OSU.L Regulatory News (OSU)

18 Apr 2008 13:40

European Minerals Corporation18 April 2008 JOINT NEWS RELEASE 1.40pm (BST) 18 April 2008 EUROPEAN MINERALS TO ACQUIRE LERO GOLD; CREATES REGIONAL CONSOLIDATION & GROWTH COMPANY FOCUSED IN THE COUNTRIES OF THE FORMER SOVIET UNION THIS NEWS RELEASE IS NOT INTENDED FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR DISSEMINATION IN THE UNITED STATES. European Minerals Corporation ("EMC" - TSX:EPM, AIM:EUM) and Lero Gold Corp.("Lero" - TSXV:LER) are pleased to announce that they have entered into abinding heads of agreement pursuant to which EMC will acquire all of theoutstanding common shares of Lero in exchange for common shares of EMC pursuantto a plan of arrangement (the "Acquisition"). The directors of EMC and Lerobelieve that the Acquisition will create a well-financed gold/copper mining andproduction, development and exploration company with an exciting growth profilefocused on regional consolidation in the countries of the former Soviet Union. Under the terms of the Acquisition, Lero shareholders will receive one commonshare of EMC for each issued share of Lero, representing a value of C$0.98 pershare based upon the 20-day volume weighted average price of EMC on the TorontoStock Exchange (the "TSX") for the 20-day period leading up to and includingApril 17, 2008. This represents an 9% premium to Lero's 20-day volume weightedaverage trading price based on the 20-day volume weighted average prices of EMCand Lero shares on the TSX and TSX Venture Exchange, respectively. Subject to receipt of required stock exchange approval, following the completion of the Acquisition, EMC's shares will continue to be listed on theTSX and admitted to trading on the AIM market of the London Stock Exchange("AIM"). The combined company will focus on regional consolidation and growthopportunities in the countries of the former Soviet Union. Some of the salientterms of the Acquisition and characteristics of the combined company are setforth below: • Upon the closing of the Acquisition, Dr. Sergey V. Kurzin, currentlyChairman of Lero, will join the board of EMC as Executive Chairman, togetherwith Dr Alexander Yakubchuk (currently Chief Executive Officer of Lero) and MrTakhirzhan T. Baratov (currently the chairman of EMC's Kazakh subsidiary, JSCVarvarinskoye). • At the next meeting of shareholders of EMC following the closing of theAcquisition, the name of EMC will be changed to Orsu Metals Corporation("Orsu"). • Concurrent with this announcement of the Acquisition, Lero announces aC$40,000,000 "bought deal" financing with Canaccord Adams Limited, details ofwhich are set out below. Of this financing, US$25 million will be lent by Leroto EMC (the "Lero Loan") prior to closing of the Acquisition on the termsoutlined below. • Endeavour Mining Capital Corp. has agreed to provide a US$5 million bridgeloan to EMC for working capital purposes to be repaid upon the completion of theLero Loan. • EMC is currently commissioning the Varvarinskoye gold/copper project inKazakhstan where commercial production is expected to be achieved by the end ofQ3 2008. At steady state production the mine is expected to produce 149,000ounces of gold and 26 million pounds of copper annually in its first three yearsof production. • As previously announced (see EMC's press release dated 31 March 2008) EMChas appointed an independent engineering company to undertake a scoping study toengineer the expansion of the Varvarinskoye plant throughput beyond thecurrently planned 4.2 million tonnes per annum. • Lero is currently exploring the Taldybulak Talas gold copper deposit inKyrgyzstan and is also exploring at the Karchiga copper deposit in westernKazakhstan. Lero expects to announce National Instrument 43-101 compliantresource estimates for both properties by the end of April 2008. • The board of directors of Lero believes there is substantial explorationupside at their Taldybulak Talas and Karchiga deposits and also within EMC'sthree square kilometre mining lease for Varvarinskoye and surrounding 220 squarekilometre exploration licence. Commenting on the transaction, Dr. Sergey V. Kurzin, Executive Chairman of Lero,said: "Combining the Varvarinskoye cashflow and expansion potential with the Lerogrowth opportunities will position Orsu Metals Corporation to be a premiergrowth company with the ability to be a regional consolidator. The benefits ofthe strategic fit between Lero and EMC is something that I look forward tobringing to fruition for all shareholders. As global demand for gold and basemetals remains strong, a well-funded Orsu Metals Corporation has a stablefoundation from which to launch its growth and consolidation platform." Tony Williams, Chairman of EMC, added: "This business combination, together with Lero's concurrent financing stabilizesthe enlarged group's