JOINT NEWS
RELEASE
1.30pm (BST) 18 April 2008
EUROPEAN MINERALS TO ACQUIRE LERO GOLD;
CREATES REGIONAL CONSOLIDATION & GROWTH COMPANY FOCUSED IN THE COUNTRIES OF
THE FORMER SOVIET UNION
THIS NEWS RELEASE IS NOT INTENDED FOR DISTRIBUTION TO UNITED STATES NEWSWIRE
SERVICES OR DISSEMINATION IN THE UNITED STATES.
European Minerals Corporation (�EMC� � TSX:EPM, AIM:EUM) and Lero Gold
Corp. (�Lero� � TSXV:LER) are pleased to announce that they have entered
into a binding heads of agreement pursuant to which EMC will acquire all of the
outstanding common shares of Lero in exchange for common shares of EMC pursuant
to a plan of arrangement (the �Acquisition�). The directors of EMC and
Lero believe that the Acquisition will create a well-financed gold/copper
mining and production, development and exploration company with an exciting growth
profile focused on regional consolidation in the countries of the former Soviet
Union.
Under the terms of the Acquisition, Lero shareholders will receive one common
share of EMC for each issued share of Lero, representing a value of C$0.98 per
share based upon the 20-day volume weighted average price of EMC on the Toronto
Stock Exchange (the �TSX�) for the 20- day period leading up to and including
April 17, 2008. This represents an 9% premium to Lero�s 20-day volume weighted
average trading price based on the 20-day volume weighted average prices of EMC
and Lero shares on the TSX and TSX Venture Exchange, respectively.
Subject to receipt of required stock exchange approval, following the
completion of the Acquisition, EMC�s shares will continue to be listed on the
TSX and admitted to trading on the AIM market of the London Stock Exchange
(�AIM�).
The combined company will focus on regional consolidation and growth
opportunities in the countries of the former Soviet Union. Some of the salient
terms of the Acquisition and characteristics of the combined company are set
forth below:
� Upon the closing of the Acquisition, Dr. Sergey V. Kurzin, currently Chairman
of Lero,
will join the board of EMC as Executive Chairman, together with Dr Alexander
Yakubchuk (currently Chief Executive Officer of Lero) and Mr Takhirzhan T.
Baratov
(currently the chairman of EMC�s Kazakh subsidiary, JSC Varvarinskoye).
� At the next meeting of shareholders of EMC following the closing of the
Acquisition, the name of EMC will be changed to Orsu Metals Corporation
(�Orsu�).
� Concurrent with this announcement of the Acquisition, Lero announces a
C$40,000,000 �bought deal� financing with Canaccord Adams Limited, details of
which are set out below. Of this financing, US$25 million will be lent by Lero
to EMC (the �Lero Loan�) prior to closing of the Acquisition on the terms
outlined below.
� Endeavour Mining Capital Corp. has agreed to provide a US$5 million bridge
loan to
EMC for working capital purposes to be repaid upon the completion of the Lero
Loan.
� EMC is currently commissioning the Varvarinskoye gold/copper project in
Kazakhstan where commercial production is expected to be achieved by the end of
Q3 2008. At steady state production the mine is expected to produce 149,000 ounces of
gold and 26 million pounds of copper annually in its first three years of
production.
� As previously announced (see EMC�s press release dated 31 March 2008) EMC has
appointed an independent engineering company to undertake a scoping study to
engineer the expansion of the Varvarinskoye plant throughput beyond the
currently planned 4.2 million tonnes per annum.
� Lero is currently exploring the Taldybulak Talas gold copper deposit in
Kyrgyzstan and is also exploring at the Karchiga copper deposit in western
Kazakhstan. Lero expects to announce National Instrument 43-101 compliant
resource estimates for both properties by the end of April 2008.
� The board of directors of Lero believes there is substantial exploration
upside at their Taldybulak Talas and Karchiga deposits and also within EMC�s
three square kilometer mining lease for Varvarinskoye and surrounding 220
square kilometre exploration
licence.
