TMC Toledo Mining

 
TIDMTMC 
 
12 July 2010 
 
             Toledo Signs Memorandum of Understanding with Jinchuan 
 
Toledo Mining Corporation PLC ("Toledo" or the "Company") (AIM: TMC) is pleased 
to announce that it has signed a Memorandum of Understanding ("MOU") with 
Jinchuan Group Limited ("Jinchuan"), the largest nickel producer in China, 
pursuant to which Toledo and Jinchuan intend to form a strategic alliance for 
the exploration, mining, processing and sale of nickel products from Toledo's 
nickel interests on Palawan Island, Philippines. 
 
The signing of the MOU follows six months of detailed negotiations involving 
respective company directors and Manila based senior management. Completion of 
the transactions set out in the MOU is subject to the satisfaction of conditions 
precedent including the signature of definitive legal agreements, completion of 
due diligence, board, shareholder, and where relevant, partner and regulatory 
approvals. 
 
HIGHLIGHTS 
 
  * Jinchuan to subscribe for new Toledo ordinary shares ("Shares") representing 
    29.9 per cent. of the Company's enlarged issued share capital at 42p per 
    Share, raising over  GBP7.4 million (US$11.2 million) 
 
  * Jinchuan to nominate two directors to the Toledo Board 
 
  * Jinchuan will enter into a Direct Ore Shipping ("DOS") sales contract for 
    the purchase, on commercial terms, of at least 1Mtpa of nickel ore from 
    2013, increasing to at least 2Mtpa in 2016. Jinchuan will provide a 
    pre-payment purchase facility to assist with working capital associated with 
    the fulfilment of these contracts 
 
  * Jinchuan, under a joint operations committee, to assume management of 
    Toledo's Philippines interests with commitment to a development programme 
    including milestones in relation to exploration, mining and development 
    options for ore beneficiation and processing 
 
  * Toledo to be granted a right to co-invest in Jinchuan's planned ferro-nickel 
    smelter in the Guangxi Province, China. The parties will work together on a 
    second planned processing plant in the Philippines 
 
 
Mr. Reg Eccles, Chairman of Toledo, commented "We are pleased to announce this 
proposed strategic alliance with Jinchuan, China's dominant and fast growing 
nickel producer. This proposed alliance is consistent with our stated objective 
of achieving value added processing for our portfolio of nickel assets and is a 
very significant step for Toledo. It provides a tangible path for the fast track 
development of our assets and provides a means to unlock the significant 
potential of the resource base in Palawan. Jinchuan's significant operating and 
technical expertise together with Toledo's assets and people in the Philippines 
are an excellent combination. 
 
The proposed capital raising and strategic alliance adds strength to our balance 
sheet and assists in funding our Philippine operations. The long term DOS sales 
contract provides the stability and potential cash flow to enable mining 
operations to recommence on a larger scale in the medium term. The opportunity 
to become an equity partner with Jinchuan in both their ferro-nickel processing 
plant in China, as well as a planned plant in the Philippines will enable us to 
become a vertically integrated nickel producer". 
 
Mr Bao Guo Zhong, Vice President of Jinchuan Group Limited commented: 
 
"We are very grateful to the Toledo board for  working with us to be their 
strategic partner. We believe that we will be able assist in accelerating the 
development of, and add significant value to, Toledo's interests in the 
Philippines and will be able to contribute to the Philippines local community by 
entering into this strategic alliance". 
 
 
SHARE SUBSCRIPTION 
 
Pursuant to the MOU, Toledo intends to issue new Shares to Jinchuan representing 
29.9 per cent. of the Company's enlarged issued share capital, at a price of 
42p per Share (the "Share Subscription"). Based on the Company's current issued 
share capital, the Share Subscription would comprise the issue of approximately 
17.7 million Shares, raising approximately  GBP7.4 million (approximately US$11.2 
million) of new funding. 
 
Following the completion of the proposed Share Subscription, it is proposed that 
Jinchuan would be given the right going forward to subscribe for further new 
Shares or share options at prevailing market prices so as to be able to maintain 
its interest at 29.9 per cent. 
 
The proposed capital raising adds strength to Toledo's balance sheet, and 
positions the Company to invest in the further development of its Philippine 
assets. 
 
 
DOS SALES CONTRACT 
 
Jinchuan intends to enter into a contract with Toledo for the purchase of nickel 
ore, commencing from 2013 for the life of its mines. Under the proposed 
agreement, Toledo will supply Jinchuan with at least 1Mtpa of nickel ore in 
2013, increasing to at least 2Mtpa by 2016. The detailed terms of the agreement 
will be determined in due course but will be conducted on an arms' length 
commercial basis. Toledo may enter into DOS contracts with other parties for 
production prior to 2013. 
Jinchuan will provide Toledo with a pre-payment purchase facility to assist in 
the funding the working capital requirements associated with the supply of ore 
under the DOS contracts. 
 
BOARD REPRESENTATION 
 
It is proposed that, subject to the completion of the Share Subscription, 
Jinchuan will be entitled to nominate around 30 per cent. of the number of 
directors to the Toledo Board, which is expected to be two of six members. 
 
