Placing and Main List

10th May 2007 08:22

Aricom PLC10 May 2007 Press Release 10 May 2007 THE INFORMATION CONTAINED HEREIN IS RESTRICTED AND IS NOT FOR PUBLICATION,RELEASE OR DISTRIBUTION IN OR INTO AUSTRALIA, CANADA, JAPAN, SOUTH AFRICA, THERUSSIAN FEDERATION OR THE UNITED STATES Aricom plc ("Aricom" or the "Company" or the "Group") Conditional Placing to raise funds for project development Intention to seek admission to the Official List Highlights Aricom plc (AIM: TIO) today announces that it is launching a conditional placing(the "Placing") of Units comprising in aggregate approximately 351 millionordinary shares (the "New Shares") and approximately 117 million warrants (the "Warrants") to each subscribe for one new ordinary share. Accordingly, each Unitconsists of 3 New Shares and 1 Warrant. JPMorgan Cazenove Limited ("JPMorganCazenove") and Canaccord Adams Limited ("Canaccord") (collectively the "JointBookrunners"), have the option to increase the size of the Placing to a maximumnumber of Units comprising in aggregate up to 399 million New Shares and up to133 million Warrants. Separately, Aricom announces today its intention to seek before the end of 2007admission to listing on the Official List of the Financial Services Authorityand to trading on the Main Market of the London Stock Exchange. The Placing The proposed Placing will provide qualified investors with the opportunity tosubscribe for approximately 117 million Units. The proceeds of the Placing will be used to provide funding for construction anddevelopment of the Group's portfolio of assets in Russia's Far East, for generalworking capital and corporate development purposes. The Placing will be subject to, inter alia, shareholder approval proposed to besought at an Extraordinary General Meeting of the Company (the "EGM") to be heldon or around Monday 4 June 2007. The Placing will take place at a price per Unit (the "Issue Price per Unit") tobe established through an accelerated bookbuilding. The terms of the Warrants provide that each Warrant will be exercisableimmediately on issue and at any point during the life of the Warrant on paymentto the Company of the exercise price. The Warrants have a life of 3 years savefor certain circumstances where early termination provisions apply. (Furtherinformation is included in the Appendix hereto and will also be included in thecircular anticipated to be sent to shareholders in Aricom on or around Friday 11May 2007). Transfer to LSE Main Market; listing applications for shares and warrants In line with the development of the Group's business, Aricom announces today itsintention to seek before the end of 2007 admission to listing on the OfficialList of the Financial Services Authority and to trading on the Main Market ofthe London Stock Exchange ("Admission to the Main Market"). It is anticipated that the newly issued warrants will be admitted to theOfficial List of the Financial Services Authority and to trading on the MainMarket of the London Stock Exchange in conjunction with the Admission of theCompany's ordinary shares to trading on the Main Market by the end of 2007 butuntil then will be unlisted. The New Shares and the Warrants will be separately transferable as of theSettlement Date. Background to and reasons for the Placing Aricom has a portfolio of assets at varying stages of development all of whichhave now been the subject of third party studies enabling the Board to considerappropriate investment decisions. The funds raised will primarily be used to commence the development andconstruction of the K&S and Garinskoye projects. K&S: Pre-production capital expenditure has been independently estimated to bec.US$800m. Garinskoye: While the capital expenditure requirement for the projectto reach full production capacity is currently estimated to total US$1,275m, thefinancing requirement for the project may be significantly lower after allowingfor estimated cashflow to be generated from the first stage of operation andinitial sales from the second stage. A summary of anticipated construction andnon-construction related capital expenditure associated with the Company'sprojects at Kuranakh, K&S and Garinskoye has been included further below. Basedon the third party studies received by the Company in respect of these projects,the Group currently anticipates that, in order to progress these projects atoptimum pace, it will require capital for commitments (and spending) of $500million or more over the next 12 to 24 months. Relevant additional information Aricom continues to make substantial progress in advancing the development ofits Kuranakh mine and expects production to commence on time and within budgetin the fourth quarter of 2007. Furthermore, Aricom has received credit approvedcommitment letters from 4 financial institutions for the project finance on thisproject. Whilst this shows the strength of the project it also demonstrates thesignificant project finance appetite for projects of this kind and in thisgeographic region. Russia's Far East is a resource-rich region which enjoys a strategicallyimportant location bordering China, where continuing strong demand for importedraw materials is expected. Aricom's management team has experience and strongregional relationships in Russia's Far East and the Company is buildingconsiderable expertise in developing mining assets in the region. Aricom intendsto apply this expertise and its position to seek further growth opportunities inmetals and minerals in the region. Jay Hambro, Chief Executive of Aricom plc, commented: "Russia's resource-rich Far East is fast becoming a commercial gateway to thehigh-growth markets of China and other parts of Asia. The construction anddevelopment of Aricom's assets should allow us to become a key player in theRussian and Asian iron ore markets. The Placing is designed to provide for a significant part of the projectexpenditure at Aricom's K&S and Garinskoye projects. The third party studies wereceived show that, with funds from the Placing and suitable project financingfor each project, Aricom could be funded through to initial production andpositive cash flows from Kuranakh, K&S and Garinskoye. Recently, we have been encouraged by the significant support from theinternational finance community in the offers for project finance for theKuranakh project as well as by the IFC's stated intention to make an equityinvestment in Aricom. The proceeds from today's Placing will lift Aricom to the next level of deliveryon the significant potential inherent in our substantial asset base, just likeour intended listing on the LSE's Main Market will take us to the next stage ofour corporate development." For further information: Aricom plcJay Hambro, Chief Executive Tel: +44 (0) 20 7201 8939 www.aricom.plc.uk JPMorgan CazenoveIan Hannam / Patrick Magee / Robert Stafler Tel: +44 (0) 207 588 2828 www.jpmorgancazenove.com Canaccord Adams Tel+44 (0) 20 7050 6500Robert Finlay / Chris Bowman www.canaccordadams.com Abchurch PRCharlie Jack / George Parker Tel: +44 (0) 20 7398 7700 www.abchurch-group.com JPMorgan Cazenove and Canaccord are acting as Joint Bookrunners in connectionwith the Placing. The books will open with immediate effect. It is currentlyexpected that the pricing of the Placing, including the exercise price of theWarrants, will be announced on Friday 11 May 2007. The timing of the closing ofthe books, pricing and allocations may be amended at the absolute discretion ofthe Joint Bookrunners. The proposed Placing will take place at a price per Unit (the "Issue Price perUnit") to be established through an accelerated bookbuilding. By way of exampleand purely for illustrative purposes: if the Issue Price per Unit was 300p, theimplied price per New Share would be 100p and, in addition, investors wouldreceive, free of payment, 1 Warrant with every 3 New Shares purchased. The Placing will take place in accordance with the terms and conditions set outin the Appendix to this announcement. Further details will also be provided inthe circular (the "Circular") anticipated to be sent to shareholders in Aricom("Shareholders") on or around Friday 11 May 2007. The proposed Placing is not underwritten and will take place at a price whichwill be established through a bookbuilding process. The Placing will take placein accordance with the terms and conditions set out in the Appendix to thisannouncement. Application will be made to London Stock Exchange plc ("the Exchange") for thePlacing Shares to be admitted to trading on the AIM Market operated by theExchange ("Admission"). Admission of the Placing Shares is expected to takeplace on or around 5 June 2007. The Placing Shares will be credited as fullypaid and will rank equally in all respects with the existing ordinary shares of0.1 pence each in the share capital of Aricom, including the right to receiveall dividends and other distributions declared, made or paid after their date ofissue. No application is being made for the admission of the Warrants to tradingon AIM. This announcement does not constitute an invitation to underwrite, subscribe foror otherwise acquire or dispose of any Units, ordinary shares or warrants in thecapital of the Company ("Aricom Securities"). Past performance is no guide tofuture performance and any investment decision to buy Units must be made solelyon the basis of Publicly Available Information (as defined in the Appendix tothis Announcement). Persons needing advice should consult an independentfinancial adviser who specialises in advising in connection with shares andother securities. This announcement is not for publication or distribution, directly orindirectly, in or into the United States. This announcement is for informationonly and does not constitute an offer or invitation to acquire or dispose ofAricom Securities in the United States. The Aricom Securities have not been andwill not be registered under the U.S. Securities Act of 1933, as amended, (the "Securities Act") and may not be offered or sold in the United States exceptpursuant to an exemption from, or in a transaction not subject to, theregistration requirements of the Securities Act. There will be no public offerof Aricom Securities in the United States, the United Kingdom or elsewhere. The distribution of this announcement and the offering or sale of the AricomSecurities in certain jurisdictions may be restricted by law. Further details inrelation to the securities laws in certain jurisdictions are set out in thisdocument and are under the heading "General" in the Appendix to thisannouncement. No action has been taken by the Company, Canaccord or JPMorganCazenove that would permit an offering of such securities or possession ordistribution of this announcement or any other offering or publicity materialrelating to such securities in any jurisdiction where action for that purpose isrequired. Persons into whose possession this announcement comes are required bythe Company, Canaccord and JPMorgan Cazenove to inform themselves about and toobserve any such restrictions. No representation or warranty, express or implied, is or will be made as to, orin relation to, and no responsibility or liability is or will be accepted byCanaccord or JPMorgan Cazenove or by any of their affiliates or agents as to orin relation to, the accuracy or completeness of this announcement, or any otherwritten or oral information made available to or publicly available to anyinterested party or its advisers and any liability therefore is hereby expresslydisclaimed. Canaccord, which is authorised and regulated by the FSA, is acting for Aricom inconnection with the Placing and no one else and will not be responsible toanyone other than Aricom for providing the protections afforded to clients ofCanaccord nor for providing advice in relation to the Placing. JPMorgan Cazenove, which is authorised and regulated by the FSA, is acting forAricom in connection with the Placing and no one else and will not beresponsible to anyone other than Aricom for providing the protections affordedto clients of JPMorgan Cazenove nor for providing advice in relation to thePlacing. This release has been reviewed by Martin Smith, C.Eng, B.Sc (Hons) MIMMM,Aricom's Technical Director. Mr Smith, who has more than 20 years experience inthe field of activity concerned, is a competent person. Mr Smith has consentedto the inclusion of the material in the form and context in which it appears. Background The Company has a portfolio of assets at varying stages of development all ofwhich have now been the subject of third party studies enabling the Board toconsider investment decisions and the Board considers that it is now anappropriate time to raise additional equity funding for the Company. The fundsproposed to be raised will, as described in greater detail below, primarily beused to commence the development and construction of the Group's projects, andfor working capital and general corporate development purposes. The Group's Current and Proposed Interests The following is a summary of the Group's principal current and proposedoperations. Further information on the relevant licence terms is set out underthe heading "Summary of Licence Terms" below. Kuranakh Olekma, a wholly owned subsidiary of the Company, holds the licence for theexploration and development of the Kuranakh ilmenite and titanomagnetite depositin the north west of the Amur Region. The licence covers an area of 85 squarekilometres and was explored extensively both during the Soviet era andsubsequently by Aricom. Kuranakh is currently at the pre-production stage with construction underway andscheduled for completion in December 2007. During 2006, a significant amount ofprogress was made in the construction of the facilities at Kuranakh. Progresshas also been made with the building of the accommodation camp which will houseup to 300 people. In terms of procurement, the major items of process equipmentwere ordered during the fourth quarter of 2006 and first quarter of 2007 fordelivery in the third quarter of 2007. A feasibility study was completed by PHME in September 2006 and audited by SRKLtd, a UK based mining consultancy company, in early 2007. The study confirmedthe technical and economic viability of a conventional shovel and truck openpitoperation producing 2.4 million tonnes per annum of iron ore with a mineablegrade of 32.9 per cent. Fe. The ore will be pre concentrated at Kuranakh usingdry crushing, screening and magnetic separation before being trucked to theprocess plant at Olekma. Here it will be further crushed and the titanium andiron ore separated using wet magnetic separation. The titanium in the form ofilmenite will be refined before both products are loaded onto railway wagons fortransport to China. Offtake agreements with a Chinese counterparty provide for the sale of up to 100per cent. of the titanomagnetite and ilmenite which it is estimated will beproduced at Olekma during the first seven years of the mine's operations. Theofftake agreements have recently been amended to reflect an increase in theagreed sales price for titanomagnetite of 27 per cent. since January 2005. An environmental impact assessment was also completed in 2006 together with theestablishment of the baseline conditions against which the effect on theenvironment will be measured. The OVOS (Russian equivalent of an EnvironmentImpact Assessment report) was submitted to the authorities in January 2007 inorder to obtain environmental permission for the operation. During 2007, the construction priority will be to complete the projectinfrastructure and buildings by the mid year ready to accept and install all ofthe equipment during the latter part of the year. The mining team plan tocommence pre-stripping operations from August 2007 with the first ore scheduledto be mined and stockpiled during November 2007. The crushing and screeningplant is scheduled to commence operation in December 2007 and it is estimatedthat it will produce 1.76 million tonnes per annum of pre concentrate for truckdelivery to the processing plant at Olekma. At full capacity the project isdesigned to produce 900,000 tonnes of saleable titanomagnetite