Option Agreement Signed
November 20 2006 - 10:26AM
UK Regulatory
Central China Goldfields plc
`GGG' or the `Company'
Option Agreement with Majestic Corp Signed
Introduction
Further to the announcements of 14 September 2006 and 31 October 2006, Central
China Goldfields plc (AIM: GGG) the mineral exploration and development company
operating in China, is pleased to announce that it has signed a conditional
option agreement ("Option Agreement") with Majestic Gold Corp. of Canada
(TSX.V: MJS)("Majestic").
The terms of the agreement grant the Company an option to acquire 50 per cent.
of Majestic China Mining Corp. ("MCMC"), Majestic's wholly-owned subsidiary.
Majestic's Chinese mining interests are held through its interests in five
BVI-incorporated companies, which are to become subsidiaries of MCMC (the "BVI
subsidiaries"). The BVI subsidiaries hold interests in three joint ventures in
China which have been fully established, and two joint ventures which are in
the process of being established (the "Joint Ventures"). The total investment
under the Option Agreement, in the event that the Company exercises all its
rights, is CAN$12.25 million (approximately �5.6 million) which will be used
for the exploration and development of these properties (the "Mining
Properties") and the transfer, exploration and development of two licences
relating to Song Jia Gou and Sawyaerdun properties (the "Mining Licences").
Details of the Mining Properties, including interests in the BVI subsidiaries
and interests in the principal assets of the BVI subsidiaries, are set out
below.
Following the exercise of the option and GGG's acquisition of a 50 per cent.
interest in MCMC, the Company will have the right to purchase the remaining 50
per cent. issued share capital of MCMC for not less than CAN$20 million by
either the payment of cash, or by the issue of ordinary shares in the Company
with an equivalent value.
Background to the Option Agreement
By entering into the Option Agreement, and by exercising the rights thereunder
and thus acquiring an interest in the Mining Properties and, potentially, the
Mining Licences the Directors believe that the Company will be able to move
into production sooner than would otherwise be possible. Following completion
of the Option Agreement, the Company will have interests in four projects that
can potentially develop into significant producers. The Option Agreement
provides the Company with a significant opportunity to pursue the Company's
strategic growth plans to become one of the leading mining and exploration
companies in China.
Principal Terms of the Option Agreement
The Option Agreement allows the Company to acquire up to 50 per cent. of the
issued share capital of MCMC for a total investment of CAN$12.25 million
(approximately �5.6 million). MCMC will own the rights and interests in certain
mining properties situated in China, notably the Song Jia Gou and Sawayaerdun
gold projects. The Company's investments under the Option Agreement will be
used for the exploration, development and transfer of the Mining Properties and
relevant Mining Licences.
An initial investment of CAN$1.5 million (approximately �700,000), due on 30
November 2006, will be followed, assuming the conditions under the Option
Agreement are satisfied, by a further payment of CAN$1.5 million due on 31
December 2006. If the Company decides to pursue the exercise of the Option, a
payment of CAN$4.5 million (approximately �2.1 million) will be due on 31
January 2007 and a further payment of CAN$4.75 million (approximately �2.2
million) on 30 September 2007. The final payment can be extended up to 31
December 2007 if the Song Jia Gou and Sawayaerdun mining licences, as well as
any remaining exploration licences, have not been transferred to the relevant
joint ventures.
The Option Agreement is conditional on certain conditions which can be waived
by the Company at its sole discretion. These conditions include, inter alia,
all applicable consents having been granted (other than passing of the special
resolution to be proposed to the shareholders of Majestic at the Majestic AGM
to approve the grant of the buyout right, further described below ("Special
Resolution")), transfer of the BVI subsidiaries to MCMC, amendment of third
party agreements to include the Company and MCMC and a minimum fundraising of �
5 million. If these conditions have not been satisfied or waived by the Company
by 31 December 2006, the Option Agreement will automatically terminate. In the
event of such termination, the Company will have the right to exercise its
conversion right, details of which are set out below.
The option to earn 50 per cent. of MCMC cannot be exercised until the entire
CAN$12.25 million investment has been made, and will automatically be deemed
exercised on the earlier of 31 December 2007 or confirmation from the project's
management committee (the "Management Committee") that the monies have been
spent on the Mining Properties and, if transferred, the Mining Licences.
In the event that the Company decides not to exercise the Option, after the
first CAN$1.5 million has been paid, but before payment of the final
instalment, the Company has the right to convert its total cash investment at
that date into ordinary shares in Majestic at a price of CAN$0.50 per share for
the first CAN$3 million invested and, using the weighted 10 days' average up to
and including the final trading day prior to the conversion, Majestic's market
share price for the remaining cash paid (the "Conversion Right").
