Orogen Gold Regulatory News (ORE)

10 Jan 2008 07:01

Aricom PLC10 January 2008 PRESS RELEASE 10 January 2008 ARICOM PLC ("Aricom" or "the Company" or "the Group") TITANIUM SPONGE PROJECT FEASIBILITY STUDY & OFFTAKE AGREEMENTS Aricom plc (LSE:ORE, OREW), the Anglo-Russian developer of mineral resources,announces the completion of a feasibility study for the development of atitanium sponge production plant (the "Feasibility Study"), and the execution ofa binding Memorandum of Understanding (the "MoU") with Aluminium Corporation ofChina ("Chinalco"), the largest non-ferrous metals company in China and owner ofChina's largest titanium metal processing plant, for the establishment of ajoint venture for the construction and operation of the Plant, the sourcing ofthe Plant's entire ilmenite requirements from Aricom's deposits and the offtakeof the Plant's titanium sponge production by Chinalco's trading arm. The Feasibility Study examines the construction of the Plant with a capacity of15,000tpa titanium sponge plant in Jiamusi City, Heilongjiang Province, China,located approximately 1,300 km from the mine. It is intended to source ilmenitefeedstock for the plant exclusively from Aricom's Kuranakh mine. The proposedjoint venture would utilise Aricom's production of ilmenite, expertise intitanium resource exploitation, access to capital and technology together withChinalco's capital, technologies, local power base and proficiency inengineering design and construction and metal production. The Feasibility Study confirms the technical and economic viability of thePlant. The study, carried out by Shenyang Aluminium and Magnesium DesignInstitute (China), utilises a conservative selling price estimate of titaniumsponge in comparison with the current market price and estimates that theproject would yield a post-tax Internal Rate of Return of 21% and a post-tax NetPresent Value (at 10% discount rate) of c.US$ 130m. Further to the FeasibilityStudy, Aricom and Chinalco are studying the possibility to further expand theproduction capacity to 30,000tpa. The total investment of c.US$300m over the first 3 years is expected to befunded on a 70:30 debt to equity ratio, which is considered to be normal forthis type of project finance. Chinalco intends to recommend this proposal totheir existing relationship Chinese banking group. The equity component of thecapital expenditure will be paid according by the joint venture's proposedshareholders on the basis of 65% by Aricom and 35% by Chinalco. On this basis,Aricom's equity funding requirement would be c.US$ 58m, which could be fundedout of existing cash resources. The binding MoU signed with Chinalco stipulates that for the first 15 years,100% of the Plant's ilmenite requirements will be sourced from Aricom's Kuranakhdeposit in Russian's Far East, which for the first 5 years, will be supplied ata fixed price based on the current market. In addition, the MoU provides forChinalco's commitment to off-take 100% of the Plant's titanium sponge productionfor the first 15 years. Re-basing the Feasibility Study to the most negativeeconomic scenario foreseeable under the conditions of the off-take contracts andthe Feasibility Study, it is estimated that the project should generate a posttax Internal Rate of Return of at least 12.1% and a post tax Net Present Valueof c.US$ 22m. The next stage of the project development includes completion of theEnvironmental Impact Assessment report by a Chinese independent contractor andits approval by the China State Environment Protection Bureau by March 2008. Theproject will then be subject to final approvals from China's NationalDevelopment and Reform Commission (NDRC) and Ministry of Commerce (MOFCOM).Following receipt of the relevant approvals, the commencement of full scaleconstruction works is currently scheduled for July 2008 and full commissioningof the Plant is expected in 2010. Aricom's Titanium Sponge Project Manager Mr. Konstantin Chernavin is relocatingto China in order to provide a direct management link for the project withAricom. Jay Hambro, Chief Executive of Aricom plc, commented: "The titanium sponge project is an exciting development for the Aricom Group.The beneficiation of ilmenite through to titanium metal is a high profit marginprocess, and realisation of the project complies with Aricom's intention tomaximise the value of its products. We have a very strong partner in Chinalco and I am very pleased to report thatthe project study, financing plan and pricing arrangements are agreed." For further information: Aricom plc Chief Executive +44 (0) 20 7201 8939 www.aricom.plc.ukAbchurchCharlie Jack / George Parker +44 (0) 20 7398 7700 www.abchurch-group.com Notes to Editors Aricom plc is a leading developer of Russian metal and mining assets, focusingon iron ore and ilmenite production and delivery. The Company was establishedin September 2003 to develop projects, situated in the north west of the AmurRegion, in Russia's Far East. These projects are set to service the Chinese andRussian commodity market. Aricom currently operates four projects in the Amur region and the adjoiningJewish Autonomous Region. The Group's projects Kuranakh, K&S, Garinskoye andBolshoi Seym have combined estimated reserves and resources of over one billiontonnes of iron ore and ilmenite ores. The location of the Group's depositsoffer a significant logistical advantage being close to theTrans-Siberian-Express and the Baikal-Amur Magistral railways. In 2005, 700 million tonnes of iron ore were shipped globally, of that 300million (43%) was shipped to China. It is estimated that China imported 300million tonnes of ore in 2006 to facilitate its demand for steel production. InJune 2006, Aricom announced a Memorandum of Understanding with China's largestnonferrous metal company Chinalco, to co-operate in the design and developmentof a Titanium Sponge production plant in China. Aricom is headquartered in London, with a highly experienced board of directorscomposed of British and Russian citizens. Aricom's shares and warrants wereadmitted to the Official List of the Financial Services Authority and the MainMarket of the London Stock Exchange on 29 October 2007 and trade under thesymbols ORE and OREW. For further information please visit www.aricom.plc.uk. Chinalco is a corporation incorporated under the laws of the People's Republicof China and is a diversified metals and mining company based in Beijing, China.Chinalco is focused on the Chinese and international aluminium markets but alsoengages in resource exploration and downstream operations in the fields ofcopper, rare metals and other non-ferrous metals. At the end of 2006, Chinalco'sassets totalled US$ 16 billion; sales revenue reached US$ 13 billion in 2006.With Chinalco being the holding company, Aluminium Corporation of China Limited(CHALCO), the second largest refiner of alumina and among the largest producersof primary aluminium in the world, is listed on the Hong Kong, New York andShanghai stock exchanges. The market value of CHALCO's shares is approximatelyUS$68 billion, making it one of China's largest publicly traded companies andranks among the top 15 public companies in the global metal and mining sectors.CHALCO produced 3.0 million tons of aluminium and 9.6 million tons of alumina in2006. Forward looking statements Any statements used in this announcement which are not historical facts areforward-looking statements which express the beliefs, opinions and expectationsof Aricom plc and its Directors at the time hereof, and are subject to variousrisks and uncertainties that could cause actual results to differ materiallyfrom such expectations. This information is provided by RNS The company news service from the London Stock Exchange