Admission to Trading on AIM

RNS Number : 3110L

China Africa Resources PLC

01 August 2011

 



THIS ANNOUNCEMENT AND THE INFORMATION CONTAINED HEREIN IS RESTRICTED AND IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES, CANADA, JAPAN, THE REPUBLIC OF SOUTH AFRICA OR THE REPUBLIC OF IRELAND OR ANY JURISDICTION IN WHICH SUCH PUBLICATION OR DISTRIBUTION IS UNLAWFUL

1 August 2011

CHINA AFRICA RESOURCES PLC

Admission to Trading on AIM

China Africa Resources plc ("CAR" or "the Company") today announces the admission to trading on AIM of its shares ("Admission") and the successful completion of a subscription (the "Subscription") raising £4.7 million for the Company, before expenses. Pursuant to the Subscription, the Company has issued 11,750,000 new shares at 40 pence each (the "Subscription Price") to Hong Kong East China Non-Ferrous Mineral Resources Co., Ltd ("HK ECE"), a subsidiary of East China Mineral Exploration and Development Bureau ("ECE"). Based on the Subscription Price, the market capitalisation of CAR, immediately following Admission, will be approximately £9.2 million.  Ambrian Partners Limited is the Nominated Adviser and broker to the Company.

Highlights

·      Admission to AIM with a market capitalisation of approximately £9.2 million

·      Subscription for 11,750,000 Ordinary Shares at 40p each by HK ECE to raise £4.7 million

·      Subscription proceeds are to be applied to fund, inter-alia:

o  A Feasibility Study on the Berg Aukas Project in Namibia - a high grade, low tonnage lead, zinc, vanadium mine which ceased production in 1978 when the zinc price fell below USD 550/t; and

o  Due diligence and the acquisition (in full or in part) of other mining assets.

·      Historical resource estimations from just prior to mine closure at Berg Aukas indicate high grade lead, zinc and vanadium mineral inventory remains in the ground.

·      Weatherly International plc ("Weatherly"), an established AIM listed mining, exploration and development company focused on operations in Namibia is to provide operation supervision, management and reporting functions and regulatory support to CAR for an interim period

Background

China Africa Resources plc (the ''Company'') was incorporated on 20 August 2010 and on 27 October 2010 the entire issued share capital of the Company was transferred to Weatherly. On 11 January 2011 Weatherly and UK ECE, a wholly owned ultimate subsidiary of ECE, entered into the Implementation Agreement with CAR to, inter alia, set out the steps and procedures by which Weatherly and UK ECE would work together to develop Weatherly's Berg Aukas Project in Northern Namibia.

Pursuant to the terms of the Implementation Agreement, Weatherly transferred 3,250,000 Ordinary Shares in the capital of the Company to UK ECE thereby resulting in UK ECE owning 65 per cent. of the issued shares in the capital of the Company, with Weatherly retaining 1,750,000 Ordinary Shares representing 35 per cent. of the issued share capital of the Company.

On 3 March 2010 Weatherly formed a wholly owned subsidiary, CAR Namibia. The Government of Namibia gave consent to the transfer of the mining licence for the Berg Aukas Project from another wholly owned Weatherly subsidiary to CAR Namibia, with effect from 25 November 2010.

On 6 June 2011 UK ECE transferred for the consideration of US$5,252.65, its entire holding of 3,250,000 Ordinary Shares in the Company to HK ECE, being another wholly owned ultimate subsidiary of ECE.

Conditional only upon Admission, Weatherly has agreed to sell the entire issued share capital of CAR Namibia (which holds the Berg Aukas licences) to the Company in consideration for the allotment of 6,326,924 Ordinary Shares in the capital of the Company.

To fund the development of the Berg Aukas Project, HK ECE has agreed to subscribe for 11,750,000 Ordinary Shares in the Company at 40p per share, amounting to £4.7m, such subscription being conditional only upon Admission.  Following Admission, HK ECE will own 65 per cent. of CAR.

