Horizonte Minerals Acquisition Of Teck Cominco -6-

27th Jul 2010 07:30

the highs of 2007 and the complementary lows induced by the world financial crisis of 2008/9, have levelled out. Since March 2009, the price of nickel has shown a steady rise from under US$5/lb to between US$9 and US$12 in recent months. In the medium and long terms, despite inevitable short term fluctuations, it is expected that the market for nickel will continue to grow, in particular to meet the demands of the developing Asian nations. 5. Current Trading and Prospects Horizonte has strategic partnerships with four companies: AngloGold, Troy, LGA and Barrick, with which the Company is working to develop its multi-commodity portfolio and explore further development opportunities in Brazil and Peru. Horizonte has a generative pipeline of early stage projects in development and has established a 50:50 joint venture company with LGA to finance the development of the Crixás, Goiás Velho, Carajás Norte, Lobo and Araguari, and Itajobi pipeline projects, and identify and acquire suitable bolt-on mineral projects in Brazil. Furthermore, Horizonte signed a US$5.3 million three year joint venture in September 2009 with AngloGold to focus on target generation and potential acquisitions of gold projects in Brazil. Additionally, the Company has two primary projects situated in the Carajás Mineral Province of northern Brazil being advanced towards a resource definition: Lontra and the Tangara gold project, for which the Company signed a US$2.8 million option agreement to advance the project with Troy in December 2007. On 26 November 2009, Horizonte announced positive metallurgical results from Lontra. The highlights of this announcement were: (i) bottle role leach results at Lontra indicated suitability for the low cost heap leach process; (ii) significant nickel and cobalt recovery with low acid consumption in the limonite zone; (iii) an average nickel recovery of 92 per cent. and an average cobalt recovery of 82 per cent. in the transition and silicate zones; (iv) the completion of soil geochemical sampling to define additional targets; and (v) the plan to drill in 2010 to define a JORC compliant resource. On 9 December 2009, Horizonte announced that it had expanded its exploration portfolio through a successful priority application with LGA for the Tucuma nickel project, a mineral exploration licence in the western part of the Carajás Mineral Province. On 11 February 2010, Horizonte announced an exploration update. The highlights of this announcement were: (i) the planned commencement in the second quarter of 2010 of resource definition drilling at Lontra; (ii) a new phase of targeting by Troy at the Tangara gold project; (iii) the commencement of a regional programme and targets generated by AngloGold in respect of its exploration alliance with the Company; and (iv) the expansion of the portfolio with LGA following the acquisition of prospective ground at the Tucuma nickel project. On 19 May 2010, Horizonte released an update on its three year exploration alliance with AngloGold. The highlights of this announcement were: (i) nine priority gold and multi element anomalies generated from sampling in the Campestre region; (ii) the best anomaly having a peak of 41.3ppb Au; (iii) 485 stream sediments year to date were taken in Campestre; (iv) 613 supporting rock samples, with a high of 18.3g/t Au; (v) ground applied for in Campestre totalling 71,738 hectares (717 km²); and (vi) total ground holding now under application in Brazil being 163,366 hectares (1,633 km²). Full details of the status of the Company's projects are contained in the CPR in Part IX of this document. On Admission, the Directors anticipate that the Enlarged Group will have cash resources (including the net proceeds of the Placing) of approximately GBP4.99 million. 6. Anglo Pacific Group Plc Horizonte has entered into a non-binding memorandum of understanding with Anglo Pacific Group Plc ("Anglo Pacific") in respect of an offer to pay to the Company US$500,000 in exchange for an option for Anglo Pacific to acquire a net smelter royalty ("NSR") on production at Araguaia exercisable by Anglo Pacific on the completion of a positive, industry standard pre-feasibility study on Araguaia with a maturity date of six years from the date of the proposed agreement. The exercise period will be the earlier of 120 days from receipt of the positive pre-feasibility study or the maturity date. Upon exercise of the option, Anglo Pacific shall pay to Horizonte a further US$12.5 million and shall receive NSR at the rate of 1.5 per cent. of revenue on production at Araguaia up to 30,000 tonnes per annum, reduced by 0.02 per cent. for every 1,000 tonnes per annum above this rate. Above 50,000 tonnes per annum that rate will be 1.1 per cent. and fixed at this level. The outline terms of the option have been agreed in a memorandum of understanding, which is not legally binding, but it is intended that they will be finalised in a definitive binding royalty agreement after Admission. As Anglo Pacific is a substantial shareholder in Horizonte, any agreement between Anglo Pacific and Horizonte will constitute a related party transaction under the AIM Rules for Companies. The Directors, having consulted with Westhouse, the Company's nominated adviser, have considered the terms of the proposed transaction with Anglo Pacific and consider them fair and reasonable insofar as Shareholders are concerned. 