Acquisitions
25 März 2008 - 8:02AM
UK Regulatory
RNS Number:6271Q
Aricom PLC
25 March 2008
Press Release 25 March 2008
Aricom plc
("Aricom", "the Company", or "the Group")
Strategic Acquisitions of Extensions to Aricom Projects
Aricom (LSE: ORE, OREW), the Anglo-Russian developer of mineral resources,
announces that it has acquired options to purchase two further licences which
would provide significant natural expansion potential to the existing K&S and
Garinskoye projects:
* the Garinskoye Flanks licence, which covers an area of 3,530km(2)
immediately surrounding Aricom's Garinskoye licence; and
* the Kostenginskoye licence, which covers an area located c.24km to the
south of Aricom's K&S project.
Both of these licences form natural expansions to existing Aricom projects. An
extensive exploration programme is scheduled to commence shortly. As is normal
practice, the exercise of the options and the completion of the acquisitions is
conditional principally on the consent of the Russian Federal Anti-Monopoly
Service, which the Company and the sellers will be seeking to obtain as soon as
practicable.
Transaction Summary
Aricom UK Limited ("Aricom UK"), a wholly owned subsidiary of the Company, has
entered into option agreements to acquire the Cypriot companies which indirectly
hold the two licences. The shareholders of these Cypriot companies are not
related parties and are not existing Aricom shareholders.
The total consideration (calculated on the basis described below) for both
assets is US$80m, comprising US$40m for each asset. As consideration for the
granting of the options, Aricom UK is today making two cash payments of
US$22.5m. Consideration for the exercise of each option comprises the allotment
and issue and/or transfer of 10,937,500 (21,875,000 in total) ordinary shares of
0.1p each in the capital of the Company ("Consideration Shares") credited as
fully paid to the vendors and having an aggregate value of approximately US$35m
(calculated using a price of UK�0.80 per Consideration Share and an exchange
rate of �1.00:US$2.00). 50% of the Consideration Shares will be subject to a
lock-in for 6 months and the remaining 50% will be subject to a 12 month
lock-in.
Project Summary
Licence area (km Category A/B/C1/C2 Category No of orebodies
(2)) (mt)
P1/P2 (mt)
Garinskoye Flanks 3,530 6.3 975 5
Kostenginskoye 24 163.9 100 1
TOTAL 170.2 1,075
Further details on each licence can be found in the description below.
Jay Hambro, Chief Executive of Aricom, commented:
"We believe that both these assets, which would nearly double Aricom's
attributable reserves and resources (from 1,442mt to 2,687mt), represent natural
extensions to our Garinskoye and K&S projects. Aricom has a stated intention to
grow both organically and by acquisition and we believe these two acquisitions
will significantly strengthen the portfolio. The terms of these these
acquisitions are accretive and utilise a blend of cash and shares that will,
following exercise of the options, continue to leave Aricom well funded and
capitalised for our future development programme.
We have already commenced our exploration planning for these new additions and
although they are only early stage exploration assets with a majority of
prognostic resources, we believe they are a very exciting addition to our
portfolio. The Garinskoye Flanks, in particular, cover a significant area of
land with previously estimated resources indicating that it could be a world
class iron ore zone."
I believe that the iron ore market is one of the most exciting commodity markets
to be involved with currently and these assets secure a long resource tail for
Aricom. This is particularly pertinent for Aricom, as Kuranakh is on schedule
to generate its first revenue within the next few months."
For further information:
Aricom plc
Charlie Gordon, Investor Relations Officer Tel: +44 (0) 20 7201 8939
www.aricom.plc.uk
Abchurch
Charlie Jack/ George Parker Tel: +44 (0) 20 7398 7700
www.abchurch-group.com
Project Descriptions
Garinskoye Flanks
As the name suggests the Garinskoye Flanks deposit is an area (of approximately
3,530km(2)) which surrounds the Garinskoye licence area (12km(2)) currently held
by Aricom. We believe that the deposit represents a natural expansion of
Garinskoye for the future as it is estimated to contain c.1bn tonnes of reserves
and resources (current Garinskoye reserves and resources are estimated at
389mt).
The locality is characterised as slightly hilly, with extensive marsh areas on
the low lying plains. The absolute elevations found in the area range from
200-550m with the highest point being 565m found on the Kosmataya Hill in the
southeast of the area. The interfluvial plains are wide and gently sloping. The
soils are predominantly loamy with sand. The main river running through the area
is the Orlovka which is typically up to 50m wide, has a depth of 0.4 - 1.8m and
has a rate of flow of 0.2-0.4m/s.
The territory was explored extensively between 1950-1955 with additional
aeromagnetic surveys in 1959 and 1971, and by aerogeophysical two-channel survey
in 1959. A number of magnetic anomalies were detected.
Geology - the ore bodies found in the anomalies are steeply dipping (70-90
degrees) veins and sheets ranging in width from 2.0 to 49.3m and with a lateral
extent from 80 to 1500m on the surface. Bore holes proved that the
mineralization extended to a depth of 500m.
The Lebedikhinskoe anomaly is found beyond the left bank of the Lebedikhi River,
8 km north of Garinskoye and contains seven layers and lenses of magnetite ore
with a thickness of 1.5-20.0m and a lateral extent of 50-360m. The reserves of
the iron ore of these layers have an average content of total iron of 36.0%. To
the northeast from Lebinikhinskoe, other promising zones are estimated to
contain 100-150m tonnes to a depth of 500m.
The Imchikanskoe anomaly is located 14km to the West of Garinskoye. The ore
bodies of magnetite ore are sheetlike with a length of 230-500m, and a width of
2-8m and an average content of total iron of 36.67%.
