TIDMJADE

RNS Number : 6350F

Jade Road Investments Limited

19 July 2021

19 July 2021

RNS

JADE ROAD INVESTMENTS LIMITED

(" Jade Road " or the " Company ")

Investment update:

Future Metal Holdings: Competent Persons Report (CPR)

SRK Consulting Report Published

Jade Road Investments Limited, the London-quoted, pan-Asian diversified investment vehicle focused on providing shareholders with attractive uncorrelated, risk-adjusted long-term returns, is pleased to announce an investment update, and confirms that the full SRK report dated March 2021 ("CPR") on Future Metal Holdings ("FMHL" or the "Quarry") has been published on https://jaderoadinvestments.com/home and will be published on https://futuremetalholdings.com in due course. Jade Road has an 85% shareholding in Future Metal Holdings Limited.

Highlights:

-- The CPR confirms a JORC Code Compliant Mineral Resources of the Zhuangpeng Mine of 35.95 million tonnes ("Mt") with an average grade of 20.74% dolomite oxide ("MgO") (Measured); 81.40Mt with an average grade of 20.48% MgO (Indicated); and 31.81Mt with an average grade of 20.61% MgO (Inferred) (see resources table below)

   --    The Quarry has already obtained all necessary operational licences and permits 

-- The CPR, incorporating the expanded ("3Mt") production rate, estimates a net present value of the asset is RMB487.47 million (c.USD75.5 million) by using the discounted cash flow method with a 9% discount rate. The assumptions are also set out below. The internal rate of return is 28.55%. Jade Road applied a further 17% discount to the independent valuation conducted by SRK and as of 31st of December 2020, the asset was valued at USD50.4m in the portfolio

   --    The Quarry is currently in production at a rate of 300kt pa 

Summary of the Report:

Geologically, the dolomite quarry project ("Quarry") is located approximately 40 kilometres ("km") east of Xi County, 90km northwest of Linfen City, or 220km southwest of Taiyuan, the capital city of Shanxi Province, P.R. China. The main ore mineral is dolomite.

Mining and stripping operations are conducted under conventional contract mining, and environmental risk is well managed under Chinese national requirements. The estimated ore loss rate and dilution rate are both 5%, respectively. As of 31 December 2020, at a cut-off grade of 19% dolomite oxide ("MgO"), the JORC Code Compliant Measured, Indicated and Inferred Mineral Resources of the Zhuangpeng Mine were:

   --    Measured:35.95 million tonnes ("Mt") with an average grade of 20.74% MgO; 
   --    Indicated: 81.40Mt with an average grade of 20.48% MgO; and 
   --    Inferred: 31.81Mt with an average grade of 20.61% MgO, respectively . 

Based on the parameters mentioned above, as of 31 December 2020, the Quarry has a Proved and Probable Reserves of 113Mt, out of approximately 149Mt of dolomite as calculated by Measured, Indicated and Inferred Resource.

SUMMARY OF RESERVES AND RESOURCES BY STATUS

 
 Category       Gross                             Net attributable (85%             Operator 
                                                   to Jade Road) 
 Ore/Mineral    Tonnes        Grade   Contained   Tonnes        Grade   Contained 
  Reserves       (millions)    MgO     Metal       (millions)    MgO     Metal 
  per asset                    (%)                               (%) 
               ------------  ------  ----------  ------------  ------  ----------  ------------- 
                                                                                    Future Metal 
 Proved         34.89         19.70   n/a         29.59         19.70   n/a          Holdings 
               ------------  ------  ----------  ------------  ------  ----------  ------------- 
                                                                                    Future Metal 
 Probable       78.51         19.47   n/a         66.58         19.47   n/a          Holdings 
               ------------  ------  ----------  ------------  ------  ----------  ------------- 
     Subtotal   113.40        19.54   n/a         96.16         19.54   n/a 
               ------------  ------  ----------  ------------  ------  ----------  ------------- 
 
