Amicable solution reached over OBMI sale
Guyana Chronicle
February 14, 2007

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AN AMICABLE and honourable solution has been reached with regard to the government’s concerns about the sale by Canadian mining company IAMGOLD of its majority shares in Omai Bauxite Mining Inc (OBMI) to Bosai Minerals Group Company Limited of China (BOSAI), the major stakeholders announced in a joint statement yesterday.

This amicable solution was reportedly reached Monday following extensive negotiations by the government and existing stakeholders in the Linden bauxite operations, facilitating the transfer of OMAI’s assets from IAMGOLD to BOSAI.

“The Guyana Government, IAMGOLD of Toronto, Canada and BOSAI Minerals (BOSAI) of Chongqing, People’s Republic of China today (Monday) executed a Letter of Agreement signalling the arrival of an amicable and honourable solution regarding the sale of IAMGOLD’s interest in Omai Bauxite Mining Inc (OBMI) and Omai Services Inc

(OSI) to BOSAI,” the joint statement said.

“The extended negotiations involved a series of issues which were critical to the future of both the bauxite operations in Linden and Guyana and all parties are pleased to have reached a friendly and honourable solution - which is not only in the best interests of OBMI, Linden and Guyana – but more importantly, a commitment to work together and safeguard the valuable bauxite resource located in Linden,” the statement said.

The National Industrial and Commercial Investments Limited (NICIL) negotiated on behalf of the Guyana Government and holds a 30 per cent share of OBMI.

OBMI is the mine and operations located in Linden and a well-known producer of the high quality refractory bauxite known as “RASC” and OSI is the plant providing power to the mine and operations, as well as to the town of Linden via the Linden Electric Company (LEC).

The statement said that under the principal terms of the agreement reached, the sale of IAMGOLD equity and debt interest in OBMI and OSI to BOSAI will proceed on the following terms:

** OBMI debt to be reduced by over US$20M. The shareholder’s debt of

OBMI will be written down to US$27M, which represents a reduction of the debt owed to IAMGOLD in excess of US$20M. This enables OBMI the opportunity to be a viable entity unencumbered by significant debt. BOSAI will succeed IAMGOLD as the owner of the reduced debt.

** OSI debt to be reduced by over US$1.20M. The OSI shareholder’s debt due IAMGOLD of US$1.7M will be reduced to US$0.50M and this will accordingly reduce the electricity costs to OBMI and LEC marginally.

** Commitment to the continued operation and existence of OBMI under BOSAI ownership. According to the joint statement, BOSAI has purchased OBMI with the sole purpose of continued operation and to expand the products produced and to increase sales.

“Should market conditions adversely affect the continued operations of OBMI and in the event that BOSAI was to ever propose that OBMI be wound-up or to suffer or allow a fall in its employment of 40% or more of what existed at December 31, 2006, then NICIL shall have the right, but not the obligation, of requiring BOSAI to sell its’ interest in OBMI through an International Tender of maximum 12 months duration,” the joint statement said.

In such case, the statement said NICIL shall have the ‘right of first refusal’ under the same Purchase Terms and Conditions as the other purchasers and this to be declared within the 12 months.

It said, too, that during this period of International Tender, BOSAI agrees to continue the OBMI operation.

** Block 37 reserves to be utilized only for an alumina refinery, which shall commence construction by end-December 2009. With regards to a Mining Licence for Block 37 reserves, OBMI will continue to enjoy the Prospecting Licence (PL) during the current and extended terms subject to compliance of applicable law, as well as their active prospecting of Block 37 and the commencement of construction of an alumina refinery by the end of 2009, and the maintenance of exploitation of the Montgomery Mine at the same levels as those at December 31, 2006.

Failing any of the above, a Mining Licence for Block 37 will not be granted by the Guyana Government and all rights of OBMI to Block 37 bauxite reserves will end as of December 8, 2009.

** Abandoned alumina refinery may be used by BOSAI for an alumina refinery.

The government agrees that BOSAI has the priority to purchase the abandoned alumina refinery in Linden, prior to year end 2009, on terms and conditions to be mutually agreed before December 2008, always providing that the intention for its land and use is for an alumina plant and that the Government of Guyana agrees to grant a mining licence for the Block 37 bauxite reserve.

** Disclosure of Market Information: In order to ensure the protection of production and sale of bauxite produced at OBMI, BOSAI agrees to share and communicate to OBMI and NICIL all relevant information with regard to all of BOSAI’s and OBMI’s sales and marketing of bauxite, including market trends and any other relevant information relevant to the bauxite markets in which OBMI and BOSAI (or its affiliates) are selling or might be in competition with one another.

In particular, the statement said BOSAI agrees that where it, or its affiliates, and OBMI are or might be participants in the same markets or in the same sales and marketing geographical areas or with the same customers, it will keep OBMI and NICIL informed of information that might be relevant to OBMI’s production, sales, marketing and competitive position.

** BOSAI’s representations/warranties in favour of OBMI and NICIL (30% shareholder of OBMI): BOSAI, as the majority shareholder of OBMI, will conduct the business of OBMI and manage and operate OBMI in a manner that is in the best interests of OBMI and is not detrimental to NICIL or any other shareholders of OBMI.

In this regard, the statement said “BOSAI represents and warrants that the acquisition of IAMGOLD’s shares in OBMI will be for the purpose of OBMI’s continued operation, and not with a view to curtailing those operations or removing OBMI as a competitor to its or any other entities’ operations or market position, and further that BOSAI is committed to the continued operation and existence of OBMI.”

To complement the BOSAI warranties, the government, through its government departments and offices, agreed to use its best efforts to ensure that OBMI is always able to operate in accordance with its laws, articles and bylaws and related agreements, the statement said.

The government also reportedly welcomed BOSAI as the successor to CAMBIOR/IAMGOLD.

It was noted that prior to the issuance of yesterday’s joint statement, the principal stakeholders, including the major opposition party in Guyana, were apprised of the principles of the transaction.

The final transaction is expected to be completed by the end of March, in accordance with the Share Purchase Agreement entered into between IAMGOLD and BOSAI on December 18th, 2006 and the Letter of Agreement dated February 12th among IAMGOLD, BOSAI, NICIL, and the Government of Guyana.

The transactions include BOSAI succeeding IAMGOLD as 70% shareholder of OBMI, 100% shareholder of OSI, and the successor owner of shareholder debt owed by OBMI and OSI to IAMGOLD.

The statement said following completion of the final transaction, it is expected that OBMI will be renamed BOSAI MINERALS GUYANA INC. (BMGI) and OSI as BOSAI MINERALS GUYANA SERVICES INC (BMGSI).