;
SEPTEMBER 2016 QUARTERLY REPORT
31 October 2016
ASX CODE: KAS
OUR PRIME COMMODITY IS TIN
LME TIN PRICE (28/10/16)
US$20,850 / t
(CASH BUYER)
ABOUT KASBAH
KASBAH IS AN AUSTRALIAN LISTED MINERAL EXPLORATION AND DEVELOPMENT COMPANY.
THE COMPANY (75%) AND IT'S JOINT VENTURE PARTNERS TOYOTA TSUSHO CORP (20%) AND NITTETSU MINING CO. (5%) ARE ADVANCING THE ACHMMACH TIN PROJECT IN THE KINGDOM OF MOROCCO TOWARDS PRODUCTION.
PROJECTS
ACHMMACH TIN PROJECT BOU EL JAJ TIN PROJECT
CAPITAL STRUCTURE
MAJOR SHAREHOLDERS
CONTACT US
: +61 8 9463 6651
: [email protected]
: www.kasbahresources.com
@kasbahresources
Kasbah Resources Limited (ASX: KAS) is pleased to report its activities for the September 2016 Quarter. The highlights include:
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Completion of the Small Start Option (SSO) definitive feasibility study confirming that an 0.5 Mtpa, high grade underground operation at Achmmach is technically and commercially viable;
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Announcement that Kasbah and Asian Mineral Resources Limited ("AMR") had entered into a Scheme Implementation Agreement pursuant to which AMR will, if implemented, acquire all of the ordinary outstanding shares of Kasbah by way of a scheme of arrangement under the Australian Corporations Act;
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The Independent Expert has considered the terms of the Scheme as outlined in the body of its report and concluded that, in the absence of a superior offer, the Scheme is fair and reasonable to Shareholders. Therefore, in the absence of any superior offer, the Independent Expert concluded that the Scheme is in the best interests of Kasbah shareholders.
Reasons to Support the Scheme
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SHARES ON ISSUE:
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556M
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UNLISTED OPTIONS:
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0.5M
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CASH @ 30/09/16:
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$0.9M
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The Board of Kasbah believe that AMR, with Pala providing a key component of the funding solution and its involvement in other recent successful project financings, can increase the certainty of development of the Achmmach Tin Project. With the Achmmach Tin Project as the prime operating asset in the new enlarged company and nickel exploration opportunities proximate to the Ban Phuc Nickel Mine in Vietnam, both Kasbah and AMR shareholders stand to benefit from the future growth opportunities in tin and base metals.
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WORLD BANK (IFC)
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17.7%
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AFRICAN LION GROUP
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15.7%
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THAISARCO
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5.6%
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TRAXYS
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5.3%
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Most importantly in this process, all Kasbah shareholders will be able to participate in the combined company's funding requirements as it seeks to capitalise on the immediate and longer term opportunities across a broader range of commodities.
With a view to the potential of the larger combined company, bolstered with a more diverse shareholder base and a strong cornerstone investor such as Pala, the Board of Kasbah unanimously recommends that Kasbah shareholders vote in favour of the proposed Scheme, in the absence of a superior offer. Each Director intends to vote in favour of the Scheme with respect to any shares they hold or control, in the absence of a superior offer.
SEPTEMBER QUARTERLY REPORT
Kasbah Resources Limited (Kasbah or the Company) is pleased to provide this update to the market.
PROJECT DEVELOPMENT UPDATE
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Achmmach Tin Project (75% Kasbah, 20% Toyota Tsusho Corp, 5% Nittetsu Mining Co. Ltd)
On 10 August 2016 the Company released the 2016 Achmmach SSO DFS to the market. The 2016 SSO DFS defined a lower capital, higher grade, staged development opportunity that is technically and economically feasible at current LME tin prices (Table 1 and 2). Importantly the Project Construction capital (on a 100% basis) is estimated to be USD 61.7 M with all in sustaining costs (AISC) of USD 11,507 / t of tin in concentrate.
The Achmmach SSO DFS is premised upon a hard rock underground tin mine with a ten year life that is developed in two stages. Stage 1 production initially commences at 0.5 Mtpa for 42 months then is expanded in Stage 2 to 0.75 Mtpa for 80 months (the remainder of the mine life). This staged approach utilises contract mining, contract crushing and modular plant design and unlike the 1 Mtpa scale where the full capacity was installed upfront, the SSO offers greater operational flexibility.
Table 1: Achmmach SSO DFS Metrics (@ LME Sn price @ 21/07/16 of USD 17,830 / t)
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SSO
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Ore Reserve
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Life of Mine (LOM)
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Project Construction Capital
USD
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All in sustaining costs (AISC)
USD / t of tin in concentrate
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NPV8
after tax
USDM (100% of
Project)
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IRR
%
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DFS
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6.56 Mt @ 0.85 %
Sn for 55,500 t of contained tin
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10.5
Years
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61.7 M
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11,507
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51
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20.6
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The SSO has maintained competitive all-in sustaining costs and at current LME tin prices generates positive substantial returns. Table 2 summarises DFS project returns across a wider range of LME tin prices.
Table 2: 2016 Achmmach SSO DFS - Sensitivity to LME Tin Price
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LME Sn Price USD / t
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NPV8aftertax
USD M (100% of Project)
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IRR
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16,000
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14.6
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11.8%
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17,000
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34.5
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16.7%
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DFS @ 17,830
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50.9
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20.6%
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18,000
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54.3
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21.3%
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19,000
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74.1
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25.7%
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20,000
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93.9
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29.9%
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Refer to the 10 August 2016 ASX announcement for full details on the SSO DFS.