 Mineral 
  Resource 
  per asset 
               ------------  ------  ----------  ------------  ------  ----------  ------------- 
                                                                                    Future Metal 
 Measured       35.95         20.74   n/a         30.49         20.74   n/a          Holdings 
               ------------  ------  ----------  ------------  ------  ----------  ------------- 
                                                                                    Future Metal 
 Indicated      81.40         20.48   n/a         69.03         20.48   n/a          Holdings 
               ------------  ------  ----------  ------------  ------  ----------  ------------- 
                                                                                    Future Metal 
 Inferred       31.81         20.61   n/a         26.97         20.61   n/a          Holdings 
               ------------  ------  ----------  ------------  ------  ----------  ------------- 
     Subtotal   149.2         20.57   n/a         126.49        20.57   n/a 
               ------------  ------  ----------  ------------  ------  ----------  ------------- 
 
 

Source: SRK

The Quarry has already all necessary operational licenses and permits, the most important being the Mining Licence and the Work Safety Permit which are valid until March 2023 and August 2023, respectively. In December 2020, the Quarry also obtained approval of its onsite environmental facilities from the local Ministry of Ecology and Environment.

The licence covers an area of 2.3 square kilometres and allows a mining capacity of 0.3 million tonnes per year ("Mtpa"). The designed capacity, which the Directors understand is feasible upon expansion, is 3Mtpa. The expected mine life is 40 years with a two-year construction period for the expansion design.

The net present value of the asset is RMB487.47 million (c.USD75.5 million) by using the discounted cash flow method with a 9% discount rate (the assumptions are set out below). The internal rate of return is 28.55%.

Risks regarding geology and resource, mining, processing, environment and capital and operating costs are considered by SRK to be relatively low since the Quarry is already in production stage. Finally, the Directors believe that enhancing the product market and sales would be the key to achieve better economic goals.

Jade Road applied a further 17% discount to the independent valuation conducted by SRK and as of 31(st) of December 2020, the Company valued the asset on its Balance Sheet at USD50.4m.

Economic Assumptions for the expanded plant, as of 31 December 2020

 
 Item                                               Unit          Amount 
 Ore Reserve 
 Proved + Probable Ore Reserves (JORC 
  Code 2012)                                        Mt            113.40 
                                                   ------------  ------- 
 
   Production Plan 
 Dolomite Production Rate                           Mtpa          3.0 
                                                   ------------  ------- 
 Qualified* Dolomite Yield                          %             80 
                                                   ------------  ------- 
 Unqualified** Dolomite Yield                       %             20 
                                                   ------------  ------- 
 Saleable Wall Rock Yield                           %             92 
                                                   ------------  ------- 
 Construction Period Proposed                       year          2 
                                                   ------------  ------- 
 Life of Mine                                       year          38 
                                                   ------------  ------- 
 Calculation period                                 year          40 
                                                   ------------  ------- 
 
   Economy 
 Construction Expenditure                           M'RMB         286.50 
                                                   ------------  ------- 
 Working Capital                                    M'RMB         46.64 
                                                   ------------  ------- 
 Sustained Capital (Project Investment 
  Base)                                             %             2.5 
                                                   ------------  ------- 
 Stripping Cash Operating Cost                      RMB /t        7.69 
                                                   ------------  ------- 
 Mining and Crushing Cash Operating Cost            RMB/t         12.37 
                                                   ------------  ------- 
 Dolomite Load and Haul Cost on Site                RMB/t         1.00 
                                                   ------------  ------- 
 Wall Rock Load and Haul Cost on Site               RMB/t         1.50 
                                                   ------------  ------- 
 Depreciation and Amortization                      M'RMB/year    19.56 
                                                   ------------  ------- 
 G&A                                                M'RMB/year    33.01 
                                                   ------------  ------- 
 Financial Expenses                                 M'RMB/year    1.96 
                                                   ------------  ------- 
 Sales Expenses (Sales Revenue Base)                %             1.00 
                                                   ------------  ------- 
 Price of Qualified Dolomite (including 
  VAT)                                              RMB/t         75.00 
                                                   ------------  ------- 
 Price of Unqualified Dolomite (including 
  VAT)                                              RMB/t         20.00 
                                                   ------------  ------- 
 Price of Saleable Wall Rock (including 
  VAT)                                              RMB/t         20.00 
                                                   ------------  ------- 
 Resource Tax (sales revenue based)                 %             5.00 
                                                   ------------  ------- 
 Value-added Tax (VAT)                              %             13.00 
                                                   ------------  ------- 
 City Maintenance and Development Tax 
  (payable VAT based)                               %             7.00 
                                                   ------------  ------- 
 Educational-surtax and Local Educational-surtax 
  (payable VAT based)                               %             5.00 
                                                   ------------  ------- 
 Corporate Tax Rate (grass profit based)            %             25.00 
                                                   ------------  ------- 
 Discount Rate                                      %             9 
                                                   ------------  ------- 
 

