Oxus Gold Plc Regulatory News (OXS)

22 Oct 2007 07:01

Oxus Gold PLC22 October 2007 news release For immediate release: 22 October 2007 OXUS GOLD PLC LONDON: 22 October 2007 - Oxus Gold Plc, ("Oxus" ) (OXS.L) is pleased toreport that its 84% owned subsidiary, Marakand Minerals Limited ("Marakand" orthe "Company") has today issued a statement announcing the convening of anExtraordinary General Meeting ("EGM") to amend its Articles of Association toenable Oxus to compulsorily acquire those ordinary shares of Marakand which itdoes not currently own. Extracts from the Marakand EGM circular are repeatedhere for the benefit of the Oxus shareholders. Extract from Extraordinary General Meeting Circular Proposed Amendment to the Articles Introduction The board of Marakand announces that it has convened an Extraordinary GeneralMeeting on 12 November 2007 to propose an amendment to the Articles ofAssociation of the Company ("Articles") to enable Oxus Gold plc to compulsorilyacquire the 16,459,073 ordinary shares of Marakand ("Ordinary Shares") which itdoes not currently own ("Remaining Shares") in exchange for new Oxus ordinaryshares. The Remaining Shares represent approximately 15.96 per cent. ofMarakand's issued share capital. Assuming the resolution is passed at the EGMand following completion of the acquisition Oxus intends to cancel admission ofthe Ordinary Shares on AIM. Background to the Proposal Marakand is a mining exploration and development company focused on base metalsand silver. Its principal asset is its interest in the Khandiza polymetallicdeposit in South East Uzbekistan. Until recently, the Company had pursued astrategy to acquire exploration assets in Turkey. The Khandiza deposit contains, above a 2 per cent. zinc cut off, a JORCclassified and audited Measured and Indicated Resource containing 11.8Mt at anaverage grade of 7.66 per cent. zinc, 3.65 per cent. lead, 0.91 per cent.copper, 129 g/t silver and 0.38 g/t gold, plus an Inferred Resource containing2.6Mt at an average grade of 5.36 per cent. zinc, 2.81 per cent. lead, 0.65 percent. copper, 161 g/t silver and 0.38 g/t gold. Marakand obtained its interest in Khandiza under the Primary ExplorationAgreement. The Primary Exploration Agreement was originally entered into on 14December 1996 between Goscomgeology (the State Committee of Geology and Mineralresources for the Republic of Uzbekistan) and Oxus Resources Corporation ("ORC"), which assigned it to Oxus Services Limited ("OSL") on 1 July 2002. The Primary Exploration Agreement provides Marakand, together with Oxus and ORC,with rights to conduct geological prospecting, prepare a feasibility study andnegotiate with Goscomgeology regarding the obtaining of an exploration licenceand the development of mining operations on the Khandiza deposit. The feasibility study was satisfactorily completed and submitted to the UzbekGovernment as scheduled in October 2004. Subsequent progress on the project hasbeen limited. In August 2006, the Uzbek Government issued Presidential Decree442, transferring the rights to develop the Khandiza deposit and related assetsfrom Goscomgeology to the State-owned Almalyk Mining and Metallurgical Combinat. Since then, Marakand has been seeking to clarify the nature of its continuedrole in the project with the Uzbek Government, but has had no response. With the further passage of time, and difficulties in engaging with the UzbekGovernment, it appears increasingly unlikely that Marakand will be involved inthe future development of the Khandiza deposit. In the event that Marakand has no future role in the Khandiza project, and inlight of the disposal of its exploration assets in Turkey, announced on 26 April2007, Marakand would become a dormant company with no activities. HoweverMarakand remains the owner of the rights to the feasibility study and theenvironmental and social impact assessment undertaken in relation to theKhandiza project, together with associated geological exploration data, resultsof all technical and engineering studies and financial analyses carried outsubsequent to June 1996. As at 30 June 2007, the book value of these studies wasUS$9,405,000. Following the various cost control measures which have been implemented sinceJanuary 2007, Marakand now has no full time employees. William Charter andOliver Prior are directors of Marakand and will continue to be directors ofMarakand until Marakand is de-listed from AIM. Marakand has today announced, in respect of the year ended 30 June 2007, a lossbefore tax of approximately US$19.4 million, after writing off approximatelyUS$19.1 million in respect of the Khandiza project. Net assets at 30 June 2007amounted to approximately US$9.4 