Oxus Gold says condition of foreign investment agreement waived for Amantaytau Goldfields project, Uzbekistan

Oxus Gold (AIM: OXS) said the agreement with a Chinese consortium over financing of its 50% owned Amantaytau Goldfields project in Uzbekistan has been amended, removing the requirement to sign a FIA (foreign investment agreement) by the end of June and allowing it to secure the initial investment of US$85 million upon receipt of the relevant approvals from the Chinese government.

The funding will be received through the issue of convertible loan notes and new ordinary shares.

The consortium comprising Baiyin Non-Ferrous Group Co Ltd (Baiyin), CITIC Construction Co Ltd (CITIC), and Chang Xin Yuan Su (Tianjin) Equity Investment Fund Management LP intends to invest and arrange financing of a total US$185 million. The financing was initially conditional on the singing of the FIA with the Uzbek government, receipt of the customary approvals from the government of the People's Republic of China and admission of ordinary shares to trading on the AIM market of the London Stock Exchange by 31 December 2010. If the FIA had not been executed by 30 June 2010 then both the company and the consortium would have been entitled to withdraw from the agreement.

The Uzbek government holds the remaining 50% in the project.

In addition to the issue of shares and loan notes, the consortium will be granted warrants to subscribe for more shares for US$20 million in return for a further US$80 million in project finance.

Oxus said that a draft FIA had already been submitted to the Uzbek government which is currently discussing its final form and content. The company has pledged to conclude the agreement as quickly as possible.

"This commitment to finance Oxus is a significant show of confidence in the future of our company...we also look forward to working closely with the Baiyin CITIC consortium to identify, secure and develop other precious metal projects in the region, for the benefit of all our stakeholders,” said executive chairman of Oxus Gold Richard Shead.

In a note, roker Fairfax called the news a “major step forward in (the company’s) progress and development strategy,” saying that the funds could be used by Oxus to invest in other gold projects in the wider region, leading to the expansion and development of a number of additional projects.

“Oxus is now re-connecting with investors and is ready to push ahead with a number of expansion ideas.  Today’s announcement is hugely significant in the development of the company and investors should see this as a meaningful move into new areas of gold mining,” said Fairfax.

In its full year report released yesterday, Oxus said that it swung to a net profit after exceptional items of US$1.02 million from a loss of US$610,000 a year earlier. During 2009, Oxus and AGF have also undertaken a comprehensive review of the 24 Moz of gold potential identified within the AGF licence area. Oxus has drawn up a five year US$22 million exploration programme to increase AGF’s JORC classified proven and probable gold reserves from the current 2.4 Moz (Million ounces) to 7 Moz. The US$2.5 million budgeted for this year will be financed from existing cash resources.

At 31 December 2009, AGF's proven and probable ore reserves stood at 339,000 ounces gold and 4.513 Moz silver in oxide ores, 2.097 Moz gold and 77,000 ounces silver in sulphide ores for a total 2.436 Moz gold and 4.591 Moz silver. Measured and indicated mineral resources amounted to 4.745 Moz gold and 34.863 Moz silver, while inferred mineral resources stood at 2.533 Moz gold and 15.706 Moz silver.