VMS Vortex Metals Inc

Orsu Metals Corporation ("Orsu" or the "Company") (TSX:OSU)(AIM:OSU) announces
the signing of a definitive sale and purchase agreement (the "SPA") to sell its
Varvarinskoye Gold-Copper Project in Kazakhstan (the "Varvarinskoye Project") to
OJSC Polymetal ("Polymetal"). The total consideration for the sale of the
Varvarinskoye Project is approximately US$235 million, comprising US$8 million
in cash payable on closing plus deferred consideration of up to a maximum of
US$12 million in cash which is contingent on and calculable by reference to the
future price of both gold and copper plus the assumption or transfer of over
US$215 million in debt and hedging obligations related to the financing of the
Varvarinskoye Project.


The sale is not conditional on financing but is subject to certain conditions
(outlined further below) being satisfied. Assuming the satisfaction or waiver of
such conditions, the Company anticipates completing the sale during Q3 2009.
Upon completion Orsu will have no outstanding long-term debt and intends to use
the proceeds from the sale of the Varvarinskoye Project to fund the Company's
operating costs and to fund ongoing exploration activities on its existing
properties, as well as any new properties acquired by it.


Commenting on the sale, Dr Sergey V Kurzin, Executive Chairman of Orsu stated:
"Proceeds from this sale will allow Orsu to focus on developing its exploration
and growth assets with renewed vigour with a substantially stronger balance
sheet. After extended negotiations with the banks to re-finance the
Varvarinskoye debt and hedging facilities, the Board believes that the sale will
release the Company from its current financial and legal burdens, enabling
directors and management to focus on providing Orsu shareholders with the
exploration, growth and development opportunities the Company is capable of
delivering."


Under the terms of the SPA, 100% of the shares in Three K Exploration and Mining
Limited ("ThreeK"), a wholly-owned subsidiary of the Company, will be sold to
Polymetal. ThreeK currently owns (directly and indirectly) JSC Varvarinskoye and
will on completion hold (directly and indirectly) all debt and hedging
obligations relating to the Varvarinskoye Project.


As set out in the Company's financial statements of 31 March 2009, the Company
had a working capital deficit of US$162 million, accumulated losses of US$536
million, shareholders' deficiency of US$103 million and had written down the
value of the Varvarinskoye Project by approximately US$189 million to a book
value of approximately US$72 million. A loss of US$221.5 million was
attributable to the Varvarinskoye Project in 2008 and US$25.9 million in Q1
2009. The Company currently has over US$215 million in debt and hedging
obligations relating to the Varvarinskoye Project. The Company was unable to
meet the debt repayment tranche under the Varvarinskoye facilities of US$16.65
million originally due on 31 December 2008. In addition, the Company has been
unable to meet its gold forward contract settlement obligations (in the
aggregate amount of US$11.82 million) as they have fallen due between January
and May 2009. On completion of the sale, Orsu will no longer be responsible for
any debt, hedging and guarantee obligations relating to the Varvarinskoye
Project. The Board of Directors of the Company has determined that the sale of
the Varvarinskoye Project is in the best interests of the Company.


Completion of the sale is subject to various significant conditions, including:
approval by a majority of Orsu shareholders; receipt of all necessary regulatory
consents including from the Kazakhstan authorities; approval of all lenders and
hedge counterparties to the Varvarinskoye Project (the "Bank Approvals"); and
definitive documentation being entered into in respect of the refinancing
arrangements required between Polymetal and the lenders in connection with the
Bank Approvals. Polymetal and the lenders have agreed to a heads of terms in
respect of the refinancing arrangements.


The annual and special meeting of shareholders of Orsu, at which shareholders
will be asked to consider and approve (among other matters) the sale of the
Varvarinskoye Project, is anticipated to be held at 10am in Orsu's London
offices on 10 July 2009. A shareholder's circular summarising the material
provisions of the SPA and providing further background and information in
relation to the transaction is expected to be mailed to all Orsu shareholders
shortly and will be made available at www.sedar.com and on the Company's
website.


Orsu's financial adviser in relation to this transaction is Endeavour Financial
and its legal advisors are Norton Rose LLP in the UK and MacLeod Dixon LLP in
Canada.