million. Reasons for the Proposal Oxus wishes to acquire the Remaining Shares, both to simplify the structure ofthe Oxus group and eliminate unnecessary costs. To do this Marakand has called the EGM to amend the Articles to insert aprovision enabling a shareholder who owns more than 75 per cent. of the issuedOrdinary Shares (being Oxus) to compulsorily acquire the Remaining Shares inMarakand. This is the simplest and most cost effective method of acquiring theRemaining Shares since they are held by more than 930 shareholders. The Resolution will amend the Articles to permit a shareholder (being Oxus inpractice) who has acquired not less than 75 per cent. of the outstanding issuedshare capital of the Company ("Acquiring Shareholder") to give notice ("Acquisition Notice") to the minority Shareholders that it desires to acquire theRemaining Shares. To pass the Resolution 75 per cent. of votes cast byShareholders at the EGM must approve the amendment. Where an Acquisition Notice has been given by the Acquiring Shareholder it willbe entitled and bound to acquire the Remaining Shares on the terms of theAcquisition Notice. The Directors understand that, provided the Resolution ispassed, it is the intention of Oxus to serve an Acquisition Notice on or around19 November 2007. In this event the amended Articles would oblige Oxus toacquire the Remaining Shares. Upon successfully acquiring the Remaining Shares, Oxus intends to cancel theadmission of the Ordinary Shares on AIM. Given that the longer term future of Marakand is in doubt, the Directors believethat Oxus ordinary shares offer greater prospects of value accretion and havemore liquidity in the market than shares in Marakand. Furthermore, Oxus, as abigger entity, is in a better position to pursue recognition of Marakand'srights in respect of the Khandiza deposit with Marakand as a 100 per cent.subsidiary of Oxus. Terms of the Acquisition Subject to the passing of the resolution, Oxus intends to acquire the RemainingShares on the following basis: For each 1 Ordinary Share held on the date of acquisition 0.135 new Oxusordinary share(s). Fractional entitlements to new Oxus Ordinary Shares will not be allotted orissued to shareholders. It is Oxus' intention to round down the number of Oxusordinary shares to be received by any such shareholder. On the basis of Oxus' closing share price of 52.25 pence on 18 October 2007, theterms of the acquisition value the entire issued share capital of Marakand atapproximately £7.3 million and the Remaining Shares at approximately £1.2million. The terms of the acquisition represent a premium of approximately 20per cent to Marakand's closing share price of 5.875 pence on 18 October 2007. The Directors, who have been so advised by Arden Partners plc ("Arden Partners"), believe that the terms of the acquisition represent a fair and reasonableprice for a minority stake in Marakand, particularly in light it appearingincreasingly unlikely that Marakand will have a role in the Khandiza project.If Marakand does not have a role in the Khandiza project then it would become adormant company with no significant assets, other than the Khandiza feasibilitystudy and environmental and social impact assessment, and limited, if any,prospects. Remaining Shares The 16,459,073 Remaining Shares will be acquired by Oxus pursuant to theAcquisition Notice fully paid and free from all liens, charges, equitableinterests, encumbrances and any other third party rights of any naturewhatsoever and together with all rights attaching thereto including, withoutlimitation, the right to receive in full and retain all dividends and otherdistributions (if any) declared, made or paid after the date of acquisition. New Oxus ordinary shares The new Oxus ordinary shares will be issued free from all liens, charges,equitable interests and encumbrances and any other third party rights of anynature whatsoever. The new Oxus ordinary shares will be issued credited asfully paid and will rank pari passu in all respects with existing Oxus ordinaryshares, including the right to receive in full and retain all dividends andother distributions (if any) declared, made or paid after the date ofacquisition. The maximum possible number of new Oxus ordinary shares which could be issued inrelation to the acquisition is up to 2,221,795 new Oxus ordinary shares,representing approximately 0.6 per cent. of the existing issued share capital ofOxus. Application will be made for such shares to be admitted to trading onAIM. Information on the Oxus Group Oxus is a UK-registered public company based in the UK, whose shares are tradedon AIM. Based on the closing price of Oxus ordinary shares on 18 October 2007Oxus has a market