Victory West Moly secures China funding for Malala Moly Project

Victory West Moly (ASX: VWM, FSE: R1E) has signed a binding Memorandum of Understanding (MOU) with China Guangshou Group Corp (CGGC) that, subject to due diligence, is to acquire a 65% interest in the Malala Molybdenum Project.

CGGC is to provide sole funding for 100% of all expenditure required to take the Project into commercial and sustainable large scale production.

Victory West (through its related entities) is to retain a free carried interest of 27.5% in the Project (non contributing to production funding).

CGGC are experienced Molybdenum miners with Molybdenum operations in China and North Korea.

The Malala Molybdenum Project is comprised of 5 strategic exploration concession that are highly prospective for Molybdenum located in the Toli-Toli Regency at the northern tip of the island of Sulawesi in Indonesia covering a total area of 23,747Ha.

Robert Hyndes, VWM's CEO, said over the last 6 months, we have been in active discussions with potential partners that have the financial strength, mining experience, and international standing to enable VWM to extract full value from the Malala Molybdenum Project."

"VWM is delighted to have attracted such a strong partner as CGGC who are not only experienced Molybdenum miners but have the global reach and financial capability to exploit the Project to its full potential and develop the resource into a world-class project."

An aggressive timetable to production is to be undertaken with key milestones including an initial exploration program of a minimum of 10,000 metres to be undertaken, and reviewed by a geological consulting group of international standard.

The company plans the definition of a 43-101 JORC resource that is capable of commercial production. Production is scheduled to start within 24 months from high grade mineralization identified during exploration.

Production is to scale up to a minimum sustainable production target of 400,000 tonnes per month by 2016.

Victory West Moly has also successfully completed a A$1.2m placement to sophisticated investors and entered into a binding term sheet to acquire the remaining 25% in Victory West Pty Ltd.

Under the proposed agreement, Victory West and the company's local BUMD (Regency owned enterprise) partner are to be "free carried" to large scale production.

As a result, Victory West and the BUMD will hold a direct or indirect interest of 27.5% and 5% respectively in the Malala Molybdenum Project. A further 2.5% interest will be acquired by local Chinese interests.

VWM and CGGC agree to work together to determine the most efficient structure to hold their respective project interests (direct or indirect).

The Parties have agreed to a 25 day completion period under the MOU, during which time the Parties will finalise legal and tax due diligence and enter into a Memorandum of Agreement (MOA) that will set out the detailed terms of the proposed transaction.

Upon execution of the MOA, CGGC is to make a payment of US$500,000, and an additional payment of US$500,000 is payable within 70 days from the signing of the initial MOU.

In summary the key MOU milestones are:

- An initial exploration program of 10,000 metres (minimum) to be undertaken and reviewed by a geological consulting group of international standard.
- Definition of a suitable 43-101 JORC resource that is capable of commercial production.
- Delivery of early production opportunities from high grade mineralization identified during exploration within 24 months.
- Development and construction of the Project for commercial production including mine development, processing plant and associated infrastructure.
- Minimum sustainable production target of 400,000 tonnes per month by 2016.

In the event that CGGC does not meet the agreed milestones within the agreed timeframes, the CGGC interest will be transferred back to the company.

The initial focus will be on identifying, defining and exploiting early production opportunities from high grade mineralization identified through early targeted exploration (small scale production).

The parties agree that any profits generated from small scale production activities are to be reinvested to develop larger scale production mining projects with a minimum sustainable production target of 5 million tonnes per annum processing.

The project transaction is subject to specified conditions including Australian and Chinese regulatory approvals, due diligence and VWM shareholder approval.

VWM has also entered into a binding term sheet to acquire the remaining 25% interest in Victory West Pty Ltd (VW P/L). This acquisition will take VWM s interest in the Malala Molybdenum project from 71.25% to 95% (prior to the proposed CGGC transaction).

The benefits of the acquisition of the remaining 25% of VW P/L are clear as it allows VWM to maximise its MOU / MOA with CGGC.

The purchase consideration to be paid by VWM for the remaining 25% interest in VW P/L consists of the following:

- 25 million ordinary fully paid shares in VWM on completion of the transaction;
- 10 million performance shares convertible to fully paid ordinary shares (on a 1 for 1 basis) upon completion of a 10,000 metre drilling exploration program on the Project; and
- $250,000 to be converted, at the election of VWM, to shares at VWM s next capital raising.

The transaction is subject to a number of key conditions, including VWM shareholder approval, execution of a final share sale agreement and all necessary regulatory approvals, including any approvals required under the ASX Listing Rules.