financial position whilst we finish bringing Varvarinskoyeup to commercial production levels. At the same time, I am delighted to see theadditional growth potential of the Lero assets and the significant experience ofthe Lero management team in the FSU bringing immediate and long-term benefits tothe EMC shareholders." Summary of Transaction The acquisition of Lero by EMC will be completed by way of a statutory plan ofarrangement under the Business Corporations Act (British Columbia) whereby eachLero common share will be exchanged for one EMC common share. After completionof the transaction, prior to giving effect to the Lero Placing described below,it is expected that current EMC shareholders will own approximately 81% of thecombined company (72% including the shares to be issued pursuant to the Offering(as defined below) and excluding the over-allotment option and the underwritersoption each as described below) and current Lero shareholders will ownapproximately 19% (28% including the shares to be issued pursuant to theOffering (as defined below) and excluding the over-allotment option and theunderwriters option each as described below and each on a non-diluted basis). The Acquisition will be subject to, among other things, confirmatory legal andfinancial due diligence (technical due diligence has been completed), definitivedocumentation, approval by the holders of Lero common shares, satisfactoryamendments to current EMC senior loan documents, regulatory and court approvals.A meeting of Lero shareholders to approve the Acquisition will be held as soonas practicable and a notice of meeting, information circular and relatedmaterials will be mailed to Lero shareholders on completion of the confirmatorydue diligence and definitive documentation. The Lero Loan will be an unsecured obligation of EMC. The Lero Loan will have aterm to 31 December 2008 and will accrue interest at a rate of 10% per annum. Principal and accrued interest will be payable on maturity. In the event thatthe Acquisition is not completed pursuant to the terms of the heads ofagreement, Lero may, at its sole discretion, subject to the approval of the TSX,convert the Lero Loan, including accrued interest, into common shares of EMC ata price equal to 95% of the market price of the common shares of EMC at the timeof conversion. If the transaction is not completed as a result of certain specified actions of EMC or Lero, such party has agreed to pay a break fee of C$3 million to theother. In addition, both EMC and Lero have provided each other with certainother customary undertakings, such as confidentiality and non-solicitationagreements. Lero Placing Lero also announced a bought-deal, private placement for gross proceeds ofC$40,000,000 (the "Offering"). In addition, Lero will grant to Canaccord AdamsLimited ("Canaccord") an over-allotment option of an equivalent of up to 15% ofthe Offering shares (C$6,000,000). Canaccord is the sole underwriter andbookrunner. Lero has also granted Canaccord the option to increase the Offeringby up to an aggregate amount of common shares equal to proceeds of C$20,000,000. The net proceeds from the proposed offering will be used primarily to fund theLero Loan detailed above, to fund continued exploration and drilling on Lero'sTaldybulak Talas and Karchiga projects, with the remainder being used forworking capital and potential acquisitions. EMC Nomad and Temporary cessation of trading on AIM In light of the proposed Acquisition, Canaccord Adams Limited has resigned asnominated advisor and broker to EMC, effective 1.30pm (BST) on Friday 18 April2008, as required under Rule 22 of the AIM Rules for Nominated Advisors. Pursuant to Rule 1 of the AIM Rules for Companies, EMC's shares will, witheffect from 1.30pm (BST) on Friday 18 April 2008, be suspended from tradingpending the appointment of a replacement Nominated Advisor. EMC is indiscussions with regards to the appointment of a replacement Nominated Advisorand, upon their appointment, the suspension of EMC's shares from trading on AIMwill be lifted. EMC's shares remain listed and posted for trading on the TSX. Advisors and Counsel EMC's exclusive financial advisor is Endeavour Financial InternationalCorporation and its legal counsel is Macleod Dixon LLP. Lero's financialadvisors are Canaccord International Limited and its legal counsel is McCulloughO'Connor Irwin LLP. EMC Overview EMC is a mineral exploration and development company focused on identifying,acquiring and developing resource projects. Its principal asset is theVarvarinskoye Gold-Copper deposit located in Kazakhstan and held by its wholly-owned subsidiary, JSC Varvarinskoye. EMC has already poured gold and producedgold-copper concentrate at Varvarinskoye and is currently in the process ofcompleting the steady state commissioning of the mine and plant facilities