capitalisation of approximately £191 million. The Oxus Groupwas established in 1996 and gained admission to AIM in 2001. Its principal areaof activity is central Asia, primarily Uzbekistan where it is in a 50/50 jointventure, Amantaytau Goldfields AO, ("AGF"), with the Uzbekistan Government todevelop several mining operations in the Tien Shan gold belt near Zarafshan. Financial Information relating to Oxus and Marakand The audited accounts of Marakand for the three years ended on 30 June 2006 andalso the unaudited preliminary results for the year ended 30 June 2007 areavailable on Marakand's website (www.marakand.co.uk) and can be obtained in hardcopy from Oxus' head office at 105 Piccadilly, London W1Y 7NJ. Save as disclosed in this document and in Marakand's preliminary results for theyear ended 30 June 2007, so far as the Directors are aware, there have been nomaterial changes in the financial or trading position of Marakand since 30 June2006, the date to which its last published audited accounts were prepared. The audited accounts of Oxus for the three years ended on 30 June 2006 and alsothe unaudited preliminary results for the year ended 30 June 2007 are availableon Oxus's website (www.oxusgold.co.uk) and can be obtained in hard copy fromOxus' head office at 105 Piccadilly, London W1Y 7NJ. Save as disclosed in this document and in Oxus' preliminary results for the yearended 30 June 2007, so far as the directors of Oxus are aware, there have beenno material changes in the financial or trading position of Oxus since 30 June2006, the date to which its last published audited accounts were prepared. Oxus outlook The year ended June 2007 was one of the most challenging periods in the OxusGroup's history. Beset with financial and legal challenges in Uzbekistan,Kyrgyzstan and in the UK, the Oxus Group was forced to spend a significantamount of management time and substantial financial resources in order toresolve these issues. However, despite these distractions, two majortransactions, which are of significant benefit to the shareholders, werecompleted during the year. The sale of the Kyrgyz, Romanian and Turkish assetsto Kazakhgold created direct value in the form of dividends and the strategicinvestment by Zeromax has created a stronger foundation and made Oxus betterequipped to meet the demands of operating in Uzbekistan, putting Oxus on apositive footing for a promising future. With the strong resource and reservebase at AGF to underpin ongoing production of gold and silver the Oxus Groupremains committed to expanding its production output from its current levels andto accelerating the development of the underground sulphides project at AGF. Therefore despite various setbacks, the year ended 30 June 2007 has ended on apositive note and has allowed Oxus to consolidate its operations in Uzbekistan,forge stronger relationships, and look to the future with confidence. Marakand Share Option Scheme There are no outstanding options under Marakand's Share Option Scheme.Previously, outstanding options amounted to 3,550,000, which were all issued tocurrent/former directors of Oxus or Marakand. The rights to these options havenow been waived by those who were entitled to these options. Board Recommendation The Board of Directors, comprising William Charter who is independent of Oxusand Oliver Prior who is a non executive director of Oxus, believe that theproposed change to the Articles in the context of the Acquisition is fair andreasonable. They therefore unanimously recommend that Shareholders vote infavour of the Resolution, as they intend to do in respect of their ownbeneficial shareholdings amounting, in aggregate, to 620,175 Ordinary Shares,representing approximately 0.6 per cent of the Company's existing issued sharecapital. In addition, the Directors, who have been so advised by Arden Partners, believethat the terms of the Acquisition are fair and reasonable. In providing itsadvice to the Directors, Arden Partners has taken into account the commercialassessments of the Directors. Circular to shareholders A circular to shareholders of Marakand describing the proposals in greaterdetail and convening the extraordinary general meeting on 12 November 2007 willbe dispatched today. END Contacts: Oxus Gold plc Jonathan Kipps - Finance Director Tel: +44 (0) 207 907 2000Richard Wilkins - Company Secretary Tel: +44 (0) 207 907 2000website: www.Oxusgold.co.uk Canaccord Adams Limited Mike Jones Tel: +44 (0)207 050 6500Erin Needra Tel: +44 (0)207 050 6500 Bankside Consultants Ltd. Keith Irons Tel: +44 (0)207 367 8888Oliver Winters Tel: +44 (0)207 367 8888 This information is provided by RNS The company news service from the London Stock Exchange