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Monday, 12 July 2010, 15:00 HKT/SGT
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Source: Toledo
Toledo Signs Memorandum of Understanding with Jinchuan

MANILA, July 12, 2010 - (ACN Newswire) - 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.

Contact:
Reg Eccles, Chairman, Toledo Mining - London, +44 20 7514 1480

Jason Cheng, Director, Toledo Mining - Asia, +852 2127 3000

Richard Greenfield, Ambrian Partners Limited, +44 20 7634 4710

Alex Buck, BuckBias Limited, +44 7932 740 452


Topic: Business Tieup
Source: Toledo

Sectors: Metals & Mining, Daily Finance, Daily News
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