and 290,000tonnes of ilmenite annually. The following table shows the estimated Kuranakh reserves. Kuranakh Project Category Ore MT Grade Contained Metal MT Reserves* 35.51 Fe 34.3% 12.17 TiO2 10.7% 3.81 Total Fe Eq 52.3% 18.59 Resources** 82.99 Fe 33.1% 27.43 TiO2 10.8% 8.99 Total Fe Eq 51.3% 42.58 TOTAL 118.51 Average Fe Eq 51.6% 61.17 * MicroMine Sep-06 found the reserves to be generally JORC compliant. ** Additional exploration of the other six orebodies is scheduled to becompleted by the end of 2008 in order to increase the estimated resourcesavailable for mining. Fe equivalent - the titanium dioxide element of the reserve andresource estimate is converted for the sake of clarity in this release toan "iron equivalent" using a market ratio of 41.56:70. Project Finance Aricom has received credit approved commitment letters from Bayerische Hypo- undVereinsbank AG, Caterpillar Financial (Zurich), VTB Bank Europe plc and ING BankN.V.. These commitment letters relate to a project finance facility of up toUS$65 million for the Kuranakh project. The financing, which is subject (inter alia) to completion of due diligence anddetailed documentation, would provide the remaining funding required for thedevelopment of Kuranakh, including construction costs and working capitalrequirements and a return of a portion of the initial capital alreadycontributed by Aricom to the project. The due diligence and documentationprocesses are well underway and are expected to be finalised by the end of June2007. Kimkanskoye and Sutarskoye In April 2006, Aricom acquired an option from Philotus Holdings Limited ("Philotus") to purchase 50 per cent. of LLC Kimkano Sutarskiy Gorno ObogatitelniyKombinat (formerly called Rubicon) ("KS GOK") which holds the licences todevelop the Kimkanskoye and Sutarskoye ("K&S") iron ore deposits. The licencesover the two deposits were granted to KS GOK in February 2006 and have a term of20 years which is extendable with the consent of the licensing authority. InJuly 2006, Aricom acquired from Malavasia Enterprises Inc ("Malavasia") the 50per cent. interest in KS GOK not subject to its option. In April 2007, after completion of Wardell Armstrong International's ("WAI")competent person's report and valuation of K&S, Aricom issued the additionalconsideration (being 65 million Shares) due to Malavasia on its existing 50 percent. interest in KS GOK and gave notice to Philotus to exercise the option toacquire the remaining 50 per cent. The acquisition pursuant to the exercise ofthe option remains conditional on FAS approval, for which an application wasmade shortly after exercise of the option. The exercise price will be satisfiedby the issue of 123,782,467 Shares. The initial feasibility study was carried out by CJSC Peter Hambro MiningEngineering ("PHME") and was completed in March 2007. This study reports onmining and processing at Kimkanskoye and Sutarskoye as well as the viability ofproducing a metal product such as pig iron. The independent valuation wascarried out by Wardell Armstrong International in February 2007 and completed inApril 2007. The study estimates, on the basis of the assumptions included in thestudy, a net present value of US$1.7bn and an internal rate of return of c. 35per cent.. The initial feasibility study envisages a mining rate of 10mtpa usingconventional open pit mining commencing at Kimkanskoye and subsequently movingto Sutarskoye. Kimkanskoye This licence covers an area of 22.4 square kilometres and extends to a depth of400 metres. The deposit is divided into four separate areas of which the mostimportant is the Central Zone. The balanced ore, which is 80 per cent. magnetiteand 20 per cent. haematite, has an average grade of 35.6 per cent. Fe. Themagnetite can be recovered by conventional magnetic separation and the haematiteby flotation. Sutarskoye This licence covers an area of 27 square kilometres and extends to a depth of500 metres. The deposit is divided into three areas of which only the southernarea is being considered at this time. The ore is mainly magnetite with somesilicate magnetite with an average grade of 33 per cent. Fe. There is almost nohaematite present at Sutarskoye (1.6 per cent.). 2006 Progress Dalgeophysica, the exploration contractor, has completed the drilling of 12confirmation boreholes at Kimkanskoye. This included the completion of drillingof 1,157 metres of boreholes and will include the excavation of 13,000 kgs ofsamples. A detailed report on the exploration and sampling for Kimkanskoye isexpected in the second quarter of 2007. In December 2006, following the completion of the confirmation drilling work atKimkanskoye, Dalgeophysica relocated to Sutarskoye and commenced drilling. 2007 Programme Dalgeophysica will continue with the confirmation drilling and trenching ofSutarskoye. Some 2,500 metres of drilling and 15,000 cubic metres of trenchesare scheduled to be completed during 2007. In addition three bulk samples aredue to be taken from Kimkan for industrial scale metallurgical testing. The initial results of the works at Kimkanskoye are being entered into aMicromine geological model which will generate JORC compliant statements ofreserves and resources later this quarter. Aricom anticipates that all drilling and evaluation works will be completed in2008 and that the Kimkanskoye deposit will achieve its full production rate of10 mtpa in 2010 and that the first full year of production at this rate will beachieved in 2011. The construction programme is expected to commence in 2008. The following table shows the estimated K & S quantities of ore and containedmetal. K&S Project Category Ore MT Grade % Contained Metal MT Kimkanskoye * 221.70 Fe 35.5% 78.74 of which Category A 17.783 Fe 35.9% 6.39 Category B 69.384 Fe 35.5% 24.63 Category C1 102.229 Fe 35.6% 36.34 Category C2 32.302 Fe 35.2% 11.38 Sutarskoye ** 369.30 Fe 32.7% 120.8 Category C1 TOTAL 591.00 Average Fe 33.8% 199.54* Formally reviewed by WAI Feb-07 for pre-feasibility study and now inputtedto MicroMine model.** Subject to the 2007 programme of confirmation drilling, Soviet estimates allSutarskoye in Category C1. This table supersedes that in the 2006 Annual Report in which there was atypographical error in the column relating to contained metal. Garinskoye In December 2006, Garinsky (formerly LLC Amurmining), in which Aricom now has aconditional agreement to acquire a 60 per cent. interest, submitted theirproposal for developing the asset for the licence in competition with a numberof other Russian companies. In December 2006, Garinsky received the licence andcommenced mobilisation of a drilling team and planning for the exploration workswhich commenced in the first quarter of 2007. In March 2007, Aricom entered into a conditional agreement to acquire a 60 percent. interest in Garinsky and to receive an option to acquire an additional 25per cent. interest. The acquisition remains conditional inter alia on sharereorganisation and Federal Anti-Monopoly Service approval, which is in theprocess of being applied for. In May 2007, PHME completed a scoping study for the mining and processing atGarinskoye. Garinskoye is situated in the Mazanovsky District, Amur Oblast, 150km NorthEastof Svobodny. The area is a sparsely populated upland taiga terrain with largeareas of marshland; elevations range from 250 to 500m. The deposit lies betweenthe Gari and Mamyna rivers and is equidistant from the Trans-Siberian Railwayand Baikal-Amur Railway. The original exploration carried out in the 1950's identified 56 orebodiesranging in thickness from 2 - 49.3m and from 80 - 1,500m long. Mineralisationwas determined to reach to a depth of 500m and that all of the orebodies dippedsteeply at 70 - 90 degrees with a Northeasterly strike. Although three types ofore were identified: magnetite, magnetite-haematite, and a magnetic pyhrrotite,only the magnetite was considered to have any industrial significance. Withinthe main magnetite group the secondary minerals were identified to be mainlyhaematite, martite, and muscovite. The magnetite was classified into three grades: Rich (Fe > 50 per cent.) which comprised 39 per cent. of balanced reserves incategories A+B+C1 of which 67.7mt had an average grade of 55.7 per cent. Fe Average (Fe from 20 to 50 per cent.) which comprised 61 per cent. of thebalanced reserves in same categories with an average grade of 32.64 per cent.Fe; Poor (unbalanced (low grade) with Fe from 15 to 20 per cent.) which comprised 21per cent. of the total sum of balanced and unbalanced reserves. The PHME preliminary pit design includes 210.3 million tons of ore (approvedreserves in Categories A, B, and C1) at a grade of 41.7 per cent., but does notinclude any of the C2 reserves or the estimated resources in the P category. Theenvisaged mine life is 25 years, including start up and closure, at an open pitoutput of 10 million tons of ore per annum producing both iron ore concentrateand pig iron. The following table shows the estimated Garinskoye quantities of ore andcontained metal and grades. It does not include any resources in the surroundingarea. Garinskoye Project Category Ore MT Grade % Contained Metal MT Reserves Category A 22.50 Fe 42.7% 9.61 Category B 61.30 Fe 43.2% 26.48 Category C1 127.70 Fe 40.8% 52.10 Category C2 177.30 Fe 40.8% 72.34 TOTAL 388.80 Average Fe 41.3% 160.53 This table supersedes that in the 2006 Annual Report in which there weretypographical errors in the column relating to contained metal. 2007 Programme: Drilling of 2,500 metres of confirmation boreholes is expectedto be completed during the second quarter of 2007. Based upon the results ofthis drilling, a pre-feasibility study will be commissioned for completion bythe end of the year. Full scale production capacity is currently forecasted for2011/2012. Bolshoi Seym In February 2006, Aricom entered into a non-binding heads of agreement withTimia, a company related to Interros which is a major shareholder in OJSCNorilsk Nickel and Polyus. Aricom has acquired a 49 per cent. stake in LLC UralMining, the company that owns the licence to develop the Bolshoi Seym deposit.The remaining 51 per cent. is beneficially owned by Timia. A joint ventureagreement in relation to a new holding company for LLC Ural Mining is undernegotiation. The Bolshoi Seym deposit is located in the Tyndinskiy region 27 kilometres fromMostovaya station on the Baikal Amur railway. The licence covers an area of 26 square kilometres and extends to a depth of1,000 metres. The licence was granted to Ural Mining in November 2005 and has aterm of 25 years which may be extended. The licence requirement is to startproduction by 1 December 2012 with a minimum extraction rate of 2 million tonnesper annum of ore. Protocol NTS KPR 25.2.1988 confirmed a P1 resource of some 36 million tonnes ofTiO2. 2007 Programme The 2007 exploration plan, under consideration, intends to focus on: • Defining the geological structure of the ore zones and bodiesby means of exploratory boreholes and trenches. • Defining the outlines of the mineralisation. • Studying of geomorphology, bedding conditions, physicalcomposition and internal structure of ore bodies, including their continuity andpossible discontinuity. • Carrying out geological- technological mapping of ore layers bytypes of ores. • Studying the physical- mechanical properties of ores and hostrocks, sufficient for calculating reserves and substantiation of the stabilityof the sidewalls of the open pit. • Determining the extent of the permafrost zone. The following table shows the estimated Bolshoi Seym quantities of ore andcontained metal and grades. Bolshoi Seym Project Category Ore MT Grade % Contained Metal MT Reserves 270.0 Fe 18.0% 48.55 TiO2 8.4% 22.68 Total Fe Eq 32.13% 86.80 Resources 430.0 Fe 17.8% 76.54 TiO2 8.4% 36.12 Total Fe Eq 31.9% 137.38 TOTAL 700.0 Total Fe Eq 32.0% 224.18 Fe equivalent - the titanium dioxide element of the reserve and resourceestimate is converted for the sake of clarity in this release to an "ironequivalent" using a market ratio of 41.56:70. Titanium Sponge In June 2006, Aluminium Corporation of China ("Chinalco"), the largestnonferrous metal company in China and owner of China's largest titanium metalprocessing plant signed a non-binding memorandum of understanding with Aricomfor the design and development of a titanium sponge production plant in China. It is intended to source ilmenite feedstock for the plant from Aricom's Kuranakhmine. Whilst Aricom is predominately a miner, this step downstream in thetitanium metal process represents a move to try and capture the higher marginsavailable in the processing of the Kuranakh end product. The proposed jointventure would utilise Aricom's production of ilmenite and expertise in titaniumresources and technology together with Chinalco's capital, technologies, localpower base and proficiency in engineering design and metal production. A pre-feasibility study has been commissioned from a specialist design institutein Ukraine in coordination with the Chinese design institute SAMI of ChinaAluminium International Engineering Corporation Limited. Site selection hasbeen completed. The next step is the completion of a Chinese feasibility studybased on the Ukrainian inputs and the chosen site. This study is expected in thesecond quarter of 2007 and will be key in the formation of the joint venture. General Planning Schedule The following table shows the Group's current planning schedule for the variousprojects. These dates may be adjusted as the planning and analysis proceed. Project Planning Schedule Years 2006 2007 2008 2009 2010 2011 2012 ->KuranakhDesign & FS •Construction • •Operation • • • • • • • •K&SDesign & FS • • • •Construction • • • •Operation • • • • •GarinskoyeDesign & FS • • •Construction • • • •Operation • • • • •Bolshoi SeymDesign & FS • • • •Construction • • • •Operation • • • Proposed Capital Expenditure The following table represents an estimate of the Group's near term constructionexpenditure. Pre Production Construction Expenditure Programs - by Project US$million 2007 2008 2009 Kuranakh 68 K&S 117 245 Garinskoye 50 276 TOTAL 68 167 521 The above includes all the main areas of construction expenditure at a projectlevel. This figure would include all project infrastructure requirementsincluding necessary railway connections. The construction element also includesestimates for the construction of both the mining and processing units. As isdiscussed in detail in the studies of the K&S and Garinskoye projects, the pigiron processing unit is a significant part of the estimated constructionexpenditure. In addition to the construction expenditure outlined above there will besignificant (non-construction) project expenditure on both K&S and Garinskoye.Among other things, this will include: • conclusion of the exploration and confirmation drillingprogrammes; • commissioning of detailed bankable feasibility studies; and • detailed mine and engineering design work. Over the coming months, Aricom's expenditure programme will require considerablecapital, not only to make payments but also for the pre-commitment of funds.Across the global mining industry contractors nowadays generally request highercapital commitments being made at earlier stages in the process, beforecontractual agreements can be secured. In general, experience at Kuranakhindicates that the commitments timetable tends to run six to nine months aheadof expenditure. At the same time, the investment decision process of the Aricom Board also takesplace in advance of commitment. The Group anticipates entering into capitalcommitments of $500 million or more over the next 18 to 24 months. Giproruda In March 2007, Aricom agreed to acquire a 68.49 per cent. holding in Giproruda,conditional on FAS approval. Based in St Petersburg, and employing 148 people, Giproruda is one of Russia'smost respected mining design institutes specialising in the analysis and designof mining projects. Giproruda has special experience in the design of pits andmines in extreme mining, geological and climatic conditions. Other areas ofexpertise include the development of efficient mining technologies, projectrepair