On 15 July 2011 Weatherly announced that it would distribute 2,307,692 Ordinary Shares, representing 10 per cent. of the issued share capital of CAR, to its shareholders by way of a Distribution in Specie, reducing Weatherly's interest in CAR to 25 per cent. on Admission.

Overview of CAR

Initially, the objective of CAR will be to carry out a full feasibility study on the Berg Aukas Project, which is expected to commence shortly after Admission and to be completed by the end of 2012. The total cost of the feasibility study is expected to be US$3 million over the full period and will be managed by Weatherly pursuant to the terms of the Management Services Agreement.

Subject to the feasibility study confirming that the Berg Aukas Project is financially viable and CAR being able to raise further funds, the Company's intention is to bring the mine back into production.

Whilst the immediate focus of the Company is the development of the Berg Aukas Project as described above, the Company's overall strategy is to build a profitable and widely based resource business and the Directors expect this to include the acquisition of additional assets from Weatherly, ECE or third parties.

Berg Aukas Project

The Berg Aukas Project is situated some 19km by road east of Grootfontein in northern Namibia and some 450km by road north of the capital, Windhoek. The mineral rights to the Berg Aukas Project and surrounds are held by CAR Namibia under two slightly overlapping mining licences, ML-14/2/3/2/1 and ML-14/2/3/2/24B which encompass all known hard rock ore-bodies, the slag dump and the tailings dam.

Geological investigations in the early 1920s established limited alluvial descloizite deposits at the base of the hill now known as Berg Aukas Mine Kopje. In 1940 prospecting was resumed and a narrow interval of fracture fill descloizite, from what is now known as the Central Ore Body, was found. The mine was worked on a small scale in 1955 when an extensive diamond drill program was started. This led to the discovery of the Northern Ore Horizon and Central Ore Body. Underground development and mine infrastructure establishment commenced in 1958.

In 1968 a second, deep, vertical shaft to access the lower levels of the orebody was established, termed the No. 2 Shaft. At the same time a kiln was put in to treat the oxide ore, complimenting the gravitational and float plant which was already in place.

Berg Aukas was a high grade low tonnage mine treating only 11,000t of ore monthly after waste sorting of the hauled material. During its production history it produced an estimated 1.6Mt (Misiewicz, 1988) at an average grade of: 17 per cent. Zn, 5 per cent. Pb and 0.6 per cent. V2O5.

Mining operations ceased in 1978 when the zinc price fell below USD 550/t causing the operation to run at a loss. Goldfields of South Africa Ltd (''Goldfields'') undertook a feasibility study on re-opening the mine in 1981. They did not subsequently reopen the mine, but conducted surface exploration over the area between 1987 and 1993 with the intention of proving up additional underground resources as well as investigating several other mineralised occurrences in the general area. There is no record of work having been done on the properties post 1993.

Strategy

The CPR concludes that the historical non-SAMREC compliant mineral resource estimate for December 1977, just prior to mine closure, indicates significant, high grade, lead, zinc and vanadium mineral inventory remains in the ground. They are proximal to significant existing infrastructure which will expedite the underground exploration and any re-opening of the mine.

However, currently insufficient data exists to establish the precise location of the remaining mineral resources within the mine or to verify the previous estimation. These can only be established and validated by completing the 3D modelling of available data and diamond drilling.

Work by previous owners to find extensions to the known mineralisation is incomplete (in the opinion of Coffey Mining (SA) Pty Ltd ("Coffey")) and potential remains for increasing the resource base immediately adjacent to the known mineralisation through additional exploration. Coffey states that this should be undertaken by a mixture of surface and underground diamond drilling.

The metallurgy of the mine is complex with multiple product streams. Significant advances in extractive metallurgy have been made in the past 30 years and it is likely that any future metallurgical plant will have a different design, process detail and recovery to that previously in operation.

In 2010, Weatherly commissioned SRK Consulting (UK) Limited (''SRK''), a Cardiff based mining consultancy to prepare a bankable feasibility study for the development of the Berg Aukas mine (''Feasibility Study''). In combination with Coffey, Sedgman Limted (''Sedgman'') and Synergistics Environmental Services (''Synergistics''), SRK has submitted a proposal to undertake this study which CAR will fund using the proceeds of the Subscription. While the scope of the Feasibility Study is restricted to surface drilling and data gathering, the Directors are confident that there will be more than sufficient information available for CAR to make a fully informed development decision.

