Moto Goldmines Limited
TSX : MGL
AIM : MOE

Moto Goldmines Limited

March 17, 2009 08:15 ET

Moto Goldmines Limited Announces Signing of Joint Venture Agreement

PERTH, WESTERN AUSTRALIA--(Marketwire - March 17, 2009) -

NOT FOR DISSEMINATION IN THE UNITED STATES OR THROUGH ANY US NEWSWIRE SERVICE

Moto Goldmines Limited ("Moto") (TSX:MGL)(AIM:MOE) is pleased to announce that it has finalised and signed the Joint Venture Agreement and ancillary agreements with L'Office des Mines d'or de Kilo-Moto ("Okimo") in respect of the establishment and conduct of the joint venture company Borgakim Mining s.p.r.l. ("Borgakim" or the "JV Company"). The joint venture is a joint venture over the Moto gold project located in the Moto goldfields in the north-east of the DRC (the "Project" or the "Moto Gold Project"). The terms of these agreements are consistent with the government approved agreements announced January 7, 2009.

Summary of the key terms

- The joint venture company will be Borgakim, which will change its name to Kibali Goldmines s.p.r.l. (the "JV Company");

- The JV Company will be held 70 per cent. by Moto and 30 per cent. (non-dilutable) by Okimo;

- Okimo will transfer the exploitation permits covering the area of the Moto Gold Project to the JV Company, excluding certain historic tailings which Okimo will be entitled to mine;

- Once the transfer of the exploitation permits is registered with the DRC Mining Registry, a pas de porte of US$4.5 million will be payable by Moto;

- US$10 million of existing shareholder loans that have funded past exploration expenditures for the Project will be capitalised by Moto in the JV Company. The balance of US$115 million of shareholder loans as at February 28, 2009 and future shareholder loans will be retained on the JV Company's books and carry market rate interest;

- The JV Company will assume the Okimo debt (the "Okimo Loan") to Societe d'Organisation, de Participation et de Management ("Orgaman") of approximately US$33.9 million, as previously agreed;

- Moto will re-pay the Okimo Loan to Orgaman in three instalments, with the first instalment of approximately US$10 million payable shortly after signing of the loan transfer and the Okimo Loan will be consolidated with the JV Company's existing shareholder loans, described above; and

- The JV Company will continue to pay Okimo rent of US$350,000 per month until commencement of commercial production at the Project, and then will pay Okimo US$350,000 per month as an interest free advance on future dividends to be declared by the JV Company.

Moto's Chairman, Sam Jonah, KBE, commented "I am delighted that a joint venture agreement has been reached with our partner, Okimo. Together, Okimo and Moto have been able to establish an excellent working relationship and we look forward to working with our partner to establish substantial gold production in the area. The 2009 year has seen us reach three significant milestones, with the registration of the title for the whole Project area; the announcement of the optimised feasibility study significantly enhancing the deliverability of the Project and now the finalisation of the joint venture agreement".

Details of the Joint Venture Agreement

The Joint Venture Agreement, in accordance with the November 2006 Protocol and the Amending Agreements entered into between the parties following the conclusion of the DRC Mining Contracts Review, provides that:

Shareholding: Moto will have a 70 per cent. equity interest and Okimo will have a 30 per cent. non-dilutable equity interest in the JV Company.

JV Company: Borgakim will be the joint venture company and will change its name to Kibali Goldmines s.p.r.l.

Capitalisation/Shareholder loans: Moto will capitalise approximately US$10 million of existing shareholder loans made to Borgakim through an issue of shares to the shareholders pro-rata to their proposed shareholdings. The balance of the existing shareholder loans, being some US$115 million as at February 28, 2009, and future shareholder loans will be retained on the books of the JV Company and carry market rate interest. The market rate will be set at the rate charged on external financings to the JV Company during the period when such loans are in place or otherwise 8 per cent. per annum. These loans will be repayable in preference to the payment of dividends to shareholders, but after paying to Okimo the monthly cashflow referred to below.

Exploitation Permits: Okimo is in the process of transferring the relevant portions of 10 exploitation permits to the JV Company so that the full 1,841 sq. kms currently held under lease is held directly by and for the benefit of the JV Company (the "Exploitation Permits"). The Exploitation Permits revert to Okimo on termination of the joint venture (as described below). The Exploitation Permits have an initial term that expires in 2014/2015 and can be renewed for periods of 15 years. Once the transfer of the Exploitation Permits to the JV Company is registered with the DRC Mining Registry, the existing lease agreement (the Consolidated Lease) will be terminated and Moto will be required to pay a pas de porte of US$4.5 million, in part to Okimo and in part to the DRC Government.

