Oxus Gold Plc Regulatory News (OXS)

14 Jul 2005 07:00

Oxus Gold PLC14 July 2005 news release For immediate release: 14 July 2005 Oxus Gold plc Oxus Gold to acquire operations in Romania and Ukraine LONDON: 14 July 2005 - Oxus Gold plc ("Oxus"), (OXS.L) the UK gold mining groupwith interests in Central Asia, is pleased to announce that it has agreedcertain principal terms with Eurogold Limited ("Eurogold") to acquire its goldassets in Romania and the Ukraine ("Transaction"). This will substantiallyincrease Oxus's gold mining operations in the former Soviet Bloc countries.Eurogold is an Australian company with its shares traded both in Australia andin the UK on AIM. The proposed Transaction comprises the acquisition by Oxus of: • all of the issued capital of Eurogold (Bermuda) Limited, a subsidiary of Eurogold which controls its assets in the Ukraine; • all of the issued capital of Explorer SA, an exploration subsidiary in Romania which holds largely exploration assets; • certain assets at fair market value of Transgold SA, a joint venture company in which Eurogold holds a 50% interest. Transgold operates a carbon-in-leach plant (CIL) at Baia Mare in southern Romania for the treatment of gold tailings. The total value of the Transaction will not exceed £17.34 million, equal to 7pper Eurogold share, with the consideration met by the issue of up to 37.1million new Oxus shares. Oxus already owns 43,188,100 shares in Eurogold, equalto 17.44% of the fully diluted share capital, which it acquired earlier thisyear at an average price of 8.4p a share. These shares will be cancelled as partof this transaction. Thus, the net purchase consideration, after set off, willbe £14.3m, with 30.6m new Oxus shares being issued, based on the average closingprice of 46.7p of Oxus shares over 6, 7 and 8 July 2005. On a fully diluted basis Eurogold has 247,679,494 shares outstanding, which havetraded on AIM between 5.0p and 9.25p over the last year. The transaction willresult in Eurogold holding approximately 10% of Oxus. Eurogold will distributethese shares to its shareholders in specie. The transaction has been structured as an asset and subsidiary company purchasein order to avoid the transfer of certain contingent liabilities to Oxus.Eurogold has not reported any profits attributable to the Transaction assets. The Transaction is conditional on a number of conditions precedent which includethe satisfactory completion of full due diligence, finalisation of legaldocumentation, receiving regulatory and governmental approvals, valuations ofthe assets being acquired, and on the approval of the shareholders of Eurogold. Oxus expects that when the proposed production from the acquisition is includedin the Oxus portfolio, the enlarged company will become a significant goldproducer with forecast production in 2006 of circa 200,000 ounces of goldattributable to Oxus, from gold mining operations in four former Soviet Bloccountries, namely Kyrgyzstan, Romania, Ukraine and Uzbekistan. Bill Trew, CEO of Oxus Gold, said today: "We are very pleased that we have beenable to reach agreement with Eurogold to purchase its assets which we believewill provide substantial benefits to our shareholders and is a furthersignificant step in the development of Oxus as a major low-cost gold producer,focussed on the southern region of the former Soviet Bloc. "These assets complement our existing mining operations; Amantaytau has been inproduction for eighteen months and Vysokovoltnoye is expected to begin oreproduction in September 2005. Jerooy is scheduled for production in the secondquarter of 2006 as construction is continuing, notwithstanding the currentlicence dispute with the Kyrgyz authorities, which we expect to resolvesuccessfully in the near future now the new government is in place following therecent elections. The completed Amantaytau Sulphide feasibility study is nowundergoing an external review and, subject to a satisfactory outcome, weanticipate starting development early in 2006. In Romania, Transgold has been in operation for a number of years, and presentssubstantial opportunities for Oxus to expand its hardrock production, usingOxus' complementary skills in construction and operation. In the Ukraine, wewill be looking to advance the Saulyak project into early production thanks tothe excellent work from Eurogold in increasing the resources to 1.2 millionounces of gold." Contacts: Bill Trew, CEO Oxus Gold 020 7907 2000 Keith Irons, Bankside 020 7367 8873/ 07885 356 639 Background notes on both companies Eurogold Limited Eurogold is an Australian corporation with gold mining and processing operationsin Romania and the Ukraine. In Romania, Eurogold has a 50% interest in Transgold, a local company which ownsand operates a 2.5 million tonnes a year carbon-in-leach (CIL) plant. Thisplant was constructed in 1998 at a capital cost of US$28 million to reprocessthe tailings from a state owned gold mine operated by Remin, Eurogold's partnerin Transgold. It is located in the Carpathian Mountains at Baia Mare in northernRomania. Transgold has historically derived most of its production from the retreatmentof tailings, where in excess of 138,000 ounces of gold and 700,000 ounces ofsilver has