- New Mining Company shareholders will get 85 per cent ownership after a
non-cash issue by Central Asia Gold
The combined company expect to have approximately 30 tons gold reserve
already during 2009
Preston Haskell, New Mining Company's majority shareholder, will guarantee
the SEK 100-125 million capital need for the combined company
New Mining Company's experienced management team with strong proven execution
together with critical mass and cost synergies will enable stable long-term
growth
Central Asia Gold shareholders representing 48.4 per cent of the shares and
votes have agreed to vote in favour of the proposed merger on the forthcoming
Extraordinary General Meeting, which is expected to be held in December 2008
Central Asia Gold ("CAG") plans to issue shares and warrants to the
shareholders in New Mining Company ("NMC"). Through the issue of shares, NMC
shareholders will receive 85 per cent ownership in the combined company.
With a new strong management team with international competence and local
presence together with secured financing of 2009 operations, the combined
company aims to expand aggressively in the still fragmented Russian gold sector
and increase its reserve base and production.
CAG and NMC are expected together have a combined C1 + C2 gold reserve base of
approximately 30 tons already during 2009 (excluding the Kopylovskoye and
Kavkaz reserves, which are planned to be divested) and a yearly production in
excess of 1,000 kg, which will place CAG within the top 25 Russian gold
producers. The new strong management team will build shareholder value by
creating significant synergy effects within administration, launching a strict
cost-saving program and a cost-controlling system and thereby improving margins
and also aiming to further increase reserves.
The main shareholder in NMC is the American entrepreneur Preston Haskell, who
has lived in Moscow and conducted Russian business successfully since the mid
1990's. His real estate advisory firm Colliers International is represented
throughout the CIS countries. The company will, through Preston Haskell,
benefit from a solid long-term majority shareholder, who is also proposed as
the new Chairman of the Board. Preston Haskell will commit resources, including
a guarantee for the estimated capital need for 2009 operations.
As a consequence of the change in ownership, a new Board of CAG will be
proposed at a forthcoming Extraordinary General Meeting, and the following
individuals have expressed their willingness to become directors: Preston
Haskell, proposed Chairman, Lars Guldstrand, proposed Deputy Chairman (former
CEO of the listed company Eniro), Risto Silander (former CEO of Alfred Berg),
Mike Nunn (South African mining entrepreneur), Patric Perenius (Swedish mining
engineer and current CAG Board director), Sergey Gorbatchev (current CEO of
NMC) and Alice Volgina (a partner and CFO of Preston Haskell's Investment
group).
The proposed transaction structure, subject to conditions set out below, and
rationale are supported by the main current shareholders representing 48.4 per
cent of the shares in CAG.
Rationale for the transaction for the shareholders in CAG
The combination of a junior Swedish public mining company and a Russian-based
junior privately owned mining company will enable the creation of a larger
entity with an attractive mix of extractable gold reserves, a huge resources
base and multiple production facilities, which will reach critical mass, cost
synergies and enable stable long-term growth
The capital need in 2009 for the combined entity is preliminarily estimated
at SEK 100-125 million. It is the intention that the current shareholders in
CAG will be given the opportunity to participate in a planned capital raising,
which will be fully guaranteed by Preston Haskell
Following the transaction, the combined company will seek to capitalise on
its larger size and on the increased financing capacity. The new main
shareholder and the quality of the local management team will facilitate a
strengthening of the company's position within the Russian gold mining industry
The new majority shareholder in CAG, Mr Preston Haskell, will, as a strategic
long-term investor, take an active role in the management of the company,
bringing his Western practices combined with local Russian operational
competence and experience to secure long-term growth and shareholder value for
CAG's shareholders
The combined entity will modernise, rationalise and expand the portfolio of
existing assets in the Russian Siberian region with a focus on increasing
overall profitability through a cost-saving program and a cost-controlling
system
Proposed transaction and overview of NMC
Central Asia Gold AB (NGM: CAG) and shareholders in LLC New Mining Company on
November 3, 2008, signed a share Sales and Purchase Agreement ("SPA")
containing the main conditions of the planned non-cash issue that will see NMC
become wholly-owned by CAG in exchange for CAG issuing new shares and warrants
to the NMC shareholders. NMC shareholders and partners will be represented on
CAG's Board of Directors and NMC's management team will take over the daily
management and operations of CAG.
