Worthington Group plc Back Rare Earth Mining Exploration as World Struggles to Fill Supply Gap in Potential USD 8bn Global Rare Earth Elements' Marketplace
The Company is pleased to announce that it has entered into an agreement with Greenland Rare Earth Projects Limited ("GREP"), a London based mineral exploration company. GREP are actively developing a portfolio of Rare Earth Element ("REE") projects in the Paatasuq area in Greenland. Worthington has agreed to provide funding to explore part of the Gardar Alkaline Igneous Province ("GAIP") in Greenland. This region of Greenland represents one of the most significant remaining exploration targets, and is neighbored by fields with significant proven reserves of REEs.
REEs comprise a group of 17 chemical (metallic) elements, REEs are vital to some of the world's fastest growing industries, not surprisingly demand for REEs is surging. REE's unique chemical properties means that they find their way into many new products, from the consumer's high tech tablet device, to mobile phones, solar panels, and even high performance clean burning engines.
Global market intelligence company Transparency Market Research, in their recent June 2014 report, suggested that the REE Market demand was worth USD 3.93 billion in 2013, and is expected to reach USD 8.19 billion by 2019.
Industry experts, including the IPC, the global trade association serving the printed board and electronics industries, talk of the shortages in future supply of these vital REEs. In their online policy briefing the IPC state that, "Demand for REEs is expected to exceed its supply in the near future". According to the U.S. Congressional Research Service, only a few mining companies are developing REEs, and because of the long lead times needed from discovery to refined elements, supply constraints are likely in the short term.
"Business Reporter" magazine in June 2014 quoted a report by research firm "Markets and Markets" that the demand for rare earth metals is estimated to reach 192,000 tons by 2018. Demand is strongest in the Asia-Pacific region, with China accounting for 60 per cent of global rare earth consumption. The Chinese government estimates that, at the current pace of mining, China will run out of all home sourced REEs by 2029.
The Paatasuq area in Greenland is bordered by the Motzfelt field. EURARE, a project funded by the European Commission for the development of a sustainable exploitation scheme for Europe's Rare Earth ore deposits says that, "Greenland is endowed with several large REE deposits in various geological settings. The largest deposits by far are hosted in peralkaline intrusions related to the Gardar Province in south Greenland, encompassing the deposits around Kvanefjeld, Kringlerne, and Motzfeldt".
In June 2014, GREP competitor Greenland Minerals and Energy raised USD 8.8M for a nearby Kvanefjeld mining project in southern Greenland, part of the Motzfeldt area. The field has large resources of REEs including 575 million pounds of U3O8, 10.33 million tonnes of total rare earth oxides and 2.25 million tonnes of zinc with direct shipping access to markets in North America and Europe.
Doug Ware CEO, of Worthington Group plc, commented today on Worthington's agreement to acquire up to 41% of GREP. "Whilst this is an investment in the exploration phase of this project, it borders areas of proven reserves in the Motzfelt field. If the reserves are proven, then we are looking at what could amount to enormous potential returns given the rising demand".
Earlier this month, GREP announced that it had signed an Option Agreement ("Agreement") with NunaMinerals A/S (COPENHAGEN: NUNA.CO / NUNA.DC) who are Greenland's leading company in the exploration of precious, base and strategic metals. NunaMinerals began operations in 1999 and is headquartered in Nuuk, Greenland. The company is listed at NASDAQ OMX Copenhagen A/S under the symbol "NUNA" (Copenhagen: NUNA.CO). The Agreement has the objective to advance the development of NunaMinerals' Paatusoq Critical Metals Project which is located within NunaMinerals' 370 km(2) Hugin exploration licence in South East Greenland, where the company is also actively prospecting for gold. Under the terms of the Agreement ,"Critical Metals" are specified as the REEs, niobium, tantalum, zirconium, uranium and thorium.
GREP is headed by mining and natural resources veteran Patrick Newman, along with mining industry expert Steven Beharrell, partner at Fasken Martineau DuMoulin LLP and recently named "Natural Resources Lawyer of the Year in England" by Corporate International Global Awards 2014. Together, the management team bring more than fifty years of exploration expertise to the project. The London based team are backed up by academic experts drawn from leading geological centres, specifically St Andrew's University in the Scotland.