The geological component of the Feasibility Study will be undertaken by Coffey and comprises:

·      shallow RC drilling to assess the upper regions adjacent to No.1 shaft;

·      diamond drilling of the deeper resources adjacent to the No.2 shaft to validate and hopefully extend the historical resource;

·      compilation of the data and subsequent development of a full 3D computer model; and

·      reporting of all resources to the JORC standard.

Mine design, engineering, capital and operating costs will be addressed by SRK in Cardiff. Analysis of metallurgical testing and flow sheet design, engineering and associated capital and operating costs will be undertaken by Sedgman Engineering in Perth. In this respect initial bulk samples have already been sent to the Amdel labs in Perth awaiting the commencement of the metallurgical testwork.

Environmental impact assessments, management programs and related social and permitting issues are being addressed by Synergistics in South Africa.

The overall Feasibility Study will be managed by CAR which will also be responsible for negotiating a number of key access and commercial arrangements that are critical to the development of the project, in particular the water/access rights relating to the dewatering of No.2 shaft and the final product sales agreements.

The total cost of the Feasibility Study is estimated to be approximately US$3 million and to take approximately 18 months to complete. Major cost components are summarised in the table below:

Entity	Function	Budget (US$)
Coffey Mining SA	Geology	1,707,300
Sedgman Limited	Processing	574,500
SRK	Mining	510,800
Synergistics	Environmental	121,000
Weatherly Management	Legal & Commercial	115,200
Total		3,028,800

Subject to confirmation by the results of the Feasibility Study, the Directors currently expect to develop the mine in two stages. The first stage would be to take advantage of any low grade oxidised ore that may exist close to surface and that could be extracted via a small open pit. This would be augmented by known high grade reserves adjacent to the old No.1 shaft that may also be accessible from the pit or alternatively via a decline from surface, providing early production while the deeper parts of the mine are dewatered. The second stage would be to rehabilitate the key working areas at a depth of 350-500m below surface where the bulk of the remaining reserves are expected to be located based on historical data. Thereafter, the mine would continue to progress down plunge limited only by the continuation of the ore zones and the ultimate depth of the No.2 shaft.

The overall scale of the operation will be primarily a function of the limitations imposed by the size of the ore pods and the mine's ore handling infrastructure. Even at quite modest levels of ore production (200,000tpa) the mine is potentially a large producer of metal because of the high grades involved (22 per cent. Zn+Pb). Berg Aukas ore is complex and contains an array of minerals in both oxide and sulphide forms. The Directors believe that the key to any successful development is to implement a process that maximises the recovery of all the metals into a saleable product - the key metals/minerals are zinc, lead, silver, and vanadium oxide.

Processing in the past was a function of the technology and the markets at the time. Nothing remains of the original plant and, as a result, a totally new plant employing state of the art processes could be built on the mine site. While this remains a likely option, two other factors that have the potential to greatly enhance the economics of the project now exist. The first is the capacity of the Scorpion zinc refinery in southern Namibia, currently a buyer of zinc oxides, and the second is the availability of the nearby Tsumeb concentrator. Conceptually the cheapest option would be to separate zinc oxides at the minesite (for sale to Scorpion) and to truck the remaining sulphide ore to Tsumeb to produce zinc and lead concentrates. This would of course depend on reaching mutually acceptable agreements with the third parties concerned.

