AgriMinco Corp. ("AgriMinco" or the "Company") announces that it has entered into a definitive agreement (the "Option Agreement") granting Premier African Minerals Limited ("Premier") the exclusive option (the "Option") to purchase AgriMinco's 30% interest in the Danakil Potash Project (the "Project"), Ethiopia.
Premier, control party to AgriMinco with a 42% stake, is a mineral exploration company focused on acquiring, exploring and developing mineral properties in Africa. Under the terms of the Option Agreement, Premier can directly acquire the 30% interest in the Project, subject to TSX Venture Exchange ("TSXV") and AIM approval, on the following basis:
- The cancellation of all the common shares of AgriMinco owned by Premier for no consideration. As at the date of this announcement, Premier owns 120,000,000 AgriMinco shares representing 42% of AgriMinco's issued share capital with a value of approximately C$2,400,000 based on the last closing mid-market price of AgriMinco shares of C$0.02 per share on 18 March 2014, being the last practicable date prior to the publication of this announcement.
- Deliver and effect payment of debt settlement agreements in favour of AgriMinco releasing AgriMinco from all monetary obligations in respect of certain debt representing, in the aggregate, liabilities totalling C$2,265,819.50 on the condensed interim consolidated financial statements of AgriMinco for the three months ended December 31, 2013 and 2012.
- Issue to AgriMinco new Premier ordinary free trading common shares with an aggregate value equal to C$1,000,000, such value per share based on the volume weighted of Premier average trading price for the 20 consecutive trading days immediately prior to the exercise of the Option. Based on the closing mid-market price of Premier shares of .82p per share on 18 March 2014, the last practicable date prior to the publication of this announcement, this would result in the issue of 66,023,049 new Premier shares assuming the price of Premier shares and the sterling Canadian dollar exchange rate remain constant.
- Resulting in total consideration valued at C$5,665,819.50 to the Company.
AgriMinco's CEO, Bruce Cumming comments: "Should the Option be exercised and the transaction close, ANO will be returned to a solvent state and will continue to hold a significant indirect interest in the Danakil Project. Alternatively, AgriMinco has the ability through the liquidity afforded by the Premier shares, to pursue its other interests in West Africa which include two phosphate projects in Togo (Bassar and the Southern Phosphate) with the Bassar project having the potential to develop more than 20-22Mt at 28-30% P2O5 of phosphate resources. The Southern Phosphate project, located along strike of the producing phosphate mine in Togo, has unexplored phosphate potential. This project also contains a mixed attapulgite-bentonite deposit of 108Mt including 28Mt of 85:15 attapulgite: bentonite wqith the deposit open along strike and down dip. indicated from previous exploration by the Bureau Nationale de Recheche Miniere fp the Togolese Ministry of Mines in December, 1990. In Mali, the Company has two greenfields potash exploration projects in the northern part of Mali, located at Taoudenni. With the agreement of the Malian authorities, this project is under force majeure until the security situation stabilises to both parties satisfaction.
"The net effect of this transaction is the avoidance of a bankruptcy event for AgriMinco and the creation of an entity with significant other assets that may now be developed, creating the opportunity for the Company to expand its portfolio of projects in the agri-minerals sector. The potentially significant shareholding in Premier will give the Company exposure to Premier's portfolio of projects, including the RHA wolframite mine development."
Premier currently owns 120,000,000 common shares representing 42% of the Company's issued and outstanding common shares and is an insider of the Company. As a result, the private placement is a related party transaction pursuant to Policy 5.9 of the TSXV and Multilateral Instrument 61-101 - Protection of Minority Security Holders in Special Transactions ("MI 61-101") and triggers the requirement for a valuation and minority approval unless exemptions therefrom are available. The Company is relying on the financial hardship exemption within MI 61-101 to exempt the Company from having to obtain an independent valuation (MI 61-101 section 5.5(g)) as well as exempt the Company from having to obtain minority shareholder approval (MI 61-101 section 5.7(e)), as described in more detail below.
As has been previously disclosed, in connection with the development of the Project, AgriMinco is required to contribute 30% of expenditure in excess of the agreed free carry by April 7, 2014. In addition, the Company must also contribute 30% of the next fiscal year exploration budget. A failure to contribute will result in a significant dilution of the Company's interest. The operator has submitted budgets and costs for the historic overspend and cash call notices will be issued on May 6, 2014. The combined cash call for the first fiscal quarter and the historic excess is expected to be of the order of US$2,000,000 and the budget for the next 12-months, of which the Company must meet 30%, is expected to be US$20,000,000. The current anticipated amounts are in significant excess of the Company's cash on hand, accordingly, the Company currently has neither sufficient funds nor reasonably available financing options to satisfy these obligations that are anticipated in the near term.
Pursuant to MI 61-101, minority approval and an independent valuation are not required for a related party transaction in the event of financial hardship in specified circumstances. As a result, a special committee of the board (the "Special Committee") "independent" in respect of the transaction, as such term is defined in MI 61-101, was constituted to consider the Option Agreement. The Special Committee determined that the Company is in serious financial difficulty, the Option Agreement is designed to improve the financial position of the Company, and the terms of the Option Agreement are reasonable in the circumstances of the Company. Following these determinations and a recommendation to the Board of Directors, the Board of AgriMinco has made the same determination. Accordingly, AgriMinco has satisfied the elements of the financial hardship exemption.