base layout, design and transportation services, the repair of technicalequipment, storage facilities and the design of administrative and domesticfacilities. Iron ore is a key area of specialisation for the institute. Thiswill be of specific benefit in the analysis and design of a number of Aricom'sfuture and existing development projects. Giproruda will continue its workprogramme for other customers but will be given an opportunity to focusattention on Aricom's portfolio of projects. Giproruda believes it currentlyhas a significant market share in the project design services market in theRussian mining sphere. As well as development plans to grow its operationswithin the CIS, Giproruda is advancing its international programme withcontracts signed on a number of projects as well as an application for ISO 9000status. The Placing The Company is today launching the Placing, a conditional placing of Unitscomprising in aggregate approximately 351 million New Shares and approximately117 million Warrants to each subscribe for one new ordinary share. Each Unitcomprises three Shares and one Warrant, which following issue will be separatelytransferable. The Joint Bookrunners have the option to increase the size of thePlacing to a maximum number of Units comprising in aggregate up to 399 millionNew Shares and up to 133 million Warrants. Pursuant to the proposed terms of the placing agreement to be entered intobetween the Company and the Joint Bookrunners (the "Placing Agreement"), theseUnits are being conditionally placed by the Joint Bookrunners with institutionaland other investors. The Placing is conditional on (inter alia) the passing of aspecial resolution by shareholders to (i) increase the authorised share capital,(ii) provide authorities (inter alia) to enable implementation of the Placingand (iii) increase the Group's borrowing powers; and the Placing Shares beingadmitted to trading on AIM. Under the Placing Agreement the Company willundertake not to issue any additional Shares following Admission (save for thoseissued pursuant to the exercise of Warrants, the outstanding K&S considerationShares, any Shares issued to the International Finance Corporation ("IFC")directly or pursuant to warrants (under the proposed arrangements with IFC whichhave recently been announced) and any Shares issued pursuant to the Company'sshare option schemes), during the period of 180 days from Admission without theprior written consent of the Joint Bookrunners who have agreed not tounreasonably withhold or delay such consent. Application will be made for the Placing Shares to be admitted to trading onAIM. Subject (inter alia) to the passing of the Resolution it is expected thatthe Placing Shares will be admitted to trading on AIM on or around 5 June 2007.No application will be made for the Warrants to be admitted to trading on AIM.However, as stated above, it is currently the Company's intention to move thepublic trading of the Company's Shares from AIM to the Official List of theFinancial Services Authority and to trading on the main market of the LondonStock Exchange and application would be made at the time for the Warrants to beadmitted to listing on the Official List of the Financial Services Authority andto trading on the main market of the London Stock Exchange. Upon the issue ofShares pursuant to the exercise of Warrants, application will be made to therelevant stock exchange for the admission to trading (and if applicable listing)of such Shares. The Placing Shares, and Shares issued on the exercise of the Warrants, will,when issued, rank pari passu with the then existing Ordinary Shares includingthe rights to all dividends and other distributions declared, made or paid afterthe date of their issue. The Shares and Warrants can be held through CREST. Peter Hambro and Pavel Maslovskiy and their related entities will not beparticipating in the Placing and following completion of the Placing theiraggregate and individual holdings will, both before and after the issue of theShares due on completion of the Philotus option exercise in relation to theremaining 50 per cent. K&S interest, be below 30 per cent. of the Company'senlarged issued share capital. Use of Proceeds It is intended that the net proceeds of the Placing, together with the Company'sexisting cash resources, will initially be used: • in combination with the project finance facilities referred toabove, to fund in part the equity portion of the planning and construction costsof the Group's Kuranakh, K&S and Garinskoye projects; • to fund Aricom's expected participation in the construction ofa titanium sponge plant in Northern China; and • for general working capital and corporate development purposes. The capital expenditure to which these funds will principally be applied issummarised under "Proposed Capital Expenditure" above. The EGM The Company will be convening an Extraordinary General Meeting ("EGM") to beheld on or around 4 June 2007, at which a special resolution will be put toincrease the authorised share capital, to provide authorities (inter alia) toenable implementation of the Placing and to increase the Group's borrowingpowers. RISK FACTORS The exploration for and development of metals and minerals resources is aspeculative activity that involves a high degree of risk. The Directors believethat, in particular, prospective investors should carefully consider thefollowing risks and uncertainties before making an investment decision regardingthe Company. If any of these risks and uncertainties, together with possibleadditional risks and uncertainties of which the Directors are currently unawareor which they consider not to be material in relation to the Company's business,actually occur, the Company's business, financial position or operating resultscould be materially and adversely affected. It should be noted that this list isnot exhaustive and that certain other risk factors may apply. Acquisitions subject to outstanding conditions Completion of various acquisitions by the Company including (i) the remaining 50per cent. indirect interest in Kimkanskoye and Sutarskoye, following itsexercise of the option to acquire this interest, (ii) its proposed acquisitionof its proposed 60 per cent. interest in Garinskoye and (iii) Giproruda are allconditional on the respective consents of the Russian Federal Anti-MonopolyService. In addition, the proposed acquisition of its interest in Garinskoye isalso conditional on a share re-organisation and shareholder consents. There isno guarantee that these consents will be received and any acquisitions inrespect of which such consents are not received cannot be implemented. Geology and reserves Any exploration programme entails risks relating to the location of economicorebodies, the development of appropriate metallurgical processes, the receiptof necessary governmental permits and the construction of mining and processingfacilities. No assurance can be given that any exploration programme will resultin any new commercial mining operation or in the discovery of new resources.The exploration for and development of mineral deposits involves significantuncertainties and the Group's operations will be subject to all of the hazardsand risks normally encountered in such activities. These hazards and risksinclude unusual and unexpected geological formations, rock falls, flooding andother climatic conditions, any one of which could result in damage to, ordestruction of, the Group's facilities, damage to life or property,environmental damage or pollution and legal liability which could have amaterial adverse impact on the business, operations and financial performance ofthe Company. Although precautions to minimise risk will be taken, even acombination of careful evaluation, experience and knowledge may not eliminateall of the hazards and risks. As is common with all exploration ventures, there is also uncertainty andtherefore risk associated with the Group's operating parameters and costs. Thesecan be difficult to predict and are often affected by factors outside theGroup's control. With all metals and minerals operations there is uncertaintyand, therefore, risk associated with operating parameters and costs resultingfrom the scaling up of extraction methods tested in pilot conditions. Metals andminerals exploration is speculative in nature and there can be no assurance thatany potential deposits discovered will result in an increase in the Group'smineable resource base. In addition, it may take many years from the initialphase of exploration and drilling before production is possible. During thistime, the economic feasibility of exploiting a discovery may change as a resultof changes in metal and/or mineral market prices. Implementation of new projects The Company has limited business activity and the Group's mining interests havenot yet been developed. Implementation of the projects outlined in this documentwill in most cases require, inter alia, conclusion of agreements with thirdparties, government consents and material additional funding. There is nocertainty that any of these will be achieved and thus no certainty that theseprojects can be implemented or that they would be successful were they to beimplemented. In pursuing the proposed projects, the Company may find itself incompetition with companies with much more substantial resources. Future fundingfor such projects could involve dilution of the interests of existingshareholders. Prices and demand The Group's earnings are intended to be principally derived from the mining andprocessing of ores and are therefore related to the market prices of such oresand related products. Iron ore is currently trading at historically high levels,and there is no certainty that these prices will be maintained. Although theGroup's anticipated costs of mining and production are expected to be relativelylow by world standards, the Group's ability to achieve or maintain earnings, paydividends in the future and undertake capital expenditure may be affected in theevent of a sustained material fall in the price of the relevant ores and/orrelated products. The Group is targeting the Chinese market for a significant proportion of itsfuture sales. A decline in Chinese demand, and/or an increase in Chinesedomestic production or other competition, could adversely affect the Group'sperformance and prospects. The Group has a minority stake in the Bolshoi Seym deposit, and the Bolshoi Seymjoint venture arrangements are yet to be finalised The Group's stake in Ural Mining, a Russian company holding the licence todevelop the Bolshoi Seym deposit, is 49 per cent. It is intended that the otherparticipant in Ural Mining will be Timia, a company related to the Interrosinvestment group, a large Russian private investment company. It is possible that Timia does not become a shareholder in the Bolshoi Seymjoint venture or that the anticipated minority protection and controlarrangements will not be agreed as currently envisaged. Timia and Aricom intendto provide certain minority protections for Aricom, but if they do not so agreethen Aricom may have to rely on statutory protections and those protectionsexisting in the charter of Ural Mining. Timia and Aricom intend to provide for certain deadlock provisions. These couldbe triggered (inter alia) by Mr. Peter Hambro and/or Dr. Pavel Maslovskiyceasing to be involved in Aricom and the resultant position not being addressedto Timia's satisfaction. Deadlock resolution could include a shareholder tablinga price at which they will buy out the other, but at which they could also bebought out (subject to a 5 per cent. premium for Timia's controlling stake). The Group's mineral licences may be challenged, which may prevent or severelycurtail the Group's use of the affected mineral deposits The Group's mineral rights may be challenged or impugned, and insurance forthese rights may not be available, or the Group may elect not to be so insuredbecause of high premium costs. Each sovereign state is the sole authority ableto grant mineral exploration and/or exploitation rights, and the Group'sability to maintain extraction rights on some of the Group's properties isdependent, inter alia, on the Government's policy and rules for use of subsoil.Some of the licences issued to the Group may be subject to prior claims, andtitle to the land plots may be affected by, among other things, undetecteddefects. In addition, a variety of factors beyond the Group's control maypreclude the Group from operating its mineral rights as permitted or not allowthe Group to enforce its mineral rights with respect to any of its depositsdespite having the right to explore and develop them. The licensing regime in Russia for the exploration, extraction and production ofminerals is governed primarily by the Subsoil Law and regulations promulgatedthereunder. Most of the Group's licences provide that they may be revoked if theGroup fails to comply with any of the licence requirements, if the Group doesnot make timely payments of levies and taxes for the use of the subsoil, if theGroup systematically fails to provide information, if the immediate licenceholders go bankrupt or if the Group fails to fulfil any capital expenditure orproduction obligations or both. There have been press reports that the Government is considering proposalsinvolving the replacement of the current subsoil licensing system with a newsystem based on concession agreements between subsoil users and the state. It isnot yet clear whether these proposals will be implemented and what effect thiswould have on the Group's operations. However, there is a risk that theimplementation of such proposals may have an adverse effect on the Group'sbusiness. The Group's exploration, development and production licences may be suspended orrevoked prior to their expiration Generally, compliance with environmental and other government regulationsrequires the Group to obtain permits issued by Russian governmental agencies.Some permits require periodic renewal or review of their conditions. The Groupcannot predict whether the Group will be able to renew these permits or whethermaterial changes in permit conditions will be imposed. Non-renewal of a permitmay cause the Group to discontinue the operations requiring the permit, and theimposition of additional conditions on a permit may cause the Group to incuradditional compliance costs, either of which could have a material adverseaffect on the Group's financial condition and results of operations.Additionally, the Group may not be able to, or may voluntarily decide not to,comply, or may not have complied in all respects, with the licence requirementsfor some or all of its licences. If the Group fails to fulfil the specific termsof any of its licences or if the Group operates in the licence areas in a mannerthat violates Russian law, regulators may impose fines on the Group or suspendor revoke its licences, any of which could have a material adverse effect on itsoperations. The Group may not be able to finance the Group's planned capital expenditures The Group's business requires significant capital expenditures, including inexploration and development, production, transport, refining and meeting theGroup's obligations under environmental laws and regulations. The Group expectsto finance a substantial part of these capital expenditures out of proceeds ofthe proposed Placing and from external borrowings. No assurance can be given that the Group will be able to raise the financingrequired for the Group's planned capital expenditures, on a secured basis orotherwise, on acceptable terms or at all. If the Group is unable to raise thenecessary financing, the Group will have to reduce the Group's planned capitalexpenditures. Any such reduction could adversely affect the Group's ability todevelop any of the Group's mineral resources. If the reductions are severeenough, the Group may not be able to commence operations at one or more of itsdeposits. If the Group does not perform mineral exploration programs required by the termsof the relevant licences, these licences may be revoked or may lapse and theGroup will