Ovoca Bio Regulatory News (OVB)

18 Apr 2006 07:01

Ovoca Gold PLC18 April 2006 Ovoca Gold plc ("Ovoca" or the "Company") Acquisition of Ayax Ovoca is pleased to announce that it has signed a conditional acquisitionagreement to acquire a 74% interest in CJSC Ayax Prospectors Artel company ("Ayax") ("the "Acquisition") from the Shareholders of Ayax ("New Shareholders").Ayax owns a 100% interest in the Goltsovoye deposit, a silver deposit located inthe district of Omsukchan in the Magadan Oblast, north east Russia. As consideration for the Acquisition, Ovoca will issue 110,001,518 new ordinaryshares of €0.025 each ("Ordinary Shares") (the "Acquisition Shares") and willmake a cash payment of US$1 million within six months of the execution of theAyax Acquisition Agreement. The Acquisition Shares will represent approximately44.3% of the Company's enlarged issued share capital. The Acquisition isconditional, inter alia, on Mr Leonid Pavlovich Skoptsov, Mr Yuri IvanovichRadchenko and Mr Mikhail Alexandrovich Mogutov, being the principal shareholdersin Ayax, being appointed to the Board of the Company and Dr Barrie Oakes, MrRoger Turner, Mr Guido Pas, Mr Danesh Varma and Mr Rowan Maule being appointedto the Board of Ayax. Upon completion of the Ayax Acquisition Agreement, Ovoca will enter into aconditional option agreement that gives Ovoca the right, but not the obligation,to acquire the remaining 26% interest in Ayax at any time between the first andsecond anniversary of the date of completion of the acquisition agreement (the "Option"). The exercise price for the Option is 43,007,250 new Ordinary Shares("Option Shares") or a cash payment of US$5 million if the market value of theOption Shares is less than US$5 million at the time of exercise of the Option. In addition, Davy has been appointed Nominated Adviser to the Company effectiveimmediately. Information on Ayax. Ayax, a registered Russian Closed Joint Stock Company formed in 2002, owns a100% interest in the Goltsovoye deposit. The Goltsovoye deposit is part of the"Pestrinskiy Ore Cluster" which covers an area of 640 km2 and forms the southernflank of the "Dukat Ore District". The Goltsovoye deposit is accessible by agood all-weather road and is 69 km from the regional administrative centre ofOmsukchan, and Bema Gold Corporation's Julietta Mine is situated nearby to thesouth. The Goltsovoye deposit was first discovered in the 1980s following thecommissioning of the Dukat Silver Mine, which is located to the north west ofthe Goltsovoye deposit. Ayax obtained a mining license for the Goltsovoyesilver deposit in September 2002. The licence renewal date is in 2012 afterwhich Ayax retains a right of extension, provided Ayax has met all of itslicence obligations. Ovoca and GBM Consultant Engineers Contractors ("GBM") have completed a study ofthe resources, mining methods, mineable reserves, processing and infrastructureas well as capital and operating costs estimates for a 260,000 tonne a yearunderground mine, with a 10 year mine life at the Goltsovoye deposit.Considerable metallurgical testwork has already been completed by Ayax, and GBMhas carried out a detailed evaluation of the work done and have advised on amine and process plant design. Source data has been taken from a previouslycompleted Russian study prepared by the Institutes VNII-I-Magadan and TsNIGRI(Moscow) and JSC NBL-Gold, independent metallurgical and engineeringconsultants. Micon International has completed a study of the information provided by Ajaxand the study by Ovoca and GBM and submitted an independent competent persons'report which concludes: 'Micon considers that the Goltsovoye project representsa good opportunity to develop a significant silver producer in a highlyprospective and established mining region of Russia'. Denton Wilde Sapte in Moscow and Deloitte & Touche in Moscow have completedlegal and financial due diligence (respectively) on Ayax for Ovoca. Goltsovoye is an advanced stage project with C1 and C2 resources, in accordancewith Russian geological estimation standards. These have been determined basedon extensive drilling and underground exploration development conducted by theDukat Geological Expedition and was approved by the Soviet State Committee forReserves (GKZ) in 1987 at a cut-off grade of 50 grammes per tonne silver. Arecalculation of the resources at various cut off grades has been completed byAyax and Ovoca and a revised resource at a 150 grammes per tonne cut-off gradeis as follows: Category Ore tonnes Silver Grade g/t Silver ozsC1 1,061,660 1,136.68 38,799,000C2 1,413,880 781.28 35,515,000C1 + C2 2,475,540 933.70 74,314,000 (Gold equivalent resources = 1,600,200 ounces based on a 46.44 gold/silverratio) Micon estimate the following:- Cash operating cost per ounce of silver = US$ 3.67 (including lead revenuecredits) Net Present Value (pre-tax & pre-debt service) • At $10.00 per ounce silver and $1,050 per tonne lead = US$ millions 111.1 • At $12.50 per ounce silver and $1,200 per tonne lead = US$ millions 182.1 Internal Rate of Return (pre-tax & pre-debt service) • At $10.00 per ounce silver and $1,050 per tonne lead = 51.8% • At $12.50 per ounce silver and $1,200 per tonne lead = 70.4% The New York closing silver bid price was $12.89 per ounce on April 14th 2006. Upon completion of the Acquisition, Ovoca will immediately commence a bankablefeasibility study with Russian and Western engineering groups and, havingsecured all necessary permits, approvals and project finance, intends to worktowards an early construction start-up date. The above information on Ayax has been reviewed and verified by Mr Roger Turner,Director and Chairman of Ovoca, for the purposes of the Guidance Note forMining, Oil and Gas Companies issued by the London Stock Exchange in March 2006.Mr Turner, with 40 years of mining engineering, management and consultingexperience, graduated as a mining engineer from the Camborne School