Khan urges rejection of 'prejudicial' ARMZ offer

By Liezel Hill

TORONTO ( - The board of TSX-listed uranium junior Khan Resources recommends that shareholders reject an unsolicited offer from Russia's Atomredmetzoloto (ARMZ), labelling the bid "highly prejudicial and opportunistic".

The company said it is pursuing alternative transactions that could offer better "strategic value".

ARMZ has offered $0,65 in cash per Khan share, which the Canadian firm's financial advisor has also said is inadequate from a financial point of view.

Khan said on Tuesday that the ARMZ offer also exposes the company to "serious risks", because it comes at a time when Khan is trying to re-register mining and exploration licences in Mongolia for the firm's Dornod uranium project, under a new nuclear energy law in the country.

"ARMZ is seeking to take advantage of Khan and its shareholders at a particularly vulnerable time, and to capitalise on this regulatory uncertainty," said Grant Edey, who chairs Khan's special committee of directors.

"The special committee and Khan management are focused on finding alternative strategic transactions that take into account the interests of all relevant stakeholders and recognize the reality of the current circumstances in Mongolia and the critical value of maintaining a positive working relationship with the Mongolian government," Edey said.

Khan also points out to shareholders that ARMZ has not made a firm offer, but rather included a number of discretionary conditions which could allow it to abandon the offer.

Altogether, major shareholders, directors and officers holding more than 30% of Khan's outstanding shares have indicated that the do not plan to tender their shares to the ARMZ offer, the company said on Tuesday.

Khan holds a 58% interest in Central Asian Uranium Company (CAUC), which holds a mining licence on the Dornod uranium project in Mongolia. ARMZ subsidiary Priargunsky owns 21% of CAUC and Mongolian government-owned MonAtom holds the balance.

Khan also has a 100% interest in an adjacent exploration licence area.

The Dornod project is expected to have a mine life of 15 years, and could produce an average of three-million pounds of the nuclear fuel, at $23,22/lb, according to a feasibility study completed earlier this year.

Edited by: Liezel Hill


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