13th Jan 2005 14:51
Aurum Mining PLC13 January 2005 For immediate release 13 January 2005 Aurum Mining plc ("Aurum" or "the Company") Proposed Acquisition of Kaldora Company Ltd Placing of 714,286 Ordinary Shares of 1p each at 84p per share by WH Ireland Ltd as Nominated Adviser and Broker Notice of Extraordinary General Meeting Aurum Mining plc (AIM: AUR), a company formed last year to acquire gold andother mineral extraction projects in the Former Soviet Union (FSU), is pleasedto announce that it has conditionally agreed to acquire, for up to £2.9 million,Kaldora Company Ltd ("Kaldora"), a company whose wholly owned subsidiary, AndashMining Company ("Andash"), holds an exploration licence over the Andash gold andcopper exploration project in the Kyrgyz Republic. At the close of business on 12 January 2005, the closing mid market price of anOrdinary Share in Aurum was 87.5p, valuing Kaldora at between £0.7 million and£2.9 million. Aurum proposes to acquire Kaldora for an initial consideration of$1.5 million in shares and cash and for a deferred consideration of up to $5million in shares. To provide the additional working capital needed followingthe acquisition, WH Ireland has conditionally placed 714,286 Ordinary Shares at84p per share in a Placing to raise £340,000 net of expenses. The Andash project has been evaluated to have 634,197 oz of "inferred" goldresources and significant exploration potential in respect of a further 412,192oz of gold although further drilling and assaying will be required to determinethe full potential of the project. It is intended that John Webster, who holds 20 per cent of the equity in Kaldoraand has more than 20 years' experience in mining engineering, will join Aurum'sBoard as Managing Director. The acquisition of Kaldora represents an important first step in the developmentof Aurum's strategy of acquiring gold and other mineral exploration projects inthe FSU. In line with Company strategy, Aurum's Directors intend to continue toseek and evaluate further acquisitions. Commenting on the acquisition, Sean Finlay, Aurum's Chairman, said: "Kaldora isan ideal first acquisition for Aurum as it offers considerable potentialunderlined by the fact that it sits in the Tien Shan gold belt, one of theworld's largest proven gold provinces. In addition the acquisition will bringJohn Webster, who has more than 24 years' experience in the FSU mining sector,to Aurum's Board as Managing Director. John will be of major assistance indeveloping Andash and in executing the Company's strategy of identifyingfurther acquisitions to create a significant natural resources group." Details of the Acquisition and Placing • Aurum has conditionally agreed to acquire the entire issued and to be issued share capital of Kaldora for an initial consideration of $1.5 million comprising the issue of 600,000 Ordinary Shares, the payment of $300,000 cash and, conditional upon the subsequently evaluated levels of gold reserves, a deferred consideration of up to $5 million comprising the further issue of up to 2,500,000 Deferred Consideration Shares. • The Consideration Shares and Deferred Consideration Shares will represent between 6.3 per cent and 25.8 per cent of the then issued share capital of the Company and in view of the size of Kaldora relative to the Company, the acquisition will constitute a reverse takeover of Aurum under the AIM Rules and therefore requires the prior approval of shareholders at an Extraordinary General Meeting to be held on 31 January 2005. • In order to provide the additional working capital that will be required following the acquisition, WH Ireland has conditionally placed 714,286 Ordinary Shares at 84p per share. The Placing is expected to raise £340,000 net of expenses. • The Vendors of Kaldora include parties associated with David Bryans who acts as a consultant to the Company and who is interested in 27.5 per cent of the Company's current issued share capital. Because the Vendors and their associates will, following completion of the Acquisition and the Placing, be beneficially interested in over 30 per cent of the Enlarged Share Capital, the Company is seeking a waiver under Rule 9 of the City Code (which will deem them to be acting in concert and would otherwise require them as members of the Concert Party to offer to acquire those Ordinary Shares that they do not own). A proposal seeking shareholder approval for a waiver is, therefore, included in the notice of the Extraordinary General Meeting • The sole asset of Kaldora is its shareholding in Andash, whose principal asset is an exploration licence over the Andash gold and copper exploration project in the Talas valley located in the north west of the Kyrgyz Republic on the border with Kazakhstan. Currently the Andash Project is not sufficiently advanced to establish formal "reserve" levels. However it has been evaluated to have 634,197 oz. of "inferred" gold resources and