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Edison Research – Cadence Minerals #KDNC – Real Progress, Real Value
Cadence Minerals remains fundamentally mispriced in our view, with the market not fully recognising the value of its unlisted assets. Cadence has recently announced progress in advancing its major non-public asset, the Amapá iron ore project in Brazil. This includes a memorandum of understanding (MOU) with Chinese firm Sinoma to potentially provide both a definitive feasibility study (DFS) and fixed-price engineering, procurement and construction (EPC) contract for the mine restart. The implied value of Cadence’s non-public assets is 3.4p/share at current prices, while in our view an appropriate value for Amapá alone is 23.9p/share.
Cadence Minerals #KDNC – Licensing & Construction Timeline for Amapa Iron Ore Project
Cadence CEO Kiran Morzaria talks to Mark Fairbairn at Stockbox and covers the latest update re the timelines for obtaining essential licenses for the Amapa iron ore project in Brazil. Kiran explains how the timelines have been significantly shortened 12 to 16 months, a marked improvement from the typical 36-month process. Following the installation license approval, the project’s construction is expected to span 12 to 18 months, potentially allowing production to resume within approximately two and a half to three years.
Cadence Minerals #KDNC – Amapá Iron Ore Project Update
Cadence Minerals (AIM/AQX: KDNC; OTC: KDNCY) is pleased to provide a progress update for its flagship Amapá Iron Ore Project (“Amapá Project”), including an expedited operational licensing and re-rating of our tailings storage facility.
Highlights:
· The expected licensing timeline for the mine, railway and port at the Amapá Project team has been shortened to12 to 16 months compared to a typical timeline of up to 36 months.
· The revised timeline is expected to result in the grant of mine Installation Licenses (“LI”) over the wholly owned port, railway, beneficiation plant and mine during the course of 2024, followed by an operational license (“LO”) after construction is completed.
· The Amapá Tailing Project (“TSF”) is approaching the lowest operational risk rating to date as a result of maintenance, reporting, drilling, and compliance work carried out since 2019
· Following the management team’s recent visit to Amapá, CEO Kiran Morzaria will present the most recent developments at a Shares Magazine investor evening on Wednesday, 13 September.
· Executive Summary of Pre-Feasibility Study Released and available here
CEO Kiran Morzaria commented: “We are delighted with the progress we saw first-hand in our recent visit to Amapá. Agreeing a shortened route to the operational licence is key to getting the Amapá Project back into production in the shortest time possible.”
“I look forward to presenting the latest developments at the upcoming Shares Magazine investor evening and reporting to the markets with further progress after that.”
Licensing Update
While the Amapá Project was operating, it held all the necessary permissions to mine, process, transport and ship some six million tonnes of iron ore annually. However, many of these licenses lapsed after it ceased operations in 2014. Cadence has been working alongside the team at the Amapá Project to obtain these licenses and permissions. To date, we have reinstated and extended the railway concession to 2046 (completed in December 2019) and been granted a change of control over the wholly owned port in November 2021, which ensured the federal licenses could be maintained.
The Amapá Project owns the required Mining Concessions; however, it must obtain a Mine Extraction and Processing Permit (“Mining Permit”) to begin operation. To obtain this permit, the Amapá Project must obtain an LI and, when constructed, an Operational License LO from the Amapá State Environmental Agency.
Before the suspension of mining, the Project had numerous LOs across the mining, rail, and port operations. These LOs expired between 2013 and 2018. In 2022, the Amapá Project began regularising the expired environmental permits and started consultation with the Amapá State Environmental Agency and the relevant state authorities. The Amapá Projectrequested that the requirement for a full environmental impact study be waived. This request for a waiver was on the basis that the previous LOs were granted on an operation that is substantially the same as is currently planned and remains applicable to future operations.
