12th Jul 2007 07:01
Aricom PLC12 July 2007 Press Release 12 July 2007 Aricom plc ("Aricom" or "the Company" or "the Group") 2007 First Half Trading Update Aricom plc (AIM: TIO), the Anglo-Russian developer of mineral resources, issuesthis statement as an update on trading for the first six months of 2007 inadvance of the interim results announcement expected in September. HIGHLIGHTS - Total gross funds raised of c.US$575m and receipt of project finance proposals- Progress on intention to move to Main Market- Conditional purchases of interests in K&S and Garinskoye- Successful completion of the acquisition of Giproruda mining institute- Construction of Kuranakh project continues on schedule- Kuranakh construction costs impacted by global steel prices and additional blasting requirements- Positive project studies on both K&S and Garinskoye suggesting a total valuation of US$3.7bn A detailed update on the development of the Group and its projects follows. Jay Hambro, Chief Executive, said: - "Aricom has advanced significantly in the last six months with an expansion andconsolidation of the project portfolio as well as attracting the necessary fundsto commit to and commence the construction of its large-scale developmentprojects. The Group's placement was the largest ever secondary fundraising onAIM. We believe that the Garinskoye deposit and its surrounding area has thepotential to develop into one of the most attractive iron ore assets in theworld. We have made great progress on increasing our understanding of theGarinskoye project by completing 70% of the confirmation drilling and receivinga positive scoping study. The independent study of K&S supports our estimates of both the viability andvalue of the project. We are now progressing with the design and approvalsprocess in order to commence construction in 2008. In order to address the technical and operating requirements of the Group wehave commenced a sizable recruitment programme and acquired a controllinginterest in a large and well respected Russian mine design institute." - Ends - For further information:Aricom plcJay Hambro, Chief Executive Tel: +44 (0) 20 7201 8939 www.aricom.plc.ukCanaccord AdamsRobert Finlay / Chris Bowman Tel: +44 (0) 20 7050 6500 www.canaccordadams.plc.ukAbchurchCharlie Jack / George Parker Tel: +44 (0) 20 7398 7700 www.abchurch-group.com CORPORATE UPDATE Treasury - Fundraising Aricom successfully raised approximately US$555million (US$532million net)through a placing of 133 million units each consisting of three ordinary sharesand one warrant, each giving the right to subscribe for one ordinary share at aprice of £0.80 per share (subject to adjustment). The placing was approved byshareholders on 4 June 2007. On 4 June 2007, Aricom also issued 17,076,372 ordinary shares to theInternational Finance Corporation ("IFC") for a total of US$20million and alsogranted IFC an option to subscribe, subject to adjustment, for a matching amountof additional new shares. These fundraisings allow Aricom to commit to and commence the constructionprogrammes at K&S and Garinskoye. Following the successful completion of thesefundraisings Aricom has instigated a comprehensive review of these assets toassess specific methods of expediting the construction and developmentprogrammes. - Project Finance In May 2007, the Group received commitment letters for a US$65million projectfinance facility to complete the financing of the Kuranakh project. BayerischeHypo- und Vereinsbank AG, Caterpillar Financial (Zurich), VTB Bank Europe plcand ING Bank have jointly committed to the facility. Following the equityfundraising, the Group is considering how to make best use of the cash currentlyon the balance sheet and reviewing the terms of this facility with the banks. Listing Aricom announced in May its intention to seek, before the end of 2007, admissionto listing on the Official List of the Financial Services Authority and totrading on the Main Market of the London Stock Exchange. As part of thisprocess Aricom has appointed advisers with whom we are working to prepare thenecessary documents for admission. Accounting - IFRS The Group successfully made the transition to reporting under InternationalFinancial Reporting Standards (IFRS) for the 2006 financial statements and willreport under IFRS going forward. Reporting under IFRS is a requirement forcompanies listed on the Main Market. The Group took the decision to make thetransformation one year earlier than required by AIM as part of its preparationfor the intended listing on the