significant exploration potential in respect of a further 412,192 oz. of gold. However further drilling and assaying will be required to establish the full potential of the Project and to prepare a feasibility study for future production. Summary of the Kyrgyz Republic and the Andash site The Kyrgyz Republic, which has population of just 5.1 million, is one of thesmallest and most mountainous nations of the FSU. It is located in the Tien Shanmountain range, on the north flank of the Pamir Mountains, and borders China inthe east, Kazakhstan to the north, Uzbekistan to the south and west andTajikistan to the south. Today, the economy is mainly agriculture-based withsome light industry around the major cities but under the Soviets mining for avariety of strategic minerals and precious metals was also important. Thegovernment has generally embraced western style commercial law, banking reform,mining code and currency regulations. The Kyrgyz Republic's gold mining industry is under-developed but the countrysits within a broad band of gold mineralisation that stretches through CentralAsia. This zone is commonly known as the Tien Shan gold belt and is one of thelargest proven gold provinces in the world. The Andash Project is located in theTalas valley, close to the north western border of the Kyrgyz Republic. It isapproximately 475 km by road from the capital city of Bishkek. The town of Talasis 45 km from the project site and the closest village, Kupre-Bazar, is lessthan 2.5 km away by road. Water is available at the site and a major power linepasses within 15 km of the licence area. Notice of Extraordinary General Meeting An Extraordinary General Meeting will be held on 31 January 2005 at 10.00 am atthe offices of Lawrence Graham LLP, 190 Strand, London WC2R 1JN, at whichresolutions will be proposed to approve the acquisition and the waiver underRule 9 of the City Code. Expected Timetable of Principal Events Extraordinary General Meeting 10.00am, 31 January Completion date of the Acquisition 1 February Admission effective and dealing in Ordinary Shares (including New Ordinary 1 FebruaryShares) expected to commence on AIM Expected date for CREST accounts to be credited (in respect of Placing Shares) 1 February Expected date for posting of the share certificates for the Placing Shares(where applicable) 1 February For further information: Aurum Mining plc Tel: 07802 858893Haresh Kanabar W H Ireland Tel: 0121 616 2101Tim Cofman Buchanan Communications Tel: 020 7466 5000Mark Court/Charlie Howard Copies of the document relating to the acquisition are available from WH IrelandLtd, 24 Bennetts Hill, Birmingham B2 5QP. Parts I and II of the document arereproduced below. PART I INFORMATION ON AURUM MINING INTRODUCTION The Board of Aurum Mining announced today that the Company has conditionallyagreed to acquire the entire issued and to be issued share capital of Kaldorafor an initial consideration of $1.5 million comprising the issue of 600,000Ordinary Shares, the payment of $300,000 cash and, conditional upon thesubsequently evaluated levels of gold reserves, deferred consideration of up to$5 million comprising the further issue of up to 2,500,000 DeferredConsideration Shares. At the close of business on 12 January 2005 the lastpracticable date before the publication of this document, the closing mid marketprice of an Ordinary Share was 87.5p, valuing the Kaldora Group at between £0.7million and £2.9 million and Aurum Mining at £7.2 million. In order to provide the additional working capital that will be requiredfollowing the Acquisition, W.H. Ireland has conditionally placed 714,286Ordinary Shares at 84p. The Placing, which is discussed further below isexpected to raise £340,000 net of expenses. The Consideration Shares will represent between 6.3 per cent. and 25.8 per cent.of the then issued share capital of the Company and in view of the size of theKaldora Group relative to the Company, the Acquisition will constitute a reversetakeover of Aurum Mining under the AIM Rules and therefore requires the priorapproval of Shareholders at an Extraordinary General Meeting, notice of which isset out at the end of this document. The Vendors include parties associated with Mr David Bryans who acts as aconsultant to the Company and who is interested in 27.5 per cent. of theCompany's current issued share capital. Because the Vendors and their associateswill, following completion of the Acquisition and the Placing, be beneficiallyinterested in over 30 per cent. of the Enlarged Share Capital, the Company isseeking a waiver under Rule 9 of the City Code (which will deem them to beacting in concert and would otherwise require them as members of the ConcertParty to offer to acquire those Ordinary Shares that they do not own). Aproposal seeking Shareholder approval for a Waiver will be proposed at theExtraordinary General Meeting to be held on the 31 January 2005. BUSINESS & STRATEGY The