NMC is a Russian gold company with gold reserves and production facilities in
the Chita region of Eastern Siberia. The gold reserves are attributable to two
early stage mining projects, Bogomolovskoye and Kozlovskoye and also to one
alluvial deposit. Preston Haskell, the main shareholder in NMC, has recently
invested over USD 30 million in the upgrade of the heap leaching plant,
alluvial gold production and in purchasing necessary machinery etc. NMC aims to
have C1 + C2 gold reserve base of close to 35 tons by 2010. The current
operations involve exploration and production of gold with main assets
comprising mineral reserves of 2.3 tons C1 + C2 according to Russian
specifications. NMC estimates its reserves to increase by 7 tons before the end
of Q1 2009, by an additional 9.5 tons before the end of Q2 2009 and to add 15
tons during 2010.
CAG is a Swedish mining company with operations in Eastern Siberia, Russia. The
operations involve exploration and production of gold, primarily in the Tyva
and Irkutsk regions. The group's main assets comprise a large number of mineral
licences held by the various subsidiaries. The licences are currently estimated
to contain some 12.6 tons of gold reserves according to the Russian C1 + C2
categories, excluding the Kopylovskoye and Kavkaz licence blocks. These two
licences are planned to be distributed as dividend to CAG's existing
shareholders prior to the acquisition of NMC.
CAG expects to produce more than 800 kg gold in 2008. NMC's gold production is
at an initial stage and is expected to be approximately 250 kg in 2008 and is
expected to increase substantially over the coming years. Thus, after
completing the transaction, CAG is by year end 2008 expected to have combined
reserves of 14.9 tons with a combined gold production rate in excess of 1,000
kg per year at the beginning of 2009. By the end of 2009 the combined gold
reserve base is thus expected to reach some 30 tons, or 1 million troy ounces.
Transaction highlights
The non-cash issue brings together CAG, a junior Swedish mining company with
assets and operations in Eastern Siberia and NMC, a junior Russian privately
owned mining and exploration company with assets in the Chita region (Eastern
Siberia) managed by a team of international and Russian managers to form a
mining and exploration company ranked as one of the top 25 gold producers in
Russia
CAG has today signed an SPA outlining the key terms and conditions for the
acquisition of all outstanding shares in NMC in exchange for 3,000,000,000
newly issued ordinary shares in CAG and 500,000,000 warrants with a
strike-price of SEK 0.20 exercisable in 3 years time with each warrant
representing one ordinary share in CAG. Based on CAG's closing share price
October 31, 2008 at SEK 0.14 and prior to the proposed dividending out of
Kopylovskoye AB, the acquisition value is approximately SEK 450 million
The pro forma ownership of CAG subsequent to the consummation of the
transaction will be 15 per cent by the current shareholders in CAG and 85 per
cent by the current shareholders in NMC. Furthermore, NMC shareholders will
hold 500,000,000 warrants, each warrant representing one ordinary share in CAG.
If the owners of NMC exercise these warrants, their shareholding in CAG will
increase to 86.9 per cent. Consequently, shareholders in NMC will become the
largest shareholders in CAG
The execution of the non-cash issue is conditional upon, inter alia, approval
of relevant authorities, exemption from the mandatory bid obligation, approval
of the transaction by CAG's shareholders at an extraordinary general meeting
and satisfactory due diligence investigations
The existing main shareholders in CAG, representing 48.4 per cent of the
capital and votes, have undertaken to, on the forthcoming Extraordinary General
Meeting, vote in favour of the transaction and the distribution of Kopylovskoye
AB's shares to the existing shareholders in CAG.
NMC is currently reporting according to Russian Accounting Standards ("RAS").