Main Market. - New reporting software The Group is currently implementing a new management information system toenhance reporting across the Group. The system is being implemented to a singleweb-based tool which simplifies the entire reporting process while providingmanagement with an in depth analytical facility to further examine and comparemanagement reports and consolidate all of our financial information. Mergers & Acquisitions - Garinskoye In March 2007, Aricom entered into a conditional agreement to acquire a 60%interest in LLC Garinsky Mining & Metallurgical Complex ("Garinsky") and toreceive an option to acquire an additional 25% interest. The acquisition remainsconditional inter alia on a share capital reorganisation and the approval of theRussian Federal Anti-Monopoly Service ("FAS"), which is in the process of beingsought. In 2006, Garinsky submitted their proposal for developing the asset forthe licence in competition with a number of other Russian companies. In December2006, Garinsky received the licence and commenced mobilisation of a drillingteam and planning for the exploration works which commenced in the first quarterof 2007. - Completion of K&S In April 2007, after Wardell Armstrong International Limited ("WAI") completedits competent person's report and valuation of K&S, Aricom conditionally agreedto acquire the remaining 50% indirect interest in K&S to bring its ownership to100%. Following the valuation Aricom issued the additional consideration (being65 million shares) due to Malavasia Enterprises Inc.for its existing 50 percent. indirect interest in KS GOK and gave notice to Philotus Holdings Limitedto exercise the option to acquire the remaining 50 per cent. indirect interest.The acquisition pursuant to the exercise of the option remains conditional onFAS approval, for which an application was made shortly after the notice ofexercise of the option was delivered. The exercise price will be satisfied bythe issue of 123,782,467 shares. - Giproruda In March 2007, Aricom agreed to acquire a 68.49% holding in OJSC "Institute forEngineering of Ore Mining Enterprises Giproruda ("Giproruda"), conditional onFAS approval. This approval was granted in June 2007 and the acquisition hasaccordingly now been completed. There was a cash consideration of RUR211m(c.US$8m). Management - Change in Chief Financial Officer As announced earlier today, Brian Egan is scheduled to join the Company on 31July 2007 as Chief Financial Officer. Aricom's current Chief Financial Officer,Peter Howes, has decided to step down due to a desire to pursue other interests.Peter will step down as a Director on 31 July 2007 but will remain with theCompany to assist in a smooth handover to Brian until the end of September. Brian Egan, aged 44, was the Group Chief Financial Officer of Gloria-JeansCorporation, the leading Russian apparel manufacturer, until March 2007 and hasover 15 years' experience in senior financial roles. He was previously VicePresident of Finance at Associated British Foods Plc, Financial Director ofGeorgia-Pacific Ireland Limited and Chief Financial Officer of Coca-ColaHBC-Russia. He is a member of the Institute of Chartered Accountants inIreland. PROJECT UPDATE KURANAKH PROJECT- Titanomagnetite Deposit at PreProduction Stage H1 2007 Highlights • Approval of the OVOS Environmental Impact Assessment by the Department of Natural Resources • Completion of the 40km power line from Olekma to Kuranakh • Assembly of the first mining shovel completed for commencing of mining in August Background: OOO Olekminsky Rudnik, the 100% owned subsidiary of Aricom, holdsthe licence for the exploration and development of the Kuranakh ilmenite andtitanomagnetite deposit in the north west of the Amur Region. The licence covers an area of 85 square kilometres and was explored extensivelyboth during the Soviet era and subsequently by Aricom. Eight individual ore zones were identified within the licence area along astrike length of 5km and over a width of 1.5km. At this time, two ore zones, OreZone 1 and Ore Zone 3, are scheduled for mining by open-pit methods, as theyhave the highest grades and lowest stripping ratios. 