2
CORPORATE
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Corporate Transaction - Asian Mineral Resources to Acquire Kasbah Resources
On 11 August 2016 Kasbah and AMR (TSX-V: ASN) announced that they had entered into a Scheme Implementation Agreement (the "SIA") pursuant to which AMR will, if implemented, acquire all of the ordinary outstanding shares of Kasbah by way of a scheme of arrangement under the Australian Corporations Act (the "Transaction").
The highlights of the proposed Transaction include:
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AMR brings an experienced management team with a track record of successful underground mine development and operations arising from its recent operation of the Ban Phuc Nickel Mine in Vietnam (now in care and maintenance);
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As a cornerstone shareholder of the combined entity, Pala Investments Ltd ("Pala") has provided a commitment to provide its pro rata share of any equity raising in relation to the Achmmach Tin Project, as well as an interim A$1,000,000 bridge loan to Kasbah;
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Once completed, the Transaction will provide a clear path to the commencement of construction at Achmmach (subject to the decision of the AMR board on an appropriate project financing package); and
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The Transaction provides upside opportunities for both AMR and Kasbah shareholders with exposure to upswings in both tin and nickel, a diversified asset base and potential for future growth.
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First Drawdown of Pala Loan Facility
On 5 September 2016 Kasbah announced that it had drawn the first $500,000 tranche of the $1,000,000 loan facility from Pala Investments Limited. These funds were made available to Kasbah to cover working capital and transaction costs.
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Court Approves Release of Scheme Booklet and Orders the Convening of Scheme Meeting
On 18 October 2016 Kasbah announced:
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that the Federal Court of Australia (Court) had approved the despatch of the Company's Scheme Booklet (Scheme Booklet) and had ordered that the Company convene a meeting of its shareholders (Scheme Meeting); and
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that the Scheme Booklet for the proposal by AMR to acquire all of the ordinary shares in Kasbah by way of a scheme of arrangement (Scheme) had been registered with the Australian Securities and Investments Commission (ASIC).
Summary of Independent Expert's Findings
Within this release the Company advised that that the Independent Expert had completed its assessment of the Company's proposed transaction with AMR. The Independent Expert had considered the terms of the Scheme as outlined in the body of its report and concluded that, in the absence of a superior offer, the Scheme is fair and reasonable to Shareholders.
Therefore, in the absence of any superior offer, the Independent Expert concluded that the Scheme is in the best interests of Kasbah shareholders.
The Independent Expert assessed that:
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the value of Kasbah shares prior to the Scheme Implementation Agreement on a control basis as being in the range of 3.3c to 3.9c with a preferred value of 3.6c; and
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the value of 1.3 AMR shares and 0.4 AMR warrants following implementation of the Scheme and on a minority basis as being in the range of 2.9c to 4.1c with a preferred value of 3.5c.
The conclusion of the Independent Expert's assessment of the Scheme* is as follows:
"The above pricing indicates that in the absence of any other relevant information, and a superior offer, the Scheme is fair for the shareholders of Kasbah" and "In our opinion, the position of shareholders if the Scheme is approved is more advantageous than the position if the Scheme is not approved. Accordingly, in the absence of any other relevant information and/or a superior proposal, we believe that the Scheme is reasonable for Kasbah's shareholders."
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Refer to the Scheme Booklet announced to ASX on 24 October 2016 for the further detail on the Independent Expert's findings.
A key consideration for the Independent Expert in the determination that approving the Scheme was more advantageous to Kasbah shareholders was that the Scheme provides the opportunity for funding the Achmmach Tin Project (the Project). Section 14.1.2 of the Independent Expert's Report explains the range of options Kasbah had previously independently evaluated, pursued and tested to achieve a financing solution for the larger, 1Mtpa Achmmach Tin Project, commenting as follows:
"Prior to entering into negotiations with AMR and Pala, Kasbah had made extensive efforts in the past few years to obtain funding for the Achmmach Tin Project. Since 2013, Kasbah has, through the engagement of financial and corporate advisers, as well as through its own efforts, explored the following options:
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negotiated merger opportunities with entities that had potential interest in Kasbah;
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approached major capital funds in Australia who are actively involved in investing in and funding resource projects;
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approached existing major Kasbah shareholders to fund the Achmmach Tin Project;
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approached the Japanese partners of the Achmmach Tin Project to increase their project shareholding;
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approached debt financiers who are actively involved in lending to resource projects; and
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approached Pala to consider a direct investment in Kasbah instead of through AMR."
Whilst Kasbah had previously received non-binding, indicative debt offers to fund the 1Mtpa Achmmach Tin Project from a range of International financiers, the ability to raise the required equity funding on its own was uncertain given the size of the required capital raising relative to the Company's market capitalisation. The equity hurdle in conjunction with the prevailing challenging market conditions of the last 3 years effectively prevented any of the above options from being realised.
The Kasbah Board believes the Scheme provides the foundation and catalyst to reduce the funding uncertainty and achieve development and mining of the Achmmach Tin Project.
AMR is backed by a significant cornerstone investor in Pala who has already provided an interim A$1.0 million loan facility to Kasbah for working capital purposes and transaction costs and made a commitment to provide its pro rata share of any equity raising in relation to the Achmmach Tin Project.Pala is a supportive shareholder and has shown its commitment to AMR in the past when it provided a short-term bridging facility to assist AMR in its temporary working capital requirements as a result of an unexpected delay in Ban Phuc Nickel Mine's nickel concentrate shipping schedule.