PETER HAMBRO MINING PLC Presentation on Possible Merger of Peter Hambro Mining and Aricom - Final.(Broadcast transcript)

PETER HAMBRO, CEO, PETER HAMBRO MINING PLC: Warm welcome to everybody who has come here on such short notice. Thank you very much indeed.

Today's announcement is about our progress towards creation of a new leading regional mining champion in the Far East of Russia though the combination of Peter Hambro Mining with Aricom. Here today we have Pavel Maslovskiy, my long term Russian business partner. Sir Rudolph Agnew and Sir Malcolm Field, Jay Hambro, Brian Egan and myself together with a number of the other executives here in the audience.

Sir Rudolph and Sir Malcolm are here as the Chairmen of the two independent committees established by both Peter Hambro Mining and Aricom to consider this offer and the associated valuations. And I want to point out very clearly that all the interested parties, including myself and Pavel, stood aside from these committees and their negotiations.

The presentation will be followed by a chance for questions and the meeting is being webcast and recorded so you'll be able to replay it on the PHM and Aricom websites after the presentation.

I show you the statutory disclaimer to keep us in check. And what to talk to you about the possible recommended merger of PHM and Aricom. In summary, this transaction will bring together the second largest gold business in Russia with the significant iron assets to create a new regional mining group in the Far East of Russia, strategically located just across the border from China.

The enlarged Group will combine one of the lowest cost gold producers worldwide, which is successfully ramping up production to a planned 460,000 to 510,000 ounces this year. With significant iron ore assets, which despite current markets, we believe have a strong medium term potential.

Financially, the Group will be stronger, benefiting from Aricom's cash and Peter Hambro's cash flow. It will be virtually debt free with the ability to pay dividends and we intend to seek to admission for the enlarged company to the Main Board as soon as practical on completion of the merger. At yesterday's prices that would put us at number 56 in the FTSE 250. We believe this will position the enlarged group well for a rerating seen by peers who have made the move to the Main Board.

When we first started looking at the combination it became very clear quickly -- very quickly clear that it would be a powerful fusion of both companies, where fusion produces energy. There are three main points about the combination that I would like to stress.

First it derisks both businesses, bringing together the strong cash position of Aricom with the strong cash flow of Peter Hambro Mining. And in the short-term, the enhanced cash position will enable us to develop our near term and world class gold projects. In the medium to longer term, the cash flows from our production will help us to fund the -- sorry, find the project financing needed to develop Aricom's world class iron ore assets as and when the iron ore and financing markets improve.

Second, we strongly believe that the derisking of our businesses will allow significant rerating of the Company to the benefit of all shareholders. Our peer group trades at a very significant premium to us as a result of our perceived financing risk. The upside potential here is considerable given that we're one of the fastest growing and lowest cost gold producers in the world.

Third, the combination will create a regional mining champion, strategically placed next to the huge Chinese market with a strong set of assets located in close proximity and bound together with the same Anglo-Russian businesses strengths and management expertise. This will also allow both Groups to benefit from the operational infrastructure and management between the two Groups.

The summary of the -- of where we are on the transaction and its structure is as follows. The independent committees of the two Boards are finalizing terms. Terms announced this morning are a range of one Peter Hambro Mining share in exchange for between 15.77 and 17.14 fully paid Aricom shares. We've also announced this morning a placing to raise approximately GBP55m.

Once agreed a transaction would be effected through a scheme of arrangements and this could result in up to 75m new shares being issued to PHM shareholders. Based on last night's closing prices this would value Aricom at between 34p and 37p. Based on PHM's closing price of GBP3.98 on January 8, the …