atVarvarinskoye. Additional information, including details of the resources andreserves of EMC, is available at www.SEDAR.com. Lero Overview Lero is a base and precious metal exploration company which is currentlyexploring and developing advanced stage gold and base metal assets in Kyrgyzstanand Kazakhstan, including other prospective regions along the Tien ShanMetallogenic Gold Belt in Central Asia. Lero is currently exploring two key project areas in north western Kyrgyzstanand eastern Kazakhstan being the Taldybulak Talas Project (Kyrgyzstan) and theKarchiga Project (Kazakhstan). Additional information relating to Lero is available at www.SEDAR.com. Qualified Persons Bert Kennedy, EMC's President and Chief Executive Officer, is the "qualifiedperson" (as such term is defined in National Instrument 43-101) responsible forthe technical and scientific information in this news release relating to EMC. For further information contact: European Minerals Corporation Lero Gold Corp. United Kingdom ---------------- Tony Williams Dr. Sergey V. KurzinChairman Chairman Bert Kennedy Alexander YakubchukPresident & CEO CEOTel: +44 (0) 20 7529 7508 Nick Clarke Executive Director Tel: +44(0) 20 7514 0590 Bankside Consultants Michael Padley/ Michael Spriggs Tel: +44(0) 20 7367 8888 North America Keith Schaefer ir@vanguardsolutions.ca Vanguard Shareholder Solutions Inc. Tel: 1.866.448.0780 No stock exchange, securities commission or other regulatory authority hasapproved or disapproved the information contained herein. The TSX VentureExchange does not accept responsibility for the adequacy or accuracy of thisrelease. Forward-Looking Information This news release contains or refers to forward-looking information. Allstatements, other than statements of historical fact, that address activities,events or developments that EMC or Lero, as applicable, believes, expect oranticipate will or may occur in the future are forward-looking information. Suchforward-looking information includes statements contained in this news releaseregarding the completion of the Lero Loan and the Acquisition, targets,estimates and/or assumptions in respect of future annual production of gold andcopper, costs, commodity prices, mineral resources and reserves, timing ofcommencement and completion of "hot" commissioning and commencement ofoperations, potential mineralization and future exploration, development andoperational plans and objectives (including delineating additional mineralresources). This forward-looking information reflects the current expectationsor beliefs of EMC or Lero, as applicable, based on information currentlyavailable to it. Forward-looking information is subject to a number of risks anduncertainties that may cause the actual results of EMC or Lero, as applicable,to differ materially from those discussed in the forward-looking information,and even if such actual results are realized or substantially realized, therecan be no assurance that they will have the expected consequences to, or effectson EMC and/or Lero. Factors that could cause actual results or events to differmaterially from current expectations include, but are not limited to: the gradeand recovery of ore which is mined at EMC's Varvarinskoye Project varying fromestimates; capital and operating costs varying significantly from estimates;inflation; changes in exchange rates; fluctuations in commodity prices; delaysin the development or commissioning of, and the commencement of operations at,EMC's Varvarinskoye Project caused by unavailability of equipment, labour orsupplies, weather and climatic conditions, delays in the delivery andinstallation of plant and equipment or otherwise; termination or suspension ofEMC's current debt facility; failure of Lero to raise the funds necessary tocomplete the Acquisition; the failure of EMC and Lero to negotiate the termsunder which funds are to be advanced under the Lero Loan or to negotiatedefinitive agreements; delays in obtaining or failure to obtain requiredregulatory and shareholder approvals; inability by Lero or EMC to delineateadditional mineral resources or reserves; and other factors. Any forward-lookinginformation speaks only as of the date on which it is made and, except as may berequired by applicable securities laws, EMC and Lero disclaim any intent orobligation to update any forward-looking information, whether as a result of newinformation, future events or results or otherwise. Although each of EMC andLero believes that the assumptions inherent in the forward-looking informationapplicable to it are reasonable, forward-looking information is not a guaranteeof future performance and accordingly undue reliance should not be put on suchstatements due to the inherent uncertainty therein. This information is provided by RNS The company news service from the London Stock Exchange