19 August 2013
Kolar Gold Limited
Kolar Gold secures equity interest in GMSI to develop Indian gold projects
Kolar Gold Limited (AIM: KGLD, referred to as 'KGL', 'Kolar Gold' or the 'Company') today announces that it has entered into a binding Heads of Agreement ("HoA") with Geomysore Services India Private Limited ("GMSI"), to invest funds into GMSI and develop a number of advanced stage quality gold projects in India, including the Jonnagiri Gold Project which already has a JORC compliant Resource.
The Company is also pleased to announce that Mr Vaidyanathan Venkateswaran Sivakumar will be joining the Board as a Non-Executive Director with immediate effect. Mr Sivakumar will be SUN Mining's representative on the Board and he will replace Shiv Khemka who is stepping down as a Non-Executive Director of the Company with immediate effect due to other work commitments.
Heads of Agreement with GMSI
The granting, exploration and development of key gold licences in India remains the Company's primary focus. The Board has completed its strategic review and its first decision is for KGL, through its wholly owned subsidiary, Kolar Gold Mauritius (KGM) to sign a HoA with GMSI for KGM to acquire a 30% equity interest in GMSI for a cash consideration of £700,000. In addition, KGL and GMSI have entered into an agreement for the cancellation of a £300,000 loan made by KGL to GMSI last year. The Transaction constitutes a substantial transaction under AIM Rule 12.
Kolar Gold already has a close and on-going operational relationship with GMSI via an Option Agreement and Mine Operator Agreement ("the Agreements" - details of which are set out in the Company's Admission Document). KGL entered into the Agreements in order to secure rights over the 14 Kolar Gold Projects. The parties have now entered into an agreement to dissolve the Agreements and return all rights in the Kolar Gold Projects to GMSI.
Under the terms of the HoA, KGL will instead acquire a 30% equity interest in GMSI, who with KGL will explore and develop its gold portfolio of 49 gold projects. The directors believe that this 30% interest will permit the Board to more easily accelerate KGL's establishment in India and increase access to gold projects nearer to production as well as spreading licence risk over a larger portfolio Under the HoA, KGM will be entitled to nominate one director to the board of GMSI and any GMSI resolution or corporate action with respect to certain corporate and operational matters will require KGM's consent.
KGL continues to search for additional quality gold projects in India to increase its portfolio and by taking a 30% equity interest in GMSI, the Board aim to accelerate KGL's establishment in India and increase access to gold projects nearer to production as well as spreading licence risk over a larger portfolio. KGL will also get access to a number of Indian operational partners that are now assisting GMSI with the licence grant process.
GMSI already has a well-established office in Bangalore and a strong gold exploration team of experienced geologists in place. Over the last 15 years GMSI have secured the rights to 49 gold projects from a large number of Reconnaissance Permits being granted and explored over the years. Project rights and first applications in process which are the subject of the Transaction include 11 Reconnaissance Permits, 32 Prospecting Licences and 6 Mining Leases covering 11,066km2 across India with 1.36Moz JORC resources defined, including the Kolar Gold Projects. There are no profits attributable to the assets which are the subject of the Transaction.
KGL is particularly excited about GMSI's main gold project, Jonnagiri which is located in Andhra Pradesh, Southern India. It is a mining lease application with central government approval that is presently at the final step in the application process with the state government. Jonnagiri has a 710,000oz JORC Resource with significant gold mineralisation intersections of 41 m grading 5.83 g/t Au at 400 m depth and 13.7 m grading 12.0 g/t Au or 22.7m at 7.52 g/t Au at a vertical depth of 320 m.
KGL is still pursuing the privatisation of the historic BGML gold mines in the Kolar Goldfields, Karnataka which has recently had a favourable Supreme Court Order instructing the Mines Ministry to proceed with the prepared sale tender to revive the famous gold mines. Upon tender release, KGL and the united ex-employees unions intend to participate in the tender and utilise their right of first refusal to counter any other bids.
No further disclosures are required under Schedule Four of the AIM Rules.
CEO Nick Spencer commented today: "This is a significant step towards consolidating our gold position in India by focussing on and developing a few quality later stage gold projects with GMSI. GMSI has a large gold portfolio of tenement rights, an experienced gold exploration team and an established office that we can both utilise. KGL and GMSI believe that together they can focus resources on quality gold deposits such as Jonnagiri. Jonnagiri has an exploration target of 2-5Moz and management believes it is likely to become India's first private operational gold mine in 3-4 years time."
Mr Vaidyanathan Venkateswaran Sivakumar is a director of the SUN Group of which SUN Mining and Exploration Limited ("SUN Mining") is a subsidiary company. SUN Mining holds 18.3% of the issued share capital of GMSI and 10.98% of the issued share capital of KGL.
A list of Mr Sivakumar's current and past directorships held within the last five years is set out below:
· Trident Mineral Resources Private Limited
· Premier Minerals Exploration Private Limited
· Jhansi Mining Pvt Limited
· Premier Nickel Mines Private Limited
· Indian Australian Mining Company Private Limited
· Geomysore Services India Pvt Limited
· Goan Mineral Resources Private Limited
· Elcom Systems Private Limited
· Boula Platinum Mining Private Limited
· Planet Metals India Private Limited
· Sun-Area Real Estate Private Limited
Directorships held in the last five years:
· Deccan Gold Mines
· Mason Global Limited
· Gumberg India Private Limited
· Baryam Consultants and Infratech Private Limited
· Ripudaman Consultants and Infratech Private Limited
· Sun Clean Renewable Power Private Limited
· Rus Sun Hydro Limited
Mr Sivakumar, aged 50, confirms he holds no shares in the Company and there is no further information to be disclosed in accordance with Rule 17 and Schedule Two paragraph (g) of the AIM Rules of Companies.
Chairman Harvinder Hungin added: "On behalf of the Board of Kolar, I am delighted to welcome Sivakumar and we look forward to working closely with him as the Company continues to acquire additional licences and explore for gold in India. I would also like to thank Shiv for all his contributions over the years. "
Kolar Gold Limited
Nick Spencer / Chris Clowes
+617 3846 0211
N+1 Singer (Nomad and Joint Broker)
James Maxwell / Jenny Wyllie
+44 20 7496 3000
Ocean Equities Limited (Joint Broker)
Guy Wilkes / Will Slack
+44 20 7786 4370
+44 20 7920 3150
+44 7768 696760