End of Arbitration at Zebediela Nickel Project

RNS Number : 2213V

URU Metals Limited

11 December 2013

 



11 December, 2013

URU Metals Limited

("URU" or "the Company")

 Announces End of Arbitration Proceedings and increases

Interest in the Zebediela Nickel Project to 100 %

 The Directors' of URU Metals Limited, (AIM:URU), the  base metals and uranium explorer and development Company, are pleased to announce the end of arbitration proceedings  with respect to its Zebediela Nickel Project , following an agreement with its remaining JV partner under which URU will (subject to confirmatory due diligence) acquire the remaining 26% interest in the Zebediela Nickel Project currently held by a subsidiary of Umnex Mineral Holdings (Pty) Ltd.

Highlights

·    Resolution of arbitration proceedings

·    URU has increased its interest in the Zebediela Nickel Project from 33% to 100% and in the Burgersfort Project from 25% to 50% through this agreement and the purchase of Southern African Nickel, announced 25 November, 2013.

·    Re-start the development of the Zebediela Project under URU's sole direction, as all arbitration and legal issues will be resolved.

·    Minimal consideration for a quality project- URU will issue 33,194,181 shares to Umnex Mineral Holdings, with a possibility of issuing an additional 12 million shares if URU sells the project to another party.

·    Gained prospecting and development rights over the projects, which it did not have before.

Commenting on the deal, URU Metals' CEO Roger Lemaitre said:

"This agreement which consolidates ownership of one of the world's largest sulphide nickel development projects, is one which we believe will be accretive to shareholder value in the near future. URU's stake in the world-class Zebediela Nickel project has now increased from  33% to 100% through this deal and our previous purchase of Southern African Nickel.  With 100% ownership of Zebediela, URU can re-start the development of this world class nickel project with combined inferred and indicated resources of over 1.5 billion tonnes free and clear of any arbitration or legal concerns.

Commenting on the deal, URU Metal's Chairman David Subotic said:

"Full ownership of this world-class nickel asset has always been our goal and I commend the URU Metals executive team on successfully negotiating a difficult agreement. We are confident this acquisition positions URU for a period of long-term growth that will benefit all shareholders."

Background on the transaction

Upon the successful conclusion of this transaction, URU will acquire 100% interest in the Zebediela Nickel Project by purchasing 100% of the stock of South African-registered company, Umnex Minerals Limpopo (Pty) Ltd.  ("UML").  Umnex  currently owns 100% of the equity of UML. UML in turn owns 100% interest in Lesago Platinum Uitloop (Pty) Ltd ("LPU"), the current holders of the prospecting rights that make up the Zebediela Nickel Project. 

As consideration for the purchase of UML, URU will issue 33,194,181 shares to Umnex, which will constitute 20% of the total URU shares outstanding at the completion of the transaction.  Should URU sell its interest in the Zebediela Nickel Project, or if URU converts the current Prospecting Rights to Mineral Licences, Umnex will be entitled to receive an additional 12 million shares of URU.

The consideration of 33,194,181 shares will be completed in two stages.  In the first stage, URU will purchase 49.9% interest in UML in exchange for 16,563,896 million shares of URU that will be free of trading restrictions.  Umnex and URU will then apply to obtain consent for a transfer of the remaining 50.1% interest in UML to URU by the Minister of Mineral Resources South Africa through a Section 11 transfer of the prospecting rights that constitute the Zebediela Nickel Property.

The Company is currently undertaking due diligence on Umnex and the Directors anticipate that this process will be completed in early January. Following successful completion of the due diligence process the transaction will be concluded, at which stage the first tranche of 16,563,896 new URU shares will be issued.

Upon obtaining the consent of the Minister, URU will issue the second stage consideration of 16,630,285 shares of URU to Umnex.  The second stage shares will be subject to a lock-in agreement under which 3,326,057 shares will be released from lock-in on quarterly intervals.

