(TheNewswire)
Highlights:
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- Jervois to acquire 100% of FreeportCobalt by purchasing all the shares of Freeport Cobalt Oy and fouraffiliated entities from Koboltti Chemicals Holdings Limited(“KCHL”)
- Long-term capacity sharing ofworld-class 1 cobalt refinery in Kokkola, Finland(operated by Umicore) via contractual rights to toll refine 6,250 mtpacobalt at cost until 2093
- Acquisition includes a flexible,downstream advanced materials platform servicing a range of cobaltspecialty product markets with longstanding customer relationshipsacross Europe, the United States and Japan
- Creates a pathway to become thesecond largest producer of refined cobalt outside China 2 ;consolidates Jervois’ strategy to become a leading nickel and cobaltcompany
- Jervois’ business is enhanced byadding a significant cash generating asset and diversifying acrossmultiple products and value chain segments
- Base consideration of US$160million (including US$75 million of net working capital):
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-- Implies a c.7.6x 2020 EBITDA of US$21million (US$15/lb cobalt price) 3
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-- Average 2018 to 2021 EBITDA of US$38million, including US$83 million in 2018 due to significant EBITDAupside at higher cobalt prices 3
- Jervois to raise A$313 million viaa fully underwritten Equity Raising to fund the Acquisition and ICOdevelopment
- Mercuria, one of the world’slargest independent energy and commodity traders with more than US$120billion annual turnover, will invest up to US$40 million in Jervois’equity raising; binding Memorandum of Understanding (MoU) signed to potentially support Jervois in a numberof areas
- AustralianSuper to investapproximately A$50 million in the equity raising, and to furthersub-underwrite the entitlement offer for approximately A$33million
- Freeport-McMoRan and Lundin Mining(shareholders of KCHL) commit to support the equity raising andsub-underwrite the entitlement offer up to approximately A$66million
- Jervois Directors and Managementwill invest A$3.5 million in the Equity Raising
- Acquisition is expected to close atthe end of August 2021, subject to closing of a portion of the equityraising and other customary conditions
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27 July, 2021 – TheNewswire – Australia - Jervois Mining Limited (“ Jervois ” or the“ Company ”) (ASX:JRV) (TSXV:JRV) (OTC:JRVMF) is pleased to announceit has agreed to acquire 100% of Freeport Cobalt by purchasing all theshares of Freeport Cobalt Oy and four affiliated entities fromKoboltti Chemicals Holdings Limited (“ KCHL ”) (the" Transaction " or " Acquisition " )pursuant to a stock purchase agreement (the “ Stock Purchase Agreement ”).
The acquisition has the potential to transform Jervoisinto the second largest producer of refined cobalt outside China,building on existing assets of Jervois’ Idaho Cobalt Operations(“ ICO ”) in the United States, expected to come into productionin mid-2022 and the São Miguel Paulista (“ SMP ”) nickel and cobalt refinery in SãoPaulo, Brazil which Jervois has agreed to acquire .
Freeport Cobalt is the Kokkola, Finland-based cobaltrefining and specialty products business retained by Freeport-McMoRan(“ Freeport ”) and certain co-owners following the sale of certainrefining and battery materials activities to Umicore in 2019. TheFreeport Cobalt business consists of:
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- a capacity sharing agreement with Umicore for the15,000 mtpa cobalt refinery in Kokkola, Finland (which is operated byUmicore) under which Freeport Cobalt has contractual rights to tollrefine 6,250 mtpa cobalt at cost until 2093;
- long-term contracts with leading global suppliers ofcobalt hydroxide, consistent with commitment to best practiceresponsible sourcing framework; and
- a downstream cobalt products manufacturing facilitywith an established marketing platform and long-term global customerbase servicing clients primarily across Europe, the United States andJapan.
The Acquisition is expected to transform Jervois into aglobal, vertically integrated cobalt and nickel company of scale, ledby a highly experienced management team. Post-acquisition, Jervoiswill be diversified across multiple products and value chain segmentswith significant relevance to leading cobalt producers and end-users.
