CGM.L Regulatory News (CGM)

12 Apr 2007 09:17

China Goldmines PLC12 April 2007 12 APRIL 2007 CHINA GOLDMINES PLC MAJOR ACQUISITON OF THE 8 PRODUCING GOLDMINES IN ITS GUANZHUANG GOLD PROJECT INHUNAN PROVINCE, CHINA CHINA GOLDMINES PLC IS PLEASED TO ANNOUNCE THE AGREEMENT TO ACQUIRE THE 8EXISTING GOLD MINES IN ITS GUANZHUANG GOLD PROJECT • AGREEMENT SIGNED WITH PEOPLE'S GOVERNMENT OF YUANLING COUNTY TO TRANSFER 100% OF THE 8 EXISTING GOLDMINES TO CHINA GOLDMINE'S SUBSIDARY HUNAN WESTRALIAN MINING CO., LTD. • AGREEMENT ELIMINATES FUTURE COMPENSATION PAYMENTS AND PROFIT SHARING ARRANGEMENTS WITH THE 8 GOLD MINERS. • TRANSFER OF THE 8 MINES WITHIN THE NEXT 4 MONTHS FOR A TOTAL CASH CONSIDERATION OF RMB 180 MILLION (APPROXIMATELY GBP 12 MILLION). • FOLLOWING TRANSFER CHINA GOLDMINES GROUP BECOMES A GOLD PRODUCER (currently the 8 mines are estimated to produce around 25000 ounces per annum). • FEASIBILITY WORK ONGOING TO CONSOLIDATE ALL MINING OPERATIONS AND CONDUCT SCALE MINING TO SIGNIFICANTLY INCREASE PRODUCTION FROM THE GUANZHUANG GOLD PROJECT. Commenting on the agreement China Goldmines CEO Frank Vanspeybroeck said: "Thisagreement is a significant milestone for the Company and its Guanzhuang GoldProject that is emerging as one of China's most exciting gold prospects.Following months of hard negotiating we have delivered on behalf of shareholdersa step change in the future potential of CGM transforming it into a solid goldproducing business. I am particularly pleased that we have managed to take themines into 100% ownership cancelling the 20% share of profits from what looks tobe a very substantial resource." China Goldmines plc ("CGM" or the "Company") is pleased to announce that, on 10April 2007, its subsidiary Hunan Westralian Mining Co., Ltd ("HWM") signed anagreement with the People's Government of Yuanling County, Hunan Province, China(the "County Government") to obtain the transfer of the eight existing goldmining licences together with all the mine assets in CGM's Guanzhuang GoldProject (the "Agreement"). At the time of Admission on 7 February 2006 HWM had agreements in place witheight privately owned gold mines (the "Gold Miners"). Under these agreementsthe Gold Miners were obliged to transfer their gold mining certificates to HWMif HWM decided to proceed with scale mining. In consideration of thesetransfers the Gold Miners would be entitled to 10% of the profit from the miningconducted by HWM (or 20% if the Gold Miners invest proportionately in the newmining operations). In addition HWM was bound to agree compensation paymentswith the Gold Miners. In the event that no agreement was reached oncompensation or co-operation arrangements, the Gold Miner(s) would retain theright to mine from their current licence and keep all revenue arising. The Agreement is a package deal whereby the County Government is transferring100% of the 8 mining licences and all the mine assets to HWM with no furtherobligations on HWM or CGM in respect of further payments to the Gold Miners(this includes the compensation payments). Furthermore HWM is not liable forany taxes or duties payable under this Agreement. The County Government willalso discharge all current liabilities relating to the Gold Miners and the goldmines. The cash purchase price payable to the County Government shall be RMB 180million (approximately GBP 12 million). A deposit of RMB 2 million(approximately GBP 134,000) is payable within 20 working days from date ofsigning the Agreement and the balance is payable within 10 days of completion oftitle transfer. The County Government is bound under the Agreement to completethe title transfer of the eight existing gold mining licences within 4 months ofreceipt of the deposit. The completion of the transfer of all licenses (including the explorationlicense from Brigade 407 and CCG) will make CGM a producer within its projectarea which the Company believes hosts a significant development target. Theresults of the CGM Group's exploration activities since the commencement inApril 2006 have significantly exceeded the Directors' expectations and, in theview of the Directors, have validated the Chinese Joint Venture Partner'sresource calculation of 1 million plus ounces within the top 325 meters fromsurface (using Chinese resource methodology and standards). The Company looksforward to accelerating its drilling programme as a pre-curser to miningoperations. Metallurgical test work, mine engineering and process design willbe reported on shortly. The Joint Venture Partner Mr. Wu of Brigade 407 commented that "we haveco-operated very well with CGM in the past year in our efforts of exploring theproject area and we appreciate not only the capital investment by CGM, but moreimportantly the technical expertise shown by CGM personnel and theirprofessional work which has greatly advanced the project. About China Goldmines plc China Goldmines plc listed on the Aim Board on the 7th February 2006 as a goldresources company focussed on the discovery and development of gold projects inthe Hunan Province, China. The company is preparing a feasibility study on its Guanzhuang Gold Project,where a resource of +1 million ounces plus within the top 325 meters fromsurface and over a strike distance of 1.5 km has been identified by our JointVenture Partner, Brigade 407 of the Hunan Region Bureau of Geology and MineralResources Exploration and Development. (This resource has not been validated byCGM and therefore cannot be categorised to a specific resource as defined inJORC Code Standards.) The Guanzhuang Gold Project consists of eight gold mines which the Company plansto consolidate. This could enhance the production potential to a vertical depthof 1000 metres from surface. For further information on China Goldmines plc you are invited to visit theCompany's website at www.chinagoldmines.com or contact one of the following: Mr Frank Vanspeybroeck (CEO) Mobile: +61 041 116 6276 Marinko Vidovich (CFO) Mobile: +61 041 997 4744 Changsha Office +86 731 515 8211 Alex Worrall +44 207 788 7621 Alan Stewart (Bell Lawrie) +44 141 221 7733 This information is provided by RNS The company news service from the London Stock Exchange