BFS Funding of ~A$29.5 Million Finalised as Formal Agreements with Appian and IFC are Executed

PERTH, Australia, Feb. 3, 2015 /CNW/ - Peak Resources Limited ("Peak" or "the Company"; ASX Code: PEK) is pleased to announce signing of formal agreements related to its previously announced funding transactions with Appian and IFC for ~A$29.5 million, which is expected to fully fund Peak's Bankable Feasibility Study ("BFS") for the Ngualla Rare Earth Project.

HIGHLIGHTS  

  • Investment to fund Peak and the world class Ngualla Rare Earth project through BFS 
  • Total investment of ~A$29.5 million from Jersey-based Appian Natural Resources Fund ("Appian") and International Finance Corporation ("IFC") on a 80:20 pro rata split 

Michael W Scherb, Appian's founder said, "Appian is delighted to be a long term and collaborative partner as the Company advances development of the Ngualla Project. After our extensive Due Diligence process we have been very impressed with the Peak management team, Board and the Project. We have carried out extensive benchmarking exercises and we rate Ngualla as one of the world's best undeveloped rare earth projects with strong alignment to the high growth magnet metals market and which we believe will emerge as one of the lowest cost and most competitive rare earth projects globally."

Darren Townsend, Peak's Managing Director said, "We are extremely pleased to have completed the formal documentation stage of the transaction. This is a significant step towards financially derisking the Ngualla Rare Earth Project as we move to the next stage of development and will enable us to maintain strong momentum following the considerable technical progress we have made."

"We see the support and backing of Appian and IFC, two of the most sophisticated investors in the sector, as a considerable vote of confidence in the world class potential of the Ngualla project. Furthermore, Appian brings deep technical, operational and financial talent to supplement the Peak team and IFC brings extensive operating experience in Africa along with tier one environmental and social standards. We are already enjoying the benefit of Appian's and IFC's global network of relationships to assist the Company as we progress towards the BFS into project financing and ultimately into production."  

Figure 1 overleaf summarises the indicative funding schedule timeline of the full ~A$29.5 million staged funding process. Additional details on the funding transaction are summarised in the Appendix and are largely in line with key terms as outlined in previous ASX Announcements titled "Peak secures BFS funding for Ngualla Rare Earth Project" of 29 September 2014 and "Peak attracts IFC as potential Cornerstone Investor" of 24 October 2014.

     (Photo: http://photos.prnewswire.com/prnh/20150203/727990-a )

About Appian  

Appian Natural Resources Fund is a private equity fund which has been established to invest specifically in the metals and mining sector. Appian has a uniquely collaborative investment approach that seeks to partner with local owners, managers and investors to leverage its world-class operational and corporate finance expertise.

With this value-add approach and long-term investment horizon, it aims to generate significant value for the investors and other stakeholders of both the Company and Appian.

For more information, visit http://www.appiancapitaladvisory.com

About IFC 

IFC, a member of the World Bank Group, is the largest global development institution focused exclusively on the private sector. Working with private enterprises in about 100 countries, IFC use their capital, expertise and influence to help eliminate extreme poverty and boost shared prosperity. In FY14, IFC provided more than US$22 billion in financing to improve lives in developing countries and tackle the most urgent challenges of development.

For more information, visit http://www.ifc.org

Next Steps 

Formal Closing is expected to occur upon the fulfillment of certain closing conditions including, without limitation, receipt of applicable regulatory approvals in Australia and Tanzania and the issuance of final legal opinions. These items are currently being actioned by the Parties' respective advisors. Appian and the IFC are well advanced with identifying potential Peak board members and we look forward to welcoming them onto the Peak board in the near term.