Acquisition represents an important first step in the development of theCompany's strategy of acquiring gold and other mineral exploration andextraction projects in the FSU. This opportunity has been introduced to theCompany by Mr David Bryans under the consulting agreement that he entered intowith the Company at the time of the original admission of its share capital totrading on AIM in May 2004. Information on Kaldora and Andash Mining is set out in Part II. The sole assetof Kaldora is its shareholding in Andash Mining. The principal asset of AndashMining is an exploration licence over the Andash gold and copper explorationproject in the Talas valley located in the north west of the Kyrgyz Republic onthe border with Kazakhstan. Currently the Andash Project is not sufficientlyadvanced to establish formal "reserve" levels. However it has been evaluated tohave 634,197 oz. of "inferred" gold resources and significant explorationpotential in respect of a further 412,192 oz. of gold. However further drillingand assaying will be required to establish the full potential of the Project andto prepare a feasibility study for future production. The Directors and theProposed Director expect this work to consume much of the Company's existingcash resources and while the Enlarged Group may, in the opinion of the Directorsand the Proposed Director, have the resources available to assess additionalopportunities, completion of any additional acquisition will require a furtherfund raising. The exploration licence held by Andash Mining was extended on 22 November 2004,and is valid until 31 January 2006, subject to a number of conditions includinga requirement to undertake a minimum amount of exploration work. Under Kyrgyzmining law, once a production feasibility study has been completed, the licenseewill have exclusive rights to obtain a licence. Such mining licences are validin the first instance for 20 years from the date of grant. In the opinion of the Directors and the Proposed Director, the funds beingraised will be sufficient to take the Andash project to the point ofestablishing the level of reserves and carrying out a pre-feasibility study andif these are positive, further funds would be required to produce a bankablefeasibility study. Further potential projects have been identified by Mr Bryans and are in thecourse of evaluation by him. CURRENT TRADING The Ordinary Shares of Aurum Mining were admitted to trading on AIM on 7 May2004. At that time the Company had cash of £1,413,000 and no other significantassets or liabilities. Since then, Aurum Mining has entered into a lease inrespect of London offices at a cost of approximately £49,000 per annum. TheBoard intends to appoint PPI, a company of which John Webster, the ProposedDirector, is a director and in which he has an interest, to undertake theadditional drilling programme required before a feasibility study can becompleted on the Andash prospect. In order to enable PPI to refurbish the rigthat will be used on this project, Aurum Mining has agreed to loan £150,000 toPPI. In its last published accounts for the year ended 30 June 2003, PPIdisclosed a loss of £127,500 on sales of £53,045 for the year and at the balancesheet date, net assets of £25,308. In the opinion of the Directors, the terms ofthis loan agreement are such that the Company will be able to achieve asignificant cost saving on its drilling program at Andash by employing PPI at adiscount to its normal rates. In order to gain access to certain potential acquisition opportunities inRussia, the Company has entered into a facility agreement to lend up to $150,000to Open Joint Stock Company Geocentr. At 31 December 2004, $115,000 of thisfacility had been drawn down. The net effect of the above is that after allowing for draw-down of the loanfacilities the Company had available cash of approximately £1,103,000 on 4January 2005. DIRECTORS, PROPOSED DIRECTOR AND EMPLOYEES The Board comprises two directors as follows: Sean Finlay (aged 55) Non-Executive Chairman Sean is a professional geologist and a chartered engineer. He has over 30 yearsexperience in mining and quarrying at senior management and board level, havingworked on projects in Ireland, Canada, Ghana, Pakistan and the FSU. He was chiefgeologist with Tara Mines Ltd until 1987 when he became managing director ofCeltic Gold plc from 1987 to 1994. In 1995 he was appointed managing director ofCeltic Resources Holdings plc until 1999. In addition, Sean has been anon-executive director of Glencar Mining plc since 1994 and has been a managingdirector of Tobin Environmental Services Ltd since May 2000. Sean is a Fellow ofthe Institution of Mining and Metallurgy and a Fellow of the Institution ofEngineers of Ireland. Haresh Kanabar (aged 46) Executive Business Development Director Haresh qualified as a certified accountant in 1986. Following a number offinance positions with Fisons plc, Reed International plc and