4 July 2005Company AnnouncementsAustralian Stock Exchange...

4 July 2005
Company Announcements
Australian Stock Exchange Limited
20 Bridge Street
Sydney NSW 2000
ASX RELEASE
MICHELAGO SET TO BECOME CHINA’S LARGEST FOREIGN GOLD PRODUCER
BIOGOLD JOINT VENTURE APPROVED
Michelago to Increase Ownership to 99% of 150,000 oz pa BioGold Facility, Shandong Province, China
Highlights
• BioGold Sino Foreign Joint Venture approved by Shandong Provincial Government;
• Michelago to become the largest foreign gold producer in China by the end of July 2005;
• Michelago increases ownership of BioGold from 82% to 99% for payment of RMB 10M (approx A$1.6M) by October 2005;
• Existing Working Capital facilities to remain in place until new arrangements with ANZ Bank are complete;
• ANZ confirmed 50% of Working Capital funding and are now in discussions with other parties to fund the balance;
• Management team in place.
The Directors of Michelago (ASX: MIC, MICO, “Michelago”) are pleased to announce that the Shandong Provincial Government has formally approved the incorporation of the BioGold Sino Foreign Joint Venture. The new entity will initially be an 82%:18% Joint Venture between Michelago and Shandong Tarzan Mining Company Limited (“STM”).
This transaction is the first step in Michelago’s ongoing China strategy and will result in Michelago becoming the largest foreign gold producer in China. The deal also provides an immediate and long-life cash flow stream for the Company.
Mr Greg Starr, Managing Director of Michelago said,“The completion of this transaction marks a major company milestone and enables the company to immediately generate cash flow and establishes Michelago as the largest foreign gold producer in China.”
In addition, Michelago has negotiated an agreement to increase its interest in the Joint Venture. The agreement entails Michelago paying RMB10M (approximately A$1.6M) to STM by the end of October 2005 in return for Michelago receiving 99% of the cashflow from the Joint Venture.
Michelago will make the payment for its 82% acquisition within the next 10 days and the new Business License for the Joint Venture will then be issued.
The BioGold facility has been in operation since 2001 and currently produces about 150,000 ounces of gold annually through an integrated BACOX©, cyanide leach and gold refining facility. The facility is in the process of increasing capacity to approximately 230,000 ounces per annum though an expansion of the BACOX© plant.
Michelago recently announced that it had arranged for the ANZ bank to replace 50% of the existing US$25M Working Capital funding for the project. In addition, Michelago and ANZ are working together to arrange another international bank to finalise the funding of the balance. Michelago has entered into an arrangement with STM to maintain the existing Working Capital facility until ANZ’s arrangements are completed.
In order to ensure the continuing success of the Joint Venture, Michelago is pleased to announce the appointment of Mr Martin Jacobsen as the new Chief Operating Officer of the Company. Mr Jacobsen brings to Michelago over 30 years of mining experience, most recently as the Operations Director of Emperor Mines Limited.
Mr Jacobsen will be supported by Mr Frank Leung, who has been appointed as the new General Manager in China. Mr Leung is a Chemical Engineer from the University of New South Wales with over 18 years operating experience in China and Australia.
Completion of the BioGold acquisition marks the start of an exciting new era in Michelago’s growth and gives the Company immediate revenues and a robust platform for expansion in the Chinese gold sector.
Yours sincerely
Michelago Limited
Heath Roberts
Company Secretary