6 June 2019
Altona Energy plc
("Altona" or the "Company")
Memorandum of Understanding
Vanadium Mining Company
Altona (NEX: ANR.PL), a mining investment company with significant coal resources in Australia, announces that it has entered into a Memorandum of Understanding (“MoU”) with Shaanxi Qianyan Vanadium and Magnesium Mining Industry Ltd Company (“Shaanxi Mining”), the owner of an operational vanadium mine in China, with the aim of forming a Joint Venture Company (“JV Company”) in which it is expected that Altona will eventually become the controlling shareholder.
Both the Company and Shaanxi Mining have commenced due diligence to examine the feasibility of this partnership. However, until a formal joint venture agreement has been signed, the deal is conditional, and not binding on either the Company or Shaanxi Mining.
There can be no guarantee that the discussions in respect of the MoU signed with Shaanxi Mining will be successful and the terms of any relationship are yet to be formulated. However, this is a positive step towards our goal of acquiring an investment in a Vanadium mine.
Information on the MoU
The due diligence process is expected to take up to six months to complete and is dependent upon a number of factors, including Shaanxi Mining being granted a provincial government permit which will allow it to enter into an international joint venture agreement with Altona. During this period, Shaanxi Mining will commission a mineral resource classification report in accordance with the Australian Joint Ore Resources Committee Code (“JORC”). This report is expected to take some five months to complete and will form the basis of a valuation for any acquisition.
When completed the report will help provide a more accurate valuation of the assets of Shaanxi Mining which will determine the quantum of Altona’s initial interest in the JV Company. The consideration for Altona’s acquisition of shares into the JV company is expected to be either cash, shares or a combination of the two.
The successful pursuance of this potential acquisition, and indeed the ability of Altona to pursue all of its strategies, requires the Company to obtain further funding. As previously announced the Company is considering a number of funding options and this may involve a strategy to re-list its shares on the , via either AIM or a listing on the Standard Market, which will be planned to coincide with the signing of the joint venture agreement. The board is of the opinion that the liquidity and access to capital provided by either AIM or the Standard Market will be more suited to Altona’s enlarged status and the owner of a revenue generating vanadium mine.
Information on the Vanadium Mine
The Directors understand that Shaanxi Mining, based in Xi’an City, Shaanxi Province, is the majority (80%) shareholder in Shaanxi Shangnan Haodi Youzhi Limited Company which in turn owns 99.5% of the Shaanxi Shangnan Haodi Vanadium Mining Industry Company Ltd (“Shaanxi Vanadium”), which owns and operates a vanadium mine in Shangnan County, Shaanxi Province.
Initial discussions with the owners of Shaanxi Vanadium indicate that it is an operational vanadium mine, with an original estimated reserve of 190,000 tonnes of vanadium. The level of reserves will be confirmed by the JORC report. It is understood that the mine uses open-cut and underground mining techniques and its main product is vanadium pentoxide (V2O5). It is currently producing 500 tonnes of V2O5, per annum which indicates an estimated lifespan for the mine of 380 years. The current mine owners are in the process of initiating a plan to increase production to 1,500 tonnes by the end of 2020.
The Board has been informed that in 2018 Shaanxi Vanadium reported revenues of approx. RMB35,000,000 (£3.9 million) and a net profit of approx. RMB20,000,000 (£2.3 million). The mine was at full production for approximately half of the year, due to the installation of new equipment and processing techniques, in order to increase productivity, as mentioned above.
The company sells the vanadium pentoxide via China FerroAlloy Online (www.cnfeol.com), a recognised Chinese commodity market.
All of the above is subject to Altona conducting detailed due diligence and verification.
Reasons for the MoU
Should a JV Company be established, Altona, with its access to the UK capital markets, will consider seeking new funding in order to help implement the mine’s current strategy to increase production over the next 18 months, although the mine is not dependent upon external funding to implement its growth strategy.
Further, the mine being owned by a non-Chinese JV Company could be beneficial in opening up new international markets in which to sell the vanadium, which is in high demand around the world.
Altona’s Executive Director, Qinfu Zhang, together with a consortium of investors, is owner of a 43% interest in Shaanxi Mining and also chairman of the company. Mr Zhang, who has an interest in Altona of 14.75% (through his investment vehicle, Wintask Group Ltd) has recognised the potential synergies which this deal will bring to both parties.
Finally, the establishment of a JV Company where Altona is the majority shareholder of a profitable mining asset will give it a source of revenue with which it can proceed with its exploration project in South Australia; namely, its Arckaringa underground coal gasification project.
Qinfu Zhang, Executive Director of Altona, commented, “As I mentioned in the Company’s AGM Statement in January, we have been investigating the possible investment into a vanadium project in China and, following four months of discussions, the two companies have now entered into an MoU allowing us to look more closely as to how we can make the synergies between the two companies work best for our shareholders. We will continue to update the market during the process until we are hopefully successful in creating a new joint venture for Altona.”
The Directors of the Company accept responsibility for the content of this announcement.
For further information, please visit www.altonaenergy.com or contact:
Altona Energy plc
Qinfu Zhang, Executive Director +44 (0) 7795 168 157
Alfred Henry Corporate Finance Ltd
(NEX Corporate Adviser) +44 (0) 20 3772 0021
Jon Isaacs / Nick Michaels
Leander (Financial PR)
Christian Taylor- Wilkinson +44 (0) 7795 168 157
Altona is an exploration company focused on the evaluation and development of its significant coal resource exceeding 7 billion tonnes (1.3 billion tonnes historic JORC compliant) in the northern portion of the Permian Arckaringa Basin in South Australia. Through its wholly owned Australian subsidiary Arckaringa Energy Pty Ltd, Altona holds a 100% interest in three exploration licences covering 1,944 sq. kms in the northern portion of the Permian Arckaringa Basin in South Australia including three coal deposits – Westfield (EL5676), Wintinna (EL5677) and Murloocoppie (EL5678). All three deposits lie close to the Adelaide to Darwin railroad and the Stuart Highway.
The Company was admitted to trading on AIM on 10 March 2005 and was subsequently admitted to NEX on 1 February 2019. A copy of its admission documents dated 4 March 2005 can be accessed on its website, www.altonaenergy.com. This website is where items can be inspected under Rule 75 of the NEX Rules for Issuers, from 1 February 2019.