21/06/2010 - 13:22

Intrepid reverse Paulsens sale

21/06/2010 - 13:22

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Intrepid Mines has reversed its decision to sell the Paulsens gold mine in the Pilbara to Northern Star Resources because it believes its value has increased since last month's sale agreement.

Intrepid reverse Paulsens sale

Intrepid Mines has reversed its decision to sell the Paulsens gold mine in the Pilbara to Northern Star Resources because it believes its value has increased since last month's sale agreement.

In a statement Intrepid said since the announcement of the sale on May 5, mine development and further exploration at Intrepid's expense has significantly increased the forecast life of gold production from Paulsens.

The company said in additional a sharp increase in the price of gold has occurred.

According to the company these two factors have increased the forecast cash flow from the mine by about $19 million.

"The Board's decision is based upon new information and changes in the market which had not previously been anticipated" said Colin Jackson, Intrepid's Chairman.

See full statement below:

Intrepid Mines Limited (ASX,TSX: IAU) (the "Company") reports that, since the announcement of the Paulsens sale transaction on 5 May 2010, mine development and further exploration at Intrepid's expense has significantly increased the forecast life of mine gold production from
Paulsens.
In addition, sharp increases in the A$ gold price have occurred (due largely to a weaker exchange rate), and together these factors have increased forecast cash flow from the mine by approximately $19 million (75%). As a result, Intrepid's Board of Directors has now withdrawn its support for the proposed sale of the mine to Northern Star Resources Limited ("Northern Star.")
"The Board's decision is based upon new information and changes in the market which had not previously been anticipated" said Colin Jackson, Intrepid's Chairman."Following additional exploration work as well as sharp changes to the gold price, we find ourselves in a position which would result in our existing shareholders forgoing far too much value for the compensation we have been offered. The Board still sees merit in selling
Paulsens to concentrate on Tujuh Bukit but not under the terms of the current deal.
Having reviewed all circumstances today, including the significantly increased size of the mine's gold resources as well as the recent increases in the Australian dollar gold price, and hence the projected increase for a Paulsens cash flow well in excess of the sale consideration, the Board now recommends that shareholders oppose the resolution to sell the Paulsens gold mine on the terms set out in the Notice of Meeting."
Based on an earlier estimate of the mine's potential production as well as on projected cash flow as calculated using earlier gold prices and Australian currency exchange rates, the two companies had signed a Letter Agreement for the planned sale for a consideration of up to A$27 million. This Letter Agreement remains subject to shareholder approvals and other approvals
and conditions usual to an agreement of this type.
Following discussions regarding the changes to cash flow forecasts, Northern Star have approached the Company with a variation on the Letter Agreement, which envisages an additional cash payment of $5 million, payable in six monthly instalments commencing on 31 August 2010, on condition that the gold price remains at or above A$1,400, plus the grant of
10 million options to subscribe for shares in Northern Star at a price of $0.10 per share (a 33% premium to the closing price on 18 June 2010).

 

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