Cerillion Regulatory News (CER)

20 Dec 2006 15:46

Celtic Resources Holdings PLC20 December 2006 20 December 2006 Celtic Resources Holdings Plc ("Celtic" or the "Company") Acquisition of Eureka Mining plc ("Eureka") The Directors of Celtic are pleased to announce that the Company's recommendedproposal for the acquisition of Eureka by a scheme of arrangement was todayapproved at the Court Hearing. Accordingly, the Scheme is expected to becomeeffective, the acquisition of Eureka completed and Eureka's listing on the AIMMarket is expected to be cancelled on 21 December 2006. The first day of dealings in the New Celtic Shares issued to the shareholders ofEureka in respect of its acquisition by the Company is expected to be 22December 2006. The acquisition will result in the issue of 7,451,537 new sharesin Celtic representing 13.35 per cent. of the enlarged issued share capital ofthe Company which, at the Celtic's closing share price on 19th December 2006 of164.5p, valued the acquisition at £12.3 million. This acquisition brings to the group three key assets; a 50 per cent. interestin a molybdenum mining operation at Shorskoye, Kazakhstan, which is now inproduction, and two very substantial copper and gold projects in the ChelyabinskRegion of Russia. Shorskoye Eureka acquired a 65 per cent. interest in this project from Celtic and thebalance from local Kazakh investors in December 2003, when this was anexploration project. During 2005 a definitive feasibility study was carried outand the results were released in July 2005. This project is a molybdenum depositwith a JORC resource of more than 20 million tonnes of ore at 0.10 per cent.molybdenum and 0.06 per cent. copper. A high grade zone of 3.1 million tonneswas identified and mining operations started in this zone in September 2005.Mining operations are supplying the concentrator, commissioned in May 2006, andthis is currently building up to full production. In July 2005 Eureka signed a joint venture agreement with KazAtomProm, the stateuranium company of Kazakhstan. This joint venture, Molyken LLP, utilisesKazAtomProm's Stepnogorsk industrial and plant facilities to process molybdenumore from Shorskoye in exchange for a 50 per cent. interest in Ar-Man LLP, theEureka subsidiary that is the owner of Shorskoye. A production licence for theconcentrate has been granted and contracts for the sale of the ongoingconcentrate have been signed. First sales receipts were achieved in September2006 and these now total US$4.7 million. Chelyabinsk - Miheevskoye This project is a large copper/porphyry deposit located at Miheevskoye some 250km from Chelyabinsk, within the Chelyabinsk Oblast in Southern Russia. Apre-feasibility study has been completed on Miheevskoye, which has provided atotal Indicated Resource to JORC standards of 373.5 million tonnes averaging0.38 per cent. copper and 0.10 grams per tonne of gold, containing 1.42 milliontonnes of copper and 1.20 million ounces of gold. There is a total Inferred Resource of 52.1 million tonnes containing 0.31 per cent. copper and 0.07 grams per tonne of gold. The study evaluated the project on the basis of a mine life of approximately 12years with a throughput of 25 million tonnes per annum, with average annualproduction of 81,000 tonnes of copper and 55,000 ounces of gold, and a totalproduction of 967,000 tonnes of copper and 668,000 ounces of gold. Drilling for the study has demonstrated that the southern zone of the depositremains open to the south and to the west. Chelyabinsk - TominskoyeThis project is a large copper/porphyry deposit located just 40km fromChelyabinsk. The proximity to Chelyabinsk means it has access to basic servicesincluding transportation, and infrastructure. Initial studies on Tominskoyeprovided a total indicated resource of 241 million tonnes averaging 0.58 percent. copper and 0.12 grams per tonne of gold, containing 1.4 million tonnes ofcopper and 0.93 million ounces of gold. Further exploration at the site isplanned for the coming year along with initial scoping studies. KentauKentau Exploration & Mining LLP, a wholly owned subsidiary of Eureka, holds twolicences in the Kentau district, first granted in 1997. It is a large and highlyprospective area from which large volumes of geological data have been accrued.Eureka has completed additional surveys (including RC drilling) as well as anextensive data review, with a comprehensive Geographic Information Systemsdatabase created. On the basis of these results a focused exploration programmeon previously identified targets is planned. DostykDostyk LLP, also a wholly owned subsidiary of Eureka, is the current holder oflicence No. 785 with an exploration period for years 2006-2007. The evaluationof achieved results is being completed and decisions regarding furtheractivities will be made in early 2007. Group Strategy It is Celtic's intention to increase its gold and other resources and productionboth organically and by acquisition. The acquisition of Eureka provides furtherresources of some 1 million ounces of gold and is expected, in time, to provideannual production of approximately 55,000 ounces of gold from the Chelyabinskproject. For many junior companies the environment for raising capital and debt financefor projects is appreciably more difficult than in previous years. Smaller companies are competing with larger, better financed local and international companies for assets in the FSU and we are witnessing a changing landscape in marketsand politics. The Directors of Celtic believe that this environment will becomeeven tougher for smaller companies and that a consolidation of interests withlike-minded companies in the FSU will result in a lowering of the risk profileand creation of stronger and more attractive investment vehicles for existingand future shareholders. This consolidation will also mitigate some of the risksof operating in the FSU. The Directors of Celtic believe that the key benefits of the acquisition ofEureka are: •an enlarged group that has a strong balance sheet and a sound operating record in the FSU with the intention of continuing the development of Eureka's assets; •the enlarged group will have two operating gold mines and an operating molybdenum mine, all in the same region in Kazakhstan which will enable cost savings and maximum use of expertise across the enlarged group; •the enlarged group will have the capacity to expand existing production at its mines, develop strong working relationships with FSU partners and accelerate the development of the Chelyabinsk Project; and •the execution of Celtic's plans to make further acquisitions of appropriate assets in the FSU which will benefit and add value, increase the scale of the Enlarged Group and create a more attractive investment vehicle. Commenting on the acquisition, Celtic's Chairman, Peter Hannen said "Eureka hassome outstanding projects with excellent management. We fully intend to maximisethe value of these for all shareholders as we continue to evaluate appropriatemerger and acquisition opportunities in the FSU." Terms and expressions used in this announcement shall, unless the contextotherwise requires, have the same meanings as given to them in the Company'sannouncement of 7 November 2006. For further information please contact: Euan Worthington/ Kate Dexter SmithCeltic Resources Holdings PlcTel: + 44 (0)20 7921 8800Investors@celticresources.com Frank Moxon / Simon EdwardsEvolution Securities LimitedTel: +44 (0) 20 7071 4300 Laurence ReadConduit PRTel: +44 (0)7979 955923 This information is provided by RNS The company news service from the London Stock Exchange