Mineral Deposits Limited De-Merger Proposal

Tuesday, Aug 24, 2010

Mineral Deposits Limited (TSX:MDM)(ASX:MDL) is pleased to provide an update in relation to the separation of its two core assets, the Sabodala gold operation ("Sabodala") and the Grande Cote Mineral Sands Project ("Grande Cote"), both located in Senegal, West Africa, into two separate, publicly traded entities.

After consideration of a number of factors, it is now currently proposed to de-merge Sabodala rather than Grande Cote, from MDL.

It is proposed that the de-merger of Sabodala is expected (subject to any necessary regulatory or third party approvals or requirements) to include the following:

--  MDL will incorporate a new Canadian-based company ("NewCo") and transfer

    the Sabodala holding companies into this new company; 

--  MDL will, subject to the approval of its shareholders, distribute 80% of

    the NewCo shares it owns to MDL shareholders with the intention of

    obtaining de-merger tax relief for Australian domiciled shareholders; 

--  NewCo will conduct an Initial Public Offering ("IPO") involving the

    issue of new shares in NewCo and apply to list on a major North American

    stock exchange, with potentially a secondary listing on the Australian

    Securities Exchange ("ASX"). It is not intended that the IPO will be

    offered in Australia; 

--  Some of the funds raised through the IPO will be distributed to MDL; and

--  MDL will own approximately 15% of NewCo post the IPO.

While work is continuing on the particular details of the proposal, planning for the de-merger is well advanced, including discussions with the proposed underwriters of the IPO. MDL shareholders will be advised of further details in coming months.

The management team of NewCo is proposed to be led by Alan Hill, as Chairman and Chief Executive Officer, and Richard Young, as President and Chief Financial Officer.

Alan Hill has had an extensive career in the mining business, most notably as the Executive Vice President, Development of Barrick Gold Corporation, a role in which he managed the development of and brought into production a number of Barrick's projects. He retired from Barrick in September 2003 and was with Gabriel Resources Ltd as its President and CEO from May 2005 until March 2009. He is currently a director of Gold Fields Limited, one of the world's largest gold miners.

Richard Young has extensive financial, mine development and capital markets experience. He was with Barrick Gold Corporation for 13 years where he served as the Vice President of Investor Relations and Manager, Corporate Development. He was then with Gabriel Resources Ltd from May 2005 until March 2010 in the position of Chief Financial Officer.

The current proposed timing of the IPO / listing of NewCo is November this year, subject to equity market conditions. The distribution of NewCo shares to MDL shareholders is also proposed to be made at around the time of the IPO / listing of NewCo. The de-merger will be subject to MDL shareholder approval under the ASX Listing Rules.

There will be no change to the company structures in Senegal following the separation. NewCo's interest in Sabodala will continue to be 90% with the other 10% owned by the Government of the Republic of Senegal, which is a non-contributory interest.

Post the de-merger and IPO / listing of NewCo, MDL will continue to be led by the existing management team and is planned to have as its key assets:

--  cash, both from the transfer of the Sabodala gold assets as well as

    existing cash resources; 

--  an approximate 15% shareholding in NewCo; and 

--  the Grande Cote Mineral Sands Project - with its financing and

    development (at a current estimated cost of US$406 million) being the

    primary focus of management.

The cash, combined with the value of MDL's residual interest in NewCo, will contribute towards the financing of Grande Cote.

MDL Executive Chairman, Nic Limb, said "It has been obvious for some time that from a market perspective, Sabodala and Grande Cote were not compatible in the one listed company. We believe this de-merger should provide an excellent opportunity to realise substantial value for shareholders. Our shareholders should benefit through having direct ownership of both a pure West African gold producer with exciting growth prospects, and the Grande Cote Mineral Sands project, which has the potential to be a Tier One asset. The split of the two assets also provides the opportunity to fund a significant portion of the equity required for the Grande Cote project in a non-dilutive manner".

Alan Hill, the proposed Chairman and CEO of NewCo, commented, "Our vision for NewCo, which comes into existence with a producing mine and large exploration position, is to grow it both organically and through strategic acquisitions into a mid-tier West African gold producer. The Sabodala district is an emerging gold belt and we will have a land position of some 1,400 square kilometres with a number of gold targets to be drilled. Our growth will always be undertaken with a view of creating value for shareholders and benefiting the communities in which we operate."

Source: Market Wire