Project funding update

RNS Number:7052K
Aztec Resources Limited
19 October 2006

19 October 2006

ASX/AIM Announcement





Project Funding Update

Aztec Resources Limited (ASX and AIM code: AZR) ("Aztec") wishes to advise
shareholders that it is now at the final stage of approval with a banking
syndicate regarding the provision of finance facilities of A$100 million to meet
the balance of development expenditure commitments and ongoing working capital
requirements associated with its Koolan Island Iron Ore Project.

The A$100 million facility will consist of:

*               a senior debt facility of A$54 million;

*               a cost overrun facility of A$10 million;

*               a working capital facility of A$30 million; and

*               an environmental bond facility of A$6 million.

However, an issue has arisen in respect of certain rights held by Australian
Royalties Corporation Pty Limited ("ARC"), the original vendor of 30% of the
Koolan Island tenements.  These rights include:

  * A royalty of A$1 per tonne for every tonne of iron ore sold from the
    Project.  ARC has recently lodged caveats (these became effective on 19
    September 2006) over Koolan Island mining tenements to secure this royalty
    interest.

  * An option for ARC to repurchase its original 30% interest in the Koolan
    Island tenements for a nominal sum if production has not commenced from
    those tenements by 15 June 2007.  Under this option ARC would have the right
    to exercise its repurchase right if Aztec has not commenced mining and
    shipping of a minimum of 500,000 tonnes of iron ore by 15 June 2007.
    Provided the current timetable for production and shipping is maintained,
    Aztec Directors do not believe this repurchase right will be triggered.

The banking syndicate is not able to finalise the banking facilities unless the
risk of ARC exercising its repurchase right is extinguished and ARC's caveats
are removed.

In light of these concerns raised by the banking syndicate, Aztec is in
negotiations with ARC to acquire its royalty (so as to remove the caveats) and
to extinguish the repurchase right.

Aztec shareholders should be aware that any transaction with ARC to acquire its
royalty may involve the issue of Aztec shares to ARC.  If shares are issued,
this may trigger a defeating condition under the takeover offer for Aztec by
Mount Gibson Iron Limited (ASX code: MGX) ("Mount Gibson").  Aztec will liaise
with Mount Gibson in this regard.

Provided the negotiations with ARC are successful, Aztec believes it will
receive credit approval from the banking syndicate shortly after any agreement
is executed with ARC.  Credit approval from Aztec's banking syndicate will allow
immediate draw-down of the first tranche of the senior debt facility.  The
remainder of this senior debt facility will be available for drawdown as soon as
certain conditions subsequent relating to environmental approvals have been met.
  These are expected to be met within the next 3 weeks.

If the negotiations are not successful, then it is likely the banking facilities
will not be available to Aztec.  As noted on pages 41 and 47 of Aztec's latest
annual report, if Aztec is unable to secure the provision of finance facilities
on or around the end of October 2006, there is significant uncertainty as to
whether the company and the consolidated entity will be able to continue as a
going concern.

Due to the ongoing negotiations with ARC, Aztec this morning requested that its
shares be placed in a trading halt for trading of its shares on the ASX, which
is to continue after this announcement.  It is anticipated that Aztec will make
a further announcement regarding the status of these negotiations with ARC
before 10am (EST) on Monday 23 October 2006.



Takeover Update - Alternative Proposals

As Mount Gibson is due to announce later this afternoon whether it plans to
extend its offer or to change any of the conditions of its offer, Aztec's
Directors wish to advise that there are no discussions with third parties
presently on foot which are likely to result in an alternative proposal being
put forward before the current scheduled close of Mount Gibson's offer.



For further information please contact:

Aztec Shareholder Information Line
                                               Media Enquiries
Australian Callers 1800 602 244                Purple Communications
International Callers: +61 8 6218 4220         Warrick Hazeldine
                                               Tel: +61 8 9485 1254
                                               Mob: +61 (0) 417 944 616
                                               E:whazeldine@purplecom.com.au

                                               UK
                                               Fiona Owen, Grant Thornton
                                               +44 (0) 870 991 2318


                      This information is provided by RNS
            The company news service from the London Stock Exchange
END

MSCUKSWRNURRARA
Aztec Res. (LSE:AZR)
Graphique Historique de l'Action
De Juin 2024 à Juil 2024