2007 Progress Construction: Crushing and Screening Site The crushing and screening site is fully cleared and foundation construction forthe workshop has been started. A large amount of construction materials (cement,sand and aggregate) have been delivered to the site. Structural steel andconcrete cladding blocks, for the construction of the buildings, have beenstacked within 2km of the site. The jaw crushers and cone crushers, beingmanufactured in China, are scheduled to be delivered to the site during July andAugust. Kapstroy and Aricom believe that the crushing and screening complexshould be operational and producing pre-concentrate by December 2007 assumingweather conditions permit construction as planned. Power The power line, from the substation at Olekma to the crushing and screening siteat Kuranakh, a distance of 40km, was completed in April. The line comprising 158pylons, each 14m high, and 175km of cable was installed in 6 weeks. The line isexpected to be electrified by mid July. Bridge The majority of the bridge sub structures and supports are at the crossing pointon the Kuranakh river. Kapstroy expect the superstructure (11 containers) to bedelivered by mid July and the construction and erection of the bridge to becompleted by mid August. Mining Equipment The erection of the five EKG5A electric rope shovels is proceeding on schedule.The assembly of the first shovel was completed in May with a second machine duefor assembly completion in July. Pre-stripping of the overburden at theKuranakh open-pit is expected to commence in August using the smaller loadersand trucks (previously used for the road construction) pending the arrival ofthe 37t capacity mining trucks in September. Accommodation Camp The accommodation and administration blocks are being constructed on threeterraces cut into the hillside overlooking the tailings dam. The administrationblock, laundry and canteen, on the lower terrace have been completed up to thefirst floor level. The middle and upper terraces have been formed by drillingand blasting and are ready for construction of the living quarters. Process Plant Site The process plant site, located approximately 1km east of the accommodationcamp, is being cleared and levelled. Completion of the process plant is expectedin early 2008 as scheduled in the feasibility study. Rail Connection The civil works associated with the rail spur line from BAM to the process plantsite have been 80% completed. Once the final approvals have been received fromthe rail authorities the rail beds will be equipped with tracks, points andsignalling equipment. The rail spur and sidings are expected to be fullyoperational by March 2008. Human Resources A major activity to take place during the second half of 2007 is theacceleration of the recruitment campaign for all levels of operators, staff andmanagement. Visits will be made to the training institutes in the Amur andneighbouring regions as well as an extensive advertising campaign both in theRussian Far East and major university cities. Although it is expected thatapproximately half of the permanent positions will be filled by Kapstroypersonnel an additional 200 positions need to be filled through the recruitmentprocess. Construction Costs The construction programme at Kuranakh is experiencing capital cost pressureswhich have to date resulted in an estimated c.13% overrun. Unaudited monthlyreporting and internal analysis shows that the construction cost is c.US$11-12million in excess of the original estimate. Aricom's analysis of the costs incurred to date show three primary reasons forthe cost overrun: • Increases in global steel prices. Increases in the price ofstructural steel used for the building frameworks at both the Kuranakh mining/crushing site and the Olekma processing facility have led to a significantincrease in costs. The majority of the structural steel has been purchased andfurther additional costs caused by increasing steel prices are expected to beminimal. • Extra drilling, blasting and rock removal. There has been asignificant amount of additional drilling, blasting and removal of hard materialduring the construction of both the main haulroad (from Olekma to Kuranakh) andthe construction of the terraces for the accommodation camp. This work is nowcomplete and it is not expected that there will be further related overruns. • Power line foundations. Additional costs were incurred in laying thefoundation works associated with the installation of the power line pylonsbetween Olekma and Kuranakh. This work is now complete and it is not expectedthat there will be further overruns. There is the possibility of additional cost overruns as the project nearscompletion however based on current information the Directors do not expectthese to exceed US$4 million - these would be mainly attributable to price risesin construction materials. Construction Summary Aricom continues to estimate the