ABOUT ORSU

In addition to the Varvarinskoye Project, Orsu's other (exploration and
development) projects include the Karchiga Volcanogenic Massive Sulphide ("VMS")
deposit in Kazakhstan and the Talas and Tokhtazan exploration licence areas in
Kyrgyzstan. The business acquisition of Lero Gold Corp. ("Lero") in 2008
positioned Orsu as a premier growth company aggressively continuing the
exploration and development of its copper-gold projects in Kyrgyzstan and
Kazakhstan and pursuing new opportunities and acquisitions in countries of the
Former Soviet Union.


- Varvarinskoye Gold-Copper Mine, Kazakhstan - Located in north west Kazakhstan,
Orsu's 100% owned Varvarinskoye Project commenced production of gold dore in
December 2007 and copper-gold concentrate in March 2008. During the year ended
31 December 2008, the Varvarinskoye Project produced a total of 1,263,697 grams
(40,629 troy oz) of gold and 4,494 tonnes of copper recovered to concentrate.
Production during the first quarter of 2009 was reported as 423,627 grams
(13,599 troy oz) of gold and 1,743 tonnes of copper recovered to concentrate. In
January 2009, the Company completed an updated mine plan, including updated
mineral reserve and mineral resource estimates, for the Varvarinskoye Project.


- Talas Exploration Licence Area, Kyrgyzstan - The Taldybulak copper-gold
porphyry deposit is the primary exploration property within the Taldybulak-Talas
licence which comprises core assets of the Company in Kyrgyzstan including the
Taldybulak, Kentash, Barkol and Korgontash licences. In April 2008, the Company
completed a National Instrument 43-101 mineral resource estimate. At a 0.30g/t
gold cut-off, the Indicated resource is 79Mt @ 0.63g/t Au and 0.17% Cu with the
Inferred resources totalling 163Mt @ 0.58g/t Au and 0.14% Cu. In December 2008,
Orsu announced it had signed a joint venture agreement with Gold Fields for the
further exploration and development of the Talas licence area. The
recently-completed 2008 to 2009 drilling programme was designed to better
delineate the extent and geometry at Taldybulak Central and assess the
additional tonnage potential through the testing of peripheral targets along
strike to the east, north west and south of the central high grade core.


- Tokhtazan Exploration Licence Area, Kyrgyzstan - The Tokhtazan exploration
licence area is located in the Jalal-Abad Oblast, western Kyrgyzstan
approximately 100 km south from the Taldybulak deposit and is covered by two
exploration licences, Akdjol and Tokhtazan. The Tokhtazan prospect of
intrusion-related and shear-zone hosted gold was drilled by Cameco Inc in
1996-1998. Orsu's work of 2005-2008 confirmed the gold tenor identified by
Cameco using diamond and RC drilling, with a possibility to extend the
mineralization. The 2009 exploration programme is underway incorporating
trenching, reverse circulation and diamond drilling as well as samples
collection and analysis.


- Karchiga Copper Project, Kazakhstan - The 47.3km2 Karchiga exploration and
mining licence contains the Karchiga VMS deposit. The Karchiga copper-gold
deposit is located in the extreme north east of the Republic of Kazakhstan,
within 40km of the Chinese border and within the Rudny Altai belt which is
ranked in the top four VMS belts in the world. In April 2008, the Company
released a National Instrument 43-101 mineral resource estimate. At a 0.50%
copper cut-off, the Indicated mineral resource is 4.75Mt @ 2.46% Cu while the
Inferred mineral resources total 2.81Mt @ 1.81% Cu. The primary scope of the
on-going 2008 to 2009 exploration programme is designed to upgrade the
previously reported mineral resource estimate to Measured and Indicated
categories under National Instrument 43-101.


Qualified Persons and Technical Reports

Mr Matthew Boyes, who is Mineral Resources Manager for Orsu, and a "qualified
person" (as such term is defined in National Instrument 43-101), has reviewed
and approved the technical information in this press release in respect of
Orsu's mineral properties. Mr Boyes has verified the data disclosed in this
press release in respect of exploration results, including sampling and
analytical data underlying the information.