Use of Proceeds

The monies raised by the issue of Subscription Shares will be used to complete a Feasibility Study on Berg Aukas, provide working capital to the Group and fund due diligence and the acquisition (in full or in part) of other mining assets. The anticipated use of funds is as follows:

	£
Feasibility Study - Berg Aukas	2.0
Management Fee (18 months)	0.5
Overhead	0.4
Admission costs	0.8
Acquisitions and due diligence thereon	1.0
Total proceeds	4.7

For further information visit www.chinaafricares.com, or enquire to:

Rod Webster, Chief Executive Officer

China Africa Resources plc

[phone]

Anthony Rowland / Ben Wright

Ambrian Partners Limited

[phone]

Carina Corbett

4C Communications(Investor Relations)

[phone]

Further Information

Background on Weatherly

Weatherly is an AIM listed mining, exploration and development company. Its principal assets are contained in its copper portfolio in Namibia, which include two mines in production at Otjihase and Matchless and three development projects. Weatherly has JORC compliant resources containing 624,000t of copper. The immediate corporate strategy is to develop a copper mining business capable of sustaining 20,000 tpa of copper at average industry cost of production for the next ten years. Production is expected to reach approximately 7,000t of copper per annum from Otjihase and Matchless.

Background on ECE

ECE was established in 1955 in China and is a Jiangsu Provincial Government subordinate organisation focusing on geological and mineral exploration and development activities. Its activities have historically been principally based in China where it has several operational mines and where it conducts extensive exploration activities. ECE has discovered approximately 160 ore deposits of which several have been developed into mines by ECE and others including the China Meishan iron mine, the Qixia lead-zincsilver mine and the Fujian Youxi zinc-lead mine.

Directors

Upon Admission, the Board will consist of one executive Director and seven non-executive Directors of which two are considered by the Board to be independent pursuant to the QCA corporate governance guidelines. Pursuant to the terms of the Relationship Agreement the board of directors of the Company will consist of four directors appointed by HK ECE, two directors appointed by Weatherly and two independent non-executive directors. HK ECE has appointed Yi Shao as the non-executive Chairman of the Company and Jianrong Xu, Shasha Lu and Jingbin Tian as non-executive director appointees of HK ECE. It is anticipated that one of the HK ECE non-executive appointees will take an executive position on the board as the operational activities of the Company increase. Rod Webster will act as the Company's chief executive officer. Rod Webster is also the chief executive officer of Weatherly. In addition Weatherly has appointed John Bryant, the current non-executive Chairman of Weatherly, as a non-executive director of the Company. James Richards and Frank Lewis have agreed to act as Independent non-executive directors of the Company, with James Richards serving as the senior independent non-executive director.

Of the directors appointed by ECE, Shasha Lu and Jingbin Tian are fluent English speakers. James Richards has considerable experience in Asia and is a fluent speaker of Chinese. Taking these facts into account, the Directors believe that language will not be a barrier to the effective functioning of the Board.

Yi Shao, aged 57 (Non-executive Chairman)

Mr Shao is a senior economist and holds an EMBA from Nanjing University Business School. He currently acts as chairman of JEC and Director General of ECE. From 2003 to 2006 he acted as General Manager of Jiangsu Provincial Aviation Industry Group. Prior to this, Mr Shao gained his professional experience as general manager of Jiangsu Provincial Transport Industry Group and as a director of Jiangsu Economic Planning Committee. Mr Shao also has experience in local government having acted as a Standing Committee Member of the Municipal Party Committee and Chief Executive Mayor of Suqian City, Jiangsu Province, PRC. Mr Shao is the Chairman of Globe Metals and Mining Ltd., an ASX listed company.

Roderick Webster, aged 61 (Chief Executive Officer)

Mr. Webster is a graduate mining engineer from the University of Sydney. He has over 35 years of experience in the resources industry, including more than 15 years in managing director or chief executive officer positions. Since 2005 Mr. Webster has been chief executive of Weatherly, an AIM listed mining, exploration and development company with a Namibian copper portfolio including two mines at Otjihase and Matchless and three development projects. Between August 2001 and February 2005 Mr. Webster was a senior executive at First Quantum Minerals Ltd (''FQM''), a Toronto Stock Exchange and AIM listed company, developing and operating copper mines in Zambia, the Democratic Republic of Congo and Mauritania. Between 2000 and 2001, Mr. Webster was a non-executive director of another major Zambian copper producer, Mopani Copper Mines Ltd, in which FQM had a major interest. Prior to his involvement with FQM, he was a founding director and the chief executive officer of an Australian base metals producer, Western Metals Ltd between 1994 and 2000. During his stewardship, the company grew to be one of Australia's largest base metals producers at the time. In his earlier years, he held senior management positions with the global resource companies, Homestake Gold of Australia Ltd (between 1988 and 1993) and BHP Minerals Ltd (between 1980 and 1988). He is a fellow of both the Australian Institute of Mining and Metallurgy and the Australian Institute of Company Directors. At various stages he has been a member of the Executive Committees of both the Australian Minerals Council and the International Zinc Association, and a non-executive director of numerous companies.

