TIDMAVM
RNS Number : 4740S
Avocet Mining PLC
19 May 2009
AVOCET MINING PLC
LAUNCH OF RECOMMENDED SHARE FOR SHARE OFFER FOR WEGA MINING ASA
Further to the announcement on 14 April 2009 of its proposed recommended share
for share offer for the entire issued share capital of Wega Mining ASA (Oslo
Axess: WEMI), Avocet Mining PLC (AIM: AVM) announces that the Offer is formally
launched today through the distribution of the Offer Document to Wega
Mining Shareholders.
Wega Mining is an Oslo based international mining company focused on exploring,
developing and operating gold deposits. Wega Mining's main asset is the Inata
Project in northern Burkina Faso, West Africa, which is currently under
construction, with first gold production expected in Q3 2009, and full steady
state production in FY2011. The Inata Project is expected to produce greater
than 120,000 ounces of gold per annum over an initial 7 year mine life. Wega
Mining's other assets include 27 exploration Licences in Burkina Faso, Guinea
and Mali, including the Koulekoun gold exploration project in Guinea which has a
NI 43-101 compliant gold Mineral Resource of 666,500 ounces, a 58.1% interest in
TSX Venture Exchange listed Merit Mining and a 35.6% interest in base metals
company, Metallica Mining AS.
Avocet Mining has offered all Wega Mining Shareholders (other than Avocet Mining
and those in certain jurisdictions to whom the Offer cannot lawfully be made)
0.23 Ordinary Shares for each Wega Mining Share. This represents a value of NOK
1.71 per Wega Mining Share based on the closing price of Avocet Mining's shares
on AIM on 15 May 2009 of GBP 0.75, and with a NOK/GBP exchange rate of 9.901,
and values the aggregate of the issued Wega Mining Shares at approximately USD
86.5 million excluding the shares currently held by Avocet Mining. This
corresponds to a 16.2% premium to the Wega Mining closing price on the Oslo
Axess on 15 May 2009, the last practicable date prior to the date of the Offer
Document.
Under the rules of the Oslo Stock Exchange the Offer must be kept open for a
minimum of 14 days from the date of posting. Following the posting of the Offer
Document today, the Offer Period will close on 2 June 2009 unless extended by
Avocet Mining. Settlement of the consideration will be made available to Wega
Mining Shareholders in accordance with the terms of the Offer Document.
Avocet Mining has received irrevocable undertakings from certain Wega
Mining Shareholders representing 237,504,206 Wega Mining Shares to accept the
Offer, which are not capable of revocation if a competing bid for Wega Mining
emerges. These irrevocable undertakings, when taken together with the Wega
Mining Shares now held by Avocet Mining following the equity subscription
announced on 14 April 2009, represent in aggregate approximately 76.6% of Wega
Mining's issued share capital.
The Offer is subject to the following closing conditions, each and all of which
are capable of waiver at the sole discretion of Avocet Mining:
* A minimum acceptance condition of that number of Wega Mining Shares which,
together with any Wega Mining Shares directly or indirectly owned by Avocet
Mining at closing, represents more than 90% of Wega Mining's then issued share
capital;
* That the unanimous recommendation to Wega Mining Shareholders to accept the
Offer made by Wega Mining's Board has not been withdrawn or modified;
* That there has been no material adverse change including, inter alia, in
respect of the terms of or withdrawal of, Wega Mining's loan facility agreement
with Macquarie Bank dated July 2008 regarding the Inata Project; and
* That the business of Wega Mining has in all material respects been conducted
in the ordinary course of business.
INATA PROJECT MANAGEMENT UPDATE
Avocet Mining and Wega Mining anticipate that the Offer will be successful. For
the purposes of forward planning, therefore, Avocet Mining and Wega Mining have
agreed on certain arrangements for the interim management of the Inata Project,
both to accelerate its construction and to achieve a successful and timely
commissioning and ramp up to full gold production.
These arrangements include the involvement of Avocet Mining representatives to
supplement the existing Wega Mining team during the Offer Period. In particular,
a specialist construction manager who has extensive experience of delivering
projects in West Africa and in other regions, including the original
construction of the Penjom plant and its expansion in 2008, which was completed
on schedule and within budget, is now on site at the Inata Project. Further
integration planning is also in progress with the objective of a smooth
transition of ownership of Wega Mining assets without adverse impact on Avocet
Mining's existing operations. The integration planning will continue during the
Offer Period, including site visits to Burkina Faso by senior management from
both companies in May and early June.
Commenting on the launch of the Offer for Wega Mining, Jonathan Henry, CEO of
Avocet Mining, stated:
"We are delighted to launch the Offer process and, in anticipation of the
Offer's success, are excited to be working with the Wega Mining team at the
Inata Project. The Offer not only delivers certainty for the future of Wega
Mining to its shareholders but gives them a premium to recent prices. Avocet
Mining now owns nearly 16% of Wega Mining directly and a further 61% of current
Wega Mining Shareholders have irrevocably committed to accept the Offer and to
participate in the future of a company which will have significant profitable
production and resources, as well as balance sheet strength. We look forward to
achieving the 90% acceptance level and to Wega Mining Shareholders joining us in
our strategic goal of creating a new "mid-tier", profitable gold company with
significant upside for future growth."
This summary announcement should be read in conjunction with, and is qualified
in its entirety by, the further details of the Offer as set out in the full
announcement below.
For the definitions of capitalised terms used throughout this announcement, see
Appendix I to the full announcement below headed "Definitions"
+------------------+---------------------+------------------+--------------------------+---------------+
| For further information please | | | |
| contact: | | | |
+----------------------------------------+------------------+--------------------------+---------------+
| Avocet Mining | Buchanan | Ambrian Partners | J.P. Morgan | First |
| PLC | Communications | Limited | Cazenove Limited | Securities |
+------------------+---------------------+------------------+--------------------------+---------------+
| | Financial PR | Financial | Lead Broker and | Norwegian |
| | Consultants | Adviser, NOMAD | Joint Financial | Financial |
| | | and Joint | Adviser | Adviser |
| | | Broker | | |
+------------------+---------------------+------------------+--------------------------+---------------+
| Jonathan Henry, | Bobby Morse | Richard Brown | Michael | Geir Lie |
| CEO | Ben Willey | Richard | Wentworth-Stanley | Stein Hansen |
| Mike Norris, | Katharine Sutton | Greenfield | Sam Critchlow | Eirik |
| Finance Director | | Andrew Craig | | Lilledahl |
+------------------+---------------------+------------------+--------------------------+---------------+
| +44 (0) 20 7907 | +44 (0) 20 7466 | +44 (0) 20 7634 | +44 (0) 20 7588 | +47 2323 8000 |
| 9000 | 5000 | 4700 | 2828 | |
+------------------+---------------------+------------------+--------------------------+---------------+
| www.avocet.co.uk | www.buchanan.uk.com | www.ambrian.com | www.jpmorgancazenove.com | www.first.no |
+------------------+---------------------+------------------+--------------------------+---------------+
FULL ANNOUNCEMENT
In this full announcement, "Avocet Mining" and "the Company" refer to Avocet
Mining PLC and its subsidiaries, and "Wega Mining" refers to Wega Mining and its
subsidiaries unless the context otherwise requires. For the definitions of
capitalised terms used throughout this full announcement, see Appendix I headed
"Definitions"
LAUNCH OF RECOMMENDED SHARE FOR SHARE OFFER FOR WEGA MINING ASA
Further to the announcement on 14 April 2009 of its proposed recommended share
for share offer for the entire issued share capital of Wega Mining (Oslo Axess:
WEMI), Avocet Mining (AIM: AVM) announces that the Offer is formally launched
today through the distribution of the Offer Document to Wega Mining
Shareholders.
Wega Mining is an Oslo based international mining company focused on exploring,
developing and operating gold deposits. Wega Mining's main asset is the Inata
Project in northern Burkina Faso, West Africa, which is currently under
construction, with first gold production expected in Q3 2009, and full steady
state production in FY2011. The Inata Project is expected to produce greater
than 120,000 ounces of gold per annum over an initial 7 year mine life. Wega
Mining's other assets include 27 exploration Licences in Burkina Faso, Guinea
and Mali, including the Koulekoun gold exploration project in Guinea which has a
NI 43-101 compliant gold Resource of 666,500 ounces, a 58.1% interest in TSX
Venture Exchange listed Merit Mining and a 35.6% interest in base metals
company, Metallica Mining AS.