following timetable: - August / September 2007 - Mine prestrip commences; - December 2007 - Production scheduled to commence at Kuranakh.Pre-concentrate from the crush and screen plant to be produced and sent toOlekma stockpile; and - Early 2008 - Completion of construction and commissioning of Olekmaprocess plant. Environmental Impact Assessment The OVOS (identification of possible impacts on the environment) and OOS (actionplan to deal with identified impacts) were approved by the Department of NaturalResources of the Amur Region in April. In addition Aricom commissioned DEBEnvironmental Consultants to prepare a Public Consultation and DisclosureStrategy document which was completed in May. Second Half Programme During the second half of 2007 construction is scheduled to continue in order tocomplete all of the structures by December. This should allow the installationand commissioning of the process plant equipment to take place inside and not besubject to any potential delays on account of the weather. Current contractual delivery dates for major items of equipment: Ball mills (x2) June-07Jaw Crusher (x1) July-07Cone Crushers (x4) July-07Plate feeders (x8) September-07Volvo A40 Trucks (x10) August>October-07 All deliveries are expected to be received on schedule. K&S - KIMKANSKOYE and SUTARSKOYE - Magnetite Iron Ore Deposit at AdvancedDevelopment Stage 2007 Highlights • Completion of WAI Valuation Report • Conditional purchase of the remaining 50% of LLC Rubicon • Commencement of the Environmental Baseline Study • Commencement of the Feasibility Study • Completion of all confirmation drilling at Kimkanskoye • Good progress on confirmation drilling at Sutarskoye Background: In April 2006 Aricom acquired an option to purchase an indirect 50per cent interest in LLC Rubicon ("the Option") which holds the licences todevelop the Kimkanskoye and Sutarskoye (K&S) iron ore deposits. The licencesover the two deposits were granted to Rubicon in February 2006 and have a termof 20 years, which is extendable with the consent of the licensing authority.Aricom has subsequently given notice to exercise the Option to purchase the 50per cent interest. Exercise of the Option remains conditional upon FAS consent.Further to this, Aricom has acquired the remaining 50 per cent. The initial feasibility study was carried out by Peter Hambro Mining Engineering("PHME") and was completed in March 2007. This study reports on mining andprocessing at K&S as well as the viability of producing a metal product such asdirect reduced iron or pig iron. The independent valuation was carried out byWAI in February 2007 and completed in April 2007. The study estimates a netpresent value of US$1.7 billion and an internal rate of return of 35%. The Kimkanskoye and Sutarskoye deposits, first identified in the early 1900s,are located in the Jewish Autonomous Region. They signify a transformationalchange in the anticipated magnitude of Aricom's mining operations. These largedeposits are together estimated to be able to sustain a mining rate of 10million tonnes per annum of iron ore mine and are located close to both theTrans-Siberian railway (4km) and the Chinese border (c.600km). Kimkanskoye: The licence covers an area of 22.4km2 and extends to a depth of400m. The deposit is divided into seven ore zones of which the most important isthe Tsentralni Zone. The ore, which is 80 per cent magnetite and 20 per centhaematite, has an average grade of 35.7 per cent Fe. The magnetite can berecovered by conventional magnetic separation and the haematite by flotation. Sutarskoye: The licence covers an area of 27km(2) and extends to a depth of500m. The deposit is divided into three ore zones of which the main zone isYuzhni, which lies on either side of the Sutara river. The ore is mainlymagnetite with some silicate magnetite with an average grade of 33 per cent Fe.There is almost no haematite present at Sutarskoye. 