Glad I topped up today...
AUSTRALIAN STOCK EXCHANGE AND MEDIA RELEASE
ACQUISITION OF RIO TINTO’S 20% INTEREST IN THE SEPON PROJECT,
ACCELERATION OF OTHER GOLD AND COPPER DEVELOPMENTS
AND ASSOCIATED RIGHTS ISSUE
Oxiana today agreed to acquire Rio Tinto’s 20% interest in the Sepon Project in Laos.
Oxiana will also undertake a major expansion of the Sepon Gold Operation and accelerate a number of other copper and gold exploration and development plans.
The acquisition, and other growth initiatives, will be funded by way of a fully
underwritten 1 for 4 Renounceable Rights Issue to all eligible shareholders at a price of 80 cents per New Share to raise approximately $189 million.
The Rights Issue enables Oxiana’s shareholders to continue to participate in the Company’s exciting suite of gold and copper developments and anticipated growth in shareholder value.
Use of Proceeds
1. Acquisition of Rio Tinto’s 20% Interest in the Sepon Project
Oxiana has reached agreement with Rio Tinto to acquire its 20% interest in the Sepon Project for US$85 million (approximately A$113 million), which will see Oxiana become the sole owner of the Sepon Project, which includes both the Sepon Gold Operation and the Khanong Copper Project.
The acquisition is expected to complete no later than 10 March 2004, and will have an effective date of 1 January 2004.
Oxiana considers the move to 100% ownership of Sepon to be a very positive
development which adds considerable value to the company. The acquisition simplifies the ownership structure, and extinguishes both Rio Tinto’s residual farm-in rights to possible new Sepon discoveries and its right to acquire Oxiana’s interest in Sepon should control of Oxiana change. Oxiana will now be able to move independently and aggressively in continuing to develop the Sepon mineral district.
In addition to the acquisition, Oxiana will enter into an agreement with Rio Tinto under which Oxiana will have access, on commercial terms, to an agreed level of technical support from Rio Tinto’s Technical Services Group until the end of 2006 or financial completion of the Khanong Copper Project, whichever is the earlier.
2. Sepon Gold Expansion
Directors today approved an expansion of the Sepon Gold Mine, from 1.25Mt/a to
2.5Mt/a, to increase gold output to an initial 230,000 oz/a at a head grade of 3.4 g/t. This follows Resource and Reserve increases in 2003 and a subsequent feasibility study. The approval is subject to completion of the Rights Issue and the acquisition of Rio Tinto’s Sepon interest.
The capital cost of the expansion will be US$30 million (A$40 million) with construction to take place during 2004 and commissioning scheduled for the fourth quarter. The expanded capacity will be available from January 2005.
Mine life, based on present Reserves and approximately 56% of the additional Resources defined at July 2003, will be extended to 2013. The conservative life-of-mine plan assumes total production of 19 Mt at approximately 3 g/t. There is no allowance for additional resource conversion, treatment of primary gold resources, processing of low grade material, orebody extensions or any further discoveries, either nearby or in the Sepon mineral district.
The expansion project offers robust returns at the estimated incremental capital and operating costs, using gold prices well below current levels.
3. Development and Exploration
Khanong Copper Project The Khanong Copper Project at Sepon is proceeding according to schedule and budget.
First cathode production from the 60,000 t/a whole-of-ore leach-SX-EW copper mine and plant is expected at end March 2005. Ore Reserves were recently upgraded to 15.5 Mt at 5.2% copper, increasing contained metal by 17% and extending estimated mine life to 13 years.
Project capital is estimated at US$205 million plus US$30 million interest and finance charges during construction. A further allowance of US$5 million, to be funded from the Rights Issue, has been made for the purchase of gold put options to ensure a minimum gold cash flow during copper construction and commissioning.
The US$185m debt component of the funding package is to be provided by a combination of European and Australian commercial banks, Government owned export credit agencies and Government owned development finance institutions. First debt drawdown is
expected in March.
If required, part of the funds from the Rights Issue will be used to fund capital expenditure at the Khanong Copper Project prior to first debt drawdown.
Other Development and Exploration
Oxiana’s copper and gold growth is expected to come from both the Sepon mineral district and other targeted exploration and development opportunities. These include:
• The evaluation of the primary (sulphide) gold Resources, building on the existing 1.1 Moz of Resources already defined immediately below the current oxide mining operation;
• Further exploration in the highly mineralised Sepon district, where no less than 36 targets have been prioritised for follow up work, and drill testing, including the
partially drilled Thengkham copper site only 8kms from the copper processing facility;
• The Prominent Hill Joint Venture in South Australia where Oxiana is earning up to a 65% interest from Minotaur Resources Limited. In 2004 Oxiana plans to accelerate the drilling program and move to a pre-feasibility study on this promising copper-gold
project;
• Other copper and gold targets in Laos where Oxiana has lodged tenement applications;
• Exploration ventures in Thailand targeting multi-million ounce epithermal gold deposits.
The balance of the proceeds from the Rights Issue will be applied to these exploration and development opportunities, to the costs of the issue and may also be available to allow Oxiana to take advantage of other opportunities which may arise.
Key Dates
The Rights Issue will be a fully underwritten pro rata entitlements issue to eligible shareholders on the record date, Monday, 2 February 2002, on the basis of 1 new ordinary share at a price of 80 cents per share for every 4 shares held.
Oxiana will apply to the ASX for a Trading Halt to apply from tomorrow morning
(Wednesday 21 January 2004) and will recommence trading on Friday, 23 January 2004 to enable the Rights Issue to be fully explained to the market. The following are the key dates for the Rights Issue:
Oxiana shares quoted ex-rights Tuesday, 27 January 2004
Rights trading commences Tuesday, 27 January 2004
Rights trading ceases Wednesday, 11 February 2004
Closing date for acceptances and payment in full Wednesday, 18 February 2004
New shares allotted Thursday, 26 February 2004
Normal trading of New Shares commences Friday, 27 February 2004
Offers of shares under the Rights Issue will be made in a Prospectus dated 20 January 2004.
The Prospectus is proposed to be mailed to eligible shareholders on Wednesday, 4 February.
A notice setting out details of the Issue is anticipated to be posted to shareholders tomorrow Wednesday, 21 January. After 21 January eligible shareholders wishing to subscribe for shares under the Rights Issue will need to complete the entitlement and acceptance form that will accompany the Prospectus.
The Prospectus will be posted to Oxiana’s website, www.oxiana.com.au.
The Rights Issue enables Oxiana to enter an exciting new growth phase to independently grow its gold and copper business in Laos, in other parts of Asia and in Australia. Oxiana has set its sights on becoming a world class low cost gold and copper producer. This Rights Issue provides the opportunity to take another major step forward.
Owen L. Hegarty
Managing Director.
OXR
oxiana limited