THE OFFER
Avocet Mining has offered all Wega Mining Shareholders (other than Avocet Mining
and those in certain jurisdictions to whom the Offer cannot lawfully be made)
0.23 Ordinary Shares for each Wega Mining Share which they hold. This represents
a value of NOK 1.71 per Wega Mining Share based on the closing price of Avocet
Mining's shares on AIM on 15 May 2009 of GBP 0.75, and with a NOK/GBP exchange
rate of 9.901 and values the aggregate of the issued Wega Mining Shares at
approximately USD 86.5 million excluding the shares currently held by Avocet
Mining. This corresponds to a 16.2% premium to the Wega Mining closing price on
Oslo Axess on 15 May 2009, the latest practicable date prior to the date of the
Offer Document.
As at the date of this announcement, Avocet Mining holds 61,409,091 shares in
Wega Mining and holds the right to convert the Convertible Loan for up to a
further 307,045,455 shares in Wega Mining, based on the exchange rate as of 8 of
April 2009, being the last practicable date before entering into the Convertible
Loan Agreement.
Assuming 100% acceptance of the Offer, Wega Mining Shareholders, excluding
Avocet Mining, will own approximately 38.4% of the Ordinary Shares in issue post
transaction (excluding treasury shares).
The Offer is not being made in any jurisdiction where the making of the Offer or
Acceptance would be a violation of the laws of such jurisdiction, as described
in the section entitled "Offer Restrictions" below.
Background to the Offer
Through the acquisition of Wega Mining, Avocet Mining will become a "mid-tier"
gold producer with an annual production expected to approach 300,000 ounces in
2011. The Offer therefore delivers key elements of Avocet Mining's acquisition
growth strategy as adopted by the Company's management in 2007. In particular,
it allows Avocet Mining to increase its gold production at a time when the gold
price remains strong, and in the Inata Project, it provides a medium life asset
with significant exploration upside in a highly prospective region.
Avocet Mining's operations are currently exclusively focused in South East Asia,
where it operates the Penjom gold mine in Malaysia and the North Lanut gold mine
in Indonesia, both of which were constructed and commissioned by Avocet Mining.
Subsequent to USD 30 million funding already provided to Wega Mining, Avocet
Mining has current cash resources of approximately USD 40 million and no debt.
Avocet Mining has a track record of building and developing new mines, and will
be able to apply strong technical skills and add value to the Inata Project. In
addition, the acquisition of 27 Licences in Burkina Faso, Mali and Guinea will
enhance Avocet Mining's existing portfolio of exploration projects in Indonesia,
Malaysia and the Philippines. Avocet Mining's strong balance sheet and
experienced exploration team will allow for a restart of exploration activities
in West Africa to create further potential upside value for its shareholders.
The acquisition of Wega Mining will create a company with three gold mines
including the Inata Project expected to be in operation from Q3 2009. The
management of both Wega Mining and Avocet Mining believe that steady state
production of greater than 120,000 ounces per annum from the Inata Project is
achievable following its commissioning, contributing to total production
forecast to be approximately 280,000 ounces in the year to 31 March 2011. Avocet
Mining is targeting production for the Enlarged Group in excess of 300,000
ounces in the year to 31 March 2013. The acquisition will immediately increase
Avocet Mining's attributable reserves by approximately 146% to 1.4 million
ounces and attributable resources, including reserves, by approximately 91% to
4.5 million ounces.
Conditions to the Offer
The acquisition of Wega Mining's outstanding shares in accordance with the Offer
is conditional upon the following (if not waived in whole or in part by Avocet
Mining to the extent permitted by law):
(a) Minimum Acceptance - That the number of Wega Mining Shares which, together
with any Wega Mining Shares directly or indirectly held by Avocet Mining,
represents more than 90% of the total outstanding share capital and voting
rights of Wega Mining, shall have been validly tendered prior to the expiration
of the Offer Period (including any extensions of the Offer Period).
(b) Recommendation - That the unanimous recommendation of the Offer made by Wega
Mining's Board of Directors has not been withdrawn or modified by Wega Mining
during the Offer Period.
(c) No Material Adverse Change - That there has not taken place any material
adverse change event on or before all of the closing conditions have been
satisfied or waived by Avocet Mining. A "material adverse change event" for this
purpose is: (i) expropriation by the government of Burkina Faso of Wega Mining's
shares in SMB, (ii) annulment of the Mining Convention to which SMB is a party,
or (iii) material adverse change or withdrawal of the Inata Project Facility.
(d) Conduct of Business - That the business of Wega Mining and its subsidiaries,
taken as a whole, in the period from the announcement of the Offer and until the
settlement of the Offer, has in all material respects been conducted in the
ordinary course of business being exploration and mining and in all material
respects in accordance with applicable laws, regulations and decisions of any
governmental body which are significant for the operations of Wega Mining, and
that there have not been made any changes in the share capital of Wega Mining or
its subsidiaries (except as contemplated by the Transaction Agreement, the
Convertible Loan Agreement or in connection with any exercises of issued and
outstanding options in Wega Mining in accordance with their terms), issuance of
rights which entitles holders to demand new Wega Mining Shares or similar
securities, payment of or decision to pay dividends or other distributions,
proposals to shareholders for merger or de-merger, or any other change of
corporate structure.
Each and all of the above conditions can be waived at the sole discretion of
Avocet Mining. If not previously met or waived, Avocet Mining will decide
whether to waive any of the conditions no later than 31 July 2009.
Offer Period
The Offer Period commences on 19 May 2009 and expires at 17:30 (Norwegian time)
on 2 June 2009. Avocet Mining reserves the right to extend the Offer Period by
up to two weeks, or in compliance with applicable law and regulations, to extend
the Offer Period by more than two weeks, one or more times.
WEGA MINING
Inata Project management update
Avocet Mining and Wega Mining anticipate that the Offer will be successful. For
the purposes of forward planning, therefore, Avocet Mining and Wega Mining have
agreed on certain arrangements for the interim management of the Inata Project,
both to accelerate its construction and to achieve a successful and timely
commissioning and ramp up to full gold production.
These arrangements include the involvement of Avocet Mining representatives to
supplement the existing Wega Mining team during the Offer Period. In particular,
a specialist construction manager who has extensive experience of delivering
projects in West Africa and in other regions, including the original
construction of the Penjom plant and its expansion in 2008, completed on
schedule and within budget, is now on site at the Inata Project. Further
integration planning is also in progress with the objective of a smooth
transition of ownership of Wega Mining's assets without adverse impact on Avocet
Mining's existing operations. The integration planning will continue during the
Offer Period, including site visits to Burkina Faso by senior management from
both companies in May and early June 2009.
Plans for further operations of Wega Mining
The Company has a clear strategy of growth underpinned by operational experience
and capability at its existing mines and future projects in order to maximise
their combined value for shareholders. The Company's goal is to develop from its
current production level of approximately 110,000 ounces in the year ended 31
March 2009 to a "mid-tier" producer of 500,000 ounces per annum or greater over
the next five years, through both internal growth and growth by acquisition. The
acquisition of Wega Mining fulfils part of this growth strategy with the
addition of the Inata Project which is due to produce in excess of 120,000
ounces per annum over an expected seven year life of mine. It is the Company's
current intention to bring the Inata Project into production as expeditiously
and efficiently as possible, with first gold pour expected in Q3 2009. Once the
Inata Project commences production, local and regional exploration activities
will focus on developing further gold resources and reserves that may be treated
at the Inata Project plant. In addition, the Company is reviewing Wega Mining's
other exploration properties in Guinea, Mali and Burkina Faso with a view to
recommencing exploration activities once the Offer completes.
Further funding requirements
During January and February 2009, the Board of Directors and management of Wega
Mining, together with Macquarie Bank, commissioned a third party review of the
construction schedule of the Inata Project. The principal focus of the review
was to identify any aspects material to the time and cost-to-complete
construction of the Inata Project ahead of the commencement of production. The
review report concluded that a potential delay for the commencement of
production was up to three months from June 2009 to September 2009. The review
report was in conflict with previous reports from the EPCM contractor and its
subcontractors. According to the review report, capital expenditure would
increase and additional pre-production expenses would be incurred prior to
positive cash flow.
On 23 February 2009 Wega Mining received a notification from Macquarie Bank that
various events of default had occurred as defined in the Inata Project Facility.
The notification was based on the findings and conclusions in the third party
review report described above.
Wega Mining announced on 2 March 2009 that it had identified a delay to
completion of the Inata Project, and estimated that an additional USD 20 - 25
million would be required to complete and commission the Inata Project, and
finance working capital in the period to first gold production. This was based
on the third party review.
