strong response to us50m lithium tender

Looks very positive - no cap raising to develop Lithium ponds ready to export - 40M (more than required) up front in 2008.

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STRONG RESPONSE TO US$50M LITHIUM TENDER
13 COMPANIES SELECTED FOR SHORTLIST
The board of directors of Admiralty Resources is pleased to announce that Rincon Lithium
Limited, currently a wholly owned subsidiary of Admiralty Resources NL is developing one of
the world¡¦s largest lithium, potash, sodium sulphate and sodium carbonate production
facilities in the world.
Rincon has had a substantially higher level of interest than expected in response to its
tender to sell 10% of its final production level of 17,000 tonnes of lithium products per
annum, per year for ten years over the period June 2009 to June 2019. Interest has been
received from commodity traders, battery manufacturers, financial commodity dealers, and
traditional minerals wholesalers around the globe.
More than 70 companies applied, and the shortlist has been reduced to 13 companies. All
the finalists have signed or submitted a final version of the confidentiality agreement.
The tender covers:
„h Supply of 10% of production for 10 years. The successful tenderer will make a
prepayment in mid 2008 of the profit margin, expected to be between US$40m and
US$60m for the 99.0+% lithium carbonate product.
„h An exclusive agency agreement for the sale of Rincon products in Asia, covering
40% of production
„h An exclusive agency agreement for the sale of Rincon products in the Americas,
covering 10% of production
„h The balance will be sold by Rincon¡¦s sales and marketing team.
Our project financier has given Rincon Lithium an indicative term sheet based on the
overview of the banking feasibility study. The value of the financing is in excess of the cost
of constructing the full production facility and 470 hectares of ponds. The deposit will come
from the tender prepayment to be received, so after the Admiralty demerger, it is not
expected that an equity raising will be required to complete the project.
The sales revenue received from the tender will be amortised over a ten year period so only
one tenth of the revenue amount received will count towards earnings per share which will
be booked in the 2007-8 financial year if the tender is concluded by 30 June 2008.
The demerger is expected some time in March 2008 after the independent expert¡¦s report is
received. Admiralty is also taking the step to get tax advice on how the cost base of the free
Rincon share will be treated. All shareholders in Admiralty Resources at the time of the
Extraordinary meeting will receive one free Rincon lithium share for every Admiralty Share
they hold, assuming the motion is passed.
Argentinean Resources Tax
Recently the new government elected in Argentina announced they would impose a 10% tax
on the value of sales of minerals.
Admiralty has taken a number of steps to minimize the impact of this tax impost by:
- Signing a 30 year fiscal stability statement with the previous government precluding
such a tax. The current government has largely ignored these fiscal stability
statements with the new law. At least two major multi-nationals have sought a
judgment from the Argentinean courts to determine whether this new tax impost is
legal or not.
- We have sought accounting advice from our advisors on how to apply the large
amount of tax deductions we have received from the Argentinean Government
including 200% deductibility for exploration expenses to minimize the impact.
- We will establish a sales and warehouse bonding office in Zona Franca which is a
customs tax free Province in Argentina located 50 kilometres from our head office at
Salta.
- Finally, we continue to have open dialogue with the government and will eventually
ask them to determine if Lithium Carbonate is a chemical or a mineral for the
purposes of the tax which may mean we are exempt.
Yours sincerely,
Phillip Thomas
Managing Director
Rincon Lithium Limited