Upon earning 50 per cent. of MCMC, the Company has the option to purchase the
remaining 50 per cent. of the issued share capital of MCMC for not less than
CAN$20 million, either by the payment of cash or through the issue of the
equivalent number of the Company's shares (the "Buyout Right").
Subject to the approval of the Buyout Right by Majestic's shareholders at
Majestic's AGM, to be convened before the end of February 2007, the Company
shall have the right to exercise the Buyout Right at any time up to and
including that date which is 90 days after the later of the date of exercise of
the Option and the date of the final report, which will report on all work done
on the Mining Properties and, if transferred, the Mining Licences using the
entire CAN$12.25 million of the Company's investment.
In the agreement Majestic has provided various representations and warranties
relating to the assets that will be acquired by the Company.
Majestic has covenanted with the Company that it will recommend to its
shareholders that they approve the Special Resolution.
The relevant exploration and mining licences are to be transferred to the Joint
Ventures once they are established. The final payment under the Option
Agreement will not be made unless the Song Jia Gou and Sawayaerdun mining
licences, as well as any remaining exploration licences, have been transferred
to the relevant Joint Ventures. The Directors have no reason to believe that
there will be any material difficulties with these approvals being granted.
The Principal assets subject to the Option Agreement: Song Jia Gou and
Sawayaerdun
The Company commissioned Golder Associates (UK) Limited ("Golder") to undertake
a due diligence audit and evaluation of the Song Jia Gou and Sawayaerdun
properties on behalf of the Company before signing the Option Agreement.
Song Jia Gou
Song Jia Gou is a near-production gold deposit with a pilot mining plant
capable of processing 120 tonnes of ore per day and four levels of extensive
underground development. The property is located in the Shandong Province of
China and lies on the Western edge of the Muping-Fushan Gold Belt which hosts
approximately 20 per cent. of the known gold deposits on the Jiaodong
Peninsula, which itself accounts for approximately 25 per cent. of China's
annual gold production. Wardrop Engineering Inc. ("Wardrop") carried out an
independent resource estimation at Song Jia Gou which produced an inferred
resource of approximately 13.5 million tonnes grading 0.88 g/t Au at a 0.5 g/t
Au cut-off grade (inverse distance method). Golder raised a number of concerns
over the resource model and made a number of recommendations to gain additional
confidence in the resource model.
With regard to Song Jia Gou Golder concluded "that the project has potential in
terms of geology, exploration potential and mining. The resource may increase
with more geological knowledge of the controls on mineralisation and further
drilling along the strike of the mineralisation. Reestimation of the resource
using alternative methods should be considered to determine the sensitivity to
smearing of grades within the current grade envelope. Mining is currently on a
very small scale. A comprehensive prefeasibility study is required in order to
confirm the viability of the project at increased production levels and at the
current gold price."
Sawayaerdun
The Sawayaerdun property, located in the Xinjiang Province, is situated in the
highly prospective Tian Shan Gold Belt. The belt hosts numerous world class
gold deposits including Muruntau (approximately 140 million oz) and Kumtor
(approximately 13.9 million oz). Wardrop carried out an independent resource
estimation at Sawayaerdun which produced an indicated resource of approximately
18 million tonnes grading 1.16 g/t Au and an inferred resource of approximately
24.4 million tonnes grading 1.09 g/t Au at a 0.5 g/t cut-off grade (Kriging
method). In the technical due diligence report commissioned from Golder, it was
noted that there was a potential inferred and indicated resource overestimation
of approximately 17 per cent. The report concluded that "Overall, the project
shows good exploration potential and the exploration program should continue.
There is not yet sufficient information to enable the project to progress to a
pre-feasibility study."
Full details of the Mining Properties are set out below.
Related Party Transaction:
Mr. John Charles Forrest, finance director of the Company, is also a director
of Majestic and currently holds 1.25 million ordinary shares (circa 1.5% of
current issued ordinary share capital of the Company), 1.25 million warrants
and 670,000 options in the Company. Mr. Forrest holds 200,000 options in
Majestic. Mr. Forrest is considered a related party for the purposes of this
transaction.
The directors (excluding Mr Forrest), having consulted with HansonWesthouse
LLP, the Company's nominated adviser, consider the terms of the transaction to
be fair and reasonable in so far as the shareholders are concerned.
