25th Mar 2008 07:01
Aricom PLC25 March 2008 Press Release 25 March 2008 Aricom plc ("Aricom", "the Company", or "the Group") Strategic Acquisitions of Extensions to Aricom Projects Aricom (LSE: ORE, OREW), the Anglo-Russian developer of mineral resources,announces that it has acquired options to purchase two further licences whichwould provide significant natural expansion potential to the existing K&S andGarinskoye projects: • the Garinskoye Flanks licence, which covers an area of 3,530km(2) immediately surrounding Aricom's Garinskoye licence; and • the Kostenginskoye licence, which covers an area located c.24km to the south of Aricom's K&S project. Both of these licences form natural expansions to existing Aricom projects. Anextensive exploration programme is scheduled to commence shortly. As is normalpractice, the exercise of the options and the completion of the acquisitions isconditional principally on the consent of the Russian Federal Anti-MonopolyService, which the Company and the sellers will be seeking to obtain as soon aspracticable. Transaction Summary Aricom UK Limited ("Aricom UK"), a wholly owned subsidiary of the Company, hasentered into option agreements to acquire the Cypriot companies which indirectlyhold the two licences. The shareholders of these Cypriot companies are notrelated parties and are not existing Aricom shareholders. The total consideration (calculated on the basis described below) for bothassets is US$80m, comprising US$40m for each asset. As consideration for thegranting of the options, Aricom UK is today making two cash payments ofUS$22.5m. Consideration for the exercise of each option comprises the allotmentand issue and/or transfer of 10,937,500 (21,875,000 in total) ordinary shares of0.1p each in the capital of the Company ("Consideration Shares") credited asfully paid to the vendors and having an aggregate value of approximately US$35m(calculated using a price of UK£0.80 per Consideration Share and an exchangerate of £1.00:US$2.00). 50% of the Consideration Shares will be subject to alock-in for 6 months and the remaining 50% will be subject to a 12 monthlock-in. Project Summary Licence area (km Category A/B/C1/C2 Category No of orebodies (2)) (mt) P1/P2 (mt)Garinskoye Flanks 3,530 6.3 975 5Kostenginskoye 24 163.9 100 1TOTAL 170.2 1,075 Further details on each licence can be found in the description below. Jay Hambro, Chief Executive of Aricom, commented: "We believe that both these assets, which would nearly double Aricom'sattributable reserves and resources (from 1,442mt to 2,687mt), represent naturalextensions to our Garinskoye and K&S projects. Aricom has a stated intention togrow both organically and by acquisition and we believe these two acquisitionswill significantly strengthen the portfolio. The terms of these theseacquisitions are accretive and utilise a blend of cash and shares that will,following exercise of the options, continue to leave Aricom well funded andcapitalised for our future development programme. We have already commenced our exploration planning for these new additions andalthough they are only early stage exploration assets with a majority ofprognostic resources, we believe they are a very exciting addition to ourportfolio. The Garinskoye Flanks, in particular, cover a significant area ofland with previously estimated resources indicating that it could be a worldclass iron ore zone." I believe that the iron ore market is one of the most exciting commodity marketsto be involved with currently and these assets secure a long resource tail forAricom. This is particularly pertinent for Aricom, as Kuranakh is on scheduleto generate its first revenue within the next few months." For further information:Aricom plcCharlie Gordon, Investor Relations Officer Tel: +44 (0) 20 7201 8939 www.aricom.plc.ukAbchurchCharlie Jack/ George Parker Tel: +44 (0) 20 7398 7700 www.abchurch-group.com Project Descriptions Garinskoye Flanks As the name suggests the Garinskoye Flanks deposit is an area (of approximately3,530km(2)) which surrounds the Garinskoye licence area (12km(2)) currently heldby Aricom. We believe that the deposit represents a natural expansion ofGarinskoye for the future as it is estimated to contain c.1bn tonnes of reservesand resources (current Garinskoye reserves and resources are estimated at389mt). The locality is characterised as slightly hilly, with extensive marsh areas onthe low lying plains. The absolute elevations found in the area range from200-550m with the highest point being 565m found on the Kosmataya Hill in thesoutheast of the area. The interfluvial plains are wide and gently sloping. Thesoils are predominantly loamy with sand. The main river running through the areais the Orlovka which is typically up to 50m wide, has a depth of 0.4 - 1.8m andhas a rate of flow of 0.2-0.4m/s. The territory was explored extensively between 1950-1955 with additionalaeromagnetic surveys in 1959 and 1971, and by aerogeophysical two-channel surveyin 1959. A number of magnetic anomalies were detected. Geology - the ore bodies found in the anomalies are steeply dipping (70-90degrees) veins and sheets ranging in width from 2.0 to 49.3m and with a lateralextent from 80 to 1500m on the surface. Bore holes proved that themineralization extended to a depth of 500m. The Lebedikhinskoe anomaly is found beyond the left bank of the Lebedikhi River,8 km north of Garinskoye and contains seven layers and lenses of magnetite orewith a thickness of 1.5-20.0m and a lateral extent of 50-360m. The reserves ofthe iron ore of these layers have an average content of total iron of 36.0%. Tothe northeast from Lebinikhinskoe, other promising zones are estimated tocontain 100-150m tonnes to a depth of 500m. The Imchikanskoe anomaly is located 14km to the West of Garinskoye. The orebodies of magnetite ore are sheetlike with a length of 230-500m, and