Kolar Gold Limited - Statement re Deccan Gold Announcement

10 December 2013

10 December 2013


Kolar Gold Limited

Statement re Announcement made by BSE listed Deccan Gold Mines Limited


Kolar Gold Limited (AIM: KGLD, referred to as "KGL", "Kolar Gold" or the "Company") notes the recent announcement by Deccan Gold Mines Limited ("Deccan"), an Indian gold exploration company listed on the Bombay Stock Exchange ("BSE").

The Deccan Board has announced its in-principle approval for its proposed amalgamation with Australia Indian Resources Limited ("AIR") under a Scheme of Arrangement pursuant to the provisions of the Companies Act, 1956, India.  AIR is an Australian company with a 38.8% equity interest in Geomysore Services India Private Limited ("GMSI").  Upon completion of the proposed amalgamation, Deccan will own and control AIR"s interests in GMSI. AIR will have no other assets other than its holding in GMSI.

In conjunction with the above, the Deccan Board has also given its in-principle approval for the proposed acquisition of the remaining 61.2% equity interests in GMSI not held by AIR, including the 30% equity interest in GMSI held by Kolar Gold.  Deccan has proposed to issue new shares in exchange for the GMSI shares held by Kolar Gold and other shareholders.  Accordingly, if the Board decides to exchange Kolar"s shares in GMSI with Deccan then Kolar Gold will become a substantial shareholder in Deccan.  Significant due diligence and valuation work is currently being undertaken by experts appointed by Deccan on the underlying value of the assets of Deccan and GMSI, including NPV valuations on the latter stage gold mine projects of each company.  A valuer and merchant bank have also been appointed by Deccan to determine the share exchange ratio.

Deccan has 41 gold licence applications underway while GMSI has 71 gold licence applications in India. Accordingly a merger of GMSI and Deccan would result in a total licence application area of 13,714 square kilometres with a combined JORC Resource of 1.670 million ounces of gold. 

Kolar Gold believes that Deccan expects to submit documentation in relation to its proposed Scheme of Arrangement for its proposed amalgamation with AIR to the Bombay courts in the coming months.  Any subsequent share exchange offer in relation to the remaining 61.2% interests in GMSI (including Kolar Gold"s interests) is expected to be made on the same terms as the Scheme of Arrangement.

The proposals will be subject to your approval of Deccan Shareholders and necessary regulatory approvals including the Securities and Exchange Board of India (SEBI), the Reserve Bank of India (RBI) and the Indian Ministry of Mines. 

The amalgamation and acquisition process contemplated by Deccan is expected to take six to nine months and Kolar Gold advises its shareholders to take no action at this time.  In due course and on the basis that the Board believes that any proposed share exchange offer made by Deccan would be in the best interests of Kolar Gold, shareholders will be sent a circular to explain the proposals in further detail including the basis on which Kolar could exchange its equity interests in GMSI for an equity interest in Deccan. Any recommendation from the Board on whether to proceed with any the proposal received will depend on a number of factors, including the valuation parameters which would determine Kolar Gold"s eventual shareholding in Deccan, the ability of Deccan to raise fresh funds to support the operations of the enlarged group and management / board representation of Kolar in the enlarged group.

The Kolar Gold Board believes this has the potential to be an excellent opportunity for the Company to combine the collective resources of Deccan and GMSI, with the ultimate aim of becoming a major gold explorer and mine developer in India to realise the significant gold resource potential in India.

For the avoidance of doubt, these proposals, which have no current legal effect, will not affect Kolar"s rights to counter offer, acquire and develop the Bharat Gold Mines Limited assets with the majority employees unions in relation to the tender sale process, details of which were announced on 11 July and 17 July 2013.

CEO Nick Spencer commented today: "Deccan"s recent announcement is an encouraging step towards creating the leading gold explorer and mine development company in India. The strategic rationale behind bringing together these two key gold exploration companies is to create a group which can draw upon their combined resources, diversify project risk and secure and develop licences in some of the most prospective gold provinces in India.  We look forward to updating shareholders on the progress of the proposed Deccan/AIR amalgamation during the course of 2014.  However, in the short term our focus remains on progressing exploration with GMSI at the Jonnagiri Mining Licence area and preparing for the tender process of the BGML assets on the Kolar Gold Fields."


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