TIDMKDNC
RNS Number : 9314K
Cadence Minerals PLC
31 August 2023
Cadence Minerals Plc
("Cadence Minerals", "Cadence", or "the Company")
Sonora Lithium Investment Update
Cadence holds an interest in the Sonora Lithium Project via a
30% stake in the joint venture interests in each of Mexilit S.A. de
CV ("Mexilit") and Minera Megalit S.A. de CV ("Megalit").
Mexilit and Megalit form part of the Sonora Lithium Project (the
"Project"). The Sonora Lithium Project consists of nine granted
concessions. Two of the concessions (La Ventana, La Ventana 1) are
owned 100% by subsidiaries of Ganfeng Lithium Group Co., Ltd
("Ganfeng"). El Sauz, El Sauz 1, El Sauz 2, Fleur and Fleur 1
concessions are owned by Mexilit S.A. de C.V. ("Mexilit"), which is
owned 70% by Ganfeng and 30% by Cadence. The Buenavista and San
Gabriel concessions are owned by Megalit, which is owned 70% by
Ganfeng and 30% by Cadence.
Ganfeng has been developing the Project, consisting of an open
pit mine and lithium chemical product processing facility in
Sonora, Mexico. The principal planned lithium product for the
Project is lithium hydroxide.
As previously announced by Cadence. In April 2022 and May 2023,
the Mexican Government approved amendments to its Mining Law (the
"Mining Law Reform"), which prohibited lithium concessions,
declared lithium as a strategic sector and granted the exclusive
right to engage in lithium mining operations to a state-owned
entity. The Mining Law Reform is not supposed to apply to
pre-existing concessions, including those held by the Mexilit and
Megalit. Ganfeng's and Cadence's position is that these reforms
cannot impact the Project's concessions because they were granted
prior to the enactment of the Mining Law Reform.
This is consistent with the terms of the Constitution of Mexico,
which, among other principles and rights, recognizes the principles
of legality and non-retroactivity of laws. Guided by the principles
of good faith, cooperation, and mutual benefit, Ganfeng has been
proactively engaging with the Mexican Government in general and
with the Secretary of Economy in particular, regarding a potential
collaboration on the Sonora Project while respecting Ganfeng and
its subsidiaries rights (including those subsidiaries 30% owned by
Cadence). Ganfeng continues to seek a mutually beneficial
resolution. As of now, no agreement has been reached among the
Company, Ganfeng and the Mexican Government concerning this
potential collaboration.
As the operator of the Project, including the concessions held
by Mexilit and Megalit, Ganfeng's ability to develop the Project is
based on a series of concessions granted in accordance with Mexican
law and held by three controlled subsidiaries of the Ganfeng
incorporated in Mexico (the "Mexican Subsidiaries").
While Ganfeng was holding discussions with the Secretary of
Economy, the General Directorate of Mines ("DGM") initiated a
review of nine of the lithium concessions held by the Mexican
Subsidiaries, including the lithium concessions including the
concessions owned by Mexilit and Megalit.
According to the DGM, if the Mexican Subsidiaries failed to
submit sufficient evidence within the specified timeframe to prove
that they had complied with minimum investment obligations for the
development of lithium concessions in 2017-2021, there was a risk
of cancellation of the above-mentioned lithium concessions.
As of May 2023, Mexlait and Megalit had submitted extensive
evidence of their compliance with the minimum investment
obligations of the above-mentioned lithium concessions in a timely
manner. However, the DGM issued a formal decision notice to the
Mexican Subsidiaries in August 2023, indicating that nine lithium
concessions were cancelled, which include those owned by Mexilit
and Megalit.
The lithium concessions' cancellations issued by the DGM are not
final and are subject to ongoing appeals. Ganfeng and Cadence
believe that the Mexican Subsidiaries have complied with their
minimum investment obligations, as required by Mexican law. Indeed,
the mine development investment by the Mexican Subsidiaries has
significantly exceeded the minimum investment obligations, and the
Mexican Subsidiaries regularly submitted to the DGM annual reports
for the 2017-2021 periods detailing their operations within the
prescribed period annually. The Mexican Government did not raise
any objections until it recently notified Mexican Subsidiaries that
the minimum investment obligations were allegedly not met, and it
took action to cancel the lithium concessions.
