NEW ENERGY MINERALS LTD - Corporate Spotlight

Independent Metallurgical tests show expandability and purity of Caula graphite – Relacement of ASX release date 14 March 2019

ASX Announcement 15 March 2019 

• Independent metallurgical testwork indicates Caula graphite to be suitable for the production of expandable graphite, spherical graphite and all kinds of other applications including flame retardants and graphite foil 
• Excellent expansion volumes achieved for all flakes sizes with an average expansion volume of 295 mL/g achieved 
• The following results were achieved: 
  • Expansion volumes of 430 mL/g for +500 micron flakes 
  • Expansion volumes of 390 mL/g for +300 to -500 micron flakes 
  • Expansion volumes of 350 mL/g for +180 to -300 micron flakes

New Energy Minerals Limited (“New Energy”, the “Company”) (ASX:NXE) (FRA:GGY) is pleased to announce the results of the first set of specialised independent tests conducted by German Based NGS Trading and Consulting GmbH (“NGS”), on its 40% owned Caula Graphite and Vanadium project located in Northern Mozambique.

Dr. Bernard Olivier MD of NXE today commented: “The specialised independent testwork returned some truly excellent results for the Caula graphite samples and concluded that they could not find any restriction on the application of this type of expandable graphite. The report further states that the chemically purified flake graphite qualifies for the production of spherical graphite and all kind of other applications including flame retardants and graphite foil.”

Background 

Two composite samples of graphite concentrate, one from the Oxide Zone and one from the Fresh Zone, were submitted to NGS for purification tests, as well as a full suite of 25 different tests for the preparation of expandable graphite, conducted over a mix of all grain sizes.

Expandability Testwork 

Expandable graphite is produced by heating graphite to a temperature that causes expansion of individual flakes of graphite. Expandable graphite is sought-after for several applications including flame-retardant building materials and textiles, with graphite concentrates that expand at high rates selling at a significant premium to typical graphite concentrates. The samples were tested for expansion adding acid-based intercalation agents and applying heat up to 1000oC.

The industry benchmark standard of 230 mL/g is considered an excellent expansion rate and is used as a reference point for expandable graphite testwork. The first set of expandable tests conducted at NGS produced expansion ratios of up to 430 mL/g for both the Oxide Zone and Fresh Zone composite samples and an average of 295 mL/g for all flake sizes combined (See Table 1 below). NGS tested expandability of both zones with the most common, low cost and simplest methods of preparation.

Table 1. Optimum Expansion coefficient achieved for the Caula graphite concentrates 

NGS described and tested several different methods for the preparation of expandable graphite and could not find any restriction on the application of this type of expandable graphite. The NGS report further concluded that very large expansion volumes were achieved for a mix of all flakes and the composite samples from the Oxide Zone and Fresh Zone are very well suited for the preparation of expandable graphite.

Purity Testwork 

Chemical purification testwork were conducted on both the Oxide Zone and Fresh Zone samples. The results of the purification testwork are indicated in Table 2 and Table 3 below.

Table 2. Results of the chemical purification process for Oxide Zone sample after drying at 80°C 

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New Energy Minerals Agreement to Sell Remaining 50% of Balama Resources Pty Ltd 

ASX Announcement 8 February 2019 

SUMMARY 

• New Energy has entered into a binding Share Sale and Purchase Agreement (SSPA) with Auspicious Virtue Investment Holding Limited for the sale by New Energy of all its remaining shares in Balama Resources Pty Limited. 
• On completion of the SSPA, Auspicious Virtue Investment Holding Limited, an investment vehicle owned by Mr Louis Ching, will be the sole shareholder of Balama, holding 100% of the shares on issue. 
• Balama is the subsidiary company through which New Energy has held its interest in the Caula graphite and vanadium project. Following completion of the SSPA, New Energy will have no further interest in the Caula project. 
• As part of the sale transaction, New Energy has agreed to conduct an equal access Capital Reduction, under which the Company will provide a return of capital to its shareholders, of an aggregate amount being not less than 60% of the Purchase Price less the costs incurred by the Company, in executing and completing the sale transaction. 
• The SSPA is subject to a number of conditions precedent including a favourable assessment by an Independent Expert and approval of the SSPA by New Energy Shareholders. 
• Although the Board of New Energy Limited is confident about the outcome of its dispute with Arena, the sale of Balama under the SSPA mitigates risks for shareholders from the dispute.

