Michelago/Golden China Business Combination Moving Toward Completion
Toronto, Ontario, March 31, 2006. Golden China Resources Corporation (TSX.V: AUC) ("Golden China" or the "Company) is pleased to provide an update on its previously announced planned business combination with Australian based Michelago Limited (ASX: MIC) ("Michelago"). Michelago has now filed the documentation with the Australian Securities and Investment Commission required as the first step in the approval of the Scheme of Arrangement under Australian law. Following this, an Australian court is also required to approve the Scheme documentation prior to it being distributed to Michelago shareholders.
Under the terms of the Business Combination Agreement between Golden China and Michelago, the share exchange ratio will be adjusted from the previously announced 1 Golden China share for each 5 Michelago shares to 1 Golden China share for each 5.55 Michelago shares. The revised exchange ratio reflects a formula adjustment arising from the debenture financing being completed by Golden China to provide working capital funds for Michelago's BioGold processing facility in Shandong Province, China. This 1:5.55 exchange ratio is before taking account of the simultaneous 1:5 consolidation of Golden China's common shares being carried out as part of the transaction. On a post-consolidated basis, the share exchange ratio will be 1 consolidated Golden China share for each 27.75 Michelago ordinary share.
Golden China is very pleased with the progress toward completing this complex international transaction. Michelago currently expects to hold shareholder and optionholder meetings to consider and approve the transaction in late May 2006. Golden China anticipates holding a special meeting of its shareholders to approve the transaction shortly thereafter. A management information circular describing the transaction will be mailed to Golden China shareholders in the coming weeks.
Since announcing the transaction in November 2005, Michelago and Golden China have made a number of important announcements in their respective markets, which are summarized below.
Golden China Developments
Debenture Financing
Golden China has recently announced the completion of the second tranche of the debenture financing, as noted above. To date Golden China has closed $16,855,000 of a maximum potential $18.0 million financing.
Nibao Project
In February 2006, Golden China also announced an initial Canadian National Instrument 43-101 compliant independent mineral resource estimate at its Nibao project in China's Guizhou Province of approximately 5.45 million tonnes grading 2.47 g/t using a cut-off grade of 0.75 g/t and a gold price of U.S. $450 per ounce resulting in a total of 432,000 ounces of contained gold. This is the first resource estimate for the Nibao gold project.
Golden China has commenced a significant 15,000 metre infill drilling and exploration programme, and currently has 10 drilling rigs, at the Nibao gold property aimed at expanding and upgrading the resource in this area, as well as to obtain a sample for detailed metallurgical test work and ore characterization. A revised mineral resource estimate, incorporating the closer-spaced drilling (at least 50m x 50m grid) and drill results received after the November 2005 cut-off date for the current estimate, is expected to be completed in June. After the completing this infill drilling aimed at expanding and upgrading the gold resource base, Golden China's programme will seek to delineate additional gold deposits along the Nibao hydrothermal system, identified from surface work (geological mapping, soil and rock geochemistry and geophysical surveys) to be at least 12 kilometres in strike length.
The Company's technical team has also started work on a Preliminary Feasibility Study for the Nibao gold project, expected to be completed later this year. Preliminary reports on key metallurgical issues indicate that the Bacox(c) processing at Michelago's BioGold processing facility may be used successfully to process Nibao gold concentrates.
Beyinhar Project
Exploration on Golden China's highly prospective Beyinhar property in Inner Mongolia is expected to resume shortly. The Company plans to carry out a 9,000 metre resource definition drilling and exploration programme on the project with a view toward establishing an initial resource estimate for the project by mid to late summer.
Qualified Person
Dr. Renato Bobis (MAusIMM, CP Geo), Golden China's Exploration Manager, is the qualified person as defined by National Instrument 43-101, is overseeing the Golden China's exploration work at Nibao and Beyinhar and supervised the preparation of the information in this release. Golden China has established and maintains a comprehensive quality control-quality assurance (QA/QC) program.
Michelago Developments
Michelago has also reported a number of corporate developments contained in press releases at their website. Key aspects of these releases are summarized below, as they are believed to be relevant to Golden China shareholders.
