Quarterly Activities Report
QUARTERLY REPORT
FOR THE PERIOD ENDED 30 JUNE 2010
HIGHLIGHTS DURING THE QUARTER
* Merger completed with Rusina Mining NL with overwhelming support from
shareholders
* Second tranche of equity raising completed raising US$10m
* Consolidation of share capital completed
* Successful listing on the ASX
* Western Bank debt financing process commenced and proceeding as planned
* Changes to the Board of Directors and Management
* Owners team established for Çaldağ
* Acoje DFS test-work continues
ENK CORPORATE
Merger and ASX Listing
On 14 June 2010 the Company completed a merger with Rusina Mining NL (Rusina) by
way of a court ordered Scheme of Arrangement wherein Rusina shareholders
received four European Nickel shares for every five Rusina shares (pre
consolidation). Highlights of the merger were as follows:
* Rusina shareholders voted overwhelmingly to approve the merger with 99.56%
of votes cast, and 94.01% of shareholders voting in favour of the merger.
* On a post consolidation basis, a total of 60,481,480 new shares were issued
to Rusina share and option holders of which 41,434,201 shares were issued in
the form of Chess Depositary Interests (CDI's) to holders outside of the
United Kingdom.
* The CDI's, which are equivalent on a one for one basis with the Company's
ordinary shares, were listed on the Australian Securities Exchange (ASX) on
29 June 2010 and trade under the symbol ENK.
Consolidation
As a consequence of the listing requirements of the ASX, the Company undertook a
consolidation of its share capital on 23 June 2010 on a four for one basis. Post
merger the Company had 221,589,003 shares on issue, of which 180,154,802 are
quoted on AIM and the balance of 41,434,201 are quoted on the ASX as CDI's.
Placement
On 17 June 2010, the Company completed the second tranche of a placement raising
£6.7 million (approximately A$11.8m) by the placing, on a pre consolidation
basis, of 96,057,000 shares at seven pence.
Directors
As a consequence of the merger with Rusina, the following changes were made to
the Board and senior management team:
* Appointment of Neil Herbert as a non-executive director;
* Resignation of Sir David Logan and Euan Worthington as non-executive
directors;
* Appointment of Robert Gregory and Mark Hanlon as Managing Director and
Finance Director respectively;
* Resignation of Andrew Lindsay as Finance Director; and
* Appointment of Simon Purkiss as Executive Deputy Chairman.
Çaldağ Project Financing
In May 2010 the Company announced that it had negotiated an indicative term
sheet and signed a joint mandate letter with Société Générale and UniCredit Bank
as the Mandated Lead Arrangers (MLA's) for funding of the Çaldağ nickel laterite
project in Turkey. The debt requirement is for a US$300 million term loan
facility and US$25 million overrun facility, of which the MLA's intend to commit
US$50 million each (subject to credit approval).
The Company has continued to advance the financing arrangements. It is expected
that the MLA's will be ready to approach the debt market with a package of
documentation including the facility agreement and major contracts during
September 2010.
Subsequent Events
Subsequent to the end of the quarter, the Company announced that it had entered
into a strategic partnership with Hunter Dickinson affiliate Constantia
Resources Ltd, to raise US$60 million of which US$50 million will provide the
equity portion of the Çaldağ project financing and US$10 million for working
capital.
Hunter Dickinson is a private mineral development company based in Vancouver,
Canada. It is associated with a suite of publicly-traded companies engaged in
mineral exploration, development and mine operations around the world. The
Company's multi-disciplinary team of 120 financial and technical specialists
provides professional services to successful mine operators and developers on
four continents, with interests in gold, copper, platinum group metals, zinc,
molybdenum and silver. Their expertise will complement European Nickel's
management team and technological know-how to assist the successfully delivery
of the Çaldağ project.
The placement, subject to shareholder approval, is in two tranches. The first
tranche is for US$5m at a price of 32 pence (~A$55cents) per share and was
completed on July 2010. The second tranche is for US$55m at a share price of
44 pence (~A$76cents) and is conditional upon the completion of the Çaldağ debt
financing package, and payable within 30 days of the completion of this package.
