13th Dec 2007 07:01
Aricom PLC13 December 2007 Press Release 13 December 2007 Aricom plc ("Aricom" or "the Group") Proposed increase of interest in Garinskoye project of up to 100% Aricom plc (LSE: ORE, OREW), the Anglo-Russian developer of mineral resources,today announces that it has reached a conditional agreement to acquire 29.26% ofthe Cypriot holding company that owns LLC Garinsky Mining & MetallurgicalComplex ("Garinsky") which in turn holds the Garinskoye licence. Together withAricom's current indirect holding of 70.22% this would give Aricom a 99.48%interest in the project. A conditional offer to acquire the remaining 0.52% hasbeen made on the same terms. Proposed Transaction Garinsky is owned by Lapwing Ltd, a Cyprus based company ("Lapwing"). Aricom UK Limited ("Aricom UK"), a wholly owned subsidiary of Aricom, originallyagreed to subscribe for new shares in Lapwing which, following expectedadditional subscriptions being made by Aricom UK's co-shareholders at the sameprice, would have resulted in Aricom UK holding a 60% interest in Lapwing.There were expected to be four further shareholders in Lapwing namely OlisConstructions Limited ("Olis") with 25% and three other shareholders with theremaining 15% (collectively the "Additional Holders"). The Additional Holdersdid not subscribe for any additional shares and consequently their interest inLapwing was diluted to a total of 0.52% whilst Aricom UK now owns 70.22% andOlis 29.26%. Aricom UK was also granted an option to acquire from Olis their expected 25%interest in Lapwing for US$100 million (the "Option"). The Option has anexercise period of two years which commenced when Aricom subscribed for sharesin Lapwing although this would be reduced to 90 days following the receipt of apositive feasibility study for Garinskoye, the generation of US$50 million inaggregate net profit or a change of control in Aricom. Following the excellent drilling results to date at Garinskoye and WardellArmstrong's positive Mineral Expert's Report on the Garinskoye project, Aricomhas agreed a modification to the arrangements with Olis in order to achieve asimilar outcome to that which was envisaged under the Option (i.e. theacquisition by Aricom of Olis' interest in Lapwing). Olis has conditionallyagreed to sell its entire 29.26% stake to Aricom for a total of 71,015,903Aricom shares (or cash proceeds of the placing of such Aricom shares orequivalent cash payments from Aricom) calculated as follows: • under the Option Olis' 25% interest in Lapwing was valued at US$100 million; • the 29.26% interest can therefore be valued at US$117 million; • this equates to 71,015,903 Aricom shares at UK£0.80 per Aricom share. Aircom is launching a placing of 30 million ordinary shares by way of vendorplacing (the ("Placing"). The Placing will take place at a fixed price of 75pper share with JPMorgan Cazenove Limited ("JPMorgan Cazenove") acting as SoleBookrunner and Canaccord Adams Limited ("Canaccord") and JPMorgan Cazenoveacting as Joint Lead-Managers (the "Managers"). The Managers have the abilityto increase the size of the Placing to 42.75 million shares (the "Placing Shares"). At a fixed price of 75p per Aricom share, the Placing of 30 millionshares will generate proceeds before any expenses of £22.5 million. Aricom hasunderwritten the receipt of the funds by Olis the largest minority shareholderof Lapwing, by agreeing that if less than 30 million shares are placed suchshortfall will not be issued and Aricom will fund the difference between theproceeds obtained before any expenses and US$46.35 million out of existing cashresources. The balance of the 71,015,903 shares, after any such reduction whichare not placed or substituted by Aircom's funding of any shortfall will beallotted directly to Olis. The Placing is not conditional on the acquisition completing and in the eventthat the acquisition does not complete on Admission, the Placing will proceed asa cash placing and if the acquisition subsequently does complete, the proceedswill fund some or all of the cash consideration payable thereunder, failingwhich it will be used for other value adding opportunities. As the transaction is with Olis, a company which is a fellow shareholder inLapwing, it may be required to be subject to shareholder approval. If theacquisition requires shareholder approval, this will involve some delay in itsimplementation. If the transaction is subject to shareholder approval a furtherannouncement on the shareholder approval process will be made in due course. The offer is also being made available to the Additional Holders in relation tothe acquisition of their 0.52% interest in Lapwing. This proposal is currentlyunder consideration by the Additional Holders and if it becomes unconditional,they will be entitled to receive the same proportion of their consideration incash (by way of a pro-rata