AZR Aztec Res.

RNS Number:3601L
Aztec Resources Limited
01 November 2006

Aztec Resources Limited ("Aztec" or "the Company")

1 November 2006

Letter to shareholders

Aztec advises that a letter will be mailed to shareholders, the content
of which is set out below.

For further information please contact:
Aztec Shareholder Information Line
Australian Callers: 1800 602 244
International Callers: +61 8 6218 4220

1 November 2006

The resistance of Aztec shareholders to Mount Gibson's inadequate offer is
clearly proving frustrating to Mount Gibson's management. Since Mount Gibson
announced its offer for Aztec (over three months ago) and despite recently
declaring it unconditional, Mount Gibson has only received acceptances for 2.8%
(1) of Aztec shares (excluding acquisition and acceptances from Aztec's previous
major shareholder, Cambrian Mining Plc).

Your Directors thank you for your continued loyalty and support.

Aztec's Directors continue to recommend that shareholders REJECT the inadequate
offer from Mount Gibson.

Shanghai Merchants Holdings Limited

Aztec shareholders need to be aware of the important developments that occurred
yesterday which could have significant ramifications for Mount Gibson's takeover
offer.

Shanghai Merchants Holdings Limited ("Shanghai Merchants") has announced today
that it has become a substantial shareholder holding 6.57% of Aztec. In an
initial conversation with representatives of this company, Shanghai Merchants
have indicated strong support for your company, its board and management as well
as its ongoing strategy to develop the Koolan Island iron ore project and become
a significant participant in the Western Australian iron ore sector.

Aztec also notes the announcement on Tuesday 31 October that Mount Gibson's
major shareholder, COL Capital, has sold its entire shareholding of 48,373,197
shares representing 10.63% of Mount Gibson. These shares have been acquired by
Shanghai Merchants.

Aztec Directors are surprised by the COL Capital divestment.

On the basis of recent statements by Mount Gibson, Aztec Directors and
shareholders were led to believe that COL Capital strongly supported the Mount
Gibson offer for Aztec.

   * In the Bidder's Statement, Mount Gibson stated that "the offer has been
     strongly endorsed by the largest shareholders in both Aztec and Mount
     Gibson" and that "COL Capital, the largest shareholder in Mount Gibson has
     also welcomed the offer and indicated that it supports the offer to merge
     with Aztec".
   * This endorsement was reiterated in Mount Gibson's media statement dated
     2 August 2006.

This sudden exit by COL Capital therefore raises significant uncertainty in
respect of both Mount Gibson and its bid for Aztec.

Mount Gibson Letter to Aztec Shareholders

The letter to Aztec shareholders dated 31 October 2006 is a clear example of
Mount Gibson's frustration as well as Mount Gibson's persistent attempts to
distort the facts. Aztec's Directors refute absolutely the allegation that they
have misled Aztec shareholders in any way.

Mount Gibson's letter is an attempt to undermine recent disclosures by Aztec for
the benefit of Mount Gibson. At the risk of repeating itself, Aztec notes the
following:

   * In respect of the repurchase right previously held by Australian
    Royalties Corporation Pty Limited ("ARC"), Aztec refutes Mount Gibson's
    allegations and notes that it had disclosed this information and its
    position in this regard in the Target's Statement, Prospectus and other ASX
    releases.
   * Aztec Directors stand by their statement that the agreement with ARC was
    an excellent outcome for Aztec shareholders. The purchase price was based on
    the current mining inventory for the Koolan Island project (ie 29.1 million
    tonnes) with no allowance for any exploration upside.
   * Aztec has fully disclosed the situation in respect of the caveats. The
    Aztec Directors are totally satisfied as to how Aztec management dealt with
    the caveats and secured the finance facilities. Aztec shareholders should be
    aware that:

* Mount Gibson's bid was unaffected by the caveats as they were
not in existence at the time Mount Gibson launched its offer for Aztec; and

* Following resolution of the situation with ARC and finalisation
of the finance facilities, Mount Gibson elected to declare its bid
unconditional, indicating that the actions by Aztec had, at the very least,
maintained the value of the company.

   * There have been no construction delays at Koolan Island since
    commencement of work. Mount Gibson has no basis for making any comment to
    the contrary. Their need to speculate on this further demonstrates their
    frustration and desperation. Aztec continues to maintain its position that
    first mining and stockpiling of iron ore will commence by the end of 2006
    and first shipments of iron ore will commence in early 2007.
   * The issue of shares to ARC was based on the Volume Weighted Average
    Price of Aztec shares for the month prior to the transaction. Valuing shares
    at the market price is normal industry practice when shares are used as
    consideration for acquisitions. This issue price cannot be compared to the
    price that Mount Gibson is required to pay for control of Aztec which must
    reflect not only fair value but also include a premium for control.

Aztec's Directors recently engaged with Mount Gibson management with a view to
reaching a commercial outcome in relation to the Offer from Mount Gibson.
However Mount Gibson has elected not to resume discussions but rather to
continue along its current course of action. While Aztec Directors are
disappointed with this approach, they will continue to work in the best
interests of Aztec shareholders and concentrate on successfully completing the
development and operation of the Koolan Island Project.

On this basis, Aztec's Directors continue to recommend that shareholders REJECT
the inadequate offer from Mount Gibson.

Yours sincerely


Ian Burston AM
Chairman

(1) As at 1 November 2006, after adjusting for the issue of 77.78 million shares
to Australian Royalties Corporation Pty Ltd, which was announced to
the Australian Stock Exchange on 24 October 2006

For further information please contact:
Aztec Shareholder Information Line
Australian Callers 1800 602 244
International Callers: +61 8 6218 4220

UK
Fiona Owen, Grant Thornton
+44 (0) 870 991 2318

Media Enquiries
Purple Communications
Warrick Hazeldine
Tel: +61 8 9485 1254
Mob: +61 (0) 417 944 616
E:whazeldine@purplecom.com.au
--------------------------





                      This information is provided by RNS
            The company news service from the London Stock Exchange

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