Verdant Minerals Ltd Advances Proposed Majority Takeover Program of CD Capital Asset Management Ltd

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  • CD Capital is now a significant shareholder, holding a 33.43% stake through its natural resources fund CD Capital III LP
  • Another shareholder held 33.43% of the company on June 14, 2018 and plans to keep his stake
  • CD hopes to recover all remaining shares if its majority takeover plan is approved
  • The company’s board of directors has recommended the value-added offer to its shareholders who are expected to vote on the plan on June 5, 2019.

What is Verdant Minerals doing?

() (FRA: 3RU) specializes in fertilizer and industrial minerals projects in Australia. It is led by Christopher N Tziolis, a chemist and senior mining executive with extensive experience in the plc () (ASX: RIO) (NYSE: RIO) (OTCMKTS: RTNTF) group.

Tziolis served as Director of Development for Rio Energy Company () (OTCMKTS: EGRAF) and was previously Director of Infrastructure and Business Development at Coal Australia Pty Ltd.

What does Verdant Minerals own?

Verdant’s key asset is the large, wholly-owned Ammaroo phosphate project in the Northern Territory.

The phosphate deposit is considered one of Australia’s most important phosphate resources with measured, indicated and inferred resources of 1.141 billion tonnes at 14% phosphate at a 10% cut-off grade.

At a cut-off grade of 15%, the resource is 333 million tonnes at 18% phosphate.

Verdant’s feasibility study in May 2018 assigned the Ammaroo project a net present value (NPV 10) of a nominal amount of $ 344 million after unindexed tax (£ 261 million, $ 245 million US) when a 10% discount has been taken into account.

The corresponding internal rate of return (IRR) was 18.1% after disproportionate tax.

The net present value of after-tax indexed equity (NPV15) for Ammaroo was $ 169 million, with an indexed after-tax IRR of 24.9%.

Capital spending (capex) including construction of Phases I and II of $ 568 million was in a baseline scenario to give way to $ 8.625 billion in revenue.

The investment bill for the downstream project was over $ 1 billion, to deliver significantly higher values.

Phase I average earnings before interest, taxes, depreciation, and amortization (EBITDA) – over expected years 1 through 5 – was $ 74 million per year, thanks to an installed capital cost of $ 368 million.

The reported Phase II EBITDA benefits for years 5-10 were $ 166 million on an installed capital cost of $ 200 million.

Verdant went into commercialization mode for the project during the December 2018 quarter.

The mode of implementation and financing had four constituent elements of the named project to be carried out while seeking financing.

These building blocks were: completion of Ammaroo native title agreements and granting of mining leases; confirm and optimize the design of the process map; advancement of final regulatory licenses, ie its mine management plan; and secure project finance agreements with the Australian Government’s Northern Australia Infrastructure Fund, commercial debt providers and / or export credit agencies.

In early December 2018, the company then received an NAIF debt facility of up to $ 160 million for the project, which would bring in approximately $ 645 million in royalties to the Government of the Northern Territory.

Federal jurisdiction is autonomous but subject to a Commonwealth veto.

Verdant had already completed environmental approvals for the project in October 2018.

In January 2019, he revealed he was making native title deals for Amaroo before securing mining leases for the project.

The company had $ 893,000 in cash and no debt at the end of 2018 and filed its semi-annual accounts for the December 2018 semester two weeks ago.

Its next quarterly reports are expected by the end of April 2019.

Verdant had planned to spend $ 700,000 in the March 2019 quarter, of which $ 200,000 was reserved for exploration and evaluation.

What is CD Capital’s takeover plan for Verdant Minerals?

London-based natural resources fund manager CD Capital has presented a plan to take majority control of Verdant.

Verdant shareholders are expected to vote on a Board-approved Plan Implementation Agreement (SIA) that relates to the transaction on June 5, 2019.

Investors in the Australian junior would then receive 3.2 cents per share held on the program’s registration date of June 17, 2019.

The offer represents a 113% premium over the closing price of 1.5 cents on the last trading day before the proposed program was released to the market.

A major shareholder () plans to keep his stake, which represented 33.43% of the company as of June 14, 2018.

CD Capital secured a 33.43% voting right in the company earlier this month through its CD Capital Natural Resources Fund III LP, counting SOL shares in its large stake.

SOL would own 33% of the entity after the partial takeover while CD would hold a majority stake of 67%.

Regulatory approvals are a necessary part of the process which will involve an independent expert report, plan passbook filing with ASIC around April 5, 2019, before a first court hearing on April 29, 2019.

The booklet would then be sent to the shareholders of the company between April 30, 2019 and May 6, 2019, before a shareholder vote around June 5, 2019, and a second hearing the next day and filing with ASIC the day after a court decision authorizing the regime.

An implementation date of June 24, 2019 for the transaction has been proposed.

If the CD buyout is successful, then Verdant may be delisted from the Australian Securities Exchange.

Inflection points

  • Recommendation of the independent expert and subsequent shareholder vote by approximately June 5, 2019
  • Court approval of an agreed plan around June 6, 2019
  • Later project milestones

CEO Chris Tziolis supports CD Capital’s proposal

“The progress of the Ammaroo phosphate project will require significant capital which, at market capitalization and pre-offer share price, is very unlikely to be raised from existing shareholders and without very significant dilution. “said Verdant Managing Director Chris Tziolis.

“Subject to an independent expert report and in the absence of a superior competing proposal, I voted with my fellow independent directors to recommend CD Capital’s proposal to the shareholders of VRM.

Investors in Verdant Minerals are expected to vote on the CD Capital program implementation agreement on June 5, 2019.


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