New Energy Minerals Limited (“New Energy”, the “Company”) (ASX:NXE FRA:GGY) announces that today it has entered into a binding Share Sale and Purchase Agreement (“SSPA”), with Auspicious Virtue Investment Holding Limited, for the sale by New Energy of all its remaining shares (the “Shares”) in Balama Resources Pty Limited (“Balama”), for a total cash consideration of AUS$7,000,000 (“Purchase Price”). On completion of the SSPA (“Completion”), Auspicious Virtue Investment Holding Limited, an investment vehicle of Mr. Louis Ching, will be the sole shareholder of Balama, holding 100% of the shares on issue, an increase from its current 50% holding of the issued capital in Balama.

Balama is the subsidiary company through which New Energy holds its interest in the Caula graphite and vanadium project. Following Completion, New Energy will have no further interest in the Caula project, which is the Company’s main undertaking.

As part of the SSPA, New Energy has agreed to conduct an equal access Capital Reduction (“Capital Reduction”), under which the Company will provide a return of capital to its shareholders of an aggregate amount being not less than 60% of the Purchase Price, less the costs incurred by the Company in executing and completing the sale transaction. Through the Capital Reduction, the Board of New Energy aims to return some value to shareholders, whilst allowing them to retain their shares in the Company. A summary of the terms of the SSPA are set out in Appendix 1 to this announcement.

As announced on 7 November 2018, the Company entered into a Strategic Investment Agreement (“Agreement”) with Mr. Louis Ching, whereby he acquired 50% of the shares on issue in Balama, through his investment vehicle, Auspicious Virtue Investment Holding Limited, a company incorporated in the British Virgin Islands. Under the Agreement, Mr. Louis Ching also entered into a private placement with New Energy through his other investment vehicle, UbezTT International Holdings (“UbezTT”), which resulted in UbezTT becoming a substantial shareholder in New Energy, currently holding 15.3% of the issued shares in the Company. Mr. Ching also holds a directorship in Balama.

Although New Energy Limited is confident in its dispute with Arena Investors LLC (“Arena”) (see announcement 6 November 2018), the sale of the remaining shares in Balama under the SSPA reduces shareholder exposure to the Company’s dispute against Arena, as an adverse outcome for the Company in the dispute, could potentially involve Arena having a substantial claim against the Company which could likely result in nil value from the Caula Project being returned to existing New Energy shareholders.

The SSPA is subject to a number of conditions precedent (described in more detail in Appendix 1), including: 

• New Energy procuring an Independent Expert's Report in which the Independent Expert concludes that the sale of the Shares by the Company to Auspicious Virtue Holding Investment Limited in accordance with the SSPA is favourable to the Company’s Shareholders, therefore either: 

(a) fair and reasonable; or 

(b) not fair but reasonable, 

to the Company's Shareholders (other than the Purchaser or its Associates); 

The Company proposes to engage BDO Corporate Finance Pty Ltd to provide the Independent Expert's Report.

• New Energy's Shareholders (excluding Auspicious Virtue Investment Holding Limited and its associates) approve of the disposal of the shares in Balama Resources Pty Ltd to Auspicious Virtue Investment Holding Limited in accordance with the SSPA at a meeting held in accordance with: 

(a) ASX Listing Rule 11.2; and 

(b) ASX Listing Rule 10.1. 

• New Energy's Shareholders approve of the Capital Reduction in accordance with section 256C(1) of the Corporations Act and New Energy complies with the requirements of section 256C in relation to the shareholder approval.

New Energy will convene an Extraordinary General Meeting (EGM) of the Company to be held as soon as practicable, currently expected to be in March 2019, for the purpose of considering and voting in favour of the resolutions in order to satisfy that condition precedent. Subject to satisfaction of all the conditions precedent, New Energy expects the sale to be completed in mid-June 2019 and the Capital Reduction is expected to be completed as soon as possible thereafter.

