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
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
- 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
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
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