Company update

Company update

Watermark Global

Watermark Global Plc
(“Watermark” or the “Company”)
Completion of the Definitive Feasibility Study

Watermark, the AIM quoted Company which focuses on the treatment of Acid Mine Drainage (AMD) in South Africa, is pleased to announce that the Definitive Feasibility Study (“DFS”) being conducted by its wholly owned subsidiary, Western Utilities Corporation (Pty) Ltd., (“WUC”) has now been completed.

The DFS was led by independent consultants, Golder Associates, together with a number of engineering and environmental specialists. It was completed within the original budget of R35million and its results confirm the project’s viability in five main areas: (1) the verification and securing of AMD for treatment; (2) the selection, design and costing of the scheme; (3) the completion of the Integrated Regulatory Process; (4) the signing of a binding off-take agreement; (5) the economic and financial analysis of the project.

Highlights

• Validation of the projects’ viability
• Total capital cost for the project of R1.5 billion
• Small delay in expected commencement of construction which is now anticipated to be in second quarter 2010 with commissioning in 2011. This timeline dependent on water off take agreement with Rand Water and funding of the project.
• Watermark is now well-placed to complete its negotiations with Rand Water by year end
• Negotiations with Black Economic Empowerment (“BEE”) partners are also expected to be finalised shortly
• Final approval of the Environmental Impact Assessment (“EIA”), is expected by February 2010

Jaco Schoeman, CEO of Watermark, commented:

“We are delighted to be able to report the completion of the DFS. It has been an incredibly complicated task and I would like to pay tribute to my colleagues and all the other parties involved - we now have a building block for future progress. With the DFS, we can complete our agreement with Rand Water and add further impetus to our project. Negotiations with our BEE partners are continuing and a draft shareholders agreement at WUC level is being discussed. Procuring BEE participation will assist with the Integrated Regulatory Process, and also add valuable local participation to the project. Further updates on the various aspects of the project will be provided over the coming weeks.”

Resource Verification

As was previously announced, the total volume of AMD available for treatment, as verified by Golder Associates is 155 Mega Litres (ML) per day of which, on average, 67 ML will be treated to industrial water standards for consumption by the mines participating in the project, while the rest (on average 88ML/day) will be treated to drinking water standards (South African Bureau of Standards 241) and sold to bulk water distributors, such as Rand Water.

Selection, Design and Costing of the Total Scheme

The total scheme incorporates the collection of AMD water from the three basins, namely the Western, Central and Eastern Basins, the treatment of the water at a centralised plant, and the distribution of the water back to the mines and to bulk water suppliers in the region such as Rand Water.

The centralised water treatment plant design is based on the Alkali-, Barium-, Calcium- process developed by the Council for Scientific and Industrial Research in which WUC has secured a 20% participation in the Intellectual Property during the development of the process.

The Integrated Regulatory Process (“IRP”)

The IRP focuses on the completion of the Environmental Impact Assessment (“EIA”) for the entire scheme. Approval of the Final Scoping Report was delayed by the Gauteng Department of Agriculture and Rural Development (GDARD) by a month and approval is finally due to be received by the 30^th of October 2009. Following this we expect to submit the Environmental Impact Report for public review by the 15^th of November. Following a 30 day public comment period the EIA will be submitted to the relevant authorities and the final Record of Decision (RoD) is expected to be received by the 15^th of February 2010 assuming no further delays from the South African Government. The delay in the approval of the Final Scoping Report has had a direct impact on the timelines of the project and, as a result, may delay the start of construction.

The IRP includes the application for an Integrated Water Use License. This application must be supported by the EIA and will be submitted together with the EIA to the relevant authorities. Approval will only be granted once the RoD has been issued. A number of discussions have been held with the relevant authorities and the Board believes that the approval of the IWULA will not be unnecessarily delayed.

Rand Water off-take Agreement

In order for WUC to negotiate an economically viable selling price for the drinking water it was necessary to complete the Definitive Feasibility Study. which included capital and operating cost estimates. Certain assumptions have been made in the financial model and Feasibility Study to ascertain this selling price and the Board believes that this will be achievable. A final agreement has not yet been reached and as previously announced a formal agreement is expected by December 2009.

Financial and Economic Analysis of the project

The total estimated capital cost of the scheme amounts to approximately R1.52bn, excluding fees and financing costs. The capital and operating cost estimates are within ±15%. Cost estimates are based on the engineering designs completed for each of the components of the scheme either through formal tenders (collection and distribution systems), formal quotes and or standard engineering practice estimates. Preferred suppliers have been selected and contract negotiations will follow the securing of funds. The following table provides an overview of the costs for the various aspects of the scheme:

Scheme Component	Â	ZAR million
Collection system		275.45
Treatment Plant		968.46
Distribution system		225.51
Other		52.18
Total Project Cost		1 521.6

With the negotiations for the off-take still in progress, the Directors believe that it would be inappropriate to release any rates of return figures at this time. However a commercially attractive rate is the minimum starting point for our discussions. Certain assumptions have been made with regard to the selling prices of water and a pricing strategy has been developed. A full financial analysis will only be released once the negotiations with Rand Water have been completed due to the sensitivity and confidentiality of the information during the negotiation process. Operating costs for the plant have been defined in great detail and an expert third party review of these costs was completed as part of the study.

Looking Forward

With the delays in the EIA approval process and completion of the Rand Water off-take agreement, it is now expected that construction of the plant will commence in the second quarter of 2010 with the plant being ready for commissioning in 2011. The timeline is also dependent on the finalisation of the funding structure of the project, which is expected by March 2010.

Enquiries:

Watermark Global	Â
Dirk Kotze, Chief Financial Officer		Tel: + 44(0) 20 7233 1462
[e-mail]
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Charles Zorab, Investor Relations		Tel: + 44(0) 20 7233 1462
[e-mail]
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Nominated Adviser
Cenkos Securities
Ian Soanes/Elizabeth Bowman		Tel: [phone]
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Financial PR
Bishopsgate Communications
Robyn Samuelson/Giang Nguyen		Tel: [phone]