Disposal of Talas Mining Interests

Tengri Resources

("Tengri" or the "Company")

Disposal of Talas Mining Interests

Tengri Resources (AIM: TEN), announces that it has signed a conditional agreement with Socagest SA ("Socagest" or the "Purchaser") pursuant to which Socagest will acquire from Tengri the entire issued share capital of Kami Associates Limited and Tatianna Limited ("Disposal"), subsidiaries of Tengri which hold the Company's mineral exploration and development operations in Talas, Kyrgyz Republic ("Talas Mining Interests"), for a total consideration of $6m.

Introduction

Background to the Talas Mining Interests and Disposal

On 16 December 2016 the Company announced that following completion of a scoping study for its Taldybulak gold copper project in the Kyrgyz Republic in Central Asia, it had decided not to proceed with the development of the project and that it had begun a strategic review in respect of its Taldybulak and Andash projects. In addition, given the general weakness in global resource prices, the Company has decided to devote additional resources to search for opportunities that might exist outside the Company's existing areas of operation, which would both require lower start-up costs and a faster route to production and cash flow than the Company's existing asset base.

Accordingly, the Company has decided to effect a sale of the Talas Mining Interests through the Disposal.

Rule 15 of the AIM Rules for Companies

Due to its size, the Disposal constitutes a fundamental change of business of the Company under Rule 15 of the AIM Rules for Companies ("AIM Rules") and therefore requires the prior approval of the Company's shareholders in an extraordinary general meeting. The Company is therefore convening an Extraordinary General Meeting to seek shareholder approval for the Disposal in accordance with Rule 15 of the AIM Rules. On completion of the Disposal, the Company will be deemed to be an "AIM Rule 15 cash shell" for the purpose of the AIM Rules and will have six months to make an acquisition or acquisitions which constitute a reverse takeover under Rule 14 of the AIM Rules or otherwise seek readmission as an "investing company" with the attendant requirement to raise at least £6 million on or immediately before such readmission.

Shareholder Circular and Extraordinary General Meeting

The Company will today publish and post to shareholders a circular (the "Circular") which sets out the background to, reasons for and details of, the Disposal.

The Circular will also contain a Notice of Extraordinary General Meeting of the Company to be held to consider and, if thought fit, to pass the resolution required to authorise the Company to complete the Disposal. The EGM will be held at 10:00 a.m. on 9 May 2016 at the offices of Fladgate LLP at 16 Great Queen Street, London WC2B 5DG.

For further information, please contact:

The following text has been extracted from the Circular.

Capitalised terms in the extracted text in this announcement shall have the same definition as in the Circular unless the context requires otherwise.

Expected timetable of principal events

Background to and reasons for the Disposal

Background

The Company acquired the Talas Mining Interests by virtue of its acquisition of the Talas Mining Companies from Robust Resources Limited on 15 July 2014. The Talas Mining Interests are situated in the Talas Valley in the North Eastern part of the Talas region of the Kyrgyz Republic on the southern slopes of Kyrgyz Republic Range, lying above the Karakol River, a tributary of the Talas River. Within the Talas Mining Interests, the priority targets for development for the Company were the Andash Mining Licence 1 and the Taldybulak Licence.

In addition to the Taldybulak Licence, the Talas Licences include the Kentash Licence, Korgontash Licence and Barkol Licence. At the time of acquisition of the Talas Mining Interests the exploration work for these resources was at an early stage. The Andash Licences also includes the Solto Licence and the Andash Mining Licence 2, the latter having expired on 31 December 2011 and in respect of which an application for extension of its term is pending.

Andash project

The Andash deposit, which is the subject of the Andash Mining Licence 1, is located near the Karakol river, and 2.5 kilometres from the village of Kupre-Bazar. The town of Talas is approximately 75 kilometres away. The site is accessible all year round and is located at an elevation of at least 2100 metres.

The Andash deposit has been subject to a number of feasibility-level studies since 2006, with interruptions to both development schedule and funding coinciding with the 2008/9 global financial crisis.

Arising from local community issues, a previous owner of Andash Mining sought the protection of "force majeure" status in order to suspend commitments under the Andash Mining Licence 1 without losing its rights thereunder. Following the acquisition by the Company of the Talas Mining Interests, the Company intended to progress a process of having the force majeure status lifted thereby restoring normal operations under the licence. At the time of completion of the acquisition of the Talas Mineral Assets the Company intended to prioritise the progression of the Andash project, however, the fast-tracking of the Taldybulak deposit development plan (see below for further information) took the Andash project off the critical path of the Company's development timeline. As such, the process of having the force majeure status lifted continues and the Company has therefore been unable to commence normal operations under the licence.