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Update for The Quarter Ending 31 December 2018

ASX Announcement 30 January 2019

HIGHLIGHTS 

• The Scoping Study for the Caula Vanadium Graphite Project in Northern Mozambique demonstrated the viability of an open pit vanadium and graphite mining operation with outstanding economics, and mine life of 26 years, based entirely on the JORC Measured Resources for both vanadium and graphite. 
• For the Scoping Study, 1,877 metres of diamond drilling over 16 drillholes and 99 metres of RC drilling (1 drillhole) were completed by the Company and approximately 4,000 metres of additional drilling, sampling, assaying and further testwork are underway to support the Reserve definition and pre-feasibility studies. 
• Based on the Scoping Study results, New Energy Minerals is now focused on delivering pre-feasibility level studies by Q1-2019, as well as the fast-tracked implementation of Phase 1 of the project targeting 1st cashflows in H2-2019. 
• Preliminary metallurgical testwork delivered high grade vanadium concentrate with preliminary WHIMS testwork on composite samples from the Fresh Zone, resulting in a Cleaner Concentrate grade of 1.66% V2O5 at a recovery rate of 80.6%. Results were achieved from an overall feed grade of 0.401% V2O5 before graphite extraction. 
• Agreement reached with a strategic investor group led by Mr. Louis Ching, a highly influential Hong Kong-based businessman. The Agreement was for a AU$1.5 million placement in NXE, across two tranches at 6.5 cents, totalling approximately 23 million shares, and a AU$3.5 million project level investment and joint venture through subscription of 50% of the post-issue shares of Balama Resources Pty Ltd, a wholly owned subsidiary of NXE. 
• Following a statutory demand from Arena Structured Private Investments (Cayman) LLC, the Company lodged an application to have the claim set aside. Both parties agreed to mediation before 31 January 2019, and with failing to reach a mediated outcome, NXE’s application will be heard by the Supreme Court of Western Australia on a date to be set by the Court but not earlier than 21 March 2019. 
• New Energy Minerals and Fura Gems agreed to amendments to the Merger Ruby Assets Agreement (MRAA), whereby the Company will receive AU$2.8 million cash available as a AU$2.8 million loan facility from which New Energy Minerals can draw down prior to the completion of the MRAA

New Energy Minerals Limited (“New Energy Minerals”, the “Company”) (ASX:NXE, FRA:GGY) is pleased to provide an update to the market in relations to the Company’s activities, for the period ending 31 December 2018.

Operational Update 

Caula Vanadium-Graphite Project Scoping Study Produces Exceptional Economics

During October 2018, New Energy Minerals released the Scoping Study on its Caula Vanadium-Graphite project in Northern Mozambique. The Company commissioned Bara International (“Bara”) to coordinate and complete a scoping study report, which demonstrated the viability of an open pit vanadium and graphite mining operation, with exceptional economics and a 26-year mine life, based entirely on the JORC Measured Resources for both vanadium and graphite.

The results of the Scoping Study indicate the potential to generate significant financial returns through a two-phase development schedule, for an open pit vanadium and graphite mining operation with: 

• The entire Life of Mine based on the JORC 2012 Measured Resources for both Vanadium and Graphite 
• The Caula deposit being technically and financially viable with no immediate or obvious impediments to mining 
• An Outstanding Life of Mine strip ratio of 1:1

Phase 1 (Pilot Plant) Key Study Outcomes¹ 

• Pre-production capex of approximately US$7.36 million (AU$10.16 million² ) 
• Mine production rate of approximately 120,000 tonnes per annum over two years 
• Estimated annual production of approximately 10,000 to 15,000 tonnes of graphite concentrates and 14,000 to 18,000 tonnes of vanadium concentrates over two years 
• Generating approximately US$16 million (AU$22 million) total EBITDA over first 2 years with Phase 2 commissioned in Year 3

