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Frontier Mining plans to re-domicile to Cayman Islands

Frontier Mining (LON:FML) has unveiled plans to re-domicile the company and its subsidiaries from Delaware in the US to the Cayman Islands. The board believes that being incorporated in Delaware is no longer efficient from a commercial or financial perspective, and it expects to carry out the change in the third quarter.

The company noted that when it initially incorporated the company in Delaware, in 1998, it planned to make acquisitions and establish operations in the United States, as well as the greater C.I.S. region.   However, it has since refocused its strategy and now intends to develop by expanding its operations in Kazakhstan.

The company also emphasised that by being incorporated in Delaware, the trading of Frontier’s shares in London is restricted, and it could potentially limit access to future opportunities by rendering the company's operations and potential future acquisitions inefficient from a tax perspective.

“The board has carefully considered several options and believes the Cayman Islands to be the most suitable place to domicile the group's holding company together with the enhanced tax efficiency resulting from the incorporation of intermediate holding companies in the Netherlands Antilles and the Netherlands.”

The change will be effected via a merger, involving a share exchange with a new Cayman Islands company. The new Cayman Island incorporated company will subsequently be admitted to trading on AIM.

Last month, the company began the construction of the open pit mine at its Benkala copper project in Kazakhstan, where initial production is targeted for the first half of 2011.

Frontier is developing the Benkala project through its KazCopper subsidiary in a 50:50% joint venture with Colville Intercorp. The JV partners are currently working towards the completion of a merger, which is set to complete in the third quarter of 2010. The merger sees Frontier take full control of Benkala and also adds another key development project to the portfolio, the Maminskoye gold project in Russia.

Also, in June, Frontier announced the results of independent technical reviews and preliminary economic assessments.

The assessments, carried out by Wardell Armstrong International (WAI), envisage a 5 million tonne per annum (Mtpa) copper open-pit mining operation at Benkala. The economic assessment estimates that Benkala has an US$191m NPV, using a 10% discount rate and an internal rate of return (NYSE:IRR) of 116% based on initial CAPEX of US$55m and a US$6,000/mt copper price. 

The WAI preliminary economic assessment is based on 5Mtpa ore mining rate, average grade of 0.36% copper and 63% overall recovery.