Due to significant differences between RAS and IFRS, work has started to
prepare combined pro forma figures according to IFRS for the combined company.
Consolidated income statement and balance sheet for the combined group
according to IFRS will be presented in ample time before the forthcoming
Extraordinary General Meeting in CAG
Torbjörn Ranta, CAG's Managing Director: "The proposed acquisition of NMC will
give CAG critical size and, equally importantly, a very strong and devoted main
owner via Preston Haskell, who has more than a decade of successful hands-on
Russian business experience. This means that CAG will have the ability to
evaluate further rapid expansion in the still fragmented and now financially
weakened Russian gold sector".
Preston Haskell, NMC majority shareholder: "Although I am an American, I have
spent the last 15 years in Russia, where I now live permanently and manage my
business projects. I have over the last decade established contacts at the
highest Russian political and business levels, and feel comfortable in this
environment. My American ancestors were for many years active in coal mining in
the US, so the mining industry is in my blood. I am very bullish on the future
of gold and the proposed combination of NMC and CAG gives me an opportunity to
scale up my gold sector exposure, and I am committed to leveraging my resources
and the experience of my local mining team to create value for all shareholders
in CAG".
Pro Forma ownership structure and lock-up agreement
Following the transaction, based on the shareholder register as of 30 September
2008, CAG's largest shareholders will be as follows:
(For table see attached file.)
The major current shareholders in CAG have entered into an agreement not to,
without prior approval, sell or otherwise dispose of any of their shares in CAG
for a period of 6 months following completion of the transaction. Such existing
shareholders include Spencer Energy A/S, Landå AB, Mikhail Malyarenko, Paal
Hveem, Benton International, Gabrielsson Invest AB and Torbjörn Ranta. The
lock-up will comprise in total 256,518,748 shares, representing 7.3 per cent of
outstanding shares after the transaction. The new majority shareholders,
Preston Haskell and Andrey Kondratiukin, are strategic long-term investors in
CAG.
Board of Directors and Management
The composition of CAG's Board of Directors is proposed to consist of the
following (see also Appendix A for personal CVs of the proposed members of the
Board): Preston Haskell, as Chairman of the Board, Lars Guldstrand, as Deputy
Chairman of the Board, Risto Silander, Mike Nunn, Patric Perenius, Sergey
Gorbatchev and Alice Volgina.
The management team of CAG will be as follows: Sergey Gorbatchev, CEO
(currently the CEO of NMC) and Yurij Ivanov, CFO (currently NMC's CFO).
Kopylovskoye AB
As announced in the press-release on 17 October 2008, CAG has signed a letter
of intent ("LoI") with the minority investors in the subsidiary Kopylovskoye
AB, representing 25 per cent of shares and capital in Kopylovskoye AB.
According to the LoI, the minority investors received the right to acquire an
additional 12.5 - 24.5 per cent of the shares in Kopylovskoye AB. The Kavkaz
licence will also be transferred to Kopylovskoye AB.
The forthcoming Extraordinary General Meeting of CAG is expected to approve the
distribution of the remaining shares of Kopylovskoye AB as dividend to the
existing shareholders in CAG, prior to the non-cash share issue to NMC.
Other information
In view of the fact that the Swedish Financial Supervisory Authority (Sw.
Finansinspektionen) has decided to withdraw the NGM Stock Exchange's licence to
conduct exchange operations, CAG has decided that the company will initiate the
process of moving the listing of its shares to First North immediately after
completion of the transaction
CAG is considering to carry out a reverse split of its shares subsequent to
the completion of the transaction
Conditions applicable to the transaction
Completion of the transaction according to the SPA is subject to, inter alia,
the following conditions:
(a) satisfactory completion of both CAG's and NMC's due diligence;
(b) approval by the Board of Directors of CAG, as well as obtaining relevant
corporate approvals from the Board of Directors and/or shareholders in NMC;
(c) approval of the distribution of the remaining shares of Kopylovskoye AB as
dividend to the existing CAG shareholders;
(d) approval of the transaction by the shareholders in CAG at the Extraordinary
General Meeting;
(e) approval by the relevant authorities;
(f) exemption from the mandatory bid obligation;
(g) other conditions as may be agreed in the transaction documentation
Preliminary timetable
CAG's 9 months 2008 interim report 28 November 2008
Extraordinary General Meeting December 2008
Closing of the transaction January 2009
Additional information about the proposed transaction will be made available to
CAG's shareholders prior to an Extraordinary General Meeting to be convened in
December 2008 to approve the transaction.