lose all interest that the Group has in these deposits. The Group'sability to obtain outside financing will depend in part upon the prices ofilmenite and iron ore and the industry's perception of their future price andother factors outside the Group's control. Cash constraints and strategicconsiderations may also lead the Group to dispose of all or part of the Group'sinterests in some of the Group's projects or mineral rights or to seek thirdparties to jointly develop one or more projects. Reserves and resources may be subject to restatement The resource and reserve estimates contained in this document are estimates ofthe resources and reserves in the ground on the Group's existing and proposedlicensed territories. Reserves and resources estimates for the Sutarskoye,Kimkanskoye, Garinskoye and Bolshoi Seym deposits reproduced in this documentare extracted from the relevant licence auction materials and have not beenaudited by independent mining engineers and have not been reviewed by theGroup's geologists. The Group's ore reserves at Kuranakh are estimates basedupon many factors, including: • the results of exploratory drilling and an ongoing sampling ofthe ore bodies; • past experience with mining properties; and • the experience of the person making the reserve estimates. Because the Group's ore resource and reserve estimates are calculated based oncurrent estimates of production costs and product prices, they should not beinterpreted as assurances of the economic life of the Group's deposits or theprofitability of the Group's future operations. Resource and reserve estimatesmay require revisions based on the definitive exploration figures and actualproduction experience. Further, a sustained decline in relevant market pricescould render ore resources and reserves containing lower grades and/ormineralisation uneconomic to recover and ultimately require a restatement ofreserves and resources. Any failure of the reserves and resources to meet theGroup's recovery expectations may have a materially adverse effect on theGroup's business, financial condition and results of operations. Liquidity The Shares are not listed on the Official List and although the Shares aretraded on AIM, this should not be taken as implying that there will be a liquidmarket in the Shares. An investment in the Shares may, therefore, in certaincircumstances be difficult to realise. In addition, although it is currentlythe Group's intention to move the public trading of the Company's shares fromAIM to the Official List, there is no certainty that this will happen. Investment risk Prospective investors should be aware that the value of an investment in theCompany may go down as well as up. In addition, there can be no certainty thatthe market price of an investment in the Company will fully reflect itsunderlying value. The price at which investors may dispose of their Shares inthe Company may be influenced by a number of factors, some of which may berelated to the Company and some not. Investors may realise less than theoriginal amount invested. Payment obligations Under the exploration licences and certain other contractual agreements to whichthe Group companies are or may in the future become parties, such companies areor may become subject to payment and other obligations. If such obligations arenot complied with when due, in addition to any other remedies which may beavailable to other parties, this could result in dilution or forfeiture ofinterests held by such companies. The Company may not have, or be able toobtain, financing for all such obligations as they arise. Currency risk The Company reports in US$, being the currency in which the markets for theGroup's proposed products are principally denominated. A large part of theGroup's expenses is denominated in Roubles which have been appreciating againstthe US$ for the last 24 months. The Group also has expenses and incomedenominated in other currencies, including those of the jurisdictions in whichit operates. The Group's financial condition and results of operations could beadversely affected by changes in the exchange rates between currencies in whichit operates or which otherwise affect it against the US dollar. Environmental regulations The Company's operations are subject to the extensive environmental risksinherent in the mining and processing industry. Although the Directors believe that the Subsidiaries are in compliance in allmaterial respects with any applicable environmental laws and regulations andhold all necessary approvals, licences and permits under those laws andregulations, there are certain risks inherent in their activities and thosewhich the Group will undertake in the future, such as risks of accidentalspills, leakages or other unforeseen circumstances, that could subject theCompany to extensive liability. In addition, the Company is subject to checks,including spot checks, by various regulators including Rosprirodnazor, theenvironmental regulator in Russia. Environmental legislation and permittingrequirements are likely to evolve in a manner which will require stricterstandards and enforcement, increased fines and penalties for non-compliance.However, the Company is unable to predict the effect of additional environmentallaws and regulations which may be adopted in the future, including whether anysuch laws or regulations would materially increase the Company's cost of doingbusiness or affect its operations in any area. Operational considerations The Company's operational targets are subject to the completion of plannedoperational goals on time and according to budget, and are dependent on theeffective support of the Company's personnel, systems, procedures and controls.Any failure of these may result in delays in the achievement of operationaltargets with a consequent material adverse impact on the business, operationsand financial performance of the Company. The location of the Kuranakh, Kimkanskoye, Sutarskoye, Garinskoye and BolshoiSeym deposits means that climatic conditions have an impact on operations and,in particular, severe weather could disrupt the delivery of supplies, equipmentand fuel. It is, therefore, possible that exploration and extraction activitylevels might fluctuate as a result of meteorological factors. Unscheduled interruptions in the Company's operations due to mechanical or otherfailures or industrial relations related issues or problems or issues with thesupply of goods or services could have a serious impact on the financialperformance of those operations. Labour Certain of the Company's operations are carried out under potentially hazardousconditions. Whilst the Company intends to continue to operate in accordance withrelevant health and safety regulations and requirements, the Company remainssusceptible to the possibility that liabilities might arise as a result ofaccidents or other workforce-related misfortunes, some of which may be beyondthe Company's control. Uninsured risks The Group, as a participant in exploration and mining programmes, may becomesubject to liability for hazards that cannot be insured against, which couldexceed policy limits or against which it may elect not to be so insured becauseof high premium costs. The Group may incur a liability to third parties inexcess of any insurance cover arising from pollution or other damage or injury. The insurance industry in Russia is in a relatively early stage of developmentand, accordingly, the available cover is relatively limited. Many forms ofinsurance designed to protect against hazards, common in other parts of theworld, are not yet generally available in some of the areas where the Groupoperates. The Group does not have full coverage for all of its plant andfacilities, for business interruption, for third-party liability in respect ofproperty, and for environmental damage arising from accidents on its property orrelating to its operations. Until the Group is able, or decides, to obtainadequate insurance coverage, there is a risk that losses and liabilities arisingfrom such events could significantly increase its costs and have a materialadverse effect on its business, results of operations and financial condition. Project development risks There can be no assurance that the Company will be able to manage effectivelythe expansion of its operations or that the Company's current personnel,systems, procedures and controls will be adequate to support the Company'soperations. Any failure of management to manage effectively the Company's growthand development could have a material adverse effect on the Company's business,financial condition and results of operations. There is no certainty that all or, indeed, any of the elements of the Company'scurrent strategy will develop as anticipated. Dependence on key personnel The Group's business is dependent on retaining the services of a small number ofkey personnel of the appropriate calibre as the business develops. However,there is no assurance that the Group will be able to attract and retain such keypersonnel. The success of the Group is, and will continue to be to asignificant extent, dependent on the expertise and experience of the Directorsand senior management and the loss of one or more could have a materiallyadverse effect on the Group. Economic, political, judicial, administrative, taxation or other regulatoryfactors The Group may be adversely affected by changes in economic, political, judicial,administrative, taxation or other regulatory factors, in the areas in which theGroup will operate and holds its major assets, as well as other unforeseenmatters. The jurisdictions in which the Company operates may in some cases haveless established judicial systems, a more volatile political environment and/ormore challenging trading conditions than in some other parts of the world.Unlawful, selective or arbitrary government action could have a material adverseeffect on the Group's business and prospects. The Group is subject to a broad range of taxes imposed at the federal, regionaland local levels, including but not limited to income tax, mineral extractiontaxes, royalty tax, sales tax, property tax, social taxes and road use tax. Lawsrelated to these taxes, such as the Russian Tax Code, have been in force for ashort period relative to tax laws in more developed market economies; therefore,the implementation of these tax laws by different tax authorities and courts isoften unclear and/or inconsistent. Accordingly, few precedents with regard tothe interpretation of these laws have been established. The Group seeks legaland tax advice and seeks to comply with all the relevant tax laws andregulations to the best of its abilities. However, no assurances can be madethat tax authorities and/or courts will apply various tax laws and regulationsin a way consistent with that taken by the Group. If the tax authorities and/orcourts adopt a different interpretation of various tax laws and regulations, theGroup may have to pay significantly higher taxes, which could have a materialadverse effect on the Group's business. The Group's assets are located in Russia, a country which is still moving from acommand to market-driven economy. While this process of change is establishingin Russia a more western-style business environment, there are still substantialdifferences between it and the more developed economies and countries, and boththese differences and the ongoing processes, could adversely affect the Groupand its operations. Ethnic, religious, historical and other divisions have, onoccasion, given rise to communal tensions, armed conflict and terroristactivity. Any spread of violence or terrorism, or political measures taken tocounter them, could hinder the operation and the expansion of the Group'sbusiness. Various recent developments in Russia have caused some concern inrelation to the investment climate in the country and no assurances can be giventhat various steps taken or being debated in the Russian Government will notaffect investment into Russia or the public perception thereof. Legal and regulatory environment There is no guarantee that the Company will be successful in all attempts toobtain mining licences. There is no guarantee of the terms of any future mininglicence. The exploration and extraction activities of the Company are subject tovarious laws governing prospecting, development, production taxes, labourstandards and occupational health, site safety, toxic substances and othermatters. Although the Directors believe that the Company's explorationactivities are currently carried out in accordance with all applicable rules andregulations and that the Company holds all necessary approvals, licences andpermits under those laws and regulations, no assurance can be given that newrules and regulations will not be enacted or that existing rules and regulationswill not be applied in a manner which could limit or curtail exploration,production or development. Amendments to current laws and regulations governingoperations and activities of exploration for and extraction of mineralresources, or more stringent implementation thereof, could have a materialadverse impact on the business, operations and financial performance of theGroup. In some cases, existing or future licences cover, or will cover, only theextraction of specified minerals. In such cases, the exploitation of otherminerals may require additional licences to be obtained, and there can be nocertainty that these will be forthcoming. Litigation Legal proceedings may arise from time to time in the course of the Company'sbusiness. The Directors cannot preclude that litigation may be brought againstthe Company or any of its Subsidiaries in future from time to time. Forward looking statements Certain statements within this announcement constitute forward lookingstatements. Such forward looking statements involve risks and other factorswhich may cause the actual results, achievements or performance of the Companyto be materially different from any future results, achievements or performanceexpressed or implied by such forward looking statements. Such risks and otherfactors include, but are not limited to, general economic and businessconditions, changes in government regulation, currency fluctuations, theCompany's ability to develop its existing or new resources, competition, changesin development plans and the other risks described herein. There can be noassurance that the results and events contemplated by the forward lookingstatements contained in this announcement will, in fact, occur. These forwardlooking statements are correct only as at the date of this announcement. TheCompany will not undertake any obligation to release publicly any revisions tothese forward looking statements to reflect events, circumstance orunanticipated events occurring after the date of this announcement except asrequired by law or by the relevant regulatory authority. Lack of infrastructure may adversely affect the Group's ability to develop itsresources The Group's current and proposed reserves and resources are situated in areaslacking infrastructure required to develop and operate the Group's reserves andresources. The Group must invest heavily into the construction of the requiredmining and auxiliary infrastructure (such as roads, loading terminals, railwaysconnecting to the BAM and/or Transsiberian railways and staff living quarters).Construction and operation of this infrastructure will require substantialcapital expenditure by the Group and no assurance can be given that the marketconditions will continue to make such investments viable. Kuranakh and Bolshoi Seym are located in close proximity to the BAM railway,which is operated by a state owned company OJSC Russian Railways. State ownedinfrastructure in Russia largely dates back to Soviet times and much has notbeen adequately funded and maintained over the last 15-20 years. Particularlyaffected are the rail and road networks, building stocks and power generationand transmission. Currently, the Russian Government sets rail tariffs and mayfurther increase these tariffs as it has done in the past. The Group could beadversely affected by