Horizonte Minerals Acquisition Of Teck Cominco -3-

27th Jul 2010 07:30

under the AIM Rules for Companies, is to provide you with information on the Acquisition and the Placing (as defined below), (together, the "Transaction") and the Quantom Transaction (as defined below) and to explain why the Board considers it to be in the best interests of the Company and Shareholders as a whole and why they recommend that Shareholders vote in favour of the Resolutions to be proposed at the General Meeting. 2. The Transaction (a) Background In May 2006 Horizonte was admitted to trading on AIM. At that time, the Company's primary focus was on the identification and acquisition of gold and base metal projects in Brazil and Peru and on the appraisal and resource definition of these projects by undertaking various exploration and development activities. Depending on the results from such activities, the Company would seek to enter into partnership/joint venture arrangements with mineral exploration and production partners, who would incur the cash investment required to further develop these projects while allowing the Company to retain a long term economic and/or financial interest in each such project. Horizonte currently has a portfolio of gold, silver and base metal projects in Brazil and Peru with the main focus in Brazil being the world class Carajás Mineral District in northern Brazil, where the Company's core gold and nickel projects are located. The Directors believe these projects have the potential to host significant mineralised systems and are surrounded by and adjacent to large mining projects, with good transport links and proximity to established production infrastructure. Horizonte has already entered into strategic partnerships with two major mining companies, a mid-tier gold producer and a Brazilian mining company as follows: · an exploration alliance with AngloGold Ashanti Limited ("AngloGold") in the Santana area and the Campestre area, both in Brazil; · an exploration alliance with LGA; · a strategic alliance with Troy Resources NL ("Troy") at the Tangara gold project; and · a strategic alliance with Barrick Gold Corporation ("Barrick") to develop the Pararapa gold project in Peru. The Directors believe that these partnerships demonstrate the ability of Horizonte's management to locate partners for joint venture arrangements in South America, particularly Brazil, and that certain of the major mining companies already recognise Horizonte's ability to generate and develop new exploration projects. A competent person's report ("CPR") on Horizonte's assets containing a description of the material strategic partnerships (and those assets of Teck Brazil being acquired by Horizonte under the Transaction) is set out in Part IX of this document. Lontra and Araguaia Nickel Projects Lontra is a 221 km² exploration land holding and is one of the Company's advanced projects in the northern state of Para in Brazil. Lontra was a grassroots discovery by Horizonte, identified using a regional multi-element stream sediment survey and follow-up soil sampling programme undertaken in 2007. In late 2007, an auger drilling programme commenced and was followed by a successful 60 diamond drill hole programme in 2008. Lontra is currently 50 per cent. owned and controlled by Horizonte whilst the Company's Brazilian partners own the remainder. Lontra lies within the Araguaia mobile belt approximately 200km south east of the main Carajás mineral province and 80km to the south of Xstrata's Serra da Tapa deposit. It is also adjacent to Teck Brazil's Araguaia nickel project ("Araguaia") and is serviced by good infrastructure with access by tar sealed and all weather dirt roads. The Araguaia mobile belt is a significant new nickel province. Major mining companies are already present in the region with Xstrata plc's Serra da Tapa nickel resource containing an Inferred Resource of 73Mt grading 1.56 per cent. nickel. Araguaia is an advanced exploration stage nickel project owned and explored to date by Teck through its wholly owned subsidiary, Teck Brazil. It is located directly to the south east of Lontra. Teck has completed 10,314m of drilling in 492 drill holes at Araguaia resulting in the grassroots discovery of a significant zone of mineralisation. The Directors believe Araguaia also contains potential for the identification of new targets and for the expansion of the mineralised nickel laterite inventory at the targets already identified. The combined nickel projects of Araguaia and Lontra will comprise 11 licences and licence applications across 73,000 hectares with 8 significant mineralised zones. The Directors believe this will enable Horizonte to work towards delineating a resource in excess of 100Mt of nickel laterite with economic grades in a region with established infrastructure. Neither