In an effort to ensure compliance with the Inata Project Facility, on 18 March
2009 Wega Mining entered into an additional forward gold sales agreement with
Macquarie Bank in which 70,000 ounces was agreed to be sold forward at a price
of USD 935 per ounce. Including this additional agreement, a total of 350,000
ounces of gold has now been sold forward at an average price of USD 958 per
ounce. The forward sales contracts have a flexible structure with certain
minimum deliverables each quarter which can be increased pending the actual
production level in the period.
Recommended share for share offer for Wega Mining
On 14 April 2009, Avocet Mining and Wega Mining jointly announced that Avocet
Mining intended to launch a voluntary offer for Wega Mining and to provide USD
30 million of funding, USD 5 million of which would be immediately available via
the Private Placement and USD 25 million via the Convertible Loan, approved by
Wega Mining Shareholders at the general meeting on 29 April 2009. At that time,
Wega Mining estimated that there was a funding gap for the completion of the
Inata Project of approximately USD 40 million assuming a drawdown of the
remaining USD 9 million available under the Inata Project Facility. Wega Mining
is currently in default of the terms of the Inata Project Facility and as a
result, the remaining USD 9 million of the Inata Project Facility cannot
currently be drawn by Wega Mining. Agreement has been reached with Macquarie
Bank, subject to certain undertakings being fulfilled which include Avocet's
acquisition of Wega Mining being completed, as to how the Inata Project Facility
may be brought back into compliance, at which point the remaining USD 9 million
would be available for draw down under certain conditions.
In order to provide Wega Mining with immediate access to necessary funding for
the further development of the Inata Project, Wega Mining resolved on 14 April
2009 to issue to Avocet Mining, and Avocet Mining subscribed for, 61,409,091
ordinary shares at a price of NOK 0.55 per ordinary share representing gross
proceeds of approximately USD 5 million.
Following the approval of Wega Mining Shareholders in an extraordinary general
meeting on 29 April 2009 and satisfaction of other conditions precedent, as
announced on 6 May 2009, Avocet Mining provided additional funding of USD 25
million for the Inata Project under the Convertible Loan Agreement.
The principal amount under the Convertible Loan may be converted, at the sole
discretion of Avocet Mining, in whole or in part, into ordinary shares in Wega
Mining at a conversion price of NOK 0.55 per Wega Mining share. If the amount
under the Convertible Loan is converted in full, Avocet Mining will acquire up
to 307,045,455 new Wega Mining Shares in addition to the 61,409,091 Wega Mining
Shares already held by Avocet Mining, representing in aggregate, approximately
52.8% of the enlarged share capital.
The right to conversion of the Convertible Loan shall expire if either:
(i) Avocet Mining withdraws the Offer and such withdrawal is based on reasons
other than it being evident that the closing conditions for the Offer (other
than the minimum acceptance level) will not be satisfied; or
(ii) the Offer lapses as a consequence of the minimum acceptance level of more
than 90% not being reached, where the acceptance level would have been reached
had Avocet Mining exercised its conversion right in respect of the Convertible
Loan in full or in part during the Offer Period (as extended at Avocet Mining's
option).
Subsequent to USD 30 million funding already provided to Wega Mining, Avocet
Mining currently has cash resources of approximately USD 40 million and is
confident that it has sufficient cash resources and lines of debt finance to
bring the Inata Project into production.
ACCEPTANCE OF THE OFFER
Statement from the Board of Directors of Wega Mining
Under section 6-16 of the Norwegian Securities Trading Act, the Board of
Directors of Wega Mining has issued a statement concerning the Offer,
including a unanimous recommendation to Wega Mining Shareholders to accept the
Offer and information on the employees' views and other factors of significance
for assessing whether the Offer should be accepted by the Wega Mining
Shareholders.
Irrevocable undertakings
Avocet Mining has received irrevocable undertakings from certain Wega Mining
Shareholders to accept the Offer which, in addition to the approximately 15.7%
of Wega Mining now held by Avocet Mining following the Private Placement,
represent in aggregate approximately 76.6% of Wega Mining's enlarged issued
share capital. These irrevocable undertakings are not capable of revocation if a
competing bid for Wega Mining emerges.
Settlement
Settlement of the share consideration to which any accepting Wega Mining
Shareholder is entitled under the Offer will be effected within six Business
Days of the Offer being declared wholly unconditional, by way of Avocet Mining
issuing the New Avocet Mining Shares.
Fractions of New Avocet Mining Shares will not be allotted and issued to Wega
Mining Shareholders pursuant to the Offer, nor will they be aggregated and sold
in the market.
AIM LISTING
An application will be made to admit the New Avocet Mining Shares to trading on
AIM. It is expected that admission will take place and that dealings in New
Avocet Mining Shares will commence no more than six Business Days after the
Offer is declared wholly unconditional.
TIMETABLE
An indicative timetable of, among other things, the expected commencement of
dealings in New Avocet Mining Shares on AIM is set out below:
+------------------------------------------------------+-----------------------+
| Event | Date |
| | |
+------------------------------------------------------+-----------------------+
| Offer Period | 19 May - 2 June 2009 |
| | at 17:30 Norwegian |
| | time |
+------------------------------------------------------+-----------------------+
| Offer is declared wholly unconditional | (D) |
| | |
+------------------------------------------------------+-----------------------+
| Issue and allotment of New Avocet Mining Shares | (D + 2) |
| | |
+------------------------------------------------------+-----------------------+
| Application to AIM for New Avocet Mining Shares to | (D + 2) |
| be admitted to trading | |
| | |
+------------------------------------------------------+-----------------------+
| Allocation of New Avocet Mining Shares into the CSN | (D + 6) |
| or CREST | |
| | |
+------------------------------------------------------+-----------------------+
| New Avocet Mining Shares admitted to trading on AIM | (D + 6) |
| and become tradable | |
| | |
+------------------------------------------------------+-----------------------+
D = Business Days
Should the Offer Period be extended, the timetable will be changed
accordingly. Each of the times and dates in the above table are subject to
change at the discretion of Avocet Mining and the Receiving Agent.
COSTS
Avocet Mining will pay costs directly in connection with Acceptance of the Offer
and completion of the transfer of the Wega Mining Shares to Avocet Mining.
The total costs relating to this transaction incurred by both Wega Mining and
Avocet Mining are not expected to exceed USD 4.5 million.
SHARE TRADING POST COMPLETION OF THE OFFER
Compulsory Acquisition of Wega Mining Shares
If Avocet Mining, as a result of the Offer or otherwise, becomes the holder of
more than 90% of the Wega Mining Shares, it may make a compulsory acquisition of
the remaining shares in Wega Mining within four weeks after the completion of
the Offer, for a cash consideration backed by a bank guarantee from a Norwegian
financial institution in respect of the settlement of the acquisition price in
accordance with the Norwegian Securities Trading Act section 6-10(7).
At this time it is Avocet Mining's intention to make a compulsory acquisition of
the remaining shares in Wega Mining upon obtaining at least 90% of the shares in
Wega Mining, pursuant to the provisions of the Norwegian Public Companies Act or
the Norwegian Securities Trading Act (as applicable).
De-listing of the Wega Mining Shares
In the event that the Offer is completed, Avocet Mining intends to propose to an
extraordinary general meeting of Wega Mining Shareholders that an application be
made to Oslo Børs to de-list the Wega Mining Shares from Oslo Axess.
Orderly market agreement
Datum AS, Wega Mining's largest shareholder which will hold approximately 12% of
Avocet Mining's share capital following the Offer (excluding treasury shares and
assuming 100% acceptances of the Offer), has entered into an orderly market
arrangement with J.P. Morgan Cazenove and Avocet Mining for a period of six
months from the date that the Offer is declared unconditional in all respects.
INFORMATION ON AVOCET MINING
Capitalisation and indebtedness
As of the date of this announcement, the Company has no long-term debt. It
should be noted however that on completion of the proposed transaction, Avocet
Mining will assume the loan arrangements with Macquarie Bank through its
ownership of Wega Mining relating to the Inata Project Facility, under which
approximately USD 56milion has been drawn down by Wega Mining.
Share capital and major shareholders
As of 7 May 2009, Avocet Mining had a total of approximately 1,097 shareholders.