2007 Progress Valuation and Purchase Following the completion of the PHME initial feasibility study in March 2007 WAIcarried out an independent competent person's report and valuation of theproject in April. This report and valuation is based upon a mining rate of 10million tonnes per year of ore and producing both pig iron and iron oreconcentrate. The Wardell Armstrong report confirms the technical and economicviability of the project and estimates that the project has a net present valueof US$1.7 billion and an internal rate of return of c.35%. Subsequently Aricompaid the additional consideration of 165 million shares for the 50% of theproject from Malavasia Enterprises Inc.. Environmental All necessary licences have been obtained by Dalgeophysica (Aricom's drillingexploration subcontractor) which allow them to carry out exploration drilling,build a temporary accommodation camp on Sutarskoye and extract water from localsources for living purposes. Baseline environmental data collection commenced inMay in preparation for the Environmental Impact Assessment report which isscheduled to begin this month. Exploration Dalgeophysica continued with the confirmation drilling and trenching ofSutarskoye using 2 core drills. Some 3,753 linear metres of drilling and 18,384cubic metres of trenches were completed by the end of May 2007. The totalexploration program at Sutarskoye includes 137 holes each of 160 linear metres(21,920 linear metres) and 58,000 cubic metres of trenches. Due to flooding of the Sutara river overlying the Sutarskoye deposit, access tothe drilling positions has been difficult, even with assistance from thebulldozers. Consequently Dalgeophysica is expecting to replace the two drillscurrently on site with one heavy duty self propelled drill which will continueto work through the Summer. At the start of the 2007 Winter Dalgeophysicaintends to bring in up to five drills to ensure that the bulk of the drilling iscompleted before the Spring thaw in 2008. The samples taken from Sutarskoye are being analysed in the laboratory inBlagoveschensk. Sample Type No of Samples No of Samples Analysed No. of Samples to be Analysed Bore holes Core 989 192 797 Crushed Core 434 0 434 Trench Coarse 614 428 186 Crushed Coarse 72 46 26 Analyses completed to date confirm the parameters of the Sutarskoye ore bodiesboth in terms of ore body thickness and total iron content. On profile 139/50, bore hole S -742 intersected Ore Body 1, and obtained 3 oresections with a visible thickness ranging from 14.1 m to 73.8 m and with a totaliron content analysis in the range 26% to 33%. On profile 132, bore holes S -732, S -733 and S -734 intersected Ore Body 1 andobtained ore sections with a visible thickness ranging from 16.6 m to 41.8 m andwith total iron content analysis in the range 27.3% to 34.8%. All references to the exploration results and mining included in this releasewere approved for release by Mr Martin Smith, C Eng. BSc (Hons) MIMMM,Technical Director for Aricom. Mr Smith has more than twenty years experiencein the fields of activity concerned and is a Competent Person. Mr Smith hasconsented to the inclusion of the material in the form and context in which itappears. The exploration drilling results of the works at K&S are being entered into aMicromine geological model which will generate JORC reserves and resourcesestimates following the completion of the drilling in 2008. Second Half Programme Aricom has commissioned a feasibility study based upon a mining rate of 10million tonnes per year of ore and the production of both pig iron and iron oreconcentrate. The study is expected to be completed by October 2007. As part of this study PHME will work with Irgiredmet, in Irkutsk, to prepare theenvironmental and social impact assessment to international standards. Thisreport will form the basis of the OVOS which is expected to be submitted to theregional environmental authorities by the end of 2007. Initial environmentalbaseline data from K&S is being collected by Amurgeologica under the guidance ofthe Aricom Environmental Engineer. Public consultation meetings are scheduled to be held with the localcommunities, at Isvestkovaya, during the third quarter of 2007 in order toadvise them of Aricom's future plans and to understand their views. The Group'scommunity work is intended to be undertaken in accordance with the World Bank'sEquator Principles and will seek to ensure that Aricom can maximise the benefitthat the project will bring to those communities. Aricom currently anticipates that all drilling and evaluation works are onschedule to be completed by June 2008 and that the Kimkanskoye deposit will comeinto full production in 2010/2011 at a mining rate of c.10 million tonnes perannum. Production at Sutarskoye should commence in 2013, in accordance with theprovisions of the licence. GARINSKOYE - Magnetite Iron Ore Deposit at Advanced Development Stage 2007 Highlights • Commencement of initial drilling • Publication of the PHME scoping study Background: In October 2006 Rosnedra (a Federal Subsoil Service, RussianFederation) initiated a tender for the licence to 'mine iron ore on theGarinskoye deposit'. The