Severstal closes deal to invest in a controlling stake in an iron ore deposit in Western Africa

Severstal announced that its Severstal Resources mining division has closed the transaction to purchase up to a 61.5% stake in African Iron Ore Group Ltd («AIOG») which owns, through subsidiaries, the exploration rights for an iron ore deposit in the Putu Range area, Liberia (Western Africa).

All of the agreement’s conditions, including approval of the TSX Venture Exchange, completion of satisfactory due diligence by Severstal Resources and extension of the exploration license had been completed.

The purchase will be effected through Severstal’s indirect wholly-owned Dutch subsidiary, Lybica Holding B.V. 

Severstal will pay US$37.5 million for a 61.5 % stake in AIOG. Of this, Severstal will pay US$ 22.5 million for the purchase of a 45% stake from Mano River Resources Inc. and from its other shareholders. US$ 15 million will be used for the purchase of an additional AIOG share issuing.

In light of Severstal Resources’ majority interest, AIOG will be re-named Severstal Liberia Iron Ore Ltd.

The money raised by AIOG through subscription will be spent on financing of exploration work and feasibility study for an iron ore deposit in the Putu Range area.

In addition, as announced in May 2008, Severstal has acquired a 6.29% stake in Mano River Resources Inc. together with share warrants exercisable within a period of 18 months.  If exercised in full, the warrants will be converted into shares which, together with a stake already held by Severstal, will give Severstal approximately 11.8% of the share capital of Mano River Resources Inc.

According to preliminary data, it is estimated that the Putu Range deposit contains more than 500 mln tn of iron ore. This number may substantially increase as a result of a detailed exploration exercise which is planned by Severstal Resources.

Mano River Resources Inc. is a junior mining company listed on the TSX Venture  Exchange (MNO) and on AIM in London (MANA). It is engaged in the acquisition, exploration and development of iron ore, gold and diamond properties located in Liberia, Sierra Leone and Guinea.

Roman Deniskin, Severstal Resources CEO, said: “The development of the Putu Range iron ore project is a significant step in the dynamic development of our mining business. From this new region we will supply production to the European and North American markets”.