OREANDA-NEWS. Cash Offer by Centroferve Limited a wholly owned subsidiary of Severstal for the issued and to be issued ordinary share capital of Celtic Resources Holdings PLC

Cash Offer by CENTROFERVE LIMITED a wholly owned subsidiary of SEVERSTAL
for  the issued and to be issued ordinary share capital of CELTIC RESOURCES HOLDINGS PLC.

Centroferve Limited (“Centroferve”) announces that, following the announcement on 28 September 2007 of its all cash offer of Ј2.70 per ordinary share (the “Offer”) for the entire issued and to be issued ordinary share capital of Celtic Resources Holdings plc (“Celtic”), it has today posted an Offer Document formally making the Offer to the shareholders of Celtic (the “Offer Document”).

The following is the text of the letter (the “Shareholder Letter”) that has been sent to holders of ordinary shares of EUR0.25 each in Celtic (“Celtic Shares”) today together with the Offer Document and the form of acceptance relating to the Offer (the “Form of Acceptance”).

“26 October 2007

Dear Celtic Shareholder,

On behalf of the Severstal Group, one of Russia’s leading steel and mining concerns, I am pleased to provide you with the enclosed Offer Document detailing the cash Offer by Centroferve Limited, a wholly owned subsidiary of Severstal, for all of your ordinary shares in Celtic Resources Holdings plc.

Centroferve is offering to acquire all of your Celtic Shares for 270p in cash for each Celtic Share you hold. This Offer values the issued and to be issued share capital of Celtic at approximately Ј161 million — significantly higher than its Ј115 million value on 17 September 2007, the day before Celtic announced that it had been approached regarding a potential offer.

The Offer Document highlights a number of issues that are relevant in considering the Offer, including the following:
Centroferve’s Offer represents an attractive premium to the market price of Celtic Shares. Our 270p per share Offer price represents a substantial:
33.0% premium to the price on 17 September 2007, the day before Celtic announced it had been approached about a possible offer;
41.4% premium to the one month volume weighted average share price*;
43.6% premium to the three month volume weighted average share price*; and
51.7% premium to the twelve month volume weighted average share price, meaning that Centroferve is offering you more than half as much again as the price your shares have been trading at in the market over this period*.

* for the period to 17 September 2007
The Offer is made to you at this time of cyclically high gold and molybdenum prices.
The Offer is fully financed and you will, if you accept the Offer and it becomes unconditional, be paid the cash consideration to which you are entitled within a maximum of 14 days after the later of: (i) the date of receipt of your Form of Acceptance and (ii) the date the Offer becomes unconditional.
The Offer removes significant risks currently borne by you, allowing you to capture full and certain cash value for your Celtic Shares (if you accept and the Offer becomes unconditional), and transfer to the Severstal Group all of the operational, development and commodity price risks inherent in Celtic’s business.
Celtic has a history of destroying shareholder value and has significantly underperformed its peer group (other public traded gold companies operating in Russia and the CIS) in the gold sector. In the three year period to 17 September 2007, Celtic’s share price decreased by approximately 48%.
Celtic has a history of broken promises. Since its admission to AIM in 2002, Celtic has not met a single production or cash cost target at its Suzdal mine. The record at the Zherek mine is little better.
Celtic’s financial performance is abysmal, with a meagre operating return on invested capital of only 2.6% in 2006. In fact, Celtic’s operating ROIC has been consistently below 6% since its admission to AIM in 2002.
Our Offer is the only offer that has been made to Celtic Shareholders. In the absence of our Offer or a competing offer, we believe that the current Celtic Share price is unsustainable, and that the price of Celtic Shares may fall substantially.

Our Offer has created more value for you in one day than the Board of Celtic has in 3 years—the Offer Price, which represents a premium of 33% above the share price on 17 September 2007, compares to the 48% decline in Celtic’s share price in the three years to 17 September 2007.