Jervois’ acquisition of Freeport Cobalt also providesthe Company with an established global market platform from which tooperate. The industrial logic and strategic rationale for theAcquisition is compelling, with value for Jervois shareholdersexpected to be created through technical and commercial synergies withICO and SMP operations.
The purchase price for Freeport Cobalt is asfollows:
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- base consideration of US$160 million (including US$75million of net working capital), subject to customary adjustments, tobe paid in cash at closing of the Acquisition; and
- an additional cash payment of the working capital inFreeport Cobalt above US$75 million, at the closing of theAcquisition; and
- contingent consideration of up to US$40 million,payable in cash up to US$10 million per year based on FreeportCobalt’s financial performance from 2022 through 2026, and through a“catch up” amount based on Freeport Cobalt’s aggregate financialperformance during that period 4 .
The Acquisition is expected to close at the end ofAugust 2021 and is subject to the closing of a sufficient portion ofthe equity raising described below and other customary closingconditions. The definitive agreement governing the Acquisitionincludes a termination fee of US$4.8 millionpayable by Jervois to KCHL if the Acquisition does not complete undercertain circumstances.
Overview of Freeport Cobalt
Freeport Cobalt is an industry leading 5 business that hasproduced cobalt products for key markets since 1968. It isstrategically located in Kokkola Finland in a competitive industrialpark, close to key markets. In 2019, the Freeport Cobalt businesswas split out from the refinery and battery materials operations whichwere sold to Umicore. Freeport Cobalt retained contractual rights toapproximately 40% of the Kokkola refinery capacity and ownership ofdownstream advanced materials processing capabilities.
Freeport Cobalt sources its own cobalt feed materialsfrom leading global suppliers and is committed to best practiceresponsible sourcing framework. It is the first cobalt chemicalcompany to achieve Conformant Cobalt Downstream Facility statusthrough the Responsible Minerals Initiative’s (“ RMI ”) DownstreamAssessment Program (“ DAP ”).
The business has a flexible mix of mid- and long-termfeed supply contracts in place (including 10-15% of annual supplythrough sustainable recycling loops with existing customers).
Freeport Cobalt has a comprehensive product portfolioof cobalt powders and cobalt-based inorganic salts and oxides. Itmanufactures products with the highest chemical purity and has thecapabilities to customize products to meet customer’s specificrequirements. These products are sold at premiums to cobalt metalprice.
The business has sufficient downstream finished productcapacity to potentially increase production to 11,000 mtpa cobaltcontained in advanced manufactured products, provided additionalrefined sources are added to the 6,250 mtpa provided by the currenttoll refining agreement with Umicore.
Freeport Cobalt’s sales and marketing team servicesblue chip customers across three major segments: chemicals / catalysts/ ceramics, powder metallurgy and batteries materials. Freeport Cobalthas an established and mature customer base with many relationshipshaving been in place for decades. Jervois’s commercial team isexcited to commence working with the marketing team at Freeport Cobaltto build and expand their presence for high value cobalt products inkey Western markets.
Funding
To fund the Acquisition and ICO development, Jervoishas entered an underwriting agreement (the “ Underwriting Agreement ”) providing a fully-underwritten A$313 million equity raising by issuance of new Jervoisordinary shares consisting of a ~A$87m institutional placement (the" Placement ") and a ~A$226 million 1 for 1.56 accelerated pro-ratanon-renounceable entitlement offer (the “ Entitlement Offer ”and, together with the Placement, the " Equity Raising ").
Jervois announced the settlement of its subsidiary'soffering of senior secured bonds on 22 July 2021. The bonds offeringraised US$100 million (priced with an annual coupon of 12.5% and anissue discount to par of 2%) which will be used to fund ICOdevelopment. 6
Jervois' cash balance at 30 June 2021 was A$33 millionand will be used in part to fund the remainder. 7
Equity Raising
The ~A$313 million fully underwritten Equity Raising iscomprised of a ~A$87 million Placement and a ~A$226 millionEntitlement Offer. Approximately ~711 million new fully paid ordinaryshares in Jervois (“ NewShares ”) will be issued under the EquityRaising, equivalent to approximately ~89% of Jervois' current issuedcapital. New Shares issued under the Equity Raising will rankequally in all respects with Jervois' existing ordinary shares.