STRATEGIC ALLIANCE AND LOCAL MANAGEMENT 
 
Toledo and Jinchuan intend to enter into a strategic alliance agreement which 
will include management and board arrangements in respect of the operations of 
TMM Management, Inc ("TMM"), the management company responsible for operating 
each of Toledo's interests in the Philippines, including the Berong and Ipilan 
deposits, on behalf of all the joint venture partners (the "Philippines Joint 
Ventures"). 
 
Under the proposed agreement, Jinchuan and Toledo will form a joint operating 
committee to oversee the operation of the strategic alliance and ensure 
strategic and operational goals are achieved. Toledo will nominate Jinchuan 
representatives to the Board of TMM and Jinchuan will be involved in managing 
the day to day activities of the Philippines Joint Ventures in accordance with 
their relevant board approval processes.  This is subject to certain milestones 
relating to exploration, mining and development of Philippine processing 
options, being met under an agreed timetable. In the event that such milestones 
are not met, other than as a result of certain external factors, Toledo has a 
right to terminate Jinchuan's involvement in the management of TMM. 
 
Jinchuan will grant Toledo a right to co-invest in processing plants which 
process nickel ore from the mines in which Toledo holds an economic interest. 
This includes the right to invest up to 30% of the equity in Jinchuan's planned 
ferro-nickel smelter in Guangxi Province in China and a second planned 
processing plant in the Philippines. Toledo will have the right to co-invest on 
the same terms as Jinchuan. Jinchuan will be the operator of the processing 
plants. 
 
CONDITIONS PRECEDENT 
 
Completion of the proposed transactions set out in the MOU are subject, inter 
alia, to the following conditions precedent: 
 
  * Completion of outstanding due diligence items by Jinchuan; 
 
  * Signing of definitive legally binding agreements; 
 
  * Toledo and Jinchuan Board approvals; 
 
  * Jinchuan having obtained all relevant Chinese governmental and regulatory 
    approvals; and 
 
  * Toledo shareholder approval for the Share Subscription and receipt of all 
    other required regulatory approvals and any required Philippine joint 
    venture board approvals. 
 
 
Toledo and Jinchuan hope to enter into definitive legally binding agreements by 
the end of August 2010, with shareholder approval being sought shortly 
thereafter. 
 
SHAREHOLDER SUPPORT 
 
Daintree Resources Limited, the largest shareholder of Toledo (representing 
around 24% of the current issued share capital of Toledo) is highly supportive 
of the proposed strategic alliance with Jinchuan and, subject to the 
finalisation of terms, intends to vote in favour of the Jinchuan Share 
Subscription. 
 
 
For further information please contact: 
 
 Reg Eccles, Chairman, Toledo Mining - London   +44 (0) 20 7514 1480 
 
 Jason Cheng, Director, Toledo Mining - Aisa    +852 2127 3000 
 
 Richard Greenfield, Ambrian Partners Limited   +44 (0) 20 7634 4710 
 
 Alex Buck, BuckBias Limited                    +44 (0) 7932 740 452 
 
 
 
NOTES TO EDITORS 
 
About Toledo 
 
Toledo Mining Corporation (AIM:TMC) is an AIM listed company with one of the 
largest nickel resource bases in the Philippines. It has majority economic 
interests in a portfolio of large, nickel laterite assets on Palawan Island in 
the Philippines. These include: 
 
  * a 56.1 per cent. economic interest in Berong Nickel Corporation, the owner 
    of the Berong mine and the Berong, Moorsom and Long Point nickel laterite 
    deposits which host a JORC resource of 10 Mt at 1.55% Ni (155,000 tonnes of 
    contained nickel) with a significant ongoing exploration programme to 
    increase the resource base; and 
 
  * a 52 per cent. economic interest in Ipilan Nickel Corporation, the owner of 
    the nickel laterite deposit at Ipilan which has a JORC resource of 30.6 Mt 
    at 1.36% Ni (416,000 tonnes of contained nickel). 
 
 
About Jinchuan 
 
Jinchuan (www.jnmc.com) is the largest nickel company in the People's Republic 
of China, the fastest growing nickel market globally. Jinchuan's revenue in the 
year to December 2009 was around RMB 55 billion (around US$8.1 billion) and the 
company has an annual production capacity of approximately 130,000 tonnes of 
nickel, 200,000 tonnes of copper, 6,000 tonnes of cobalt, 8,000 kilograms of 
platinum group metals and 1,200,000 tonnes of chemical products. 
Jinchuan has an estimated 90% share of China's nickel production. The Jinchuan 
nickel mine was discovered in 1958 with proven ore reserves of 520 million 
tonnes, of which nickel reserves are 5.5 million tonnes, ranking it the fifth 
largest deposit of its kind in the world, and copper reserves of 3.43 million 
tonnes, the second largest in China. It has 37,000 employees and operations in 
12 countries around the world. 
 
 
[HUG#1430967] 
 
 
 
 
 
 
 
 
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Source: Toledo Mining Corporation PLC via Thomson Reuters ONE 
 

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