Lontra nor Araguaia contain JORC or NI 43-101 compliant Mineral Resources and the mineral inventory is conceptual in nature as there has been insufficient exploration to define a classified Mineral Resource. Further information on Lontra and Araguaia is set out in Parts II (Information on Horizonte), III (Information on Teck Brazil), IV (Information on the Combined Lontra and Araguaia projects) and IX (the CPR) of this document. (b) Summary of the Transaction The Transaction will result in Horizonte acquiring Araguaia from Teck through the acquisition of Teck Brazil. Consideration payable to Teck will be in the form of new Ordinary Shares. Horizonte will also acquire the remaining 50 per cent. interest in Lontra. The Transaction can be summarised as follows: 1. Acquisition of Araguaia by Horizonte The Brazilian nickel laterite project, Araguaia, is held by Teck through its wholly owned Brazilian incorporated subsidiary, Teck Brazil. Horizonte's acquisition of Araguaia will involve Horizonte purchasing the entire issued share capital of Teck Brazil from Teck conditional, among other things, on Horizonte raising at least GBP5 million (before expenses) pursuant to the Placing. The consideration for Teck Brazil will be satisfied through the issue by Horizonte to Teck of the Consideration Shares, being such number of Ordinary Shares as will equal 50 per cent. of the Enlarged Share Capital. Horizonte currently has 59,019,096 Ordinary Shares in issue. At a price of 10 pence per Placing Share, Horizonte will issue 51,261,144 Placing Shares. A further 10,000,000 Ordinary Shares will be issued to Quantom in consideration for the acqusition of the remaining 50 per cent. of Lontra (the "Quantom Shares") and a further 3,000,000 Broker Shares will be issued to satisfy amounts due to Westhouse in respect of advisory fees and commissions relating to the Transaction. Accordingly, as Consideration Shares, Horizonte will issue 123,280,240 Ordinary Shares to Teck. 2. Horizonte fundraising and defined use of funds The Acquisition is conditional upon Horizonte raising a minimum of GBP5 million (before expenses) and Horizonte has agreed to a predefined application of a proportion of the funds. A proportion of the proceeds of the Placing will be used on further drilling of the Enlarged Group's nickel laterite project (including Lontra) to produce a JORC or NI 43-101 compliant resource and further drilling at its gold projects. Further details of the agreements governing the Transaction are described below under "Principal Terms of the Transaction" in this Part of the document and in the summaries of material contracts contained in Part X of this document. Teck Brazil Teck Brazil is a wholly owned subsidiary of Teck. It was incorporated as Teck Participações Ltda in Brazil on April 5, 1994 with Federal Taxpayer registration No. CGC 97.515.035/.0001-03. As a result of the recent global financial crisis, combined with Teck's acquisition of additional Canadian coal assets in late 2008, Teck chose to focus its near term discretionary spending on its active producing assets and certain select development projects. As a result Teck reduced exploration and development expenditures on certain other projects, non-core commodities and in certain jurisdictions where it does not have active mines. As a result, whilst Teck Brazil continues to hold Araguaia, it has not advanced Araguaia since November 2008. With its current focus upon its core assets, Teck considered its options for Araguaia with the objective of further developing the project whilst maintaining a significant equity interest. Quantom Transaction The Company has also entered into an agreement to acquire the 50 per cent. interest in Lontra not currently held by the Horizonte group by virtue of the acquisition from Quantom Holdings Limited ("Quantom") of 50 per cent. of the capital of Lontra Empreendimentos e Participações Ltda ("Lontra Ltda") (a newly incorporated Brazilian company into which the Lontra mineral concessions are being transferred pursuant to a pre-sale reorganisation (see paragraph 8.5 of Part x of this document for further information)) (the "Quantom Transaction"). In consideration for the purchase of Lontra Ltda, Horizonte will issue to Quantom the Quantom Shares, being such number of new Ordinary Shares equal at the Placing Price to a value of GBP1 million. This agreement will result in Horizonte owning and controlling 100 per cent. of Lontra alongside its 100 per cent. ownership of Araguaia. Completion of the Quantom Transaction is intended to take place on Admission. (c) Reasons for the Transaction The Acquisition gives Horizonte the opportunity to acquire an advanced nickel project for consideration in Ordinary Shares without incurring any additional (MORE TO FOLLOW) Dow Jones Newswires July 27, 2010 02:30 ET (06:30 GMT)