RE: Great Newsandorin Goldfields Inc (C-MGD) - News Release
Mandorin Goldfields to acquire Kiepersol colliery project
2006-03-20 05:50 ET - News Release
Shares issued 103,093,623
MGD Close 2006-03-17 C$ 0.06
Mr. Errol Smart reports
MANDORIN GOLDFIELDS INC.: IMPROVED TERMS COLLIERY ACQUISITION SIGNED; IMPROVED TERMS ACQUISITION DOCUMENTATION SIGNED
Mandorin Goldfields Inc.'s joint venture project development company, Duration Gold Ltd. (DGL), has signed a binding heads of agreement to acquire: the long mine-life Kiepersol colliery project in South Africa; and mine-life usage of a private railway siding on the main export rail line to Richards Bay, South Africa. The new binding heads of agreement replaces the previous binding, written and signed undertakings exchanged by the parties with respect to the terms of the purchase.
The original purchase terms (outlined in the Mandorin news issued in Stockwatch on Dec. 19, 2005), have been materially improved with the agreement now stipulating that DGL will hold a direct 70-per-cent interest (with an additional 4 per cent being made available for management incentivisation). The cash purchase consideration is $10.2-million, plus a maximum of $250,000 (South African rand 1,333,333) for potential taxation liabilities. DGL, or a subsidiary, proposes to undertake an equity issue to finance the acquisition. Completion will be subject to Duration and the vendors fulfilling conditions, including receiving appropriate regulatory approvals.
Snapshot of the project economics
In late 2005, Mandorin financed the completion of a positive, independently prepared (Badger Mining & Consulting) bankable feasibility study (BFS) on the Kiepersol colliery project.
The BFS life-of-mine (owner-operated) net operating "profit after tax" is estimated to be $208-million (1.2 billion South African rand) at an average unit revenue of $60 per tonne (327 South African rand per tonne).
The BFS has been based upon 100% debt financing at a 15% interest rate.
All technical information contained in this release has been extracted from previously posted news and is represented here solely for convenience.
The project has an assessed life of 17 years, during which time production sourced exclusively from reserves, as exhibited in the news issued in Stockwatch dated Dec. 19 and 21, 2005, are mined. The mine is expected to deliver the first product for sale in the seventh month after commencing mine development. The project contemplates a staged development reaching peak production of 100,000 tonnes (ROM) at the end of the third year of the mine life. This production will be from both bituminous and anthracite coal reserves. The bituminous reserves are depleted in the 10th year of the project, where-after the rate of production reduces to 50,000 tonnes per month of anthracitic coal only. The coal is suitable for either domestic consumption or for export.
Errol Smart, chief executive officer of Mandorin and DGL, today commented: "I am pleased to be able to announce the renegotiated terms for the purchase of Kiepersol colliery. I am sure that our investors will be pleased to see that their patience has paid off, and that after concerted effort, we have achieved vastly improved terms.
Mandorin as a founding partner, currently retains a 39-per-cent direct equity holding in DGL, and will benefit significantly from this substantial acquisition. The BFS indicates that the Kiepersol project has a baseline net present value (real terms discount rate of 10 per cent) that currently exceeds $70-million and allowing for DGL having 70 per cent of the project, Mandorin is effectively exposed to a 27.3-per-cent beneficial interest in the project.
The strong cash flows indicated in the BFS combined with us securing the use of a critical private rail siding on the main export conduit to Richards Bay, make this project a key foundation asset. It gives us the ability to play the role of a regional consolidator. We will now turn our attention toward acquiring additional projects that can benefit from our centralized infrastructure."
Qualified persons
Scientific and technical information relating to geological information and resource estimation for the Kiepersol project was prepared by independent qualified person, Rob J. Whyte (PrSciNat). Technical mining assessment, financial evaluation and reserve estimation was undertaken by Clarkson Muzoriwa (FZIE, MSc Engineering) of Badger Mining and Consulting under the supervision of independent qualified person, Neville E. Roberts (PrEng, FIMM)
Mandorin's technical reports are verified by Peter Haworth (PrEng; PrSciNat), vice-president of mineral resource development of Mandorin, acting as Mandorin's qualified person.
We seek Safe Harbor.