Update re Temporary Suspension of IMLs
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26 April 2023
Capital Metals plc
("Capital Metals", the "Company" or the "Group")
Update re Temporary Suspension of Industrial Mining Licences
Capital Metals (AIM: CMET), a mineral sands company approaching mine development stage at the high-grade Eastern Minerals Project in Sri Lanka (the "Project"), provides the following update regarding the temporary suspension by the Geological Survey and Mines Bureau ("GSMB") of the Company's Industrial Mining Licences ("IMLs") referred to in Company announcements dated 12 December 2022, 10 February 2023, and 20 February 2023.
As previously announced, despite obtaining legal advice from Sri Lankan lawyers demonstrating that the ownership structure of the Company's Sri Lankan subsidiary, Damsila Exports (Pvt) Limited ("Damsila"), which holds the IMLs, complied with all relevant Sri Lankan laws, following engagement with the GSMB, the Company expeditiously divested 60% of Damsila to a Sri Lankan national.
Despite having received written evidence on several occasions from Damsila of these changes in ownership structure having taken effect, the GSMB has neither lifted the suspension of the IMLs nor provided an indication of when or on what basis it will do so. Management continues to engage with GSMB officials to seek to understand the department's reasoning; however, to date no explanation for the continued unjust suspension has been forthcoming.
Accordingly, the Company, in consultation with its Sri Lankan and international legal advisers, has formally written to the GSMB and various high-level officials in Sri Lanka reminding the agency of the consequences of its actions and reserving the Company's rights in relation to potential illegal activities and potential breaches of international treaty obligations. The Board's objective is to resolve the matter in a timely and amicable manner; however, the Company has advised the GSMB that it is ready to pursue all actions to protect the interests of its shareholders in the Company, which has invested US$11 million in exploration and development of the Project between 2017 and 2022.
The Company continues to have positive dialogue with a potential funding and offtake partner which has made it clear to the Company that once the suspension of the IMLs has been lifted it will seek to conclude long form agreements expeditiously to fund the Project into production. Further updates will be announced as this process progresses.
Greg Martyr, Chairman of Capital Metals, commented:
"We continue to seek to work with the GSMB to resolve this matter as proactively as possible. We are encouraged by the support of many individuals within the GSMB for our activities but remain concerned about certain governance practices within that agency that are allowing the unwarranted and prolonged suspension of the IMLs. We are also receiving strong support from our approaches to high-level officials from the Sri Lankan and UK governments. We are hopeful that logic will prevail within the GSMB to enable us to build the Project which, with a capital cost of over US$80 million, will provide significant benefits to Sri Lanka through much needed foreign investment, increased employment opportunities and export revenues.
We are reassured by the progress of financing discussions for the Project which we are confident could be concluded soon after the suspensions are lifted."
For further information, please visit www.capitalmetals.com or contact:
Capital Metals plc
Michael Frayne (CEO)
James Mahony (CFO)
Via Vigo Consulting
Vigo Consulting (Investor Relations)
Ben Simons / Peter Jacob
+44 (0)20 7390 0234
SPARK Advisory Partners (Nominated Adviser)
Neil Baldwin / James Keeshan
+44 (0)20 3368 3554
Jonathan Evans / Oliver Stansfield
+44 (0)20 7100 5100
About Capital Metals
Capital Metals plc is a British company listed on the London Stock Exchange and one of only a few foreign investors in Sri Lanka's mining industry. After investing US$11 million in exploration and development activities including detailed environmental assessments between 2017 and 2022, the Company's Sri Lankan subsidiary, Damsila Exports (Pvt) Limited, was issued an initial two licences in August 2022 to mine heavy mineral sands in the Eastern Province, containing industrial minerals including ilmenite, rutile, zircon, and garnet.