aztec offers sacrifice to arc

The Australian, 25/10/2006

CASH-strapped iron ore aspirant Aztec Resources has come to terms with the company behind a blocking stake in its Koolan Island tenements, issuing it $17.5 million worth of shares in a move it hopes will appease its bankers.
Aztec has promised to give Australian Royalties Corporation, run by 26-year-old Sydney barista Sarkis "Sam" Gabrielian, 77.8 million shares in the company at 22.5c each to terminate lucrative royalty arrangements and repurchase rights over its original 30 per cent interest in the tenements.

ARC had sold Aztec the ground in 2004 but put a caveat over the tenements on September 19 to ensure a $1 a tonne royalty arrangement which had scared off Aztec bankers. The ARC skeleton was only really brought to light by Aztec late last week in a move that shocked Aztec suitor Mt Gibson and revealed the company was in danger of calling in corporate undertakers as early as next week.

The deal with ARC has triggered a defeating condition of Mount Gibson's proposed $280 million scrip bid for the company under a 1-for-3 share offer.

Importantly, ARC said it would only terminate the royalty and repurchase rights if Mt Gibson extended its takeover bid for the new stock. It effectively hands the Aztec board a 9.6 per cent blocking stake.

Aztec managing director Luke Tonkin said he believed a number of legal avenues had opened up because of the ARC debacle.

"The ARC situation was not in Aztec's target statement," he said. "Our board is not going to make a firm commitment to the offer until we know what finances Aztec has in place. "The only reason why Aztec was able to issue the shares at 22.5c each was because our bid was in play, which has artificially lifted their share price."

Mt Gibson already owns about 33 per cent of the company.

Aztec chairman Ian Burston said credit approval would come in the "next few days".

"The signing of this (ARC) agreement was a commercial imperative that was critical to the future of the company," Mr Burston said.

"Directors of the company felt the interests of Aztec shareholders were best served by entry into this agreement.

"Aztec has kept Mt Gibson, to the extent possible, fully appraised of developments."

Aztec shares remain suspended at 23.5c.