As a result of the discussions between the various state authorities and the Amapá Project, we are pleased to announce that Amapá Project will be able to shorten the licensing timeline substantially. We have agreed with Amapá State Environmental Agency that on the mine and railway, we will be able to submit an Environmental Control Plan – “PCA” (Plano de Controle Ambiental) and an Environmental Control Report – “RCA” (Relatório de Controle Ambiental). However, on the port, we will need to complete a full environmental assessment, but given that the Amapá Project has already begun some of the background studies, we also anticipate that the timeline for the grant of the port LI will be shortened.
The fieldwork for the LI’s will begin as soon as possible with current expectations that we will be able to submit the required reports for the mine and rail in the second quarter of 2024 and the reports for the port in the second quarter of 2024. The Amapá State Environmental Agency will then review the application for the LI’s, and we anticipate that these licenses will be granted in 2024.
This timeline is substantially shorter than expected on a greenfield site, where the impact study and associated approval can typically take between 24 and 36 months, while the Amapá Project could achieve this in 12 to 16 months.
Tailings Storage Facility
One of Cadence’s initial investment criteria into the Amapá Project was the safety and stability of the TSF. As such, before entering into the investment agreement with our joint venture partners, we carried out a TSF review by an internationally recognised consultant group and were satisfied with the structure and stability of the TS. Nonetheless, given the lack of reporting and maintenance from 2014 onwards, the TSF at the Amapá Project was considered a high risk. The work carried out since 2019, including maintenance, reporting, drilling and compliance, has meant that the Amapá Project TSF is approaching the lowest risk rating for operating TSF. The intent is that the TSF will continue to improve its risk rating. This will be achieved by completing a dam break study, installing video monitoring on the TSF, and ongoing inspection and remediation of various TSF-associated infrastructure.
Shares Magazine Investor Evening
CEO Kiran Morzaria will present at the Shares and AJ Bell ‘LIVE’ investor evening in London on 13 September 2023.
The presentation will contain information about the Company’s flagship Amapa Iron Ore Project in Brazil following a recent visit by the management team.
The Shares and AJ Bell Media, investor evening event is an opportunity for senior board directors to make a presentation about their company and update existing and potential investors on their business plans.
Investors will have the chance to discover investment opportunities and get to know the companies better by asking questions ‘live’ in person after the presentation over drinks and buffet food.
Shareholders and potential investors can register to join us LIVE at the Novotel, Tower Hill, for free via this link:
https://www.sharesmagazine.co.uk/events/event/shares-investor-evening-london-live-event-130923
Pre-Feasibility Executive Summary
As part of the ongoing engagement with potential investors, we have also released an executive summary of the previously announced PFS, which is available here.
For further information contact:
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Cadence Minerals plc |
+44 (0) 20 3582 6636 |
Andrew Suckling |
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Kiran Morzaria |
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WH Ireland Limited (NOMAD & Broker) |
+44 (0) 207 220 1666 |
James Joyce |
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Darshan Patel |
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Brand Communications |
+44 (0) 7976 431608 |
Public & Investor Relations |
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Alan Green
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Qualified Person
Kiran Morzaria B.Eng. (ACSM), MBA, has reviewed and approved the information contained in this announcement. Kiran holds a Bachelor of Engineering (Industrial Geology) from the Camborne School of Mines and an MBA (Finance) from CASS Business School.
Cautionary and Forward-Looking Statements
Certain statements in this announcement are or may be deemed to be forward-looking statements. Forward-looking statements are identified by their use of terms and phrases such as “believe”, “could”, “should”, “envisage”, “estimate”, “intend”, “may”, “plan”, “will”, or the negative of those variations or comparable expressions including references to assumptions. These forward-looking statements are not based on historical facts but rather on the Directors’ current expectations and assumptions regarding the company’s future growth results of operations performance, future capital, and other expenditures (including the amount, nature, and sources of funding thereof) competitive advantages business prospects and opportunities. Such forward-looking statements reflect the Directors’ current beliefs and assumptions and are based on information currently available to the Directors. Many factors could cause actual results to differ materially from the results discussed in the forward-looking statements, including risks associated with vulnerability to general economic and business conditions, competition, environmental and other regulatory changes actions by governmental authorities, the availability of capital markets reliance on key personnel uninsured and underinsured losses and other factors many of which are beyond the control of the company. Although any forward-looking statements contained in this announcement are based upon what the Directors believe to be reasonable assumptions. The company cannot assure investors that actual results will be consistent with such forward-looking statements.
