Joint Venture Agreement re Acquisition of 30% of the Kalengwa Exploration Project, Zambia
Bezant entered into a binding joint venture agreement dated 24 April 2020 with KPZ International Limited (“KPZ Int”) (the “JV Agreement”) in relation to the acquisition of a 30 per cent. interest in the approximate 974km2 large scale exploration licence numbered 24401-HQ-LEL in the Kalengwa greater exploration area in The Republic of Zambia (the “Licence”) by acquiring a 30 per cent. shareholding in KPZ Int. The Licence is held by Kalengwa Processing Zone Ltd (“KPZ”), a 100 per cent. (less one share) Zambian subsidiary of KPZ Int, and is for the exploration of copper, cobalt, silver, gold and certain other specified minerals. The Licence was granted on 2 April 2019 and is valid for an initial period up to 1 April 2023.
- The acquisition, for aggregate consideration of US$0.75m, provides access to and operatorship of a large, strongly prospective exploration area surrounding the historic, high-grade Kalengwa open pit copper mine.
- Past third party production at the Kalengwa open pit mine estimated at 1.9 million tonnes grading at 9.44% Cu and 50 g/t Ag.
- Historic exploration data highlights several strong geochemical/structural targets on the property, many not previously drill tested.
- Initial objective of the joint venture is to fully evaluate the extensive historic exploration data in order to prioritise targets for follow-up and early drilling.
- Targets include partially drilled mineralisation within 2-4km of the historic Kalengwa mine and an untested 13km long copper soil anomaly aligned with the major structure.
- The Company’s pre-existing option over the Buffalo Project in Zambia will be lapsed on 30 April 2020 to enable the Company to focus its resources on progressing the larger scale Kalengwa Exploration Project.
The Licence, 24401-HQ-LEL, covers an area of 974.83km2 in the North-Western Province of Zambia and is accessed from the regional centre of Solwezi via a 240km long tarred road of good quality and then by dirt/gravel roads within the property. The exploration acreage includes extensive ground surrounding and along strike from the historic, high-grade Kalengwa open pit copper mine. Past third party production from such mine is estimated at 1.9 million tonnes (“Mt”) grading at 9.44% Cu and 50 g/t Ag. The historic mine workings exhibit features of both IOCG-type deposits as well as stratiform copper mineralisation, more typical of that seen at the major Zambian Copperbelt mines to the east.
In addition, the Licence surrounds a further copper deposit at Mufumbwe in the southwest of the property which is held by a third party. A non-compliant mineral resource estimate of 7.2Mt grading at 2.2% Cu has previously been estimated from drilling at this adjacent prospect.
The stratigraphic package at Kalengwa is similar to that hosting the world-class deposits in the Copperbelt. These deposits are thought to be formed from hydrothermal and ore-bearing fluids sourced from the intrusives of the Hook Granite complex. It is notable that such intrusives occur at the Kalengwa mine and are known from historic third party drilling and airborne magnetic surveying to occur at, or close to, several other prospects within the Licence.
Previous exploration data available to the joint venture partners includes extensive soil geochemistry, airborne magnetics and electromagnetics, structural interpretation and drilling. Based on an initial review of such data sets, up to nine high priority targets have been highlighted within the Licence boundary, most with limited or no previous drill testing. They encompass several prospects a short distance along strike from the Kalengwa open pit, including two with copper-bearing drill intercepts (Minemba & Minemba southwest). Assay intervals at Minemba based on very limited historic drilling include 4.3m grading at 1.43% Cu and 2.7m grading at 2.08% Cu. Mineralisation remains open at both prospects along strike and to depth. Further targets have been identified a short distance to the southwest of the open pit, based on soil geochemistry and airborne geophysics.
Amongst other strong targets on the Licence is the Mufumbwe northeast extension, an undrilled 13km long northeast-trending soil geochemical anomaly aligned with an interpreted structural zone, lying directly along strike from the Mufumbwe copper deposit. The remaining exploration targets all have significant soil geochemical anomalies as well as geophysical and structural features of interest. The historical exploration datasets in respect of the Licence will be reviewed in detail in order to prioritise targets and assist with planning the requisite follow up work by Bezant. Detailed mapping, sampling and trenching is anticipated to define potential shallow, early drilling targets.
It is noted that to be able to explore a mining licence area in Zambia, the licence/mining rights holder is required to obtain the consent of the relevant surface rights owner(s) and where any such consent is unreasonably withheld, the Director of Mining Cadastre may intervene and, if necessary, arrange for arbitration of the matter. KPZ has duly obtained such permission from Kalengwa Mineral Processing Ltd, the current holder of surface rights in respect of the areas of initial interest in relation to the Kalengwa Exploration Project, and will seek to obtain additional approvals from surface rights owners as are required under Zambian law as necessary and appropriate going forwards.
Key Terms of the Joint Venture Agreement
The project comprises the Licence but specifically excludes the processing area, the tailings dumps and the flooded open pit (the “Flooded Pit”) and the area 500 metres to the north of the Flooded Pit and 500 metres to the south of the Flooded Pit (the “Kalengwa Exploration Project”), such excluded area being the subject of the pre-existing Kalengwa Processing Project between the existing shareholders of KPZ Int and Xtract Resources Plc (AIM: XTR) (“Xtract”) (the “Kalengwa Processing Project”) details of which are set out in Xtract’s announcement of 15 July 2019.
