GobiMin Inc. ("GobiMin" or the 'Company") is pleased to announce that it has entered into two revocable framework agreements ("Framework Agreement") with Xinjiang Xinxin Mining Industry Co., Ltd. ("Xinxin") to dispose of its three nickel-copper mining properties, namely Yellow Mountain East, Xiangshan and Yellow Mountain, in Hami, Xinjiang Uygur Autonomous Region of the People's Republic of China ("China"). The proposed transaction (the "Transaction") will be facilitated through the sale of its two Chinese subsidiaries, Xinjiang Yakesi Resources Co. Ltd. ("Yakesi") and Hami Jubao Resources Co. Ltd ("Jubao"). Xinxin, based in Xinjiang, is China's second-largest nickel producer. It became public on The Stock Exchange of Hong Kong Limited in 2007.
Terms of the Transaction
Pursuant to the Framework Agreement and prior to the completion of the Transaction, Yakesi and Jubao will distribute as dividend to their existing shareholders their retained earnings as of October 31, 2008 and repay all shareholder loans outstanding. Immediately thereafter, Xinxin will acquire 100% equity interest of Yakesi and Jubao for a total cash consideration of RMB540 million (CAD$96 million). GobiMin presently owns 93.55% of Yakesi and 95.16% of Jubao respectively through its wholly owned subsidiary, Alexis Investments Limited ("Alexis"). In order to complete the Transaction, GobiMin will procure the minority shareholders of Yakesi to sell their stake at the same time. Xinxin will make an initial deposit of RMB25 million (CAD$4.46 million) within 3 days from the date of the Framework Agreement. It is estimated that GobiMin will receive net proceeds of RMB490 million (CAD$87.5 million) before Chinese tax upon completion of the Transaction.
In addition, GobiMin presently holds as of October 31, 2008 cash and cash equivalents outside of Yakesi and Jubao of approximately CAD$18.4 million and receivables from Yakesi and Jubao of approximately CAD$7.1 million (before taking into account of the distribution of the retained earning as of October 31, 2008).
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The definitive sales and purchase agreement will be entered into before
December 15, 2008 subject to:
a) the approval of the board of directors and shareholders (where
applicable) of Alexis, GobiMin and Xinxin;
b) the completion of the audit of accounts of Yakesi and Jubao until
October 31, 2008 and the due diligence review by Xinxin;
c) the regulatory approvals.
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In case the Transaction cannot be consummated due to the Company's fault, a breakup fee of RMB25 million (CAD$4.46 million) is payable by the Company in addition to refund of the initial deposit.
The Transaction is expected to close before February 6, 2009.
Exchange rate used: CAD $1 = RMB 5.6
Benefits of the Transaction
As previously announced on October 20, 2008, the Company has started a strategic review on its mining projects due to the recent dramatic decline of nickel and copper price. As a result of the review and after detailed financial analysis, the management believes that the Transaction will increase the Company's financial resources, reduce shareholders' risk and potential shareholders dilution while providing an optimal return of value to its shareholders, especially in light of GobiMin's current market capitalization of approximately CAD$31 million on the basis of 71 million outstanding shares. Most of all, the Company is of the view that the current market conditions will provide exciting opportunities for cash rich mining companies.
The Transaction has the full support of the Company's board of directors and management team.
GobiMin's Other Exploration Projects
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Upon completion of the Transaction, the Company will aggressively pursue
its other projects:
1. The potential future development of the newly discovered Yanxi
Project using typical low-cost Chinese mining methods. The NI 43-101
compliant Indicated Mineral Resources total 15 million tonnes at
0.75% copper (254 million lbs of contained copper) while Inferred
Mineral Resources total 10 million tonnes at 0.71% copper
(160 million lbs of contained copper);
2. The exploration of projects under 4 other exploration companies in
Xinjiang; and
3. The acquisition of identified high grade mining projects for metals
such as iron, copper, lead and zinc.
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About GobiMin
GobiMin is a junior mining company with nickel/copper sulphide operations and development properties in northwestern China. Through its subsidiaries, Xinjiang Yakesi Resources Co. Ltd. and Hami Jubao Resources Co. Ltd., GobiMin controls three concessions, within a 10-kilometre radius, totaling 455 hectares. In operation since 1999, GobiMin currently operates two underground mines (Yellow Mountain East and Xiangshan) and is also currently developing its Yellow Mountain nickel/copper deposit.
GobiMin also has 40% interest in the newly discovered Yanxi Copper Deposit in Hami region.
FORWARD-LOOKING STATEMENTS AND RISK FACTORS
The release contains certain forward-looking statements. These forward-looking statements are subject to a variety of risks and uncertainties beyond the Company's ability to control or predict which could cause actual events or results to differ materially from those anticipated in such forward-looking statements. These risks include, but are not limited to, those associated with our capacity to finance our activities, the price of minerals and other commodities, reliance on subcontractors and key personnel, and other risks and uncertainties detailed from time-to-time in our filings with the Canadian securities commissions. There is no guarantee that the Transaction will be completed or that its terms will not vary from those described above, nor that Yakesi will ever be profitable and in a position to declare dividends.
Readers should not place undue reliance on forward-looking statements, given that (i) our actual results could differ materially from a conclusion, forecast or projection in the forward-looking information, and (ii) certain material factors or assumptions which were applied in drawing a conclusion or making a forecast or projection as reflected in the forward-looking information, could prove to be inaccurate. Additional information about (i) the material factors that could cause actual results to differ materially from the conclusion, forecast or projection in the forward-looking information, and (ii) the material factors or assumptions that were applied in drawing a conclusion or making a forecast or projection as reflected in the forward-looking information, is contained in the Company's annual report and other documents filed from time to time with the Canadian securities commissions and which are available at www.sedar.com.
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SOURCE: GobiMin Inc.
James Xiang, Chief Financial Officer, GobiMin Inc., Tel: (416) 915-0133, This email address is being protected from spambots. You need JavaScript enabled to view it., www.gobimin.com