18/02/2009 - 11:28

Arafura strikes funding deal with China

18/02/2009 - 11:28

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Perth-based Arafura Resources has become the latest miner to sign an investment deal with a Chinese company, which has agreed to inject at least $8 million in return for a major shareholding.

Arafura strikes funding deal with China

Perth-based Arafura Resources has become the latest miner to sign an investment deal with a Chinese company, which has agreed to inject at least $8 million in return for a major shareholding.

Arafura said it has agreed to execute a letter of intent with Jiangsu Eastern China Non-Ferrous Metals Investment Holding Co, a subsidiary of the East China Exploration and Development Bureau (ECE).

Under the deal, ECE has agreed to subscribe for an initial placement of Arafura shares valued at $8.5 million with shares priced at 30 cents each.

ECE will also subscribe for further shares following the completion of the rights issue shortfall, with the new shares to be priced at 40c apiece.

On completion of the second tranche, ECE will emerge with a shareholding in Arafura of 25 per cent and will be invited to nominate two people to the Arafura board.

Both placements are subject to regulatory and shareholder approvals.

Arafura said funds raised from the ECE placement will go towards feasibility over its Nolans rare earths project in the Northern Territory.

Shares in Arafura were down 0.5c at 29c at 13:34 AEDT.

 

The announcement is below:

 

The Board of Arafura Resources Limited (Arafura Resources) has agreed to undertake a strategic equity investment with a large scale and highly strategic Chinese partner.

The Chairman of Arafura Resources, The Hon Ian Laurance AM, stated that the Arafura Resources Board has agreed to execute a Letter of Intent with Jiangsu Eastern China Non-Ferrous Metals Investment Holding Co. Ltd, a subsidiary of the East China Exploration & Development Bureau (ECE), to assist with funding requirements and future project development, exploration projects and growth opportunities.

East China Exploration is a major mineral exploration, development and mining group based in Nanjing in the Jiangsu Province of China.

The investment by ECE will be made through its associated entity "Jiangsu Eastern China Non-Ferrous Metals Investment Holding Co., Ltd" or its affiliate.

Funding

ECE has agreed to subscribe for up to an initial placement of Arafura Resources fully paid ordinary shares to a maximum amount of A$8.5 million at a price of A$0.30 per share. The allotment will not form part of the placement of Shortfall Shares pursuant to the Prospectus lodged by Arafura Resources with ASIC on 15 October 2008.

The percentage of placement to ECE will be dependent on the final shares on issue after the completion of the rights issue shortfall on 21 February 2009. The number of New Shares allotted to ECE will be determined on completion of the placement of Shortfall Shares on Friday 20 February 2009.

The allotment of New Shares to ECE will be completed within forty (40) business days and is subject to completion of due diligence by ECE, Australian Foreign Investment Review Board approval and approval by the Jiangsu Provincial People's Government.

In addition, and on completion of the Rights Issue Shortfall Offer and ECE's initial placement, ECE will be offered additional New Shares through a placement of Fully Paid Ordinary Shares at an issue price of A$0.40.

This second placement may take East China Exploration & Development Bureau's total shareholding to 25% of final shares on issue. The additional placement will be subject to shareholder approval and the requirements of the Corporations Act. On completion of the first tranche of funding, an ECE representative will be invited to the Arafura Resources Board as a Director.

On completion of the second tranche of funding at $0.40 an additional ECE representative will be invited to the Arafura Resources Board as a Director. Both board appointments will be subject to shareholder ratification in line with Arafura's Constitution.

The funds raised from ECE will be used to fund the ongoing work on the Bankable Feasibility Study for the Nolans Rare Earths Project. The Hon Ian Laurance said "the ECE funding would enable Arafura to maintain its timetable to complete the Bankable Feasibility Study with production of Rare Earths and uranium during 2011.

The strategic partnership between Arafura and the East China Exploration & Development Bureau comes on the back of many years of dedicated promotion by the Northern Territory Government to involve Chinese companies in the exploration and development of assets in the Northern Territory.

Mr. Laurance said the ECE funding would enable Arafura to maintain its works programme in its endeavour to complete the Bankable Feasibility Study as soon as practical.

Arafura Resource's Managing Director, Alistair Stephens, who is currently in Nanjing, said, "This is far more than an investment by a major Chinese mining house."

Mr. Stephens said that, "East China Exploration & Development was a highly strategic and influential partner who will actively work together with Arafura to assist funding and development of the Nolans Project. The skills and expertise that ECE brings to Arafura are substantial. We have agreed to undertake a philosophy not to dilute the Company shareholding, fund projects, grow our project profile and ultimately increase shareholder wealth."

Exploration and Business Development Arafura Resources and The East China Exploration & Development Bureau have also agreed to establish joint ventures and co-operate in additional funding for exploration on all of Arafura Resources' existing exploration licences. In addition, the parties have agreed that if Arafura Resources acquires additional exploration licences or mineral projects, then the parties will negotiate in good faith to develop them jointly. Arafura Resources and The East China Exploration & Development Bureau view this investment as the foundation for an ongoing and significant strategic relationship. Arafura Resources welcomes this investment from The East China Exploration & Development Bureau and looks forward to building on this relationship. About East China Mineral Exploration & Development Bureau East China Mineral Exploration & Development Organisation (ECE) was formed in 1955. ECE is one of the few State authorised organisations focused on engaging in mineral and energy exploration and is permitted to carry out geological exploration as well as conducting scientific research in major State classified projects. ECE has discovered more than 160 ore deposits in China with a potential value in excess of $10 billion. ECE has over 4,000 employees, 8 subsidiary Geological Exploration units, 7
scientific research institutions, a post-doctoral research station, a business research and development centre and 22 companies which specialise in the field of mining, engineering and drilling. ECE boasts outstanding qualifications in the field of exploration, hydrology, environmental geology, geophysical and geochemical exploration, remote sensing and geological engineering. With first-class technology and management experts, advanced exploration technology, significant mining and processing experience and strong financial capabilities, ECE is well positioned for foreign investment in mineral exploration and development. Major discoveries include Meishan iron ore, Qixiashan lead-zinc, Fujian Meishan zinc-lead, Yunnan Boka gold-copper and Anhui Matou copper-molybdenum. ECE has several mines and refining operations including Youxi Jindong lead-zinc mine and refining operations, Fujian Taiyangshan gold mine, Yunan Boka gold mine, Anhui Matou copper-molybdenum mine and an iron mine in Brazil.

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