MOU for the Development of Pickstone Peerless G...
African Consolidated Resources plc / Ticker: AFCR / Index: AIM / Sector: Mining
14 July 2010
African Consolidated Resources plc ('ACR' or 'the Company')
MOU for the Development of Pickstone Peerless Gold Mine
African Consolidated Resources plc, the AIM listed resource development company
focussed in Zimbabwe is pleased to announce that it has entered into a
memorandum of understanding ('MOU'), subject to due diligence, with a group of
individuals known as the SSSB Group, for the development of its gold property at
the Pickstone Peerless mine ('the Mine').
The SSSB Group comprises a number of highly experienced mining experts with many
years of international experience in senior executive positions with major
international mining companies. In particular, the SSSB Group has a wealth of
operational experience in Africa, including Zimbabwe, where they have been
instrumental in the success of a variety of gold, nickel, copper, platinum,
chrome and coal operations.
The MOU at this stage concerns the intended development of open pit mining
operations at Pickstone Peerless and excludes the sulphide dump resource, where
the possibility exists to establish a tailings retreatment operation. Â Further
to ACR's announcement of 9 June 2010 regarding delays in the establishment of
such an operation under an agreement with TWP Investments (PTY), ACR and the
SSSB Group will evaluate potentially mutually beneficial arrangement that can be
made for the SSSB Group's involvement in the exploitation of the sulphide dumps
resource.
Subject to the completion of due diligence, ACR and the SSSB Group intend to
enter into a legally binding project agreement containing the key terms as set
out in the MOU as soon as possible ('the Project Agreement'). Â The main terms of
the MOU applicable, after normal suspensive conditions relating to due diligence
have been fulfilled, are:
·                   The whole of the Mine apart from the Sulphide Dump will be
transferred to a jointly owned structure ('JOS') under which ACR will own 40%
and the SSSB Group 60%
·                   The SSSB Group will at its cost prepare a Pre Feasibility
Study ('PFS') on the Mine
·                   Should the PFS indicate an internal rate of return ('IRR')
for the SSSB Group of at least 30% then the SSSB Group will undertake a
Definitive Feasibility Study ('DFS') at its cost
·                   If the DFS indicates an IRR for the SSSB Group of less than
30% then the SSSB Group has the option not to proceed in which case the entire
shareholding of the SSSB Group in the JOS falls back to ACR without cost to ACR
·                   If the DFS indicates an IRR for the SSSB Group of at least
30%, the SSSB Group will arrange funding for the project of up to $50 million,
without dilution to ACR's interest in the JOS, of which up to 65% may be raised
by interest bearing project finance or shareholder loans with the balance being
in equity
·                   If funding is required in excess of $50 million then 90%
will be raised by the SSSB Group and 10% by ACR, if ACR is to maintain its
equity interest in the JOS. If ACR elects not to do this its equity in JOS will
be reduced to 30%
·                   If at any stage after the DFS has indicated an IRR of at
least 30% and in the SSSB Group's opinion the project is not feasible then the
SSSB Group's funding may cease and ACR will have an option for 90days to
purchase the SSSB Group's equity in the JOS at the SSSB Group's cost plus
interest
·                   When there is positive cash flow, 50% of available cash
flow before servicing or repaying any external debt will in the first instance
be allocated to repay the accumulated spend to date by ACR and spend by the SSSB
Group pursuant to the MOU on a pro rata basis
·                   In order to align objectives the SSSB Group will be issued
share options in ACR, which will be defined in a more detailed project agreement
('Project Agreement') which is to be prepared as soon as possible
·                   The SSSB Group will have a pre-emptive right with regard to
any future ACR gold project along the Gadzema Belt (located approximately 30km
north of the Pickstone Peerless mine) on the same terms as contained in the MOU
or as superseded by the Project Agreement
Andrew Cranswick, CEO of African Consolidated Resources plc said, "I am very
bullish about the upside for gold prices internationally, and thanks to the
Zimbabwe Government's forward-thinking rationalisation of the gold sector, we
can help the country build a world-class industry around this metal. The MOU
signed last week takes another step along the road in building that dream and
what's more, it is an important milestone in the road to extracting value for
our shareholders. The model is in line with our long-term mining strategy and I
believe that this particular partnership could prove a long and rewarding one.
We have a high degree of confidence in the skill sets that have come on board
and I expect to bring more good news to the market in this regard over the
coming years."
**ENDS**
For further information visit www.acrplc.com <
http://www.acrplc.com/> or please
contact:
Andrew Cranswick                 African Consolidated +44 7920 189010
Resources plc
Roy Tucker                        African Consolidated +44 1622 816918
Resources plc +44 7920 189012
Richard Greenfield                Ambrian Partners +44 20 7634 4700
Limited
Hugo de Salis St Brides Media & +44 (0) 20 7236 1177
Finance Ltd
Susie Callear St Brides Media & +44 (0) 20 7236 1177
Finance Ltd
[HUG#1423460]
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