Texas Homecare Ltdhe became finance director of F E Barber Limited, a subsidiary of HillsdownHoldings plc, in 1994. In 1997 he was appointed group finance director ofWhitchurch Group Plc which he left in May 1998 to become finance director of TMVFinance Limited. In December 1999 he left to join Corvus Capital Inc. as chiefexecutive and in November 2002 he left to become finance director of GamingInsight plc. Haresh is also currently chief executive of Blue Star Capital plc,non-executive chairman of Greenfield Construction Group, India OutsourcingServices plc and Silentpoint plc and executive director of Bombay Restaurantsplc, Knighteagle plc and Silvermines Media plc. Haresh was also a director ofSpiritel plc until July 2004. In addition, upon Admission, John Webster (aged 46), will join the Board asManaging Director. John has over 20 years of experience in mining engineeringspecialising in mine evaluation and development in the countries of the FSU.John is currently managing director of, and a substantial shareholder in PPI, anengineering and equipment supply company (in which John holds a 31 per cent.rising to a possible 47 per cent. on the exercise of options in PPI held byhim). Prior to PPI, John held senior positions with Far East Gold, Nelson Gold,JD Welsh & Associates and is a Member of the Australasian Institute of Miningand Metallurgy, The Society of Mining Engineers of A.I.M.E. and the Society ofExplosive Engineers. John's services will be provided under a consultancyagreement between Aurum Mining and Laverock Ventures Limited. Under thisagreement his services to the Company will be provided on a full time basis and,accordingly, he will become a non-executive director of PPI. Upon Admission, Mr Webster will also be granted options over 1,000,000 OrdinaryShares at an exercise price of 84p. The first 500,000 of the options will beexercisable at any time from Admission for a period of 5 years. 166,667 optionswill become exercisable upon the first two anniversaries of Admission and166,666 on the third anniversary. John also has an interest in 20 per cent. of the equity capital of Kaldora. Aurum Mining does not have any employees other than the executive Director. Consultancy Agreement In addition to the above arrangements with the Directors and the ProposedDirector, the Company has the benefit of a consultancy agreement with TyryServices Limited ("Tyry") which has agreed to provide the exclusive services ofMr David Bryans to bring suitable mineral exploration projects to Aurum Mining. Under the terms of this agreement, Tyry receives a retainer fee of £5,000 permonth (or such amount as may be agreed) together with agreed expenses. Inaddition, Tyry is entitled to receive an introductory fee to be agreed betweenthe parties on a project by project basis. Generally it is expected that suchfees will be equivalent to a two per cent. equity interest, without capitalcontribution, in projects introduced by Tyry and subsequently acquired ormaterially developed by the Company. However, in the case of the currentacquisition, Mr Bryans provided finance for Andash Mining to enable it tocontinue to assess the Andash Project and acquired an interest in 20 per cent.of the equity of Kaldora. This interest will now be acquired by Aurum Mining aspart of the Acquisition. In the context of the consultancy agreement, therefore,the Directors believe that this arrangement is exceptional and is unlikely to berepresentative of future transactions. CITY CODE ON TAKEOVERS AND MERGERS The terms of the Acquisition give rise to certain considerations under the CityCode. Brief details of the Panel, the City Code and the protections they affordare described below. The City Code has not, and does not seek to have, the force of law. It has,however, been acknowledged by government and other regulatory authorities thatthose who seek to take advantage of the facilities of the securities market inthe United Kingdom should conduct themselves in matters relating to takeovers inaccordance with best business standards and so according to the City Code.The City Code is issued and administered by the Panel. The City Code applies toall takeover and merger transactions, however effected, where the offereecompany is, inter alia, a listed or unlisted public company resident in theUnited Kingdom. The Company is such a company and its shareholders are entitledto the protection afforded by the City Code. Rule 9 of the City Code is designed to prevent the acquisition of control of acompany to which the City Code applies without a general cash offer being madeto all shareholders of that company. Under Rule 9, a person who acquires,whether by a series of transactions over a period of time or not, shares which(taken together with shares held or acquired or acquired by persons acting inconcert with him) carry 30 per cent. or more of the Voting Rights of a companyis normally required by the Panel to make a general