7. Admission and CREST Application will be made for the Enlarged Share Capital to be admitted to trading on AIM. Admission is expected to take place, and dealings in the Enlarged Share Capital are expected to commence on AIM, at 8.00 a.m. on 13 August 2010. The Consideration Shares and Quantom Shares will initially be issued in certificated form but, following Admission, all Ordinary Shares, including the Consideration Shares and Quantom Shares, may (subject to applicable overseas laws) be held in either certificated or uncertificated form. It is expected that the Placing Shares will be delivered in CREST immediately following Admission, except where definitive share certificates are requested, in which case certificates will be posted by first class post as soon as is practicable. No temporary documents of title will be issued in connection with the Placing. CREST is a paperless settlement procedure enabling securities to be evidenced otherwise than by a certificate and transferred otherwise than by a written instrument in accordance with the Uncertificated Securities Regulations 2001. The articles of association of the Company permit the holding of Ordinary Shares under the CREST system. The Existing Ordinary Shares are, and the Consideration Shares, Quantom Shares and the Placing Shares will be, in registered form and no temporary documents of title will be issued. The Ordinary Shares have been admitted to CREST and accordingly enabled for settlement in CREST on the date of Admission. Accordingly, settlement of transactions in Ordinary Shares following Admission may (subject to overseas laws) take place within the CREST system if any Shareholder so wishes. CREST is a voluntary system and holders of the Ordinary Shares who wish to receive and retain share certificates will be able to do so. 8. Lock-in and Orderly Market Agreements Following the Transaction and the Quantom Transaction, the Directors will be interested in an aggregate of 6,522,142 Ordinary Shares representing 2.65 per cent. of the Enlarged Share Capital on Admission. Each of the Directors has agreed that he will not dispose of any interest in the Company's share capital held by him at Admission for a period of 12 months following Admission except in strictly limited circumstances. Both Teck and Quantom have agreed that they will not dispose of any interest in the Consideration Shares or the Quantom Shares as applicable for a period of 12 months following Admission except in strictly limited circumstances. Further details of these agreements can be found in Part X of this document. 9. Dividend Policy The Directors believe that the Company should seek to generate capital growth for Shareholders through the appraisal, exploration and appropriate development of gold, silver and base metals projects in producing mineral districts in Brazil and Peru. It is not anticipated that the Directors will recommend a dividend in the short to medium term following Admission. Thereafter, it is the Directors' intention to pay dividends when it is commercially prudent to do so, taking into account the availability of distributable reserves, the appropriate level of dividend cover and the capital necessary to grow the business. 10. Corporate Governance The Directors recognise the importance of sound corporate governance and intend to observe the requirements of the Code of Best Practice, as published by the Committee on Corporate Governance published by the Financial Reporting Council in June 2008 (commonly known as the "Combined Code") and, when applicable, the UK Corporate Governance Code, published by the Financial Reporting Council in May 2010, to the extent they consider appropriate in light of the Company's size, stage of development and resources. The Company further intends to comply with the principles of the Corporate Governance Guidance for AIM Companies published by the Quoted Companies Alliance in 2005. Following Admission, the Board will comprise two executive directors and three non-executive directors. The Company will hold Board meetings throughout the year at which reports relating to the Group's operations, together with financial reports, will be considered. The Board is responsible for formulating, (MORE TO FOLLOW) Dow Jones Newswires July 27, 2010 02:30 ET (06:30 GMT)