PLS 2.41% $3.24 pilbara minerals limited

Ann: Conditional Agreement to Acquire Altura Lithium Operations, page-2

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    A $A175M purchase and $A240m CR.

    Get outta here!!!!!!!!!!!!

    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.
 
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