Wits Basin and London Mining Sign Agreement Relating to Joint Ventureadmin
Wits Basin Precious Minerals Inc. announced today that London Mining Plc and Wits Basin have entered into definitive terms for the formation and operation of a 50/50 joint venture company which will own all the issued shares in China Global Mining Resources Ltd. (“CGMR”). CGMR, currently a wholly-owned subsidiary of Wits Basin, holds the rights to acquire the Maanshan Xiaonanshan iron ore mine located in the Anhui Province in the People’s Republic of China and the Nanjing Sudan processing plant located in the nearby Jiangsu Province.
London Mining has conditionally agreed to subscribe for a 50 percent interest in the joint venture company for an initial investment of USD$45 million. London Mining’s obligation to subscribe for shares in the joint venture company is subject to the satisfaction of certain conditions, including, without limitation, the completion of its due diligence, incorporation of the joint venture company, transfer of the shares in CGMR to the joint venture company, and the satisfaction of the remaining conditions precedent in CGMR’s contracts to purchase the Maanshan Xiaonanshan Mine and the Nanjing Sudan processing plant. These remaining conditions precedent include, among other matters, receipt of approvals from the Chinese Ministry of Commerce and the issuance of an updated mining permit for the Maanshan Xiaonanshan Mine.
While Wits Basin and London Mining will each initially have a 50 percent interest in the joint venture, London Mining will have preferential rights with respect to return of capital and distributions of available profits until its USD$45 million initial investment is returned. The joint venture company will be controlled through a shareholders’ agreement.
Definitive conditional purchase agreements relating to the acquisition of the Maanshan Xiaonanshan Mine and the Nanjing Sudan processing plant were originally executed in August 2008 and were based on a Chinese governmental system using a Wholly Foreign Owned Enterprise (WFOE) as the legal entity buying the iron ore business. Subsequent changes in PRC policy, which rendered the WFOE structure non-applicable to this transaction, required that the parties restructure the acquisitions. Because of this, our anticipated closing date of October 31, 2008 has been extended. A new closing date for the acquisitions of the Maanshan Xiaonanshan Mine and the Nanjing Sudan processing plant will be set after an approval is received from the Chinese Ministry of Commerce and the new mining permit is issued, which is not expected to occur prior to mid-December 2008.
As a condition to London Mining’s subscription in the joint venture company, Wits Basin will transfer to CGMR the right to acquire the Matang Project, which right is currently held by a wholly-owned subsidiary of Wits Basin. The Matang Project, which is owned by the same people who own the Maanshan Xiaonanshan Mine and the Nanjing Sudan processing plant, is still in the development stage and there has been no mining of the iron ore deposit to date. Completion of this acquisition is conditional on a number of matters including, without limitation, the receipt by Maanshan Zhao Yuan Mining Co Ltd of full business licenses and such other operational permits as are required to enter into production.