Cadence Minerals #KDNC – European Metals (AIM: EMH) – Funding Arrangement & Potential Strategic Partnership With CEZ.

Cadence Minerals (AIM/NEX: KDNC; OTC: KDNCY) is pleased to note the announcement published today by European Metals Holdings Limited (“European Metals” or “EMH”) that CEZ Group (“CEZ”), one of Central and Eastern Europe’s largest power utilities, has today conditionally agreed to provide a EUR 2 million finance facility by way of a convertible loan. CEZ is currently conducting due diligence on the European Metals and the Cinovec Lithium/Tin Project (“Cinovec”). The successful outcome of the due diligence process could see CEZ become European Metals’ largest shareholder and co-development partner for the Cinovec Project through conversion of the convertible note and subsequent additional investment.

Headquartered in the Czech Republic, CEZ is an established, integrated energy group with operations in a number of Central and Southeastern European countries and Turkey. CEZ’s core business is the generation, distribution, trade in, and sales of electricity and heat, trade in and sales of natural gas, and coal extraction. CEZ Group has 31,400 employees and annual revenue of approximately AUD 12 billion.

The largest shareholder of its parent company, CEZ a. s., is the Ministry of Finance of the Czech Republic with a stake of approximately 70%. The shares of CEZ a.s. are traded on the Prague and Warsaw stock exchanges and included in the PX and WIG-CEE exchange indices.

As one of the leading Central European power companies, CEZ intends to develop energy storage projects in the Czech Republic and in Central Europe which include energy storage and charging infrastructure and electricity supply, for users of electric vehicles.

Cadence holds approximately 19.1 percent of the equity in European Metals, which, through its wholly owned Subsidiary, Geomet s.r.o. (“Geomet”), controls the mineral exploration licenses awarded by the Czech State over Cinovec.

Funding Facility

The funding facility takes the form of a convertible loan (“Loan”). The key terms of the Loan are as follows:

• Principal amount: EUR 2 million.
• Maturity date: 31 December 2019.
• Interest rate: 7.5% per annum compounded annually.
• Conditions to Loan: The drawdown of the principal amount is subject to certain conditions, including entry into a pledge agreement (see below), and execution of a letter of intent pursuant to which the Company will, subject to applicable regulatory restrictions or the rules of any relevant stock exchange, grant exclusivity to CEZ until 31 December 2019 to carry out due diligence on the Company in respect of a potential acquisition of an interest in the Cinovec Project and/or Geomet.
• Use of funds: The Company shall use the Loan for the purposes of development of the Project.
• Conversion terms:
  • CEZ may elect to convert the principal amount to shares in the Company at any time up to and including the maturity date or in the case of an event of default by the Company or if there is a further financing of the Company.
  • Any conversion shares will be issued at the lower of EUR 0.24305337 (the volume weighted average price on AIM for the month of May 2019 converted to euros) and the actual share price at the time of conversion.
  • The number of conversion shares will be limited such that, inter alia, CEZ will not as a result hold a stake in the Company that would require CEZ to make a mandatory offer for the entire issued share capital of the Company or otherwise require the Company to seek shareholder approval for the purposes of the Australian Securities Exchange Listing Rule 7.1.
• Security: As a condition precedent to the provision of the Loan, the parties intend to enter into a pledge agreement in order to secure the obligations of the Company under the Loan agreement, subject to applicable regulatory restrictions or the rules of any relevant stock exchange. Such obligations will be secured for the benefit of CEZ up to EUR 3,000,000 by a pledge over the 76% ownership interest of European Metals (UK) Limited (“EMH UK”) in GEOMET s.r.o. (“Geomet”), including a related negative pledge and prohibition of transferring and/or encumbering any of the 76% ownership interest of EMH UK in Geomet as well as the 24% ownership interest of EMH UK in Geomet.
• Further financing: During the term of the Loan agreement, CEZ has the opportunity to participate in any further new equity and / or debt financing of the Company, subject to certain restrictions.
• Representations, warranties and covenants: The Company has given CEZ certain customary representations and warranties with respect to the Company and its subsidiaries. The Company also covenants, subject to certain exceptions, not to allow a change of control of EMH, EMH UK or Geomet, not to pay or declare any dividends, not to grant security over the group and not to merge, liquidate or cease operations of EMH, EMH UK or Geomet.
• The Loan agreement is legally binding on the parties and is subject to English law.

The full release can be found at: https://www.londonstockexchange.com/exchange/news/market-news/market-news-detail/EMH/14150225.html

Cadence CEO Kiran Morzaria commented:“That EMH are now in advanced discussions with utility giant CEZ as funding and development partners once again confirms the Cinovec project status as a key future battery grade lithium supplier to the European lithium market. Today’s announcement also provides further validation of our investment strategy into EMH, and we look forward to further developments.”

– Ends –

For further information:

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.

Forward-LookingStatements:

Certain statements in this announcement are or may be deemed to be forward-lookingstatements. Forward-lookingstatements are identified 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-lookingstatements reflect 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 keypersonnel 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-lookingstatements