a width of2-8m and an average content of total iron of 36.67%. The Partisan layer of magnetite and magnetite-hematitic ore is located in theregion of the Polunochki River. The reserves of iron ore have a total ironcontent of 62.0%. Total Reserves and Resources - according to the Russian Federal Agency,Rosnedra, in its order 1417 dated October 9 2007, the total reserves of iron orein the licence area is estimated to be 6.3mt in the Russian CategoriesA+B+C1+C2. Forecast resources are 275mt in the Category P1 and 700mt in theCategory P2. These reserves and resources estimated by Rosnedra will be subjectto confirmation drilling by Aricom. The drilling will be carried out by one ofour preferred exploration contractors, who is already working at Garinskoye,and, subject to completion of the acquisition of the asset, is expected to becompleted during the third quarter of 2008. The confirmed reserves and resourceswill be reported in both the Russian and JORC classification. Reserve and Resource summary Russian Million Tonnes CategoriesGarinskoye A/B/C1/C2 388.8Garinskoye Flanks C1/C2/P1/P2 981.3TOTAL 1,370.1 Kostenginskoye The Kostenginskoye iron ore deposit is situated in Obluchenskiy District ofEvreyskaya Avtonomnaya Oblast ("EAO"), 35 km to the south of the Izvestkovayastation of the Trans-Siberian Railway, and 24 km to the south of the Kimkanskoyedeposit. The area of the deposit within the licence area is 24 km2. Assuming completion of the acquisition of this asset, Aricom expects to commenceexploration / confirmation drilling during the winter 2008 / 2009 and thisprogramme would last approximately 2 years. Based upon experience gained at theK&S deposits Aricom could reasonably expect to drill up to 150 confirmationholes during the 2 year programme at a cost of US$7-10 million. This work couldculminate in full GKZ approval of reserves and permission for mining by mid2011. As would be expected with its location, the deposit may be regarded as havingsimilar geology to the K&S deposits. The original 1972-75 exploration programmeconcluded that the deposit comprised of 8 individual orebodies although onlyOrebody 1 was evaluated to be economic - the other ore bodies were considered tobe smaller and with lower grade. Total Reserves and Resources - according to Rosnedra, in its order 904 datedJuly 17 2007, the total reserves of iron ore in the licence area is estimated tobe 163.9mt in the Category C1. Forecast resources are 100mt in the Category P1to a depth of 600m. These reserves and resources estimated by Rosnedra will besubject to confirmation drilling by Aricom. The drilling will be carried out byDalgeofisika, who are already working at Sutarskoye. The confirmed reserves andresources will be reported in both the Russian and JORC classification. Reserve and Resource summary Russian Million Tonnes CategoriesKimkanskoye A/B/C1/C2 221.7Sutarskoye P1/P2 369.3Kostenginskoye C1/P1 263.9TOTAL 854.9 Transaction Descriptions Garinskoye Flanks Aricom UK has today been granted an option to acquire Guiner Enterprises Ltd,the company indirectly holding the Garinskoye Flanks licence, from MyrtleCorporate Limited and Ardoryna Commercial Limited. As is normal practice, theexercise of the option and the acquisition is conditional principally on theconsent of the Russian Federal Anti-Monopoly Service. Aricom UK today made thecash payment of US$22.5m in respect of the grant of the option. At completion, the exercise price for the option will be satisfied by theallotment and issue credited as fully paid and/or transfer of 10,937,500Consideration Shares to Myrtle Corporate Limited and Ardoryna Commercial Limitedsuch Consideration Shares having an aggregate value of US$17.5m (on the basis ofan exchange rate of £1.00:US$2.00 and each Consideration Share being valued at£0.80, irrespective of whether the market price for a share is at that timelower or higher than £0.80). The Garinskoye Flanks licence is held by Ekvador LLC, a Russian company which isfurther owned by a Cypriot company Guiner Enterprises Ltd which is itself ownedby two British Virgin Islands ("BVI") companies: Myrtle Corporate Limited,holding 51% and Ardoryna Commercial Limited, holding 49%. The shareholders ofGuiner Enterprises Ltd, none of whom are related parties to Aricom and are notexisting Aricom shareholders, have conditionally agreed to sell their shares inGuiner Enterprises Ltd to the Group. Kostenginskoye Aricom UK has today been granted an option to acquire Rumier Holdings Ltd, thecompany indirectly holding the Kostenginskoye licence, from Myrtle CorporateLimited and Ardoryna Commercial Limited. As is normal practice, the exercise ofthe option and the acquisition is conditional principally on the consent of theRussian Federal Anti-Monopoly Service. Aricom UK today made the cash payment ofUS$22.5m in respect of the grant of the option. At completion, the exercise price for the option will be satisfied by theallotment and issue credited as fully paid and/or transfer of 10,937,500Consideration Shares to Myrtle Corporate Ltd and Ardoryna Commercial Ltd suchConsideration Shares having an agreed aggregate value of US$17.5m (on the basisof a fixed exchange rate of £1.00:US$2.00 and each Consideration Share beingvalued at £0.80, irrespective of whether the market price for a share is at thattime lower or higher than £0.80). The Kostenginskoye licence is held by Optima LLC, a Russian company which isfurther owned by a Cypriot company Rumier Holdings Ltd which is itself owned bytwo BVI companies, Myrtle Corporate Ltd holding 51% and Ardoryna Commercial Ltdholding 49%. The shareholders of Rumier Holdings Ltd, none of whom are relatedparties to Aricom and are not existing Aricom shareholders, have conditionallyagreed to sell their shares in Rumier Holdings Ltd to the Group. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Orogen Gold