Çaldağ OPERATIONS - TURKEY
Construction
An owners team for the construction of Çaldağ was established during the
quarter, headed by Ric Burns of GBM consultants as the Project Manager. The
reappointment of the Engineering Procurement (EP) contractor, Aker Solutions,
and the Construction Management (CM) contractor, Merit Engineers, is underway.
This is the same EP/CM team who undertook the previous phase of development at
Çaldağ in 2006/07.
Negotiations for all principal construction contracts are also underway and are
expected to be finalised during the third quarter 2010 as a pre-requisite for
the project financing.
During June 2010, a "construction recommencement" workshop was held on site
involving the EP/CM representatives, the owners team and China Tianchen
Engineering Corp (TCC), who are building the "turnkey" acid plant for the
project. As a result, co-ordination for pre-finance activities and mobilisation
planning is well advanced to ensure a smooth and rapid transition to
construction.
Permits
On 14 May 2010 the Company became aware that, due to a technical legal conflict
under the current Turkish legislation between the Forestry Law and the mining
regulations, the procedure for issuing new forestry permits to mining companies
in Turkey since 11 June 2009 was deemed unconstitutional. This resulted in the
cancellation of the forestry permits by the regional court which was considering
an unrelated case. The decision was based on a separate constitutional court
decision made on 15 January 2009, which was published on 11 June 2009 but was
not to be effective until 11 June 2010, in order to allow a new mining law to be
enacted. The Company's forestry permits, approved by the Ministry of
Environment and Forestry on 3 April 2009, fell between the constitutional
court's hearing and the published dates.
On 10( )June 2010, the Turkish Parliament passed the new mining law, which was
ratified by the Turkish President on 24 June 2010. The Company has now
re-applied for the permits and expects them to be re-issued during the coming
quarter.
ACOJE OPERATIONS - PHILIPPINES
Acoje Heap Leach Trial & Test Centre
The commencement of the heap leach trial at Acoje was deferred until the merger
between Rusina and European Nickel was completed. Due to the commencement of the
rainy season the heap leach trial has been deferred until the dry season, at
which time the precise commencement date will be assessed in light of the
construction timetable for Çaldağ and the Company's personnel resources.
Work in the Acoje Test Centre (ATC) continues apace. The test-work program for
the 4m full column tests, now at the 100 day mark, is progressing in line with
expectation. The ATC will provide all the metallurgical data required for the
definitive feasibility study (DFS), whilst the heap leach trial will demonstrate
the operability of the process under Philippines equatorial conditions, such as
the use of raincoats over heaps and ponds.
A significant benefit of the merger with Rusina is to enable further development
of the downstream processing research currently underway at ATC to provide a
more optimal inclusion in the Acoje DFS. This was not previously possible due to
the joint venture obligations previously in place. The additional downstream
processing research includes examining the opportunity to produce separate
nickel and cobalt hydroxides rather than the base case Mixed Hydroxide Product
(MHP), which will be produced at Çaldağ. It is possible that the new products
could bypass the refinery stage and they should have increased marketability and
higher payability than the MHP. Test-work to date has been very encouraging at
laboratory level. A larger pilot plant has been assembled to operate with the
full commercial height Heap Leach Trial facility.
Other Properties
The Company is conducting a thorough review of all of its non core exploration
assets and tenements. Options include sale or farm out, as well as the transfer
of Philippine assets to the Philippine partner Montemina.
Yours faithfully,
Robert G M Gregory
Managing Director
For further information please visit: www.enickel.co.uk
or contact:
Mark Hanlon, Finance Director Tel: +61 8 9226 1111
Simon Purkiss, Deputy Executive Chairman Tel: +44 (0)20 7290 3130
Andrew Chubb or Tarica Mpinga, Canaccord Genuity Tel: +44 (0)20 7050 6500
Alex Buck, BuckBias Tel: +44 (0)7932 740 452
[HUG#1435057]
ENK Quarterly Activities Report: http://hugin.info/138911/R/1435057/380534.pdf
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Source: European Nickel PLC via Thomson Reuters ONE
