Gemcom raises $14.6m to fund Surpac acquisition

Canadian company Gemcom Software International Inc has made a $14.6 million private placement deal to help fund its $34 million acquisition of West Perth-based mining software provider Surpac Minex Group Pty Ltd.
Gross proceeds from the private placement will be held in escrow pending the closing of the cash and scrip acquisition.
Surpac Minex's systems span exploration through mine planning, supporting both open pit and underground operations.
The company generated revenue for the 12 months to 31 March 2006 of $19.3 million and net earnings of $2.7 million.
Audited revenue of the company has grown by an average of over 36 percent between July 2002 and June 2005, and over the same period earnings have grown on average by 50 percent a year.
Established in 1985, Gemcom is a global provider of Mine Production Management Solutions (MPMS) and delivers technical mining applications, professional services, training, and support.

The full announcement is below:

GEMCOM ANNOUNCES $12 MILLION PRIVATE PLACEMENT AND PROVIDES UPDATE ON ACQUISITION OF SURPAC MINEX GROUP
Vancouver, British Columbia - Gemcom Software International Inc. ("Gemcom"), a global provider of mine production management solutions, today announced that it has engaged a syndicate of agents, led by Clarus Securities Inc. (collectively, the "Agents"), in connection with a proposed private placement (the "Private Placement") of subscription receipts (the "Subscription Receipts") for expected gross proceeds of approximately CDN$12 million.
The gross proceeds from the Private Placement will be held in escrow pending the closing of Gemcom's previously announced acquisition (the "Acquisition") of Australia's, Perth-based, Surpac Minex Group Pty Ltd. ("Surpac Minex"). Each Subscription Receipt will be automatically exchanged for one unit (the "Unit") of Gemcom, without payment of additional consideration, on the date of the closing of the Acquisition. If such closing does not take place before September 1, 2006, the escrowed funds will be returned to holders of the Subscription Receipts. Each Unit will consist of one common share of Gemcom (the "Common Shares") and a partial common share purchase warrant (the "Warrants"), each whole Warrant being exercisable to acquire an additional Common Share of Gemcom for a period of 24 months following the closing of the Private Placement.
The Private Placement will be made to investors on a best efforts basis, and will be subject to certain approvals, including necessary regulatory and stock exchange approvals. The Subscription Receipts will be offered in certain provinces of Canada by way of private placement pursuant to applicable prospectus exemptions.
Proceeds from the Private Placement and Gemcom's existing cash resources will be used to fund Gemcom's anticipated acquisition of Surpac Minex. The Acquisition is subject to completion of the Private Placement, due diligence by Gemcom, regulatory approvals, approval by Gemcom and Surpac Minex boards, approval by the Gemcom shareholders, approval by Surpac Minex shareholders, and other customary conditions.
Gemcom will acquire 100% of all the outstanding shares of Surpac Minex for consideration of approximately CDN$27 million. The consideration will consist of the issuance of Gemcom shares and cash. The cash consideration, excluding any closing adjustments, is approximately C$13.2 million of which C$2.5 million is subject to holdback. The share consideration is approximately 13.1 million Gemcom shares. The issued shares will be subject to escrow for six months after closing at which time 50% of the shares subject to escrow will be released and on June 20, 2007 the remaining will shares held in escrow will be released.
Surpac Minex is one of the world's leading providers of mining software, generating revenues for the twelve months ended March 31, 2006 of AUD$19.3 million, and net earnings of AUD$2.7 million (figures unaudited). The March 31, 2006 revenue streams are: license sales AUD$11.3 million; professional services AUD$2.0 million; Maintenance income AUD$5.8 million and other AUD$0.2 million.
In the four year period from July 1, 2002 until June 30, 2005 the audited revenue of Surpac Minex has grown by an average of over 36% per year and over the same period earnings have grown on average by over 50% per year.
Financial year
July 1 to June 30 Audited Revenue in Australian dollars
2002 $6,969,517
2003 $11,247,772
2004 $14,832,759
2005 $17,050,850
Surpac Minex's systems span exploration through mine planning, supporting both open pit and underground operations. With more than 5,000 users in 89 countries, Surpac Minex has one of the largest installed bases of technical mining software in the industry and has developed significant channels to the global market, including a network of 15 strategically located offices and agents.
The strategic acquisition of Surpac Minex is expected to result in the following benefits and synergies for Gemcom:
- Creates the largest customer base in the industry.
- The Company will become the dominant player, with an approximate 35 - 40% market share.
- Unites complementary revenue streams and channels to market, across all mining commodities and geographic locations.
- Offers industry-leading breadth and depth of products and services.
- Includes the acquisition of technology for stratified deposits, such as coal, iron ore, lateritic nickel, bauxite and oil sands.
- Enhances Gemcom's strong employee base with the addition of highly-skilled mining and software specialists.
- Facilitates research and development efficiencies, including an established development facility in India.
Following the acquisition of Surpac Minex, Gemcom's customers will benefit from:
- Sales and support that is available in more geographic locations.
- Access to a broader range of product and service offerings.
- Incorporation of best-in-class features across product lines.
- Faster delivery of new and more sophisticated product features.
- Enhanced professional services capabilities and collaboration with clients.
- Gemcom staff will double in size, giving the Company the scale needed to effectively service and support the world's largest mining enterprises.
"Gemcom and Surpac Minex are highly complementary organizations in terms of geographic market penetration, customer groups and technology. There are many synergies and opportunities to cross-sell and up-sell products to our combined customer base. At the same time, with additional product lines and enhanced channels to market, there are strong growth prospects and significant opportunities to sell into new markets, like China and Russia, and into new sectors, such as oil sands and coal," commented Rick Moignard, Gemcom President and CEO.
Tim Moore, Surpac Chairman, added, "The mining industry is looking for a leader they can work with to address several key issues that the industry is currently facing, such as the need to optimize throughput to meet sustained demand for the commodities they produce. Combined, Gemcom and Surpac Minex have the resources and technology to deliver the systems and solutions the industry requires."
At closing Tim Moore (chairman of Surpac Minex) and Tony Packer (Surpac Minex director) will both join the Gemcom board. Jointly they are currently beneficially entitled to more that 55% of the shares in Surpac Minex. Tim Moore has a background in investment banking, accounting and the software industry. Tony Packer has extensive experience in property and investment. Both Mr. Moore and Mr. Packer bring considerable international public company experience to the Gemcom board as they have both served as CEOs and directors of public companies.
This release shall not constitute an offer to sell or the solicitation of any offer to buy securities in any jurisdiction. The common shares have not been registered under the United States Securities Act of 1933, as amended, and they may not be offered or sold in the United States absent registration or an applicable exemption from registration.