BioGold Processing Facility
In January 2006 Michelago completed the final payment of 10 million RMB (A$1.67 million) to move from 82% to 99% equity interest in the BioGold SFJV, which owns and operates the BioGold processing facility. Additionally, Michelago completed final arrangements required to secure its exclusive licence to use the Bacox(c) technology for treatment of China's largely refractory gold resources.
Michelago has also obtained a bank commitment to provide working capital financing for the BioGold processing facility. This commitment, together with the financing to be provided by Golden China to Michelago as a result of the debenture financing carried out by Golden China (described above), will be sufficient to satisfy BioGold's working capital requirements, one of the conditions to completion of the business combination transaction.
During the five-month period to the end of December 2005 since Michelago acquired its initial interest in the BioGold facility, production achieved the following results:
|
BioGold Plant Production* | ||
|
August 1 - December 31, 2005 (Bacox and Cyanide Leach) | ||
|
Concentrate Treated |
(tonnes) |
34,075 |
|
Concentrate Grade |
(grams/tonne) |
60.99 |
|
Gold Recovery |
(%) |
94.64% |
|
Silver Recovery |
(%) |
87.46% |
|
Gold Equivalent Won** |
(ounces) |
59,798 |
* Michelago acquired an 82% interest in BioGold's on 22 July 2005 and increased its interest to 99% on January 20, 2006.
** Gold equivalent calculated at $US485.44/oz Au and $US7.64/oz Ag
Michelago also reported that a number of initiatives implemented during the half year have taken effect, particularly in relation to operational cost reductions. Finally, in January 2006, Michelago completed construction and commissioning of a new flotation plant at the facility to treat non-refractory plant residue to produce a lead-zinc concentrate.
Australian Solomons Gold
Australian Solomons Gold Pty Ltd ("ASG") is a private company currently 37.2% owned by Michelago and is the owner of the Gold Ridge Mine in the Solomon Islands. The Gold Ridge Mine is located on Guadalcanal Island in the Solomon Islands. The mine originally commenced production in August 1998 and produced gold and silver over the next two years until June 2000 when ethnic tensions and civil unrest on the island forced suspension of mining operations and the evacuation of all personnel from the mine site. In December 2004, Michelago and several partners acquired Gold Ridge with a view to resuming operations since order had been restored through the intervention of Australia and other Asian-Pacific governments.
In mid-2005, ASG commissioned a Bankable Feasibility Study for the re-development of the mine. Work on the study is well advanced and is expected to be completed in the third quarter of 2006. To date, the plant and mining equipment have been assessed for condition; metallurgical sample drilling and further limited exploration have been carried out; resources definition drilling is continuing; and further work has been done to interpret the geology, mineralization and controls on the ore bodies, with additional metallurgical testwork to characterize the various ores in the mining areas. Revised mineral resources block modeling, revised open pit optimizations and detailed open pit mine design studies are in progress. A new environmental assessment has been completed, together with a revised tailings dam design, to accommodate a future 10-year operating plan. Work is also continuing on updated estimates for capital costs, operating costs and construction costs.
ASG is currently in discussions with respect to a possible initial public offering of its common shares to provide funding through to the mine development stage.
About Golden China Resources Corporation:
Golden China Resources Corporation is a public company focused on the exploration and development, operations, and merchant banking in the Chinese precious metal industry. Golden China is capitalizing on a combination of its international mining and financing expertise and a partnership with the Hong Kong-based financial services provider, Kingsway Group, to become a significant participant and consolidator in China's developing precious metals sector. Golden China's shares are listed on the TSX Venture Exchange under the symbol AUC. Golden China has announced a planned business combination with Michelago Limited (ASX: MIC) to form a significant participant and consolidator in the Chinese precious metal industry and the largest foreign producer of gold in China.
For further information please contact:
|
Golden China Resources Corp. |
or |
Renmark Financial Communications Inc. |
Forward-Looking Statements: Statements in this release that are forward-looking statements are subject to various risks and uncertainties concerning the specific factors disclosed under the heading "Risk Factors" and elsewhere in the Company's periodic filings with Canadian securities regulatory authorities. Such information contained herein represents management's best judgment as of the date hereof based on information currently available. The Company does not assume the obligation to update any forward-looking statement.
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