China's Xinhai Mining Advances Namibia's Ongombo Copper Mine Development

en.Wedoany.com Reported - On September 21, African Pioneer Plc announced that all transaction conditions precedent have been satisfied for the financing and technical services agreement signed with Hong Kong Xinhai Mining Services Limited regarding the Ongombo and Ongeama copper projects in Namibia. Next, Xinhai will complete the subscription of 712,786 pounds of African Pioneer shares in accordance with the agreement, and upon completion of payment, African Pioneer will issue the corresponding shares and warrants.

The two parties signed a formal agreement on July 30, with cooperation covering financing, exploration, engineering design, mine construction, and commissioning for the Ongombo and Ongeama projects. The agreement establishes a project holding company, which will hold 95% interests in the two Namibian projects; Xinhai will provide the required funds for four agreed development milestones through a secured loan with an annual interest rate of 10%, and will also undertake related EPC technical services. The phased development investment expected to be covered by the agreement is approximately USD 60 million.

The first development phase includes a total of 7,000 meters of drilling at Ongombo and Ongeama. African Pioneer has commenced preparations for the drilling program and plans to deploy up to 4 diamond drill rigs depending on rig availability. The drilling results will be used for the Ongombo geotechnical study, final design of the open-pit and underground mines, and updating the existing JORC mineral resource estimate. Ongombo currently has a published resource of approximately 29 million tonnes at a copper equivalent grade of approximately 1.1%, and the company has begun recruiting local personnel for large-scale core processing and technical management work.

Subsequent development will proceed according to milestones. The second phase involves Xinhai completing the detailed engineering design for Ongombo; the third phase includes transporting mine construction equipment to Walvis Bay, Namibia, and transferring it to the project holding company, while adding 3,000 meters of drilling after the preliminary drilling results at Ongeama meet the conditions. The fourth phase requires the construction at Ongombo of a processing plant with an annual ore processing capacity of no less than 720,000 tonnes and the achievement of a commercial operation level of at least 75% of design capacity for 30 consecutive days, while also completing the phase one decline for the underground mine.

The financing arrangement also includes an equity conversion mechanism. Xinhai may choose to repay its development financing with equity in the project holding company, with the corresponding shareholding ratio reaching up to 53.68% after completion of the third phase and up to 73.68% after completion of the fourth phase. African Pioneer may also, after the fourth phase, choose to convert its interest in the project company into a net smelter return royalty equivalent to 4% of the total revenue from the two projects. The two parties will each appoint directors to the board of the project holding company, and after completion of the third phase, Xinhai has the right to appoint one additional director.

The conditions precedent included Xinhai obtaining the required regulatory approvals in China, African Pioneer obtaining the necessary shareholder and UK capital market-related approvals, no material adverse change occurring in the projects and mining rights, and local shareholders waiving their pre-emptive rights over the project company and mining rights. The above conditions have now been satisfied. In addition to the subscription of 712,786 pounds of shares, African Pioneer will also issue 3,333,333 shares to Xinhai to convert the previously paid 30,000 pounds deposit.