John Bryant, aged 65 (Non-executive)

Mr. Bryant was appointed to the Board in October 2010. He is the non-executive chairman of Weatherly and the Senior Independent Director of AIM listed Igas plc. Mr. Bryant and was formerly chairman of AIM quoted Gas Turbine Efficiency plc and a board member of Attiki (Athens) Gas Company. Mr. Bryant also served as President of Cinergy Global Resources Corp, responsible for all international business and global renewable power operations of this US-based electricity and gas utility provider. Before joining Cinergy, John's professional experience was gained with Midlands Electricity plc as Executive Director Generation, British Sugar plc, Drexel Limited, BOC Limited and Unilever plc. Mr. Bryant holds an MSc from Reading University and a BA from Nottingham University, and is a fellow of the Institute of Directors and a fellow of the Royal Society of Arts.

Jianrong Xu, aged 48 (Non-executive)

Mr Xu holds an EMBA from Nanjing University and a doctorate in geophysics and information technology. Mr Xu is a director and chief executive officer of JEC with responsibility for major mining projects and outward investment and Deputy Director General of East China Mineral Exploration and Development Bureau. In addition, Mr Xu holds directorships with the following companies: JEC, Hong Kong Southwest Gold Inc., Hong Kong East China Non-Ferrous Mineral Resources Co., Ltd, Australian ECE Nolans Investment Ltd. and Globe Metals and Mining Ltd., an ASX listed company.

Shasha Lu, aged 37 (Non-executive)

Ms Lu has acted is a director of HK ECE where she is responsible for coordinating overseas investment.  Prior to this, she worked as a project manager for the World Health Organisation at Geneva University for Sch 2 (g)32 the Asia area. Ms Lu has considerable academic experience, having worked as an Assistant Professor at Nanjing University from 1997 until 2002 and later having held a position as a Post-doctoral fellow and Assistant Professor at the Karolinska Institute. In addition to her position with HK ECE, Ms Lu is a director of Hong Kong Southwest Gold Inc., which holds a stake in a gold mine in the Yunnan province in PRC. Ms Lu's other directorships include Australian ECE Nolans Investment Ltd., ECE Nolans Investment Pty. Ltd. and Arafura Resources Ltd., an ASX listed company in which ECE has a shareholding. Ms Lu is fluent in English.

Jingbin Tian, aged 45 (Non-executive)

Mr Tian holds a masters degree from Nanjing University and an LLM in International Commercial Law from Nottingham University. Since January 2010 he has acted as head of the outward investment division for ECE and previously gained professional experience in a variety of roles working for Jiangsu International Tender Co., Ltd and Jiangsu Trading Centre of Machinery and Electrical Equipment. Mr Tian is a director of Globe Metals and Mining Ltd., an ASX listed company. Mr Tian is fluent in English.

James Richards, aged 63 (Senior Independent Non-executive)

Mr Richards is a graduate of Oxford and Hong Kong Universities and has considerable academic and professional experience in business in China. Since 2010 Mr Richards has been the Group Director for China for De La Rue plc. Prior to this, from 1996 to 2000 he was Director of North East Asian Affairs for Rolls Royce plc, before taking on a combined role as Director of EU relations and Advisor to the chief executive of Rolls Royce China. Mr Richards is a fluent speaker of Chinese who served for 25 years with HM diplomatic service. From 1977-1980 he acted as the official Chinese interpreter to the UK government.

