had the dic Bad move on Michelago behalfMore script to be issued...

had the dic Bad move on Michelago behalf

More script to be issued and mining in an unstable country will not be received very well by shareholders,

I do not think this the best move for MIC

_____________________________________________

29th November 2004
Company Announcements Platform
Australian Stock Exchange Limited
20 Bridge Street
SYDNEY NSW 2000
Dear Sir/Madam
Michelago to acquire interest in 2.3 million ounce Gold Ridge mine and announces A$20 million capital raising
Michelago Limited (ASX:MIC) is pleased to announce that it has become a shareholder in a
consortium which has entered into an exclusivity agreement to acquire the Gold Ridge Mine in the
Solomon Islands from American Home Assurance Company (“AHAC”).
Michelago Limited has an initial 20% interest in the consortium entity, Australian Solomons Gold
Pty Ltd, (“ASG”) and intends to fund up to 50% of the acquisition cost of the Gold Ridge Mine.
The Gold Ridge deposits host over 2.3 million ounces of resources and 1.68 million ounces of
reserves. Michelago and its partners in ASG intend to re-commission the mine in the second half
2006 with initial annual production averaging some 150,000 ounces of gold and a cash operating
cost of approximately $US235/oz.
The Company also announces that Austock Corporate Finance Limited has undertaken a placement
of 200 million fully paid ordinary shares in the Company at A$0.10 per share to raise A$20 million.
The placement has been structured as follows:
• Tranche 1 – 75 million shares placed using the Company’s 15% placement capacity, raising
A$7.5 million; and
• Tranche 2 – 125 million shares placed subject to shareholder approval to raise A$12.5
million.
The placement has been made to institutional and sophisticated investors pursuant to Section 708 of
the Corporations Act 2001. All shares issued under the placement will rank pari passu with existing
ordinary shares.
The Company is also issuing one option for every two shares subscribed for under the placement,
subject to shareholder approval. The options have a two year term and an exercise price of A$0.15.
The funds raised from the placement of are to be applied as follows:
Funding of the first acquisition payment for the Gold Ridge Project A$13 million
Funding for entry into the BioGold SFJV. A$6 million
For ongoing general corporate working capital A$1 million
The placement is subject to a number of conditions including approval of Michelago shareholders
and adverse changes in market conditions.
A shareholder meeting to approve the placement and issue of options has been scheduled for late
December 2004. A notice of meeting and explanatory statement providing additional information
in relation to the Gold Ridge Project, will be distributed to shareholders shortly.
Australian Solomons Gold Pty Ltd (“ASG”)
Michelago is a shareholder in ASG, a consortium which has entered into an exclusivity agreement
to sign a Share Purchase Agreement “SPA” to acquire the Gold Ridge Mine from AHAC. The final
transaction is subject to signing the SPA and meeting a number of Conditions Precedent. Michelago
currently owns 20% of ASG, along with Ausenco Resources Pty Ltd (20%), Societe Generale
Australian Branch (10%), Resource Capital Fund III LP (20%) and Sashmo Pty Ltd (30%).
Transaction Summary
ASG anticipates spending up to $US90M for the acquisition and capital development of the Gold
Ridge project. This will be funded by a combination of project debt and equity. However, up to
$US20M of the acquisition component is conditional upon several milestones, the most significant
of these being finalisation of the fiscal regime for the operation and the gold price at the time of
drawdown of project financing. Michelago will make the first of three acquisition payments on
finalisation of documentation, with the other two following and dependent on milestone
achievements.
As a result the total acquisition and development costs are equivalent to between $US30 to $US39/oz
of resource and $US42 to $US53/oz of Reserve.
The Gold Ridge Project
Gold Ridge, located in the Solomon Islands, and the surrounding exploration lease is able to support
a long life, low cash cost gold operation. It represents an exceptional opportunity to recommence
operations of a 2,300,000 ounce gold project in a country where sovereign stability has been
restored.
Gold Ridge was operated from August 1998 to June 2000 before closing due to civil unrest. The
operation has remained closed since that time, however stability has now returned to the Solomon
Islands after the successful intervention of the Regional Assistance Mission to the Solomon Islands
(“RAMSI”).
Gold Ridge consists of four known deposits, with only the Valehaichichi Pit mined to date.
Mineralisation for all four pits is near surface with minimal pre-stripping required. Maximum pit
depths are approximately 70m with average strip ratios approximately 1:1. The current reserves of