To the Company's knowledge, the shareholders with an interest disclosable under
the AIM Rules for Companies of over 3% in the share capital of the Company are
listed in the table below:
+--------------------------------------------+-------------------+---------------+
| Investor: | Shares held: | Ownership: |
| | | |
+--------------------------------------------+-------------------+---------------+
| Elliot Management | 31 773 701 | 26.2% |
+--------------------------------------------+-------------------+---------------+
| J.P. Morgan Asset Management | 11 471 079 | 9.5% |
+--------------------------------------------+-------------------+---------------+
| Artemis Investment Management | 10 812 978 | 8.9% |
+--------------------------------------------+-------------------+---------------+
| BlackRock Investment Management | 9 039 629 | 7.5% |
+--------------------------------------------+-------------------+---------------+
| NG McNair Scott | 6 133 452 | 5.1% |
+--------------------------------------------+-------------------+---------------+
| Invesco Perpetual | 5 878 952 | 4.6% |
+--------------------------------------------+-------------------+---------------+
| | | |
+--------------------------------------------+-------------------+---------------+
| Sum 20 largest shareholders | 95 511 181 | 78.8% |
+--------------------------------------------+-------------------+---------------+
| | | |
+--------------------------------------------+-------------------+---------------+
| Other | 25 655 349 | 21.2% |
+--------------------------------------------+-------------------+---------------+
| | | |
+--------------------------------------------+-------------------+---------------+
| Total number of shares (excl. treasury | 121 166 530 | 100.0 % |
| shares) | | |
+--------------------------------------------+-------------------+---------------+
RISK FACTORS
The acquisition of Wega Mining may bring additional risks to Avocet Mining's
business which could affect some or all of the Enlarged Group's activities and
which may make an investment in the Company one of higher risk. The actual
results of the Company following completion of the Offer could differ materially
from those anticipated as a consequence of many factors, which are described in
more detail in Appendix II.
OFFER RESTRICTIONS
The Offer Document has been prepared in accordance with the requirements of
section 6 of the Norwegian Securities Trading Act of 2007 and contains the same
information as required by section 7-13 of the Norwegian Securities Trading Act.
A prospectus has not been prepared in connection with the Offer, in accordance
with the exemption from the obligation to prepare a prospectus set out in
section 7-4(6) of the Norwegian Securities Trading Act.
The Offer Document has been reviewed and approved by Oslo Børs in accordance
with section 6-14 of the Norwegian Securities Trading Act.
The presentation of the Offer to the Wega Mining Shareholders resident in
countries other than Norway may be affected by the laws of other relevant
jurisdictions and shall not be deemed to be an offer in any jurisdiction in
which it is unlawful to make such offer under the laws of any relevant
jurisdiction or any governmental approval is required or any additional
documents must be issued, including but not limited to the Restricted
Jurisdictions.
The Offer is not being made and will not be made, directly or indirectly, in or
into the Restricted Jurisdictions. This announcement, the Offer Document, and
any and all materials related thereto, should not be sent or otherwise
distributed in or into the Restricted Jurisdictions, whether by use of mail or
by any means or instrumentality of the Restricted Jurisdictions' commerce
(including, but without limitation, the mail, facsimile transmission, telex,
telephone and the Internet) or any facility of a Restricted Jurisdiction
national securities exchange, and the Offer cannot be accepted by any such use,
means or instrumentality, in or from within the Restricted Jurisdictions.
Accordingly, copies of this Offer Document and any related materials are not
being, and must not be, sent or otherwise distributed in or into or from the
Restricted Jurisdictions or, in their capacities as such, to custodians,
trustees or nominees holding shares of the Company for Restricted Jurisdictions
persons, and persons receiving any such documents (including custodians,
nominees and trustees) must not distribute or send them in, into or from the
Restricted Jurisdictions. Any purported acceptance of the Offer resulting
directly or indirectly from a violation of these restrictions may be invalid. No
shares of the Company are being solicited from a resident of the Restricted
Jurisdictions and, if sent in response by a resident of the Restricted
Jurisdictions, will not be accepted.
In the UK, the Offer Document is being distributed only to, and the Offer is
directed only at, persons who are both qualified investors within the meaning of
section 86(1)(a) of the UK Financial Services and Markets Act 2000 and have
professional experience in matters relating to investments falling within
Article 19(5) of the Financial Services and Markets Act 2000 (Financial
Promotion) Order 2005 (all such persons together being referred to as "relevant
persons"). Any investment or investment activity to which this document relates
is available only to, and will be engaged in only with, relevant persons.
IMPORTANT INFORMATION
This announcement does not constitute an offer for sale or an invitation to
subscribe for, or the solicitation of an offer to buy or subscribe for, shares
in Avocet Mining or Wega Mining in any jurisdiction where such an offer or
solicitation is unlawful. Overseas shareholders in Wega Mining and any person
(including, without limitation, custodians, nominees and trustees) who has a
contractual or other legal obligation to forward this announcement to a
jurisdiction outside the UK should seek appropriate advice before taking any
action.
This announcement contains forward-looking statements, which are based on Avocet
Mining's and Wega Mining's current expectations and assumptions and involve
known and unknown risks and uncertainties that could cause actual results,
performance or events to differ materially from those expressed or implied in
such statements. These forward-looking statements are subject to risk factors
which are described in Appendix II to this announcement. Each forward-looking
statement speaks only as of the date of the particular statement. Except as
required by the Market Abuse Rules, the AIM Rules for Companies, the London
Stock Exchange or by law, the Company and Wega Mining disclaim any obligation or
undertaking to release publicly any updates or revisions to any forward-looking
statements contained herein to reflect any change in the Company's or Wega
Mining's expectations with regard thereto or any change in events, conditions or
circumstances on which any such statement is based.
The information in this announcement regarding Avocet Mining has been provided
by Avocet Mining. The Managers make no representation or warranty, express or
implied, as to the accuracy or completeness of such information, and nothing
contained in this announcement is, or shall be relied upon as, a promise or
representation by the Managers.
The information contained in this announcement with respect to Wega Mining is,
or consists of, extracts from, or summaries of, publicly available information.
None of Avocet Mining or the Managers or any of their respective affiliates, nor
any other person, accept any responsibility for the correctness or completeness
of the announcement in terms of the information on Wega Mining or for the
contents and distribution of this announcement other than as set out above.
No person has been authorised to give any information or make any representation
on behalf of Avocet Mining not contained in this announcement and, if given or
made, such information or representation must not be relied upon as having been
authorised by Avocet Mining or provided or made by or on behalf of Avocet
Mining.
The delivery of this announcement shall not under any circumstances create any
implication that there has been no change in the affairs of Avocet Mining or
Wega Mining since the date hereof or that the information in this announcement
or in the documents referred to herein is correct as of any time subsequent to
the dates hereof or thereof. Any new material information and any material
inaccuracy in this announcement or Offer Document that might have an effect on
the assessment of the New Avocet Mining Shares which arises after the
publication of this announcement and before the expiry of the Offer Period, will
be published and announced without undue delay.
Ambrian Partners (which is regulated in the UK by the Financial Services
Authority) is acting exclusively for Avocet Mining as financial adviser,
nominated adviser and broker and no one else (including the recipients of this
announcement) in connection with the arrangements described in this announcement
and will not be responsible to anyone other than the Company for providing the
protections afforded to customers of Ambrian Partners or for advising any other
person in connection with the arrangements described in this announcement.
Ambrian Partners makes no representation, express or implied, with respect to
the accuracy or completeness of any information contained in this announcement
and accepts no responsibility for, nor does it authorise, the contents of, or
the issue of this announcement, or any other statement made or purported to be
made by the Company, or on its behalf, in connection with the Company or any of
the other arrangements described in this announcement and accordingly disclaims
all and any liability whatsoever whether arising out of tort, contract or
otherwise which it might otherwise have in respect of this announcement or any
other statement.
J.P. Morgan Cazenove (which is regulated in the UK by the Financial Services
Authority) is acting exclusively for Avocet Mining as financial adviser and
broker and no one else (including the recipients of this announcement) in
connection with the arrangements described in this announcement and will not be
responsible to anyone other than the Company for providing the protections
afforded to customers of J.P. Morgan Cazenove or for advising any other person
in connection with the arrangements described in this announcement. J.P. Morgan
Cazenove makes no representation, express or implied, with respect to the
accuracy or completeness of any information contained in this announcement and
accepts no responsibility for, nor does it authorise, the contents of, or the
issue of this announcement, or any other statement made or purported to be made
by the Company, or on its behalf, in connection with the Company or any of the
other arrangements described in this announcement and accordingly disclaims all
and any liability whatsoever whether arising out of tort, contract or otherwise
which it might otherwise have in respect of this announcement or any other
statement.