Taldybulak project

The Taldybulak deposit is the subject of the Taldybulak Mining Licence which covers an area located approximately 20 kilometres west of Andash and 270 kilometres west of the capital Bishkek by bitumen road. The Taldybulak deposit is a large porphyry style copper-gold system with a SAMREC compliant resource defined by a previous owner.

In August 2014, following the signing of a two-year access agreement with the local Talas community, the Company commenced a 12 hole, 2,000 metre diamond drilling programme at the Taldybulak deposit and targeted a previously identified near-surface, sheeted-vein system. Securing the community access agreement was a significant milestone for the Company and was the result of extensive consultation with the Aral Village Rural Council in the Kyrgyz Republic. As part of that agreement, the Company agreed to establish a social development fund aimed at improving the standard of living and skill sets of the Aral community.

Following the completion of the drilling programme the Company announced, on 3 December 2014, that it had achieved the drilling of 13 holes and 2,029 metres with results confirming the existence of near-surface and a higher-grade gold sheeted-vein system within the project deposit. The results from the Company's 2014 drilling programme successfully confirmed the existence of a shallower, higher-grade sheeted-vein gold system within the existing resource envelope. The programme also determined that there was a higher-grade zone featuringcoarse free gold in some intervals which could be readily recovered by simple gravity methods. As a result of the gold grades returned from the deposit the Company decided to prioritise the fast tracking of the Taldybulak deposit's development during 2015.

The Company's plans for Taldybulak involved taking a two-phased approach to development. Phase one of the development of the Taldybulak deposit was intended to target the development of a smaller, high grade gold copper mine at modest capital cost prior to expanding to a phase two large scale bulk tonnage mining and processing operation supplemented by higher-grade feed from the Andash project, some 27 kilometres away, functioning as a satellite mine feeding Taldybulak's central plant.

On 28 May 2015 the Company announced that it had commenced a 2,500 metre drilling programme designed to define the optimum mine plan between the phase one and phase two pits, as well as to increase the grade, tonnage and resource category of the overall deposit.

The Company subsequently commenced a scoping study on phase 1 of its proposed two-stage process in 2015.

Reasons for the Disposal

The 2015 scoping study, which was concluded against the backdrop of lower gold and copper prices and a subdued outlook for commodity prices generally, was undertaken to ascertain the economic feasibility of the two-phased development at Taldybulak.

The study showed that the Taldybulak and Andash projects, under all studied development scenarios, did not meet the Company's investment criteria. In particular, the Company had hoped that the scoping study would demonstrate that Taldybulak and Andash could deliver an internal rate of return in excess of 25% and production costs in the lowest quartile of the global cost curve. The scoping study showed up-front capital costs to develop the project of approximately US$320 million that delivered annual production of an average of approximately 70,000 ounces of gold and approximately 7,750 tonnes of contained copper over a mine life of 28 years. The key assumptions used in the scoping study included a gold price of US$1,200 per ounce and a copper price of US$5,500 per tonne. The results demonstrated a negative net present value and an internal rate of return below the Company's cost of capital.

Whilst the Company believes that Taldybulak and Andash host large resources with significant upside exploration potential, the Board decided not to proceed with the development of Taldybulak in the current commodity price environment. As a result of the decision not to proceed with the development of Taldybulak and Andash resources the Company commenced a strategic review in respect of the Taldybulak and Andash projects and, given the general weakness in global resource prices, has taken the decision to undertake the Disposal to the Purchaser and to instead devote resources in search of new opportunities which would both require lower start-up costs and a faster route to production and cash flow than the Company's existing asset base.

Principal Terms of the Disposal 

The Company and the Purchaser entered into a share sale agreement relating to the acquisition by the Purchaser of the entire issued share capital of Kami Associates and Tatianna from the Company dated 12 April 2016 (Share Sale Agreement).

Under the terms of the Share Sale Agreement, the Purchaser has conditionally agreed to acquire Kami Associates and Tatianna for a total consideration of US$6 million to be structured as follows:

· US$1 million deposit paid upon execution of the Share Sale Agreement (Execution Amount);

· US$4 million payable on completion of the Disposal (Completion Amount) which will occur following satisfaction of the Condition (see below); and

· US$1 million to be held in escrow until the second month anniversary of the date of completion of the Disposal (Escrow Amount).