been produced. More recently, with the successful delineation of theNorth-West Corridor licence area, the company has changed its emphasis to thedevelopment of its hardrock portfolio. Exploration by Transgold suggests asignificant trendline incorporating its three deposits of June 11, Sophia andHanau. The Hanau deposit, is currently being mined using open-pit methods and the oreis trucked some 20 kms to the company's CIL plant at Baia Mare. In the Ukraine, Eurogold has a 99.9% interest in the Saulyak gold projectlocated only 60 kms from the Baia Mare CIL plant. A rail line runs close to theSaulyak deposit and connects to Baia Mare and provides the opportunity totransport the ore to the CIL plant for treatment. The Saulyak deposit has an estimated resource of 2.14 million tonnes at 8.4 g/t,containing approximately 578,000 ounces of gold under the Russian C1 and C2classification. In addition 2.53 million tonnes at 8 g/t, being 650,000 ounceshas been identified from the 2004 drilling programme, and classified as "Inferred" under the JORC resource classification system. This increases thecombined total resource potential to 1.2 million ounces of gold. Eurogold believes that the 2005 exploration programme will continue to expandthis deposit. Over 9 km of underground development work was completed by theformer owners which is expected to reduce the capital costs to bring the mineinto production. About the Carpathian Mountains The Carpathian Mountains are one of the richest mineral provinces in Europe,stretching through Eastern Europe from Poland to Bulgaria via Slovakia, Ukraine,Hungary, Romania and Serbia. The region hosts several substantial mines producing gold, silver, copper andother base metals. The largest gold occurrences identified to date are the 14million ounce Rosia Montana and the 3.5 million ounce Certej deposits, bothsituated to the south west of Baia Mare. Historically gold has been mined in the Carpathians since before the days of theRoman Empire, however more recently mining has been firmly focussed on theextraction of deep, vein-hosted base metal mineralisation and hence goldexploration has been a low-priority activity. Oxus Gold The Oxus Group was established in 1996 and quoted on the Alternative InvestmentMarket (AIM) in London in 2001. Oxus is the joint owner (50/50) with thegovernment of Uzbekistan of the Amantaytau Goldfields ("AGF") mine which Oxusconstructed and commissioned in January 2004 on time and within budget.Commercial production commenced in February 2004 and AGF has produced more than230,000 ozs of gold since. Oxus plans to open five new mines in the next five years. The Company willcommence mine development this month at Vysokovoltnoye with first gold andsilver ore stacked to the heap leach pad by September. Within the Oxus licenceareas there are 26 known deposits and, as yet, only three have been fullyexplored. The potential of the Vysokovoltnoye area is believed to besignificant with the ore zones open at depth. The company is also completing an external review of the feasibility study forthe Amantaytau sulphide mining project which has a current resource of 2.7million ounces at a 6g/t gold cutoff from a total resource of 3.9 million ouncesat zero gold cutoff, and is expected to produce in excess of 250,000 ouncesannually. Shaft access has been gained and refurbishment of the primaryunderground level is ongoing to access ore. Mine development and plantadaptation for gold production from sulphide processing is expected to beginearly in 2006. A major drilling programme will commence in August 2005 to targetdeeper known extensions of the deposits with the objective of increasing theseresources. Oxus has also commenced construction at the Jerooy gold deposit in Kyrgyzstanand the mine is expected to start production in the second quarter of 2006 at anannual rate of 180,000 ounces a year. Oxus has already spent $23 million atJerooy and recently raised $55 million to complete construction. The company hasbeen negotiating with the government of the Republic of Kyrgyzstan for there-instatement of the Jerooy licence, which was purportedly annulled in August2004. Jerooy is the largest unexploited gold deposit in the Kyrgyz Republic with areserve of 9.88 million tonnes of ore at a grade of 7.5 g/t gold that equates to2.38 million ounces of gold. Oxus Gold plc holds 66.7% of Talas Gold MiningCompany (TGMC), the project operating company, and the balance is held byKyrgyzaltyn (Kyrgyz State Mining Enterprise). The deposit is located in theTalas Region, some 190km west of the capital city Bishkek. The deposit is to be mined by both open pit and underground methods and has aninitial mine life of 12 years, with an additional four years of potentialcurrently in the inferred category of resources. Additional exploration targetsinclude several known occurrences of gold within the vicinity of Jerooy. In addition, Oxus holds a 57% interest in the Khandiza polymetallic project inUzbekistan via its shareholding in Marakand Minerals Limited. Marakand wasfloated on the Alternative Investment Market (AIM) of the London Stock Exchangein December 2003. This information is provided by RNS The company news service from the London Stock Exchange