Saudi industrialists sign JV agreement to exploit

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Ghurayyah, in production, is planned to supply 10p.c. of world supply for tantalum which is used in most mobile phones and computers and other electronic circuitry.

The Consortium comprises two families of Saudi Arabian industrialists - A.H.Algosaibi & Bros. Co. and AlNahla Trading & Contracting Co - both diversified companies with a range of domestic and international business interests.

Following the signing, Tertiary's executive chairman Patrick Cheetham said today: 'We are delighted to have entered into this Joint Venture with strong financial partners who are committed to the project. We are also grateful for the practical help our partners are giving us with the work programmes already in progress and look forward to their continued cooperation and to bringing Ghurayyah successfully into production.'

Work programmes in progress include a 3,000m drill programme to collect a sample of approximately 80 tonnes of Ghurayyah ore for metallurgical processing testwork and to provide data for resource upgrading.

URANIUM PRESENT AT CONSISTENT LEVELS

The feasibility studies will also evaluate the potential value of the uranium and rare-earth minerals that are known to occur at Ghurayyah. Whilst previous resource estimates at Ghurayyah (Inferred Minerals Resource of 385 million tonnes) did not include uranium, it is known to be present at consistent levels and the average uranium content of drill samples on which the resource estimate was based is 133ppm (or 0.3 lb/tonne) U3O8 - a grade which is equivalent to an in-situ value of over US$12 per tonne of ore at current prices.

Uranium was recovered with the tantalum and niobium in mineral concentrates produced in previous testwork. These concentrates also contained 6% yttrium oxide, a rare-earth element used in electronics, the value of which is yet to be evaluated.

Ghurayyah would be exploited by conventional open pit mining, with sufficient ore outcropping above the Wadi floor for the first ten years of operation. The whole deposit, covering a surface area of 90 football pitches, is large enough to support an open-pit mine life of 200 years at the initial planned rate of production.

The final Joint Venture signing today follows from the Preliminary Agreement announced on 7 December 2005. The estimated US$2m cost of the Preliminary Feasibility Study will be funded US$300,000 by Tertiary, US$850,000 from an immediate issue to the Consortium of zero-coupon convertible loan notes and a further US$850,000 immediate direct contribution to the joint venture account from the Consortium.

The loan notes will be convertible to ordinary shares in Tertiary at any time prior to completion of the Preliminary Feasibility Study at a price equal to the higher of 15p per share or 80% of the weighted average market price in the 30 days prior to conversion. The full conversion of the loan notes would result in the Saudi Consortium holding a 15% interest in the enlarged issued share capital of Tertiary after having previously bought an initial 5m share stake at 10p.

The costs of a subsequent Bankable Feasibility Study, estimated at US$5 million, will be met 90% by the Consortium and 10% by Tertiary by direct contribution to joint venture expenses.

Assuming successful completion of these studies a special purpose vehicle, funded and owned equally by Tertiary and the Consortium, will be incorporated to develop the Ghurayyah deposit.

In arranging financing for construction, the project partners will seek to maximise the benefit of favourable debt funding available in Saudi Arabia, including that from the Saudi Industrial Development Fund and the Al Yamamah Offset programme, which could reduce Tertiary's project equity requirement to as little as 6.5% of the US$75-100 million total capital costs of the project estimated in the 2003 Scoping Study.