· Central Asia Gold attracts 10 million USD of equity financing for the
Kopylovskoye project in Irkutsk.
· The Kopylovskoye project is transferred to a separate Swedish subsidiary and
25% of the equity is sold to a consortium of qualified investors.
· This implies that outside investors enter at a valuation twice the
acquisition value.
· The appraisal programme of Kopylovskoye commences immediately.
· An Extraordinary General Meeting of shareholders in CAG will be summoned
shortly to approve of the transaction.
The Board of Directors of Central Asia Gold ("CAG AB") has decided to summon
for an Extraordinary General Meeting (EGM). The key EGM agenda point will be a
decision to sell a 25% equity stake in the Kopylovskoye project in the Irkutsk
region to a consortium of professional investors. The background for the
transaction is the following:
Central Asia Gold acquired the Kopylovskoye project in Irkutsk in late autumn
2006. Kopylovskoye is a gold deposit which holds some 7 tonnes of gold reserves
(some 240,000 oz). The potential reserve base, however, is significantly larger
and hence, a comprehensive appraisal programme will have to be carried out at
an estimated cost of at least 10 MUSD. The appraisal programme is planned to
take at least one year. If successful CAG will launch a development programme
encompassing an ore processing plant with a production capacity of some 1
million tonnes of ore per year.
The reasons for attracting equity financing directly to the project instead of
to CAG are essentially the following:
i) CAG today has no financial means available for taking on the Kopylovskoye
appraisal programme. All CAG internal financial resources for 2007 are already
dedicated to the continued development of the Tardan mine. Thus, external
financing must be attracted for the Kopylovskoye development.
ii) To date the stock market has appreciated CAG's acquisition strategy of
acquiring well established gold producing projects like the purchase of the
alluvial producer Artelj Tyva in 2005 and the acquisition of the alluvial
producer Artelj Lena in early 2007. The rather recent purchases of the
Kopylovskoye deposit and the Kara-Beldyr gold mineralization have thus far not
resulted in any observable increase in the CAG share price indicating a
shareholder preference for acquisitions of established production companies to
the purchase of green field projects where appraisal and development programmes
are to follow.
iii) The consortium of external investors has accepted a value of the project
that is twice as high as the original acquisition price by CAG. Thus this
transaction, if approved by the EGM, will visualise the potential upside of the
project.
iv) The Kopylovskoye project, not withstanding its potential, is at an
appraisal stage. It is very difficult to secure credit financing for such
appraisal programmes. When enough gold reserves have been identified and
proven, in other words when the development stage commences, credit financing
will be easier to attract.
v) The existing 240 000 oz of gold reserves are not enough for warranting the
start of a large volume development project. After proving a reserve base of a
couple of million oz, however, Kopylovskoye will be considered a world class
object. The 25% minority will take the bulk of the risks at the appraisal stage
and CAG will retain 75% of the reserves.
vi) Since the consortium takes a 25% part of the new subsidiary, the same
consortium will be responsible for financing 25% of the future capital
requirements in respect of the coming development programme.
The Kopylovskoye project is today owned via the limited liability company OOO
Kopylovskoye. This subsidiary will now first be sold to Central Asia Gold AB by
the subsidiary OOO Tardan Gold. Thereafter, given an EGM-approval of the
transaction, the consortium of investors will invest the equivalent of 10 MUSD
for 25% of the new holding company named "Kopylovskoye AB".
The Board of Directors for CAG, where shareholders representing more than 30%
of the capital and votes of the company are represented, has unanimously
approved this proposed transaction.
The Board of Directors of Central Asia Gold AB
For further information, please visit our website www.centralasiagold.se or
contact Mr. Torbjörn Ranta, Managing Director, on telephone +46 8 624 26 80,
fax: +46 8 624 37 20, cell phone +46 708 85 55 04 or via email
torbjorn.ranta@centralasiagold.se, address: Brovägen 9, SE-182 76 Stocksund,
Sweden.
Central Asia Gold AB is a Swedish junior mining company focused on gold
production and exploration in Russia and Mongolia in the central parts of Asia.
The gold production was initiated in late January 2005 and the assets today
encompass some 747,000 troy ounces (1 troy ounce = 31.1 g) of Russian gold
reserves C1/ C2. CAG AB plans to produce 1,400 - 1,500 kg of gold (45,000 -
48,000 oz) during 2007.
Cautionary Statement
Statements and assumptions made in this report with respect to Central Asia
Gold AB's ("CAG") current plans, estimates, strategies and beliefs and other
statements that are not historical facts are forward-looking statements about
the future performance of CAG. 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 operates; (ii) changes as regards the geologic information
available in respect of the various projects undertaken; (iii) CAG's continued
ability to secure enough financing for carrying 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 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 assumes no unconditional obligation to immediately update any
such statements and/or forecasts.
