Aricom in expansion deals
Article Date: Feb 01 2006Titanium group Aricom is buying into Russia's Bolshoi Sejm ilmenite and magnetite deposit and taking a key iron ore option.
AIM-quoted Aricom, a 2003 spin-off from Russia-focused gold miner Peter Hambro Mining, is paying the equivalent of £2 million for 49 per cent of Bolshoi Sejm in Russia's Far East. Bolshoi Sejm, which the company says represents a 'significant and natural extension' to its current operations at Kuranakh, holds an estimated resource of 58 million tonnes of Titanium Oxide Ti02 and 125 million tonnes of iron.
Funding for this deal, which should give Aricom 49 per cent of a company set up to own local mining licence holder Ural Mining, is coming from PetroPavlovsk (Cyprus), a company in which Peter Hambro and his colleague Pavel Maslovsky, joint deputy chairmen of Aricom, have personal stakes. Aricom has also paid the equivalent of £5.3 million to Hambro and Maslovsky for an option on 50 per cent of the Kimskanskoye and Sutarskoye iron ore deposits in the adjacent Evrejskaya Avtonomnaya Oblast region, with an exercise price capped at £36 million in Aricom shares at 28p.
That compares to today's price of 38.5p. The company speaks of potential cashflow of up to £15 million a year from selling Bolshoi Sejm's output into nearby China after the expected start of production late next year.
Aricom envisages funding the expected £36 million capital expenditure this will need with a 'core' equity raising together with project finance from the banks. The shares, which have fluctuated between 2004's high of 50p and last October's 16.5p low, could make up more ground.
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