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Omagine, Inc. (the “Company”) is publically traded on the OTC-BB (Stock Symbol: OMAG). The Company has proposed to the Government of the Sultanate of Oman (the “Government”) the development in Oman of a USD $1.5 billion real-estate and tourism project (the “Omagine Project”). In May 2008, the Omagine Project was approved by the Government for development on a one million square meter site provided by the Government. The Company’s management has raised $110 million of capital for the project from investors in Oman, including the office of Royal Court Affairs which represents the personal interests of His Majesty Sultan Qaboos bin Said, the ruler of Oman. The Company’s financial advisor is Bank Muscat (the “Bank”), the largest financial institution in Oman. Management’s internal financial model for the Omagine Project predicts approximately USD $600 million of free cash flow over the five year period subsequent to signing the “Development Agreement” with the Government of which 50.5% will flow to the Company. In July 2008 a draft Development Agreement, incorporating all of the commercial and other terms as agreed with and approved by the Government and accepted by the Company, was delivered to the Government. As required the draft Development Agreement is presently being reviewed by The Ministry of Tourism; The Ministry of Legal Affairs; and The Ministry of Finance. The Company anticipates that the Development Agreement will be signed in August or September 2008.
The Project Company
The Company is a real-estate development, entertainment and hospitality company focusing on development opportunities in the Middle East and North Africa (MENA) resulting from the aggressive growth strategies adopted by governments in the hyper-wealthy MENA region. These governments are seeking to diversify their economies through mega-projects that create tourist destination hot spots. Recent increases in the price of crude oil have only added to the already impressive amount of liquidity in the MENA region and have exerted enormous upwards pressure on the selling prices of real estate in the region.
The Omagine Project will be developed by Omagine SAOC (the “Project Company”), an Omani company presently under formation by the Company. The “Founder Shareholders” of the Project Company are the Company and Consolidated Contractors International Company, SA (“CCC”), a USD $5 billion company with worldwide operations and approximately 150,000 employees (see: www.ccc.gr). As presently contemplated the Company will own 50.5% of the Project Company and CCC will own 12%. The remaining 37.5% of the Project Company will be owned by highly prominent Omani investors, including His Majesty the Sultan. The Project Company will be capitalized at approximately USD $110 million and will have the financial capacity to begin development of the Omagine Project almost immediately after the signing of the Development Agreement with the Government. Bank Muscat has agreed to arrange the necessary construction and other financing for the Project Company.
The $ 1.5 + Billion Omagine Project
The Company's planned Omagine Project is an integration of cultural, heritage, educational, entertainment and residential components. The development site (the “Omagine Site”) is an amazingly pristine coastal stretch of beachfront approx. 20 kilometers northwest of Muscat and only 4 kilometers from Oman’s International Airport. The one million (1,000,000) square meter Omagine Site (equal to approx. 245 acres) has one kilometer of beach frontage – but will be developed to have over seven km. of water frontage – of which 1.8 km. will be beach-front. The Omagine Project also includes several hundred thousand square meters of residential housing units that will be developed and sold by the Project Company. Significant commercial, retail and hospitality elements are also included. The Omagine Project is expected to take between 4 to 5 years to complete.
Management is aware that due to market conditions the value of the Omagine Site has increased sharply over the past 2 years and, provided such values are sustained, this increased value will have a materially positive effect on the Project Company’s future cash flows as well as its financing activities. The Omagine Project’s construction and capital cost is presently estimated at approximately U.S. $1.6 billion.
The Project Company’s financial model which has been reviewed by Bank Muscat presently predicts an internal rate of return ("IRR") for the Omagine Project in excess of 20% and net positive cash flow in excess of approximately USD $600 million (the "Projected Cash Flow") over the five year period immediately subsequent to the signing of the Development Agreement.
Pursuant to the terms agreed in writing with the Government, the Omani investors and CCC, the Project Company will be owned fifty and one-half percent (50.5%) percent by the Company (the “Company Equity”) and the Company Equity will remain the majority equity stake in the Project Company and the Government will not own any equity of the Project Company.
In order to move into the actual development stage of the Omagine Project, the Founder Shareholders must now organize the Project Company and the Government and the Project Company must then sign the Development Agreement. As recently reported, the Company believes that no outstanding issues exist prior to the signing of the Development Agreement and all parties, including the Omani investors, are desirous of signing the Development Agreement as soon as possible. The Company anticipates that the Development Agreement will be signed in August or September of 2008.
Subsequent to the signing of the Development Agreement, the Omagine Site's value will be definitively determined by a qualified independent real-estate appraiser and such appraisal will be used by Bank Muscat to optimize the Project Company's financing alternatives with Bank Muscat and other financial institutions.
Please be advised that the foregoing assumptions and this discussion are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 which involve uncertainties and other factors which could cause the outcomes described herein to differ from future Company achievements as expressed or implied by such forward-looking statements.
OMANI GOVERNMENT APPROVAL
In May 2008 the Company announced that it received an official letter from the Government of Oman formally approving the terms by which the Omagine Project will be developed (the “Approval Letter”). As required by the Approval Letter, the Company formally notified the Government in writing on May 31, 2008 of its approval and acceptance of the Approval Letter and furnished the Government with various confirmations relating to the Omani and other shareholders of the Project Company and elements of the Omagine Project.
Approval of such commercial terms by the Government and acceptance thereof by the Company was a required step before the Founder Shareholders representing the Project Company signs a Development Agreement with the Government. The Company has concluded negotiations with respect to the Omagine Project and believes that no outstanding issues exist and all parties, including the Omani Shareholders, are desirous of signing the Development Agreement as soon as possible. Given summer vacation schedules in Oman the Company is hopeful that the Development Agreement will be signed in August or September of 2008 but the date of such signing is entirely in the hands of the Government.
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