Dr. Jeff Malaihollo, Managing Director of Central China Goldfields, commented:
"This is a very important agreement which we believe is a key step to achieving
our goal of becoming the premier player in mining and exploration in China. It
is our intention to continue to improve our asset portfolio through
exploration, the development of under-capitalised mines and through beneficial
corporate deals such as this."
For further information, please contact:
Central China Goldfields plc Hanson Westhouse LLP
Dr. Jeffrey Malaihollo Cailey Barker / Anita Ghanekar
Tel: 020 7621 0200 Tel: 020 7601 6100
Email: info@ccgoldfields.com
Website: www.ccgoldfields.com
Public Relations: Gresham PR Ltd King & Shaxson Capital Limited
Neil Boom Nick Bealer
Tel: 020 7404 9000 Tel: 020 7426 5986
Technical information in Company news releases has been reviewed and approved
by Dr. Jeffrey Malaihollo. He holds a BA and PhD in Geological Sciences and is
a Fellow of the Geological Society.
Additional Information:
Details of the Mining Properties
The following table sets out a list of the Mining Properties to be owned by
MCMC through the Joint Ventures and includes details of the exploration
licences, seven of which have been transferred and the remaining 13 which have
yet to be transferred to the Joint Ventures. Currently Majestic owns 90 per
cent. of each of the five BVI subsidiaries, which interests are to be
transferred to MCMC, but has the right to purchase the remaining 10 per cent.
third party interest using cash and/or shares.
The Option Agreement dictates that the 10 per cent. third party interest in
each of the existing BVI companies can be acquired by MCMC in consideration of
the issue to the relevant third party of ordinary shares of the Company and of
Majestic in proportion to their respective interests in MCMC.
Majestic has already entered into joint venture agreements for MJS Shandong
Gold Ltd. (BVI) and three exploration licences in Majestic Yantai Gold Inc.,
these being Dazai, Shugezhuang and Chenjiagou licences, with TSX-V listed Trans
America Industries Ltd. The Option Agreement entered into by the Company covers
Majestic's 45 per cent. interest (with the right to purchase an additional 5
per cent.) of these properties.
Name of Percentage Name of Principal Asset Name of Registered
the BVI of BVI other S (s) of BVI other holder of
Subsidiary Subsidiary hareholder Subsidiary, being Interested the Mining
owned by (s) of BVI the respective Parties and Property as
MCMC Subsidiary Chinese Percentage at 9
and Subsidiary and of Holding November
Percentage the respective of Chinese 2006
of Holding Existing Licence Subsidiary
(s)
Majestic 90% 10% held by 90% interest in Xinjiang Xinjiang
Tianshan Richard's Xinjiang Majes Baodi Mining Baodi
Gold Inc. Resource Mining Inc*** Ltd. holds Mining Ltd.
Technologies 10% of
Inc. Sawayaerdun Tianshan
Licence # Gold Inc.
6500000530248
(Centered: 40�
04'19"; North
latitude: 74�
126'30; East
longitude: 35.56
km�)
Majestic 90% 10% held by 60% interest* in Shandong Yantai
Yantai Richard's Yantai Zhongjia Yantai Zhongjia
Gold Ltd. Resource Mining Inc. Muping Gold Mining Inc.
Technologies Mine (China)
Inc. 13 Muping holds 40% of Yantai
Licences: Yantai Zhongjia
Zhongjia Mining Inc.
1. Song Jia Gou Mining Inc.
License # Yantai
3700000521468 Zhongjia
(Area: 4.11km Mining Inc.
�)
Yantai
2. Dazai Licence Zhongjia
# Mining Inc.
3700000521465
(Area: 11.63 Yantai
km�)* Zhongjia
Mining Inc.
3. Shugezhuang
Licence # Yantai
3700000521464 Zhongjia
(Area: 10.95 Mining Inc.
km�)*
Shandong
4. Chenjiaguo Yantai
Licence # Muping Gold
3700000521466 Mine
(Area: 4.10
km�)* Yantai
Zhongjia
5. North of Mining Inc.
Shuidao
Licence # Shandong
3700000521463 Yantai
(Area: 2.57 Muping Gold
km�) Mine
6. Houzhang Shandong
Heiniu Yantai
Licence # Muping Gold
3700000431275 Mine
(Area: 9.74
km�) Shandong
Yantai
7. Jialong Muping Gold
Licence # Mine
3700000521467
(Area: 6.66 Shandong
km�) Yantai
Muping Gold
8. Nan Kuang Mine
Licence #
3700000531399 Shandong
(Area: 3.07 Yantai
km�) Muping Gold
Mine
9. Helizhuang
Licence #
3700000531396
(Area: 7.17
km�)
10. ChangJia
Zhuang
Licence #
3700000531397
(Area: 1.02
km�)
11. WuZhua
Licence #
3700000530024
(Area: 9.57
km�)
12. Zhaodao
Mountain
Licence #
3700000630100
(Area: 1.03
km�)
13. Futai Licence
#
3700000531398
(Area: 4.44
km�)
Majestic 90% 10% held by 60% interest in Shandong Majestic
Jiaodong Richard's Yantai Jinfu Yantai Jinfu
Gold Ltd. Resource Mining Inc. Fushan DJY Mining Inc.