The mineral resource estimates at Taldybulak referred to in this press release
were prepared under the supervision of Matthew Boyes (Mineral Resources Manager,
Orsu), a 'qualified person' (as defined by National Instrument 43-101). These
results were also reviewed and approved by Wardell Armstrong International
("WAI"). However, WAI relied upon the data presented by Lero in formulating its
opinion. WAI's complete technical report respecting the mineral resource
estimates at Taldybulak (entitled "Technical Report on the Exploration Licences
held by Lero Gold Corporation In Kyrgyzstan & Kazakhstan, Central Asia" and
dated May 2008) can be viewed on www.sedar.com.


The mineral resource estimate at Karchiga referred to in this press release was
prepared by Matthew Boyes (Mineral Resources Manager, Orsu), a "qualified
person" (as defined by National Instrument 43-101). The mineral resource
estimation methodology was reviewed by WAI. Assays were conducted at the
internationally certified Alex Stewart Lab in Bishkek, Kyrgyzstan. Orsu operates
a stringent QA/QC policy that includes external certified standard samples and
blanks in each individual batch sent for analysis. WAI's complete technical
report respecting the mineral resource estimates at Karchiga (entitled
"Technical Report on the Exploration Licences held by Lero Gold Corporation In
Kyrgyzstan & Kazakhstan, Central Asia" and dated May 2008) can be viewed on
www.sedar.com.


Forward-looking Information

This press release contains forward-looking information which is not comprised
of historical facts. Forward-looking information involves risks, uncertainties
and other factors that could cause actual events, results, performance and
opportunities to differ materially from those expressed or implied by such
forward-looking information. Forward looking information in this press release
includes, but is not limited to, the total estimated value of the transaction,
the Company's intended use of proceeds from the sale, the expected effect of the
sale on the Company's ability to continue the exploration and development of its
other (exploration) properties, the expected terms and conditions of the sale,
the anticipated timing for the annual and special meeting of the shareholders of
Orsu, the anticipated timing for completing the sale, the Company's intentions
and expectations to continue discussions with Polymetal and the banks, its
ability to reach a satisfactory arrangement with respect to the sale of the
Varvarinskoye Project and/or the restructuring of the payments due under the
loan facility, including the hedging payments due under the facility, mineral
resource estimates and statements regarding potential mineral resources. Factors
that could cause actual results to differ materially from those described in
such forward-looking information include, but are not limited to, the parties'
respective ability to satisfy all conditions precedent to the completion of the
sale, including (but not limited to) the parties' respective ability to obtain
all required regulatory approvals , the shareholders of Orsu approving the sale,
adverse general market conditions, adverse changes in commodity prices, the
inability to enter into a definite arrangement with the banks with respect to
the restructuring payments under the loan facility, including hedging
obligations, failure to establish estimated mineral resources (the mineral
resource figures referred to in this press release are estimates and no
assurances can be given that the indicated levels of minerals will be produced)
and those other risks set out in the Company's public documents filed on SEDAR.

If the sale is not completed for any reason, including as a result of the
Company, Polymetal and the banks failing to reach an arrangement regarding
restructuring of payments under the loan facility and its hedging obligations,
there is a risk that, unless the Company raises additional financing in order to
meet its immediate loan facility and hedging obligations, or negotiates the
terms of repayment with the banks, the banks may demand immediate payment of the
amounts owing and enforce their security (which may result in the Company losing
its interest in the Varvarinskoye Project). Although the Company believes that
the assumptions and factors used in preparing the forward-looking information
are reasonable, undue reliance should not be placed on such information, which
only applies as of the date of this press release, and no assurance can be given
that such events will occur in the disclosed time frames or at all. The Company
disclaims any intention or obligation to update or revise any forward-looking
information, whether as a result of new information, future events or otherwise,
other than as required by law.


Additional information about the risks and uncertainties of the Company's
business is provided in its disclosure materials, including its Annual
Information Form, dated 24 April 2009 (the "Annual Information Form") available
under the Company's profile on SEDAR at www.sedar.com.

Vortex Metals (TSXV:VMS)
Historical Stock Chart
From Jun 2024 to Jul 2024

Vortex Metals (TSXV:VMS)
Historical Stock Chart
From Jul 2023 to Jul 2024