KHAN ACKNOWLEDGES ARMZ INTENTION

Ulaanbaatar, /MONTSAME/ Khan Resources, a Canadian company, has announced that it acknowledges that Atomredmetzoloto JSC (ARMZ), a Russian state-owned nuclear energy corporation, intends to allow its unsolicited offer to purchase all of the outstanding common shares of Khan for Cn$0.65 per share to expire.
The decision by ARMZ to abandon its bid comes in the face of the commencement on February 26 by CNNC Overseas Uranium Holding Ltd. (CNNC) of its superior offer to acquire all of the outstanding shares for Cn$0.96 in cash per share. ARMZ cites the reason for the abandonment of its unsolicited offer to be the recent announcement by the working group established by the Security and Foreign Policy Standing Committee of the State Great Khural, the Mongolian Parliament, that it recommends that a number of uranium exploration and mining licenses in the Dornod province should be invalidated based on alleged and unspecified violations of Mongolian law. It is unclear if the licenses held by Khan’s Mongolian subsidiaries are implicated in these allegations as Khan has received no notifications from the Government of Mongolia on this matter. Khan believes that it and its Mongolian subsidiaries have always operated and continue to operate in strict compliance with all applicable Mongolian laws, including the Mineral Law and the Law on Nuclear Energy, as well as the more recent Nuclear Energy Law. Khan has also become aware that ARMZ has erroneously alleged in the Russian media that Khan’s licenses have been annulled and further, that it plans to proceed with a joint venture with Mongolia, called the Dornod Uranium joint venture, which was signed in August 2009, and excludes any mention of Khan’s legitimate property rights to the Dornod property.
“Although unsolicited, we were hopeful that ARMZ’s offer for Khan demonstrated their recognition of the validity of transparent Western rules designed to protect shareholders and their investment in foreign public companies”, said Martin Quick, CEO of Khan. “Instead, it is clear that ARMZ plans to continue to advance its interests in the Dornod property through opaque political maneuvering and unsubstantiated allegations without recognizing Khan’s or its shareholders’ rights.”
Khan also notes that a statement has been posted on the website of the Mongolian Nuclear Energy Agency (NEA) to the effect that the CNNC offer requires the approval of the NEA in accordance with Article 7.1 and 7.2 of the Nuclear Energy Law, and suggests that the licenses held by Khan’s subsidiaries in Mongolia may be revoked if such approval is not sought and obtained. Although these statements are not official government actions and have no legal effect, Khan’s indirectly wholly owned subsidiary Khan Resources LLC and its indirect 58% subsidiary, Central Asian Uranium Company, LLC are writing to the NEA to register their objection to the statements. Khan has obtained legal opinions that Articles 7.1 and 7.2 apply only to transfers of shares from the direct holders of Mongolian mining and exploration licenses in Mongolia. They do not apply to an acquisition of shares of Khan Resources.
S.Batbayar
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