insufficient capacity on the BAM railway. Although the construction of a cross-border rail bridge in close proximity to K&S may be beneficial to the Group's operations, there is no certainty that thenecessary intergovernmental approvals will be forthcoming or that such bridgewill be constructed. China The Company will be exposed to the Chinese economy and to the state ofdiplomatic relations between Russia and China. Deterioration in the Chineseeconomy and/or in the trading environment could adversely affect the tradingposition of the Company. Similarly the imposition of export controls in Russiaor import controls in China could adversely affect the Company's operations. General The risks noted above do not necessarily comprise all those potentially faced bythe Company and are not intended to be presented in any assumed order ofpriority. SUMMARY OF LICENCE TERMS The Group's principal licence interests The Group has obtained the mineral exploration and extraction rights it requiresto conduct its operations on its properties. The Group uses sub-contractors(including MCPHM related entities) which have the requisite licences to performthe relevant works. In relation to the licence over which the Group has newlyacquired an interest (Bolshoi Seym) and the licences over which the Groupproposes to acquire an interest (Kimkanskoye and Sutarskoye), the Group is inthe process of being issued the necessary mining allotments and other surfacerights. This is an automatic process which follows the grant of the mineralexploration and extraction rights. Olekma licence (also referred to herein as the Kuranakh licence) This licence No. BLG 01244 BE was issued to LLC Olekma on 25 June 2001 by AmurOblast Geology Committee. LLC Olekma is as at the date of this document in fullcompliance with the terms and conditions of this licence. The licence andlicence agreement provide that LLC Olekma has the exclusive right to explore forand extract titanomagnetite ores within the licensed territory of the Kuranakhtitanomagnetite ore deposit and on its flanks situated in the basin of RiverKhani, 85 km to the South of Olekma village in the Tynda District of AmurOblast. The licence is valid until 1 June 2026 and may be extended with theconsent of the licensing authority. Currently LLC Olekma pays a minimal fee related to the cost of exploration worksand 1 per cent. of the cost of prospecting works. Once production oftitanomagnetite ores will commence, LLC Olekma will have to pay an 8.2 per cent.royalty of the value of the first commercial shipment of ilmenite sold and asub-soil compensation fee of between 2 and 6 per cent. of the value of extractedmaterials. LLC Olekma will have to pay a mineral extraction tax at the rates calculated onthe basis of the rules set out in Chapter 26 of the Russian Tax Code. Bolshoi Seym licence Licence No.BLG 13384 TE was issued to Ural Mining on 30 November 2005 by theFederal Agency on Subsoil Use and is valid until 1 December 2030 and may beextended with the consent of the licensing authority. The licence and licenceagreement provide that Ural Mining has the exclusive right to explore for andextract titanomagnetite ores within the licensed territory of the Bolshoi Seymtitanomagnetite ore deposit situated in the basin of River Imangra, 27 km to theWest of the railway station Mostovaya (Baikal-Amur Railway) in the TyndinskyDistrict of Amur Oblast. Ural Mining must ensure that geological exploration ofthe deposit is fully completed by 1 December 2010, and extraction oftitanomagnetite ore shall commence not later than on 1 December 2013 with anextraction rate of 2,000,000 tpa by 1 December 2014. Ural Mining has paid thelicence fee of 46,200,000 RUR, 1,000,000 RUR for geological information and thelicence issue fee of 8,000 RUR in respect of the Bolshoi Seym licence. UralMining will also have to pay an annual fee for each square kilometre of thelicensed area which applies for the period up to the start of industrialproduction. The levels of this annual fee are set out below: Year RUR/km2 km2 Total RUR 2005 1,900 26 49,400 2006 4,000 26 104,000 2007 6,000 26 156,000 2008 8,000 26 208,000 2009 10,500 26 273,000 Ural Mining will have to pay a mineral extraction tax at the rates calculated onthe basis of the rules currently set out in Chapter 26 of the Russian Tax Code. Kimkanskoye licence This licence No. BIR 13475 TE was issued to KS GOK on 16 February 2006 andre-issued under number 14037TE on 27 April 2007 by the Federal Agency on SubsoilUse and is valid until 30 December 2025 and is renewable with the consent of thelicensing authority. Under this licence, KS GOK has the right to explore for andextract iron ores within the licensed territory of Kimkanskoye ferruginousquartzite deposit situated in the Obluchensky district, 4 km to the South-Westof the railway station Izvestkovaya in the EAO. Under the licence KS GOK mustensure that the technical development plan in relation to the deposit iscompleted by 30 December 2007, and the extraction of iron ore shall commence notlater than on 30 December 2009 with an extraction rate of 5,000,000 tpa by 30December 2010. KS GOK has paid a licence fee of 136,500,000 RUR; 11,433,000 RURfor geological information and a licence issue fee of 8,000 RUR to the issuingauthority in respect of the Kimkanskoye licence. KS GOK must pay the mineralextraction tax at the rates calculated on the basis of the rules currently setout in Chapter 26 of the Russian Tax Code. Sutarskoye licence This licence No. BIR 13476 TE was issued to KS GOK on 16 February 2006 andre-issued under number 14038 TE on 27 April 2007 by the Federal Agency onSubsoil Use, is valid until 30 December 2025 and is renewable with the consentof the licencing authority. Under this licence, KS GOK has the right to explorefor and extract iron ores within the licensed territory of Sutarskoyeferruginous quartzite deposit situated in the Obluchensky district, 10 km to theSouth-West of the railway station Izvestkovaya in the EAO. Under the licence KSGOK must ensure that geological exploration of the deposit is completed by 30December 2010, and the extraction of iron ore shall commence not later than 30December 2013 with an extraction rate of 5,000,000 tpa by 30 December 2014. KSGOK has paid a licence fee of 157,000,000 RUR, payment for geologicalinformation amounting to 10,000 RUR and a licence issue fee of 8,000 RUR payableto the issuing authority in respect of the Sutarskoye licence. KS GOK will alsohave to pay an annual fee for each square kilometre of the licensed area for theperiod up to the start of industrial production. The levels of this annual feeare set out below: Year RUR/km2 km2 Total RUR 2005 1,900 27 51,300 2006 4,000 27 108,000 2007 6,000 27 162,000 2008 8,000 27 216,000 2009 10,500 27 283,500 KS GOK must pay the mineral extraction tax at the rates calculated on the basisof the rules currently set out in Chapter 26 of the Russian Tax Code. Garinskoye Licence No. BLG 13893 TE was issued to Amur Mining (now LLC Garinsky Mining andMetallurgical Complex ("Garinsky")) on 27 December 2006 by Rosnedra followingthe tender for the licence for the extraction of iron ores within the Garinskyiron-ore deposit in the Mazanovsky District in the Amur Region, which was heldon 5 December 2006 LLC. Under the Licence, Garinsky has the exclusive right toextract iron ores within the licensed territory of Garinsky iron-ore depositsituated in Mazanovsky district, on the left coast of the river Gar, 28 km fromits entry, 140 km to the North-East from the city Svobodniy and 80-90 km fromBAM railway and railway branch Shimanovsk-Chagoiyan in the Amur Region. Thelicence term is until 31 December 2026 and is renewable with the consent of thelicensing authority. The licensee has to ensure that specified development isperformed. The licensee has to make the following payments in relation to the issue of thelicence and subsoil use within the licensed area. A licence fee of 500,000,000Rbs (minus 280,000,000 Rbs paid earlier as a deposit for the purpose ofparticipation in the tender), payment for geological information (the amount ofsuch payment depends on the volume of acquired information), a licence issue feeamounting to 8,000 Rbs, mineral extraction tax (at the applicable rate), watertax, in case of extraction of the ground waters during the subsoil use (at theapplicable rate) and other types of payments and taxes envisaged by applicableRussian legislation. MATERIAL CONTRACTS • Pursuant to an agreement dated 21 January 2005 between LLCAricom and China National Gold Corporation ("CNGC") (as amended and supplementedby additional agreements dated 21 December 2005 and 2 March 2007), LLC Aricomconditionally undertook to deliver and CNGC conditionally undertook to acceptand to pay for titanomagnetite concentrate produced from the Kuranakh deposit(the "Goods"). The agreement takes effect from the date of entry into force of adebt facility agreement to be entered into between the Company and a foreignbank for the financing of the production of the Goods and shall remain in fullforce and effect until 31 March 2015. The agreement may be terminated orextended by the parties by mutual agreement. The total quantity of Goods to bedelivered in accordance with the delivery schedule shall be up to 6,100,000metric tonnes at a price based on the prevailing market price and on the basisagreed between the parties. The price may be revised in accordance with themechanism set out in the agreement no more than three times per calendar year. • Pursuant to an agreement dated 21 January 2005 between LLCAricom and CNGC (as amended and supplemented by additional agreements dated 21December 2005 and 2 March 2007), LLC Aricom conditionally undertook to deliverand CNGC conditionally undertook to accept and to pay for ilmenite concentrateproduced from the Kuranakh deposit (the "Goods"). The agreement takes effectfrom the date of entry into force of a debt facility agreement to be enteredinto between the Company and a foreign bank for the financing of the productionof the Goods and shall remain in full force and effect until 31 March 2015. Theagreement may be terminated or extended by the parties by mutual agreement. Thetotal quantity of Goods to be delivered in accordance with the delivery scheduleshall be up to 2,000,000 metric tonnes at a price based on the prevailing marketprice and on the basis agreed between the parties. The price may be revised inaccordance with the mechanism set out in the agreement no more than three timesper calendar year. • Pursuant to an option agreement (the "Option Agreement") dated18 April 2006 between Philotus and the Company, the Company paid to Philotus anoption premium of $9,000,000 which entitled the Company to acquire all theordinary shares (the "Option Securities") in Expokom (Cyprus) Limited ("Expokom") on the terms described below. Philotus had the right to invest the optionpremium in new Shares at a price of 28p per Share (using a final exchange rateof £1: US$1.76) which it did on 15 June 2006, following the grant of anextension to do so up to 31 July 2006. The Option was exercisable following thecompletion of an initial feasibility study and independent valuation and theprice payable for the acquisition of Expokom (the Exercise Price) was the valueplaced on it by an independent discounted cash flow valuation on an ungearedbasis (principally of the underlying Kimkanskoye and Sutarskoye deposits andusing a discount rate of 30 per cent.) by an expert acceptable to the Companyand Philotus subject to a cap on the Exercise Price of US$61,000,000.Completion of the feasibility study by Wardell Armstrong International wasannounced on 5 April 2007. On 4 April 2007, the Company gave notice of itsintention to acquire all the Option Securities subject to the consent of FAS.The Exercise Price will be settled by Aricom through the issue to Philotus ofnew Shares at 28p per Share (using a final exchange rate of £1: US$1.76) and123,782,467 new Shares will be issued. Under the Option Agreement, the Companyagreed to fund Philotus's share of the Rubicon feasibility study and certainother expenses which are to be agreed in advance by Aricom. • The Company entered into a master services agreement dated 1June 2006 with MCPHM governs the overall relationship between Aricom and MCPHMand covers the provision of a range of services by MCPHM to any member of theGroup on an arm's-length basis. Aricom is entitled but not obliged to use theservices of MCPHM (including its subsidiaries). Specific services to be providedpursuant to this agreement are subject to approval by the Independent Directors,being members of the Board who are not also (i) directors of Peter HambroMining (PHM"); or (ii) directors of any other company in the PHM group; or (iii)a director whose related parties (as defined in the AIM Rules for Companies)include such persons or any company in the PHM group. Services provided underthis agreement include: (a) taking over from VNIPI the completion and issue of thefeasibility study for Kuranakh; (b) the construction of the mine at Kuranakh on the basis of theKuranakh construction agreement; (c) the provision of mining, appraisal, development and otherservices to the relevant licence holding companies in respect of the BolshoiSeym, Kimkanskoye and Sutarskoye deposits (and potentially any other deposits inwhich the Group may acquire interests in the future); and (d) such other general management, technical, project management andother services as may be agreed. In particular Aricom may decide to commissionthe provision of services in relation to the development of Garinskoye. Personnel provided to Aricom under these arrangements may become members of theboards of Group companies if both parties agree. Services are provided on suchcost-plus basis as is agreed, with the margin to be agreed for the Company bythe Independent Directors. Outside the scope of this agreement the Company wouldseek Shareholder approval for any further arrangements for which the Company isobliged by law to seek advanced Shareholder approval. The agreement may beterminated by either party giving not less than 3 months' notice to the other.Such termination is without prejudice to the completion of projects alreadybeing carried out under the agreement, save where otherwise agreed between theparties. • Pursuant to an agreement dated 29 March 2007 between LapwingLimited ("Lapwing"); Olis Construction Limited ("Olis") and Aricom UK, Aricomagreed, subject, inter alia, to FAS Consent and to the concurrent subscriptionby Olis for additional shares, to subscribe for 20,220,000 Shares (which numberwould comprise 60 per cent. of the enlarged issued share capital followingfurther subscriptions) in Lapwing which owns a 100 per cent. interest in LLCGarinsky Mining and Metallurgical Complex (previously LLC AmurMining) ("Garinsky") which holds the licence for the Garinskoye iron ore deposit. The agreementcontains provisions governing the constitution of the board, business plan andoperation of the licence going forward. The agreement contains restrictions onfuture transfers of shares including rights of first refusal for existingshareholders and tag along provisions. The agreement contains confidentialityprovisions. In addition, pursuant to this agreement, Olis has granted Aricom UKthe option to acquire its 25 per cent holding in Garinsky. The option premiumis a non-refundable payment of US$19.7 million payable immediately beforecompletion of the subscription for the 60 per cent. interest. The strike priceis US$100 million. The exercise period is 2 years from the date of thesubscription but can be shortened in certain circumstances including inter aliachange of control of Aricom and generation of US$50 million of net profit inLapwing and/or its subsidiary. • Pursuant to a loan agreement dated 23 April 2007, Aricom UKmade available to Lapwing a loan in the amount of Euro 20,220,000 payable in USdollars for the purpose of settlement of debts of Lapwing and/or any subsidiaryof Lapwing. The loan was drawndown on 1 May 2007 and is repayable on the datefalling one year from the date of crediting of the last