6th Oct 2005 07:00
Celtic Resources Holdings PLC06 October 2005 Celtic Resources Holdings Plc ("Celtic" or "the Company") Third party claims concerning ownership of Nezhdaninskoye The board of Celtic has noted the recent press comment concerning the Company's50 per cent. ownership of South Verkhoyansk Mining Company ("SVMC"), the companywhich owns the Nezhdaninskoye gold mine in Yakutia, north-eastern Russia("Nezhdaninskoye"). Further to the disclosure on the subject in the Company'spreliminary and interim results announcements this year, the board believes itis important to clarify the matter for shareholders. In early 2000, Celtic engaged in a financing arrangement with a Russian Bank forthe purposes of funding SVMC in the development of Nezhdaninskoye. As part ofthe financing, Celtic entered into a security arrangement which included aRussian Law trust management agreement, under which the Company pledged a 30 percent. interest in SVMC (60 per cent. of Celtic's holding in SVMC) to the Russianbank. Under the trust management agreement, no ownership or title to the shareswas transferred to the Russian bank and all actions carried out under the trustmanagement agreement were, by law, always to be made in the interests of Celtic. In October 2001 Celtic entered into further negotiations with the bank foradditional lending and at the same time initiated plans to seek admission ofCeltic shares to the AIM Market of the London Stock Exchange plc ("AIM"). In December 2001, Celtic received from Standard Bank Limited an offer to providea loan to SVMC of US$10 million with a further US$3.5 million extension. TheRussian bank, which was well known to Standard Bank Limited, was notified of theoffer and agreed to roll over the existing lending and provide additional funds. Following this extension the Russian bank required that the trust managementagreement, under which the shares in SVMC were pledged, be renegotiated and theshares be allowed to move to companies in the Cayman Islands. The Russian bankrepresented to Celtic that moving the shares to offshore companies was no morethan a reorganisation of the security, with a benefit to the bank of providingan easier means to enforce its rights in the event of a default by SVMC. Celticalso saw some strategic benefits in such an arrangement at the time and agreedto the proposal. In early 2002 the Russian bank indicated that it no longerwanted to pursue the offshore structure and Celtic believed the issue to beclosed. The loan from Standard Bank and the proposed admission to AIM took longer thananticipated to complete and Celtic therefore obtained agreement from the Russianbank to extend the date for repayment of the financing being provided to SVMC.The security documentation was amended twice to reflect this and a new repaymentdate of 18 October 2002 was agreed. In early October 2002 Celtic had informed the Russian bank of its intention torepay the loan and funds were received by the Russian bank on 17 October 2002.As soon as Celtic notified the bank that funds had been remitted, the Russianbank announced that it had previously assigned SVMC's debt to a third partyRussian lender along with the other transferable elements to the security, butnot the trust management agreement. To avoid any suggestion of a default, Celticrepaid the third party lender as well and subsequently recovered the previouspayment from the primary Russian bank. The third party lender acknowledgedreceipt of the funds and fully discharged Celtic from any further obligations. Following on from this repayment, under Russian Law, all pledged assets areautomatically released. Nevertheless, Celtic requested that the Russian bankconfirm that the trust management agreement, under which the SVMC shares wereheld, was now at an end and sign the relevant documentation confirming thislegal position. Celtic was subsequently notified in November 2002 that theRussian bank had transferred the shares in SVMC to two companies in the CaymanIslands on 11 October 2002 and now considered the matter closed. The Russian bank has claimed since that time that it is unable to return the 30per cent. shareholding in SVMC to Celtic and that it has no control over theCayman Island companies or any class of shares in them. Celtic does not acceptthese claims. Celtic initiated proceedings against the Cayman Island companies and in June2003, the Company obtained judgment in default against the Cayman Islandcompanies only to then be informed that the shares had been transferred by thosecompanies in November 2002 to companies registered in the British VirginIslands. At that time Celtic had also entered into negotiations with Investment GroupAlrosa ("IGA") to acquire the remaining 50 per cent. shareholding in SVMC whichthe Company did not own. As part of these negotiations, Celtic agreed to stayits pending legal actions in Russia and to engage in discussions with the aim ofachieving recognition of its lawful claim to the ownership of the disputed SVMCshares. This was done with a view to achieving an amicable settlement. As recently announced the negotiations with IGA have not proved successful andconsequently Celtic has now re-initiated legal proceedings in Russia. As part of its ongoing legal strategy Celtic has on 12 September 2005 obtainedan injunction in the British Virgin Islands against the companies to whom theSVMC shares were transferred. This injunction prevents any dealings with thoseshares or representations by the British Virgin Island companies as toownership. The British Virgin Island companies have indicated that they intendto defend the injunctive proceedings. Celtic has always and will continue to maintain that its ownership in SVMCstands at 50 per cent. as evidenced by the original and true share register forSVMC. Commenting, Celtic's Chairman, Peter Hannen, said, "We are the rightful andlegal owners of 50 per cent. of Nezhdaninskoye and we will defend ourselvesvigorously against pretenders to any of these shares. Nezhdaninskoye cannot bedeveloped without Celtic's participation." On a related issue as indicated in its announcement of 19 September 2005, theCompany can confirm that preliminary discussions with ZAO Polyus, the other 50per cent. holder in SVMC, with regard to the future development ofNezhdaninskoye have commenced and the Company will keep shareholders informed ofprogress. For further information please contact: Kevin Foo / Kate Dexter Smith Leesa Peters / Laurence ReadCeltic Resources Holdings Plc Conduit PRTel: + 44 (0)20 7921 8800 Tel: +44 (0)7812 159 [email protected] Tel: +44 (0)20 7618 8708 [email protected] www.celticresources.com This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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