Exchange rate as of 14(th) July: 1RMB-0.15$USD

*Qualified Dolomite: Carbonate mineral sold as raw material for magnesium smelting.

** Unqualified Dolomite: Carbonate mineral unsuitable for smelting and sold as building stone.

Production Schedule

 
      Item         Unit      Ramp-up Stage                    Production Stage 
                             2021       2022      2023      2024-2038   2039-2042   2043-2045 
                          ----------  -------  ----------  ----------  ----------  ---------- 
 Mined ore          kt        300       300       2,100       3,000       3,000       3,000 
                  ------  ----------  -------  ----------  ----------  ----------  ---------- 
 Stripping 
  rock              kt       7,300     9,700      7,900       7,000       6,500       3,230 
                  ------  ----------  -------  ----------  ----------  ----------  ---------- 
 Stripping          m3/ 
  ratio              m3      24.33     32.33      3.76        2.33        2.17        1.08 
                  ------  ----------  -------  ----------  ----------  ----------  ---------- 
 Ore and waste 
  rock in total     kt       7,600     10,000    10,000      10,000       9,500       6,230 
                  ------  ----------  -------  ----------  ----------  ----------  ---------- 
 Rock for 
  sale              kt        550      9,260      7,540       6,690       6,210       3,080 
                  ------  ----------  -------  ----------  ----------  ----------  ---------- 
 Qualified 
  dolomite 
  for sale          kt        240       240       1,680       2,400       2,400       2,400 
                  ------  ----------  -------  ----------  ----------  ----------  ---------- 
 Unqualified 
  dolomite 
  for sale          kt        60         60        420         600         600         600 
                  ------  ----------  -------  ----------  ----------  ----------  ---------- 
 
 Item              Unit                             Production Stage 
                  ------  ------------------------------------------------------------------- 
                           2046-2053    2054    2055-2056   2057-2058     2059        2060 
                  ------  ----------  -------  ----------  ----------  ----------  ---------- 
 Mined ore          kt       3,000     3,000      3,000       3,000       3,000       3,000 
                  ------  ----------  -------  ----------  ----------  ----------  ---------- 
 Stripping 
  rock              kt       1,500     1,200      1,000        700         400         200 
                  ------  ----------  -------  ----------  ----------  ----------  ---------- 
 Stripping          m3/ 
  ratio              m3       0.5       0.4       0.33        0.23        0.13        0.07 
                  ------  ----------  -------  ----------  ----------  ----------  ---------- 
 Ore and waste 
  rock in total     kt       4,500     4,200      4,000       3,700       3,400       3,200 
                  ------  ----------  -------  ----------  ----------  ----------  ---------- 
 Rock for 
  sale              kt       1,430     1,150       960         670         380         190 
                  ------  ----------  -------  ----------  ----------  ----------  ---------- 
 Qualified 
  dolomite 
  for sale          kt       2,400     2,400      2,400       2,400       2,400       2,400 
                  ------  ----------  -------  ----------  ----------  ----------  ---------- 
 Unqualified 
  dolomite 
  for sale          kt        600       600        600         600         600        5,400 
                  ------  ----------  -------  ----------  ----------  ----------  ---------- 
 

