OmegaCorp assets reunited as Mantra, Mavuzi plan merger

Perth-based metals explorers Mavuzi Resources Ltd and Mantra Resources Ltd have announced plans to merge, combining their respective South African copper-gold and uranium interests in a deal that values the merged company at $74 million.

Under the deal, Mavuzi shareholders will receive one Mantra share for every three shares held, and one listed Mantra option for every five Mavuzi options held.

On completion, Mantra shareholders will hold approximately 74 per cent of the merged company, with Mavuzi shareholders owning the remaining 26 per cent.

The companies were both spun-out of Perth-based OmegaCorp Ltd, which was acquired earlier this year by Canadian uranium producer Denison Mines Corporation, and are both currently chaired by industry veteran Ian Middlemas.

Anglo Pacific Group Plc, which owns 17 per cent of Mantra and 6 per cent of Mavuzi, has expressed strong support for the proposal, according to a joint company announcement.

The full text of a joint company announcement is pasted below

Mantra Resources Limited (ASX: MRU - "Mantra") and Mavuzi Resources Limited (ASX: MAV - "Mavuzi") have reached agreement to merge the two companies. The companies have executed a Merger Implementation Agreement ("MIA") to effect the merger by way of a Scheme of Arrangement ("Scheme") under which Mantra will make offers to acquire all of the issued securities in Mavuzi.

The proposed merger will create a dynamic and well funded exploration company with:

• A diversified portfolio of quality uranium, gold and copper projects in southern Africa covering approximately 14,000 km2;
• An enhanced and highly credentialed management team; and
• Strengthened technical, operational and financial capabilities to support continued growth through aggressive exploration and acquisition.

Commentating on the proposed merger, Mantra's Managing Director, Mr Robert Behets, said "This represents an opportunity to expand Mantra's interests in southern Africa and enhance the Company's executive management through the addition of Mr Matthew Yates, a proven resources industry executive with significant uranium expertise through his OmegaCorp involvement as well as significant African expertise through working in Tanzania and other
southern African countries over the past 12 years. The combined exploration assets, enhanced management team and strong cash position provide an excellent platform for future growth and development."

Mavuzi's Managing Director, Mr Matthew Yates, said "The proposed merger has the potential to deliver significant benefits to our shareholders, giving them exposure to Mantra's high potential uranium projects in Tanzania and an asset base spanning a number of rapidly expanding mineral provinces in southern Africa."

Anglo Pacific Group Plc ("Anglo Pacific") has expressed strong support for the proposed merger. Anglo Pacific is Mantra's largest shareholder, holding approximately 17% of the company, and Mavuzi's second largest shareholder, holding approximately 6% of the company.

Details of the Merger Terms

Under the terms of the proposed Scheme of Arrangement, Mavuzi securityholders will receive one (1) Mantra share for every three (3) Mavuzi shares they hold and one (1) Mantra listed option for every five (5) Mavuzi listed options they hold. Based on the closing prices of Mantra shares and options on 25 September 2007 of $1.17 and $0.90 respectively, the implied prices of Mavuzi securities are:

1. Share Offer:

2. Option Offer:

Mantra will also make private offers to exchange Mavuzi's unlisted options on terms to be agreed between the parties.

On completion, the merged company will have market capitalisation of approximately $74 million (fully diluted $108 million) with Mantra securityholders holding approximately 74% and Mavuzi securityholders approximately 26% of the merged company. The proposed capital structure of the merged company is:

After careful consideration of the possible structures, an offer by Mantra for all of Mavuzi's issued securities by way of a Scheme was determined to be the most beneficial to securityholders of both companies.

The Scheme is subject to conditions including:

• Satisfactory completion of due diligence by the Boards of both companies;
• Approvals being received from the securityholders of Mavuzi and the Court;
• Approval being received from shareholders of Mantra;
• All relevant regulatory approvals; and
• Conditions customary for a transaction of this nature.

The Merged Company

The combined Mantra/Mavuzi group will have a market capitalisation of approximately $74 million, a strong balance sheet with cash reserves of approximately $20 million (net of transaction costs) and no debt.

The merged company will have direct and joint venture interests in a portfolio of significant exploration projects located in southern Africa, including:

• The Mkuju River Project in southern Tanzania, where recent trenching and limited RC drilling has confirmed the presence of widespread sandstone-hosted ("Karoo") uranium mineralisation at the Nyota Prospect and NW Trending Anomalies target area;
• The Mavuzi Project in the Tete province of Mozambique, which is currently the focus of an earlystage exploration program focusing on the project's gold and copper potential;
• The Bahi North and Handa uranium exploration projects in central Tanzania;
• The Mbamba Bay uranium exploration project in south-western Tanzania;
• The Chintheche and Chikangawa uranium exploration projects in Malawi; and
• The Meponda Project in the Niassa Province in northern Mozambique.

The merged company will control an impressive pipeline of quality exploration projects in southern Africa that has the potential to deliver a number of advanced stage resource projects in the short-term.

Rationale and Benefits

The Directors of Mantra and Mavuzi believe the merger, if successful, has the potential to unlock significant synergies and a greatly increased range of growth opportunities. The key benefits of the merger include:

• A larger market capitalisation, expanded asset base and increased attractiveness to large international institutions and investors;
• The ability to leverage the complementary technical, operational and commercial skills and industry experience of the respective management teams of the two companies;
• A strong cash position of approximately $20 million (net of transaction costs) to support aggressive exploration and business development activities;
• An increased share trading liquidity;
• Operational synergies including access to a larger pool of in-country technical, operational and administrative personnel and enhanced utilization of exploration equipment and drilling rigs;
• Immediate cost savings through the removal of duplication; and
• Diversification of project development and geographic risk.

Board and Management Structure

Due to the aggressive exploration and growth strategies being pursued by both companies, it is envisaged that the existing management and operational teams will remain in place and continue their focus on the development of the respective assets during the merger process, with the combined team to be expanded as the exploration projects are advanced.

It is envisaged that the Board of the merged company will comprise Mr Ian Middlemas, who has extensive international experience in the mining industry, as Chairman, and both Mr Robert Behets (Managing Director - Mantra) and Mr Matthew Yates (Managing Director - Mavuzi). In addition, Mr Mark Pearce who is currently a non-executive director of both companies will be retained by the merged company in the same role.

Indicative Timetable

Securityholders of Mavuzi will be asked to approve the Scheme of Arrangement at meetings which are expected to be held by December 2007. Full particulars of the Scheme, transaction terms and recommendations will be provided to securityholders though a Scheme Booklet which will include an Independent Expert's Report in relation to the offer. It is expected that this booklet will be mailed to securityholders in November 2007.

Mantra and Mavuzi securityholders are not required to take any action at this stage in relation to the Scheme of Arrangement.

Advisors

Mantra is being advised by Argonaut Capital Limited as financial advisor and Tottle Partners as legal advisor, while Hardy Bowen Lawyers is acting as Mavuzi's legal advisor. Mavuzi will engage an independent expert to consider whether the merger is in the best interests of its securityholders.