Proactive investors

Additional information

Additional	Information
Market:	ASX
Sector:	General Mining
Epic:	ASX:KOR
News:	Latest news
Web Site:	Korab Resources
Other Articles:	03-03-201001-03-201020-01-2010

Korab Resources adds value for shareholders, to spin-off gold assets

by Proactive Investors

Perth-based Korab Resources (ASX: KOR) has added immediate value for shareholders by electing to de-merge the company into three separate listed entities.

Andrej Karpinski, executive chairman of Korab said today after evaluating alternatives, the gold mining projects will be demerged into two independent companies, one (Melrose) operating in Australia and the other (Lugansk) operating in Europe.

Investors in Korab at record date will be offered free shares in both spun-off IPO's.

Following the demerger of the gold mining operations, Korab will concentrate on developing its organic phosphate rock (GeolSec) and its magnesium oxide (Winchester) businesses in the Northern Territory.

Korab's new strategy follows strong interest from brokers and investment banks that have approached Korab about spinning-off the Ukranian Bobrikovo gold project into a separate entity listed in Australia, UK and Canada.

Lugansk Gold Ltd is intended to be demerged from Korab and to seek multiple listing of LUG in Australia and overseas by way of an IPO. Lugansk will seek to raise between US$40 million and US$50 million to fast track the development of the deposit to become a mid size gold producer focused on European gold and silver projects.

Korab is currently finalising the documentation required to call an Extraordinary General Meeting where Korab’s shareholders will be asked to approve the demerger and the in-specie distribution of shares in Lugansk Gold to Korab shareholders at a pro-rata ratio of between 1 and 1.5 Lugansk Gold Ltd shares for each Korab share held on the record date (yet to be determined).

Work on the Lugansk Gold Prospectus is well advanced and should be completed prior to the EGM taking place. It is the intent of Korab to call the EGM for the first quarter 2010. Lugansk Gold is expected to re-commence mining at Bobrikovo in the first quarter of 2010 and to commence production of gold and silver in the second quarter of 2011.

The Bobrikovo gold mine would then be able to take full advantage of the current strong gold price by fast tracking ramp-up of gold production at Bobrikovo to an annual rate of around 60,000 ounces of gold without diluting shareholder’s interest in other Korab projects.

A separate and (multiple) listing in Australia, UK and Canada would ensure the Bobrikovo project is more fully valued in line with intrinsic value in a new multiple listed company, rather than as an asset on Korab's books.

Interestingly, the oxidised zone of the Bobrikovo deposit begins at the surface and extends down to 35m. Sulphide gold mineralisation starts at 35 m depth and continues to a depth of 3,200m. Veins are easily recognizable and suitable for selective extraction. 

Korab has elected to spin-off the Melrose project near Leinster in the Yilgarn in Western Australia into a separate entity listed on ASX.

During the quarter, Korab has commenced the work on the development of the Melrose project. This work (which includes: resource re-estimation, metallurgy testing, process design, mine design, etc) will continue in parallel with the work on the spin-off of the project and the IPO of the new company.

Korab is currently working on the documentation required to call an EGM to approve the spin-off and the in-specie distribution of free shares in the new company to Korab shareholders. It is expected that Korab shareholders will receive free shares in the new company at a pro-rata ratio of 1 new company share for each Korab share held.

Korab intends to  maintain representation on the new company’s board following the demerger.

Melrose gold deposits have a 306,000 ounce JORC code compliant resource base with a substantial exploration upside. All are located within 3 granted mining leases within the Wanganoo greenstone belt near Leinster in the Eastern Goldfields province of Western Australia.

Significantly, gold mineralisation at Melrose commences at a depth of 10 meters and remains open at depth. The area is underexplored and significant potential exists for substantial additional mineralisation along strike and at depth. Additional step-out drilling confirmed independent assessment that additional gold mineralisation extends below the deposits and along strike with multiple high grade intercepts of up to 211 g/t gold.

Register here to be notified of Proactiveinvestors One2One Forums.