Celtic Resources Holdings Plc
3�Feb�2006
Sale of interest in Nezhdaninskoye raises US$80 million
Future plans outlined
Celtic Resources Holdings Plc ('Celtic' or 'the Company') today announces that it has agreed to sell 20% of The South Verkhoyansk Mining Company ('SVMC') for US$80 million cash. SVMC is the holder of the license for the Nezhdaninskoye gold mine in Yakutia, Russia ('Nezhdaninskoye').
The Company has had productive discussions on the future of Nezhdaninskoye with Interros Group, one of Russia's largest private investment companies and a controlling shareholder in Norilsk Nickel and Polyus. As a result of these discussions, KM Technologies (Overseas) Limited, an investment vehicle for the Interros Group, has made the cash offer. The transaction is conditional on Celtic withdrawing all legal actions concerning the disputed ownership in Nezhdaninskoye. In addition to the cash consideration, Celtic expects to receive the repayment of the principal component of the debts owed by SVMC to Celtic totalling approximately US$10 million.
Following discussions with the Company's advisers, the board of Celtic has unanimously decided that its acceptance of the cash offer is in the best interests of Celtic and its shareholders. The US$80 million will be held in escrow and released to the Company conditional upon the withdrawal of all legal actions by Celtic in relation to the ownership of Nezhdaninskoye, which is expected to occur by 31st March 2006.
Whilst its goal of developing Nezhdaninskoye has not been met, the Company recognises that a cash return of this magnitude in the current business climate in Russia is exceptional and very much in the best interests of shareholders.
Celtic's total investment in Nezhdaninskoye to date has been approximately US$30 million.
Celtic has always maintained, and continues to do so, that it owns 50% of SVMC, but third parties laid claim to 60% of this interest. Full details of these disputes were provided by the Company on 6th October and 24th November 2005. For almost three years, Celtic has been in negotiations with various parties, principally IG Alrosa, relating to the future of the Nezhdaninskoye mine and whilst doing so, had agreed to postpone legal actions concerning the disputed shareholding in SVMC. These legal actions were reactivated when Polyus announced that it had acquired from IG Alrosa certain gold properties which included the interests in Nezhdaninskoye which Celtic did not own.
Whilst the Company believes that the continuation of the legal cases would have eventually resolved the ownership dispute in Nezhdaninskoye in its favour, this process could have taken between 18 and 24 months to complete, at substantial financial and managerial cost to the Company and with no guarantee of success.
Consequently, Celtic believes that resolution of the disputed 30% interest in SVMC is best left to remaining SVMC shareholders and the third parties.
Comment
Peter Hannen, Chairman of Celtic, commented, 'Whilst this is not the outcome we anticipated or wished for, it does now provide an opportunity to reinvest the substantial cash value we have obtained.
In the last three years, the Company has moved forward on all of its goals for shareholders - except its ability to convert Russian gold mine ownership into producing ounces. We disposed of all non-core assets, now represented by shareholdings in companies worth significantly more that their original values and increased our ownership from 15% to 100% of Suzdal. We have introduced leading processing technology to Kazakhstan via the Suzdal agglomeration-heap leach for low grade oxide ores and the BIOX(R) process for refractory sulphide ores. The Company has learned a lot about asset acquisitions in the region from its recent experience and the management has gained valuable insights, which we will now use to move forward and continue building a significant company geared to the bright future of gold.'
Source: Celtic Resources Holdings Plc announcement
Kerman & Co LLP, led by Daniel O'Connell, and assisted by Cormac Lloyd, advised Celtic Resources Holdings Plc in relation to the sale.
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