Phase 2 Key Study Outcomes³

• Pre-production capex of approximately US$114 million (AU$157 million) with construction scheduled to commence in Year 2 of Phase 1 
• Estimated mine production rate of 1.5 Mtpa 
• Estimated annual production of approximately 120,000 tonnes of graphite concentrates and approximately 204,200 tonnes of vanadium concentrate (1.7% V2O5 flake) per year over 24 years 
• Generation of approximately US$2.68 billion (AU$3.4 billion) total EBITDA over 24 years 
• Total project Pre-Tax NPV10 estimated to be approximately US$673 million (AU$929 million 
• Total project Pre-Tax IRR estimate of 78%4 
• Total project Post Tax NPV10 estimated to be approximately US$448 million (AU$619 million) 
• Total project Post-Tax IRR estimate of 59% 
• Total project post tax Payback less than 4 years from start of phase 1 production (see Appendix 2 for a detailed sensitivity analysis
  

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Amendment to the Fura Gems Merger of Ruby Assets Agreement with Pre-Completion Loan 

ASX Announcement 29 November 2018 

New Energy Minerals Limited (“New Energy”, the “Company) (ASX:NXE FRA:GGY) announces that the terms of the Merger of Ruby Assets Agreement dated 14 July 2018 (“MRAA”) with Fura Gems Inc. (“Fura”), have been amended between the parties with an amendment agreement dated 26 November 2018 (“Amending Agreement”). ¹ 

Under the terms of the Amending Agreement, the consideration payable to New Energy upon closing of the transaction will now be A$2.8 million in cash, rather than the originally agreed 10.5 million Fura shares to be issued to the Company over a 20-month period from closing

The parties have also agreed to extend the closing date of the agreement from 30 November 2018 to 28 February 2019, to allow for the satisfaction of the remaining conditions precedent, principally being a binding tax opinion from the tax authorities in Mozambique, and Ministerial approval. In the event that the Company has not obtained and supplied all the outstanding documents and approvals required for closing to occur on or before the closing date, Fura may exercise a unilateral right to extend the closing date until all conditions are met. Fura may also terminate the MRAA if the conditions precedents are not met by the closing date. 

Concurrently with the Amending Agreement, New Energy has also entered into a Loan Agreement (“Loan Agreement”) with Fura for the aggregate amount of A$2.8 million (the “Commitment”). In terms of the Loan Agreement, the Company will be able to draw down funds prior to completion of the MRAA, for purposes of settling any claims or disputes with Arena Investors, should this be required2 . Any funds drawn under the Loan Agreement will bear capitalised interest at 15% per annum and the loan is unsecured. Upon Fura closing the MRAA, the Loan Agreement will automatically terminate, and the payment of all accrued capitalised interest waived by Fura.

If the MRAA is terminated and closing did not occur under the MRAA, then all advances made by Fura to New Energy under the Loan Agreement will be repayable by New Energy with interest.

The Loan Agreement is conditional on Fura obtaining TSX Venture Exchange approval for the loan within 21 business days and any advance by Fura under the Loan Agreement is conditional on either (i) Arena withdrawing its Statutory Demand, or (ii) Arena agreeing to withdraw the Statutory Demand conditional upon receiving an amount of money from the Company not exceeding the amount of the Commitment.

Further conditions to advances being made under the Loan Agreement to the Company include warranties regarding solvency, no security being registered over the Company or its assets and the Company entering into the MRAA Amending Agreement.

The Company has also agreed to sell certain gemstone processing related plant and equipment to Fura for A$489,439.86 independently of the advances under Loan Agreement. These funds are expected to be received by the Company within 3 business days and are not repayable if the MRAA as amended is terminated in accordance with its terms.

New Energy Minerals Managing Director Bernard Olivier Commented: “The amendment to the Merger of Ruby Assets Agreement and the cash consideration was specifically re-negotiated due to the statutory demand received from Arena Investor and now places New Energy in an advantageous position in the dispute process. It is also particularly important as the Company enters the financing stage of its pilot plant development at the Caula Vanadium-Graphite project”.

“The board of New Energy would like to thank Fura for renegotiating the terms of the MRAA at the request of the Company”.

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