First Securities (which is regulated in Norway by the Kredittilsynet) is acting
exclusively for Avocet Mining and no one else (including the recipients of this
announcement) in connection with the arrangements described in this announcement
and will not be responsible to anyone other than the Company for providing the
protections afforded to customers of First Securities or for advising any other
person in connection with the arrangements described in this announcement. First
Securities makes no representation, express or implied, with respect to the
accuracy or completeness of any information contained in this announcement and
accepts no responsibility for, nor does it authorise, the contents of, or the
issue of this announcement, or any other statement made or purported to be made
by the Company, or on its behalf, in connection with the Company or any of the
other arrangements described in this announcement and accordingly disclaims all
and any liability whatsoever whether arising out of tort, contract or otherwise
which it might otherwise have in respect of this announcement or any other
statement.
APPENDIX I - DEFINITIONS
When used in this announcement, the following terms shall have the meanings set
out below, unless the context otherwise requires. Words importing the plural
shall be construed to include the singular and vice versa.
+---------------------+--------------------------------------------------------+
| Acceptance | Acceptance of the Offer by a Wega Mining Shareholder |
+---------------------+--------------------------------------------------------+
| Acceptor | A Wega Mining Shareholder having accepted the Offer |
+---------------------+--------------------------------------------------------+
| AIM | The AIM market of the London Stock Exchange |
+---------------------+--------------------------------------------------------+
| Ambrian Partners | Ambrian Partners Limited , acting as Manager for the |
| | Offer |
+---------------------+--------------------------------------------------------+
| Avocet Mining | The Offeror, Avocet Mining PLC, a public limited |
| | liability company incorporated under the laws of |
| | England and Wales, and with registered office in |
| | London |
+---------------------+--------------------------------------------------------+
| Business Day | Any day on which commercial banks are open for |
| | business in Oslo |
+---------------------+--------------------------------------------------------+
| Company | Avocet Mining PLC and/or Avocet Mining PLC and its |
| | subsidiaries |
+---------------------+--------------------------------------------------------+
| Convertible Loan | The convertible loan of USD 25 million from Avocet |
| | Mining to Wega Mining, resolved on by the general |
| | meeting of Wega Mining on 29 April 2009 |
+---------------------+--------------------------------------------------------+
| Convertible Loan | The agreement entered into on 9 April 2009 and |
| Agreement | resolved on by the extraordinary general meeting of |
| | Wega Mining on 29 April 2009 regarding the Convertible |
| | Loan of USD 25 million from Avocet Mining to Wega |
| | Mining |
+---------------------+--------------------------------------------------------+
| CREST | An international real-time share settlement system. |
| | Uniquely, it provides settlement services for UK, |
| | Irish and international securities and government |
| | bonds. It settles large volumes of transactions at low |
| | cost and in multiple currencies |
+---------------------+--------------------------------------------------------+
| CSN | Corporate Sponsored Nominee, a nominee account into |
| | which the New Avocet Mining Shares will be placed on |
| | behalf of the Acceptors |
+---------------------+--------------------------------------------------------+
| Enlarged Group | Avocet Mining, as enlarged by the acquisition of Wega |
| | Mining and its subsidiaries |
+---------------------+--------------------------------------------------------+
| EPCM | Engineering,Procurement and Construction Management |
+---------------------+--------------------------------------------------------+
| First Securities | First Securities AS, acting as Manager and Receiving |
| | Agent in the Offer |
+---------------------+--------------------------------------------------------+
| GBP | Pound sterling, the lawful currency of the UK |
+---------------------+--------------------------------------------------------+
| Guinea | Republic of Guinea |
+---------------------+--------------------------------------------------------+
| Inata Project | Wega Mining's main asset; the development of the Inata |
| | Project in Burkina Faso |
+---------------------+--------------------------------------------------------+
| Inata Project | Wega Mining's loan facility agreement with Macquarie |
| Facility | Bank dated 4 July 2008 regarding the Inata Project |
+---------------------+--------------------------------------------------------+
| Indonesia | Republic of Indonesia |
+---------------------+--------------------------------------------------------+
| J.P. Morgan | J.P. Morgan Cazenove Limited, acting as Manager for |
| Cazenove | the Offer |
+---------------------+--------------------------------------------------------+
| JORC | The Joint Ore Reserves Committee of The Australian |
| | Institute of Mining and Metallurgy, Australian |
| | Institute of Geoscientists and Minerals Council of |
| | Australia |
+---------------------+--------------------------------------------------------+
| Licence | Any exploration and mining pre-claim, claim, licence, |
| | permit or concession |
+---------------------+--------------------------------------------------------+
| Macquarie Bank | Macquarie Bank Limited |
+---------------------+--------------------------------------------------------+
| Mali | Republic of Mali |
+---------------------+--------------------------------------------------------+
| Managers | First Securities, Ambrian Partners and J.P. Morgan |
| | Cazenove |
+---------------------+--------------------------------------------------------+
| Merit Mining | Merit Mining Corp. |
+---------------------+--------------------------------------------------------+
| Mineral resources | A concentration or occurrence of natural, solid, |
| | inorganic or fossilized organic material in or on the |
| | earth's crust in such form and quantity and of such |
| | grade or quality that it has reasonable prospects for |
| | economic extraction. The location, quantity, grade, |
| | geological characteristics and continuity of a mineral |
| | resource are known, estimated or interpreted from |
| | specific geological evidence and knowledge |
+---------------------+--------------------------------------------------------+
| Mining Convention | The mining agreement between the government of Burkina |
| | Faso and the holder of an exploitation permit which |
| | governs the relationship between the two parties |
+---------------------+--------------------------------------------------------+
| New Avocet Mining | The Ordinary Shares to be issued as consideration for |
| Shares | the Offer |
+---------------------+--------------------------------------------------------+
| New Avocet Mining | Holders of New Avocet Mining Shares |
| Shareholders | |
+---------------------+--------------------------------------------------------+
| NI 43-101 | Canadian National Instrument 43-101, a mineral |
| | resource classification scheme used for the public |
| | disclosure of information relating to mineral |
| | properties |
+---------------------+--------------------------------------------------------+
| NOK | Norwegian Kroner, the lawful currency of Norway |
+---------------------+--------------------------------------------------------+
| Norwegian Public | The Norwegian Act relating to Public Limited Liability |
| Companies Act | Companies of 13 June 1997 no. 45 |
+---------------------+--------------------------------------------------------+
| Norwegian | The Norwegian Securities Trading Act of 29 June 2007 |
| Securities Trading | no. 75 ("Verdipapirhandelloven") |
| Act | |
+---------------------+--------------------------------------------------------+
| Offer | The offer to acquire all outstanding shares in Wega |
| | Mining on the terms outlined in the Offer Document and |
| | summarised in this announcement |
+---------------------+--------------------------------------------------------+
| Offer Document | This combined offer document and information |
| | memorandum, serving the purpose of being an Offer to |
| | acquire all outstanding Wega Mining Shares not already |
| | held by the Offeror |
+---------------------+--------------------------------------------------------+
| Offer Period | The period from and including 19 May 2009 to 17:30 |
| | (Norway time) on 2 June 2009 (or such date and time to |
| | which the Offeror shall have extended the period) |
| | during which the Offer can be accepted |
+---------------------+--------------------------------------------------------+
| Offer Price | The ratio of New Avocet Mining Shares offered to Wega |
| | Mining Shareholders, as detailed in the Offer Document |
+---------------------+--------------------------------------------------------+
| Offer Restrictions | The offer restrictions as outlined in the "Offer |
| | Restrictions" in this announcement |
+---------------------+--------------------------------------------------------+
| Offeror | Avocet Mining PLC |
+---------------------+--------------------------------------------------------+
| Ordinary Shares | ordinary shares of GBP 0.05 each in the capital of |
| | Avocet Mining |
+---------------------+--------------------------------------------------------+
| Ore Reserves | The economically mineable part of a measured or |
| | indicated mineral resource demonstrated by at least a |
| | preliminary feasibility study. This study must include |
| | adequate information on mining, processing, |
| | metallurgical, economic and other relevant factors |
| | that demonstrate, at the time of reporting, that |
| | economic extraction can be justified. A mineral |
| | reserve includes diluting materials and allowances for |
| | losses that may occur when the material is mined |
+---------------------+--------------------------------------------------------+
| Oslo Axess | A fully regulated market under the control of Oslo |
| | Børs for Norwegian listed equities |
+---------------------+--------------------------------------------------------+
| Oslo Børs | Oslo Børs ASA (Oslo Stock Exchange) |
+---------------------+--------------------------------------------------------+
| Philippines | Republic of the Philippines |
+---------------------+--------------------------------------------------------+
| Private Placement | The private placement of 61,409,091 ordinary shares in |
| | Wega Mining towards Avocet Mining resolved on 14 April |
| | 2009 |
+---------------------+--------------------------------------------------------+
| Receiving Agent | First Securites AS |
+---------------------+--------------------------------------------------------+
| Resolute | Resolute (West Africa) Limited, a Jersey-registered |
| | company wholly owned by Wega Mining |
+---------------------+--------------------------------------------------------+
| Restricted | the United States, Canada, Australia, Japan or the |
| Jurisdictions | Cayman Islands and any other jurisdictions where it |
| | will be unlawful to make the Offer unless any |
| | additional documents are issued |
+---------------------+--------------------------------------------------------+
| Settlement Date | The date when settlement of the Offer takes place, |
| | expected to be on or about six Business Days after the |
| | Offer being declared unconditional, however 14 days |
| | after the expiry of the Offer Period at the latest. If |
| | the Offer Period is extended, the Settlement Date will |
| | be postponed correspondingly. |
+---------------------+--------------------------------------------------------+
| SMB | Société des Mines de Belahouro S.A. |
+---------------------+--------------------------------------------------------+
| Transaction | The agreement in respect of the combination of Avocet |
| Agreement | Mining and Wega Mining (the Enlarged Group) to be |
| | implemented through a share exchange offer to be made |
| | by Avocet Mining |
+---------------------+--------------------------------------------------------+
| UK | United Kingdom of Great Britain and Northern Ireland |
+---------------------+--------------------------------------------------------+
| United States | The United States of America |
+---------------------+--------------------------------------------------------+
| USD | United States Dollar, the lawful currency of the |
| | United States of America |
+---------------------+--------------------------------------------------------+
| VPS | The Norwegian Central Securities Depository |
| | ("Verdipapirsentralen"). |
+---------------------+--------------------------------------------------------+
| Wega Mining | Wega Mining ASA, a public limited liability company |
| | incorporated under the laws of Norway with |
| | registration no. 989 698 176 |
+---------------------+--------------------------------------------------------+
| Wega Mining | A holder of Wega Mining Shares |
| Shareholder | |
+---------------------+--------------------------------------------------------+
| Wega Mining Share | A share in Wega Mining, listed on Oslo Axess with |
| | ticker code "WEMI", and registered in VPS with ISIN NO |
| | 001 0324585 |
+---------------------+--------------------------------------------------------+
APPENDIX II - RISK FACTORS
The acquisition of Wega Mining may bring additional risks to the Avocet Mining
business which could affect some or all of the Enlarged Group's activities and
which may make an investment in the Company one of higher risk.
