Orsu Metals Corporation has entered into an exclusive and binding heads of agreement for the potential acquisition of a company which holds the Sergeevskoe Gold Project in Far East Russia. The project is in a long-established gold-mining province.

The Sergeevskoe licence covers an area of 7.6sqkm and is about 40km southwest of the town of Mogocha in the Zabaikal’skiy Region. Mogocha hosts a large railway station on the Trans-Siberian Railway which runs within about 35km of the licence area. The newly built Chita-Khabarovsk motorway is about 8km south of the area.

Orsu intends to acquire Sibzoloto Investments Ltd, a Cyprus registered company which is the sole owner of LLC GK Alexandrovskoe, which in turn is the sole holder of the Sergeevskoe licence area, from two arm’s length parties - Metalsib Group (BVI) and Olympia Capital (OC) Management Group (BVI).

The agreement has the following key terms:

1. Orsu has agreed to acquire 100% of the Sergeevskoe Gold Project via the acquisition of Sibzoloto, and 100% of a nearby work camp via the acquisition of LLC Davenda, a company under effective control of the sellers. The transaction is conditional upon good faith negotiation of formal definitive sale and purchase documentation, and completion of due diligence. The exclusivity period runs until January 31, 2017 and may be extended by mutual agreement.
2. The consideration for Sibzoloto will be the issue of new common shares of Orsu. The company will issue 146,605,683 new common shares in Orsu to the sellers for the acquisition of 30% of the outstanding shares of Sibzoloto such that, post-closing, the sellers will own approximately 44.5% of the enlarged share capital of Orsu. The sellers shall transfer the remaining 70% of the outstanding shares of Sibzoloto at the time Orsu completes the sale of its Karchiga project in Kazakhstan.
   In the event that proceeds from the Karchiga sale are not received by June 30, 2017, Orsu will issue further common shares to the sellers such that they will own approximately 74.2% of Orsu.
3. Orsu will acquire 100% of LLC Davenda, a company under effective control of the sellers that owns a fully operational work camp near the Sergeevskoe project area for aggregate cash consideration of US$600,000.

Shortly following completion of the proposed transaction, Orsu will make available no less than US$1.5 million to fund the exploration of the project.
Sergeevskoe is immediately west of Klyuchevskoe gold deposit, which is owned by Sun Gold Ltd. This deposit has estimated mineral resources containing 47.8 tonnes of gold in Russian style A+B+C1 categories, 26.6 tonnes of gold in Russian style C2 category and 4 tonnes of gold in ‘out of balance’ category, all grading up to 2 grams/tonne gold.

According to the Russian Federal Antimonopoly Agency, Klyuchevskoe is in the advanced stages of being sold to China National Gold Group.

The nearby Alexandrovskoe gold mine, which was commissioned in September 2013, is to the west of the Sergeevskoe licence area.

Orsu conducted a site visit in July 2016 and, based on this and a review of the technical information made available, believes that the geology of the Sergeevskoe project area is principally similar to the Klyuchevskoe deposit. Some ore bodies from the Klyuchevskoe deposit extend into the Sergeevskoe area.

Sergeevskoe area hosts numerous gold occurrences, discovered and partially drill tested in the 1950s and 1960s, with geophysical and geochemical works performed in the 1970s. No field exploration activity was undertaken from the mid-1980s until 2013, when the sellers acquired the project via public auction from the Government of the Russian Federation.

All potential quantities and grades referred to are conceptual in nature; there has been insufficient exploration to define a mineral resource and it is uncertain if further exploration will result in the target being delineated as a mineral resource.

Orsu’s executive chairman Dr Sergey V Kurzin said, “I am very excited by this opportunity. Gold is a commodity in which management and partners of Orsu have extensive experience, especially in the Former Soviet Union. We believe that the Sergeevskoe Gold Project has significant potential value to be added.

“I am looking forward to working with the group of new partners who are also very experienced in Russian gold geology, finance and the industry. The combination of the project’s potential, Orsu competencies and a strong local team will allow us to fast-track the exploration works to its fruition.”