Letter of Intent Signed
December 22 2005 - 7:28AM
UK Regulatory
Ovoca Resources plc
OVOCA GOLD PLC
OVOCA SIGNS HEADS OF AGREEMENT TO ACQUIRE 74 MILLION OUNCE SILVER DEPOSIT IN
NORTH-EAST RUSSIA
Ovoca Gold plc, ("Ovoca" or "the Company") the London AIM (OVG.L) and Dublin IEX
(OVX.IR) traded exploration company is pleased to announce that it has signed a
heads of agreement to acquire a 74% controlling interest in CJSC Ayax
Prospectors Artel company ("Ayax"), a Russian company which owns the Goltsovoe
silver deposit in the Magadan oblast in Eastern Russia.
Subject to satisfactory completion of additional due diligence over the next 3
to 4 months, and any regulatory approvals required in Dublin and London, Ovoca
will acquire 74% of the equity in Ayax for 110 million Ovoca new ordinary shares
together with a payment of $1m within six months of signing the acquisition
agreement. Ovoca will also have the option at its sole discretion to acquire the
remaining 26% of the equity of Ayax at any time between the first and second
anniversary of the signing date. Under the heads of agreement Ayax will have the
right to appoint three directors to the Ovoca Board upon completion of the
acquisition agreement.
Ovoca has been in discussions with the shareholders of Ayax since early
September 2005 and, with the assistance of GBM Minerals Engineering Consultants
Limited of the UK ("GBM"), has invested some 300 man days evaluating their
Goltsovoe Silver project in Magadan. The Company has instructed DentonWildeSapte
and Deloitte & Touché, who have completed preliminary legal and financial
reviews of Ayax from their Moscow offices
The Goltsovoe deposit is located in the district of Omsukchan in the Magadan
Oblast. It is 69 kilometres from the regional administrative centre of Omsukchan
and is accessed by a good all-weather road. A 110 kV power line and telephone
communications run along the Magadan-Omsukchan highway. It is close to Bema Gold
Corporation's Julietta Mine and near the famous Dukat silver deposit.
Ovoca and GBM have completed a study of the resources, mining methods, mineable
reserves, processing and infrastructure as well as capital and operating costs
estimates for a 260,000 tonne a year underground mine, with a 10 year mine life.
Considerable metallurgical testwork has already been completed by Ayax, and GBM
has carried out a detailed evaluation of the work done and have recommended a
mine and process plant design. Source data has been taken from a previously
completed Russian study prepared by the Institutes VNII-I-Magadan and TsNIGRI
(Moscow) and JSC NBL-Gold, independent metallurgical and engineering
consultants.
Goltsovoe is an advanced stage project with C1 and C2 resources, in accordance
with Russian geological estimation standards. These have been determined based
on extensive drilling and underground exploration development conducted by the
Dukat Geological Mission and were approved by the Soviet State Committee for
Reserves (GKZ) in 1987 at a cut-off grade of 50 grammes per tonne silver. A
recalculation of the resources at various cut off grades has been completed by
Ayax and a revised resource at a 150 gramme per tonne cut-off grade is being
submitted to GKZ for approval. The recalculated resource at a 150 gramme per
tonne cut-off grade will be audited during the due diligence process.
The Goltsovoe Resources as calculated by Ayax, in accordance with Russian
geological estimation standards, at 150 grams per tonne silver cut-off grade are
as follows:
Category Ore tonnes Silver Grade g/t Silver ozs
C1 1061.66 1136.68 38,799,000
C2 1413.88 781.28 35,515,000
---------------------------------------------------------------------------------
C1+C2 2475.54 933.70 74,314,000
(Gold equivalent resources 1,239,000 ounces)
GBM have evaluated the metallurgical testwork that had previously been completed
by VNII-I-Magadan and TsNiiGRI (Moscow) and have estimated the following data
for the project.
Mineable Reserves 2,400,000 Tonnes
Annual Production 260,000 Tonnes/year
Average Diluted Silver Grade 752 Grams per tonne
24.2 Ounces per tonne
Average Lead Grade 2.46 %
Operating Cost 71 US$ per tonne ore
Average Cash Cost of Production 2.41 US$ per ounce of silver
Pre Production Capital Cost 65 US$Millions
Commenting on this potential major acquisition Roger Turner, Chairman of Ovoca,
stated:-
"This high-grade, advanced-stage, silver project will allow Ovoca to commence
feasibility studies as soon as the acquisition is complete. We will work closely
with Russian, as well as Western, engineering groups to complete a bankable
feasibility study and obtain all of the required permits and approvals for early
construction. In the earlier years of the mine life we believe a production rate
of over 6 million ounces of silver a year can be achieved and the exploration
potential is good. The three designated Russian Directors who will join the
Ovoca Board are already successful businessmen in their own right. They will
bring committed and strong support to Ovoca, not only for the Goltsovoe project
but also our project in Kola, and possible additional mine and mineral deposit
acquisitions throughout Russia. We have developed a good working relationship
with them over the past months and I look forward to working with them in the
future. Goltsovoe has the potential to be one of the lowest cost silver
producers in the world and we have the experience of building and commissioning
mines within the Former Soviet Union. We will try to complete the technical,
financial and legal due diligence, and obtain the required approvals, to close
this acquisition as quickly as possible. Once done this will be Ovoca's flagship
project and has the potential to make Ovoca a profitable mid-tier producing
mining company with a secured future"
For further information please contact:
Barrie Oakes -CEO +44 (0)795 1139266
Roger Turner - Chairman +44 (0)7739 092 813
Kevin Lynch - Nabarro Wells & Co Limited +44 (0)20 7710 7400
John Frain - Davy Corporate Finance + 353 (0)1 679 6363
Emma Priestley - Ambrian Partners Limited +44 (0)20 7776 6465
Connexions PR - Tom McCormack + 353 (0)86 245 4215
+ 353 (0)1 230 3015
Ovoca Gold (LSE:OVG)
Historical Stock Chart
From Jun 2024 to Jul 2024
Ovoca Gold (LSE:OVG)
Historical Stock Chart
From Jul 2023 to Jul 2024
