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Peak Resources raises A$3.2m to complete Ngualla Rare Earth Project acquisition

Peak Resources (ASX: PEK) will raise A$3.2 million through the placement of 11.3 million shares at $0.28 per share to fund the acquisition of Zari Exploration Ltd, providing the company with a 100% interest in the Ngualla Rare Earth Project in southern Tanzania.

Consideration for the acquisition to Zari shareholders is through a combination of cash and shares consisting of US$6 million cash and the issuing of 24.2 million Peak shares.

The issue price of $0.28 represents a discount of about 8.2% to the last closing price on 11 November 2011. GMP Securities Australia Pty Ltd acted as lead manager to the placement.

Recent drilling results have underscored that Ngualla is one of the largest and better grade new rare earth discoveries of recent years. Ngualla is a virgin discovery, and with mineralisation from surface and extending over a large area, the project has vast potential.

By gaining 100% ownership of the Ngualla, Peak will have greater flexibility of options in progressing the project where a maiden JORC Resource estimate is scheduled for completion in the first quarter of 2012.

Along with the existing cash balance of $5.6 million at 30 September 2011, funds raised will be used to fund the cash component of the Ngualla acquisition, continue the drilling program at the project, and meet general working capital requirements.

Also, the acquisition will open up new potential opportunities for future funding and offtake arrangements with strategic partners.

Alastair Hunter, Peak’s executive chairman, said “the company believes the next six to twelve months will be a very productive and exciting period in terms of exploration results and the advancement of the project to maiden rare earth resource status."

Currently Peak as operator and manager is earning 80% equity in the Ngualla Project by carrying Zari through to the completion of a Bankable Feasibility Study.

The acquisition is conditional upon Peak completing financial and legal due diligence of Zari to its satisfaction, becoming entitled to not less than 100% of the Zari shares, and obtaining Peak shareholder approval at an EGM to be held on or around Thursday 22 December 2011. Also the deal is subject to obtaining approvals from Tanzanian authorities.

The company has also initiated its search for a managing director with technical and mining engineering experience to oversee the continued growth of the resource base and development of the Ngualla Project.

Peak is expecting further drilling results from current 22,000 metre resource drilling program shortly where previous intersections included wide intersections such as 170 metres at 4.18% REO from surface.