landmark aud12.5m capital raising

24 October 2006
ASX / MEDIA RELEASE
LANDMARK A$12.5M CAPITAL RAISING TO ACCELERATE YANDERA DEVELOPMENT
• Share placement of 50M shares at 25 cents to be completed in two tranches.
• Leading international private equity resource fund (Sentient Global Resources Fund II, “Sentient”), to subscribe for $6.3M of the placement. At completion, Sentient will hold 19.7% of Marengo’s expanded capital.
• Share placement strongly supported by both existing and new institutional shareholders.
• Funds to be used to accelerate the pre-feasibility study on the Yandera Project and to target substantial increases in the resource inventory.
Diversified metals company Marengo Mining Limited (ASX Code: MGO) is pleased to announce a A$12.5million capital raising through a share placement comprising 50 million shares at 25 cents each, to be made in two tranches to both existing and new Australian, and international institutional, and professional investors.
As part of the raising, Sentient has agreed to subscribe for $6.3 million of the placement and will, at completion of the placement, become Marengo’s largest shareholder with a stake of 19.7%.
A number of the Company’s current key shareholders, including Sempra Metals & Concentrate Corp (USA), have also agreed to participate in this strongly supported capital raising.
The proceeds of the placement will underpin the next key phase of activity at Marengo’s 100%-owned Yandera Copper- Molybdenum Project in Papua New Guinea, including the recently commenced pre-feasibility study and ongoing programs of diamond drilling designed to substantially increase the initial 371 million tonne copper-molybdenum resource announced earlier this month.
1
The first tranche of 10 million shares is within the limit set out in the ASX Listing Rules and will be issued immediately under Marengo’s existing 15% placement capacity.
G:\MARENGO\MS Secretarial\11 ASX\MS 11 02 Lodgements\ASX Media Release_CapitalRaising_24Oct.doc
- 2 -
The issue of the second tranche of 40 million shares will require shareholder approval at a meeting to be called shortly. The placement shares will rank pari passu with the Company’s existing ordinary shares from the date of allotment.
Following completion of the placement, Marengo will have 128 million shares on issue, with a market capitalisation, at the placement price of some A$32 million.
Marengo recently commenced a pre-feasibility study on the Yandera Copper-Molybdenum Project after announcing a preliminary mineral resource estimate for the central portion of the project of 371 million tonnes at 0.49% copper equivalent (at a 0.3% copper equivalent cut-off grade), of some 4 billion pounds of contained copper metal equivalent.
Use of Funds
The funds raised from the placement will be used for the following purposes:
• to complete the recently commenced pre-feasibility study on the Yandera Project, The study includes preliminary mine design and open pit optimisation, metallurgical testwork, plant flowsheet design and throughput options with capital and operating cost estimates;
• to commence baseline studies for the environmental and social aspects of Yandera Project development;
• ongoing diamond drilling at the Gremi, Omora and Imbruminda zones to specifically target higher grade zones within the current resource envelope. Such near-surface zones having the potential to maximise cashflow in the early stages of mining operations;
• drilling of deeper targets at Gremi, Omora and Imbruminda which have the potential to add very significant tonnages to the existing resource;
• selected drilling of other mineralised zones, along the extensive Yandera porphyry sequence, where earlier drilling intersected very significant copper-molybdenum mineralisation; and
• for general corporate purposes and to provide working capital to underpin Marengo’s continued development as a PNG-focused metals company.
Background on the Sentient Global Resources Funds
Sentient Global Resources Funds total over US$500 million and are used for investment in development of quality metal, mineral and energy assets across the globe.
The manager of these Funds, The Sentient Group (“The Group”), is based in the Cayman Islands with subsidiary offices in Sydney, Australia and Montreal, Canada. The Group, on behalf of Sentient, has investments in a number of Australian and international resources companies, including Ivernia Inc. (lead), Queensland Gas Company (coal seam gas), Monto Minerals (industrial minerals), East Asia Minerals Corp (copper-silver) and Norsemont Mining (copper-molybdenum) and has divested a range of other successful investments, upon completion of development funding.
Investors in Sentient include institutional investors, university endowment funds, government agencies, corporate pension funds, family offices and resource industry participants. The global spread of investors complements Sentient’s global mandate.
Marengo’s Managing Director, Mr Les Emery, said the capital raising represented a major step forward for the Company and would result in the introduction of a new major shareholder and other strategic institutional, and professional investors to support the future development of the Yandera Project.
“We are very pleased with the strong support received for the raising, which I believe reflects growing recognition of the quality of the Yandera Project as a potentially world-class, long-life copper-molybdenum mine. It is particularly pleasing to welcome Sentient to our register and consider their support as further confirmation of the profile that Marengo has gained, since acquiring the Yandera Project ” Mr Emery said.
“The recent announcement of the initial resource for the central zone at Yandera has given an indication of the scale and potential of this project, and we have received strong support from both existing and new shareholders keen to participate in its next phase of development,” he added.
“The funding now in place will see us through to completion of the pre-feasibility study and underpin ongoing diamond drilling programs which will continue through until the end of this field season before recommencing in early 2007,” Mr Emery commented. “Based on the success to date, we are confident that these programs will deliver further strong increases in the resource inventory at Yandera.”
Located in Madang Province less than 20km from the planned US$850 million Ramu Nickel-Cobalt Project, the Yandera Project is believed to be one of the South Pacific’s largest undeveloped copper-molybdenum projects.
The Yandera porphyry is an extremely large mineralised system containing eight known, coherent mineralised zones, identified to date from more than 100 diamond drill holes (for some 33,000 metres), which were mostly drilled by Kennecott and BHP in the early 1970’s. More than US$20 million was expended at that time, resulting in the generation of a number of pre-JORC resource estimates and the completion of a mining scoping study by BHP in the mid 1970’s.
Since entering the Yandera Project in early 2005, Marengo has completed a full review and digitisation of this extensive database, and to date, has completed an additional 16 diamond drill holes (for some 5000 metres). Earlier this month Marengo released a preliminary resource estimate for the central portion of the Yandera porphyry system.
Les Emery
Managing Director
Marengo Mining Limited
Telephone: (+61 8) 9429 0000
Mobile: 0407 190 860
Email: [email protected]
www.marengomining.com
or
www.irasia.com/listco/au/marengo/
G:\MARENGO\MS Secretarial\11 ASX\MS 11 02 Lodgements\ASX Media Release_CapitalRaising_24Oct.doc
- 3 -