Prior to this transaction and the acquisition of Southern African Nickel (see RNS of 25 November 2013), URU held a 33% direct interest in the Zebediela Nickel Project and a 25% direct interest in the Burgersfort Project, both through its ownership participation in the SAN JV.

As part of these transactions, URU will have the right to acquire all current prospecting right applications located in whole or in part within 5 km of the current Zebediela Prospecting Rights, and will have the right to acquire any such rights granted to SAN, Pangea, Umnex or by any corporate member of the Umbono Capital Group (Umnex's ultimate owner) within the next five years.  URU will also acquire the right to explore for and develop all platinum-group element, iron, and copper resources on the Zebediela Nickel Project, which was previously excluded from the SAN JV.  The Zebediela Nickel Project is located immediately south-east and adjacent to Ivanhoe's Mines Platreef Platinum project which is advancing towards development.

The agreements are conditional subject to due diligence of the corporate entities URU will be acquiring and completion of a satisfactory title opinion on the Zebediela mineral rights.  URU anticipates that the closure of both transactions will occur prior in early January.

Upon completion of the due diligence, URU and Umnex will terminate the current arbitration proceedings between Umnex and URU's newly acquired and wholly-owned subsidiary Southern African Nickel ("SAN"), and the agreement will act as full and final settlement of all claims that Umnex, URU, and SAN may have against each other.  The SAN JV will also be dissolved, as URU will be the sole participant of the JV.

After the successful completion of the first stage of this transaction, URU will be seeking a Black Economic Empowerment ("BEE") partner to help develop the Zebediela Nickel Project.  Under South African law, all mining projects are required to have at least 26% BEE equity ownership.

A further announcement will be made in due course.

Contact details:

URU Metals Limited Roger Lemaitre, CEO	+ 1 416 892 2870
WH Ireland Limited (Nominated Adviser and Broker) Adrian Hadden James Bavister	+ 44 207 220 1666
Ribeiro Communications Ana Ribeiro	[phone]

Additional information regarding the SAN Nickel JV Projects can be found on the Company's website at www.urumetals.com.

Notes to Editors

Background information on SAN JV Nickel Projects

The Zebediela Nickel Project is located in the Limpopo Province of South Africa close to the platinum mining town of Mokopane, very close to existing rail, highway, and electrical power infrastructure.

The Zebediela Nickel Project is a large disseminated sulphide resource with mining engineering aspects similar to porphyry copper deposits in terms of size and grade.  The NI 43-101-compliant PEA led by the MSA Group outlined indicated resources of 485.4 million tonnes averaging 0.245% nickel, and additional inferred resources of 1,115.1 million tonnes of 0.248% nickel.  The Zebediela Project also contains significant iron minerals in the form of magnetite that is also being investigated as a potential by-product.

The PEA considered the mining and milling of only 500 million tonnes of mineralized material in an open pit mine approximately 1700 m long by 880 m wide by 250 m deep.  The proposed mining rate is 20 million tonnes per annum using a contractor mining fleet.  The strip ratio was calculated to be 0.36:1.

Extensive work was conducted on the Zebediela deposit metallurgy indicating that 50% of the total contained nickel could be recovered into a high quality saleable nickel concentrate averaging 16% Ni.  Start-up capital expenditures including contingencies and working capital are estimated to be $650 million and sustaining capital is estimated at $58 million over the life of the mine.  Operating expenditures are estimated to be $3.35 per pound of recoverable nickel.

The PEA projects a pre-tax and pre-royalty net present value of $1,018 million, an internal rate of return of 25.7% and a 3.8 year payback period at an 8% discount rate using a nickel price of $8.50/lb and a ZAR/USD ratio of 8.1.  Annual cash flow is project to be $203 million.

URU is aware of the potential value of a magnetite as an iron concentrate by-product at Zebediela since the inception of the project.  Metallurgical work investigating by-product magnetite was included in the scope of the PEA investigations, but due to analytical delays, any potential economic impact from iron by-product was not included in the report.

 

END

 

 

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