TIDMAVM
RNS Number : 5695Y
Avocet Mining PLC
24 December 2010
AVOCET MINING ANNOUNCES CONDITIONAL SALE OF SOUTH EAST ASIAN
ASSETS FOR US$200 MILLION CASH
Avocet Mining PLC ("Avocet" or "the Company") announces that it
has signed a binding agreement for the conditional sale of its
South East Asian assets to J&Partners, L.P., a private Cayman
Islands company, for a cash consideration of US$200 million. The
South East Asian assets, details of which are provided below,
include: the Penjom mine in Malaysia; the North Lanut mine and
Bakan project in North Sulawesi, Indonesia; and a number of
exploration properties in Indonesia.
J&Partners, L.P. ("J&Partners") is a mining fund
established by Mr Jimmy Budiarto, a member of the Indonesian family
that in November 2009 sold its interest in Indonesia's second
largest mining contractor, PT Bukit Makmur Mandiri Utama (BUMA).
The principals in J&Partners are Mr Jimmy Budiarto and Mr Chris
Hui, former Head of Investment Banking for Barclays Capital in
China and Hong Kong.
Completion is conditional on government agency approvals and
other conditions precedent, with the result that completion is not
guaranteed. The transaction with J&Partners is also subject to
certain rights of first refusal ("ROFR") held by minority interest
parties, the exercise and outcome of which cannot easily be
predicted. In particular, PT Lebong Tandai ("PTLT") owns a 20 per
cent interest in PT Avocet Bolaang Mongondow ("PT ABM") and holds a
ROFR over the Company's 80 per cent interest in PT ABM. PT ABM
holds the Contract of Work for the North Lanut mine and Bakan
project. Further details of the transaction with J&Partners and
of PT Lebong Tandai's ROFR are provided below.
The transaction with J&Partners is the result of a strategic
review of the Company's business in South East Asia aimed at
maximising the value of the assets for Avocet's shareholders. Its
completion would leave Avocet as a West African gold producer with
a clear strategy of growth in that region, holding no further
assets in South East Asia. Decisions about the use of proceeds will
be taken following completion of the transaction, which is expected
to occur in Q2 2011.
Avocet Mining will host a conference call on Friday 24 December
2010 at 09:00am (London, UK time) to discuss the conditional sale
of its South East Asian assets. Participants may join the call by
dialling one of the following three numbers, approximately 10
minutes before the start of the call.
From UK (toll free): 0808 238 7396
From Norway (toll free): 800 187 79
From rest of world: + 44 20 3364 5947
Participant pass code: 936500#
Commenting on the agreement, Avocet's Chief Executive Officer,
Brett Richards stated:
"This agreement represents progress on one of the Company's
strategic objectives for 2010, and is aimed at allowing us to focus
on building a bigger business in West Africa, while capturing real
value for our shareholders from the assets in South East Asia. We
believe J&Partners has the ability to realise the potential of
these assets and will best serve the interests of the employees and
communities vested in these assets. As well as completing this
transaction in South East Asia, our strategic objectives in West
Africa include plant enhancements at Inata to underpin increased
life of mine production, and an aggressive exploration campaign in
both Burkina Faso and Guinea."
Details of the transaction with J&Partners and PT Lebong
Tandai's ROFR
The binding agreement has been reached after a four month period
of technical due diligence carried out on behalf of J&Partners
by UK and Australian mining consultants, as well as financial and
legal due diligence. As part of this transaction J&Partners has
paid an initial consideration of US$10 million into an escrow
account. A second tranche of US$100 million is due to be paid into
escrow at the end of February and the remaining consideration is
payable upon completion. Total consideration is US$200 million on a
cash free and debt free basis. After adjustments for working
capital and cash at completion, actual proceeds may be greater than
or less than US$200 million.
In the event that PTLT elected to exercise its ROFR, PTLT would
be required to complete the acquisition of Avocet's interest in PT
ABM for US$120 million in cash by 21 March 2011, in order to match
the cash amount agreed with J&Partners. In this instance, the
transaction with J&Partners would lapse and Avocet would retain
Penjom and the other exploration assets, together with US$120
million proceeds from the sale of PT ABM.
The Company expects that certain employees would receive a bonus
in respect of this transaction, conditional on its completion and
dependent on the proceeds received.
Completion of the transaction with J&Partners for the sale
of the South East Asian assets as a whole would generate a pre-tax
profit of approximately US$100 million.
Standard Chartered Bank has acted as financial adviser to Avocet
on this transaction. J&Partners were advised by Macquarie
Capital (Singapore) Pte. Limited.
The counsels acting for Avocet were Field Fisher Waterhouse LLP
and Hadiputranto Hadinoto & Partners while O'Melveny &
Myers LLP and Susanto & Partners acted for J&Partners.
Details of the South East Asian assets
The principal assets contained within the agreement are as
follows:
-- 100 per cent interest in the Penjom mine in Malaysia;
-- 80 per cent interest in PT ABM, which holds the Contract of
Work for the North Lanut mine and the Bakan exploration
project;
-- 51 per cent interest in the Izin Usaha Pertambangan ("IUP" or
exploration licence company) for the Seruyung exploration
property;
-- 60 per cent interest in the IUP for the Doup exploration
property;
-- 75 per cent interest in PT Gorontalo Sejahtera Mining,
including the Pani prospect.
