Ferret's Stock to Watch: AGD MINING LIMITED08:17, Thursday, 18...

Ferret's Stock to Watch: AGD MINING LIMITED
08:17, Thursday, 18 May 2006

LOCAL GOLD AND ANTIMONY PRODUCER JOINS THE BIG LEAGUE

Sydney - Thursday - May 18: (RWE Aust Business News)
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OVERVIEW
********

It's business as usual at AGD Mining Ltd (ASX:AGZ) as the company
faces being swallowed up by Cambrian Mining plc, a London mining finance
company, in a scrip exchange to the benefit of both parties, the
companies believe.

The offer is being made on the basis of one new Cambrian share
for every nine AGD shares, valuing each AGD share at 42c and one new
Cambrian share for every 19 AGD options (valuing each AGD option at 20c).

The offer values AGD at about $63.5million, based on the closing
price of Cambrian shares of 160.25p on April 26, and an exchange rate of
$1 to 41.7 pence.

It represents a premium of about 31 per cent to the closing price
of 32c per AGD share on April 24.

The Cambrian board believes that AGD shareholders will benefit
from:

* Exposure to a stronger combined asset portfolio;

* Additional management expertise;

* Cambrian shares being tradeable on the ASX (subject to approval
of the ASX);

* Potential for increased liquidity through the exchange of their
AGD shares for Cambrian shares.

The Cambrian board believes Cambrian shareholders will benefit
from:

* AGD becoming a 100 per cent-owned subsidiary (assuming Cambrian
reaches the compulsory acquisition stage by the end of the Offer period)
and the benefit of 100 per cent of the cash flow from the operation of
the Costerfield mine;

* The unlocking of value by the removal of the holding company
discount as it applies to Cambrian's investment in AGD;

* Overhead and management synergies.

Commenting on the acquisition, Charles de Chezelles, chairman of
Cambrian, said:

"We expect the consolidation of AGD to unlock value for both
Cambrian and AGD shareholders through the removal of a level of holding
company discount with respect to AGD's underlying investments and as a
result of overhead and management synergies achieved through the creation
of a stronger combined management team."

Yesterday, directors advised that AGD Mining has signed a
contract with Zhongnan Antimony and Tungsten Trading Co Ltd of Hunan,
China, for the supply of 75 per cent of proposed antimony concentrate
production from its newly established mine and treatment plant at
Costerfield in central Victoria.

AGD intends to commence production from the new Augusta mine and
the rebuilt Costerfield processing plant late next month and to average
production of 21,000 ounces of gold and 5,500 tonnes of antimony
concentrate annually over the first three years of the mine's life.

SHARE PRICE MOVEMENTS
*********************

Shares of AGD yesterday edged up 1c to 36c. Rolling high for the
year has been 41c and low 13.5c. The company has 131.2 million shares on
issue with a market cap of $45.9 million.

The contract with Zhongnan is for a three-year term and is based
on market prices for both the antimony and gold content of the
concentrates.

On current metal prices, the contract would generate in excess of
$US40 million ($52.5 million) over three years and indicates the
Costerfield project is capable of generating a free cash flow before tax
of $15 million annually at its planned production level.

AGD is pleased with the competitive terms of the contract with
Zhongnan, one of the strongest and most successful antimony smelters in
China. AGD's marketing agent, Penfolds Ltd, organised the contract
through its Adelaide and Shanghai offices.

Antimony prices have firmed considerably over the past two years
and are currently at $US5,650 per tonne.

The gold price used in calculating free cash flow is $US680 per
ounce. AGD has no hedging in place for metal production or exchange
rates.

The offer from Cambrian Mining - which already has a 70 per cent
stake in AGD - has the support of the AGD board which, subject to
receiving a satisfactory independent expert's report, recommends that AGD
shareholders accept the offer in the absence of any higher offer.

The proposed listing of Cambrian on the ASX will offer greater
flexibility to Cambrian and AGD shareholders, particularly those located
in Australia and New Zealand, wishing to trade their existing or new
Cambrian securities.

AGD chairman Raymond Taylor said Cambrian has been a major
contributor in the development of AGD's Costerfield project and the
re-establishment of AGD as a viable public company.

"The offer presents shareholders with the opportunity to receive
an immediate 31 per cent premium to the current share price and to hold
stock in a growth-oriented mid-tier resource company with considerably
greater liquidity," he said.

BACKGROUND
**********

AGD Mining Ltd (formerly L-Tel Corporation) is an explorer and
mine producer in gold and antimony exploration and development in central
Victoria.

In its last quarterly report to March 31, the company reported
that mining commenced at the Augusta gold and antimony deposit near
Costerfield.

Plant construction was 70 per cent complete and progressing
towards a production startup late in the June quarter.

Mining of both E and C lodes commenced during the quarter, and
about 4,900 tonnes of ore estimated at 31.6g/t gold and 9.9 per cent
antimony was mined and stockpiled.

Bradco Pty Ltd began earthworks and open cut mining on
January 9.

By the end of the quarter the company successfully completed all
major earthworks consisting of the access road, the creek diversion and
the evaporation pond and were well advanced with mining in both the E
lode open cut and the C lode open cut/ portal excavation.

ENDS