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About Gemcom
Gemcom is a global provider of Mine Production Management Solutions (MPMS). Established in 1985, the Company delivers technical mining applications, professional services, training, and support. Reliable, timely information provided by Gemcom's MPMS allows for greater control throughout the mine lifecycle, which can translate into significant productivity gains.
Gemcom has a customer base of more than 1000 sites in over 90 countries, including such industry giants as Anglo American, BHP Billiton, Codelco, CVRD, De Beers, Newmont, Rio Tinto and Teck Cominco.
About Surpac Minex
Surpac Minex is a global leader in the development and provision of mining software, including mine planning, engineering, geology, surveying, mineral exploration and resource modelling software. The company has more than 130 staff.
With more than 30 years experience in mining, in any extractable commodity and all methods of mining, Surpac Minex is at the forefront of technological advancements in mine planning, 3D visualisation and geological modelling.
Surpac Minex serves clients from 15 locations: Perth, Mittagong, Singleton, Brisbane (Australia), Krasnoyarsk, Moscow (Russia), Kielce (Poland), Accra (Ghana), Pretoria (South Africa), Hyderabad (India), Beijing, Hunan (China), Santiago (Chile), Vancouver (Canada) and Coalville (UK).
Surpac Minex Group Pty Ltd is an Australian private company.