Mineral Commodities launches bid for Erebus; raises $9m

Welshpool-based Mineral Commodities Ltd has launched a takeover bid for all unrelated shares in Erebus plc whose major asset is the ownership of an advanced diamond tailings dump re-treatment project in the African state of Sierra Leone.

Mineral Commodities is proposing to acquire all of the shares (that it does not already own) in Erebus plc. The company is currently the largest shareholder in Erebus, holding some 26.3 per cent of the issued share capital of Erebus. Erebus is a public company incorporated in the United Kingdom.

Mineral Commodities has also announced it had completed a placement of 30 million shares at 30cents each to clients of UK broker Mirabaud Securities Ltd.
The $9 million in funds raised from this placement will be applied to project development on the company's existing Xolobeni and Tormin projects, as well as development of the Kariba Kono diamond project, upon completion of the proposed Erebus plc acquisition.

On the 22nd May, the company requested a trading halt of its securities, pending release of today's announcement.

At market close, shares in the company were up 2 cents to 31 cents.

Below is the news release:

Mineral Commodities announced today that it had completed a placement of 30 million shares @ AUD 0.30c each to clients of UK broker Mirabaud Securities Limited.
In addition Mineral Commodities has launched a takeover bid for all unrelated shares in Erebus plc whose major asset is the ownership of an advanced diamond tailings dump re-treatment project in the African state of Sierra Leone.
The bid by Mineral Commodities is via an all scrip offer for all of the remaining 73.7% shares it does not own in the project's owner, UK-based public company, Erebus plc.
The bid has been recommended by the Board of Erebus and is supported by all major shareholders of Erebus, and accordingly the company is very confident of achieving the requisite acceptances.
The terms of the offer value Erebus at approximately AUD2.8 million. The offer is due to close on or before 13 June 2006.
Erebus's principal asset is 100% ownership of the Kariba Kono mining lease in the Kono district of eastern Sierra Leone and on which is located the No. 11 Oversize Tailings Dump, closed for the past 15 years after a successful diamond mining history.
"We are currently the largest shareholder in Erebus, holding some 26.3% of its issued share capital but wish to more rapidly progress a start-up of modern day treatment of the diamond tailings," Mineral Commodities Managing Director, Mr Mark Caruso, said today.

"The move to full ownership has been made after Erebus's intentions of undertaking an initial public offer and listing on the Alternative Investment Market of the London Stock Exchange, were withdrawn," Mr Caruso said.
"The No. 11 Heavy Media Separation Plant when commissioned in 1969 and operated at Kono, was one of the largest alluvial diamond plants in the world and generated the highest grades in the region, so the re-treatment potential from its tailings, in addition to outcomes from further exploration in the area, is high."
"The bid to full control of Kariba Kono is in line with our strategy to establish key, early cash generating positions in Africa's diamond and mineral sands sectors."

Terms of Erebus Offer

Under the terms of the Offer announced by Mineral Commodities today, the Perth based explorer is offering Erebus shareholders one and a half (1.5) MRC shares and half (0.5) an option exercisable at A$0.40 cents by June next year, for every two Erebus shares held.
Erebus currently has 8.36 million shares on issue, with Mineral Commodities 26.3% holding accounting for about 2.2 million of these.
If the Offer is fully accepted, Mineral Commodities will issue approximately 9.2 million shares and 3.1 million options, taking its total securities on issue to 106.3 million shares, and 22.4 million options.
The Offer opens on 30 May 2006 and is scheduled to close on or before 13 June 2006. It is conditional on Mineral Commodities receiving acceptances from shareholders representing at least 90% of the shares in Erebus other than those the Australian company does not own.
Background on Erebus
Erebus's principal activity through its 100% controlled Sierra Leone subsidiary, Kariba Kono (SL) Ltd, is diamond tailings dump re-treatment, diamond mining and mineral exploration in Sierra Leone.
The grant of exclusive rights to re-treat the No. 11 Oversize Tailings Dump and underlying diamondiferous gravels was negotiated with the Gbense Chiefdom in January 2004 and the lease was awarded to Kariba Kono by the Sierra Leone Ministry of Mineral Resources in July 2004 for the period of 10 years. The mining lease covers an area of 32 hectares.
An independent Competent Persons Report undertaken by CSA Group estimated the No. 11 Dump volume based on past production, being in the order of 4.7 million cubic metres (7.85 million tonnes) excluding the underlying gravels which is estimated at a further 70,300 tonnes.
The project is located close to Sefadu in the Kono district of eastern Sierra Leone where diamonds were first discovered in 1930 by a colonial geological survey team, led by J.D. Pollet. Sierra Leone's established diamond fields are concentrated in the Kono, Kenema and Bo districts. The Kono fields have been extensively exploited by licensed and illegal miners from the 1930's up to the present day. A number of diamond plants were established during the 1960s by Sierra Leone Selection Trust (SLST) to process alluvial diamonds, of which the No.11 Heavy Media Separation Plant was the largest, with the highest grade reserves.
Although the No. 11 Heavy Media Separation Plant was advanced for its time, investigation into the operating history of the plant after the fortuitous discovery of the 969.8 carat "Star of Sierra Leone" diamond indicated that the initial plant design was flawed and it is believed that the operating efficiency would have reduced with time, leading to the loss of diamonds to tailings.
Mining consultants, Mackay & Schnellmann, in a report commissioned by National Diamond Mining Company (NDMC), a majority Government owned enterprise, in 1972, recommended re-treatment of the No. 11 Oversize Tailings Dump to recover any diamonds greater than 45mm and to recover smaller stones due to their tabular shape which could have slid over the screens and passed out into the waste stone conveyor and thence to the No. 11 Oversize Tailings Dump. This re-treatment was never undertaken.
During their 1972 visit, the mill feed grade to No. 11 Heavy Media Separation Plant was reported by Mackay and Schnellmann as in excess of 75cts/100 tonnes.
Ownership of SLST's assets including the separation plant later reverted to the NDMC. Since its closure in 1992, the tailings dump has remained untreated and un-sampled, except for some small-scale illegal artisanal activity that has now ceased due to the implementation of appropriate security measures on the Lease site.
"While we plan to implement the same development plan for Kariba Kono as proposed by Erebus, the Company has conducted an initial review of the Project using South African independent consultants Promet Engineers, and is confident that the Project can be technically fine-tuned to enhance Project economics.
It is Mineral Commodities intention to recommence full scale re-treatment of the tailings dump for diamonds and gold utilising a fully mobile module 300 tph processing facility together with a 50 tph DMS plant and a containerised X-ray recovery unit within 4 months " Mr Caruso said.
The Company is currently commissioning a small scale plant to commence grade control and initial sampling of the No 11 dump
The Company also holds a 50% interest in Mining Area No. 5 through Leonaust Mining Limited, with a right to purchase the remaining 50% on terms to be negotiated. Mining Area No.5 is within 1km of Dump No.11 and gives the Company further latitude to expand its diamond production within the Kono District.
As well as a stake in the Xolobeni and Tormin mineral sands projects in South Africa, Mineral Commodities is also a substantial shareholder in emerging Papua New Guinea ASX/AIM listed gold explorer, Allied Gold Limited, whose Simberi oxide gold project is scheduled for first production next year.