supporting documentation estimated that the depositcontained iron ore reserves and resources of 388.8 million tonnes in the Russiancategories A, B, and C with an average grade of 41.7 per cent and 2,590 milliontonnes of Russian resource category P1 and P2 contained in the flanks. Of the A,B and C1 category reserves, 39 per cent (82.5mt) were defined as 'rich ore' andcontained an average grade in excess of 50 per cent Fe of which 67.7mt had anaverage grade of 55.7 per cent Fe. In December 2006 LLC Amur Mining, subsequently renamed Garinsky, a company inrespect of which Aricom now has a conditional agreement to acquire an indirect60% and an option to acquire a further 25% interest, submitted their proposalfor developing the asset for the licence in competition with a number of otherRussian companies. In December 2006, Garinsky received the licence and commencedexploration works and studies with the initial work focusing on a comprehensiveprogramme of confirmation drilling. Following suitable positive results fromthis, a feasibility study should be completed in the fourth quarter 2007 and theproject could be in full production by 2011. Aricom has also conditionallyagreed to acquire an option over a further 25 per cent in this company at anexercise price of US$100m. As magnetite is the predominant source of iron at Garinskoye it could beconcentrated using the same magnetic separation process as at Aricom's Kuranakhproject. This should result in an initial production of standard iron ore finesaveraging +/-65 per cent iron which would then be developed into a number ofpremium products including standard pellets, direct reduced iron (DRI), or pigiron. 2007 Progress: Exploration In January the Regis drill rig reached the site and commenced drilling. By theend of May the exploration team had completed the following: • Core drilling - 1820 linear metres completed out of a planned 3000 linear metres; • Trench samples - 3410 cubic metres completed out of a planned 5000 cubic metres; • Technological tests - 1 test of 2000 kilogrammes completed out of 4 tests planned. The 3 tests outstanding are expected to be completed during the third quarter of 2007; • Sample testing - by the end of May 12,000 kilogrammes of core and trench samples had been sent to the PHM Laboratory in Blagoveshchenk; and • Construction of a temporary accommodation camp for the 20 man exploration and drilling crew consisting of 5 houses, canteen, and core store. In addition all Soviet era drilling results are being entered into a Microminemodel. The PHME Garinskoye scoping study was published in May. The study is based upona mining rate of 10 million tonnes per year of ore and the production of bothpig iron and iron ore concentrate. The study estimates that the project has anet present value of US$1.95 billion and an internal rate of return 43%. Second Half Programme Based upon the economic viability of the project demonstrated in the scopingstudy, Aricom's in-house design institute, Giproruda, will prepare apre-feasibility study for delivery during the fourth quarter 2007. This studywill be based upon a mining rate of between 10 million tonnes and 20 milliontonnes per year of ore and will investigate a number of methods of producing pigiron using both gas and coal as the reductant. The study will investigate theoptimal location of the process plant and iron foundary either at the Garinskoyedeposit or another more optimal location where it could also process theconcentrate coming from Kimkanskoye and Sutarskoye. The exploration team expect to complete the drilling and trenching work duringthe second half of the year and the main Micromine model, incorporating theresults of the 2007 drilling and sampling, is expected to be completed byOctober. Construction of the access road, to connect the site to the Federal roadSvobodny - Fevralsk, which is to be 60 kilometres in length is intended to becommenced during the winter of 2007. This will allow an initial mining operationto commence early in 2009 at the rate of 2 million tonnes per year of ore. Theaverage insitu grade of this ore is expected to be 59% Fe. The ore shouldrequire minimal crushing, screening and beneficiation prior to shipment. Full scale production at the rate of 5MTPA is expected to commence in 2011reaching 10MTPA by 2012. For this, Aricom is studying, among otherpossibilities, the feasibility of installing an 80 kilometres conveyor belt totake the dry screened ore directly from the mining site to a processing andmetallisation plant to be constructed closer