Michelago Limited (MIC) – Approaching BioGold Plant Acquisition Final Approval

• The approved restructure of Laizhou Jincheng Gold Mining Company (the primary vendor of the BioGold Facility) into a private company by the Laizhou City Government in June 2004, has advanced MIC into the final approval stages.
• The submission of the final financial audit to June 2004 by Deloitte, Shanghai in mid-August 2004, infers that final approval (MOFCOM and SAFE) at the Shandong Province level to acquire 82% of the BioGold SFJV and hence the BioGold Facility is expected to be attained within the next 3 months to the end of November 2004.
• The required acquisition cost of ~A$12m for 82% of the BioGold Facility is being met from a combination of MIC’s own cash, the almost $4m BacTech agreement at $0.13 per share and a $6m Convertible Note facility (expected to be at least $0.13 per share) with the LinQ Resources Fund (prev Rothschild Golden Arrow Fund).
• On attaining final approval, MIC becomes entitled to up to 20% of the spot gold price for 82% of the ore being treated through the bacox and cyanide leach circuits, currently of 140,000ozpa to 160,000ozpa, but increasing to a rated 200,000ozpa, and expected to expand further beyond that.
• MIC can also attribute 51% of 82% of the 300,000ozpa in dore treated at the refinery (on which it only receives a marginal profit), received from processing through the bacox and cyanide leach circuits and ~100,000ozpa purchased dore.
• Virtually nothing currently appears to be being ascribed in MIC’s share price to the Shandong Exploration SFJV with Laizhou Jincheng in which MIC has an LOI to earn a 51% interest in any JV areas below 500m from surface. Based on a visit to Dongji (one of the current four mine properties), the mineralisation (which can be significant) appears capable of continuing deeper there from the last intersection of 5m @ 18.2g/t, already about 480m below surface.