Moreover, Ganfeng and Cadence's position is that the resolutions
cancelling the concessions violate both Mexican law and
international law as they are arbitrary, unsubstantiated in both
fact and law and infringe upon the Company's, Ganfeng's and its
Subsidiaries' fundamental due process rights. Therefore, Ganfeng
and the Mexican Subsidiaries have filed administrative review
recourses before the Secretary of Economy against the
aforementioned resolutions.
Impact on the Company
The lithium concessions' cancellations issued by the DGM are not
final. Depending on the progress of Ganfeng's further actions and
the outcome of the above-mentioned matters, whether cancellations
will be revoked or maintained in place and the scope of the
concessions affected are still uncertain.
Cadence's investment into the Sonora Lithium project is circa
GBP3.89 million. The total value of Cadence's portfolio of assets
is circa GBP41.15 million, including GBP28.01 million attributed to
our 30% stake in the Amapa Iron Ore project.
Ganfeng's interim results announcement published on 29 August
2023 discussed these developments as part of their post-balance
sheet analysis. Therefore, there is still uncertainty about the
impact on Cadence's investment. Ganfeng is pursuing various
remedies, including administrative review recourses to challenge
the DGM's resolutions. If necessary, Ganfeng will resort to
additional remedies under Mexican or international law.
Cadence will continue to liaise with our joint venture partners
on a regular basis and ensure within the limits of the join venture
agreement that the matter is given the utmost attention and that
regulatory requirements are fulfilled in a timely manner.
Cadence CEO Kiran Morzaria commented: "While on the face of it,
this development further delays the prospect of a return from the
Mexalit and Megalit concessions for Cadence shareholders, it is
important to remember that any opportunity to grow value at Sonora
would only start to accrue once mining commences in the concessions
owned by Mexilit, which is nine years into the mine life. In the
board's opinion, substantially more value is to be had from our 30%
stake in the Amapa Iron Ore Project once it is brought back into
production."
"I look forward to reporting on further progress at Amapa."
For further information
contact:
Cadence Minerals plc +44 (0) 20 3582 6636
Andrew Suckling
Kiran Morzaria
WH Ireland Limited (NOMAD
& Broker) +44 (0) 207 220 1666
James Joyce
Darshan Patel
Brand Communications +44 (0) 7976 431608
Public & Investor Relations
Alan Green
Qualified Person
Kiran Morzaria B.Eng. (ACSM), MBA, has reviewed and approved the
information contained in this announcement. Kiran holds a Bachelor
of Engineering (Industrial Geology) from the Camborne School of
Mines and an MBA (Finance) from CASS Business School.
Cautionary and Forward-Looking Statements
Certain statements in this announcement are or may be deemed to
be forward-looking statements. Forward-looking statements are
identi ed by their use of terms and phrases such as "believe",
"could", "should", "envisage", "estimate", "intend", "may", "plan",
"will", or the negative of those variations or comparable
expressions including references to assumptions. These
forward-looking statements are not based on historical facts but
rather on the Directors' current expectations and assumptions
regarding the Company's future growth results of operations
performance , future capital, and other expenditures (including the
amount, nature, and sources of funding thereof) competitive
advantages business prospects and opportunities. Such
forward-looking statements re ect the Directors' current beliefs
and assumptions and are based on information currently available to
the Directors. Many factors could cause actual results to differ
materially from the results discussed in the forward-looking
statements, including risks associated with vulnerability to
general economic and business conditions, competition,
environmental and other regulatory changes actions by governmental
authorities, the availability of capital markets reliance on key
personnel uninsured and underinsured losses and other factors many
of which are beyond the control of the Company. Although any
forward-looking statements contained in this announcement are based
upon what the Directors believe to be reasonable assumptions. The
Company cannot assure investors that actual results will be
consistent with such forward-looking statements.
The information contained within this announcement is deemed by
the Company to constitute Inside Information as stipulated under
the Market Abuse Regulation (E.U.) No. 596/2014, as it forms part
of U.K. domestic law under the European Union (Withdrawal) Act
2018, as amended. Upon the publication of this announcement via a
regulatory information service, this information is considered to
be in the public domain.
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