Block Commodities Ltd: Agreement to Acquire Strategic Stake in South African Fertiliser Wholesale Distributor

The information communicated within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014. Upon the publication of this announcement, this inside information is now considered to be in the public domain.

14 March 2018

BLOCK COMMODITIES LIMITED

("Block Commodities" or the "Company")

Block Commodities Limited / Epic: BLCC / Sector: Mining

Agreement to Acquire Strategic Stake in South African Fertiliser Wholesale Distributor,

and divestment of Associate

Block Commodities Limited is pleased to announce that it has today entered into an agreement to acquire a strategic 21% equity stake in VIPA Holdings (Pty) Limited ("VIPA"), a South African wholesale distributer of quality fertiliser and speciality plant and animal nutrition products (the "Acquisition"). As one of the leading providers of fertilisers and raw animal feed materials to South Africa's agricultural industry, VIPA shares Block Commodities' business ethos of supporting farming communities, and as such will provide the Company with access to high quality and specialised agricultural products. The Acquisition, when completed, will form the procurement platform for the Company's strategy to develop commodity ecosystems in Africa based on blockchain technology, the initial such ecosystem being based on the Company's existing fertiliser business.

Acquisition Overview

• Block Commodities' 21% stake in VIPA will, on completion of the Acquisition, provide the Company with improved purchasing capabilities and access to the wholesale market for speciality fertilisers in South Africa and across the continent.

• The Acquisition will be effected by a combination of:

-          a subscription for new shares in VIPA; and

-          the purchase of existing shares in VIPA

by the Company.

• The consideration payable for the Acquisition is as follows:

-          a cash subscription of USD 150,000 for new ordinary shares to be issued by VIPA (the "Cash Subscription"); and

-          payment of the sum of USD 610,000 to existing shareholders of VIPA for the acquisition of existing shares in VIPA, to be satisfied by the allotment of 748,463,318 new ordinary shares in the capital of the Company (the "Consideration Shares").

• Completion of the Acquisition will be subject to, amongst other matters:

-          the completion of satisfactory due diligence by the Company into VIPA; and

-          all necessary and applicable third-party approvals having been obtained in all relevant jurisdictions to enable the parties to complete the Acquisition (including without limitation, any approvals required by the South African Reserve Bank and from all relevant and applicable competition, anti-trust or equivalent authorities with jurisdiction over the Acquisition).

Block Commodities Executive Chairman, Chris Cleverly, said "We are delighted to enter into this transaction with VIPA as it gives Block Commodities access to the wholesale market and revenues of the South African fertiliser market, as well as securing a significant relationship with an established procurement operation that will underpin our own trading business".

VIPA Chief Executive, David Smillie, said "The VIPA Approach is - We feed people.  VIPA is a highly organized and focused agricultural business that is exporting large volumes of what is termed beneficiated fertilizer products into Africa.  Based in Durban and with offices throughout South Africa, VIPA has the ability to provide first class trade execution services throughout the continent.  Entering into this agreement with Block Commodities will help guarantee the closure and completion of large scale Agricultural contracts and provide access for product to thousands of small scale farmers in the region.  VIPA and Block Commodities will also collaborate in the development of strategic software to help streamline logistics and payments from clients across Africa."

Background Information on VIPA Holdings (Pty) Limited

VIPA was founded in 2004 and has grown to be one of the top ten fertiliser traders in South Africa.  VIPA is at the forefront of product development in the plant nutrition and soil fertility business with its range of registered and approved natural raw material additives and coatings which can convert some of the large commodities such as Urea and MAP into more efficient products, realising improved results and cost savings for its clients.

In the year ending 28 February 2017, the unaudited turnover for VIPA was ZAR 177m. However, following the abrupt withdrawal from the market of a major international trading partner, VIPA reported a loss before interest, tax, depreciation and amortisation of ZAR 12.6m.  VIPA is expecting a significant improvement in trading performance for the financial year ending 28 February 2018.

Consideration Shares

The Consideration Shares which will, on issue, amount to 16.3% of the enlarged issued share capital of the Company, will be issued following the satisfaction of the conditions precedent outlined above.  Further information on the timing of the completion will follow in due course.  The Consideration Shares will rank pari passu with the existing ordinary shares.

Divestment

As a result of its negotiations with VIPA, Block Commodities has decided to focus on the wholesale market for speciality fertiliser products, as the board considers that this will offer greater opportunities for expansion of both businesses across the African continent.

Consequently, the Company has agreed with the vendors of Advanced Agricultural Holdings (Pty) Limited ("AAH") to unwind the investment made by the Company into AAH, which completed on 16 June 2017. In this context, the Company has therefore agreed to surrender its shareholding in AAH and the 221,601,740 shares issued to the AAH vendors as initial consideration will also be surrendered.  A further announcement will be made in due course once this process has been completed.

The Directors of the Company accept responsibility for the content of this announcement.

For further information, please contact:

About Block Commodities

Block Commodities' strategy is to maximise the value of African agricultural and other commodities through the deployment of blockchain technology. The resources will be linked through the vertical integration of primary industries down to consumers via blockchain platforms. Using blockchain's ability to dynamically incorporate all market participants into an efficient ecosystem, Block Commodities aims to facilitate the commercial operation of such ecosystems in the context of the agricultural production cycle.

In reclaiming the value lost in African agricultural and extractive industries through inefficient supply and distribution systems, Block Commodities will help African farmers raise productivity and secure better returns for produce. This is an important step in establishing African communities as significant future global agricultural producers. 

The Acquisition and development of a significant relationship with VIPA will directly assist Block Commodities in successfully implementing this strategic vision.