cash offer to all theshareholders of that company to acquire the balance of the shares not held bysuch person, or group of persons acting in concert, at the highest price paid byhim or them or any person acting in concert with him or them within thepreceding 12 months. Rule 9 also provides, inter alia, that where any person, together with personsacting in concert with him, holds shares carrying not less than 30 per cent. butnot more than 50 per cent. of a company's Voting Rights and such person, or anyperson acting in concert with him, acquires additional shares which increase hispercentage of the Voting Rights in that company, such person is normallyrequired to make a general cash offer to all shareholders of that company at notless than the highest price paid by him or them or any persons acting in concertwith him or them for any such shares within the preceding 12 months. For the purposes of the City Code, a concert party arises where persons actingin concert pursuant to an agreement or understanding (whether formal orinformal) actively co-operate, through the acquisition by them of shares in acompany, to obtain or consolidate control of a company, irrespective of whetherthe holding or holdings give de facto control. The Panel has determined that the Vendors, together with David Bryans, JohnWebster, Oleg Kim and Talyn International Limited, are acting in concert for thepurposes of Rule 9 of the City Code. Under Rule 9, unless a specific Waiver is obtained from the Panel and the termsof the Acquisition Agreement for the issue of the Consideration Shares and theproposed grant of options to John Webster are approved by Shareholders on apoll, the members of the Concert Party would be obliged to make a mandatory cashoffer for the entire issued ordinary share capital of Aurum Mining once theConcert Party held 30 per cent. or more of the Voting Rights in the Company.Your Board believes that this consequence is not in the best interests of AurumMining or its Shareholders.The Panel has agreed, subject to the passing of Resolution 2 in the notice ofEGM by the Independent Shareholders on a poll, that it will not require themembers of the Concert Party to make a general offer under Rule 9 as a result ofthe Acquisition and the grant of options to Mr Webster. The members of theConcert Party, who are currently interested in 2,275,000 Ordinary Sharesrepresenting 27.5 per cent. of the existing share capital of the Company, willnot be entitled to vote on this resolution. Immediately following Admission, the members of the Concert Party will ownapproximately 30 per cent. of the Enlarged Share Capital. On issue of theDeferred Consideration Shares, this interest could increase up to 45 per cent.and on exercise of the 1 million options over Ordinary Shares to be granted toMr Webster, this interest could increase further to 49 per cent. The relevant holdings of the members of the Concert Party, now and followingcompletion of the Acquisition, are set out below and for so long as theycontinue to be treated as acting in concert any further increase in theiraggregate shareholding will be subject to the provisions of Rule 9. SIGNIFICANT SHAREHOLDER Talyn International Limited and Jake Consultants Limited (both being companiescontrolled by David Bryans) will together control Voting Rights in respect of24.9 per cent. of Aurum Mining's enlarged equity upon Admission which could fallto 23.9 per cent. following the issue of the conditional element of theConsideration. Talyn International Limited, Jake Consultants Limited and David Bryans havetherefore entered into a controlling shareholder agreement with the Company andW.H. Ireland pursuant to the terms of which they have given certain undertakingsconcerning the use of the shares controlled (directly or indirectly) by them andtheir related parties to the Company. LOCK-IN AGREEMENTS Each of the Directors, the Proposed Director, the Vendors, Brookspey Limited (acompany controlled by Nigel Robertson) and Talyn International Limited haveentered into agreements not to dispose of any interests in the securities of theCompany within the twelve month period following Admission, save in certaincircumstances permitted by the AIM Rules, including in connection with a generalor partial takeover offer. Collectively upon Admission, these Shareholders willcontrol or be interested in 58.4 per cent. of the Enlarged Share Capital. PRINCIPAL TERMS OF THE ACQUISITION Under the terms of the Acquisition Agreement, the Company has conditionallyagreed to acquire Kaldora for an initial consideration of $1.5 millioncomprising the issue upon Admission of 600,000 Ordinary Shares and the paymentof $300,000 cash to the Vendors and, conditional upon the subsequently evaluatedlevels of gold reserves, deferred consideration of up to $5 million satisfied bythe issue of up to a further 2,500,000 Ordinary Shares to the Vendors. Theconditional element of the Consideration