Zanaga Iron Ore Co Ltd (AIM:ZIOC, OTC:ZNGGF) (ZOIC) said an agreement has been reached with Glencore Projects for the acquisition of its controlling shareholding in the Zanaga Iron Ore Project, located in the Republic of Congo, giving ZOIC a 100% interest in the project.
The agreement will see ZOIC purchase Glencore Projects' 50%-plus one-share interest in Jumelles, an entity which indirectly holds the benefit of the project's mining licence, for a minority shareholding in ZIOC.
ZIOC and MPD, an indirect wholly owned subsidiary of Jumelles which holds the benefit of the project's mining licence, have also entered into a marketing agreement with Glencore International, which will take effect immediately prior to completion, for the sale and purchase of all future iron ore production from the project or any other of their or their affiliates' assets using similar infrastructure in the Republic of Congo.
Subject to ZIOC shareholder approval, the acquisition will be concluded through the issuance of 286,340,379 new ZOIC shares to Glencore Projects, which are expected to represent a shareholding of 48.26% in ZIOC on completion.
A relationship agreement will be entered into between Glencore Projects and ZIOC with effect from completion to ensure that the company can carry on its business independently of Glencore Projects. Glencore Projects will have the right with effect from completion to appoint two non-executive directors to the board of ZIOC.
Glencore Projects has agreed that it will not dispose of any of the consideration shares in the company in the six months following admission without the consent of the company (not to be unreasonably withheld or delayed) other than in certain limited circumstances and to comply with orderly market provisions in the following six months.
In order to fund the project's continuing work programme and budget, as well as the working capital requirements of ZIOC, until 31 December 2023, Glencore Projects has agreed to amend the terms of its loan agreement as follows:
- Increase in loan quantum from US$1.2mln to US$1.8mln;
- Extension of loan repayment date to 31 December 2023.
- Jumelles may utilise up to US$200,000 of the loan facility to advance loans to ZIOC to fund its working capital.
In a statement, Clifford Elphick, non-executive chairman of ZIOC, commented: "The acquisition of Glencore Projects' shareholding in the Project is a key milestone for ZIOC's shareholders, demonstrating to third party investors that the Project is now represented by a single entity and management strategy.
"The Acquisition is value accretive to Shareholders and increases effective equity ownership of the Project by existing Shareholders, enhancing their look-through ownership of the Project and securing control of the Project without paying any premium for such interest.
"Furthermore, entering into the Marketing Agreement with Glencore International now provides comfort to investors and financiers that the Project's future production is underpinned by one of the largest iron ore traders globally."