We feel compelled to respond to the ARMZ Release", said Grant Edey, Chairman of the Special Committee. "It contains inaccurate or misleading information, and does not address very real and substantial concerns
- By Linton Levy -
Khan Resources Inc. has announced its response to the news release issued by Atomredmetzoloto JSC on December 18, 2009 (the "ARMZ Release"). The ARMZ Release was in response to Khan's Directors' Circular dated December 14, 2009 in which the Khan Board of Directors, on the unanimous recommendation of the Special Committee, unanimously recommends that shareholders REJECT and NOT TENDER their shares to ARMZ's unsolicited offer to acquire all of the outstanding common shares of Khan at $0.65 in cash per share (the "Offer").
"We feel compelled to respond to the ARMZ Release", said Grant Edey, Chairman of the Special Committee. "It contains inaccurate or misleading information, and does not address the very real and substantial concerns identified by the Special Committee and the Board of Directors of Khan in coming to its unanimous determination that the Offer is not in the best interests of Khan or its shareholders. We continue to stand by our recommendation to Khan shareholders to reject the ARMZ Offer."
Khan believes that there are many inaccurate statements and misleading information contained in the ARMZ Release that shareholders should be aware of; however, Khan believes that the following issues in particular should be clarified:
- The ARMZ Release states that: "The Conditions contained in the Offer are standard for offers of this type and are meant to protect ARMZ in the event Khan undertakes any initiatives to diminish the value of the Khan Shares in the context of the Offer … A large number of the conditions contained in the Offer are fully within the ability of Khan management to satisfy by not taking any actions to frustrate the Offer. At this time, ARMZ fully expects that all of the conditions of the Offer will be fully satisfied at the Expiry Time." This statement suggests rather clearly that ARMZ has waived or intends to waive all conditions that do not relate to initiatives undertaken by Khan to diminish the value of Khan's shares in the context of the Offer. ARMZ has, in Khan's view, indicated the manner in which it would have shareholders interpret the conditions of the Offer. Khan has today written to ARMZ (see attached letter) to confirm this interpretation and make certain that shareholders have not been misled.
- ARMZ's statement that the Offer compares favourably with the recent Western Prospector Group Ltd. acquisition is misleading. The implied value per pound of measured and indicated resource paid for Western Prospector was approximately US$1.09/lb U3O8 versus ARMZ’s current Offer for Khan at US$0.65/lb (assuming 51% Mongolian government ownership). The statement also ignores the substantial differences between Khan’s project and Western's Gurvanbulag project. Both Khan and Western had feasibility studies published in 2009 using a uranium price of US$65 per pound. Khan’s Dornod after tax NPV10% was calculated to be US$276.0 million (US$108.4 attributable to Khan under 51% Mongolian government ownership). In contrast, Western’s Gurvanbulag after tax NPV5% was calculated to be negative US$51.3 million, confirming that the pounds contained within Khan's Dornod project are substantially more valuable than those at Western's Gurvanbulag project.
Each of Khan's Special Committee and its Board of Directors stands by its unanimous recommendation to REJECT the ARMZ Offer and each and every one of the detailed "Reasons for Rejection" set out in the Directors' Circular and summarized in Khan's related press release dated December 15, 2009, copies of which are available on SEDAR at www.sedar.com.
RECOMMENDATION AND DIRECTORS' CIRCULAR
Khan's Board of Directors, on the unanimous recommendation of the Special Committee, continues to unanimously believe that the ARMZ Offer is inadequate, fails to recognize the full value of Khan, contains objectionable terms and conditions that are not in the best interests of Khan or its shareholders and is a prejudicial and opportunistic attempt by ARMZ to acquire Khan without offering fair value to shareholders. The Board of Directors unanimously recommends that shareholders REJECT the ARMZ Offer and NOT TENDER their common shares to the ARMZ Offer. The Directors' Circular has been mailed to shareholders of Khan. It is also available on SEDAR at www.sedar.com. Khan strongly urges shareholders to read the Directors' Circular in its entirety, including the inadequacy opinion of Haywood Securities Inc.
HOW TO WITHDRAW TENDERED SHARES AND OTHER INQUIRIES
To reject the ARMZ Offer, you should do nothing. The Offer is open for acceptance until February 1, 2010. Tendering your shares before the Special Committee and its advisors have had an opportunity to explore all available alternatives may preclude the possibility of a superior strategic transaction emerging.
Shareholders who have already tendered their shares to the ARMZ Offer can withdraw them at any time before they have been taken up and accepted for payment by ARMZ. Shareholders holding shares through a dealer, broker or other nominee should contact such dealer, broker or nominee to withdraw their common shares. Shareholders may also contact the information agent retained by Khan:
100 University Avenue 11th Floor, South Tower Toronto, Ontario M5J 2Y1
North American Toll-Free Number: 1-866-374-9877 Banks and Brokers and Collect Number: 1-212-806-6859 Email: gsproxygroup@gscorp.com
KHAN RESOURCES INC.
Khan Resources Inc. (TSX:KRI) is a Canadian company engaged in the acquisition, exploration and development of uranium properties. Its current activities are focused on the Dornod area in northeastern Mongolia, the site of a former Russian open-pit uranium mine. Khan holds interests in the Main Dornod Property, licensed for mining, and in the Additional Dornod Property, licensed for exploration. The Company’s website is www.khanresources.com.