oxide and transitional ores is of sufficient size to support a 10 year plus operation life.
The reserve and resource figures (JORC compliant) as reported by a previous owner, at June 2000
(calculated using a A$450/oz gold price and a 0.8 g/t cut-off grade), are tabled below:
Tonnes (000t) Grade (g/t Au) Gold (ozs)
Resources 39,210 1.90 2,367,300
Reserves 25,182 1.97 1,684,700
Table 1: Gold Ridge Resources and Reserves as of 30 June 2000.
Exploration to date has predominately been focused on the immediate pit areas with minimal
exploration conducted outside this area since the early 1990’s. Significant exploration potential
exists within the mining lease at Kupers and Dawson pits, along strike and at depth at the
Valehaichichi Pit and, additionally, within the surrounding exploration lease which totals an area of
130km2.
Preliminary exploration drilling to depths of up to 300 metres below the existing pits has shown that
mineralisation continues at depth. This mineralization is refractory in nature and is not included in
the current ore resources. Michelago will be evaluating the potential to produce refractory
concentrates at Gold Ridge and ship these concentrates to the BioGold facility in Shandong, PRC
for secondary processing.
The mining and exploration leases have been kept in good standing since the closure of the mine
and agreements with landowners remain in force. Significant plant remains on site with the main
infrastructure generally in good condition. ASG intends to recommence mining operations utilising
a contract mining equipment fleet.
China Projects
Discussions with Bank of China regarding the continuation of working capital loans on entering
into the Sino Foreign Joint Venture (“SFJV”) (MIC 82%) with BioGold are advancing and it is
believed that these will be finalised in the near future.
In light of capital commitments for BioGold and Gold Ridge, it is proposed that a JV partner will be sought for the on-going exploration program at Jinya.
Please contact Michelago Limited on (02) 9299 8821 for any enquiries relating to the proposed
transactions.
Yours sincerely
Michelago Limited
John Horan
Chairman
issued through
FIELD PUBLIC RELATIONS PTY LTD ABN 74 008 222 311
231 South Road, MILE END SA 5031
Ph: 08 8234 9555 Fax: 08 8234 9566
[email protected]
1
N E W S
• R E L E A S E •
FOR IMMEDIATE RELEASE
29 November, 2004
Michelago to acquire interest in 2.3 million ounce Solomon
Islands Gold mine and announces A$20 million capital
raising
The only gold mine on the Solomon Islands will be acquired by a consortium including
listed Australian gold explorer and processor, Michelago Limited (ASX:MIC).
Michelago Limited has an initial 20% interest in the consortium entity, Australian
Solomons Gold Pty Ltd, (“ASG”) and intends to move to a 50% interest via partial
funding of the acquisition cost of the Gold Ridge Mine.
The total acquisition and mine development cost to production is conditional upon a
number of factors, but is priced at between $US30 to $US39/oz of resource and $US43 to
$US53/oz of reserve.
Michelago also announced that Austock Corporate Finance Limited has undertaken a
placement of 200 million fully paid ordinary shares in the Company at A$0.10 per share
to raise A$20 million.
The placement has been structured as follows:
• Tranche 1 – 75 million shares placed using the Company’s 15% placement
capacity, raising A$7.5 million; and
• Tranche 2 – 125 million shares placed subject to shareholder approval to raise A$12.5 million.
The placement has been made to institutional and sophisticated investors pursuant to
section 708 of the Corporations Act 2001. All shares issued under the placement will
rank pari passu with existing ordinary shares.
The Company is also issuing one option for every two shares subscribed for under the
placement, subject to shareholder approval. The options have a two year term and an
exercise price of A$0.15.
The funds raised from the placement are to be applied by Michelago as follows:
Funding of the first acquisition payment for the Gold Ridge Project A$13 million
Funding for entry into the BioGold SFJV. A$6 million
For ongoing general corporate working capital A$1 million
The placement is subject to a number of conditions including approval of Michelago
shareholders and adverse changes in market conditions.
issued through
FIELD PUBLIC RELATIONS PTY LTD ABN 74 008 222 311
231 South Road, MILE END SA 5031
Ph: 08 8234 9555 Fax: 08 8234 9566
[email protected]
2
A shareholders meeting to approve the placement and issue of options has been scheduled
for late December 2004. A notice of meeting and explanatory statement providing
additional information in relation to the Gold Ridge Project, will be distributed to
shareholders shortly.
The ASG consortium plans to refurbish and re-commission the Gold Ridge Mine to
achieve a first gold pour in the first half of 2006 at an estimated operating cost of
approximately $US235/oz and at an annual production rate of some 150,000 ounces of