Technologies Gold Mine,
Inc. Fushan Licence # China holds
3700000531216 40% of
(Centred: 37� Yantai Jinfu
15'15"; North Mining Inc.
Latitude: 121�
19'00"; East
Longitude: 17.03
km�)
Majestic 90%** 10% held by 90% interest in Yantai Jinze Yantai
Shandong Troland Yantai Jinze Gold Mining and Jinze
Gold Ltd. Resources Inc. Technology Mining and
Inc. Ltd. holds Technology
2 Yantai 10% of Ltd.
Licences: Yantai Jinze
Gold Inc. Yantai
1. Licence # Jinze
3700000510712 Mining and
Technology
2. Licence # Ltd
3700000510828
Majestic 90% 10% held by 70% interest in China Shandong
Zhaoyuan Troland Yantai Ludi Shandong No. No. 3
Gold Ltd. Resources Jingang Gold 3 Mineral Mineral and
Inc. Mining Inc. *** and Geological
Geological Exploration
Jingang Licences: Exploration Institute
Institute
1. Licence # (China) Shandong
3700000630386 holds 30% of No. 3
(Yantai Yantai Ludi Mineral and
Geigezhuang Jingang Gold Geological
(SW)) Mining Inc. Exploration
(PRC) Institute
2. Licence #
3700000630255 Shandong
(Yantai No. 3
Muping Mineral and
Jicheng) Geological
Exploration
3. Licence # Institute
3700000410398
(Jiaodong
Basin (NE))
*Note: In respect of licences 2, 3 and 4 (the "Shandong Project"), Majestic has
assigned 50 per cent. of its interest to Trans America Industries Ltd.
**Note: Trans America Industries Ltd. has an option to acquire 50% of
Majestic's interest (i.e. 45 per cent. interest in Majestic Shandong Gold
Ltd.).
***Note: Joint venture currently under establishment.
Notes to Editors:
About Central China Goldfields:
AIM listed Central China Goldfields plc (AIM: GGG) develops and explores for
economically mineable Gold, Silver and Copper projects in China focusing on
areas with historical production where modern mine extraction methodology have
been under utilised. The company's core skill is to move under-valued
exploration assets quickly through to mine ready deposits. The Company is keen
to grow through exploration, development and acquisitions.
GGG's property portfolio is currently made up of two flagship projects: the
Snow Mountain Project in Sichuan Province (Carlin style), the Nimu
Copper-Molybdenum Project in Tibet (copper oxide) and three other projects: the
Dong Mao Huo Mine in Nei Menggu (oxide gold), the De Ming Ding Project in Tibet
(porphyry copper) and the Xiang Shui Tan Silver-Gold Project in Hubei Province
(vein type).
GGG's local partners have defined a total of 1,300,000 ounces of gold and >
600,000 tonnes of contained copper in these projects (all Chinese standards).
All properties are under-explored and GGG is actively developing these
projects, including a drilling programme at Snow Mountain and geophysical
survey at Nimu.
About Majestic Gold Corporation:
The Majestic Gold Corp. (TSX.V: MJS) is a Canadian gold exploration and
development company, with numerous property sites located within China's most
prolific gold belts. The company focuses on projects at or near the development
stage, where the potential for low-cost production can provide a greater return
on investment.
The Sawayaerdun property located in the Xinjiang Province is situated in the
highly prospective Tian Shan Gold Belt. The belt hosts numerous world class
gold deposits including Muruntau (140 million ounces) and Kumtor (13.9 million
ounces).
Majestic also has two properties located in the Shandong Province of China on
the Western edge of the Muping-Fushan Gold Belt, which hosts 20% of the known
gold deposits on the Jiaodong Peninsula. The Muping property consists of 13
exploration licenses, one of which is Song Jia Guo, and covers an area of 75.03
km2. The virtually unexplored Fushan Gold Property is located on the western
side of the belt and consists of a 17.03 km2 mineral exploration permit.
END
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