There is some doubt that might affect FDI into Congo (and NZC) until these laws become more clear or adjusted. Juts like whats been happening in Tanzania for the last 6 months.1
At the current state of play NZC owns 85% of the project. GICC the Congo partner owns 10% government 5%. This 85% could decrease to 80% of the project and also limit the upside if there is a super tax legislation that comes into play, hopefully it doesnt but I wouldn't hold my breath, they seem to be following in the tracks of our south american friends and once these dictators get an idea into there head…….
Now in addition to this there is also still the possibility of losing another 30% of the project through the MOA with Ivanhoe back in 2015. When I saw losing, NZC will be compensated as per below which would likely be a decent chunk of change. We already have satisfied the requirements of both part 1 and I would guess part 2 of that MOA, cant find an announcement confirming such, the terms are:
Key Terms of the Agreement with Ivanhoe are:
- Regal will be required to pay an Initial Signing Fee of USD100,000,
- Regal will be required to pay a non-refundable Subsequent Signing Fee of USD150,000, no later than the first anniversary of the signing of this agreement (“Effective Date”),
- By Regal expending the amounts referred to below (“Earn-In Expenditure”),
- Regal can earn 80% by expending USD3,000,000 expenditure by no later than 3 (three) years after the Effective Date (“First Earn-In”), and
- Regal can earn 90% by expending USD3,000,000 expenditure by no later than 2 (two) years after the First Earn-In (“Second Earn-In”).
Regal will have the option to acquire a further 8% at an agreed price.
Ivanhoe has the right within 1 (one) year of the Second Earn-In or the announcement of a Measured and Indicated Resource estimate (as classified by the Australian JORC guidelines) in excess of 500,000 tonnes of contained copper to Claw-Back up to 30% by paying 4 (four) times the total Earn-In Expenditure incurred by Regal (“Claw-Back Price”). The Claw–Back Price shall be reduced on a pro-rata basis should a Claw-Back Shareholding Interest of less than 30% be acquired.
In the event Ivanhoe exercises its Claw Back Right, Ivanhoe will be required to contribute to exploration and development costs on a pro-rata basis.
The MOA agreement is likely carried forward from Regal days to Nzuri days and that this option is still on the table for Ivanhoe. Currently NZC has proven 212kt of contained copper so it doesnt satisfy that requirement but this year could go a long way to changing that or even if indications are good Ivanhoe might take up there right of the 30%, within the second earn in expenditure clause.
In that situation NZC would be left holding 50% of the project with a 62.5% paying interest from free carried GICC/government. Are you aware of this MOA/Claw back option and given your workshop with Ivanhoe geologists do you have an opinion on whether they would likely take up this 30% claw back option?
On the positive side a tie up with Ivanhoe would likely have many positive benefits on the economics of the project such as shared infrastructure reducing capex/opex, it would bring a lot experience to the project during continued exploration and especially development which they seem to be lacking currently, perhaps the use of an existing SX-EW plant, reduced capital cost burden for Nzuri if a new build SX-EW goes ahead and the likelyhood that they would only look to take up the option if they are very confident of making big increases to the current resource base.
What are you thoughts on these matters……….
