Kaoclay Shareholders to Receive 1.65 Erdene Shares and a Half Warrant
HALIFAX, Feb. 21 /CNW/ - Kaoclay Resources Inc. ("Kaoclay") today
announced it has reached an agreement with Erdene Gold Inc. ("Erdene")
(TSX:ERD) whereby Erdene will acquire all of the outstanding shares of Kaoclay
in exchange for shares and warrants of Erdene.
"The board of Kaoclay sees this transaction as a strong positive for our
shareholders," said Philip Webster, Chairman of Kaoclay Resources Inc. "We are
very familiar with the strength of Erdene's management team, which has
accomplished a great deal in the last year. We believe they have the
experience and ability to realize the value of the Kaoclay assets. This gives
our shareholders ownership in a Nova Scotia based TSX-listed Company with
strong international relationships and an exciting portfolio of exploration
properties and also strengthens our association with Xstrata."
"This acquisition will be an ideal combination of strengths, adding
Kaoclay's established mineral resources in North America to Erdene's high
potential mineral and energy properties in Mongolia," said Peter Akerley,
President and CEO of Erdene Gold Inc. "The Kaoclay assets have significant
upside potential and are well managed by internationally recognized partners
who are leaders in their respective fields. We believe adding assets of this
magnitude to our portfolio creates a much stronger company and will create
significant long-term value for our shareholders."
Erdene is a Nova Scotia based, diversified mineral exploration company
focused on Mongolia with over 20 mineral exploration projects that include 68
licenses and cover approximately four million acres. Significant projects
include the Zuun Mod molybdenum-copper project, the Central Basin Uranium
Projects (International Uranium Corporation Joint Venture), the Ikh Tal-
Erdenet Mine copper exploration program where high priority targets have been
identified adjacent to Mongolia's largest mining complex, the Tsenkher Gol
Gold project targeting a granite hosted disseminated gold target and the
Galshar coal program, where programs are underway to determine coal quality.
Further information about Erdene can be obtained on the Company's web site at
www.erdene.com.
Details of the Transaction
Erdene is listed on the Toronto Stock Exchange (TSX) under the symbol
ERD, has 30,599,933 shares outstanding (before the issuance to Kaoclay
Shareholders) and a fully diluted share position of 35,188,910 common shares.
Kaoclay has 8,979,950 shares outstanding. Under the terms of the Agreement,
each Kaoclay share will be exchanged for 1.65 Erdene shares plus a half
warrant, with each full warrant entitling the holder to purchase an Erdene
share at $1.60 for a period of three years from closing. Kaoclay will be
entitled to name 2 nominees to the Board of Directors of Erdene. The
transaction must be approved by the shareholders of Kaoclay and is subject to
the receipt of all required regulatory and court approvals. All of the
directors of Kaoclay who own or control Kaoclay shares have agreed to vote
their shares in support of the acquisition. If all required approvals are
received, it is expected that closing will take place in May. Based on
yesterday's closing price of Erdene shares of $1.05 per share, this puts an
approximate value of $15.6 million on the transaction.
This transaction is subject to the approval of Kaoclay shareholders at a
special meeting to be announced. Notice of the meeting and an information
package will be distributed to all shareholders once all required information
has been prepared.
Highlights of the Transaction
- Creates a larger, stronger, TSX-listed company with the ability to
capitalize on diversified high-growth commodities in the short term
and exposure to Chinese demand and the developing Mongolian mineral
sector in the longer term
- Provides Erdene shareholders with near-term cash flow opportunities
from three advanced-stage projects to provide shareholder value and
help fund exploration in Mongolia
- Provides Kaoclay shareholders with access to Erdene's high potential
base metal, precious metal and energy exploration properties in
Mongolia
- Kaoclay's projects are all operated by joint venture or lease partners
who are leaders in their respective fields, which means Erdene's
operational resources will not be significantly impacted
- Adds greater liquidity and strengthens the Erdene shareholder base
- Builds on the partnership with Xstrata Coal, which owns 9.8 per cent
of Erdene and 66% of the Xstrata Donkin Coal Alliance with Kaoclay
- Erdene is well financed with a current working capital position of
approximately $7.0 million.
Since going public in March, 2004, this is the second strategic
acquisition for Erdene. The first, announced in March, 2005 involved the
purchase of significant mineral properties from Mohammed AlFayed's Gallant
Minerals Limited. Erdene has also secured three alliances with strategic
partners that have contributed to its growth. The first, announced in April,
2005 was an alliance with International Uranium Corporation to explore uranium
deposits on Erdene's Mongolian properties. The second, announced in June, 2005
was with Erdenet Mining Corporation, Mongolia's largest copper-molybdenum
producer, to explore new porphyry-style copper deposits near their mining
operations. Most recently Erdene announced on February 14, 2006 that Xstrata
Coal Canada Limited ("Xstrata"), a wholly-owned subsidiary of Xstrata, plc and
Kaoclay's 66% partner in the Xstrata Donkin Coal Alliance, acquired a 9.8%
equity interest in Erdene by investing $3 million and agreed to collaborate to
develop Erdene's promising projects, with a particular focus on coal.
Forward-Looking Statements
Certain information regarding the Company contained herein may constitute
forward-looking statements within the meaning of applicable securities laws.
Forward-looking statements may include estimates, plans, expectations,
opinions, forecasts, projections, guidance or other statements that are not
statements of fact. Although the Company believes that the expectations
reflected in such forward-looking statements are reasonable, it can give no
assurance that such expectations will prove to have been correct. The Company
cautions that actual performance will be affected by a number of factors, many
of which are beyond the Company's control, and that future events and results
may vary substantially from what the Company currently foresees. Factors that
could cause actual results to differ materially from those in forward-looking
statements include market prices, exploitation and exploration results,
continued availability of capital and financing and general economic, market
or business conditions. The Company's forward-looking statements are expressly
qualified in their entirety by this cautionary statement. The information
contained herein is stated as of the current date and subject to change after
that date.
NO REGULATORY AUTHORITY HAS APPROVED OR DISAPPROVED THE CONTENT OF THIS
RELEASE.
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