of Mines,has an MSc degree in Economic Geology from Leicester University and is a memberin good standing with the Institute of Mining and Metallurgy and a UK CharteredEngineer. Lock-in and Orderly Market Agreements The New Shareholders will enter into lock-in and orderly market agreements.Pursuant to these agreements, the New Shareholders will undertake, subject tocertain limited exceptions, not to sell, transfer, grant any option over orotherwise dispose of the legal, beneficial or other interest that they have inany Ordinary Shares or other securities in the Company or rights attaching fromany such Ordinary Shares or other securities in the Company for a period oftwelve months following admission of the Acquisition Shares to trading on theAIM and IEX and. Should the Option Share be issued similar lock-in provisionswill apply for the Option Share for a period of twelve months followingadmission of the Option Shares to trading on the AIM and IEX (the ''Lock-upPeriods"). Orderly market arrangements apply for twelve months after the expiryof the Lock-up Periods, which require the sale of any Ordinary Shares by the NewShareholders only through the Company's then broker. Working Capital Following completion of the Acquisition and having regard to existing cashresources, Ovoca will not have sufficient working capital for its presentrequirements. These requirements include the cost of planned feasibility studiesand other development activities on the Goltsovoye deposit, and the cash elementof the consideration for the Acquisition, continuing exploration work on theCompany's existing exploration assets and other corporate and working capitalpurposes. The board of Ovoca has plans to raise the necessary finance to fundthese requirements, by way of private placements or other financial arrangement.However, there can be no certainty on the availability, or, where available,on the terms and timing of such financing arrangements. Should the Company notbe able to complete such financing arrangements then it will be unable tofinance its exploration and development programmes for the Goltsovoye depositand its existing exploration assets. Information on the Proposed Directors Below is certain information regarding the Proposed Directors. There are nodetails specified by Schedule 2 (g) iii-viii of the AIM Rules and the IEX Rulesto be disclosed by the Proposed Directors. Leonid Pavlovich Skoptsov (Aged 52) Mr Skoptsov was born in Krasnodar in southern Russia and graduated from theMoscow State University in 1979. Mr Skoptsov is a shareholder and Chairman ofthe OAO Pervaya Gornorudnaya Companiya, which in 2002 discovered the Pavlovskoedeposit, a large lead-zinc deposit containing silver in the Yuzhny Isle of theNew Land archipelago. Mr Skoptsov was Chairman of OAO Volganeft in SamaraOblast until December 2004, which was acquired by the Russian oil companyRussneft and is a shareholder and Director of the Magadan Geological Expeditionand a number of other companies with exploration licences for precious metals ineastern Siberia and Transbaikalia. Yuri Ivanovich Radchenko (Aged 55) Mr Radchenko was born in Almaty, Kazakhstan and graduated as a geologist fromthe Kazakhstan Polytechnical Institute. From 1975 Mr Radchenko worked with theDukat Exploration Expedition, starting on the Dukat gold-silver deposit and in1991 was appointed head of the Dukatsky Exploration Expedition where he wasinvolved in prospecting, exploration and assessment of the Julietta deposit andmany other exploration programmes. In 1994 Mr Radchenko assisted with thefoundation of and managed OAO Dukatsky Mining Geological Company which completedthe exploration of the Julietta deposit and undertook other explorationactivities in the Magadan Oblast including a programme to study and develop thecopper porphyry deposits in north east Russia. In 1995 Mr Radchenko founded thejoint venture Omsukchansky Mining Geological Company with Arian ResourcesLimited, a company, subsequently acquired by Bema Gold Corporation, which wasinvolved in the development of the Julietta mine. In July 1998 Mr Radchenko wasawarded the 'Order of Honour' by the President of the Russian Federation for hiscontribution in the development of the mineral law of the Magadan Oblast andalso was awarded the Diploma of 'Mineral Deposit Discoverer' as discoverer ofthe Lunnoe gold and silver deposit. Mikhail Alexandrovich Mogutov (Aged 50) Mr Mogutov was born in Shakhtersk town, Sakhalin Oblast, Russia. Mr Mogutovgraduated from the Moscow Physics Technical Institute with a degree in moleculargenetics and chemistry of high velocity processes and is a doctor of biology.Mr Mogutov is currently President of OOO Bioprocess Holding, Chairman of OAOBiomed and is an Assistant to a Federation Council Member of the FederalAssembly Federation Council of Russia. Mr Mogutov is currently a board memberof a number of Russian companies in the resources, industrial and chemicalsectors. Implications under the Irish Takeover Rules The Acquisition and the Option may give rise to certain implications under theIrish Takeover Rules. The completion of the Acquisition may require, inter alia,that shareholders approve a waiver of an obligation to make an offer for thebalance of the remaining share capital of the Company (which would not be heldby the New Shareholders), which otherwise may fall on the New Shareholderspursuant to the Irish Takeover Panel Rules, at an extraordinary general meetingof the Company. Further details of such an extraordinary general meeting will be announced indue course. ENDS For Further information please contact: Mr. Roger Turner Chairman, Ovoca +44 (0) 773 909 2813 Dr Barrie Oakes CEO, Ovoca +44 (0) 795 113 9266 Mr Tom McCormack Connexions PR +353 (0)86 245 4215 Mr John Frain Davy +353 (0)1 614 8761 Ms Alex Buck Buckbias +44 (0)7887 920 530 This information is provided by RNS The company news service from the London Stock Exchange