Development of Garinskoye to begin in 2007

Aricom, the Anglo-Russian developer of mineral resources in Far East Russia’s Amur region, has announced that the Amur Oblast Territorial Department on the Use of Subsoil has notified OOO Amur Mining, a company connected to the group, that its submission to the tender for the combined exploration and extraction license over the Garinskoye iron ore property contained the best terms. The tender was held in Blagoveshensk on December 5. Amur Mining’s tender offer for the License was some $19 million. Aricom expects to be in a position to purchase a controlling interest in OOO Amur Mining on a cost reimbursement basis, subject to any relevant regulatory approvals.

The results of the tender will have to be formally approved by the Licensing Commission of Rosnedra (the Agency on the Use of Subsoil of the Ministry of Natural Resources of the Russian Federation) in Moscow, which process will take some additional time. Aricom expects to make an additional announcement once the License is issued.

The license area is estimated to contain iron ore reserves and resources of 388.8 Mt of Russian category A, B and C ore with an average grade of 41.7% Fe and 2,590 Mt of Russian resource category P1 and P2. Of the A, B and C1 category reserves, 39% (82.5 Mt) is defined as ‘rich ore’ and contains an average grade in excess of 50% Fe of which 67.7 Mt have an average grade of 55.7% Fe.

Aricom believes that the deposit could be developed into a large scale open pit iron ore mining and concentrating operation on the following basis. Development of the project is expected to commence in 2007. Initial work will focus on a comprehensive programme of confirmation drilling. Subject to and following suitable positive results from this, a feasibility study should be potentially completed in early 2008 and the project could be in operation as early as 2010-2011.

As magnetite is the predominant source of iron at Garinskoye, the ore could be concentrated using the same process as at Aricom’s Kuranakh project, in the northeast of the Amur Region. This should result in an initial production of standard iron ore fines averaging +/- 65% Fe which could then be developed into a number of premium products including standard pellets, pig iron, direct reduced iron (DRI) and hot briquetted iron (HBI).

Jay Hambro, Chief Executive of Aricom, commented: "Garinskoye is an extremely exciting asset with enormous potential. We believe the deposit has the ability to produce up to 12 Mt/y of premium iron ore concentrate as early as 2010 and is located 225 km from the Russian-Chinese border and approximately 65 km from the two large regional railroads."

The Garinskoye deposit is situated in the Mazanovsky District, Amur Oblast, 150 km northeast of Svobodny and 65 km southwest of the Baikal-Amur main railway line. The area is a sparsely populated upland taiga terrain with large areas of marshland and an elevations range from 250 to 500 m above sea level.

The deposit lies equidistant from both the Trans-Baikal Railway (TBR) and the Baikal-Amur Mainline (BAM). The deposit has no existing transportation links with either of the main railway lines and no metalled road access. The nearest railway station, Shimanovsk TBR, is approximately 100 km from the deposit.

Exploration of the area started in 1949 and between 1950 and 1955, extensive exploration was carried out by Soviet geologists and included drilling, trenching and underground shaft work. In 1955, the GKZ (State Committee for Reserves) approved an original reserve and resource estimate of 388.8 Mt. Between 1982 and 1984, Dalgeophysica identified additional resources with a further programme of aeromagnetic surveying and in 1993 additional potential resources of 2,590 Mt were further estimated.

Aricom is focusing on iron ore and ilmenite production and delivery. The company was established in September 2003 to develop projects, situated in the northwest of the Amur Region. These projects are set to service the Chinese and Russian commodity market.

Aricom currently operates three projects in the Amur region and the adjoining Jewish Autonomous Region. The company’s projects Kuranakh, K&S and Bolshoi Seym have combined estimated reserves and resources of over 1,000 Mt of iron ore and ilmenite ores. The location of the company’s deposits offer a significant logistical advantage being close to the Trans-Siberian-Express and the Baikal-Amur Magistral railways.

In 2005, 700 Mt of iron ore were shipped globally, of that 300 Mt (43%) was shipped to China. It is currently estimated that China is on course to have imported 300 Mt of ore by the end of 2006 to facilitate its demand for steel production. In June 2006, Aricom announced a Memorandum of Understanding with China’s largest nonferrous metal company Chinalco, to co-operate in the design and development of a Titanium Sponge production plant in China.