CONDITIONAL AGREEMENT TO ACQUIRE ALTURA LITHIUM OPERATIONS Following the appointment of KordaMentha as the Receiver of Altura Mining Limited (“Altura”) 1 on 26 October 2020, Pilbara Minerals Limited (“Pilbara Minerals” or the “Company”) (ASX: PLS) has entered into an Implementation Deed with the senior secured loan noteholders of Altura (“Loan Noteholders”) which provides it with a path to potentially acquire the Altura Lithium Project (“Altura Project”) through the purchase of the shares in Altura Lithium Operations Pty Ltd (“ALO”) for approximately US$175 million, subject to completion of the receivership process. ALO is a wholly-owned subsidiary of Altura Mining Limited and owns and operates the Altura Project. Under the Implementation Deed, Loan Noteholders have agreed to vote in favour of the Pilbara Minerals sponsored Deed of Company Arrangement (“DOCA”) for ALO should the acquisition proceed. Furthermore, Pilbara Minerals has procured the right to match any competing proposal offered for the Altura Project, and has secured payment of a break fee in the event that the Receiver accepts a competing proposal, or the Loan Noteholders fail to vote in favour of the DOCA. The Altura Project is a producing hard rock spodumene concentrate operation located on an adjoining tenement package immediately to the west of Pilbara Minerals’ Pilgangoora Lithium-Tantalum Project (“Pilgangoora Project”). The operation is part of the same mineralised system that underpins the Pilgangoora Project and uses similar open-pit mining methods, processing flowsheets and mining equipment. The combination of these factors along with the proximity of both operations provides a unique opportunity for Pilbara Minerals (should it complete the acquisition) to realise tangible synergies, both immediately following the acquisition and over time. Pilbara Minerals has agreed to pay an upfront cash payment of US$155 million and deferred consideration of approximately US$20 million2 (total consideration of US$175 million) for the shares in ALO upon the successful completion of the transaction. The upfront cash consideration would be predominantly funded through a future equity capital raising which is being supported by binding equity funding commitments from both AustralianSuper Pty Ltd in its capacity as trustee for AustralianSuper (“AustralianSuper”) and Resource Capital Fund VII L.P. (“RCF VII”) for a total A$240 million. 1 Refer to Altura ASX announcement ‘Appointment of Receivers and Managers’ (26 October 2020). 2 Deferred consideration represents the value of approximately 69 million Pilbara Minerals shares (at a deemed issued price of A$0.4072) payable 12 months after the signing of the Share Sale Agreement (Maturity Date). The deferred consideration has an implied minimum value of A$28 million today and can be settled by Pilbara Minerals on or before the Maturity Date with cash in equivalent value (at the date of payment) in lieu of shares at Pilbara Minerals’ election. 2 STRATEGIC RATIONALE The acquisition of the Altura Project would provide Pilbara Minerals with a unique opportunity to realise tangible operational synergies by consolidating the two neighbouring projects into a single integrated operation. Of particular interest to the Company is the opportunity to mine that section of the Altura orebody that is otherwise sterilised without access being granted to Pilbara Minerals’ ground to undertake mining activities. Should Pilbara Minerals be the successful acquirer at the end of the Receivership Process, it will acquire the Altura Project on an unencumbered basis free of pre-administration claims, providing the Company with maximum flexibility when integrating and consolidating the enlarged Pilgangoora operation. Commenting on today’s announcement, Pilbara Minerals’ Managing Director, Ken Brinsden, said: “This potential acquisition represents a logical consolidation of two neighbouring operations to unite the greater Pilgangoora orebody, unlocking tangible synergies in both the short and long term. “If successful, the acquisition will cement Pilbara Minerals’ position as the largest pure-play ASX-listed lithium company by enterprise value and will provide strong leverage to the expected recovery in lithium prices, driven by the increasing demand for electric vehicles and energy storage applications evident across the world. “We believe this will help safeguard jobs in the Western Australian lithium sector and ultimately create some exciting new growth opportunities that will deliver a range of benefits for the local economy.” As Receiver, KordaMentha has announced that it intends to place the Altura Project on care and maintenance to preserve near-term cash flow whilst trying to maximise proceeds to creditors. The receivership process will provide the Pilbara Minerals technical team with time to further assess the optimal management plan for a combined lithium mining operation, including the full extent of potential operational synergies and savings from the acquisition. Pilbara Minerals will provide shareholders with a more detailed operational plan should it be successful in the formal sale process and the acquisition reach completion. THE IMPLEMENTATION DEED AND RECEIVERSHIP PROCESS Before Pilbara Minerals is able to proceed, KordaMentha, as Receiver and Manager of Altura, has announced it will conduct a formal process to market ALO and its assets for sale and recapitalisation opportunities which is expected to take approximately five weeks (“Receivership Process”). Should the acquisition proceed following the completion of the Receivership Process, the Receiver will enter into a Share Sale Agreement with Pilbara Minerals. The Loan Noteholders have agreed to vote in favour of a Pilbara Minerals sponsored Deed of Company Arrangement (“DOCA”) for ALO. The approved DOCA will be the final step prior to completion of the Share Sale Agreement, at which point Pilbara Minerals would acquire ALO and the Altura Project on an unencumbered basis. Under the Implementation Deed, Pilbara Minerals has the right to match any competing proposal offered to the Receiver during the Receivership Process. Pilbara Minerals has also 3 secured a break fee in the event the Receiver accepts a competing proposal, or the Loan Noteholders fail to vote in favour of the Pilbara Minerals sponsored DOCA. COMMITTED ACQUISITION FUNDING In the event Pilbara Minerals’ proposal is accepted by the Receiver, the Company proposes to fund the acquisition through a combination of a future A$240 million equity raising and existing cash reserves (after allowing for transaction costs and working capital requirements). Pilbara Minerals has received binding equity funding commitments from AustralianSuper and RCF VII for a total of A$240 million in support of the future equity raising. These binding equity commitments include AustralianSuper and RCF VII in aggregate agreeing to subscribe for a A$119 million placement and sub-underwrite a A$121 million non-renounceable entitlement offer at a fixed price of A$0.36 per share, which represents a 7.7% discount to Pilbara Minerals’ last traded price of A$0.39 per share and a 11.4% discount to the 5 day VWAP (both calculated at market close on 27 October 2020). The equity raising will only be launched if Pilbara Minerals’ proposal is ultimately accepted by the Receiver. TIMETABLE AND NEXT STEPS Assuming Pilbara Minerals is successful in acquiring the Altura Project through the Receivership Process, the Company would then expect that the Share Sale Agreement would be executed in early December 2020, with any equity raising to be formally launched immediately following this event. Pilbara Minerals notes that there is no guarantee that it will be successful in acquiring the Altura Project via the Receivership Process and that there is a risk that the transaction and related future equity raising outlined in this announcement may not occur. Further information will be provided in due course. Nothing contained in this announcement constitutes investment, legal, tax or other advice. You should seek appropriate professional advice before making any investment decision. For further information on the transaction, Pilbara Minerals shareholders should read: • a summary of the Implementation Deed included in Appendix A; and • a summary of the Subscription Agreements in Appendix B. Macquarie Capital (Australia) Limited and Allen & Overy are acting as financial and legal advisers to Pilbara Minerals in relation to the acquisition of the Altura Project. Release authorised by Ken Brinsden, Pilbara Minerals Limited’s Managing Director.
PLS Price at posting:
39.0¢ Sentiment: Buy Disclosure: Held
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