If any of the following risks actually materialise, the Enlarged Group's
business, financial position and operating results could be materially and
adversely affected. The risks described below are not exhaustive as additional
risks not presently known to the Company, or which the Company currently deems
immaterial, may also impair its business operations and adversely affect its
share price.
Such information is presented as of the date hereof and is subject to change,
completion or amendment without notice.
RISKS RELATED TO AN INVESTMENT IN THE ENLARGED GROUP
Operational risks
Exploration, development and operating risk
The Enlarged Group's existing activities are directed towards mining operations,
the development of mineral deposits and exploration for additional mineral
deposits. Mining operations generally involve a high degree of risk.
The Enlarged Group's mining operations in various countries are subject to all
the hazards and risks normally encountered in open pit mining operations; the
Enlarged Group may also develop underground mines in future which would be
subject to all the hazards and risks normally encountered in underground mining
operations. These risks could adversely affect the development or continuation
of mining operations. Such risks include pit slope failure, adverse weather
conditions, flooding and other risks involved in the drilling and removal of
material, the processing and storage of material and the closure of operations
at the end of their economic lives. The actual mined grades and tonnages of the
ore may vary significantly from the resource model and mine plan. Additionally,
the metallurgical characteristics of orebodies may vary contrary to those
anticipated and processing plant ore throughput and metal recoveries may be
below expectations, resulting in lower than anticipated metal production. There
is no certainty that any portion of the resources will be converted to mineable
reserves. Although precautions to minimise risk are and will be taken, any of
these factors could result in damage to or destruction of mines and other
producing facilities, damage to life or property, environmental damage and
possible legal liability.
The exploration for, and development of, mineral deposits involves significant
risks which even a combination of careful evaluation, experience and knowledge
may not eliminate. While the discovery of an ore body may result in substantial
rewards, few properties which are explored are ultimately developed into
producing mines. Major expenses may be required to locate and establish mineral
resources, to develop metallurgical processes and to construct mining and
processing facilities at a particular site. It is impossible to ensure that the
exploration or development programs planned by the Enlarged Group will result in
profitable commercial mining operations.
Whether a mineral deposit will become or remain commercially viable depends on a
number of factors. These include the particular attributes of the deposit, such
as size, grade and proximity to infrastructure, commodity prices which can
fluctuate significantly, government regulations, including regulations relating
to prices, taxes, royalties, land tenure, land use, importing and exporting of
minerals and environmental protection. The exact effect of these factors cannot
be accurately predicted, but a combination of these factors may result in the
Enlarged Group not receiving an adequate return on invested capital, or projects
not being developed, or operations becoming unprofitable.
A number of the Enlarged Group's projects are at an early stage of development.
There is no guarantee that expenditures made by the Enlarged Group or drilling
results will result in subsequent development into profitable commercial mining
operations. Lack of availability of drilling rigs could result in increased
expenditures and/or project delays.
Mineral and metals prices
The Company is currently focused on gold mining, and the profitability and cash
flow of Avocet Mining's operations are dependent upon the market price of gold
and other precious minerals and metals that are produced at its gold mines.
These prices have fluctuated widely in recent years. The spot price of gold and
many other metals is determined by commodity exchanges and is therefore outside
the Company's control. The prices of gold and other commodities can be affected
by numerous factors including economic and political conditions, inflation,
levels of supply and demand, currency exchange fluctuations, interest rates,
global or regional consumption patterns, and the availability of alternative
mineral sources. The effect of these factors on the price of precious and base
minerals and metals, and therefore the future economic viability of any of the
Company's current mines and exploration projects, cannot be accurately
predicted.
Should the Enlarged Group acquire or develop operations focused primarily on
mining other metals, the profitability and cash flow of Enlarged Group's
operations will be dependent on the prices of those other metals in addition to
the gold and by-product metals currently produced.
Hedging risk
On 19 March 2009 Wega Mining entered into hedging arrangements whereby 70,000
ounces were forward sold at a price of USD 935/oz. Including this latter
arrangement, a total of 350,000 ounces of gold have been forward sold for
physical delivery between September 2009 and June 2014 at a weighted average
price of USD 958/oz.
As part of a strategy of commodity price risk management, or as required in
relation to financing arrangements, the Company has periodically undertaken
commodity hedging. As of the date hereof, the Company is not party to any
hedging agreements. There is a risk that when entering into hedging positions,
the realised commodity prices and cash flow could be materially different from
the spot price and unhedged cash flow.
Permits and licences
The Enlarged Group holds a variety of exploration and mining pre-claims, claims,
licences, permits and concessions in several countries. Some of these Licences
are subject to certain conditions.
In Indonesia a number of the Company's Licences are held by third parties with
whom the Company has legally binding agreements to act as principal contractor
on the Licences in order to derive its economic interest. Implementation
regulations have yet to be issued in respect of certain recent changes to the
mining law in Indonesia and uncertainty therefore exists as to how these
Licences will be transferred or amended to be consistent with the new law. These
regulations will require the Company to make amendments to the mechanism by
which these Licences are held and administered. There can be no guarantee on how
the implementation regulations will be fulfilled or whether all necessary
permits will be transferred.
Risk associated with judgment, estimation and reporting of resources and
reserves
There are considerable uncertainties in estimating the size and value of Mineral
Resources and Ore Reserves. The Enlarged Group may report its mineral resources
and ore reserves in accordance with the JORC Code or NI 43-101. Under the
requirements of these reporting standards, judgements about Mineral Resources
are made by competent persons in respect of the technical and economic factors
likely to influence the prospect of economic extraction, including the
approximate mining parameters. Also as required by JORC and NI 43-101,
appropriate assessments and studies are carried out in determining Ore Reserves,
including consideration of and modification by realistically assumed mining,
metallurgical, economic, marketing, legal, environmental, social and
governmental factors. The evaluation of these factors may later prove to be
inaccurate, and reported Mineral Resources and Ore Reserves may therefore be
adjusted downward or upward.
