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Shaw River Manganese back trading on the ASX after settlement of Namibian legal matter

Shaw River Manganese's (ASX: SRR) shares have been re-instated to the ASX and will resume trading at the market open this morning (Friday 9 December 2011) due to the settlement of a legal matter in Namibia, which now clears the way forward for development of the Otjozondu Manganese Project (Otjo) in the country.

Court action against Shaw River's Namibian subsidiary has been abandoned, and a broad deed of release has been executed in favour of the Shaw River Group.

As a result there will be no significant financial or ongoing negative legal effects on Shaw River or Otjo, which forms the backbone of the company's global manganese production strategy.

Vincent Algar, Shaw River’s managing director, told Proactive Investors this week that strong news flow is expected over the coming months. The company will upgrade resources and progress the Feasibility Study at Otjozondu - where a start-up production rate of 250,000 tonnes per annum has been targeted.

News is also pending for a maiden resource for at the company's Baramine Project in the Pilbara, with exploration and development pressing ahead at the Butre Project in Ghana.

Otjo continues to deliver new opportunities

Ongoing exploration is continuing to identify new potential manganese exploration targets at Otjo. Investigations into metallurgy, environmental, hydro-geology, mine cost analysis and logistics relating to the infrastructure corridor to Walvis Bay are progressing well.

Shaw River is currently reviewing its targeted timing to commence production, and is likely to establish a new timetable based on commencing production at an initial rate of 250,000 tonnes per annum.

Investors should note that during 2007/08, the manganese price rose from a low of ~$3.00 per DMTU (Dry Metric Tonne Unit) to ~$18.00 per DMTU over a period of only 18 months.

Shaw River aims to ramp up production  to 500,000 tonnes per annum of manganese ore, placing the company in a strong position to capitalise on any increase in the manganese price.

Vincent Alga on the legal issue

Algar added “the legal issue arose unexpectedly as a result of circumstances that were outside of our control. However, we have been able to resolve it without any significant financial or legal impact on the company, and we are now in a position to move forward with our development plans with confidence and certainty.”

The settlement

Having assessed the risks associated with the potential outcomes of the case, Otjozondu Mining (Proprietary) Ltd (OM) and Shaw River decided to engage with the plaintiff to negotiate a settlement.

The settlement amounts payable to the plaintiff by OM (75.5% owned by Shaw River) comprise a cash payment of US$2 million and royalties of a capped amount of NAD20 million (US$2.4 million), which are payable following the commencement of production at Otjo.

These settlement amounts are well below the potential exposure of OM and Shaw River, had the outcome of the court action been unfavourable.

Broad deed of release executed in favour of the Shaw River Group by the plaintiff and its associated or related entities.

The settlement arrangements provide the Shaw River Group and its projects with broad protection from any future action by the plaintiff and its associated or related entities.

Shaw River is seeking to recover the value of the settlement from the vendors of the project and Oreport.

Advancement of projects

Shaw River has continued to work towards progressing Otjo towards production. A number of activities have been considerably advanced since the company’s shares were suspended, including:

- completion of a major resource extension drilling program at Otjo;
- commencement of the resource estimation process, including an upgrade of resource category and expected increase in the resource base at Otjo;
- commencement of resource estimation and additional beneficiation test work at the Baramine Project in the Pilbara region of Western Australia;
- beneficiation test sampling characterisation at both Otjo and Baramine;
- environmental, water, dust and social impact studies for the completion of a revised production plan at Otjo;
- completion of a road condition report and infrastructure studies at Otjo;
- mine cost modelling at Otjo;
- commencement of a regional soil sampling and exploration mapping program on the 1,300km2 lease area at Otjo; and
- completion of soil sampling programs at Baramine and 701 Mile in the Pilbara region.