Afri-Can Marine Minerals Corp. has signed an agreement with International Mining and Dredging Holding Ltd. (IMD) to resume diamond exploration on marine concession block J in Namibia. Upon completion of this exploration program, Afri-Can will be in a position to delineate diamond resources in compliance with the National Instrument 43-101 on block J.
The exploration program is planned in two phases. First, the company will carry out a geophysical survey totalling up to 3,100 lines per kilometre. Second, it will retrieve 319 large samples over the sampling target areas, features F, H and J. Work is scheduled to begin in the first half of 2006, and will continue for approximately six months. The final schedule and details for the program will be disclosed in the coming weeks.
IMD is an international marine mining contractor with state-of-the-art geophysical survey and sampling equipment. The parent company of IMD owns several marine exploration and mining vessels, including the mining vessel (mv) Ya Toyvo, which has been operating diamond mining projects successfully in Namibian territorial waters for over six years. The vessel designated to conduct the exploration program on block J is the mv Mare Oceano. The vessel has a gross tonnage of 2,033 tonnes and is equipped with DGPS positioning system as well as advanced survey and geotechnical equipment. The vessel will be equipped with a two-square-metre sampling tool and a dense media separation plant with a capacity of 10 tonnes per hour.
The salient features of the agreement are summarized below.
Afri-Can will charter the vessel and supervise the survey and sampling program. The complete survey and sampling program is estimated to cost approximately $2.5-million (U.S.). Afri-Can will pay for fuel consumption at the end of each month of vessel use. At the end of the sampling program, the remaining balance, after payment of mobilization fees and fuel costs, is estimated to be about $1.8-million (U.S.).
Upon completion of the sampling program, IMD will have the choice of requesting a cash payment, estimated at $1.8-million (U.S.), or choosing one of the following options:
option 1 — IMD will have the option of converting the remaining balance, increased by a
value of 40 per cent of the said balance, into shares of Afri-Can at a price equal
to the market value of Afri-Can’s shares on the same day as the notification
of the remuneration election by IMD. IMD shall also have the right to
appoint one director to the board of directors of Afri-Can. The amount to be
paid in shares under option 1 is estimated to be about $2.5-million (U.S.);
option 2 — IMD shall have the option to convert the remaining balance, increased by a value of 40 per cent of the said balance, into a new Namibian company (Newco) to be established, which will own 70 per cent of block J, which is presently owned by Afri-Can. IMD shall own 51 per cent and Afric-Can shall own 49 per cent of Newco. Under this option, block J would be owned 35.7 per cent by IMD, 34.2 per cent by Afri-Can and 30 per cent by Woduna Mining Holding (PTY) Ltd. Under this option, ownership of Afri-Can’s other concessions in Namibia would not be affected and would remain unchanged; andoption 3 — IMD shall have the option to convert the remaining balance, increased by a
value of 40 per cent of the said balance, into a direct 51-per-cent holding of the block J
joint venture. In the event that IMD elects option 3, Afri-Can shall have
the option to pay IMD the remaining balance in cash, excluding the 40-per-cent value added described in options 1 and 2 above. Afri-Can
shall have the obligation to complete the payment within 30 days after IMD’s
election notification date, but not earlier than 30 days after completion of
the prospecting work.
In the event that Afri-Can exercises its option to pay the remaining balance
in cash, the resulting ownership of block J would remain unchanged, with
Afri-Can at 70 per cent and Woduna Mining at 30 per cent. In the event
that Afri-Can does not exercise its option to pay the remaining balance in
cash, the resulting block J would be owned 51 per cent by IMD, 30 per cent by Woduna Mining and 19 per cent by Afri-Can. Ownership of Afri-Can’s other
concessions in Namibia would not be affected by option 3 and would remain
unchanged.
- option 1 — IMD will have the option of converting the remaining balance, increased by a
value of 40 per cent of the said balance, into shares of Afri-Can at a price equal
to the market value of Afri-Can’s shares on the same day as the notification
of the remuneration election by IMD. IMD shall also have the right to
appoint one director to the board of directors of Afri-Can. The amount to be
paid in shares under option 1 is estimated to be about $2.5-million (U.S.);
- option 2 — IMD shall have the option to convert the remaining balance, increased by a value of 40 per cent of the said balance, into a new Namibian company (Newco) to be established, which will own 70 per cent of block J, which is presently owned by Afri-Can. IMD shall own 51 per cent and Afric-Can shall own 49 per cent of Newco. Under this option, block J would be owned 35.7 per cent by IMD, 34.2 per cent by Afri-Can and 30 per cent by Woduna Mining Holding (PTY) Ltd. Under this option, ownership of Afri-Can’s other concessions in Namibia would not be affected and would remain unchanged; and
- option 3 — IMD shall have the option to convert the remaining balance, increased by a
value of 40 per cent of the said balance, into a direct 51-per-cent holding of the block J
joint venture. In the event that IMD elects option 3, Afri-Can shall have
the option to pay IMD the remaining balance in cash, excluding the 40-per-cent value added described in options 1 and 2 above. Afri-Can
shall have the obligation to complete the payment within 30 days after IMD’s
election notification date, but not earlier than 30 days after completion of
the prospecting work.
In the event that Afri-Can exercises its option to pay the remaining balance
in cash, the resulting ownership of block J would remain unchanged, with
Afri-Can at 70 per cent and Woduna Mining at 30 per cent. In the event
that Afri-Can does not exercise its option to pay the remaining balance in
cash, the resulting block J would be owned 51 per cent by IMD, 30 per cent by Woduna Mining and 19 per cent by Afri-Can. Ownership of Afri-Can’s other
concessions in Namibia would not be affected by option 3 and would remain
unchanged.
The agreement with IMD contains a cancellation clause which stipulates that Afri-Can can cancel the agreement at any time before mobilization in consideration of a cancellation fee of $250,000 (U.S.) and at any time after mobilization in consideration of $250,000 (U.S.) and the fee for use of the vessel, which is calculated from the number of days that the vessel was working on the sampling program.
The agreement is subject to the approval of the payment options by the shareholders of Afri-Can at their annual general meeting to be held on Feb. 23, 2006. In the event that Afri-Can’s shareholders do not grant the approval of the payment options and that IMD does not successfully acquire new additional offshore exploration and prospecting licences in Namibia on or before Feb. 23, 2006, IMD shall have the right to cancel the agreement.
The existing joint venture agreement between Afri-Can and Woduna Mining shall remain in force unless renegotiated by the parties involved. The joint venture agreement stipulates that Afri-Can is the operator and manager of the exploration and development programs on the concession block J. It also stipulates that, in the event that block J becomes a commercial mining lease, Afri-Can, and if applicable, IMD, shall be reimbursed their full investment with interest before Woduna can receive its 30-per-cent share of the net profit. As of Aug. 31, 2005, Afri-Can’s exploration and development investment on the block J amounted to $3.4-million (Canadian).
The agreement is subject to the approval of Canadian regulatory authorities.
Pierre Leveille, president and chief executive officer of Afri-Can, stated, “We are pleased with this agreement as it enables Afri-Can to resume exploration on its most prospective marine diamond area with one of the leading marine mining contractors.”