Colin Bird, Executive Chairman of Bezant, is also the Executive Chairman of Xtract. The Kalengwa Processing Project is in relation to the processing of various historic dumps and in-situ ore located on the aforementioned demarcated area within the overall Licence and does not form part of the Kalengwa Exploration Project or impact on the exploration activity intended to be undertaken in relation to such joint venture project between Bezant and KPZ Int nor does it provide Xtract with any direct or indirect ownership interest in the Licence. Xtract and Bezant are independent of one another and are independently managed, and the Company has no rights or obligations in relation to the Kalengwa Processing Project (held by Kalengwa Mineral Processing Limited) and Xtract has no rights or obligations in relation to the Kalengwa Exploration Project.
Parties: The JV Agreement was entered into on 24 April 2020 by the Company and KPZ Int (the “Parties”).
Share issue and consideration payable: The consideration for the issue of Bezant’s 30 per cent shareholding comprises: i) payment by Bezant of US$125,000 to KPZ Int on or before 1 August 2020 (the “Initial Payment”); ii) payment by Bezant of a further US$125,000 to KPZ Int on or before 1 December 2020 (the “Second Payment”); and (iii) Bezant agreeing to spend before the second anniversary of the agreement (the “Drilling Deadline”) an aggregate sum of US$500,000 on initial reconnaissance drilling (the “Drilling Expenditure”) on the general exploration area covered by the Licence. Drilling is expected to commence by 1 September 2020.
Initial Payment and Second Payment to be paid to the Existing Shareholders: The Parties have agreed that it is the intention of KPZ Int to use the Initial Payment and the Second Payment to repay Shareholder Loans made by the 70% shareholders of KPZ prior to Bezant’s involvement with the project (the “Existing Shareholders”) and distribute the balance to the Existing Shareholders and Bezant has agreed to waive any rights it has to receive a proportionate share of such balancing amount.
Consequence of not making the Initial Payment, the Second Payment or spending the Drilling Expenditure: Except with the prior written consent of KPZ Int and the Existing Shareholders, if Bezant decides not to continue with the project for whatever reason or does not make the Initial Payment or Second Payment or spend all of the Drilling Expenditure by the Drilling Deadline then it will cease to have any entitlement to hold the Subscription Shares and shall be required to transfer its 30% shareholding to the Existing Shareholders (or, if KPZ Int elects in writing shall co-operate in taking such action or signing such documents as KPZ Int may reasonably require in order to cancel Bezant’s 30% shareholding). Bezant would thereafter have no further liability in relation to the project.
Operatorship: The Parties have agreed that Bezant shall be the project’s operator and have day-to-day management control of KPZ Int. Accordingly, if Bezant deems the results of the Drilling Expenditure to be appropriate, it will use its reasonable endeavours to advance the project (except where the Parties have agreed otherwise, using KPZ’s funds, not Bezant’s own funds) towards definitive feasibility study status and, thereafter, if the results of such a study indicate an internal rate of return (“IRR”) in excess of 25 per cent., will seek to advance the project into potential future production.
Use of Bezant’s personnel: As operator, Bezant will provide the personnel required to operate the project. Bezant will also ensure that all accounting and administrative work in connection with the project is carried out and the cost of such accounting and administrative work shall not exceed US$75,000 (being 15 per cent. of the Drilling Expenditure).
Future funding of KPZ: If, in addition to the Drilling Expenditure, Bezant and the Existing Shareholders agree that any further money is required by KPZ then i) if such additional money is to be provided by way of debt, then such money will be borrowed by KPZ (and not by Bezant or the Existing Shareholders); and ii) if the additional money is to be provided by way of equity, then subscriptions will be for ordinary shares in KPZ Int and KPZ Int will then, in turn, subscribe for ordinary shares in KPZ and, in either case, Bezant will use its reasonable endeavours to procure such additional funding.
KPZ Int Board: KPZ Int shall have five directors and Bezant has the right to appoint (and replace any such appointee) up to three directors on the board of KPZ Int. A board meeting of KPZ Int will only be quorate if: i) there are at least two directors in attendance; and ii) where there are four or less directors present that the number of directors appointed by Bezant equal the number of other directors present. The Chairman of the board of KPZ Int will be appointed by Bezant and Colin Bird the Executive Chairman of Bezant will be the initial Chairman.
Future sale of KPZ Int shares: If a shareholder of KPZ Int (the “Recipient”) receives a bona fide offer from a third party (a “Third Party”) to buy, or otherwise acquire KPZ Int shares (the “Offer”) it shall within three business days inform the other KPZ Int shareholder(s) in writing of the Offer and provide details of the price and payment terms of the Offer; and details of the proposed buyer (the “Offer Details”). The shareholders of KPZ Int then undertake within ten business days of receipt of the Offer Details to, in good faith, discuss the Offer and make a unanimous written decision whether to accept or reject the Offer.
Other costs: Bezant will be responsible for all costs of maintaining the Licence and all matters ancillary thereto and the Parties have agreed that the Existing Shareholders may charge a maximum of US$37,500 (being 7.5 per cent. of the Drilling Expenditure) to KPZ or KPZ Int in relation to the management of all local Zambian government and regional affairs.
31 May 2020