Uninsured losses
The Enlarged Group's business is subject to a number of risks and hazards which
could have a material and adverse effect on the Enlarged Group's business,
operating results or financial condition, including the exploration, development
and operating risks set out above. Although Avocet Mining and Wega Mining
maintain insurance to protect against certain risks in such amounts as they
consider appropriate, these insurance arrangements will not cover all the
potential risks associated with the Enlarged Group's operations.
Competition
The mining industry is a global business with producers in many different
countries. There is strong competition for the discovery and acquisition of
properties considered to have commercial potential. The Enlarged Group will
compete with other mining companies, many of which have greater financial
resources than the Enlarged Group, for the acquisition of properties, leases and
other interests as well as for the recruitment and retention of skilled
personnel. The Enlarged Group operates in relatively remote areas, and these
locations may negatively affect its ability to attract the necessary management
resources. Such factors may result in the Enlarged Group being unable to secure
new exploration areas or recruit and retain staff.
Acquisitions
The Company may fail to select appropriate acquisition targets, fail to
negotiate favourable acquisition or financing terms, or may complete
acquisitions or business arrangements which do not ultimately benefit the
ongoing business of the Enlarged Group.
Health and Safety
Certain of the Enlarged Group's operations are carried out under potentially
hazardous conditions. Whilst the Enlarged Group intends to continue to operate
in accordance with relevant health and safety regulations and requirements, the
Enlarged Group remains susceptible to the possibility that liabilities may arise
as a result of accidents or other workforce-related misfortunes, some of which
may be beyond the Enlarged Group's control.
Dependence on key personnel
The Enlarged Group's development and prospects are dependent upon the continued
services and performance of its senior management and other key personnel.
Financial difficulties or other factors could adversely affect the Enlarged
Group's ability to retain key employees. The loss of the services of any key
personnel may have negative effects on the Enlarged Group's operating results
and financial condition.
The Company is highly dependent on its Directors. Whilst the Board has sought to
and will continue to ensure that Directors and any key employees are
appropriately incentivised, their services cannot be guaranteed. The Enlarged
Group will have a small management team and the loss of one or more executive
Directors may have an adverse effect on its operational performance and growth
plans. The continued involvement of key employees, consultants and Directors is
not assured, and the loss of their services to the Enlarged Group may have a
material adverse effect on the performance of the Enlarged Group.
Payment Obligations
Under the Licences and certain other contractual agreements to which the
Enlarged Group is or may in the future become a party, the Enlarged Group is or
may become subject to payment and other obligations. In particular, the permit
holders are required to expend the funds necessary to meet the minimum work
commitments attaching to Licences. Failure to meet these work commitments may
render the Licence liable to be cancelled. Further, if any contractual
obligations are not complied with when due, in addition to any other remedies
which may be available to other parties, this could result in dilution or
forfeiture of interests held by the Enlarged Group.
Risks related to technological developments
The Enlarged Group's ability to compete in the identification of new resources
and to produce gold competitively is dependent in part on its ability to keep
pace with changes and improvements in georelated and mineral processing
technologies.
Litigation
Legal proceedings may arise from time to time in the course of the Enlarged
Group's business. The Directors cannot preclude that litigation may be brought
by or against the Enlarged Group. Wega Mining may be subject to litigation,
which could adversely impact Avocet Mining's financial situation and results or
Avocet Mining's share price.
Integration of Wega Mining into the Enlarged Group
The integration of Wega Mining into the Enlarged Group could turn out to be more
complex than anticipated, leading to, inter alia, further delays in the
commissioning of the Inata Project or material cost overruns. As noted above,
the Enlarged Group will have a small management team and the successful
integration of Wega Mining into the Enlarged Group will require additional
management focus which could damage the prospects of the Enlarged Group as a
whole.
Financial risks
Additional requirement for capital
Substantial additional financing may be required if the Enlarged Group is to be
successful in pursuing its ultimate strategy. No assurances can be given that
the Enlarged Group will be able to raise the additional finance that it may
require for its anticipated future operations. Gold prices, environmental
rehabilitation or restitution, revenues, taxes, transportation cost, capital
expenditures, operational expenses and geological results are all factors which
will have an impact on the amount of additional capital that may be required.
There can be no assurance that additional financing will be available on terms
acceptable to the Enlarged Group or at all. If the Enlarged Group is unable to
obtain additional financing, as needed, it may be required to reduce the scope
of its operations or anticipated expansion, forfeit its interest in some or all
of its Licences, incur financial penalties or reduce or terminate its
operations.
Foreign currency risk
The Company's functional currency is USD, as the currency which most affects the
Company's revenues, costs and financing. This includes the fact that as a
producer of gold, the Company receives USD for all of its sales and that cash
deposits and debt are typically held in USD. Parts of the Company's costs are in
the local currencies of the countries where the Company operates, and in other
currencies depending on sourcing of supplies. The Enlarged Group may, from time
to time, hold material cash balances in a currency other than USD with the
potential for short term foreign exchange exposure. Fluctuations in exchange
rates can have an impact on the Company's results.
To mitigate the impact of USD weakness on operating costs that are not USD
denominated, the Company has previously entered into currency hedging
arrangements. Should the Enlarged Group enter into similar hedging arrangements
n future, and in the event of adverse currency movements, there is a risk that
cash flows may be worse than if no hedging had been entered into.
Interest rate risk
The Company currently finances its operations through equity fundraising and
therefore does not carry significant borrowings. As of the date of this Offer
Document the Company has no debt. Cash balances are held on current accounts
that normally bear no interest, and on short term fixed deposits, whose interest
rates are established at the time of deposit, with reference to the current
market rates, the duration of the term, and the amounts deposited. Following the
completion of the Offer, the Enlarged Group will have both cash and debt,
including the Inata Project Facility, which incurs interest at a floating rate.
Going forward, the Enlarged Group may from time to time hold either net cash or
net debt and will be exposed to fluctuations in interest rates. The Company does
not currently use financial instruments to hedge its interest rate exposure.
Liquidity risk
The Company's objectives for managing its liquidity are to ensure that its
operating subsidiaries have available to them local cash balances and lines of
credit sufficient to fund their working capital needs, and that the maturities
of any debt it may have are not beyond its ability to repay or refinance.
Subsequent to the USD 30 million funding recently provided to Wega Mining, the
Company has current cash resources of approximately USD 40 million and in
addition, the Company has a USD 25 million revolving credit facility, available
dependent on certain conditions precedent, which is undrawn as at the date of
this Offer Document. As a result of the acquisition of Wega Mining, Avocet
Mining will acquire debt including the Inata Project Facility of approximately
USD 56 million and in addition will incur significant additional expenditure
commitments including, inter alia, in relation to the completion of the Inata
Project. There is a risk that as a result of these additional expenditure
commitments and indebtedness, the Company's ability to manage its liquidity and
fund its existing operating subsidiaries may be restricted.
Breaches of debt covenants
Prior to Avocet Mining expressing an interest in acquiring Wega Mining, on 23
February 2009 Wega Mining received a notification from Macquarie Bank in which
the loan parties were made aware that various events of default had occurred as
defined in the Inata Project Facility agreement entered into in July 2008. The
notification was based on the findings and conclusions in a third party project
review report commissioned by Macquarie Bank.
Avocet Mining, Wega Mining, Resolute and SMB have entered into certain
agreements with Macquarie Bank to formalise their relationship with Macquarie
Bank in relation to the Inata Project Facility and Avocet Mining's takeover of
Wega Mining. In addition they have given certain undertakings to Macquarie Bank
in order to gain Macquarie Bank's consent to the proposed change of control
which would arise from the Offer completing and to the Convertible Loan being
offered by Avocet Mining, which could be converted at any time to equity such
that Avocet Mining would own greater than 50% of the issued shares of Wega
Mining. Upon satisfaction of and compliance with all agreements and undertakings
by Avocet Mining, Wega Mining, Resolute and SMB, and based on facts and
information available at the time it gave its consent, Macquarie Bank and Avocet
Mining expect that SMB will be in full compliance with the Inata Project
Facility agreement.
Notwithstanding the above, the Inata Project Facility currently remains in
default. In conjunction with the above consent, Macquarie Bank has confirmed
that prior to July 31, 2009, or such later date which Macquarie Bank agrees, but
not later than August 31, 2009, it will not demand repayment of the debt or
enforce any other remedies set out in the Inata Project Facility as a result of
any existing events of default known to Macquarie Bank which have occurred up to
the date of the consent.
It is the current belief of the Board of Avocet Mining that it will be able to
satisfy its obligations to ensure that the borrower under the Inata Project
Facility will be in full compliance with the Inata Project Facility prior to the
expiry of the non-acceleration undertaking given by Macquarie Bank, assuming
that the Offer is declared unconditional in all respects. The Inata Project
Facility will have no recourse to Avocet Mining, and therefore Macquarie Bank
cannot require Avocet Mining to repay the loan, at any time.