The Partisan layer of magnetite and magnetite-hematitic ore is located in the
region of the Polunochki River. The reserves of iron ore have a total iron
content of 62.0%.
Total Reserves and Resources - according to the Russian Federal Agency,
Rosnedra, in its order 1417 dated October 9 2007, the total reserves of iron ore
in the licence area is estimated to be 6.3mt in the Russian Categories
A+B+C1+C2. Forecast resources are 275mt in the Category P1 and 700mt in the
Category P2. These reserves and resources estimated by Rosnedra will be subject
to confirmation drilling by Aricom. The drilling will be carried out by one of
our preferred exploration contractors, who is already working at Garinskoye,
and, subject to completion of the acquisition of the asset, is expected to be
completed during the third quarter of 2008. The confirmed reserves and resources
will be reported in both the Russian and JORC classification.
Reserve and Resource summary
Russian Million Tonnes
Categories
Garinskoye A/B/C1/C2 388.8
Garinskoye Flanks C1/C2/P1/P2 981.3
TOTAL 1,370.1
Kostenginskoye
The Kostenginskoye iron ore deposit is situated in Obluchenskiy District of
Evreyskaya Avtonomnaya Oblast ("EAO"), 35 km to the south of the Izvestkovaya
station of the Trans-Siberian Railway, and 24 km to the south of the Kimkanskoye
deposit. The area of the deposit within the licence area is 24 km2.
Assuming completion of the acquisition of this asset, Aricom expects to commence
exploration / confirmation drilling during the winter 2008 / 2009 and this
programme would last approximately 2 years. Based upon experience gained at the
K&S deposits Aricom could reasonably expect to drill up to 150 confirmation
holes during the 2 year programme at a cost of US$7-10 million. This work could
culminate in full GKZ approval of reserves and permission for mining by mid
2011.
As would be expected with its location, the deposit may be regarded as having
similar geology to the K&S deposits. The original 1972-75 exploration programme
concluded that the deposit comprised of 8 individual orebodies although only
Orebody 1 was evaluated to be economic - the other ore bodies were considered to
be smaller and with lower grade.
Total Reserves and Resources - according to Rosnedra, in its order 904 dated
July 17 2007, the total reserves of iron ore in the licence area is estimated to
be 163.9mt in the Category C1. Forecast resources are 100mt in the Category P1
to a depth of 600m. These reserves and resources estimated by Rosnedra will be
subject to confirmation drilling by Aricom. The drilling will be carried out by
Dalgeofisika, who are already working at Sutarskoye. The confirmed reserves and
resources will be reported in both the Russian and JORC classification.
Reserve and Resource summary
Russian Million Tonnes
Categories
Kimkanskoye A/B/C1/C2 221.7
Sutarskoye P1/P2 369.3
Kostenginskoye C1/P1 263.9
TOTAL 854.9
Transaction Descriptions
Garinskoye Flanks
Aricom UK has today been granted an option to acquire Guiner Enterprises Ltd,
the company indirectly holding the Garinskoye Flanks licence, from Myrtle
Corporate Limited and Ardoryna Commercial Limited. As is normal practice, the
exercise of the option and the acquisition is conditional principally on the
consent of the Russian Federal Anti-Monopoly Service. Aricom UK today made the
cash payment of US$22.5m in respect of the grant of the option.
At completion, the exercise price for the option will be satisfied by the
allotment and issue credited as fully paid and/or transfer of 10,937,500
Consideration Shares to Myrtle Corporate Limited and Ardoryna Commercial Limited
such Consideration Shares having an aggregate value of US$17.5m (on the basis of
an exchange rate of �1.00:US$2.00 and each Consideration Share being valued at
�0.80, irrespective of whether the market price for a share is at that time
lower or higher than �0.80).
The Garinskoye Flanks licence is held by Ekvador LLC, a Russian company which is
further owned by a Cypriot company Guiner Enterprises Ltd which is itself owned
by two British Virgin Islands ("BVI") companies: Myrtle Corporate Limited,
holding 51% and Ardoryna Commercial Limited, holding 49%. The shareholders of
Guiner Enterprises Ltd, none of whom are related parties to Aricom and are not
existing Aricom shareholders, have conditionally agreed to sell their shares in
Guiner Enterprises Ltd to the Group.
Kostenginskoye
Aricom UK has today been granted an option to acquire Rumier Holdings Ltd, the
company indirectly holding the Kostenginskoye licence, from Myrtle Corporate
Limited and Ardoryna Commercial Limited. As is normal practice, the exercise of
the option and the acquisition is conditional principally on the consent of the
Russian Federal Anti-Monopoly Service. Aricom UK today made the cash payment of
US$22.5m in respect of the grant of the option.
At completion, the exercise price for the option will be satisfied by the
allotment and issue credited as fully paid and/or transfer of 10,937,500
Consideration Shares to Myrtle Corporate Ltd and Ardoryna Commercial Ltd such
Consideration Shares having an agreed aggregate value of US$17.5m (on the basis
of a fixed exchange rate of �1.00:US$2.00 and each Consideration Share being
valued at �0.80, irrespective of whether the market price for a share is at that
time lower or higher than �0.80).
The Kostenginskoye licence is held by Optima LLC, a Russian company which is
further owned by a Cypriot company Rumier Holdings Ltd which is itself owned by
two BVI companies, Myrtle Corporate Ltd holding 51% and Ardoryna Commercial Ltd
holding 49%. The shareholders of Rumier Holdings Ltd, none of whom are related
parties to Aricom and are not existing Aricom shareholders, have conditionally
agreed to sell their shares in Rumier Holdings Ltd to the Group.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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