The information contained within this announcement is deemed by the company to constitute Inside Information as stipulated under the Market Abuse Regulation (E.U.) No. 596/2014, as it forms part of U.K. domestic law under the European Union (Withdrawal) Act 2018, as amended. Upon the publication of this announcement via a regulatory information service, this information is considered to be in the public domain.
Edison Research Note: Cadence Minerals #KDNC – A mispriced miner?
Cadence Minerals #KDNC – Amapa Project Update & Loan Financing
Cadence Minerals (AIM/NEX: KDNC; OTC: KDNCY) is pleased to announce an update on the Amapá Iron Ore Project (“Amapá”) and the completion of a Mezzanine Loan Facility (“Loan Facility”), which will be applied to the Amapá project.
Highlights
Ø Savings of approximately US$28 million were identified on port refurbishment costs at Amapá.
Ø Cadence has agreed US$ 2 million Loan Facility (“First Tranche”) that has been arranged by Riverfort Global Capital Ltd to be entered into by RiverFort Global Opportunities PCC Ltd and YA II PN, Ltd (the “Investors”). The Loan Facility allows a further US$ 8 million to be drawn down over the next three years, subject to agreement by the Investors.
Ø The net proceeds from Loan Facility will be used to continue the development of the Amapá Project, including optimisation studies on the processing route and environmental licensing.
Ø Continued investment into Amapá Project will increase the Company’s stake to circa 33%.
Ø The term of the Loan Facility is two years, with a 6-month principal repayment holiday. The annual interest rate that Cadence will pay is 9.5%.
Ø The principal and interest of the Loan Facility are payable in cash. However, the Company can elect not to pay any outstanding principle or accrued interest of the Loan Facility in cash, granting the Investors the right to convert these outstanding amounts into ordinary shares.
Amapá Project Port Studies
On 1 March, we announced that a scoping level study had been completed to improve the capital cost associated with the port refurbishment of the Amapá’s wholly owned port. We have now reviewed how these changes can be integrated into the original Pre-Feasibility Study (“PFS”), published in January this year, and have identified that a potential net capital saving to the port refurbishment costs of US$28 million or circa 24% of the direct capital expenditure associated with the port refurbishment.
The savings were derived by moving the current rail loop, which is used for unloading iron ore at the port so that it is one hundred metres further inshore. The change in the location of the railway loop reduces the load on the ground near the shore and negates the installation of a substantial retaining wall. This change in the rail loop will also require a reorientation of the on-shore iron-ore storage and loading system. The net of these two capital items is anticipated to result in a net capital saving of US$28 million. These results will need to be confirmed once the project advances with further geotechnical investigations.
Details of the Mezzanine Loan Facility
The Mezzanine Loan Facility (“Loan Facility”) involves an unconditional and committed initial tranche by the Investors of US$ 2 million and a further conditional Loan Facility amount of US$ 8 million, subject to agreement by the Investors. The Loan Facility is valid for three years.
The First Tranche of US$ 2 million has a 24-month term (“Maturity Date”). It has a six-month principal repayment holiday, followed by 18 equal monthly cash repayments thereafter to the Maturity Date. The Loan Facility has an effective annual interest rate of 9.5% and has a 5% implementation on the value of the First Tranche.
If the Company elects not to settle a monthly payment in cash (each being a “Missed Payment”), they will automatically grant a right for the Missed Payment to be settled in shares as per the non-cash repayment terms contained in the Loan Facility Agreement (“Non-Cash Repayment”). Following a Non-Cash Repayment, the Investors will be automatically granted conversion rights over such principal and interest balances due concerning the Missed Payment. The Investors will then have the right for 12 months to convert such amounts either at a price equal to 12.7 pence (representing a 30% premium to the closing price on 25/05/2023) or at a 7% discount to the average of the five daily VWAPs chosen by the Investors in the 20 trading days preceding its conversion notice or at the price the Company issues further equity if lower than the existing conversion price.