instalment of the loanand may be reduced or extended as agreed between the parties. The loan does notbear interest. • The Company expects to enter into the Placing Agreement on oraround 11 May 2007 between (1) the Company and (2) the Joint Bookrunners. Underthe Placing Agreement, the Joint Bookrunners conditionally agree on the termsand conditions of the Placing Agreement to use their reasonable endeavours toprocure subscribers for the Units at the Placing Price. Under the PlacingAgreement the Company agrees, on the terms and subject to the conditions of theagreement, to pay to the Joint Bookrunners a fee of 4 per cent. The PlacingAgreement contains representations, warranties and undertakings from the Companyconcerning, inter alia, the accuracy of the information in this document. ThePlacing Agreement also contains indemnities from the Company in favour of theJoint Bookrunners. The Placing is not being underwritten. The Placing Agreementmay be terminated by the Joint Bookrunners in certain limited circumstancesprior to Admission. Any such termination would be without prejudice to thecontinuing enforceability of the warranties, indemnities and undertakings givenby the Company or the Company's obligation to pay the costs and expenses of theJoint Bookrunners. PROPOSED WARRANT TERMS The Warrants are to be constituted by, and will be issued subject to and withthe benefit of, a Deed Poll to be executed by the Company (the "WarrantInstrument"). Holders of Warrants will be bound by all the terms and conditionsset out in the Warrant Instrument. The following is a brief summary of theprincipal terms and conditions to be attached to the Warrants. Furtherinformation may be provided during the bookbuilding:Warrants Each Warrant, when exercised, will entitle the warrantholder to subscribe for 1 new ordinary share of the Company (a "Warrant Share")Life of the Warrants 36 months from the Settlement Date (subject to Early Termination)Early Termination At any time: (i) after closing price of shares is in excess of 175 pence per share on 30 out of 40 consecutive trading days; or (ii) if and when at least 75% of the Warrants will have been exercised; the Company will be entitled to terminate the subscription period for the Warrants by giving not less than 14 days' RNS notice.Exercise of Warrants At the time of exercise, the exercise price shall be paid by the exercising warrantholders to the Company in Pounds Sterling. The exercise price will be confirmed as part of the Pricing Announcement expected to be made on Friday 11 May 2007. Shares to be issued to exercising warrantholders within 3 business days of receipt of notice and payment. Warrantholders may exercise all or any of their Warrants at any time after the Settlement Date until 3 pm Greenwich Mean Time on the last day of the Life of the WarrantsListing for Warrants As set out in this announcement, the Company intends to transfer its listing (the "Transfer") to the Official List of the London Stock Exchange ("LSE Main Board") before the end of 2007. Upon such Transfer, application will be made for the Warrants to be admitted to the LSE Main Market.Listing for Upon the exercise of any Warrants by a warrantholder, application willWarrant Shares be made for the admission of the underlying Warrant Shares to listing on the relevant exchange (the "Relevant Exchange") - Prior to the Transfer, the Relevant Exchange will be AIM. - Following the Transfer, the Relevant Exchange will be LSE Main Market.Non-Registration The New Shares, the Warrants and the Units will be offered and/or issued in the United States only to Qualified Institutional Buyers (as defined in Rule 144A under the Securities Act of 1933) ("QIBs") pursuant to Section 4(2) under the Securities Act and outside of the United States in offshore transactions pursuant to Regulation S under the Securities Act. A warrantholder exercising subscription rights under the Warrants must satisfy one of these criteria.Ranking Warrant Shares to be issued to warrantholders upon exercise of the Warrants will rank pari passu with all existing shares of the Company and will be of the same class as all existing shares, save that they will not rank for any dividends or other distributions declared, paid or made on the ordinary shares by reference to a record date prior to the relevant subscription date.Separability and transfer The New Shares and the Warrants will be separately transferable as ofof Warrants the Settlement Date. Warrants to be freely transferable (subject to securities laws).Option style Warrantholder can exercise each warrant at any point up to maturity.Adjustability The exercise price and the number of Warrant Shares issuable upon exercise of Warrants are both subject to adjustment from time to time including as described below. (A) Adjustments for consolidation/share split. (B) Following a takeover with cash consideration, unexercised warrants will lapse with a cancellation payment including time value compensation payable in cash. Following a takeover with share consideration (share exchange offer or scheme), the Company will undertake reasonable endeavours to procure an opportunity for unexercised warrants to be rolled over into substitute warrants exercisable into shares of the offeror or the surviving entity.Anti-dilution in Adjustment to subscription terms for rights issues, no adjustment forPre-emptive issues other open offers or non pre-emptive issues for cash or non-cash consideration, irrespective of price. Ability to exercise ahead of record date for pre-emptive offers.Dividends Adjustment to subscription terms in the event of payment of dividend or other distribution of assets by way of dividend or spin-off or similar corporate rearrangement in relation to Shares.Conditions to exercise Confirmation of ability to exercise under laws applicable to holder and certification by US warrant holders of QIB status or availability of another exemption from registration under the US Securities Act.Form of the Warrants The Warrants will be issued in electronic form through CREST A register of the Warrants will be maintained by the Company's registrars.Settlement Date Warrants expected to be settled in CREST within 3 business days of Admission of new Shares to AIM.Unissued, Reserved shares Following the Settlement Date, the Company shall at all times reserve and keep available such number of authorised but unissued and uncommitted Shares as is required to enable full exercise of the Warrants. All Warrant Shares shall, when issued, be issued, fully paid and non-assessable and free from all taxes, liens and charges. APPENDIX IMPORTANT INFORMATION ON THE PLACING FOR PLACEES ONLY. MEMBERS OF THE PUBLIC ARE NOT ELIGIBLE TO TAKE PART IN THE PLACING. THISAPPENDIX AND THE TERMS AND CONDITIONS SET OUT HEREIN ARE DIRECTED ONLY ATPERSONS WHOSE ORDINARY ACTIVITIES INVOLVE THEM ACQUIRING, HOLDING, MANAGING ORDISPOSING OF INVESTMENTS (AS PRINCIPAL OR AGENT) FOR THE PURPOSES OF THEIRBUSINESSES AND WHO HAVE PROFESSIONAL EXPERIENCE IN MATTERS RELATING TOINVESTMENTS FALLING WITHIN ARTICLE 19(1) OF THE FINANCIAL SERVICES AND MARKETSACT 2000 (FINANCIAL PROMOTION) ORDER 2005, AS AMENDED ("THE ORDER") OR AREPERSONS FALLING WITHIN ARTICLE 49(2)(a) TO (d) ("HIGH NET WORTH COMPANIES,UNINCORPORATED ASSOCIATIONS, ETC") OF THE ORDER OR TO WHOM IT MAY OTHERWISELAWFULLY BE COMMUNICATED (ALL SUCH PERSONS TOGETHER BEING REFERRED TO AS "RELEVANT PERSONS"). THIS APPENDIX AND THE TERMS AND CONDITIONS SET OUT HEREIN MUST NOT BE ACTED ONOR RELIED ON BY PERSONS WHO ARE NOT RELEVANT PERSONS. ANY INVESTMENT ORINVESTMENT ACTIVITY TO WHICH THIS APPENDIX AND THE TERMS AND CONDITIONS SET OUTHEREIN RELATES IS AVAILABLE ONLY TO RELEVANT PERSONS AND WILL BE ENGAGED IN ONLYWITH RELEVANT PERSONS. NEITHER THIS APPENDIX NOR THE ANNOUNCEMENT OF WHICH IT FORMS PART CONSTITUTES ANOFFER FOR SALE OR SUBSCRIPTION OF ANY SECURITIES IN THE COMPANY. This announcement does not constitute an offer to sell or issue or thesolicitation of an offer to buy or subscribe for ordinary shares in the capitalof the Company in Australia, Canada, Japan, South Africa, the United States orin any jurisdiction in which such offer or solicitation is unlawful and theinformation contained herein is not for publication or distribution, directly orindirectly, in or into Australia, Canada, Japan, South Africa, the United Statesor any jurisdiction in which such publication or distribution is unlawful. The Units, the Placing Shares, the Ordinary Shares, the Warrants or the OrdinaryShares into which the Warrants may be converted referred to in this announcementhave not been and will not be registered under the Securities Act and may not beoffered or sold in the United States except pursuant to an exemption from, or ina transaction not subject to, the requirements of the Securities Act. There willbe no public offer of Units, the Placing Shares, the Ordinary Shares, Warrantsor the Ordinary Shares into which the Warrants may convert in the United States,the United Kingdom or elsewhere. Any placing to be made in the United Stateswill be made to a limited number of QIBs within the meaning of Rule 144A underthe Securities Act in reliance on an exemption from the registrationrequirements of the Securities Act. The Units, the Placing Shares, the OrdinaryShares, the Warrants or the Ordinary Shares into which the Warrants may beconverted are being offered and sold outside the United States in reliance onRegulation S under the Securities Act. The Units, the Placing Shares, theOrdinary Shares, the Warrants or the Ordinary Shares into which the Warrants maybe converted have not been approved by the US Securities and ExchangeCommission, any state securities commission in the United States or any otherregulatory authority, nor have the foregoing authorities passed upon or endorsedthe merits of the Placing. Any representation to the contrary is unlawful. Inaddition, until 40 days after the commencement of the Placing, any offer or saleof Units, the Placing Shares, the Ordinary Shares, the Warrants or the OrdinaryShares into which the Warrants may be converted in the United States by anydealer (whether or not participating in the Placing) may violate theregistration requirements of the Securities Act. The distribution of this announcement and the offering or sale of the Units, thePlacing Shares, the Ordinary Shares, the Warrants or the Ordinary Shares intowhich the Warrants may be converted in certain jurisdictions may be restrictedby law. Further details in relation to the securities laws in certainjurisdictions are set out in this document. No action has been taken by theCompany, Canaccord or JPMorgan Cazenove that would permit an offering of suchUnits, the Placing Shares, the Ordinary Shares, the Warrants or the OrdinaryShares into which the Warrants may be converted or possession or distribution ofthis announcement or any other offering or publicity material relating to suchUnits, the Placing Shares, the Ordinary Shares, the Warrants or the OrdinaryShares into which the Warrants may be converted in any jurisdiction where actionfor that purpose is required. Persons into whose possession this announcementcomes are required by the Company, Canaccord and JPMorgan Cazenove to informthemselves about and to observe any such restrictions. Details of the Placing Agreement and the Units The Joint Bookrunners have entered into a placing agreement (the "PlacingAgreement") with the Company whereby each of the Joint Bookrunners has, subjectto the conditions set out therein, undertaken to use its reasonable endeavoursas agent of the Company to procure Placees to subscribe for the Units. The Placing Shares will be credited as fully paid and will rank equally in allrespects with the existing issued ordinary shares of 0.1 pence each in thecapital of the Company including the right to receive all dividends and otherdistributions declared, made or paid in respect of such ordinary shares aftertheir date of issue. For every three whole Placing Shares subscribed for the Company will issue oneWarrant. Fractional entitlements to Warrants will be disregarded and nofractions of Warrants will be issued. Each Placee's entitlements to Warrantswill be determined by reference to the number of Shares being credited to eachCREST account of that Placee on an account by account basis. In this Appendix, unless the context otherwise requires, Placee or "you" means aRelevant Person (including individuals, funds or others) by whom or on whosebehalf a commitment to subscribe for Units has been, or is proposed to be,given. Application for admission to trading Application will be made for admission of the Placing Shares to trading on theAIM Market operated by the Exchange. It is expected that dealings in thePlacing Shares will commence on or about 5 June 2007. No application is beingmade for the admission of the Warrants to trading on AIM. Bookbuild Commencing today each of the Joint Bookrunners will be conducting an acceleratedbookbuilding process (the "Bookbuilding Process") for participation in thePlacing. This Appendix gives details of the terms and conditions of, and themechanics of participation in, the Bookbuilding Process. No commissions will bepaid to Placees or by Placees in respect of any Units. Principal terms of the Bookbuilding Process Each of Canaccord and JPMorgan Cazenove is arranging the Placing as an agent ofthe Company. Participation will only be available to persons invited to participate by eitherof the Joint Bookrunners. Each of the Joint Bookrunners is entitled to enterbids as principal in the Bookbuilding Process. The Bookbuilding Process willestablish a single price (the "Placing Price") payable by all Placees. ThePlacing Price will be agreed between the Joint Bookrunners and the Companyfollowing completion of the Bookbuilding Process. Subject to the BookbuildingProcess being completed the Placing Price will be announced (the "PricingAnnouncement") on the Regulatory News Service no later than 8 am on Friday 11May 2007. To enter a bid into the Bookbuilding Process, you should communicate your bid bytelephone to your usual sales contact at Canaccord or JPMorgan Cazenove. Yourbid should state the number of Units for which you wish to subscribe at eitherthe Placing Price which is ultimately established by the Company and the JointBookrunners or at prices up to a price limit specified in your bid. Each of the Joint Bookrunners reserves the right not to accept bids or to acceptbids in part rather than in whole. The acceptance of bids shall be at each ofthe Joint Bookrunners' absolute discretion. The Bookbuilding Process is expected to close no later than 5 pm on Thursday 10May 2007, but may be closed earlier at the sole discretion of the JointBookrunners. Each of the Joint Bookrunners may, at its sole discretion, acceptbids that are received after the Bookbuilding Process has closed. If successful, your allocation will be confirmed to you orally following theclose of the Bookbuilding Process, and a contract note will be dispatched assoon as possible thereafter. The relevant Joint Bookrunners' oral confirmationto you, following completion of the Bookbuilding Process, will constitute alegally binding commitment upon you to subscribe for the number of Unitsallocated to you on the terms and conditions set out in this Appendix and inaccordance with the Company's Memorandum and Articles of Association,conditional inter alia upon the EGM and Admission as set out below. The PricingAnnouncement will detail the number of Units to be issued as well as the priceat which the Units have been placed together with the exercise price of theWarrants. A bid in the Bookbuilding Process will be made on the terms and conditions inthis Appendix, will be legally binding on the Placee by which, or on behalf ofwhich, it is made and will not be capable of variation or revocation after theclose of the Bookbuilding Process. Conditions of the Placing The Placing is conditional, inter alia, on: 1 the Circular together with the Form of Proxy being posted tothe Shareholders; 2 the resolutions set out in the notice of extraordinary generalmeeting contained in the Circular having