will be payable as to 5 shares perounce of gold or gold equivalent included in the pre-feasibility study, to beprepared by an internationally recognized independent expert. In addition, theCompany has agreed to procure repayment upon Admission of all outstanding moniesdue from Andash to Tyry Services Limited pursuant to the loan agreement dated 19August 2004. The Acquisition Agreement is conditional, inter alia, on (i) the passing of theResolutions; (ii) the Placing Agreement becoming unconditional in all respects(other than any condition relating to completion of the Acquisition Agreementand Admission); and (iii) Admission. The Initial Consideration Shares will, on Admission rank in full for alldividends or other distributions hereafter declared, made or paid on theordinary share capital of the Company after their date of issue and will rankpari passu in all other respects with all other Ordinary Shares which will be inissue on Admission. DIVIDEND POLICY The Company has not yet commenced trading and it is, therefore, inappropriate tomake a forecast of the likely level of any future dividends. DETAILS OF THE PLACING The Company is issuing 714,286 New Ordinary Shares pursuant to the Placing atthe Placing Price to raise approximately £340,000 (net of expenses). The PlacingShares will represent approximately 7.5 per cent. of the Enlarged Share Capitalof the Company and will be fully paid upon issue and will rank pari passu in allrespects with the existing Ordinary Shares and the Initial Consideration Shares. The Company, the Directors and the Proposed Director have entered into thePlacing Agreement with W.H. Ireland. The Placing is not being underwritten. ThePlacing Shares have been conditionally placed with institutions and otherinvestors. The Placing is conditional upon the Placing Agreement becomingunconditional and not having been terminated in accordance with its terms, andAdmission becoming effective on 1 February 2005 (or other such later time anddate as the Company and W.H. Ireland may agree). USE OF PROCEEDS The Placing will raise approximately £340,000, net of expenses, for the Company.The funds raised by the Placing are intended to provide further working capital. EXTRAORDINARY GENERAL MEETING An Extraordinary General Meeting will be held at 10.00 a.m. on 31 January 2005at the offices of Lawrence Graham LLP, 190 Strand, London WC2R 1JN. At theExtraordinary General Meeting, the Resolutions will be proposed to approve theAcquisition and the Waiver: As the Acquisition constitutes a reverse takeover, Shareholder approval, as setout in Resolution 1, is required under the AIM Rules. In accordance with therequirements of the Panel for granting a Waiver of the requirement for themembers of the Concert Party to make a general offer under Rule 9 of the CityCode, Resolution 2 will be taken on a poll and the members of the Concert Partywill not be entitled to vote on such resolution. Resolution 1 is conditionalupon the passing of Resolution 2. The Acquisition Agreement is conditional, inter alia, upon the passing of theResolutions and therefore if either is not approved by the Shareholders, theAcquisition will not be completed. IRREVOCABLE UNDERTAKINGS FROM CERTAIN SHAREHOLDERS IN AURUM MINING An undertaking to vote in favour of the Resolutions has been given by BrookspeyLimited (a company controlled by Nigel Robertson) in respect of all the OrdinaryShares held by it amounting to 2,250,000 Ordinary Shares (being 27.5 per cent ofthe existing Ordinary Shares). David Bryans is interested in 2,250,000 OrdinaryShares (being 27.5 per cent. of the existing Ordinary Shares) which he holdsthrough Talyn International Limited. In light of Mr Bryans' interests inKaldora, Talyn International Limited has undertaken to abstain from voting onResolution 1 and is disenfranchised from voting on Resolution 2 in accordancewith the requirements of the City Code. John Webster is interested in 25,000 Ordinary Shares (being 0.3 per cent. of theexisting Ordinary Shares). In the light of his interest in Kaldora, he hasundertaken to abstain from voting on Resolution 1 and is disenfranchised fromvoting on Resolution 2 in accordance with the City Code. RECOMMENDATION OF THE DIRECTORS The Directors, who have been so advised by W.H. Ireland, consider that the termsof the Acquisition and the Waiver are fair and reasonable and in the bestinterests of the Company and Shareholders as a whole. In providing advice to theBoard, W.H. Ireland has taken into account the Directors' commercialassessments. Accordingly, the Directors unanimously recommend Shareholders tovote in favour of the Resolutions as they themselves intend to do in respect oftheir own beneficial holdings which amount, in aggregate, 425,000 OrdinaryShares, representing approximately 5.2 per cent. of the existing OrdinaryShares. PART II INFORMATION ON KALDORA AND ANDASH MINING INTRODUCTION Andash Mining was registered as a Kyrgyz limited