FML.L Regulatory News (FML)

29 Nov 2007 08:57

Frontier Mining Ltd29 November 2007 29 November 2007 AIM: FML Frontier Mining Ltd. Frontier Completes Benkala Acquisition and Placing Frontier Mining Ltd ("Frontier" or "the Company"), the AIM listed Kazakhstanfocused gold mining and exploration company, is pleased to announce that it hastoday completed its acquisition of a 50% interest in a joint venture companywith rights to the Benkala copper-molybdenum-gold deposit located innorthwestern Kazakhstan within the Urals gold/copper ore belt ("Benkala", or "the Benkala Project") and a concurrent placing at a placing price of 10p ("Placing Price"). Acquisition In light of the registration of the Benkala subsoil use contract which wasannounced on 19 November 2007, the acquisition by Frontier of a 50% interest ina joint venture company with rights to the Benkala Project has closed. Pursuant to the acquisition, 6,250,000 new shares of Frontier common stock wereissued to the vendor, Coville Intercorp Ltd. ("Coville"). Also, Frontier issueda $7.7 million convertible note to Coville in lieu of the final cash payment toacquire the 50% interest in the Benkala Project. This note is convertible at 14pence per share for a period of 12 months from the registration of the SUC and,if not converted, is payable at the end of that period. Accordingly, the aggregate consideration paid to Coville for the interest inBenkala is US$21 million comprising US$10.8 million paid in cash in advance, theissue of a US$7.7 million convertible note, and the issue of the 6,250,000 newshares of Frontier common stock. Aggregate value of shares issued The aggregate value of the various share issuances made or to be made inconnection with the acquisition and the Placing is $28,400,000 from the issue of85,538,495 new shares of Frontier. This will represent approximately 39% of theenlarged share capital. The aggregate number of shares will be 218,120,082following admission to AIM on 5 December 2007. Cash Raised The Placing raised a total of US$7.4 million cash, which will be used to servicethe working capital requirement of the Benkala programme and costs related tothe acquisition and placing. Immediate Share Issuances 36,540,000 new shares are being issued at the Placing Price in connection withthe $7.4 million cash element of the Placing. As noted above, 6,250,000 sharesare being issued to Coville representing 2.9% of the enlarged share capital on anon diluted basis and 42,748,495 shares are being issued at the Placing Price toSokol Holdings Inc ("Sokol"), in satisfaction of a debt of $8,806,190 owing fromFrontier to Sokol. This represents 19.6% of the enlarged share capital on a nondiluted basis. Convertible Instruments As noted above, Frontier has issued to Coville a $7.7 million convertible note. Following the announcement on 6 September 2007 where Frontier issued a $2.0million convertible note to Sokol. This will be an interest free debt until 29February 2008 and thereafter will bear interest of 8% per annum and will beconvertible at Sokol's election at a price of 20p per share. Related Party Sokol, a company registered in the state of Delaware, United States, is arelated party to Frontier as Brian Savage (CEO of Frontier) and Thomas Sinclair(CFO of Frontier) are shareholders holding 50% each. Following the announcement on 6 September 2007, the independent non-executivedirectors of Frontier consider, having consulted with ZAI, that the terms of therelated party transaction are still fair and reasonable so far as Frontier'sshareholders are concerned. Information on the Benkala Project The Benkala Project, a porphyry copper project, is situated in northwesternKazakhstan in the Urals gold/copper ore belt, north east of Aktobe Oblast and100km south east of the Zhetikara Mountains, an area close to the Russian borderwith a long regional mining history. Benkala is in a highly attractive positionfor mine development given that it already contains developed infrastructure,including a main line railway, an all weather highway and excellent power supplyto the site. The property was discovered in 1968. Between 1976 and 1980, 70 holes totalling21,800 metres of core drilling on a 200 metre by 200 metre and 200 metre by 100metre grid, some to a depth of 700 metres with core recovery between 70% and75%. Metallurgical test work was conducted between 1973 and 1979 and determinedthat that the near surface chalcocite ores were amenable to heap leaching usingsulphuric acid as well as flotation. The sulphide ores were amenable toflotation. A Competent Person Report ("CPR") on the Benkala Project completed by WardellArmstrong International ("WAI") in March 2007 estimates 47.75 Mt at an averagegrade of 0.36% Cu for the oxide mineralisation, and 873.75 Mt at an averagegrade of 0.30% Cu for the sulphide mineralisation. CREST Admission The shares to be placed pursuant to the Benkala Acquisition will not be eligiblefor settlement through the CREST system for at least 12 months from the Placing.The 85,538,495 new shares to be admitted to AIM on 5 December 2007 are deemed"restricted securities" under the US Securities Act of 1933. Brian Savage, CEO of Frontier, commented "Benkala is a key strategicacquisition and we believe it will contribute very positively towards the growthof Frontier Mining. We were delighted to have recently secured the registrationof the Benkala contract, and following that, to have completed this placing. Wenow look forward to implementing our development program which will focus onconfirming resources and reserves to a JORC standard with the intent ofprogressing Benkala towards production as soon as possible". Enquiries: Frontier Mining Ltd Brian Savage +44 (0)20 7898 9019Parkgreen Communications Louise Goodeve / Justine Howarth +44 (0)20 7851 7480Zimmerman Adams Ray Zimmerman / Jonathan Evans +44 (0)20 7060 1760 About Frontier Mining Ltd: Frontier Mining Ltd. is a mineral exploration and development company that wasincorporated in the state of Delaware, USA, on 5 August 1998 for the purpose ofexploring and developing gold and copper deposits in the Republic of Kazakhstan.Through its subsidiaries and affiliates, Frontier locates, evaluates,acquires, explores and develops mineral properties Frontier has two licenses in Kazakhstan. They are the Naimanjal exploration andmining licence, held by FML Kazakhstan, and the Baltemir exploration licence,held by Baltemir LLP. Both companies are wholly-owned subsidiaries of FrontierMining Ltd. Frontier has one producing gold mine, Naimanjal; onepre-feasibility stage gold project, Koskuduk; and one exploration stage goldprospect, Baltemir. Frontier also has one potential copper porphyry deposit with associated gold andmolybdenum, Baitimir; and several copper/gold prospects along a 25-km trendincluding both VMS and porphyry types. Metallurgical tests on its Beschoku andYubileiny copper projects confirm the oxide copper ore is amenable to extractionusing low cost SX-EW technology. Issued and Fully Diluted Ordinary Shares Frontier shares are traded on the AIM market of the London Stock Exchange. Priorto the completion of the Placing, Frontier has 132,581,587 ordinary sharesissued and 6,057,091 reserved and outstanding options and warrants, giving138,638,678 fully diluted ordinary shares. Following completion of the Placing,the enlarged share capital will be 218,120,082 and 6,057,091 reserved andoutstanding options giving 224,177,173 fully diluted ordinary shares. Further company information may be accessed at the Frontier Mining Ltd. websiteat: www.frontiermining.com This information is provided by RNS The company news service from the London Stock Exchange