There can be no certainty that Avocet Mining, Wega Mining, Resolute and SMB will
be able to satisfy and be in compliance with all agreements entered into and
undertakings provided by them prior to 31 July 2009 in respect of existing
events of default or in respect of events following the date of this document
which may be considered breaches of debt covenants or events of default by
Macquarie Bank. If either situation were to occur, then Macquarie Bank would
have the right to demand the acceleration of payment of the obligations or
enforce any other remedies set out in the Inata Project Facility, including but
not limited to exercising its security over the Inata Project and/or
intercompany loans.
The Board of Avocet Mining believes that the successful development of the Inata
Project is in the best interests of both Avocet Mining and Macquarie Bank, and
furthermore that Avocet Mining's long relationship with Macquarie Bank, dating
back to the building of the Penjom gold mine in 1995, will allow both parties to
work towards this goal in preference to any other outcome. However, if either of
the above situations were to occur, and in the event that Macquarie Bank was to
exercise its right of acceleration, Avocet Mining's Board is confident of its
ability to secure alternative debt funding.
Regulatory, political and environmental risk
Regulatory and political risk
The Enlarged Group has Licences, exploration and/or development projects in
foreign countries. Therefore the Enlarged Group's activities are exposed to
varying degrees of political and economic risks and other risks and
uncertainties. These risks and uncertainties vary from country to country and
include, but are not limited to, risk of war or civil unrest, expropriation and
nationalisation, renegotiation or nullification of existing concessions,
licences, permits and contracts, illegal mining, changes in taxation policies,
restrictions on foreign exchange and repatriation, changing political
conditions, currency controls and governmental regulations that favour or
require the awarding of contracts to local contractors or require foreign
contractors to employ citizens of, or purchase of supplies from a particular
jurisdiction.
The exploration, development and operating activities of the Enlarged Group are
generally subject to various laws or regulations governing exploration,
development, mining, processing, taxes, labour standards and occupational health
and safety, toxic substances, use of motorised machinery, land use, water use,
and land claims of local people and protection of the environment and cultural
monuments and other matters. Although the Company and Wega Mining believe to the
best of their knowledge that their activities are currently being carried out in
accordance with all applicable laws, no assurance can be given that new rules
and regulations will not be enacted or that existing rules and regulations will
not be applied in a manner which could limit or curtail production or
development. Amendments to current laws and regulations governing exploration,
development and operating activities or more stringent implementation thereof,
could have a substantial adverse impact on the Enlarged Group.
Changes in exploration, mining or investment policies or shifts in political
attitude could materially adversely impact the Enlarged Group's financial
results. The Company's accounting policy in respect of exploration is that all
costs associated with mineral exploration including those incurred through joint
venture projects are capitalised within non-current intangible assets pending
determination of the project's feasibility. If an exploration project is deemed
to be economically viable based on feasibility studies, the related expenditures
are transferred to property, plant and equipment and amortised over the life of
the mine on a unit of production basis. Where a project is abandoned or is
considered to be no longer economically viable, the related costs are written
off. The Enlarged Group's operations may be affected in varying degrees by
government regulations with respect to, for example, restrictions on
exploration, development, processing, price controls, export controls, currency
remittance, income taxes, expropriation of property foreign investment,
maintenance of claims, environmental legislation, land use, land claims of local
people, water use and mine safety. Projects in respect of which the Company
currently holds amounts capitalised within non-current intangible assets in the
expectation of obtaining appropriate permits include Bakan, Doup, Seruyung and
Tanoyan in Indonesia. There is no certainty that these projects will be
permitted in order for development of a mine and there is therefore a risk of
significant impairments in the future. Failure to comply strictly with
applicable laws, regulations and local practices relating to mineral right
applications and tenure could result in loss, reduction or expropriation of
entitlements, or the imposition of additional local or foreign parties as joint
venture partners with carried or other interests.
Legislative Changes
Changes in government regulations and policies in Malaysia, Indonesia, Burkina
Faso or elsewhere may adversely affect the financial or other performance of the
Enlarged Group.
Country Risk
The Enlarged Group's primary assets are located in Malaysia, Indonesia and
Burkina Faso, which introduce both sovereign and Malaysian, Indonesian and
Burkinabe domestic economic risk issues to investors owning the New Avocet
Mining Shares. Investors in the Enlarged Group should be aware of the specific
country risk issues associated with Malaysia, Indonesia and Burkina Faso.
As with other companies having operations in Malaysia, Indonesia and Burkina
Faso, the Enlarged Group's operations are closely linked to the economic
fundamentals and political stability of Malaysia, Indonesia and Burkina Faso.
Any adverse developments or uncertainties in the political and economic
environment in Malaysia, Indonesia and/or Burkina Faso may materially adversely
affect the business, financial condition and results of operations of the
Enlarged Group. Such developments could include social or civil unrest, outbreak
of hostility with an external party, unfavourable changes in the policies of the
Malaysian, Indonesian or Burkina Faso governments or changes in regulation and
legislation. In addition, other political uncertainties include but are not
limited to the risk of expropriation and nationalisation. If any of these events
(or similar events) were to occur, there may be an adverse effect on the
Enlarged Group's business, financial condition and results of operations, as
well as on any investment in the New Avocet Mining Shares.
Environmental risk
The Enlarged Group's operations are subject to environmental regulation in the
various jurisdictions where the Enlarged Group operates. These regulations
mandate, among other things, the maintenance of air and water quality standards
and land reclamation. They also set forth limitations on the generation,
transportation, storage and disposal of solid and hazardous waste. Environmental
legislation is evolving in a manner which may require stricter standards of
enforcement, increased fines and penalties for non-compliance, more stringent
environmental assessments of proposed projects and a heightened degree of
responsibility from companies and their officers, directors or employees. There
is no assurance that future changes in environmental regulations, if any, will
not adversely affect the Enlarged Group's operations.
In addition, the Enlarged Group may be subject to significant fines and
penalties if it does not comply with environmental laws and regulations
including those referred to above, many of them relating to the discharge of
hazardous substances and the protection of the environment. Environmental
remediation and mine closure costs could be significant and cause the Enlarged
Group to incur a substantial loss.
Risks related to the shares
Volatility of the share price
The trading price of the Ordinary Shares could fluctuate significantly in
response to variations in operating results, general economic outlook, adverse
business developments, interest rate changes, changes in financial estimates by
securities analysts, matters announced in respect of commodity prices or
competitors or changes to the regulatory environment in which the Enlarged Group
operates.
Market conditions may affect the Ordinary Shares regardless of Enlarged Group's
operating performance or the overall performance of the mineral exploration and
development sector. Accordingly, the market price of the shares may not reflect
the underlying value of Enlarged Group's net assets, and the price at which
investors may dispose of their shares at any point in time may be influenced by
a number of factors, only some of which may pertain to the Enlarged Group, while
others of which may be outside the Enlarged Group's control.
The market price of the Ordinary Shares could decline due to sales of a large
number of shares in the Company in the market or the perception that such sales
could occur.
Liquidity of the shares
The Company's shares are listed on AIM. This should not be taken as implying
that there will always be a liquid market for the shares. An investment in the
shares may thus be difficult to realise. Investors should be aware that the
value of the shares may be volatile and may go down as well as up. Investors
may, on disposing of the shares, realise less than their original investment or
may lose their entire investment.
Shareholders may be diluted if they are unable to participate in potential
future equity offerings. In order to pursue its strategy, the Company may elect
to raise further funding through future equity offerings. Certain investors may
be unable to participate in potential future equity offerings, due to the
disapplication of shareholders' pre-emptive rights in order to raise equity at
short notice in the investor market, or for reasons relating to foreign
securities laws or other factors. Shareholders unable to participate in
potential future equity offerings may therefore see their shareholding in the
Enlarged Group diluted.
Risks related to the Offer
Should Wega Mining's financial situation or results not conform to Avocet
Mining's expectations, the Company may be required to incur significant fair
value adjustments or impairment charges against the value of assets acquired.
Should a significant number of Wega Mining Shareholders decide to sell the New
Avocet Mining Shares they will receive upon completion of the Offer, this could
adversely affect the Avocet Mining share price.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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Avocet Mining (LSE:AVM)
過去 株価チャート
から 7 2024 まで 8 2024
Avocet Mining (LSE:AVM)
過去 株価チャート
から 8 2023 まで 8 2024
