Re: NTU - Northern Uranium
On 9 August, 2010 Northern Uranium announced it had signed a binding Letter of Intent with Jiangsu Eastern China Non-Ferrous Metals Investment Holding Co., Ltd, an affiliate of East China Exploration & Development Bureau (?ECE?).
Subject to approval from Northern Uranium shareholders, ECE will invest about A$15.7m in your Company at a share subscription price of A$0.145 per share.
The Northern Uranium Board believes the proposed deal is a major development for your Company. It will allow it to move ahead with a funded and aggressive exploration program across our uranium and rare earth portfolio, with the support of a highly credentialed Chinese partner. ECE is very supportive of Northern Uranium?s strategy, and of our operating and off-take arrangements with Areva.
In addition to shareholder approval, ECE?s investment is subject to completion of formal documentation and due diligence and regulatory approvals including FIRB and Chinese provincial government approvals.
On completion, ECE will hold 51% of Northern Uranium?s share capital on an undiluted basis. It will have the right to nominate three representatives onto the Board and, along with the Company?s existing Board members, to approve the appointment of an additional two independent Australian Board members. While this will initially produce a large Board of nine, this will be reviewed over time in light of the size and requirements of the Company and in accordance with applicable principles of Australian corporate governance.
The share price at which ECE may invest in Northern Uranium represents a 58% premium to the 1 month volume weighted average price of Northern Uranium shares (up to and including 4 August 2010, being the last trading day prior to the day on which a trading halt was requested in respect of Northern Uranium shares).
What are the benefits for Northern Uranium?
Northern Uranium is an exploration company relying on the support of capital markets for success and the Board is delighted to have entered into this arrangement with a highly credentialed Chinese counterparty. The transaction validates the strategy of compiling our portfolio of uranium and heavy rare earth elements (?HREE?) projects in Australia. Both commodities are highly leveraged to the ?new energy? market which is set for rapid growth, underpinned by the continued process of urbanisation and industrialisation of China and other emerging economies.
Critically, the proposed investment by ECE will provide the Company with a substantial funding platform to aggressively explore and add value to its asset base. This is at a time when capital market conditions remain very challenging, especially for early-stage explorers such as Northern Uranium. ECE also brings a wealth of exploration experience and skills and access to further funds that will help the Company execute its strategy.
As I mentioned earlier, ECE is supportive of Northern Uranium?s strategic alliance with global uranium leader AREVA in relation to the Company?s Gardiner-Tanami uranium assets, and has confirmed its intent to work in close commercial cooperation with AREVA on uranium related developments at the project. ECE does not intend to control the sale of future products.
ECE background
ECE is a major Chinese mineral exploration, development and mining group based in Nanjing, which has been in operation since 1955 and has more than 4,000 employees.
Its track record includes the discovery more than 160 ore deposits in China, including iron ore, base metals and gold, with a potential value in excess of $10 billion. In addition, ECE has several mines and refining operations including Youxi Jindong lead-zinc mine and refining operations, Fujian Taiyangshan gold mine, Yunan Boka gold mine and Anhui Matou copper-molybdenum mine.
ECE also holds a 22.14% interest in ASX listed minerals explorer, Arafura Resources (ASX:ARU).
What are the next steps?
The Board is now focussed on implementing the steps set out in the Letter of Intent for the completion of due diligence, formalisation of documentation and obtaining of all necessary shareholder and regulatory approvals.
It is expected that due diligence will be completed by the end of September, with shareholder approval documentation (including an Independent Expert?s report on the transaction) to be dispatched shortly thereafter. It is our aim to complete the transaction before the end of this calendar year.
In the meantime, the Board will be focussing on the previously announced drill programme for the Gardiner-Tanami project, including a Reverse Circulation (RC) drilling program, detailed geological and structural mapping of target areas including several new targets, and airborne Electromagnetic (EM) surveys over recently granted tenements.
We will continue to communicate with you as we progress with this exciting stage in the growth of your Company, and we look forward to your ongoing support.
If you have any further questions, I encourage you to contact our Managing Director George Bauk on +61 8 94812344.
Yours sincerely
KEVIN SCHULTZ Chairman