3rd Feb 2006 10:55
Celtic Resources Holdings PLC03 February 2006 Celtic Resources Holdings Plc Sale of interest in Nezhdaninskoye raises US$80 million Future plans outlined Celtic Resources Holdings Plc ("Celtic" or "the Company") today announces that it has agreed to sell 20% of The South Verkhoyansk Mining Company ("SVMC") for US$80 million cash. SVMC is the holder of the license for the Nezhdaninskoye gold mine in Yakutia, Russia ("Nezhdaninskoye"). The Company has had productive discussions on the future of Nezhdaninskoye withInterros Group, one of Russia's largest private investment companies and acontrolling shareholder in Norilsk Nickel and Polyus. As a result of thesediscussions, KM Technologies (Overseas) Limited, an investment vehicle for theInterros Group, has made the cash offer. The transaction is conditional onCeltic withdrawing all legal actions concerning the disputed ownership inNezhdaninskoye. In addition to the cash consideration, Celtic expects to receivethe repayment of the principal component of the debts owed by SVMC to Celtictotalling approximately US$10 million. Following discussions with the Company's advisers, the board of Celtic hasunanimously decided that its acceptance of the cash offer is in the bestinterests of Celtic and its shareholders. The US$80 million will be held inescrow and released to the Company conditional upon the withdrawal of all legalactions by Celtic in relation to the ownership of Nezhdaninskoye, which isexpected to occur by 31st March 2006. Whilst its goal of developing Nezhdaninskoye has not been met, the Companyrecognises that a cash return of this magnitude in the current business climatein Russia is exceptional and very much in the best interests of shareholders.Celtic's total investment in Nezhdaninskoye to date has been approximately US$30million. Celtic has always maintained, and continues to do so, that it owns 50% of SVMC,but third parties laid claim to 60% of this interest. Full details of thesedisputes were provided by the Company on 6th October and 24th November 2005. Foralmost three years, Celtic has been in negotiations with various parties,principally IG Alrosa, relating to the future of the Nezhdaninskoye mine andwhilst doing so, had agreed to postpone legal actions concerning the disputedshareholding in SVMC. These legal actions were reactivated when Polyus announcedthat it had acquired from IG Alrosa certain gold properties which included theinterests in Nezhdaninskoye which Celtic did not own. Whilst the Company believes that the continuation of the legal cases would haveeventually resolved the ownership dispute in Nezhdaninskoye in its favour, thisprocess could have taken between 18 and 24 months to complete, at substantialfinancial and managerial cost to the Company and with no guarantee of success.Consequently, Celtic believes that resolution of the disputed 30% interest inSVMC is best left to remaining SVMC shareholders and the third parties. The future Celtic's fundamental aim remains: to grow into a significant gold miningcompany. This will be accomplished by building on the production base at theSuzdal and Zherek mines in Kazakhstan and by way of new acquisitions in the FSUand elsewhere. The Company has been assessing a number of such acquisitions andcontinues to do so in order to build up its gold resources under management. Kazakhstan update In Kazakhstan, Group gold production from Suzdal and Zherek for 2005 will totalmore than 37,000 ozs, an increase of approximately 17% on 2004. While this levelof production is short of management's forecast, the Board is satisfied with theprogress at both mines throughout 2005 and is confident of the increase inproduction forecast for the current year. Construction of a new plant at Suzdal to treat sulphide ores using BIOX(R)technology was completed in May 2005 and full scale commissioning is underway.Various mechanical issues, principally due to western supplied air blowers tothe BIOX(R) plant, are being overcome. Suzdal mine production is forecast toreach a rate of more than 60,000 ounces in the current year and, at fullcapacity is expected to produce 100,000 ounces of gold per year. At Zherek, open pit heap leach operations continued normally and for the fullyear exceeded budget forecasts. We will investigate further the potential formining the sulphide ores in place below the open pit. Comment Peter Hannen, Chairman of Celtic, commented, "Whilst this is not the outcome weanticipated or wished for, it does now provide an opportunity to reinvest thesubstantial cash value we have obtained. In the last three years, the Company has moved forward on all of its goals forshareholders - except its ability to convert Russian gold mine ownership intoproducing ounces. We disposed of all non-core assets, now represented byshareholdings in companies worth significantly more that their original valuesand increased our ownership from 15% to 100% of Suzdal. We have introducedleading processing technology to Kazakhstan via the Suzdal agglomeration-heapleach for low grade oxide ores and the BIOX(R) process for refractory sulphideores. The Company has learned a lot about asset acquisitions in the region fromits recent experience and the management has gained valuable insights, which wewill now use to move forward and continue building a significant company gearedto the bright future of gold." For further information please contact: Kevin Foo / Kate Dexter Smith Leesa Peters / Laurence ReadCeltic Resources Holdings Plc Conduit PRTel: + 44 (0)20 7921 8800 Tel: +44 (0)7812 159 [email protected] Tel: +44(0)20 7429 6666 [email protected] Frank Moxon / Nick MorganWilliams de Broe PlcTel: +44 (0)20 7588 7511 www.celticresources.com This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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