Frank Lewis, aged 65 (Independent Non-executive)

Mr Lewis has over 25 years experience in listed and unlisted companies. He has held a number of board positions as chairman, non-executive director, chief executive officer and finance director both in the UK and abroad with growing mid-market companies. Mr Lewis started as an IT entrepreneur in South Africa, where he co-founded Computer Warehouse and listed it on the Johannesburg Stock Exchange. He was previously Chairman of Lloyds British Testing Plc and senior non-executive director of Zeehan Zinc Limited, a mining exploration company in Tasmania, Australia listed on AIM. He is currently Chairman of Asia Ceramics Holdings Plc an AIM listed company and Zeo Medical Plc. Mr Lewis is a member of the South African Institute of Chartered Accountants, as well as a Fellow of The Institute of Chartered Accountants of England and Wales. He is a former member of the AIM Advisory Council that advises the London Stock Exchange.

Subscription and Acquisition Statistics

Number of Ordinary Shares in issue prior to the Subscription and Acquisition            5,000,000

Subscription Price                                                                                                         40p

Number of Ordinary Shares being issued pursuant to the Subscription                    11,750,000

Percentage of Enlarged Share Capital represented by Subscription Shares      50.9 per cent.

Gross proceeds of the Subscription                                                                      £4.7million

Estimated net proceeds of the Subscription receivable by the Company                  £3.9 million

Number of Consideration Shares being issued in connection with Acquisition            6,326,924

Percentage of Enlarged Share Capital represented by Consideration Shares     27.4 per cent.

Number of Ordinary Shares in issue immediately following Admission                     23,076,924

Market capitalisation (approximate) of the Company following                                £9.2 million

  completion of the Subscription and Acquisition

Terms in this announcement shall have the same meaning as those ascribed to them in the Company's AIM admission document dated 26 August 2011.  The above information is extracted from the Admission Document and should be read in conjunction with the full text from which it is derived and must be read in its entirety in order to obtain a full appreciation of the Company.  Your attention is specifically drawn to the section entitled "Risk Factors" in the Admission Document.

Further information about the Company, including the Admission Document and the information required to be disclosed pursuant to AIM Rule 26 is available on the Company's website, www.chinaafricares.com

Ambrian, which is authorised and regulated in the United Kingdom by the FSA, is acting as nominated adviser and broker to the Company for the purposes of the AIM Rules in connection with the Subscription, Acquisition and Admission. Ambrian is not acting for, and will not be responsible to, any person other than the Company for providing the protections afforded to its customers nor for advising any other person on the contents of this document or on any transaction or arrangement referred to in this document. Ambrian's responsibilities as the Company's nominated adviser and broker under the AIM Rules are owed solely to the London Stock Exchange and are not owed to the Company or to any Director or to any other person in respect of that person's decision to acquire shares in the Company in reliance on any part of this document or otherwise.

The Ordinary Shares have not been, and will not be, registered under the United States Securities Act 1933 as amended (the ''US Securities Act'') in reliance on the exemption from the registration requirements of the US Securities Act as provided under section 3(a)(10) of that Act. The Ordinary Shares have not been approved or disapproved by the US Securities and Exchange Commission, any state securities commission in the United States or any other US regulatory authority, nor have any of the foregoing authorities passed on or endorsed the merits of the offering of the Ordinary Shares or the accuracy or adequacy of this document. Any representation to the contrary is a criminal offence in the United States.

FORWARD LOOKING STATEMENTS

This announcement contains forward looking statements relating to the Company's prospects, developments and business strategies, including, without limitation, statements containing the words ''believe'', ''anticipated'', ''expect'' and similar expressions. Those forward looking statements involve unknown risks, uncertainties and other factors which may cause the actual results, financial condition, performance, discoveries and/or achievements expressed or implied by those forward looking statements to be materially different. Factors that might cause that difference might include, but are not limited to, those set out in the section entitled ''Risk Factors'' in Part II of the Admission Document. In light of these issues, uncertainties and assumptions, the events described in the forward looking statements in this document may not occur. Subject to legal or regulatory requirements, the Company disclaims any obligation to update any forward looking statements in this document to reflect future events or developments.

 

END

 

 

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