to the rail connection atShimanovsk. BOLSHOI SEYM - Titanomagnetite Exploration Deposit 2007 Highlights • Agreement with Timia on 2007 exploration campaign Background: In February 2006 Aricom entered into a heads of agreement withTimia, a company related to Interros, which is the major shareholder in OJSCNorilsk Nickel. The agreement relates to the establishment of a new holdingcompany for LLC Ural Mining, the company that owns the licence to develop theBolshoi Seym deposit. The holding company would be 49 per cent owned by Aricomand 51 per cent owned by Timia with Aricom appointing the General Director ofUral Mining. The Bolshoi Seym deposit is located in the Tyndinskii region 37km from theYukatala station (on the Baikal Amur railway) and c.40km to the south east ofOlekma where Aricom are constructing their Kuranakh project process plant. TheDirectors believe it represents a natural extension to Aricom's activities inthis area. The licence covers an area of 26km2 and extends to a depth of 1,000m. Thelicence was granted to Ural Mining in November 2005 and has a term of 25 yearswhich may be extended. The licence requirement is to start production by 1December 2012 with a minimum extraction rate of 2 million tonnes per year ofore. 2007 Progress: Exploration The exploration plan being developed by Timia was finalised during the firstquarter and the exploration drilling contractor is expected to be mobilisedduring the third quarter following the construction of an access road and atemporary accommodation camp. The 2007 planned exploration works focus on: 1. Defining the geological structure of the ore zones and bodies by means of exploratory boreholes and trenches. 2. Defining the outlines of the mineralisation. 3. Studying of geomorphology, bedding conditions, physical composition and internal structure of ore bodies, including their continuity and possible discontinuity. 4. Carrying out geological and technological mapping of ore layers by types of ores. 5. Studying the physical-mechanical properties of ores and host rocks, sufficient for calculating of reserves and substantiation of the stability of the sidewalls of the open-pit 6. Determining the extent of the permafrost zone. Work to be carried out includes: Drilling: Amount of drilling 12720m. The majority of the boreholes will bedriven at an angle of 50o in order to intersect the mineralised zones at rightangles. The holes will average 200m in depth. Three geological-structuralboreholes will be driven to a depth of 600 m for evaluating the propagation ofmineralisation at depth. Trench Sampling and Analysis: Volume of trench sampling 52647 m(3). The trenchsample will be used to determine the preliminary metallurgical process bylaboratory and pilot scale testing. Giproruda 2007 Highlights • Awarded ISO 9001:2000 Quality Management System • Commenced the Garinskoye pre feasibility study In March 2007 Aricom announced that it had agreed to acquire a 68.49% holding inOJSC Giproruda ("Giproruda") for a cash consideration of RUR211m (c.US$8m)conditional on Russian Anti-Monopoly approval. Aricom received the necessaryapproval and completed the acquisition in June 2007. Based in St Petersburg and employing 148 people, Giproruda is one of Russia'smost respected mining design institutes specialising in the analysis and designof open pit and underground mining projects. Giproruda has unique experience inthe design of open pits and underground mines in extreme mining, geological andclimatic conditions. Iron ore is a key area of specialisation for the institute. This will be ofspecific benefit in the analysis and design of a number of Aricom's future andexisting development projects. Giproruda will continue its work programme forother customers and believes it currently has a c.60% market share in theproject design services sector in the Russian mining sphere. However it willbecome more involved with Aricom's portfolio of projects and has commenced theGarinskoye pre feasibility study for delivery in the fourth quarter 2007. 