$60 mill finance deal

6 January 2005
CHEMEQ SIGNS TERM SHEET
TO RAISE UP TO $60 MILLION
Veterinary pharmaceutical company Chemeq Limited (Chemeq; ASX: CMQ)
today announced that it had signed a Term Sheet with Mizuho International
Plc (MHI) for MHI or its nominees to invest up to AU$60 million in Chemeq.
MHI is part of the Mizuho Financial Group (“MFG”) which is one of the world’s
largest financial institutions with assets of over US$1.1 trillion and a capital
base in excess of US$30.0 billion. MHI is a subsidiary of Mizuho Securities Co.
Ltd. and is based in London. Through the Global Special Situations Group,
MHI has made a variety of investments around the world, including more
recently in Australia, in turnaround opportunities. To date investments have
been made in the mining, telecommunications, cable television, airline, property, speciality chemical and specialist engineering sectors.
The Term Sheet provides for Chemeq to issue to MHI 40,000 convertible
bonds with a face value of AU$1,000 per bond for an initial investment of
AU$40 million. The conversion price (exercisable between 31 March 2005 and
1 March 2008) is the lower of AU$1.10 per Chemeq share or the volume
weighted average price of Chemeq shares for the 30 ASX trading days prior to
conversion.
In addition, MHI commits to underwrite an additional AU$20 million
investment in Chemeq to the extent Chemeq’s listed options exercisable at
AU$2.40 on or before 30 June 2005 (June 2005 Options) do not generate
AU$20 million of capital for Chemeq.
The key terms and conditions of the Term Sheet are set out in the attachment.
Issue of the convertible bonds and the underwriting of the exercise of the
June 2005 Options are subject to shareholder approval for the purposes of
the Listing Rules and Corporations Act. An extraordinary general meeting of
Chemeq shareholders is expected to be held during late February 2005. An explanatory memorandum supported by an independent expert’s report will
be sent to shareholders as soon as practicable.
As part of the investment in Chemeq, the Term Sheet provides for Chemeq’s
Board to appoint two nominees by MHI, to the Board of Chemeq; MHI would
also have a right of veto over any candidate proposed for appointment
regarding Chemeq’s planned, new CEO and CFO. Pending these
appointments, and for a period of at least six months, Chemeq has agreed to
hire an experienced management team which has been recommended by
MHI, in order to assist the Company to achieving its business objectives. This
management team has expertise across operational management, marketing
and finance.
Chemeq Chairman and CEO Dr Graham Melrose said that he was delighted
that MHI has undertaken such a significant investment of both capital and
management resources in Chemeq.
“This investment by MHI is an endorsement of the future of Chemeq – and comes at an important stage in Chemeq’s development following the
successful construction and conditional approval of our manufacturing facility.
Importantly, the AU$40 million investment plus the underwriting of the
options of a further AU$20 million will provide Chemeq with the funding
flexibility necessary to meet its current business objectives” he said.
“I am pleased that a major global financial institution like MHI has seen the
potential in Chemeq and has decided to support us with such a large
investment. The Board and management of the Company are looking
forward to a productive partnership with MHI as milestones continue to be
achieved. We believe the partnership will ensure the Company’s capability in
executing its business plan in 2005 and beyond.”
Chemeq will immediately begin work with MHI to draft full documentation
with an expectation that it will be executed by the end of January 2005. The
actual investment will be pending the achievement of conditions precedent as
outlined in the attachment.

About Chemeq
Chemeq is an emerging veterinary drug producer, which has developed a
unique product, CHEMEQ ® polymeric antimicrobial for the prevention and
control of intestinal bacterial diseases in feedstock animals such as pigs and
poultry.
The company’s manufacturing facility in Western Australia was completed in August
2004 and is currently undergoing commissioning and optimisation.

Chemeq has secured conditional approval from the Australian Pesticides &
Veterinary Medicines Authority (APVMA) to commence production at its
manufacturing facility south of Perth, Western Australia.
To date, product approval has been secured in South Africa (pigs and poultry)
and New Zealand (pigs). Distribution agreements with leading distributors
have been secured in South Africa, New Zealand and Malaysia.
As Chemeq becomes a full-scale manufacturer, the company is moving to
boost its management capabilities with the planned recruitment of a new CEO
and CFO to complement its existing team.
Chemeq has signed a AU$1.5 million sales order for its CHEMEQ ® polymeric
antimicrobial with an agent in South Africa in August 2004.
-ends-
FOR FURTHER INFORMATION CONTACT:
Adam Deane
Company Secretary
Tel: 08 9362 0100