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Mkango Resources Ltd (2)
Symbol MKA
Shares Issued 268,453,574
Close 2024-08-16 C$ 0.115
Market Cap C$ 30,872,161
Recent Sedar Documents

Mkango Resources raises 1.25 million British pounds

2024-08-21 10:13 ET - News Release

Mr. William Dawes reports

MKANGO RAISES POUNDS STERLING1.25M (C$2.19M) FROM EXISTING SHAREHOLDERS AND IN ADDITION, EUROS0.20M (C$0.30M) FROM EIT RAWMATERIALS TO ADVANCE ITS PORTFOLIO OF ADVANCED STAGE STRATEGIC RARE EARTH ASSETS

Mkango Resources Ltd. has conditionally raised gross proceeds of 1.25 million British pounds (approximately $2.19-million) through the issuance, on a private placement basis, of 25 million units of the company at a price of five pence per unit (approximately 8.8 cents). A unit comprises one common share of the company and one warrant. Each warrant will entitle the holder to acquire one common share at a price of seven pence per common share for a period of three years following the closing of the subscription. EIT RawMaterials GmbH will provide financing of 200,000 euros ($302,000) and receive a 5.7-per-cent interest in Mkango Polska sp zoo, currently a 100-per-cent-held subsidiary of Mkango. EIT RawMaterials's interest in Mkango Polska is convertible into common shares of Mkango by no later than Nov. 30, 2024, or such later time as the parties may agree in writing at the prevailing market price of Mkango shares (subject to a minimum price of 11.5 cents per Mkango share) through put and call options exercisable by either Mkango or EIT RawMaterials.

Highlights

  • Mkango Resources has conditionally raised gross proceeds of 1.25 million British pounds ($2.19-million) through a direct company subscription from existing shareholders.
  • EIT RawMaterials will, subject to the approval of the TSX Venture Exchange, provide additional financing of 200,000 euros ($302,000) and receive a 5.7-per-cent interest in Mkango Polska, currently a 100-per-cent held subsidiary of Mkango developing the Pulawy rare earth separation project in Poland, which will finance commencement of process optimization for the Songwe Hill rare earths project in Malawi, a future source of mixed rare earth carbonate feed for the Pulawy project.
  • EIT RawMaterials is an impact investor and provides strategic support to start up and scale up projects across metals and minerals value chain. EIT RawMaterials was established in 2015 to develop raw materials into a major strength for Europe by driving innovation, education and entrepreneurship. EIT RawMaterials is the acting legal entity of the Knowledge and Innovation Community EIT RawMaterials, comprising approximately 300 members from industry, university and research and development in the raw materials sector collaborating with the European Institute of Innovation and Technology, co-funded by the European Union, and mandated to lead the European Raw Materials Alliance.
  • Last month's signing of the mine development agreement (MDA) for the Songwe project and the opportunity to progress process optimization through the investment by EIT RawMaterials enhance options for the Songwe and Pulawy projects in conjunction with the continuing strategic review.
  • In parallel, discussions continue with potential strategic investors, project finance providers, grant funding bodies and other sources to finance recycling scale-up opportunities and further technology rollout.
  • Use of proceeds from the subscription include the acquisition of additional equipment for the 2025 commercial development of rare earth magnet recycling operations at Tyseley Energy Park in Birmingham, United Kingdom, and at Pforzheim, Germany, by HyProMag Ltd. and HyProMag GmbH, respectively, in addition to working capital.
  • The company continues to put a strong focus on cost-cutting initiatives to conserve working capital in order to advance the company's assets, and executive management have agreed to continue the salary reductions and bonus scheme announced on May 10, 2024.

William Dawes, chief executive of Mkango, stated: "In light of progress being made by HyProMag as it progresses towards commercialization of rare earth magnet recycling in the U.K. [United Kingdom] and Germany and completion of the USA feasibility study and with the recent signing of the mine development agreement for Songwe, existing shareholders were happy to continue to support the company with further investment at a minimal discount to prevailing prices. Furthermore, the investment by EIT RawMaterials further highlights the strategic importance of Songwe and Pulawy to the strengthening of rare earth supply chains in Europe and beyond.

''Since obtaining the MDA for Songwe last month, we now believe there is additional value to be unlocked from both Songwe and Pulawy which is not reflected in our current market capitalization and will be considered in our review of strategic options for the project. Nevertheless, our current focus remains on advancing our recycling business to commercial production -- the see-through valuation for Mkango's interest in Maginito implied by the Cotec investment alone was [15 million British pounds] in March, 2023, with significant progress made by Maginito since then."

The subscription

The issue price equates to a discount of 4 per cent and 22.1 per cent to the trailing five-day volume-weighted average price (VWAP) of Mkango's shares on the AIM (Alternative Investment Market) and the TSX-V, respectively.