share of the placing proceeds or direct payment byAricom) as Olis. Garinskoye Work Programme Aricom has completed the construction of an exploration camp at Garinskoye andhas recently completed the exploration drilling for the confirmation stage.Although the full results of the drill analysis are not yet completed, initialdata supports the previous reserve and resource estimations. In May 2007, Peter Hambro Mining Engineering ("PHME") completed a scoping studyon the Garinskoye deposit. The study is based upon a mining rate of 10 mtpa ofore and the production of both pig iron and iron ore concentrate. The studyestimates that the project has a net present value of US$1.95 billion and aninternal rate of return of 43 per cent. Based upon the economic viability of theproject demonstrated in the scoping study, Giproruda is preparing apre-feasibility study for delivery in the first half of 2008. This study will bebased upon a mining rate of between 10 mtpa and 20 mtpa of ore and investigatesa number of methods of producing pig iron using both gas and coal as thereductant. The study will investigate the location of the process plant and ironfoundry either at the Garinskoye deposit or another more optimal location whereit could also process the concentrate coming from the K&S project. Further opportunties to expand Aricom's portfolio The Group continues to pursue a growth strategy seeking to develop mineralassets in Russia's Far East. Given the rich mineral resources in that area, theGroup has the potential to grow its asset base both organically throughexploration success and through the further acquisitions which the Boardbelieves are accretive. The Group is currently in advanced negotiations with the owner of a projectwhich is located close to one of Aricom's assets. The Group believes that thisproject, although smaller than its neighbour, is a continuation of the sameorebody and may provide upside by way of production growth. If that acquisitiondoes proceed Aricom may pay for the acquisition through the issue of new sharesbut would only do so if such shares issued would be subject to an appropriatelock-up agreement. The expected consideration in respect of this opportunity issignificantly less than US$50 million. Jay Hambro, Aricom's Chief Executive said: "This transaction will enable Aricom to acquire the bulk of the minorityinterest in the Garinskoye asset for just over US$100 million. We have donethis by demonstrating the value of Aricom's equity story to the vendors andoffered them the consideration in Aricom shares at a premium to the currentprice and with a portion in the form of a vendor placing. Work at Garinskoyecontinues to generate encouraging results and we are confident in receiving apositive feasibility study in the New Year." - Ends - For further information: Aricom plcJay Hambro, Chief Executive +44 (0) 20 7201 8939 www.aricom.plc.ukAbchurchCharlie Jack / George Parker +44 (0) 20 7398 7700 www.abchurch-group.comJPMorgan CazenoveIan Hannam / Patrick Magee / Joe Seifert +44 (0) 20 7588 2828 www.jpmorgancazenove.comCanaccordAdams LimitedMike Jones / Robert Finlay / Chris Bowman +44 (0) 20 7050 6500 www.canaccordadams.com Notes to Editors Aricom plc is a leading developer of Russian metal and mining assets, focusingon iron ore and ilmenite production and delivery. The Company was establishedin September 2003 to develop projects situated in the north west of the AmurRegion, in Russia's Far East. These projects are set to service the Chinese andRussian commodity market. Aricom currently operates four projects in the Amur region and the adjoiningJewish Autonomous Region. The Group's projects Kuranakh, K&S, Garinskoye andBolshoi Seym have combined estimated reserves and resources of over one billiontonnes of iron ore and ilmenite ores. The location of the Group's depositsoffer a significant logistical advantage being close to theTrans-Siberian-Express and the Baikal-Amur Magistral railways. In 2005, 700 million tonnes of iron ore were shipped globally, of that 300million (43%) was shipped to China. It is estimated that China imported 300million tonnes of ore in 2006 to facilitate its demand for steel production. InJune 2006, Aricom announced a Memorandum of Understanding with China's largestnonferrous metal company Chinalco, to co-operate in the design and developmentof a Titanium Sponge production plant in China. Aricom is headquartered in London, with a highly experienced board of directorscomposed of British and Russian citizens. Aricom's shares and warrants wereadmitted to the Official List of the Financial Services Authority and the MainMarket of the London Stock Exchange on 29 October 2007 and trade under thesymbols ORE and OREW. For further information please visit www.aricom.plc.uk. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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