Moto has agreed that certain historic tailings located within the area covered by the Exploitation Permits can be mined by Okimo and the JV Company shall arrange for the transfer to Okimo of tailings exploitation permits covering the relevant areas. This does not affect the mineral resources identified in the area of the Project by the JV Company.

Board and management: The Board of Directors of the JV Company will consist of five members, three to be appointed by Moto and two by Okimo. The Chairman of the Board shall be appointed annually on a rotating basis, with Okimo appointing the first Chairman. The Chairman will have no second or casting vote.

Daily management of the JV Company will be delegated to the executive management. There will be an executive committee composed of a maximum of five members. Moto shall recommend persons for the positions of general manager/chief executive officer; chief financial officer and chief operating officer. Okimo shall recommend persons for the positions of deputy chief executive officer; corporate and social responsibility officer.

Certain matters (principally amendments to the articles, issues of shares, entering into contracts otherwise than on an arms' length basis and changing the description of social projects to be performed in respect of local communities) require the approval of both shareholders.

Okimo Loan: In the next few weeks, the JV Company will formally document its previously announced agreement to assume the Okimo Loan. At the end of 2008, Moto agreed to acquire the benefit of the Okimo Loan from Orgaman for its face value plus accrued interest, with the purchase price to be paid in three instalments. Shortly after the JV Company and Okimo sign the formal transfer agreement, the first instalment payment to Orgaman of approximately US$10 million will be payable by Moto. The Okimo Loan will be consolidated with the existing shareholder loans to the JV Company on the terms referred to above. Moto may elect to settle up to 50 per cent. of each instalment by the issuance of common shares of Moto, subject to regulatory approvals.

Funding: Funding for the JV Company will be provided by Moto or one of its subsidiary companies to the extent third party financing is not directly available to the JV Company. Okimo is not obliged to pledge its shares to secure any financing and the JV Company may not charge the Exploitation Permits without Okimo's consent.

Cashflow: Until the commencement of commercial production at the Project, the JV Company will continue paying Okimo a rent of US$350,000 per month. Once commercial production has commenced, the JV Company will continue to pay Okimo US$350,000 per month to maintain Okimo's monthly cash flow, which payments will be treated as an advance (interest free) of dividends from the JV Company. The balance of the surplus cashflow of the JV Company shall be used to repay shareholders loans in priority to the payment of dividends and, once Okimo's share of dividend payments exceeds US$350,000 per month, the excess shall be used to repay other loans owed by Okimo to the JV Company and to repay the dividend advances referred to above.

Social and other benefits: As planned in the 2007 feasibility study and included in the optimised feasibility study, the JV Company shall invest up to US$170 million in infrastructure and in the economic and social development of local communities over the life of the Project.

As previously disclosed by Moto, the JV Company will loan Okimo up to US$3.0 million (of which an advance of US$200,000 has been made) following independent review to assist Okimo in paying arrears due to Okimo employees, including termination payments due to former employees.

Revised ATF: As previously disclosed by Moto, the JV Company will loan Okimo up to US$7.0 million in accordance with the revised financial and technical assistance contract. These loans are expected to be advanced over a two year period and will be subject to a separate financing agreement to be agreed between the parties.

Termination: Unless terminated by mutual agreement, the Joint Venture Agreement will continue for so long as the Exploitation Permits are held by the JV Company and shall only be terminable on the non-payment of the rentals or advances due to Okimo, royalties, surface rights and other amounts due under the DRC Mining Code and certain limited insolvency events. On termination, the Exploitation Permits shall return to Okimo free of all encumbrances and the parties shall agree as to the dissolution of the JV Company.

Moto's Chief Financial Officer, Mr. Mark Arnesen, commented "With the announcement of the optimised feasibility study we have greatly improved the robustness of the Project which remains economically sound even when utilising a gold price of US$600 ounce. I am pleased to report that a number of development and export credit agencies, equipment suppliers and commercial banks have expressed an interest in helping us raise the required debt financing. I am optimistic that in the current market conditions we will be able to find third party debt financing of some 50 per cent. of the estimated capital Project costs. Already we have signed a number of confidentiality agreements with various financial institutions and I look forward to putting together another substantial African project financing for this Project".

Caution Regarding Forward-Looking Statements: Certain statements contained in this announcement that are not historical facts constitute "forward-looking statements", including but not limited to those statements with respect to the Company's plans for debt financing of the Project and with respect to the development of mineral deposits, the price of mineral commodities and the Company's financial resources. There can be no assurance that debt financing for the Project will be made available on terms that are acceptable to the Company or at all, that the Moto Gold Project will be successfully developed, that any mineralisation previously disclosed in respect of the Moto Gold Project will be proven to be economic, that anticipated metallurgical recoveries will be achieved, that future evaluation work will confirm the viability of deposits identified in the Project or that future required regulatory approvals will be obtained.

ARBN 113 274 874

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