been validly passed by theShareholders; 3 the Placing Agreement being entered into and becomingunconditional in all respects and not having been terminated in accordance withits terms as set out below; 4 the Company entering into the Warrant Deed; 5 neither Canaccord nor JPMorgan Cazenove having exercised any ofits rights to terminate the Placing Agreement; and Admission having become effective, by no later than 8 am on 5 June 2007 (or such later time and/or date as theCompany, Canaccord and JPMorgan Cazenove may agree being no later than midnighton 30 June 2007). If (a), the conditions above are not satisfied or waived byboth Joint Bookrunners within the stated time period or (b), the PlacingAgreement is terminated in accordance with its terms, the Placing will lapse andyour rights and obligations hereunder shall cease and determine at such time andno claim can be made by you in respect thereof. By participating in the Bookbuilding Process you agree that your rights andobligations hereunder are conditional upon the Placing Agreement becomingunconditional and not being terminated and will terminate only in thecircumstances described above and will not be capable of rescission ortermination by you. The Joint Bookrunners reserve the right (with the agreementof the Company) to waive or to extend the time and/or date for fulfilment of anyof the conditions in the Placing Agreement. Any such extension or waiver willnot affect Placees' commitments. Neither of the Joint Bookrunners shall have anyliability to any Placee (or to any other person whether acting on behalf of aPlacee or otherwise) in respect of any decision it may make as to whether or notto waive or to extend the time and/or date for the satisfaction of any conditionin the Placing Agreement or as to whether or not to terminate the PlacingAgreement. Right to terminate under the Placing Agreement Either Canaccord or JPMorgan Cazenove may by notice in writing to the Companyprior to Admission terminate their obligations under the Placing Agreement,inter alia, if: 1 any statement contained in the Circular has become untrue,incorrect or misleading or a new matter has arisen or a change has taken pacewhich would, if the Circular was published at that time, constitute a materialomission in the context of the Placing therefrom; or 2 any of the warranties and representations contained in thePlacing Agreement are not true and accurate or have become misleading (or wouldnot be true and accurate or would be misleading if they were repeated at anytime before Admission) in respect of a matter which, in the opinion of therelevant Joint Bookrunner (acting in good faith), is material in the context ofthe Placing or the Company fails to comply with its obligations in the PlacingAgreement which is material in the context of the Placing; or 3 if there shall have occurred, in the opinion of either JointBookrunner (acting in good faith), a material adverse change in or affecting theoperations, properties, conditions (financial or other), trading position orprospects or results of operations or general affairs of the Company and itssubsidiaries taken as a whole; or 4 there has been, in the opinion of either Joint Bookrunner(acting in good faith) any change in national or international financial,political, economic or stock market conditions (primary or secondary) or anyincident of terrorism, outbreak or escalation of hostilities, war, declarationof martial law or any calamity or crisis or a suspension or material limitationin trading of securities generally or the securities of the Company on any stockexchange or any change in currency exchange rates or exchange controls or adisruption of settlement systems or a material disruption in commercial bankingas would, in the opinion of the relevant Manager (acting in good faith) belikely to prejudice the success of the Placing. By participating in the Bookbuilding Process you agree with the JointBookrunners that the exercise by Canaccord and JPMorgan Cazenove of any right oftermination or other discretion under the Placing Agreement shall be within theabsolute discretion of Canaccord and JPMorgan Cazenove and that the JointBookrunners need make no reference to you and shall have no liability to youwhatsoever in connection with any such exercise. No Prospectus No prospectus has been or will be submitted to be approved by any regulatoryauthority in any jurisdiction in relation to the Units, the Placing Shares, theOrdinary Shares, the Warrants or the Ordinary Shares into which the Warrants mayconvert and the Placees' commitments will be made solely on the basis of theinformation contained in this announcement, the Pricing Announcement, and anyinformation publicly announced to a Regulatory Information Service by or onbehalf of the Company prior to the date of this announcement (together, the "Publicly Available Information"). Each Placee, by accepting a participation inthe Placing, agrees that it has not relied on any other information,representation, warranty or statement made by or on behalf of either of theJoint Bookrunners or the Company and neither of the Joint Bookrunners will beliable for any Placee's decision to accept this invitation to participate in thePlacing based on any other information, representation, warranty or statement.Nothing in this paragraph shall exclude the liability of any person forfraudulent misrepresentation. Each Placee, by accepting a participation in the Placing, agrees that it hasneither received nor relied on any other information, representation, warrantyor statement made by or on behalf of either of the Joint Bookrunners or theCompany and neither of the Joint Bookrunners will be liable for any Placee'sdecision to accept this invitation to participate in the Placing based on anyother information, representation, warranty or statement. Each Placeeacknowledges and agrees that it has relied on its own investigation of thebusiness, financial or other position of the Company in deciding to participatein the Placing. Each Placee in the United States further acknowledges and agreesthat it has consulted with its own independent advisors or otherwise hassatisfied itself concerning, without limitation, relevant legal, currency andother economic considerations and the effects of the United States federal,state and local income tax laws and foreign tax law generally and the USEmployee Retirement Income Security Act of 1974, as amended, the US InvestmentCompany Act of 1940, as amended and the Securities Act. Nothing in thisparagraph shall exclude the liability of any person for fraudulentmisrepresentation. Registration and Settlement Settlement of transactions in the Placing Shares and the Warrants comprised inthe Units following Admission will take place within the CREST system, subjectto certain exceptions. Each of the Joint Bookrunners reserves the right torequire settlement for and delivery of the Placing Shares and/or the Warrants toPlacees in such other means that it deems necessary if delivery or settlement isnot possible within the CREST system within the timetable set out in thisannouncement or would not be consistent with the regulatory requirements in thePlacee's jurisdiction. If you are allocated any Units in the Bookbuilding Process you will be sent acontract note. Settlement in the Placing Shares will be on delivery versuspayment on the date of Admission. Interest is chargeable daily on payments tothe extent that value is received after the due date at the rate of 5 percentagepoints above prevailing LIBOR. Settlement in the Warrants will be in CREST within 2 days of Admission. If you do not comply with these obligations, the relevant Joint Bookrunner maysell your Units on your behalf and retain from the proceeds, for its own accountand benefit, an amount equal to the Placing Price plus any interest due. Youwill, however, remain liable for any shortfall below the Placing Price and youmay be required to bear any stamp duty or stamp duty reserve tax (together withany interest or penalties) which may arise upon any transaction in the Units,the Placing Shares, the Warrants or the Ordinary Shares into which the warrantsmay be converted on your behalf. If Units are to be delivered to a custodian or settlement agent, please ensurethat the contract note is copied and delivered immediately to the relevantperson within that organisation. Insofar as Units are registered in your name or that of your nominee or in thename of any person for whom you are contracting as agent or that of a nomineefor such person, such Placing Shares and Warrants will, subject as providedbelow, be so registered free from any liability to UK stamp duty or stamp dutyreserve tax. You will not be entitled to receive any fee or commission inconnection with the Placing. Representations and Warranties By participating in the Bookbuilding Process you (and any person acting on yourbehalf): 1 represent and warrant that you have read this announcement,that you are a Relevant Person and that in entering a bid in the BookbuildingProcess you acknowledge and accept that such bid is legally binding on you andany person on whose behalf you make the bid and will not be capable of variationor revocation after the close of the Bookbuilding Process; 2 represent and warrant that the only information upon which youhave relied in committing yourself to subscribe for the Units is that containedin this announcement for which the Joint Bookrunners accept no responsibilityand confirm that you have not relied on any other information, representation,warranty or statement made by or on behalf of the Company or either of the JointBookrunners; 3 represent and warrant that you are not, or at the time theUnits are subscribed and purchased will not be, subscribing on behalf of aresident of Australia, Canada, Japan or South Africa; 4 acknowledge that the Units have not been and will not beregistered under the securities legislation of Australia, Canada, Japan, SouthAfrica or the United States and, subject to certain exceptions, may not beoffered, sold, taken up, renounced or delivered or transferred, directly orindirectly, within Australia, Canada, Japan, South Africa or the United States; 5 represent and warrant that you are entitled to subscribe forand/or purchase Units under the laws of all relevant jurisdictions which applyto you and that you have fully observed such laws and obtained all suchgovernmental and other guarantees and other consents which may be requiredthereunder and complied with all necessary formalities and that you have nottaken any action or omitted to take any action which will or may result inCanaccord, JPMorgan Cazenove, the Company or any of their respective directors,officers, agents, employees or advisers acting in breach of the legal orregulatory requirements of any territory in connection with the Placing or yourapplication; 6 if the Units are offered to you in the United States, representand warrant that in making your investment decision: (i) you have relied on yourown examination of the Company and the terms of the Placing, including themerits and risks involved; (ii) you have made your own assessment of theCompany, the Units, the Placing Shares, the Warrants and the Ordinary Sharesinto which the Warrants may be converted and the terms of the Placing based onthis announcement and on such information as is publicly available; (iii) youhave consulted your own independent advisors or otherwise have satisfiedyourself concerning, without limitation, the effects of United States federal,state and local income tax laws and foreign tax laws generally and the USEmployee Retirement Income Security Act of 1974, the US Investment Company Actof 1940, as amended and the Securities Act; and (iv) you have received allinformation that you believe is necessary or appropriate in order to make aninvestment decision in respect of the Company and the Units, the Placing Shares,the Warrants and the Ordinary Shares into which the Warrants may be converted; 7 if the Units are offered to you in the United States, representand warrant that you understand that the financial information made publiclyavailable by the Company has been prepared in accordance with a UK format andstyle. In particular, without limitation, such financial information has beenprepared in accordance with UK generally accepted accounting principles for theCompany and the International Financial Reporting Structures for the Group andthus may not be comparable to financial statements of US companies prepared inaccordance with US generally accepted accounting principles; 8 represent and warrant that you either (i) are a QIB and youhave received and duly executed an investor letter relating to the Placing fromone of the Joint Bookrunners, or (ii) are acquiring the Units in an "offshoretransaction" in accordance with Rule 903 of Regulation S under the SecuritiesAct ("Regulation S") and if you are a QIB (i) you are subscribing for the Unitsfor your own account, or for one or more accounts as to each of which youexercise sole investment discretion and each of which accounts is a QIB, forinvestment purposes, and not with a view to any distribution or for resale inconnection with the distribution thereof, in whole or in part, in the UnitedStates; and (ii) have such knowledge and experience in financial and businessmatters as to be capable of evaluating the merits and risks of your investmentin the Units, the Placing Shares, the Ordinary Shares, the Warrants and theOrdinary Shares into which the Warrants may be converted, and you and anyaccounts for which you are subscribing for Units (a) are each able to bear theeconomic risk of your or their investment in the Units; (b) will not look to theCompany or the Joint Bookrunners for all or part of such loss or losses you orthey may suffer; (c) are able to sustain a complete loss on your or theirinvestment in the Units; (d) have no need for liquidity with respect to your ortheir investment in the Units; and (e) have no reason to anticipate any changein your or their circumstances, financial or otherwise, which may cause orrequire any sale or distribution by you or them of all or any part of the Units,the Placing Shares, Ordinary Shares, the Warrants and the Ordinary Shares intowhich the Warrants may be converted; 9 acknowledge that the Units, the Placing Shares, the OrdinaryShares, the Warrants and the Ordinary Shares into which the Warrants may beconverted have not been and will not be registered under the Securities Act orwith any state or other jurisdiction of the United States, nor approved ordisapproved by the US Securities and Exchange Commission, any state securitiescommission in the United States or any other United States regulatory authority,and you agree not to re-offer, resell, pledge or otherwise transfer the Units,the Placing Shares, the Ordinary Shares, the Warrants and the Ordinary Sharesinto which the Warrants may be converted except (i) outside the United States inoffshore transactions in accordance with Regulation S under the Securities Act,(ii) in the United States to QIBs pursuant to Rule 144A under the Securities Act (iii) in compliance with Rule 144 under the Securities Act if available, (iv)pursuant to another exemption from the registration requirements of theSecurities Act, if available and, in each such case in compliance with allapplicable laws; 10 acknowledge that no representation has been made as to theavailability of Rule 144 or any other exemption under the Securities Act for there-offer, resale, pledge or transfer of the Units, the Placing Shares, theOrdinary Shares, the Warrants and the Ordinary Shares into which the Warrantsmay be converted; 11 acknowledge and understand that the Units, the Placing Shares, theOrdinary Shares, the Warrants and the Ordinary Shares into which the Warrantsmay be converted are "restricted securities" within the meaning of Rule 144(a)(3) under the Securities Act, and represent and warrant on your own behalf andon behalf of any accounts for which you are acting that, for so long as theUnits, the Placing Shares, the Ordinary Shares, the Warrants and the OrdinaryShares into which the Warrants may