Allegiance Rejects Zinifex's Offer



    SYDNEY, Jan. 17 /CNW/ - Allegiance Mining (ASX Code: AGM) today released
its Target Statement and in a letter to shareholders accompanying the Target's
Statement, Allegiance Chairman, Tony Howland-Rose wrote:
    Your Directors unanimously recommend that you REJECT Zinifex's
unsolicited, opportunistic and inadequate Offer.
    Firstly, let me thank you for your overwhelming support for the
"Allegiance Team" since Zinifex's opportunistic and unsolicited Offer was
announced just before Christmas. You will by now have received the formal
Offer to acquire all your Allegiance Shares. After a detailed assessment of
the Zinifex Offer, your Directors are unanimous in the view that you should
REJECT the Offer. Our reasoning is as follows:

    
    -   The purpose built Avebury mill is due for completion in the current
        quarter. Over the last 12 months Allegiance has been developing the
        mine, stockpiling ore and accessing the North Avebury and Viking ore
        bodies in preparation to supply the mill. These ore bodies are
        expected to produce amongst the world's highest premium grade
        concentrate (20% nickel) and our sales agreement with Jinchuan Group
        Limited (Jinchuan) positions us well for excellent returns.

    Zinifex's Offer before production even commences short circuits the value
creation process set in motion a decade ago.
    You deserve to reap the rewards of your Company's success since the
discovery of Avebury in January 1998!

    -   Over the last 10 years Allegiance has acquired a new nickel province
        and discovered a new nickel deposit type. This was acknowledged by
        the London Mining Journal Pioneering Award in 2003 and the Award of
        Prospector of the Year in 2007. The initial exploration strategy was
        to define the Avebury Nickel Project and move towards a cash
        generating operational mine to fund the exploration of the Allegiance
        Nickel Province. This strategy is expected to provide significant
        exploration upside for Shareholders as approximately 90% of the
        87 square kilometre Allegiance Nickel Province is still to be
        explored.

    Should Zinifex really wish to purchase your Allegiance Nickel Province
with all that future potential they must adequately compensate you not only
for the Avebury Mine, but for the exploration potential of the whole nickel
province and any future mines that may come.

    Participate in the creation of a world class nickel company

    -   The Allegiance mine geology team has expanded the resource at over
        16% p.a. on average in nickel metal terms since 2005. This increase
        represents significant excess over the planned ore depletion rate,
        providing your Board with confidence in the longevity of the
        resource. Our exploration discovery cost of nickel is $0.05 per pound
        - amongst industry lows!

    Let your exploration team unlock the potential nickel "treasure chest" for
your benefit!

    -   Allegiance has progressively added value for Shareholders with the
        Share price increasing many multiples from $0.03 over the decade
        since the Avebury discovery in January 1998. More recently the
        Allegiance share price has increased 373% since December 2005, well
        above returns generated by S&P/ASX 300 Metals and Mining index over
        the same period.
    -   The Allegiance Team has attracted to your Company a most talented,
        dedicated and competent team of highly motivated individuals skilled
        in all aspects of the business from exploration through to mining,
        processing and sales, including Allegiance Director, Shi Peirong,
        Vice President, Vice Chairman and Chief Financial Officer of
        Jinchuan, the largest nickel producer in China. The Allegiance Team
        are, like you, Shareholders in Allegiance and are committed to adding
        value going forward in their various fields.

    The geothermal potential of the Hot Granites on the west coast of Tasmania
is but one example of initiatives being pursued by your Allegiance Team.

    Let your Allegiance Team continue to deliver for you

    -   Allegiance is committed to maximising your Company's unique assets
        ensuring your Company is well positioned for future growth
        opportunities. Plans for co-operative exploration with Allegiance's
        major Shareholder, Jinchuan, in Australia and overseas are underway.
        Allegiance has also had discussions with the Hong Kong Stock
        Exchange, major investment banks and brokers with respect to a
        potential listing in Hong Kong. The response has been most
        encouraging.

    Participate directly in China's growth through nickel

    -   Your Allegiance Team was far sighted enough in 2003, before the
        nickel price rise, to design the original exploration decline for
        1.5 Million tonnes per annum (Mtpa) mining rate and similarly the
        mill was designed for expansion to 1.5Mtpa with only minimal
        disruption. For the past six months we have been working on an
        immediate low cost expansion to 1.2Mtpa, with a further expansion to
        1.5Mtpa to follow.

    Reap the benefits of the well planned future expansion

    -   Shareholders representing a combined interest of 11.1% of Allegiance
        Shares, including your Directors (6.4%), intend to REJECT the Offer.
        In addition, Allegiance's major Shareholder, Jinchuan (10.4%), has
        stated that "Jinchuan believes there to be significant further upside
        in Allegiance and therefore the A$1.00 per share offer for Allegiance
        is not reflective of the true value of the company".

    Accordingly, Shareholders representing a combined interest of 21.5% have
either confirmed the Offer is inadequate or will REJECT the Offer.

    Follow your Directors - REJECT the offer

    -   Whilst we believe the Allegiance Team is best equipped to deliver you
        the best return, we will, of course, evaluate all opportunities with
        vigour. Since the announcement of Zinifex's Offer we have had a
        number of approaches from domestic and international parties
        interested in holding discussions. Your Board is driven at all times
        by a commitment to maximising value for Allegiance's Shareholders. We
        are very confident in our ability to develop Allegiance into a world
        class mining company, but of course remain ever vigilant in examining
        opportunities to enhance Shareholder value - after all, we are all
        Shareholders together.
    

    Maintain your Allegiance - IGNORE the offer

    A full copy of the Target's Statement and Investor Presentation is
available at www.allegiance-mining.com.au





For further information:

For further information: Media: Ross Thornton, Third Person, +61 418 233
062; Stuart Carson, Third Person, +61 403 527 755, Shareholders: Information
line on 1300 135 871 (foreign holders please dial +61 3 9415 4395); To
register for immediate email updates and for electronic copies of this and
other reports please visit our website www.allegiance-mining.com

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