gold.
This investment will be the largest by Michelago in the global gold industry and its first
outside mainland China where the Sydney-based gold company has a range of exploration
and established gold processing interests.
“This is a significant company builder and will deliver our first mining-based revenue,”
Michelago’s Managing Director, Mr Peter Secker, said today.
“The outlook for the mine is positive given that stability has returned to the Solomon
Islands through the ongoing presence of peace-keeping forces, including Australian units,
under the Regional Assistance Mission (RAMSI) to the Islands,” Mr Secker said.
ASG has received positive support from the Solomon Islands Government and Gold
Ridge landowners in regard to the re-opening of the mine.
“Michelago’s participation in the Solomons is also in line with our strategy to expand
beyond China into the broader region, to assess value-adding projects across all three gold
skill-sets - exploration, mining and processing” Mr Secker said.
“Additionally, Michelago will be evaluating the potential to produce refractory
concentrates from potential ore outside the current reserves at Gold Ridge, and ship these
concentrates to the BioGold facility in Shandong, PRC, for secondary processing.
“We are confident that the 2.3 million ounces of resources and 1.6 million ounces of
reserves at Gold Ridge should lead to an upwards re-rating of Michelago.
“The acquisition is also timely, given the sustained high gold prices and the retreat to gold
as a safe hedge amid global security and economic concerns.”
Acquisition details
The vehicle for the Solomon Islands’ acquisition is Brisbane-based Australian Solomons
Gold Pty Ltd (“ASG”).
Michelago Limited is a shareholder in ASG, a consortium which has entered into an
exclusivity agreement to acquire the Gold Ridge Mine from American Home Assurance
Company (“AHAC”). Michelago currently owns 20% of ASG, in partnership with Australian
engineering group, Ausenco (20%); the banking group, Societe Generale Australian Branch
(10%); renowned international resources fund, Resource Capital Fund (20%); and Sashmo Pty
Ltd (30%).
While Michelago has an initial 20% interest in ASG, it intends to fund up to 50% of the
mine acquisition cost to significantly increase its equity position.
issued through
FIELD PUBLIC RELATIONS PTY LTD ABN 74 008 222 311
231 South Road, MILE END SA 5031
Ph: 08 8234 9555 Fax: 08 8234 9566
[email protected]
3
ASG anticipates spending up to $US90 million for the acquisition and re-development of the
Gold Ridge project. This will be funded by a combination of project debt and equity.
However, up to $US20 million of this payment is conditional upon several milestones, the
most significant of these being the fiscal regime finalised for the operation and the gold price
when project financing is drawn down. Michelago will make the first of three acquisition
payments on finalisation of documentation, with the other two following and dependent on
milestone achievements.
The Gold Ridge Project
Mr Secker said Gold Ridge and its surrounding exploration lease could support a 10-year,
low cash cost gold mine on current known reserves of oxide and transitional ores.
The Gold Ridge project hosts over 2.3 million ounces of resources and 1.6 million ounces
of reserves. It consists of four known deposits, with only the Valehaichichi Pit mined to
date.
Mineralisation for all four pits is near surface, with minimal pre-stripping required.
Maximum pit depths are approximately 70 metres with average strip ratios of 1:1.
The reserve and resource figures (JORC compliant) reported by a previous owner at 30
June 2000 (calculated using a A$450/oz gold price and a 0.8 g/t cut-off grade), are:
Tonnes (000t) Grade (g/t Au) Gold (ozs)
Resources 39,210 1.90 2,367,300
Reserves 25,182 1.97 1,684,700
Exploration to date has predominately been focused on the immediate pit areas with
minimal exploration conducted outside this area since the early 1990’s.
Significant exploration potential exists within the mining lease at Kupers and Dawson
pits, along strike and at depth at the Valehaichichi Pit and, additionally, within the
surrounding exploration lease which totals an area of 130 square kilometres.
Preliminary exploration drilling to depths of up to 300 metres below the existing pits has
shown that mineralisation continues at depth.
“In addition, the mining and exploration leases have been kept in good standing since the
closure of the mine and agreements with landowners remain in force. Significant plant
remains on site with the main infrastructure generally in good condition,” Mr Secker said.
The required approvals by Michelago shareholders will be sought at an EGM to be held
in Sydney late in December.
Details and additional information is being distributed to shareholders this week.
MEDIA CONTACTS:
Peter Secker Michelago Limited (02) 9299 8821 / 0407 426 912
Kevin Skinner Field Public Relations (08) 8234 9555 / 0414 822 631