Glencar/Gold Fields Mali deal (excludes Glencar's bonanza)
(Glencar stock is GEX on the London Stock Exchange, GCM on the Irish Stock Exchange. Gold Fields is GFI on the New York Stock Exchange and on the Johannesburg Stock Exchange. FL)
GLENCAR MINING PLC
Glencar Signs Agreement with Gold Fields on Sankarani Project, Mali
13 February 2006
Glencar Mining plc (“Glencar” or “the Company”) is pleased to announce the execution of a legally binding, conditional agreement (the “Agreement”) with Orogen Holdings BVI Limited, (“Gold Fields”) a wholly owned subsidiary of Gold Fields Limited relating to the Sankarani project in Mali, West Africa. Pursuant to the Agreement, Gold Fields must spend up to US$12 million in exploration expenditures in order for it to earn a 65% interest in three of the five exploration licences in Glencar’s Sankarani Project.
Glencar’s Sankarani Project consists of five exploration concessions at Bokoro, Sanioumale, Farasaba, Solona and Komana in southwestern Mali, totalling 1,250 square kilometres in area. Under the terms of the Agreement, Gold Fields may earn an interest in the Bokoro, Sanioumale and Farasaba concessions, (the “Property”) by making exploration expenditures as follows:
* Gold Fields will be entitled to earn a 25% right to the Property by incurring exploration expenditures of US$2.5 million by 31 December 2007, the Phase 1 Earn-in Period.
* Gold Fields will be entitled to a 51% right to the Property by incurring exploration expenditures of US$4 million in aggregate by 31 December 2008, the Phase 2 Earn-in Period.
* Gold Fields will then be entitled, but not required, to increase its stake in the Property by acquiring a further 14% interest, increasing its overall stake to 65%, by funding additional exploration if required and a Feasibility Study, prior to 30 June 2011, subject to a maximum additional expenditure of US$8 million (US$12 million in total) for such additional interest, the Phase 3 Earn-in Period.
The Agreement also provides that, following completion of a positive feasibility study, Glencar may require that Gold Fields provides Glencar’s share of the senior finance required to build a mine, in which case Glencar will transfer a further 5% interest in the Property to Gold Fields. Gold Fields will have the right to recover any such finance provided on behalf of Glencar, from the proceeds of production at an interest rate of LIBOR plus 2%. The Agreement is subject to certain conditions precedent, such as Mali Government approval of the transfer of the three concessions to a new Malian corporate entity to be owned jointly by Glencar and Gold Fields, following the completion of the Phase 1 Earn-in Period. The Agreement is also subject to the conclusion of a Shareholders Agreement between the relevant subsidiaries of Gold Fields and Glencar. However, pending the satisfaction of the conditions precedent, anticipated to be before 30 June 2006, Gold Fields has agreed to immediately commence exploration funding under the terms of the Agreement and it is expected that field work will commence within the next 10 days. Should certain of the conditions precedent not be met by the due date and those conditions are not waived, then the Agreement falls away except that the funds expended by Gold Fields up to a maximum of US$1 million shall be repayable from the proceeds of production from any mine found on the Property, but shall not be repayable at all in the event that no commercial deposit is found on the Property by Glencar or its subsidiary.
The effect of this Agreement (if it becomes unconditional) is that should a commercial deposit be found within the Property, Glencar may retain a 15% interest in a producing mine, without having to raise further funding to contribute to the capital cost of that mine or mines. In addition, should Glencar exercise the option which it has with Africa Resources s.a.r.l. and La Societe Malienne de la Petite Mine d’Or s.a.r.l., the two Malian companies which hold the concessions, Glencar may acquire the 5% interest in the Property held by those companies for a total of US$1 million (on the basis that only one mine will be found within the Property as a whole), thereby bringing its carried interest in a mine to 20%.
This Agreement does not affect the ownership of the Solona concession or the Komana concession, upon the latter of which Glencar has recently completed a drilling programme which encountered bonanza gold grades. Glencar will continue to work independently on these concessions which will now be referred to collectively as the Yanfolila Project. The Bokoro, Sanioumale and Farasaba concessions will now be referred to collectively as the Sankarani Project. The Agreement anticipates that Gold Fields may be given first refusal on the Komana concession, should Glencar in the future wish to bring in a major to assist in the further development of the Komana project.
Glencar is very pleased to have concluded this agreement with Gold Fields, one of the world’s largest gold producers. The terms are favourable to Glencar, securing a substantial exploration expenditure on very prospective ground. The Gold Fields technical team is very strong and focussed, and will be a big asset to the aggressive exploration programme which is now about to commence on the Sankarani Project.
For further information, please contact:
Glencar Mining plc
Hugh McCullough, Chief Executive
Tel: +353 1 661 9974
e-mail: info@glencarmining.ie
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