Commenting on the transaction, Dr. Sergey V. Kurzin, Executive Chairman of
Lero, said:
�Combining the Varvarinskoye cashflow and expansion potential with the Lero
growth opportunities will position Orsu Metals Corporation to be a premier
growth company with the ability to be a regional consolidator. The benefits of
the strategic fit between Lero and EMC is something that I look forward to
bringing to fruition for all shareholders. As global demand for gold and base
metals remains strong, a well-funded Orsu Metals Corporation has a stable
foundation from which to launch its growth and consolidation platform.�
Tony Williams, Chairman of EMC, added:
�This business combination, together with Lero�s concurrent financing
stabilizes the enlarged group�s financial position whilst we finish bringing
Varvarinskoye up to commercial production levels. At the same time, I am
delighted to see the additional growth potential of the Lero assets and the
significant experience of the Lero management team in the FSU bringing
immediate and long-term benefits to the EMC shareholders.�
Summary of Transaction
The acquisition of Lero by EMC will be completed by way of a statutory plan of
arrangement under the Business Corporations Act (British Columbia) whereby each
Lero common share will be exchanged for one EMC common share. After completion
of the transaction, prior to giving effect to the Lero Placing described below,
it is expected that current EMC shareholders will own approximately 81% of the
combined company (72% including the shares to be issued pursuant to the
Offering (as defined below) and excluding the over-allotment option and the
underwriters option each as described below) and current Lero shareholders will
own approximately 19% (28% including the shares to be issued pursuant to the
Offering (as defined below) and excluding the over-allotment option and the
underwriters option each as described below and each on a non-diluted basis).
The Acquisition will be subject to, among other things, confirmatory legal and
financial due diligence (technical due diligence has been completed),
definitive documentation, approval by the holders of Lero common shares,
satisfactory amendments to current EMC senior loan documents, regulatory and
court approvals. A meeting of Lero shareholders to approve the
Acquisition will be held as soon as practicable and a notice of meeting,
information circular and related materials will be mailed to Lero shareholders
on completion of the confirmatory due diligence and definitive documentation.
The Lero Loan will be an unsecured obligation of EMC. The Lero Loan will have a
term to 31
December 2008 and will accrue interest at a rate of 10% per annum. Principal
and accrued interest will be payable on maturity. In the event that the
Acquisition is not completed pursuant to the terms of the heads of agreement,
Lero may, at its sole discretion, subject to the approval of the TSX, convert
the Lero Loan, including accrued interest, into common shares of EMC at a price
equal to 95% of the market price of the common shares of EMC at the time of
conversion.
If the transaction is not completed as a result of certain specified actions of
EMC or Lero, such party has agreed to pay a break fee of C$3 million to the
other. In addition, both EMC and Lero have provided each other with certain
other customary undertakings, such as confidentiality and non-solicitation
agreements.
Lero Placing
Lero also announced a bought-deal, private placement for gross proceeds of
C$40,000,000 (the �Offering�). In addition, Lero will grant to Canaccord Adams
Limited (�Canaccord�) an overallotment option of an equivalent of up to 15% of
the Offering shares (C$6,000,000). Canaccord is the sole underwriter and
bookrunner. Lero has also granted Canaccord the option to increase the Offering
by up to an aggregate amount of common shares equal to proceeds of
C$20,000,000.
The net proceeds from the proposed offering will be used primarily to fund the
Lero Loan detailed above, to fund continued exploration and drilling on Lero�s
Taldybulak Talas and Karchiga projects, with the remainder being used for
working capital and potential acquisitions.
EMC Nomad and Temporary cessation of trading on AIM
In light of the proposed Acquisition, Canaccord Adams Limited has resigned as
nominated advisor and broker to EMC, effective 1.30pm (BST) on Friday 18 April
2008, as required under Rule 22 of the AIM Rules for Nominated Advisors. Pursuant
to Rule 1 of the AIM Rules for
Companies, EMC�s shares will, with effect from 1.30pm (BST) on Friday 18 April
2008, be suspended from trading pending the appointment of a replacement
Nominated Advisor. EMC is in discussions with regards to the appointment of a
replacement Nominated Advisor and, upon their appointment, the suspension of
EMC�s shares from trading on AIM will be lifted. EMC�s shares remain listed and
posted for trading on the TSX.
Advisors and Counsel
EMC�s exclusive financial advisor is Endeavour Financial International
Corporation and its legal counsel is Macleod Dixon LLP. Lero�s financial
advisors are Canaccord International Limited and its legal counsel is
McCullough O�Connor Irwin LLP.