liability company on 14 June2004 and on 22 June 2004 the Andash exploration licence was re-issued to AndashMining. On 22 July 2004 Kaldora acquired the entire issued share capital ofAndash Mining from Marsa Gold LLC, a local Kyrgyz company which had previouslyheld the Licence. Since that date it has incurrred additional explorationexpenditure of $100,000, principally in respect of drilling and a chemicalanalysis of rock samples taken from the site. THE ANDASH SITE The Kyrgyz Republic sits within a broad band of gold mineralisation thatstretches through Central Asia. This zone is commonly known as the Tien Shangold belt and is one of the largest proven gold provinces in the world. The goldmining industry in the Kyrgyz Republic is under developed. The Andash Project is located in the Talas valley, close to the north westernborder of the Kyrgyz Republic with the Republic of Kazakhstan. It isapproximately 475km by road from the capital city of Bishkek. A shorter 260kmroute is open in the summer months but is inaccessible at other times because ofsnow and the risk of avalanche. The town of Talas is 45 km from the site and the closest village, Kupre-Bazar isless than 2.5 km away by road. Water is available at the site and a major powerline passes within 15km of the licence area. The Licence covers an area of 53km2 and rises between 2,100 and 2,400m above sealevel. In 1962, a survey carried out for the Soviet geological authorities bythe Aktash geological team identified a copper/gold deposit at the AndashProject. Further survey work including trenching, drilling and tunneling wascarried out between 1977 and 1997. This established that the site comprised amain tube shaped copper gold porphyry deposit and two smaller deposits. Furtherexploration was carried out by the Ala-Too Gold Company ("Ala-Too") a subsidiaryof Commonwealth and British Minerals plc, during the period 1996 to 1997, but atthe time the decision was taken not to proceed with further exploration and nosignificant further work was undertaken until 2003 when Marsa Gold carried out afurther geophysical exploration THE LICENCE The Licence which covers gold and copper resources was granted by the LicencingOrgan to Marsa Gold in January 2003 was re-issued to Andash Mining on 22 June2004 and was extended on 22 November 2004 with an expiry date of 31 January2006. The Licence Agreement specifies the minimum levels of investment to beconducted as follows; • in 2005: $277,000 • in 2006; $60,000 The Company's legal advisers in the Kyrgyz Republic have advised the Directorsthat under Kyrgyz law, that subject to the conditions of its Licence Agreement,Andash Mining may apply for continuations of the exploration licence for up to10 years. Furthermore, Kyrgyz mining law states that "should a deposit bediscovered, the licensee shall have exclusive rights to obtain a licence". Suchmining licences are valid in the first instance for 20 years from the date ofgrant. The Directors and Proposed Directors do not believe that there is anyreason why the Licence should not be renewed at the end of January 2006. RESERVES & RESOURCES Currently three gold-copper mineralized zones have been identified within theLicence area: Zone 1 is hosted in a cylindrical breccia. This zone has been the mostthoroughly investigated, initially by the North Kyrgyz Geological Expedition(NKGE) and later by Ala-Too. Both of these parties prepared resource/reserveestimates. The Ala -Too estimate considered that the resource contained withinZone 1 could be classified as inferred in line with JORC (western) guidelines.The contained gold in Zone 1 according to this estimate is 634,197 ozs. at agrade of 1.03 g/t, using a cut-off grade of 0.5 g/t. This estimate does not include any copper values. NKGE estimated copperresources of 11,076 tonnes grading 0.49% Cu in Zone 1. Zones 2 and 3 are less well delineated than Zone 1 and under western resourceestimation criteria would be considered as having significant explorationpotential. NKGE estimated the gold resources in Zones 2 and 3 at 287,329 ozs.and 124,863 ozs. respectively. Several areas with additional exploration potential have been identifiedelsewhere within the licence area by NKGE and by the current licencee, AndashMining. To date the work undertaken has not been sufficient to establish formal "reserve" levels, however the Directors and the Proposed Director believe that this willbe done through the programme of work on which the Company is now set to engage. Overall, the Experts Report set out in Part IV indicates a value range for theresources in Zone 1 of $4 million to $5.2 million The Enlarged Group could incur a tax liability of up to £0.6 million if Kaldorawere to be sold at the upper end of this valuation, although, it is not theintention of the Directors to pursue such a sale. THE PROPOSED PROGRAM In the opinion of the Directors and the Proposed Director; upon Admission, theCompany should