The excellent value the Offer represents is demonstrated by the following:
Barrick Gold Corporation, the world’s largest gold company by market value, has signed a letter of intent to accept the Offer in respect of its 6.6% stake in Celtic;
DWS Investments sold its 3.0% stake in Celtic to the Severstal Group on 28 September 2007 at a price of 270p per share—a clear endorsement of the Offer Price;
East Guardian Opportunity Fund sold its 4.6% stake in Celtic to the Severstal Group on 20 September 2007 at a price of 232p per share—well below the Offer Price; and
Aton International sold its 22.0% stake in Celtic to the Severstal Group on 14 August 2007 at a price of 220p per share—well below the Offer Price.

As you see above, the evidence suggests that four of Celtic’s largest current and former shareholders think the Offer is great value. Notwithstanding, your board sought to deny you the opportunity to participate in the Offer. We believe that they value their own roles above shareholders’ best interests and prioritise value to themselves over value to you.

Centroferve has received an irrevocable undertaking to accept the Offer from Bluecone, a member of the Severstal Group, in respect of Celtic Shares representing approximately 29.7% of the issued share capital of Celtic, and the letter of intent referred to above from Barrick Gold Corporation. Accordingly, Centroferve has received commitments to accept or procure acceptance of the Offer in respect of 20,271,193 Celtic Shares, representing approximately 36.3% of the issued share capital of Celtic.

I encourage you to read the Offer Document carefully for details of the Offer, its terms and benefits. To accept the Offer, you should complete the enclosed Form of Acceptance by following the instructions set out in the Form of Acceptance and in paragraph 4 of Part II of the Offer Document. The Form of Acceptance must be completed and returned by post to Capita Registrars, PO Box 7117, Dublin 2, Ireland or (during normal business hours only) by hand to Capita Corporate Registrars Plc, Unit 5, Manor Street Business Park, Manor Street, Dublin 7, Ireland as soon as possible, and in any event so as to be received no later than 3pm (Dublin time) on 16 November 2007. Celtic Shareholders who are returning a Form of Acceptance and accompanying documents to the Receiving Agent and are concerned that the documents may not reach Capita Registrars by 3pm on 16 November 2007, may send the Form of Acceptance and accompanying documents by courier to Capita Registrars at Unit 5, Manor Street Business Park, Manor Street, Dublin 7, Ireland.

If you are in any doubt as to the procedures for acceptance of the Offer or require assistance with completion of the Form of Acceptance, please telephone the Centroferve helpline on freephone 1-800-556-693 or, if you are calling from outside Ireland, on + 44(0) 207-199-7811 (freephone 0800-987-8750 within the UK).

I strongly endorse this Offer to you, and encourage you to ACCEPT THE OFFER.

Yours Sincerely,
Roman Deniskin
Chief Executive, Severstal Resurs
On behalf of Centroferve Limited

The directors of Centroferve and the directors of Severstal accept responsibility for the information contained in this letter save that the only responsibility accepted by the directors of Centroferve and by the directors of Severstal for information relating to the Celtic Group, which has been compiled from published sources, has been to ensure that such information has been correctly and fairly reproduced or presented (and no steps have been taken by the directors of Centroferve or the directors of Severstal to verify this information). To the best of the knowledge and belief of the directors of Centroferve and the directors of Severstal (who have taken all reasonable care to ensure that such is the case), the information contained in this letter for which they accept responsibility is in accordance with the facts and does not omit anything likely to affect the import of such information.

Any person who is a holder of 1% or more of the Celtic Shares may have disclosure obligations under Rule 8.3 of the Irish Takeover Rules, effective from the date of the commencement of the Offer Period.

This letter should be read in conjunction with the full text of the accompanying Offer Document and Form of Acceptance. Appendix IV of the Offer Document contains sources and bases for certain information contained in this letter and the Offer Document. Appendix V of the Offer Document contains definitions of certain terms used in this letter and the Offer Document.”