Under the terms of the agreement with GREP, Worthington have agreed to provide GREP with immediate funding of USD 550,000 by way of a loan convertible into 20% of GREP's ordinary share capital. In addition, Worthington has acquired the right, but not the obligation, to acquire a further 10% of GREP for a further investment of USD 1,150,000 payable within one year, subject to WRN being satisfied with the performance of GREP and satisfactory exploration results. An option to acquire an additional 11% for USD 1,150,000 within two years, has also been agreed so that, if Worthington is satisfied with exploration results, it has the right to increase its holding to 41%.
Patrick Newman CEO of GREP said, "The agreement reached with Worthington Group plc provides us with access to capital markets vital to the funding of our exploration work. The Paatusoq project lying in the Gardar Province of South West Greenland is known to contain some of the earth's largest deposits of critical metals, such as the rare earths, yet its continuation on the South East coast of Greenland has remained unexplored so far. GREP, in partnership with NunaMinerals and backed by Worthington, now have a unique opportunity to unlock the mineral potential of the last remaining virgin exploration target in this world class province. The agreement provides an ideal synergy between NunaMinerals in-depth knowledge and expertise in critical metal exploration in Greenland, and GREP's financial capabilities backed by Worthington Group within the global financial centre of London. We now look forward to working alongside Worthington and our partners in NunaMinerals to develop this recent addition to our exploration portfolio, starting with a helicopter-borne geophysical survey over the complex during September 2014 to delineate targets for a multi-phase, aggressive field program in 2015."
Doug Ware, CEO of Worthington Group plc said, "This investment is a good example of our strategy defined as 'The Worthington difference' going forward. We're looking for a diversified portfolio of investments across the world in fast growing market places. We are looking to support experienced management teams with strong potential. Our backing of Patrick and his teamat GREP is an example of this: a great team in a vital industry with enormous growth potential which needed capital investment to grow. This investment fits in exactly with Worthington's current mission statement."
Worthington are placing up to GBP450,000 of unsecured convertible loan notes ("UCLN") with specialist investors in order to finance the first phase of the GREP investment. The UCLNs will pay an interest coupon of 4.5% per annum and are convertible at any time after three months from the date of issue, at the option of the loan note holders, into Worthington ordinary shares at a price per Worthington ordinary share of 50p. To the extent that the loan notes have not been converted within three years thereof, Worthington may elect to either redeem the loan notes for cash, or issue to the Loan Note holders new Worthington ordinary shares at a price per Worthington ordinary share of 40p.
Commenting on the placing Doug Ware stated "We believe that it is important that the Company raises money in the most efficient way possible in order to maximise returns for our shareholders. We are particularly keen to avoid deeply discounted placings which often tend to prefer new investors over existing ones".
About Worthington Group Plc ("Worthington")
Worthington (Stock Exchange LSE: WRN) is a British investment company that this year celebrates its 60th anniversary as a London Stock Exchange main market listed company. The company has five areas of investment focus: traditional manufacturing, property, litigation claims, new economy and emerging markets. The Company believes that exceptional shareholder returns can be achieved by utilising its main market Sterling paper to acquire investments in these sectors worldwide.
Forward-looking statements contained in this announcement, including descriptions of GREP/WorthingtonGroupplc/NunaMinerals' exploration and development projects, strategy and plans, as well as expectations for future revenue and earnings, reflect GREP/WorthingtonGroupplc/NunaMinerals' current views and assumptions with respect to future events and are subject to certain risks, uncertainties and assumptions. There are many factors that may cause actual results achieved by GREP/WorthingtonGroupplc/NunaMinerals to differ materially from expectations for future results and expectations that may be expressed in or form an assumption of such forward-looking statements. Such factors include risks related to exploration, development and mining activities, uncertainties related to the results of GREP/WorthingtonGroupplc/NunaMinerals' exploration and development projects, including risks of delays or closure of projects, price falls, currency fluctuations and changes in concession terms, legislation and administrative practices, as well as competition risk and other unforeseen factors.
If one or more of such risks or factors of uncertainty were to materialise, or should one or more of the statements provided prove to be incorrect, actual developments may differ materially from the forward-looking statements contained in this announcement. GREP/WorthingtonGroupplc/NunaMinerals are not under any duty to update the forward-looking statements contained in this announcement or to adjust such statements to actual results, except as may be required by law.
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