Michelago Limited (MIC) – Merging with Golden China Resources (AUC.V)

• On 14 December 2005, MIC announced that it had executed a BCA (Business Combination Agreement) under which it intended to merge with Golden China Resources Corporation (AUC.V) using a scheme of arrangement. In the BCA, both companies undergo a consolidation of their shares such that MIC shareholders receive 1 new AUC –for- 25 MIC shares and AUC shareholders receive 1 new AUC –for- 5 old AUC shares (or effectively MIC shareholders receive 1AUC –for- 5 MIC).
• As part of the BCA, Golden China Resources (GCR) intends to provide MIC with a >US$9.2m loan (secured by MIC’s ASG (Gold Ridge) assets), to add to the US$12.2m ANZ loan and other monies being used to replace the US$25m working capital facility that Shandong BioGold was receiving from the Bank of China to purchase the concentrates treated at the BioGold facility in Shandong Province.
• Michelago sees the proposed merger as providing the next stage in its growth due to Golden China’s: advanced refractory project at Nibao in Guizhou, exploration and financial assets, 85% international institutional holding, and Hong Kong based investment bank sponsorship connection providing another access to China.
• Golden China’s refractory Nibao orebody asset in Guizhou may be able to initially supply the expansion of BioGold and enable the combined company to reap the full benefits of mining the ore through to gold bars. Nibao could also have the potential to feed a separate Bactech (bacterial oxidation or bacox) plant in the Golden Triangle. Golden China also has a number of exploration assets and agreements in China at various stages of exploration through to possible fruition.
• All of the current 3 orebodies at Nibao have differing characteristics and their geological interpretation is under review as further information comes to hand. The resource at Nibao could ultimately range between 1moz and 4moz, although just how much is mineable (some of the grades are <1g/t) depends on the PFS and subsequent BFS, as the orebody requires a higher cost bacox-type process.
• MIC still appears to be receiving little recognition for its holding in ASG and hence Gold Ridge, despite the increase in the gold price potentially significantly upgrading the Project’s worth. Gold Ridge appears to have upside potential from the “gaps” in its orebodies, at depth, and the fact that its resources were top-cut.