Advisor
Carnegie acts as financial advisor to the shareholders in New Mining Company.
Contact details:
Central Asia Gold
Torbjörn Ranta (Managing Director)
Tel: +46 8 624 26 80
Mob: +46 708 85 55 04
Fax: +46 8 624 37 20
E-mail: torbjorn.ranta@centralasiagold.se
New Mining Company
Preston Haskell (New Mining Company's majority shareholder)
Mob: +7 962 938 3986
E-mail: haskell@newfields.ru
Cautionary Statement: Statements and assumptions made in this report with
respect to Central Asia Gold AB's ("CAG") and New Mining Company's ("NMC")
current plans, estimates, strategies and beliefs, and other statements that are
not historical facts, are forward-looking statements about the future
performance of CAG and/or NMC. Forward-looking statements include, but are not
limited to, those using words such as "may", "might", "seeks", "expects",
"anticipates", "estimates", "believes", "projects", "plans", strategy",
"forecast" and similar expressions. These statements reflect management's
expectations and assumptions in light of currently available information. They
are subject to a number of risks and uncertainties, including, but not limited
to, (i) changes in the economic, regulatory and political environments in the
countries where CAG and/or NMC operates; (ii) changes relating to the
geological information available in respect of the various projects undertaken;
(iii) CAG's and/or NMC's continued ability to secure enough financing to carry
on its operations as a going concern; (iv) the success of its potential joint
ventures and alliances, if any; (v) exchange rates, particularly between the
Russian rouble and the U.S. dollar. In the light of the many risks and
uncertainties surrounding any gold production and exploration company at an
early stage of its development, the actual results could differ materially from
those presented and forecast in this report. CAG and/or NMC assumes no
unconditional obligation to immediately update any such statements and/or
forecasts.
APPENDIX A
Résumés for the proposed members of the Board of Directors
Preston Haskell, proposed new Chairman of the Board of Directors
Preston Haskell is an American citizen. Mr Haskell is the founder and majority
owner of Colliers International, represented throughout the former USSR with
offices in Moscow and St Petersburg (Russia), Kazakhstan, Ukraine, Lithuania,
Latvia and Estonia and is a member of the International Governing committee of
Colliers International. He has been working in Russia since 1993 and is in
partnership with Forum Properties, one of Moscow's most successful advisory
firms. This partnership has developed over 150,000 sq.m. of office space and
owns a portfolio of class A properties, including the award winning projects
Avrora Business Park and Hermitage Plaza.
Mr Haskell serves as a member of the Board of Fleming Family and Partners Real
Estate Development Fund Ltd. He is also a partner of the management company
called FF&P Real Estate Advisory Holdings, Ltd.
Mr Haskell is a founder and Non-Executive Chairman of Office Solutions, which
is an authorized dealer of Steelcase on the territory of the former USSR and
parts of Eastern Europe. He is also a co-founder and the Executive Chairman of
AMARI Land International.
Mr Haskell holds a Bachelor of Business Administration degree from the
University of Southern California.
Lars Guldstrand, proposed new Deputy Chairman of the Board of Directors
Lars Guldstrand has more than 25 years of international execution and investing
experience from the Telecom, Media and Technology sector. Mr Guldstrand has
also taken part in turnarounds, restructurings and M&A activities within a
number of other sectors, including the financial and internet industries.
