Erdene Resource Development Corporation press release
Kaoclay Announces Planned Acquisition by TSX Listed Nova Scotia Company - Erdene Gold Inc.
TSX - Toronto Stock Exchange · Gold · Silver · Lead · Zinc · Molybdenum · Antimony · Copper · Canada
Kaoclay Shareholders to Receive 1.65 Erdene Shares and a Half Warrant
HALIFAX, Feb. 21 /CNW/ - Kaoclay Resources Inc. ("Kaoclay") today announced it has reached an agreement with Erdene Gold Inc. ("Erdene") (TSX:ERD) whereby Erdene will acquire all of the outstanding shares of Kaoclay in exchange for shares and warrants of Erdene. "The board of Kaoclay sees this transaction as a strong positive for our shareholders," said Philip Webster, Chairman of Kaoclay Resources Inc. "We are very familiar with the strength of Erdene's management team, which has accomplished a great deal in the last year. We believe they have the experience and ability to realize the value of the Kaoclay assets. This gives our shareholders ownership in a Nova Scotia based TSX-listed Company with strong international relationships and an exciting portfolio of exploration properties and also strengthens our association with Xstrata." "This acquisition will be an ideal combination of strengths, adding Kaoclay's established mineral resources in North America to Erdene's high potential mineral and energy properties in Mongolia," said Peter Akerley, President and CEO of Erdene Gold Inc. "The Kaoclay assets have significant upside potential and are well managed by internationally recognized partners who are leaders in their respective fields. We believe adding assets of this magnitude to our portfolio creates a much stronger company and will create significant long-term value for our shareholders." Erdene is a Nova Scotia based, diversified mineral exploration company focused on Mongolia with over 20 mineral exploration projects that include 68 licenses and cover approximately four million acres. Significant projects include the Zuun Mod molybdenum-copper project, the Central Basin Uranium Projects (International Uranium Corporation Joint Venture), the Ikh Tal- Erdenet Mine copper exploration program where high priority targets have been identified adjacent to Mongolia's largest mining complex, the Tsenkher Gol Gold project targeting a granite hosted disseminated gold target and the Galshar coal program, where programs are underway to determine coal quality. Further information about Erdene can be obtained on the Company's web site at www.erdene.com.
Details of the Transaction
Erdene is listed on the Toronto Stock Exchange (TSX) under the symbol ERD, has 30,599,933 shares outstanding (before the issuance to Kaoclay Shareholders) and a fully diluted share position of 35,188,910 common shares. Kaoclay has 8,979,950 shares outstanding. Under the terms of the Agreement, each Kaoclay share will be exchanged for 1.65 Erdene shares plus a half warrant, with each full warrant entitling the holder to purchase an Erdene share at $1.60 for a period of three years from closing. Kaoclay will be entitled to name 2 nominees to the Board of Directors of Erdene. The transaction must be approved by the shareholders of Kaoclay and is subject to the receipt of all required regulatory and court approvals. All of the directors of Kaoclay who own or control Kaoclay shares have agreed to vote their shares in support of the acquisition. If all required approvals are received, it is expected that closing will take place in May. Based on yesterday's closing price of Erdene shares of $1.05 per share, this puts an approximate value of $15.6 million on the transaction. This transaction is subject to the approval of Kaoclay shareholders at a special meeting to be announced. Notice of the meeting and an information package will be distributed to all shareholders once all required information has been prepared.
Highlights of the Transaction
Creates a larger, stronger, TSX-listed company with the ability to capitalize on diversified high-growth commodities in the short term and exposure to Chinese demand and the developing Mongolian mineral sector in the longer term Provides Erdene shareholders with near-term cash flow opportunities from three advanced-stage projects to provide shareholder value and help fund exploration in Mongolia Provides Kaoclay shareholders with access to Erdene's high potential base metal, precious metal and energy exploration properties in Mongolia Kaoclay's projects are all operated by joint venture or lease partners who are leaders in their respective fields, which means Erdene's operational resources will not be significantly impacted Adds greater liquidity and strengthens the Erdene shareholder base Builds on the partnership with Xstrata Coal, which owns 9.8 per cent of Erdene and 66% of the Xstrata Donkin Coal Alliance with Kaoclay Erdene is well financed with a current working capital position of approximately $7.0 million.
Since going public in March, 2004, this is the second strategic acquisition for Erdene. The first, announced in March, 2005 involved the purchase of significant mineral properties from Mohammed AlFayed's Gallant Minerals Limited. Erdene has also secured three alliances with strategic partners that have contributed to its growth. The first, announced in April, 2005 was an alliance with International Uranium Corporation to explore uranium deposits on Erdene's Mongolian properties. The second, announced in June, 2005 was with Erdenet Mining Corporation, Mongolia's largest copper-molybdenum producer, to explore new porphyry-style copper deposits near their mining operations. Most recently Erdene announced on February 14, 2006 that Xstrata Coal Canada Limited ("Xstrata"), a wholly-owned subsidiary of Xstrata, plc and Kaoclay's 66% partner in the Xstrata Donkin Coal Alliance, acquired a 9.8% equity interest in Erdene by investing $3 million and agreed to collaborate to develop Erdene's promising projects, with a particular focus on coal.
Forward-Looking Statements
Certain information regarding the Company contained herein may constitute forward-looking statements within the meaning of applicable securities laws. Forward-looking statements may include estimates, plans, expectations, opinions, forecasts, projections, guidance or other statements that are not statements of fact. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct. The Company cautions that actual performance will be affected by a number of factors, many of which are beyond the Company's control, and that future events and results may vary substantially from what the Company currently foresees. Factors that could cause actual results to differ materially from those in forward-looking statements include market prices, exploitation and exploration results, continued availability of capital and financing and general economic, market or business conditions. The Company's forward-looking statements are expressly qualified in their entirety by this cautionary statement. The information contained herein is stated as of the current date and subject to change after that date.
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