Darren Townsend 
Managing Director

Appendix - Key Terms of the Formal Agreements  

The funding is provided through a three stage earn in process the details of which are illustrated in Figure 1 and summarized below:

Stage 1 

Appian and IFC (80:20 split) to subscribe for a total approximately 50.1 million Peak shares at a price of A$0.09 (raising approximately A$4.5 million). This represents a 20% premium to the 30 day ASX traded VWAP share price and will result in Appian and IFC holding approximately 13% of the enlarged share capital of Peak. On closing of the transaction Appian will be entitled to nominate two Directors and IFC one Director to the current four person Peak board.  Following the appointment of Appian's and IFC nominees there will be a maximum of seven Directors on the Peak board.  Appian's right to the two board seats will remain subject to Appian holding, or being entitled to hold, a shareholding in Peak of at least 10% of the issued share capital or a direct or indirect interest of 20% or greater in the issued share capital of Peak's 100% owned subsidiary, Peak African Minerals ("PAM"). IFC's right to one board seat will remain subject to IFC holding, or being entitled to hold, a shareholding in Peak of at least 2% of the issued share capital.

PAM is a Mauritian company that currently owns 100% of the shares in PR NG Minerals Limited ("PRNG"), the 100% owner of the Ngualla Project. On Closing Appian have been granted additional rights for an equal number of Directors as Peak for the board of PAM, including the right to nominate the Chairman with a casting vote, subject to Appian's direct or indirect holding in the issued share capital of PAM being 20% or greater.

Appian and IFC will initially invest approximately US$4.4 million (80:20) to purchase a combined 12.5% interest in PAM.

A payment of up to approximately US$5.2million on Closing will be made to PRNG to purchase a 2% Gross Smelter Royalty. This payment will be offset against any principal plus interest (Applicable interest rate is 15%) from the US $3 million Bridge Loan Facility ("BLF") already provided to PRNG (Figure 1) and the BLF will then be at an end.

Appian and IFC (on an 80:20 pro rata split) will be granted a Convertible Note ("CN") for payment of A$2.6 million by PAM and Peak and redeemable at a conversion price of A$0.103 cents per Peak share with a term of two years.  Upon Peak shareholder approval being received (if required) and subject to the receipt of any regulatory approvals that may be required, Appian and IFC will convert the CN which will result in Appian and IFC (80:20 pro rata) being issued with a total of approximately 33.4 million additional ordinary shares in Peak, increasing Appian's final total interest in Peak to approximately 15.99% and IFC's to 4% (Figure 2).

Should Peak shareholders not approve the CN, if a vote was required, it will be settled by the issue of shares in PAM. This would provide Appian and IFC with an additional 4.99% (80:20) interest in PAM.

Stage 2 

On or before 31st December 2015 if Appian and IFC deem a high-grade mineral concentrate can be produced from a steady state pilot plant which is of sufficient scale to support scalability to a production sized plant Appian and IFC will invest a further ~US$4.4 million (80:20) to purchase a further 12.5% interest in PAM to take their combined interest to 25% of PAM (80:20).

Stage 3 

On or before 31st July 2016 if Appian and IFC deem production of fully separated rare earths of saleable quality is economically viable Appian and IFC will invest a further ~US$4.4 million (80:20) to purchase a further 12.5% interest in PAM to take their total final combined interest to 37.5% of PAM (80:20).

Subject to closing and meeting all milestones, Appian's and IFC's overall investment will total approximately ~A$29.5 million and will result in an ownership structure as outlined below in Figure 2. 

     (Photo: http://photos.prnewswire.com/prnh/20150203/727990-b )

Security and Conditions Precedent  

Forms of security customary for a transaction of this type have been agreed and are to be registered including share pledges over the shares in PAM, PRNG and asset level security given by PRNG.  The BLF also benefits from a parent guarantee from Peak. Appian, IFC, Peak and PAM have entered into formal agreements subject to customary Conditions Precedent to Closing which include receipt of regulatory approvals required in Australia and Tanzania and plan on entering into a shareholders agreement in relation to PAM.

SOURCE Peak Resources Limited

For further information: Telephone: +61-8-9200-5360, Email: info@peakresources.com.au, Web: http://www.peakresources.com.au

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