. 

For further information on the Company, visit: http://www.chinaafricares.com/.

China Africa Resources Investing Policy:

Under the AIM Rules for Companies, CAF is required to complete an acquisition or acquisitions that constitutes a reverse takeover within six months of becoming an AIM Rule 15 Cash Shell or it will face suspension from trading on AIM. The Directors intend to apply the investing policy set out below in seeking an acquisition or acquisitions that will constitute a reverse takeover but there can be no certainty that they will be able to do this in the specified time frame.

The Board proposes to invest in and/or acquire companies and/or projects within the natural resource sector but with a particular interest in opportunities in the energy metal and minerals sector and with a key focus on opportunities in respect of uranium, lithium, cobalt, copper and coal. Each commodity has a specific relevance to the Energy space in terms of power generation, storage and distribution.

The Board considers that, as evidenced by the financial support provided by the new investors for the proposals outlined, there is a strong demand for energy metal and mineral opportunities on London's AIM.

The Board will not be limited to a specific geographic focus. In selecting investment opportunities, the Board will focus on businesses, assets and/or projects that are available at attractive valuations and hold opportunities to unlock embedded value or where, through efficient and focused work, there is the prospect of adding considerable value to each project, for the benefit of shareholders.

Where appropriate, the Board may seek to invest in businesses where it may influence the business at a board level, add their expertise to the management of the business, and utilise their industry relationships and access to finance.

The Company's interests in a proposed investment and/or acquisition may range from a minority position to full ownership and may comprise one investment or multiple investments. The proposed investments may be in quoted or unquoted companies; be made by direct acquisitions or farm-ins; and may be in companies, partnerships, earn-in joint ventures, debt or other loan structures, joint ventures or direct or indirect interests in assets or projects. The new Board may focus on investments where intrinsic value can be achieved from the restructuring of investments or merger of complementary businesses.

The Board expects that investments will typically be held for the medium to long term, although short term disposal of assets cannot be ruled out if there is an opportunity to generate an attractive return for Shareholders. The Board will place no minimum or maximum limit on the length of time that any investment may be held.

The Board will conduct initial due diligence appraisals of potential businesses or projects and, where they believe further investigation is warranted, intend to appoint appropriately qualified persons to assist.

The Board believes it has a broad range of contacts through which it is likely to identify various opportunities which may prove suitable. The Board believes its expertise will enable it to determine quickly which opportunities could be viable and so progress quickly to formal due diligence.

The Company will not have a separate investment manager. The Board proposes to carry out a comprehensive and thorough project review process in which all material aspects of a potential project or business will be subject to rigorous due diligence, as appropriate. Due to the nature of the sector in which the Company is focused the Company expects a focus on capital returns over the medium to long term. Should opportunities arise for an early cash return to investors, this will be considered by the Board.

It is emphasised that there is no certainty that the Company will be able to secure an acquisition or Reverse Takeover as set out above.