During his career Mr Guldstrand has held executive positions in a number of
privately held and publicly listed companies in both Europe and the US,
including Din Del, Sweden, Telia Infomedia International, Telia Infomedia
Directory Group, LOCAL Touch Inc. USA, and one of Europe's leading directories
companies, the publicly listed Eniro. Mr Guldstrand's prior assignments include
member of the Board of BT Directories, Chairman of the Board of Monetar
Pensionsförvaltning AB, Sweden and Executive Chairman of European Directories
SA, Scandinavia.
Mr Guldstrand is currently Executive Partner of GKL Growth Capital AB,
Stockholm; Chairman of Paynova AB, Stockholm; G-Life AB, Stockholm. He is also
deputy chairman of Golden Pages Ltd, Israel. Mr Guldstrand holds an MBA from
California Coast University, California.
Risto Silander
Risto Silander has worked for 20 years in the investment banking industry and
has held senior positions within Svenska Handelsbanken, Goldman Sachs, UBS and
Alfred Berg. In 2001 he quit his position as CEO of the Alfred Berg Group and
pursued business opportunities in St Petersburg and took on board
directorships.
Mr Silander is currently a director of the Boards of Swedish Export Credit
Corporation AB, East Capital Asset Management AB, 11 Real Asset Fund AB, 11
Invest S.A., Varenne AB, Brevan Howard Offshore Management Ltd., Endeavour
Funds (ll and lll) Ltd., Stronghold Invest AB, E. Öhman Jr. AB and the Trygg
Foundation. Previous board positions include listed companies in Sweden such as
Telelogic AB, Tornet AB, NetonNet AB and Russian retail chain "Lenta".
Mr Silander holds a business degree from the Stockholm School of Economics and
has studied finance on the MBA program at Stern Business School, NY.
Mike Nunn
Mike Nunn, a South African mining entrepreneur, founded Amari Holdings with the
objective of leveraging his past success and knowledge in the resource industry
and combining it with his network of African business associates.
Mr Nunn is recognised as the pioneer of the global tanzanite industry. As both
the founder and former CEO of AIM-listed TanzaniteOne Ltd, he turned a
grassroots project into the world's leading miner and marketer of tanzanite. He
also founded the Tanzanite Foundation as the industry's organisation
responsible for the worldwide marketing and promotion of tanzanite. Although he
stepped down in 2006 to pursue the development of Amari, he remains its largest
shareholder.
Other resource businesses developed by Mr Nunn include the rescue of MDM, a
long established mining engineering firm, which has since become a leading
African mining consultancy firm and listed its shares on AIM in 2008.
In 2005 Mr Nunn founded Xceldiam Ltd, an Angolan diamond exploration company,
which was successfully listed on AIM in 2006 and was subsequently sold to Petra
Diamonds.
Mr Nunn consolidated a number of his mining interests in mid 2006 and formed
Amari, an Africa-focused mining and resource investment incubator which now has
interests in gold, platinum, uranium, manganese, nickel, coal and iron ore.
Mr Nunn is presently Executive Chairman of Amari and is based in Johannesburg.
Patric Perenius
Patric Perenius is a Swedish citizen, born in 1951, and holds a degree as a
Mining Engineer from the Royal Swedish Institute of Technology (KTH) (1977). He
has worked with geology in the oil and mining industries since 1978, including
Norsk Hydro and the Swedish company SECAB. As well as being a Board member of
CAG, Mr Perenius is also a Board member of the publicly listed Swedish
companies Archelon Mineral AB and Capital Oil AB.
Sergey Gorbachev
Mr Gorbatchev is a Russian citizen, born in 1973, and holds a degree from the
Moscow State Geological Academy. He also studied at the University of Texas in
Austin. In the period between 1996 and 2003 Mr Gorbatchev worked in large
international logistical and operational companies in Moscow. Before joining
NMC as CEO in February 2008, Mr Gorbatchev was deputy CEO and head of the
Moscow representative office of the Swedish International Electricity Holding
Company.
Alice Volgina
Alice Volgina is a Russian citizen, a partner and a CFO in Preston Haskell's
Investment group.