As part of the Equity Raising, Mercuria, one of theworld’s largest integrated energy and commodities companies with aUS$120 billion annual turnover, will acquire an equity position withan investment of up to US$40 million. Mercuria and Jervois haveagreed to work together to advance their commercial footprint andleverage rising demand for nickel and cobalt products. Mercuria hasindicated it stands ready to commit additional capital to supportexpansion of Jervois’s activities across ICO, SMP, Freeport Cobaltand future growth initiatives. This partnership has been defined ina binding memorandum of understanding (“ MoU ”).
The investment and partnership with Jervois is in linewith Mercuria’s larger corporate strategy to increase investments inthe energy transition sector. Potential areas of cooperation includerisk management services, tolling at SMP and / or Kokkola; cobalthydroxide supply, inventory financing, freight and warehousing.
The Company’s largest shareholder, AustralianSuper,has also entered into commitments to invest approximately A$50million, and to further sub-underwrite the Entitlement Offer forapproximately A$33 million. AustralianSuper has requested theright to appoint a director to the Board if it holds more than 15% ofthe enlarged capital of Jervois. This is currently underconsideration by the Board.
Freeport and Lundin Mining through KCHL have alsocommitted to support the Equity Raising and sub-underwrite theEntitlement Offer up to approximately A$66 million. KCHL haswarranted that it will not deal in any shortfall shares it picks upunder the Retail Entitlement Offer until: a) if Jervois releases itsnext annual results prior to market open on ASX, then 10.00am on theASX trading day after that date; or b) if Jervois releases its nextannual results after market close on ASX, then 4.15pm on the ASXtrading day after that. This is subject to certain exceptions,including transfers of any shortfall shares to the shareholders ofKCHL (provided that the lockup representations are given by thoseholders).
Jervois is pleased to welcome Mercuria, Freeport andLundin Mining through KCHL, and all new institutional investors fromEurope, the United States and the Asia Pacific including Australia toits share register.
Jervois Directors and Management will participate forapproximately A$3.5 million.
Under the Entitlement Offer, eligible shareholders areinvited to subscribe for 1 new Jervois share for every 1.56 existingJervois shares (“ Entitlement ”) held as at 7:00pm (Sydneytime) on Thursday, 29 July 2021.
All new Jervois shares offered under the Equity Raisingwill be issued at a fixed price of A$0.44 per new Jervois share, whichrepresents a:
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- 13.6% discount to TERP 8 (including placement) of A$0.509; and
- 15.2% discount to TERP (excluding placement) ofA$0.519; and
- 22.8% discount to the last close price of A$0.57 onFriday, 16 July 2021.
Institutional EntitlementOffer
Eligible institutional shareholders will be invited toparticipate in the institutional component of the Entitlement Offer(the " InstitutionalEntitlement Offer "), which is beingconducted today, Tuesday, 27 July 2021 in Australia.
Eligible institutional shareholders can choose to takeup all, part or none of their Entitlement. Eligible institutional shareholders who do not take up theirEntitlement under the Entitlement Offer, in full or in part, will notreceive any value in respect to those Entitlements not taken up. Institutional Entitlements cannot be traded onthe ASX, TSXV, OTC or transferred.
Institutional Entitlements that eligible institutionalshareholders do not take up by the close of the InstitutionalEntitlement Offer, and Institutional Entitlements that would otherwisehave been offered to ineligible institutional shareholders, will beoffered to new institutional investors and existing institutionalshareholders concurrently with the Institutional Entitlement Offer andPlacement.
Jervois' shares will recommence trading on the ASX on Wednesday, 28 July 2021 following closing of the Institutional Entitlement Offer andthe Placement.
