Anglesey to acquire controlling interest in Grangesberg Iron

Anglesey Mining plc

29 May 2014        LSE:AYM

Anglesey to acquire controlling interest in Grangesberg Iron

Anglesey Mining plc (“Anglesey”) is pleased to report that it has entered into agreements giving it the right to acquire a controlling interest in the Grangesberg Iron project in Sweden.

Grangesberg Iron Ore Mine:

The Grangesberg iron ore mine is situated in the mineral-rich Bergslagen district of central Sweden about 200 kilometres north-west of Stockholm. Until its closure in 1989 due to prevailing market conditions, the Grangesberg mine was the third largest iron ore mine in Sweden, next only to the Kiruna and Malmberget mines in the north of Sweden, with in excess of 150 million tonnes of iron ore mined down to around 500 metres deep.

Prior indications are that at least 115 million tonnes of iron ore containing around 40% iron remain for exploitation at Grängesberg. The homogenous iron ore body in Grängesberg is of significant size and of the Kiruna geological type, making it well suited for cost-effective production of attractive iron ore products.

The Grangesberg mine site benefits from excellent infrastructure and is located adjacent to the Swedish national rail system which will permit easy access to ice free port of Oxelosund on the Baltic Sea on the south east coast of Sweden, the location of SSAB Sweden’s largest steel plant.  Significant underground and surface infrastructure remains intact at Grangesberg, including a fully operational railway line from mine to port.

It is expected that following the normal environmental permitting processes and engineering design and financing, a conventional underground bulk mining operation followed by processing using standard technology can produce some 2.0 to 2.5 million tonnes per year of saleable iron ore concentrate for the European, Middle East and Asian steel markets.

Agreements:

In a series of agreements Anglesey has purchased for US$145,000 a direct 6% interest in Grangesberg Iron AB (“GIAB”), a private Swedish company that was founded in 2007 with the target of re-opening the historic iron ore mine in Grangesberg and which, in conjunction with the Anglesey investment and with Anglesey assistance, has recently completed a financial and capital restructuring.  GIAB holds a 25 year exploitation permit covering the previously mined Grangesberg underground mining operations granted by the Swedish Mining Inspectorate in May 2013.

At the same time Anglesey has negotiated a 12 month evaluation option to acquire 51% of the enlarged share capital of GIAB for the issue of new ordinary shares of Anglesey.  Anglesey has also entered into shareholder and cooperation agreements such that during the term of the option Anglesey holds management control and operatorship of GIAB and will appoint three out of five directors to the board of GIAB including the Chairman.

The remaining 43% of GIAB is held by Roslagen Resources AB, a Swedish private company, which has led the re-development of the Grangesberg iron project since 2007.  Roslagen will appoint two directors to the board of GIAB and provide experienced local executive management.

As part of the agreements and reorganisation an outstanding loan in GIAB in the principal amount of US$3.5 million due to KII Holdings Limited, a Cypriot company has been renegotiated and is now repayable by the end of 2016.

At the same time, Eurang Limited, a UK private company, has agreed to invest $1.75 million, of which $1.25 million has been invested in GIAB, for new shares representing the 51% shareholding interest in GIAB.  This has been carried out through a new wholly owned special purpose Swedish company, Eurmag AB over which, during the term of the option, Anglesey will hold management and control rights. The additional $500,000 will be used to cover transaction costs and expenses and certain outstanding liabilities.

Option to acquire 51% of Grangesberg

Upon the exercise of the option, which will be entirely at Anglesey’s discretion, Anglesey will acquire all of the shares of Eurang Limited by the issue of new shares of Anglesey to the value of $1.75 million, to be priced at the average of the Anglesey share price at the date of option (3.375p) and the 20 day average share price prior to date of exercise, (but at no lower than 3.375p), and thereby acquire direct ownership and control of the 51% shareholding in GIAB, and thus increase Anglesey’s direct interest in GIAB to 57%.

GIAB will have debt outstanding of about US$ 5 million, (about $4 million including accrued interest payable to KII and about US$1 million of subordinated debt payable on a deferred basis to Roslagen), while Eurang Limited will have debt of approximately US$4.5 million.

During the term of the option Anglesey will hold management control over Eurmag with the ability to exercise voting rights on the shares of GIAB.  If following its evaluation and assessment Anglesey does not exercise its option it will relinquish its board seats and management direction and control of GIAB at the end of the 12 month option period but will continue to hold 6% of the shares of GIAB.

Grangesberg Development plan:

Grängesberg is a mine with a rich historical heritage and an exciting future potential said Bill Hooley, Anglesey Chief Executive. Anglesey believes that there is an opportunity to re-open the Grangesberg mine to provide a local source of high quality iron ore, well known, to the European steel industry.  The agreements announced today give Anglesey the opportunity to evaluate Grangesberg, both technically at the mine level in the Grangesberg area and commercially throughout the Swedish and European steel industry, with the right to acquire control of the Grangesberg project on attractive terms.”

The new capital injection of US$1.25 million in GIAB will be used under Anglesey’s direction to advance the Grangesberg project towards production and for working capital.

Anglesey intends to carry out an evaluation of the Grangesberg project including a technical and economic assessment to determine the viability of putting the Grangesberg iron ore mine back into commercial production under the economic conditions to be expected during the proposed mine life.

Immediate planned work will include a programme of geo-mechanics and monitoring at the mine site as a prelude to obtaining permission to dewater the mine.  In the same time-frame Anglesey plans to produce a new compliant ore resource estimate and to progress work on the pre-feasibility study on reopening the Grangesberg mine.

In parallel with these activities the ongoing background environmental studies and permit applications will be progressed.  Anglesey will also carry out detailed marketing studies on both the Swedish and the greater European markets for Grangesberg iron ore products.

In the subsequent periods, following the exercise of the option and subject to successful financing, it is expected that a definitive feasibility study will be undertaken, including mine definition drilling, process test-work and detailed engineering design and costing.

About Anglesey Mining plc

Anglesey previously led the redevelopment of the Schefferville Area iron ore deposits in western Labrador and north-eastern Quebec and sponsored the initial public offering of Labrador Iron Mines Holdings Limited on the Toronto Stock Exchange. Sharing some common directors and senior management, Anglesey continues to hold 15.3% of the shares of Labrador Iron Mines Holdings Limited which over the three years 2011 to 2013 produced about 3.5 million tonnes of iron ore from its direct shipping iron ore deposits, all of which was sold in the China spot market.

Anglesey is also carrying out exploration and development work at its 100% owned Parys Mountain zinc-copper-lead deposit in North Wales, UK where a JORC Code-compliant resource of 2.1mt at 6.9% combined base metals in the indicated category and 4.1mt at 5.0% combined in the inferred category was published in November 2012.  A detailed review of the resource base for the entire site has recently been commenced by Micon International.  The company continues to review the future demand predictions for base metal concentrates particularly zinc ahead of any decision to move to development and production.

For further information, please contact:

Bill Hooley, Chief Executive +44 (0)1492 541981;

Danesh Varma, Finance Director +44 (0)207 6539881;

Samantha Harrison:  RFC Ambrian +44 (0)20 3440 6800;

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