Pursuant to the terms of the Share Sale Agreement the Purchaser will, within 20 business days of completion of the Disposal, give notice to the Company of any liabilities of Kami Associates, Kaldora and Tatianna (but excluding Talas Copper and Andash Mining) as at the completion date including liabilities incurred but not invoiced as such date. An amount equal to the lower of (i) such liabilities and (ii) the Escrow Amount, as agreed between the Company and the Seller, will be deducted from the Escrow Amount and the balance will be paid to the Company on the second month anniversary of the date of completion of the Disposal.

The Execution Amount paid on execution of the Share Sale Agreement is non-refundable except in the case of the Condition (as defined below) not being satisfied or the Company failing to provide to the Purchaser its completion deliverables.

The Disposal is conditional upon being approved by the Shareholders (Condition). The Purchaser may rescind the Share Sale Agreement if (i) the Condition is not met by 31 May 2016, or (ii) the Company is in breach of its conduct of business undertakings such that the breach causes a material adverse effect on the Talas Mining Companies or their assets as a whole. Either party may rescind the Share Sale Agreement if the other party fails to meet its obligations at completion of the Share Sale Agreement.

The Share Sale Agreement provides that the Company will use part of the Execution Amount to repay, on behalf of the Talas Mining Companies and the Robust Branch, outstanding creditor balances for the Talas Mining Companies and the Robust Branch as at 31 December 2015 in the sum of US$583,259 (December Balances). The sum remaining from the Execution Amount after payment of the December Balances will be for the Company's account. In addition, the Share Sale Agreement provides that the Company will use part of the Completion Amount to repay, on behalf of the Talas Mining Companies and the Robust Branch, outstanding creditor balances for the Talas Mining Companies and the Robust Branch as at 31 January 2016 in the sum of US$286,717 (January Balances). The sum remaining from the Completion Amount after payment of the January Balances will be for the Company's account.

The Company has given a number of specific undertakings to the Purchaser regarding the conduct of the business of the Talas Mining Companies and the Mining Interests from the date of the Share Sale Agreement to completion of the Disposal. The Share Sale Agreement contains only limited warranties as to title to the shares of the Talas Mining Companies and the Company's ability to sell the shares of Kami Associates and Tatianna.

The Share Sale Agreement is governed by the laws of England and Wales and the parties submit to the jurisdiction of the English courts as regards any claim or matter arising under it

Use of Proceeds

The proceeds of the Disposal will be used to:

· pay the December Balances and the January Balances in accordance with the provisions of the Share Sale Agreement;

· pay to certain of the Company's loan note holders approximately US$4,680,845 in respect of principal amounts and interest outstanding on the Company's convertible loan notes; and

· fund the costs of the Disposal and the costs of settling any other pre and post deal liabilities/matters,

with the remainder being retained for working capital purposes by the Company.

AIM Rule 15

The Disposal represents a disposal of the only significant assets of the Company and, as such, the Disposal constitutes a fundamental change of business of the Company under Rule 15 of the AIM Rules and accordingly requires the prior approval of Shareholders in an extraordinary general meeting. Accordingly, the Company is convening the EGM to seek Shareholder approval for the Disposal in accordance with Rule 15 of the AIM Rules. On completion of the Disposal, the Company will be deemed an "AIM Rule 15 cash shell" for the purpose of the AIM Rules and will have six months to make an acquisition or acquisitions which constitute a reverse takeover under Rule 14 of the AIM Rules or otherwise seek readmission as an "investing company" with the attendant requirement to raise at least £6 million on or immediately before such readmission.

Irrevocable Undertaking

Robust Resources Limited, a Shareholder, has irrevocably undertaken to vote in favour of the Resolution to be proposed at the Extraordinary General Meeting in respect of its entire beneficial holdings of Ordinary Shares, which amount to 93,831,153 Ordinary Shares representing approximately 87.3% of the issued Ordinary Share capital as at the date of this circular. The irrevocable undertaking given by Robust Resources Limited is not inconsistent with the provisions of the relationship agreement entered into between Robust Resources Limited, finnCap Ltd and the Company governing the relationship between those parties and dated 17 June 2014. For further details of the relationship agreement please refer to the Company's admission document dated 18 June 2014.

Extraordinary General Meeting

Due to its size, and given its importance to the Company, under the AIM Rules, the Disposal is subject to the approval of Shareholders in an Extraordinary General Meeting of the Company. If passed, the Resolution will authorise the Directors to implement the Disposal on the terms set out in the Share Sale Agreement, as is summarised in section 3 of Part I of this circular.

A Notice of Extraordinary General Meeting is set out at the end of this circular convening the EGM to be held at the offices of Fladgate LLP at 16 Great Queen Street, London WC2B 5DG at 10:00 a.m. on 9 May 2016 at which the Disposal Resolution will be proposed as an ordinary resolution.