be converted are "restricted securities" youwill not deposit the Units, the Placing Shares, the Ordinary Shares, theWarrants and the Ordinary Shares into which the Warrants may be converted intoany unrestricted depositary receipt facility maintained by any depositary bankin respect of the Company's securities; 12 represent and warrant that the issue to you, or the personspecified by you for registration as holder, of Units will not give rise to aliability under any of sections 67 to 72 inclusive and 93 to 97 inclusive of theFinance Act 1986 (depositary receipts and clearance services); 13 if you are in the UK, represent and warrant that you have compliedwith your obligations in connection with money laundering under the CriminalJustice Act 1993 and the Money Laundering Regulations (2003) (the "Regulations")and, if you are making payment on behalf of a third party, that satisfactoryevidence has been obtained and recorded by you to verify the identity of thethird party as required by the Regulations; 14 represent and warrant that you fall within section 86(7) of theFinancial Services and Markets Act 2000 ("FSMA"), being a qualified investor,and within Article 19 and/or 49 of the Financial Services and Markets Act 2000(Financial Promotion) Order 2005 and undertake that you will acquire, hold,manage or dispose of any the Units, the Placing Shares, the Ordinary Shares,the Warrants and the Ordinary Shares into which the Warrants may be convertedthat are allocated to you for the purposes of your business; 15 represent and warrant that you have not offered or sold and, priorto the expiry of a period of six months from the commencement of trading of theUnits, the Placing Shares, the Ordinary Shares, the Warrants and the OrdinaryShares into which the Warrants may be converted, will not offer or sell anyUnits, the Placing Shares, the Ordinary Shares, the Warrants and the OrdinaryShares into which the Warrants may be converted to persons in the United Kingdomexcept to persons whose ordinary activities involve them in acquiring, holding,managing or disposing of investments (as principal or agent) for the purposes oftheir business or otherwise in circumstances which have not resulted and whichwill not result in an offer to the public in the United Kingdom within themeaning of Section 85(1) of FSMA, as amended; 16 represent and warrant that you have only communicated or caused tobe communicated and will only communicate or cause to be communicated anyinvitation or inducement to engage in investment activity (within the meaning ofsection 21 of FSMA) relating to the Units in circumstances in which section 21(1) of FSMA does not require approval of the communication by an authorisedperson; 17 if you are in the Netherlands, represent and warrant that you area qualified investor (gekwalificeerde belegger) within the meaning of section 1:1 of the Act on the Financial Supervision (Wet op het Financieel toezicht); 18 represent and warrant that you have complied and will comply withall applicable provisions of FSMA with respect to anything done by you inrelation to the Units in, from or otherwise involving the United Kingdom; 19 represent and warrant that you have all necessary capacity andhave obtained all necessary consents and authorities to enable you to commit tothis participation and to perform your obligations in relation thereto(including, without limitation, in the case of any person on whose behalf youare acting, all necessary consents and authorities to agree to the terms set outor referred to in this announcement); 20 undertake that you will pay for the Units acquired by you inaccordance with this announcement on the due time and date set out herein,failing which the relevant Units may be placed with other subscribers at suchprice as each of the Joint Bookrunners determines; 21 acknowledge that participation in the Placing is on the basisthat, for the purposes of the Placing, you are not and will not be clients ofeither of the Joint Bookrunners and that neither of the Joint Bookrunners hasduties or responsibilities to you for providing the protections afforded totheir clients or for providing advice in relation to the Placing nor in respectof any representations, warranties, undertakings or indemnities contained in thePlacing Agreement; 22 undertake that the person who you specify for registration asholder of the Units, the Placing Shares or the Warrants will be (i) the Placeeor (ii) a nominee of the Placee, as the case may be. Neither of the JointBookrunners nor the Company will be responsible for any liability to stamp dutyor stamp duty reserve tax resulting from a failure to observe this requirement.Each Placee and any person acting on behalf of the Placee agrees to subscribe onthe basis that the Placing Shares and Warrants will be allotted to the CRESTstock account of either of the Joint Bookrunners who will hold them as nomineeon behalf of the Placee until settlement in accordance with its standingsettlement instructions; 23 acknowledge that time shall be of the essence as regardsobligations pursuant to this Appendix to the announcement; and 24 acknowledge that any agreements entered into by the Placeepursuant to these terms and conditions shall be governed by and construed inaccordance with the laws of England and you submit (on behalf of yourself and onbehalf of any Placee on whose behalf you are acting) to the exclusivejurisdiction of the English courts as regards any claim, dispute or matterarising out of any such contract. The Company, the Joint Bookrunners and others will rely upon the truth andaccuracy of the foregoing representations, warranties and acknowledgements. The agreement to settle your subscription (and/or the subscription of a personfor whom you are contracting as agent) free of stamp duty and stamp duty reservetax depends on the settlement relating only to a subscription by you and/or suchperson direct from the Company for the Units in question. Such agreement assumesthat the Units are not being acquired in connection with arrangements to issuedepositary receipts or to transfer the Units into a clearance service. If therewere any such arrangements, or the settlement related to other dealings in theUnits, stamp duty or stamp duty reserve tax may be payable, for which neitherthe Company nor either of the Joint Bookrunners will be responsible. If thiswere the case, you should take your own advice and notify the relevant Manageraccordingly. General This Appendix and the announcement of which it forms part are not fordistribution directly or indirectly in or into the United States, Canada,Australia, Japan or South Africa. Neither this Appendix nor the announcement ofwhich it forms part constitutes an offer to sell or issue or the solicitation ofan offer to buy or acquire Units, the Ordinary Shares, the Warrants and theOrdinary Shares into which the Warrants may be converted in the capital of theCompany in any jurisdiction in which such offer or solicitation is unlawful. Information contained in this announcement is not an offer, or an invitation tomake offers, sell, purchase, exchange or transfer any securities in Russia, anddoes not constitute an advertisement of the securities in Russia and must not bepassed on to third parties or otherwise be made publicly available in Russia.The securities to which this announcement relates have not been and will not beregistered in Russia and are not intended for "placement" or "public circulation" in Russia. Neither the Placing Shares, Units, the Ordinary Shares, the Warrants or theOrdinary Shares into which the Warrants may be converted have been and will notbe offered or sold to the public in France (appel public a l'epargne") and nooffering or marketing materials relating to the Placing Shares, Units, theOrdinary Shares, the Warrants or the Ordinary Shares into which the Warrants maybe converted must be made available or distributed in any way that wouldconstitute directly or indirectly, an offer to the public in the Republic ofFrance. The Placing Shares, Units, the Ordinary Shares, the Warrants or theOrdinary Shares into which the Warrants may be converted may only be offered orsold to qualified investors (investisseurs qualifies) or to a limited group ofinvestors ("cercle restreint d'investisseurs") as defined in and in accordancewith articles L.411-1, L.411-2, D.411-1 and D.411-2 of the French Code monetaireet financier". This announcement is not being distributed in the context of, and does notconstitute, a public offer, public advertisement or similar offer of securitiesin Germany within the meaning of Section 1(1) and Section 2 no. 4 of the GermanSecurities Prospectus Act (Wertpapierprospektgesetz, "WpPG"). This announcementdoes not constitute a prospectus within the meaning of the WpPG and has not beenfiled with, approved by or notified to the German Federal Financial ServicesSupervisory Authority (Bundesanstalt fur Finanzdienstleistungsaufsicht - "BaFin") for public distribution in the Federal Republic of Germany. Neither aGerman prospectus within the meaning of the WpPG, nor any German translationwithin the meaning of Article 18 of the European Securities Prospectus Directive(No. 2003/71/EC), has been, or will be, prepared, published, notified orotherwise provided. In Germany, this announcement, copies of this announcementor any other documents relating to the Units, the Placing Shares, the OrdinaryShares, the Warrants and the Ordinary Shares into which the Warrants may beconverted may not be distributed, and the Units, the Placing Shares, theOrdinary Shares, the Warrants and the Ordinary Shares into which the Warrantsmay be converted may not be advertised, promoted, offered, sold, or resold,other than in compliance with the provisions of the WpPG, and of any other lawsapplicable in the Federal Republic of Germany governing the issue, offering andsale of securities. Therefore, this announcement and any other related offeringmaterial is directed only at persons who qualify as "qualified investors" in themeaning of Section 2 no. 6 of the WpPG. The announcement does not constitute an issue prospectus pursuant to article652a of the Swiss Code of Obligations. None of the Units, the Placing Shares,the Ordinary Shares, the Warrants and the Ordinary Shares into which theWarrants may be converted will be listed on the SWX Swiss Exchange and,therefore, the Circular does not comply with the disclosure standards of theListing Rules of the SWX Swiss Exchange. Accordingly, the Units, the PlacingShares, the Ordinary Shares, the Warrants and the Ordinary Shares into which theWarrants may be converted may not be offered to the public in or fromSwitzerland, but only to a selected and limited group of investors, who do notsubscribe for the Units, the Placing Shares, the Ordinary Shares, the Warrantsand the Ordinary Shares into which the Warrants may be converted with a view todistribution to the public. The investors will be individually approached fromtime to time. The announcement is personal to each addressee of it and does notconstitute an offer to any other person. It may only be used by those persons towhom it has been handed out in connection with the transaction described thereinand may neither be copied nor directly or indirectly distributed or madeavailable to other persons without the express consent of the Company. Eachaddressee of the Circular may not on-sell or offer to any other person theUnits, the Placing Shares,the Ordinary Shares, the Warrants and the OrdinaryShares into which the Warrants may be converted. This announcement does not constitute a prospectus within the meaning of theItalian Securities Law and accordingly has not been filed with, approved orcleared by or notified to the Italian Securities Exchange Commission(Commissione Nazionale per le Societa e la Borsa, "CONSOB"). The Units, thePlacing Shares, the Ordinary Shares or the Ordinary Shares into which theWarrants may be converted may not and will not be offered, sold or delivered,directly or indirectly, nor may or will copies of this announcement and all itsrelated documents be distributed in Italy, other than to professional investors("investitori professionali"), pursuant to Article 30, paragraph 2 and Article100 of the Italian Securities Law, and relevant implementing regulations fromtime to time issued by CONSOB or in any other circumstance where an expressexemption from the requirements of Articles 93-bis and seq. of the ItalianSecurities Law and relevant implementing regulations from time to time issued byCONSOB, is provided. Any offer, sale or delivery of the Units, the PlacingShares, the Ordinary Shares or the Ordinary Shares into which the Warrants maybe converted or distribution of copies of this document in Italy may and will beeffected in accordance with all Italian securities, tax, exchange control andother applicable laws and regulations, and, in particular, will be: made by (a)an investment firm, bank or financial intermediary permitted to conduct suchactivities in Italy in accordance with the Legislative Decree No. 385 ofSeptember 1, 1993, as amended (the "Italian Banking Law"), Italian SecuritiesLaw, CONSOB Regulation No. 11522, or by (b) foreign banks or financialinstitutions authorized to place and distribute securities in the Republic ofItaly pursuant to Articles 15, 16 and 18 of the Italian Banking Law, in eachcase acting in compliance with any applicable laws and regulations. The announcement is not a Securities Sales Prospectus (Prospekt) within themeaning of Sections 1, 2 and 7 of the Austrian Capital Market Act(Kapitalmarktgesetz) and has not been filed with and approved by theOesterreichische Kontrollbank Aktiengesellschaft or any other competentauthority in Austria. Furthermore, this announcement does not constitute aProspectus (Prospekt) pursuant to Section 74 of the Austrian Stock Exchange Act(Borsegesetz) that would be required for the listing (admission to trade) of theUnits, the Placing Shares, the Ordinary Shares, the Warrants and the OrdinaryShares into which the Warrants may be converted at the Stock Exchange in Vienna. The announcement, copies of this announcement and/or any other documentsrelating to the Units, the Placing Shares, the Ordinary Shares, the Warrants andthe Ordinary Shares into which the Warrants may be converted may not bedistributed and the Units, the Ordinary Shares, the Warrants and the OrdinaryShares into which the Warrants may be converted may not be offered or sold otherthan to qualified persons (qualifizierte Anleger) pursuant to Section 3 para. 1subpara. 11 of the Austrian Capital Market Act. Pursuant to Section 1 para. 1subpara 5a of the Austrian Capital Market Act e.g. legal entities under thesupervision of the Austrian Financial Market Authority that are not small andmedium-sized enterprises or natural persons being registered with the AustrianFinancial Market Authority are considered qualified persons. This Placing is not an offer of securities to the public in the Netherlandswithin the meaning of the Act on the Financial Supervision (Wet op hetfinancieel toezicht) and no prospectus has been approved by the NetherlandsAuthority for the Financial Markets (the "AFM") for this Placing as the Units,the Placing Shares, the Ordinary Shares, the Warrants and the Ordinary Sharesinto which the Warrants may convert are not and will not be offered to ordirected at anyone other than qualified investors (gekwalificeerde beleggers)within the meaning of article 1:1 of the Act on the Financial Supervision. This Appendix and the announcement of which it forms part have been issued bythe Company and are the sole responsibility of the Company. The Joint Bookrunners are acting for the Company and no one else in connectionwith the Placing and will not be responsible to any other person for providingthe protections afforded to their respective clients nor for providing anyadvice in relation to the Placing or any other matters referred to in thisAppendix or the announcement of which it forms part. END This information is provided by RNS The company news service from the London Stock Exchange

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