Future Metal Holdings Update:

During Q1 2020, the Quarry recommenced activities with the construction of a steel structure to enclose its stockpile site as well as the process of land hardening to comply with the local environmental requirements. The construction of both the land hardening and the enclosed structure was completed around the end of Q2 2020. Due to the two construction projects, production was suspended between April and May 2020. In line with the wide-ranging industrial activities in China, the Quarry resumed operations in June 2020.

In 2020, the Directors understand intense efforts were exerted to maximise the value of the project. In order to expand the Quarry's sales channels, the local team engaged a new contractor in 2021 to help expand the local networks and to facilitate the process of product selling to downstream customers.

With the appointment of the new contractor, it is intended that the Quarry's products will reach customers with a further geographical radius. Currently, all the mined dolomite is sold to mixing plants in the local region for construction purposes. The Directors also understand that the management team of the Quarry is in contact with external parties regarding a potential business collaboration of a highway construction project using dolomite and wall rock. Jade Road will continue to keep investors informed of project updates in this area. The Directors of Jade Road will also continue to focus on enhancing the asset's efficiency of operations and actively seeking potential or partial exits where possible.

John Croft, Executive Chairman of Jade Road, commented:

'We are very pleased to share the full SRK Report on Future Metal Holdings, one of Jade Road's main assets. The notable improvement in the Asset between 2019 and 2020 is mainly attributed to the effort made to substantially improve the Quarry from the completion of its external structure in 2019 to the different licences secured to comply with the latest environmental regulations in 2020. Furthermore, the production schedule shows a strong commitment to develop the different resources on site and the local Management Team is in constant interaction with external parties for potential business collaborations. Our objective remains to maximise the value of the asset whilst also positioning it for a possible monetisation event, which would ultimately benefit the Shareholders of Jade Road'.

FOR FURTHER INFORMATION, PLEASE CONTACT:

 
 Jade Road Investment Limited                 +44 (0) 778 531 5588 
 John Croft 
                                             --------------------- 
 
 Lionsgate Communications - Communications 
  Adviser                                     +44 (0) 779 189 2509 
                                             --------------------- 
 Jonathan Charles 
                                             --------------------- 
 
 Hybridan LLP - Corporate Broker               +44 (0)203 764 2341 
                                             --------------------- 
 Claire Noyce 
                                             --------------------- 
 
 WH Ireland Limited - Nominated Adviser       +44 (0) 20 7220 1666 
                                             --------------------- 
 James Joyce 
                                             --------------------- 
 James Sinclair Ford 
                                             --------------------- 
 

About Jade Road Investments Limited

Jade Road Investments Limited (Jade Road) is quoted on the AIM Market of the London Stock Exchange and is committed to providing shareholders with attractive uncorrelated, risk-adjusted long-term returns from a combination of realising sustainable capital growth and delivering dividend income.

The Company is focused on providing growth capital and financing to emerging and established Small and Medium Enterprises (SME) sector throughout Asia, well diversified by national geographies, instruments and asset classes. This vital segment of the economy is underserved by the traditional banking industry for regulatory and structural reasons.

The Company's investment manager, Harmony Capital, seeks to capitalise on its team's established investment expertise and broad networks across Asia. Through rigorous diligence and disciplined risk management, Harmony Capital is dedicated to delivering attractive income and capital growth for shareholders with significant downside protection through selectively investing in assets and proactively managing them.

Harmony Capital is predominately sourcing private opportunities and continues to create a strong pipeline of attractive income-generating assets from potential investments in growth sectors across Asia, including healthcare, fintech, hospitality, IT and property.

For further information, please visit the Company's website at https://jaderoadinvestments.com and follow the Company on Twitter (@JadeRoadInvest).

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July 19, 2021 02:00 ET (06:00 GMT)

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