Retail Entitlement Offer
Eligible retail shareholders in Australia and NewZealand will be invited to participate in the retail component of theEntitlement Offer (the “ Retail Entitlement Offer ”) at the same offerprice and offer ratio as the Institutional Entitlement Offer. TheRetail Entitlement Offer will open on Tuesday, 3 August 2021 inAustralia and close at 5.00pm (Sydney time) on Wednesday, 25 August2021.
Further details about the Retail Entitlement Offer willbe set out in the retail offer booklet, which Jervois expects to lodgewith the ASX and dispatch to eligible retail shareholders on Tuesday,3 August 2021. The retail offer booklet will also enclosepersonalised entitlement and acceptance forms.
Entitlements cannot be traded on the ASX, TSXV or OTCor transferred. Eligible shareholders who do not take up theirEntitlement under the Entitlement Offer, in full or in part, will notreceive any value in respect to those Entitlements not takenup.
Event 9 | Date in Australia |
Announcement of Offer, Institutional Entitlement Offerand Placement opens | Tuesday, 27 July 2021 |
Institutional Entitlement Offer and Placementcloses | Tuesday, 27 July 2021 |
Announcement of results of Institutional EntitlementOffer and Placement Suspension is lifted and trading resumes on an“ex-entitlement” basis | Wednesday, 28 July 2021 |
Record date for the Entitlement Offer (7:00pm Sydneytime) | Thursday, 29 July 2021 |
Retail Entitlement Offer opens and Retail EntitlementOffer Booklet dispatched | Tuesday, 3 August 2021 |
Settlement of New Shares issued under the InstitutionalEntitlement Offer and the Placement | Wednesday, 4 August 2021 |
Allotment and normal trading of New Shares issued underthe Institutional Entitlement Offer and the Placement | Thursday, 5 August 2021 |
Retail Entitlement Offer closes (5:00pm Sydneytime) | Wednesday, 25 August 2021 |
Announcement of results of Retail EntitlementOffer | Monday, 30 August 2021 |
Settlement of Retail Entitlement Offer | Tuesday, 31 August 2021 |
Allotment of New Shares issued under the RetailEntitlement Offer | Wednesday, 1 September 2021 |
Normal trading of New Shares issued under the RetailEntitlement Offer | Thursday, 2 September 2021 |
Commencement of trading and holding statementsdispatched for Retail Entitlement Offer |
All dates and times are indicative only and subject tochange.
Additional Information
Further details of the Acquisition and the EquityRaising are set out in the Investor Presentation also released to theASX today and expected to be filed by the Company shortly on SEDAR,together with a copy of the Stock Purchase Agreement and theUnderwriting Agreement. The Investor Presentation contains importantinformation including disclaimers, key risks and foreign sellingrestrictions with respect to the Equity Raising and theAcquisition.
UBS is acting as an M&A adviser to Jervois inrelation to the Acquisition and has or will receive fees in thatcapacity. Jervois has also received financial advice from MagmaCapital.
This announcement has been approved for release by theBoard of Directors of Jervois.
For further information, please contact:
Investors and analysts: James May Chief Financial Officer Jervois | Media: Nathan Ryan NWR Communications nathan.ryan@nwrcommunications.com.au |
Forward-LookingStatements
This news release may containcertain “Forward-Looking Statements” within the meaning of theUnited States Private Securities Litigation Reform Act of 1995 andapplicable Canadian securities laws. When used in this news release,the words “anticipate”, “believe”, “estimate”,“expect”, “target, “plan”, “forecast”, “may”,“schedule”, “expected” and other similar words or expressionsidentify forward-looking statements or information. Theseforward-looking statements or information may relate to timing andeffects of closing the contemplated acquisition of Freeport Cobalt,future supply contracts, future sales contracts, and certain otherfactors or information. Such statements represent Jervois’ currentviews with respect to future events and are necessarily based upon anumber of assumptions and estimates that, while considered reasonableby Jervois, are inherently subject to significant business, economic,competitive, political and social risks, contingencies anduncertainties. Many factors, both known and unknown, could causeresults, performance or achievements to be materially different fromthe results, performance or achievements that are or may be expressedor implied by such forward-looking statements. Among the risks and uncertainties thatcould cause actual results, performance or achievements to differ fromthose expressed or implied by such forward-looking statements are: (1)the satisfaction or waiver of the conditions precedent to theconsummation of the contemplated acquisition, including the closing ofUS$200m of Jervois financing; (2) the occurrence of any event, changeor other circumstance that could give rise to the termination of thedefinitive purchase agreement; (3) unanticipated difficulties orexpenditures relating to, of the failure to realize the benefits of,the contemplated acquisition; (4) legal proceedings, judgments orsettlements in connection with the contemplated acquisition; (5)disruptions of current plans and operations caused by the announcementand pendency of the contemplated acquisition; and (6) the response ofemployees, customers, suppliers, business partners and regulators tothe announcement of the contemplated acquisition. Jervois does notintend, and does not assume any obligation, to update theseforward-looking statements or information to reflect changes inassumptions or changes in circumstances or any other events affections such statements andinformation other than as required by applicable laws, rules andregulations.
