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Agreement Between Uranium One and ARMZ

Source: www.gulfoilandgas.com 12/15/2010, Location: Not categorized

Uranium One Inc. and JSC Atomredmetzoloto (ARMZ) jointly announced that ARMZ has entered into a definitive agreement to acquire all of the issued shares of Mantra Resources Limited pursuant to an Australian Scheme of Arrangement. Mantra's core asset is the world-class Mkuju River Project in Tanzania which is nearing the completion of a definitive feasibility study.

Concurrently with the execution of the Scheme, ARMZ and Uranium One have entered into a definitive put/call option agreement pursuant to which Uranium One has the right to acquire from ARMZ, and ARMZ has the right to sell to Uranium One, all of the Mantra shares for consideration equal to ARMZ's acquisition cost plus certain additional expenditures.

Enhancing and Diversifying Uranium One's Production Base

The joint strategy of Uranium One and ARMZ is to create a world-leading diversified uranium production company with high quality mines and development projects. Based on Mantra's public disclosure for the Mkuju River Project, this transaction:

- Increases Uranium One's NI 43-101 compliant measured and indicated resources by 68% and inferred resources by 34%
- Enhances Uranium One's attractive diversified portfolio of assets with mines in Kazakhstan, the United States and Australia and the addition of a new development project in Tanzania
- Increases Uranium One's steady state annual production range to approximately 22 - 26 million pounds from approximately 18 - 20 million pounds
- Maintains Uranium One's industry leading total cash costs at approximately US$20 per pound sold on a consolidated basis

Uranium One has completed extensive due diligence on Mantra and believes that the Mkuju River Project has excellent potential to increase the resource base, as well as the ultimate steady state production rate.

Jean Nortier, Chief Executive Officer of Uranium One, said:
"Uranium One believes that the Mkuju River Project ranks among the best uranium development projects in the world. Our option to acquire Mantra from ARMZ provides Uranium One with the opportunity to add this significant development project, located in a mining friendly jurisdiction, to our existing portfolio of world-class operations and complements the long-term growth strategy of the Company."

Vadim Zhivov, Director General of ARMZ, commented:
"Our acquisition proposal provides all Mantra shareholders with the opportunity to realize cash consideration at a premium valuation. This transaction also highlights our continuing strong support of Uranium One as its majority shareholder and will allow all of Uranium One's shareholders and stakeholders to benefit from the acquisition of a high-quality uranium development project."

Mkuju River Project Overview

- Large-scale uranium development project located in southern Tanzania
- NI 43-101 compliant resource base of 65.5 million pounds of measured and indicated resource and 35.9 million pounds of inferred resource
- Completed pre-feasibility study with estimated Phase 1 production of 3.7 million pounds per year
- Planned usage of low-cost conventional resin-in-pulp processing
- Currently investigating viability of Phase 2 production growth via heap leach
- Large land package with attractive exploration potential

Key Terms of the Put/Call Agreement

The Put/Call Agreement between Uranium One and ARMZ:
- provides Uranium One with an opportunity to acquire a world-class uranium development project at a fixed cost in a rising uranium price environment
- gives Uranium One flexibility with respect to the timing and consideration to satisfy the exercise price, subject to ARMZ maintaining its ownership stake of not less than 51%

Uranium One has a call option to acquire Mantra from ARMZ, exercisable at any point within 12 months of closing (subject to extension) of the acquisition of Mantra by ARMZ. The Put/Call Agreement also provides ARMZ with a put option to sell Mantra to Uranium One at the end of the term.

The purchase price to be paid upon exercise of either the put or call option will be equal to ARMZ's acquisition cost of Mantra, including any additional expenditures contributed by ARMZ to Mantra or its properties and interest thereon at a rate of 2.65% per annum.

The exercise of the put or call option will constitute a related party transaction under applicable Canadian securities legislation. Accordingly, the exercise of the put and call options is subject to Uranium One minority shareholder approval, as well as to required regulatory approvals.

Uranium One will endeavour to seek shareholder approval following completion of the acquisition of Mantra by ARMZ, including majority of minority approval, at the earliest date upon which an Independent Committee of the Board of Directors is prepared to recommend that Uranium One minority shareholders vote in favour of the exercise of the Put/Call Agreement.

Uranium One will become the operator of the Mkuju River Project immediately upon completion of the acquisition of Mantra by ARMZ, and will be responsible for the continued advancement of the Mkuju River Project towards commencement of production.

Key Terms of the Scheme Implementation Agreement

ARMZ and Mantra have entered into a Scheme Implementation Agreement which sets out, among other things, the terms under which the acquisition of the Mantra shares will be undertaken. Under the Scheme, each common share of Mantra will be exchanged for a cash payment in the amount of A$8.00, representing a 15.5% premium to Mantra's 20 day volume weighted average price on the Australian Stock Exchange. The transaction values Mantra at approximately A$1.2 billion and is expected to close during Q2 2011.

The transaction between ARMZ and Mantra has been unanimously approved by the Board of Directors of Mantra subject to the receipt of an independent expert opining that the transaction is in the best interests of Mantra shareholders.

The directors of Mantra intend to vote in favour of the Scheme. Mantra's largest shareholder, Highland Park S.A. and its related entities, hold approximately 13.5% of Mantra's outstanding fully-diluted shares and have indicated to the board of Mantra their intention to vote in favour of the Scheme, subject to the absence of a Superior Proposal as determined by the Mantra Board of Directors.

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Related Categories: Accounting, Statistics  Acquisitions and Divestitures  Asset Portfolio Management  Economics/Financial Analysis  General  Industrial Development  Insurance  Investment  Mergers and Acquisitions  Risk Management 

Related Articles: Accounting, Statistics  Acquisitions and Divestitures  Asset Portfolio Management  Economics/Financial Analysis  General  Insurance  Investment  Mergers and Acquisitions  Risk Management 


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