Cadence has provided a security package to the Investors as part of the Loan Facility. This package includes a floating charge over the Company’s investments, placing its holding in European Metals Holdings into escrow and the issue of new ordinary shares to the Investors (“Initial Issued Shares”). The Initial Issued Shares represent 50% of the value of the First Tranche, or 8,251,224 new ordinary shares. These initial Issued Shares will be used as part of any Non-Cash Repayments if applicable. On the Maturity Date, the Company can utilise the Initial Issued Shares to pursue its investment strategy or for working capital purposes. If it has settled all amounts in cash and these Initial Issued Shares revert to the Company.
As part of the Loan Facility, the Company has agreed to grant 8,251,224 warrants to subscribe for ordinary shares in the Company at an exercise price of 13.2 pence (representing roughly a 35% per cent premium to the current share price of the Company’s Shares) with a 48-month term.
The application will be made for the 8,251,224 Initial -Issued Shares to be admitted to trading on the AIM market of London Stock Exchange plc and to the AQSE Growth Market operated by Aquis Exchange Plc (“Admission”), and this is expected to become effective on or about 5 June 2023. On Admission, the Pre-Issued Shares will rank pari passu with all existing ordinary Shares in the Company.
Following Admission, the Company will have 180,971,037 Shares in issue, with each Share carrying the right to one vote. There are no Shares currently held in treasury. The total number of voting rights in the Company is, therefore, 180,971,037. This figure may be used by shareholders as the denominator for the calculations by which they determine if they are required to notify their interest in, or a change to their interest in, the Company under the Disclosure Guidance and Transparency Rules of the Financial Conduct Authority.
For further information contact:
|
|
Cadence Minerals plc |
+44 (0) 20 3582 6636 |
Andrew Suckling |
|
Kiran Morzaria |
|
WH Ireland Limited (NOMAD & Broker) |
+44 (0) 207 220 1666 |
James Joyce |
|
Darshan Patel Enzo Aliaj |
|
Brand Communications |
+44 (0) 7976 431608 |
Public & Investor Relations |
|
Alan Green
|
Qualified Person
Kiran Morzaria B.Eng. (ACSM), MBA, has reviewed and approved the information contained in this announcement. Kiran holds a Bachelor of Engineering (Industrial Geology) from the Camborne School of Mines and an MBA (Finance) from CASS Business School.
Cautionary and Forward-Looking Statements
Certain statements in this announcement are or may be deemed to be forward-looking statements. Forward-looking statements are identified by their use of terms and phrases such as “believe”, “could”, “should”, “envisage”, “estimate”, “intend”, “may”, “plan”, “will”, or the negative of those variations or comparable expressions including references to assumptions. These forward-looking statements are not based on historical facts but rather on the Directors’ current expectations and assumptions regarding the Company’s future growth results of operations performance, future capital, and other expenditures (including the amount, nature, and sources of funding thereof) competitive advantages business prospects and opportunities. Such forward-looking statements reflect the Directors’ current beliefs and assumptions and are based on information currently available to the Directors. Many factors could cause actual results to differ materially from the results discussed in the forward-looking statements, including risks associated with vulnerability to general economic and business conditions, competition, environmental and other regulatory changes actions by governmental authorities, the availability of capital markets reliance on key personnel uninsured and underinsured losses and other factors many of which are beyond the control of the Company. Although any forward-looking statements contained in this announcement are based upon what the Directors believe to be reasonable assumptions. The Company cannot assure investors that actual results will be consistent with such forward-looking statements.
The information contained within this announcement is deemed by the Company to constitute Inside Information as stipulated under the Market Abuse Regulation (E.U.) No. 596/2014, as it forms part of U.K. domestic law under the European Union (Withdrawal) Act 2018, as amended. Upon the publication of this announcement via a regulatory information service, this information is considered to be in the public domain.