2007 Progress Income for the first six months of 2007 was 35% more than forecast. During the first half of 2007 Giproruda acquired three new clients and commencedstudies on: - The design and construction of an apatite ore mining andbeneficiation plant. - An iron ore project feasibility study. - The design of the reconstruction and expansion of an iron ore openpit mine and beneficiation plant in Kazakhstan. In addition to the Datamine software currently in use, Giproruda has decided topurchase the Micromine software in order to be compatible with the Aricom / PHMEgeological computer modelling department. On 8 June 2007 Giproruda was awarded the ISO9910:2000 rating in the fields ofdesign, construction supervision and ecological feasibility of open pits,underground mines and their associated infrastructure. Second Half Programme The order book for the second half of 2007 is 30% over budget. Giproruda willcontinue with the studies commissioned earlier in the year and aims to deliverthe Garinskoye pre feasibility study during the fourth quarter. Titanium Sponge Plant - Potential Downstream Chinese Joint Venture H1 2007 Highlights • Initial Pre-feasibility study received and soon to be complete • Technology studies carried out and initial project analysis completed • City of Jiamusi selected for the potential construction site Background: In June 2006, Aluminium Corporation of China ("Chinalco"), thelargest nonferrous metal company in China and owner of China's largest titaniummetal processing plant, signed a Memorandum of Understanding with Aricom for thedesign and development of a titanium sponge production plant in China (the "Project"). 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 capital, production of ilmenite, expertise intitanium resources and technology together with Chinalco's capital,technologies, local power base and proficiency in engineering design/construction and metal production. 2007 Progress An initial pre-feasibility study has been received from the Chinese designinstitute SAMI of China Aluminium International Engineering Corporation Limited,the wholly owned subsidiary of Chinalco, in coordination with a specialistdesign institute in Ukraine. Now that the location of the plant has been agreedas the city of Jiamusi in Heilongjiang Province of China. This study is beingadapted to fit the specific design criteria. Based on such progress, Chinalcoand Aricom signed a Heads of Agreement and jointly entered into a CooperationAgreement with Jiamusi City in May 2007. These two agreements set forth theprinciples for the completion of the Project. The next step is the completion ofa Chinese feasibility study based on the Ukrainian input and the chosen site.This study is expected by the year end and will be key in the formation of thejoint venture. Second Half Programme The pre-feasibility study is now nearing completion. On receipt of this,Chinalco's design team will add their input before the intended joint venturepresses ahead with the investment decision. It is expected that constructioncould commence in 2007 with commissioning of a plant in 2010. Notes to Editors Aricom plc is a leading developer of Russian metal and mining assets, focussingon iron ore and ilmenite (titanium dioxide). The Company was established inSeptember 2003 in order to develop mines, situated in the north west of the AmurRegion, in Russia's Far East. It is intended that the output from the mineswill be sold primarily to the Chinese and Russian commodity markets. Aricom currently has five projects in its portfolio in the Amur region and theadjoining region. The Group's deposits Kuranakh, Kimkanskoye and Sutarskoye (K&S), Bolshoi Seym and Garinskoye have estimated combined reserves of 1.285billion tonnes of iron ore and ilmenite ores. The location of the Company'sdeposits offers a significant logistical advantage being close to theTrans-Siberian-Express and the Baikal-Amur Magistral railways and in anadvantageous proximity to China. In March 2007, Aricom announced that it hadagreed to acquire a majority holding in the leading Russian mining designinstitute Giproruda. In 2006 it is estimated that China imported c.326 million tonnes of iron ore tofacilitate its demand for steel production. This figure is expected to growfurther as the Chinese economy continues to grow. In June 2006, Aricom announceda diversification by entering into a Memorandum of Understanding with China'slargest nonferrous metal company Chinalco, to co-operate in the design anddevelopment of a titanium sponge production plant in China. Aricom is headquartered in London, with a highly experienced board of Directorscomposed of UK and Russian citizens. Aricom's shares were admitted to trading onthe AIM Market in December 2003 and trade under the symbol TIO.L. Aricom hasstated its intention to move its trading to the Main Market of the London StockExchange (the Main Board). For further information please visitwww.aricom.plc.uk This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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