have sufficient cash available to progress the exploration of theAndash licence to the point of completing a reserves estimate to Westernstandards and a pre-feasibility study. Additional funds, of the order of $0.5million, would then need to be raised if the outcome of these was sufficientlypositive to justify taking the project to the stage of preparing a bankablefeasibility study. A detailed work programme is summarised in the CompetentPerson's Report in Part IV of this document. The Board intends to retain PPI to undertake additional drilling on the AndashProject to confirm and upgrade the estimates of mineral resources on the site.In order to facilitate and expedite this work, Aurum Mining has agreed to lendPPI £150,000 to refurbish a drilling rig to be used at Andash and on any otherproperties in which Aurum Mining may acquire an interest. Aurum Mining will havefirst call on the use of this drilling rig at a discounted rate. In the opinionof the Directors, this arrangement will provide Aurum Mining with a competitiveadvantage in securing cost effective and preferential drilling services. FINANCIAL In the period from incorporation to 30 September 2004 the Kaldora Group hasincurred expenditure of approximately $13,500, which has been funded by a loanof up to $100,000 from Tyry Services Limited of which an initial $30,000 wasdrawn down. At 30 September 2004, the Kaldora Group had net liabilities of$13,465. Since then a further $70,000 has been drawn down under the loan fromTyry Services Limited. It is intended that the loan will be repaid uponAdmission. SHAREHOLDERS OF KALDORA AND MEMBERS OF THE CONCERT PARTY The shareholders of Kaldora are Jake Consultants Limited (as to 20 per cent.),Clayhill Investments Corp. (as to 20 per cent.) and Kantanna Company Limited (asto 60 per cent.). These are trust companies with no other assets or liabilitiesand hold their shares for the beneift of David Bryans, John Webster and Oleg Kimrespectively, the interests and potential interests of whom in the equity ofAurum Mining are shown in the table below. Number of Total Concert party David Bryans and John Webster and Oleg Kim andOrdinary Shares associated associated associated companies companies companies Currently in 8,191,489 2,275,000 28% 2,250,000 27.5% 25,000 0.3% - -issue To be issued as(i) initial 600,000 600,000 120,000 120,000 360,000consideration (ii) under the 714,286 - - - -Placing 9,505,775 2,875,000 30% 2,370,000 24.9% 145,000 1.5% 360,000 3.8% (iii) maximum 2,500,000 2,500,000 500,000 500,000 1,500,000deferredconsideration 12,005,775 5,375,000 45% 2,870,000 23.9% 645,000 5.4% 1,860,000 15.5% (iv) on exercise 1,000,000 1,000,000 1,000,000of options 13,005,775 6,375,000 49% 2,870,000 22.1% 1,645,000 12.6% 1,860,000 14.3% Of the above options, 500,000 are exercisable on Admission, with a further166,667 becoming exercisable upon the first two anniversaries of Admission and166,666 exercisable on the third anniversary. Mr Bryans' interests are held through two companies which he controls andinclude 2,250,000 Ordinary Shares already held by Talyn International Limited. David Bryans, (aged 61) has spent the past 10 years in assessing mining projectsin the FSU, particularly in Russia. David was instrumental in the formation ofCeltic Resources Holdings plc and in the negotiations on the formation of SouthVerkhoyansk Mining Company ("SVMC"), a Russian company in which Celtic ResourcesHoldings Plc held a 50 per cent. interest. David was a director of SVMC from itsformation in 1996 until November 2002 and its general director from March 1998to May 2002. Prior to that his early professional career was in investmentmanagement in the UK and Ireland and subsequently as an investor internationallyin a range of companies, latterly in the extractive industries. Details of John Webster's background and career to date are given above. Oleg Kim, (aged 44), is a Kyrgyz national with graduate and post graduatequalifications in geology from Russia and Uzbekistan and further qualificationsin economics from Canada. Having worked for the state geology bodies andsubsequently Kyrgyzaltyn, the Kyrgyz state gold mining holding company, Oleg wasinvolved from 1993 with the development of the Kumtor gold deposit joint venturewith Cameco and became chief exploration geologist in charge of the majorcontinuing exploration programme for this gold mine and also generallyresponsible for Cameco's Central Asian exploration programme. Since 1992 he hasdeveloped his own business interests in gold exploration and production. Inaddition to his directorships of Andash and Marsa Gold he is a director ofBulakashu Mining Company in the Republic. Oleg developed a professionalrelationship with PPI during his service with Cameco and PPI has providedprofessional mine industry consulting services to Marsa Gold. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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