The subscription is expected to close on or around Sept. 5, 2024, and is subject to the receipt of all necessary approvals, including the approval of the TSX-V, and admission of the subscription shares to trading on the AIM.

The 25 million subscription shares will rank pari passu with the company's existing shares and application will be made for the subscription shares to be admitted to trading on the AIM. It is expected that admission will become effective and dealings in the subscription shares will commence at 8 a.m. on or around Sept. 5, 2024. The subscription shares and Mkango shares issuable pursuant to exercise of the warrants will be subject to a statutory hold period in Canada expiring on the date that is four months and one day from issuance of the subscription shares and warrants and will also be listed for trading on the TSX-V, provided that approval of such listing from the TSX-V is obtained.

In accordance with the disclosure guidance and transparency rules (DTR 5.6.1R), the company hereby notifies the market that, immediately following admission of the subscription shares, its issued and outstanding share capital will consist of 293,453,574 Mkango shares. The company does not hold any shares in treasury. Shareholders may use this figure as the denominator for the calculations by which they will determine if they are required to notify their interest in or a change to their interest in the company under the Financial Conduct Authority's disclosure and transparency rules.

In connection with the subscription, Mkango has agreed to pay, at completion of the subscription, commissions of 5 per cent in cash and 5 per cent in non-transferable broker warrants to Jub Capital Management LLP on funds raised by Jub Capital. The broker warrants will have a term of three years from issue and an exercise price of five pence each (approximately 8.8 cents). The total number of broker warrants to be issued on completion of the subscription is 1.25 million. Payment of the commissions (and issuance of the broker warrants) to Jub Capital is subject to acceptance of the TSX-V. The Mkango shares issuable pursuant to exercise of the broker warrants will be subject to a statutory hold period in Canada expiring on the date that is four months and one day from issuance of the broker warrants.

The EIT RawMaterials investment

In addition to the subscription, Mkango Polska will, subject to TSX-V approval, receive further financing of 200,000 euros from EIT RawMaterials. EIT RawMaterials is a European innovation initiative that aims to develop raw materials into a major strength for Europe. It focuses on responsible sourcing, sustainable materials and circular societies for a carbon-neutral future.

This financing will be used to optimize the chemical and physical properties of the raw material, specifically mixed rare earth carbonate sourced from Songwe Hill in Malawi, in preparation for the production of rare earth oxides at the planned Pulawy project in Poland.

The financing is structured as a combination of equity and grant funding. EIT RawMaterials will be issued with six new shares in Mkango Polska resulting in a 5.7-per-cent interest in Mkango Polska for 300 Polish zloty. Concurrently, a grant of 200,000 euros will be awarded to Mkango Polska by EIT RawMaterials. Of this grant, 150,000 euros is payable immediately and 50,000 euros is payable upon final approval of the final project report scheduled by no later than June 30, 2025.

A put and call agreement has been entered into between EIT RawMaterials and Mkango, whereby both the equity investment and grant can be converted, subject to TSX-V approval, at either party's option into Mkango shares no later than Nov. 30, 2024, or such later time as the parties may agree in writing.

The number of Mkango shares to be issued to EIT RawMaterials shall be determined by dividing the sum of 200,000 euros and 300 Polish zloty converted to Canadian dollars by the closing price of a share of Mkango on the TSX-V on the day before the date of conversion, subject to a minimum share price of 11.5 cents.

About Mkango Resources Ltd.

Mkango is listed on the AIM and the TSX-V. Mkango's corporate strategy is to become a market leader in the production of recycled rare earth magnets, alloys and oxides through its interest in Maginito Ltd., which is owned 79.4 per cent by Mkango and 20.6 per cent by Cotec Holdings Corp., and to develop new sustainable sources of neodymium, praseodymium, dysprosium and terbium to supply accelerating demand from electric vehicles, wind turbines and other clean energy technologies.

Maginito holds a 100-per-cent interest in HyProMag and a 90-per-cent direct and indirect interest (assuming conversion of Maginito's convertible loan) in HyProMag GmbH, focused on short-loop rare earth magnet recycling in the United Kingdom and Germany, respectively, and a 100-per-cent interest in Mkango Rare Earths U.K. Ltd., focused on long-loop rare earth magnet recycling in the United Kingdom through a chemical route.

Maginito and Cotec are also rolling out HyProMag's recycling technology into the United States through the 50/50-owned HyProMag USA LLC joint venture company. HyProMag is also evaluating other jurisdictions and recently launched a collaboration with Envipro on rare earth magnet recycling in Japan.

Mkango also owns the advanced-stage Songwe Hill rare earth project; an extensive rare earth, uranium, tantalum, niobium, rutile, nickel and cobalt exploration portfolio in Malawi; and the Pulawy rare earth separation project in Poland.

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