SRO Spitfire Oil Limited

    RNS Number : 0351I
  Griffin Mining Ld
  13 November 2008
   

    GRIFFIN MINING LIMITED
    60 St James's Street, London SW1A 1LE, United Kingdom
    Telephone: + 44 (0)20 7629 7772 Facsimile: + 44 (0)20 7629 7773
    E mail: griffin@griffinmining.com

    13 November 2008

    PURCHASE OF 39% INTEREST IN SPITFIRE OIL LTD

    RELATED PARTY TRANSACTION

    Griffin Mining Limited ("Griffin" or the "Company") announces that it has agreed to purchase 16,666,667 ordinary shares in Spitfire Oil
Ltd ("Spitfire"), representing a 39.2% interest in the issued share capital of Spitfire, at 15p per share for a total cash consideration of
�2,500,000 from Citadel Equity Fund Ltd ("Citadel").

    Background on Spitfire*

    Spitfire was incorporated on 2 May 2007 and on 11 July 2007 acquired the entire issued capital of Spitfire Oil Pty Ltd (formerly
Hurricane Fuels Pty Ltd) by way of a share swap. On 18 July 2007, Spitfire's shares were admitted to trading on AIM under the ticker "SRO".
At the same time, Spitfire placed 16,666,667 new Ordinary Shares with Citadel at 60p per share to raise �10,000,000 (before expenses).

    Spitfire's principal activity is the pursuance of the production of fuel oil and distillate from the Salmon Gums Lignite deposits in
Western Australia. Spitfire controls 6 exploration tenements totalling 519 km2 near Salmon Gums, near Esperance, in the south east of
Western Australia. As reported in Spitfire's Admission Document dated 13 July 2007 ("Admission Document"), the tenements contain a large
lignite (brown coal) deposit with a JORC Inferred Resource (>10m thick seam) of 500 million tonnes of lignite. The lignite has a high
Kerogen (hydrocarbon) content which, based on Spitfire's testwork, on a limited number of samples, indicates that oil may be recoverable
from the deposit at an average yield of approximately 69 litres per tonne of lignite (in situ) or 0.43 barrel per tonne. This implies a
potentially recoverable fuel oil resource of approximately 200 million barrels (or 33 billion litres) throughout the deposit. Salmon Gums is
located next to a main road, railway and pipeline connecting Kalgoorlie and the port of Esperance.  

    In the period from incorporation to 30 June 2008, Spitfire reported a loss before tax of A$2.8m and net assets of A$16.6m including cash
balances of A$14.1m equating to �6.8m or 16p per share.

    Mr Mladen Ninkov and Mr Roger Goodwin are directors of both Griffin and Spitfire. This will give Griffin significant influence over
Spitfire requiring Griffin to treat Spitfire as an associated company under International Accounting Standard 28 requiring Griffin to
recognise its share of Spitfire's financial results.    

    Rationale Of Proposed Transaction

    Griffin has been seeking acquisition opportunities for some considerable time, since successfully bringing into production its
Caijiaying zinc gold project in China in the summer of 2005. Griffin's preference has been for a resource project that already has a JORC
resource that can be developed in the near term to generate significant profits and cash flow. In these uncertain times, Griffin has of late
sought to spread political and commodity risk by seeking a project outside of China with alternative commodities to zinc. At 30 June 2008,
Griffin reported that it had cash balances of US$84m available to invest in such projects. 

    To date, Griffin has reviewed a considerable number of projects, few of which have met Griffin's investment criteria. Spitfire meets
Griffin's criteria in that, as reported in Spitfire's Admission Document, its Salmon Gums project has a JORC Inferred Resource (>10m thick
seam) of 500 million tonnes of lignite and is located in a stable country where Griffin already has a presence. Although Spitfire's Salmon
Gums project is a hydrocarbon project, this does meet Griffin's objective of spreading commodity risk and all of Griffin's directors have
experience of the oil and gas sector.  

    The Transaction

    For a period until 27th May 2008 Citadel held a 30.2% interest in the issued share capital of Griffin, accordingly the transaction is
considered a related party transaction under the AIM Rules. In this regard, the directors of Griffin (with the exception of Mladen Ninkov
and Roger Goodwin), having consulted with its nominated adviser, Collins Stewart Europe Limited, consider that the terms of the transaction
are fair and reasonable insofar as its shareholders are concerned.

    Comment

    Chairman Mladen Ninkov commented, "this purchase enables Griffin to acquire a strategic stake in a project that meets Griffin's
investment criteria, spreading both political and commodity risk. The opportunity to acquire this strategic stake at such a favourable
price, being at a 75% discount to the original funding price, has been carefully considered and approved by the independent directors.
Griffin's investment should be well placed to benefit from Spitfire's continuing exploration drilling program to define a JORC Indicated
Resource, results expected from the L2VTM Pyrolysis tests and conceptual mine and process engineering studies to deliver a definitive
feasibility study and a design basis for a phase 1 commercial plant. 

    With dwindling world resources and the expectation of significant increases in the price of oil in the future, this alternative energy
project is highly attractive. Should the results from the L2VTM tests be successful and the development of a commercial plant be achievable,
Griffin has the potential to reap significant financial rewards upon the Salmon Gums project coming into commercial operation."  

    Griffin retains significant cash balances and continues to look for other projects. 

    *Notes:

    The information in this announcement that relates to exploration results, coal resources or reserves is based solely on information
extracted from the Competent Person's Report prepared for Hurricane Fuels Ltd and Spitfire Oil Limited ("Competent Person's Report"), which
is set out in Spitfire's Admission Document. 

    Spitfire is a Bermuda registered company and as such is not subject to the Takeover Code and accordingly there is no obligation for a
mandatory offer under the Rules of the Takeover Code by any shareholder increasing their holding above 30% of Spitfire's issued share
capital.


    Further information

 Mladen Ninkov - Chairman                      Telephone: +44(0)20 7629 7772
 Roger Goodwin - Finance Director
 Griffin Mining Limited

 Adrian Hadden                                 Telephone: +44(0)20 7523 8350
 Collins Stewart Europe Limited (Nominated
 Adviser & Broker)

 Jos Simson/ Leesa Peters                      Telephone: +44 (0) 20 7429 6603
 Conduit PR Ltd                                Mobile: + 44(0) 7899 870 450


    Griffin Mining Limited's shares are quoted on AIM, the London Stock Exchange (symbol GFM).
    The Company's news releases are available on the Company's web site: www.griffinmining.com


This information is provided by RNS
The company news service from the London Stock Exchange
 
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