Not fordistribution or release in the United States
This announcement has been preparedfor publication in Australia and may not be distributed or released inthe United States. This announcement does not constitute an offer tosell, or a solicitation of an offer to buy, any securities in theUnited States or to any person who is acting for the account orbenefit of any person in the United States (to the extent such aperson is acting for the account or benefit of a person in the UnitedStates). The New Shares described in this announcement have not been,and will not be, registered under the U.S. Securities Act of 1933, asamended (the “ U.S. Securities Act ”) and may not be offered or sold,directly or indirectly, in the United States except in transactionsexempt from, or not subject to, the registration requirements of theU.S. Securities Act and any other applicable US state securitieslaws.
Neither TSX Venture Exchange nor itsRegulation Services Provider (as that term is defined in policies ofthe TSX Venture Exchange) accepts responsibility for the adequacy oraccuracy of this release.
NOT FOR DISTRIBUTION OR RELEASE INTHE UNITED STATES
1 Refers to the scale of operations as well asprocesses in place established by Umicore.
2 Based on 6,250 mtpa capacity of Freeport Cobalt andc.2,250 mtpa capacity of SMP (Source: Market Review 2020 21, DartonCommodities).
3 EBITDA refers to pro forma, adjusted EBITDA for allperiods. See Slide 33 of the investor presentation for information onthe basis of preparation for the financial information.
4 For each year in the period, the contingentconsideration payable increases linearly from a payment of US$0million if Freeport Cobalt’s EBITDA equals US$20 million or less toa payment of US$10 million if Freeport Cobalt’s EBITDA equals morethan the agreed target of US$40 million. The “Catch up” amountis quantified as the difference between (a) the sum of all contingentamounts already payable and (b) the sum that would have been payableif Freeport Cobalt’s aggregate EBITDA over the period (2022 to 2026)were averaged out over the period. This remains subject to theoverall maximum contingent consideration payment of US$40m .
5 Based on products volumes and range.
6 Refer to the ASX announcements dated 5 July 2021 and 22July 2021 and the Freeport Cobalt investor presentation fordetails
7 After 30 June 2021 and prior to settlement of the bonds on20 July 2021, A$24 million was transferred to the Escrow Account andDebt Service Account held by Jervois Mining USA in accordance with thebond terms.
8 Theoretical ex rights price (TERP) includes theshares issued under the Placement, Institutional Entitlement Offer andthe Retail Entitlement Offer. TERP is the theoretical price at whichJervois shares should trade immediately after the ex-date for theEntitlement Offer. TERP is a theoretical calculation only and theactual price at which Jervois shares trade on ASX immediately afterthe ex-date for the Entitlement Offer will depend on many factors andmay not be equal to TERP. TERP is calculated by reference to theclosing price of Jervois' shares as traded on ASX on Monday, 26 July2021, being the last trading day prior to the announcement of theEntitlement Offer.
9 Note that securities acquired by Canadian residents willbe subject to a customary 4 months hold period pursuant to applicableCanadian provincial securities laws
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