EMC Overview
EMC is a mineral exploration and development company focused on identifying,
acquiring and developing resource projects. Its principal asset is the
Varvarinskoye Gold-Copper deposit located in Kazakhstan and held by its
wholly-owned subsidiary, JSC Varvarinskoye. EMC has already poured gold and
produced gold-copper concentrate at Varvarinskoye and is currently in the
process of completing the steady state commissioning of the mine and plant
facilities at Varvarinskoye. Additional information, including details of the
resources and reserves of EMC, is available at www.SEDAR.com.
Lero Overview
Lero is a base and precious metal exploration company which is currently exploring
and developing advanced stage gold and base metal assets in Kyrgyzstan and
Kazakhstan, including other prospective regions along the Tien Shan
Metallogenic Gold Belt in Central Asia. Lero is currently exploring two key
project areas in north western Kyrgyzstan and eastern Kazakhstan being the
Taldybulak Talas Project (Kyrgyzstan) and the Karchiga Project (Kazakhstan). Additional
information relating to Lero is available at www.SEDAR.com.
Qualified Persons
Bert Kennedy, EMC's President and Chief Executive Officer, is the �qualified
person� (as such term is defined in National Instrument 43-101) responsible for
the technical and scientific information in this news release relating to EMC.
For further information contact:
United Kingdom
European Minerals Corporation
Tony Williams
Chairman
Bert Kennedy
President & CEO
Tel: +44 (0) 20 7529 7508
Lero Gold Corp.
Dr. Sergey V. Kurzin
Chairman
Alexander Yakubchuk
CEO
Nick Clarke
Executive Director
Tel: +44(0) 20 7514 0590
Bankside Consultants
Michael Padley/ Michael Spriggs
Tel: +44(0) 20 7367 8888
North America
Keith Schaefer ir@vanguardsolutions.ca
Vanguard Shareholder Solutions Inc.
Tel: 1.866.448.0780
No stock exchange, securities commission or other regulatory authority has
approved or disapproved the information contained herein. The TSX Venture
Exchange does not accept responsibility for the adequacy or accuracy of this
release.
Forward-Looking Information
This news release contains or refers to forward-looking information. All
statements, other than statements of historical fact, that address activities,
events or developments that EMC or Lero, as applicable, believes, expect or
anticipate will or may occur in the future are forward-looking information. Such
forward-looking information includes statements contained in this news release
regarding the completion of the Lero Loan and the Acquisition, targets,
estimates and/or assumptions in respect of future annual production of gold and
copper, costs, commodity prices, mineral resources and reserves, timing of
commencement and completion of �hot� commissioning and commencement of
operations, potential mineralization and future exploration, development and
operational plans and objectives (including delineating additional mineral
resources). This forward-looking information reflects the current expectations
or beliefs of EMC or Lero, as applicable, based on information currently
available to it. Forward-looking information is subject to a number of risks
and uncertainties that may cause the actual results of
EMC or Lero, as applicable, to differ materially from those discussed in the
forward-looking information, and even if such actual results are realized or
substantially realized, there can be no assurance that they will have the
expected consequences to, or effects on EMC and/or Lero.
Factors that could cause actual results or events to differ materially from
current expectations include, but are not limited to: the grade and recovery of
ore which is mined at EMC�s Varvarinskoye Project varying from estimates;
capital and operating costs varying significantly from estimates; inflation;
changes in exchange rates; fluctuations in commodity prices; delays in the
development or commissioning of, and the commencement of operations at, EMC's
Varvarinskoye Project caused by unavailability of equipment, labour or
supplies, weather and climatic conditions, delays in the delivery and
installation of plant and equipment or otherwise; termination or suspension of
EMC's current debt facility; failure of Lero to raise the funds necessary to
complete the Acquisition; the failure of EMC and Lero to negotiate the terms
under which funds are to be advanced under the Lero Loan or to negotiate
definitive agreements; delays in obtaining or failure to obtain required
regulatory and shareholder approvals; inability by Lero or EMC to delineate
additional mineral resources or reserves; and other factors. Any
forward-looking information speaks only as of the date on which it is made and,
except as may be required by applicable securities laws, EMC and Lero disclaim
any intent or obligation to update any forward-looking information, whether as
a result of new information, future events or results or otherwise. Although
each of EMC and Lero believes that the assumptions inherent in the
forward-looking information applicable to it are reasonable, forward-looking
information is not a guarantee of future performance and accordingly undue
reliance should not be put on such statements due to the inherent uncertainty
therein.
European Minerals
Vanguard Shareholder Solutions
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