-- 100 per cent interest in PT Avocet Mining Services.
-- 100 per cent interest in Avocet Mining (Malaysia) OHQ Sdn.
Bhd.
Together these assets have approximately 1,000 employees.
Financial and production figures extracted from the third
quarter report announced by Avocet on 5 November 2010 in respect of
the South East Asian assets are shown below. Further details are
disclosed in the Company's segmental analysis in its annual and
quarterly reports, including income statement and balance sheet
information for the Malaysia and Indonesia geographic segments.
Penjom - Malaysia
Nine months Nine months
Quarter ended Quarter ended ended ended
30 Sep 2010 30 Jun 2010 30 Sep 2010 30 Sep 2009
Unaudited Unaudited Unaudited Unaudited
================ ============== ============== ============= =============
Production
statistics
Ore mined
(tonnes) 127,000 51,000 283,000 886,000
Waste mined
(tonnes) 3,871,000 4,115,000 11,721,000 13,118,000
Ore and waste
mined
(tonnes) 3,998,000 4,166,000 12,004,000 14,004,000
Ore processed
(tonnes) 193,000 187,000 565,000 545,000
Average ore
head grade
(g/t Au) 2.86 2.21 2.62 3.33
Process
recovery rate 85% 79% 82% 82%
================ ============== ============== ============= =============
Gold produced
(ounces) 15,020 10,461 39,150 48,142
================ ============== ============== ============= =============
Cash costs
(US$/oz)
- mining 517 682 549 398
- processing 201 293 231 171
- royalties and
overheads 123 144 127 104
================ ============== ============== ============= =============
Total cash cost
(US$/oz) 841 1,119 907 673
================ ============== ============== ============= =============
Gold production at Penjom increased significantly in the third
quarter, after intensive waste stripping in the first six months of
the year, and as higher grade ores were accessed, notably at the
Jalis zone. Ore mined therefore improved in both tonnages and in
grade, and mill feed also improved as increased quantities of
higher grade ore was able to be sourced directly from the pit,
rather than drawing on the lower grade stockpiles as in previous
periods. Higher production resulted in a drop of 25 per cent in the
cash costs per ounce reported compared with the second quarter of
the year.
North Lanut - Indonesia
Nine months Nine months
Quarter ended Quarter ended ended ended
30 Sep 2010 30 Jun 2010 30 Sep 2010 30 Sep 2009
Unaudited Unaudited Unaudited Unaudited
================ ============== ============== ============= =============
Production
statistics
Ore mined
(tonnes) 305,000 295,000 1,015,000 1,034,000
Waste mined
(tonnes) 380,000 428,000 1,200,000 1,710,000
Ore and waste
mined
(tonnes) 685,000 723,000 2,215,000 2,744,000
Ore processed
(tonnes) 368,000 267,000 900,000 916,000
Average ore
head grade
(g/t Au) 1.92 1.70 1.86 1.81
Process
recovery rate 54% 77% 65% 67%
================ ============== ============== ============= =============
Gold produced
(ounces) 12,311 11,184 34,865 35,529
================ ============== ============== ============= =============
Cash costs
(US$/oz)
- mining 329 343 334 270
- processing 177 172 168 120
- royalties and
overheads 151 163 155 109
================ ============== ============== ============= =============
Total cash cost
(US$/oz) 657 678 657 499
================ ============== ============== ============= =============
Gold production at North Lanut rose 10 per cent compared with
the previous quarter, due to increased leach pad availability
allowing for higher ore tonnages to be processed. Grades were also
improved as mining accessed higher grade areas at depth in the
Rasik pits. The initial low process recovery rate of 54 per cent
reflects the fact that high ore tonnes were placed on the leach pad
towards the end of the quarter, from which only a small proportion
of gold had leached out by the end of September. The gold from this
ore will continue to be recovered in the fourth quarter. Higher
gold production meant that cash cost per ounce was slightly below
the previous quarter.
North Lanut's excellent safety record continues, with the
operation having worked over 15 million lost time injury free
hours.
South East Asian Exploration
During the third quarter of 2010 exploration in South East Asia
focused on advancing the Doup and Seruyung projects, with drilling
commencing in August and September, respectively. Diamond drilling
at Doup is focussed on infill drilling on the Panang zone where the
metallurgy is simpler. The aim of this programme is to evaluate the
continuity of higher-grade gold zones and facilitate an estimate of
Measured and Indicated Mineral Resources. This will enable the
estimation of Mineral Reserves and the first economic evaluation of
the project.
At Seruyung, the Company has mobilised two diamond drill rigs to
commence the first phase infill drilling programme of the Main
Silica Cap zone, which forms the core of the project. This will
allow the estimation of Inferred Mineral Resources and facilitate
an understanding of the scope and scale of the project.
For further information please contact:
Avocet Mining PLC Buchanan Ambrian Partners Limited J.P. Morgan Arctic
Communications Cazenove Securities
Financial PR NOMAD and Joint Broker Financial
Consultants Lead Broker Adviser
Brett
Richards,
CEO Mike
Norris, FD
Hans-Arne
L'orange,
EVP Business
Development
& Investor Bobby Morse Katharine Sutton Richard Michael Wentworth-Stanley Niklas Kloepfer Arne
Relations Brown Wenger
+44 20
+44 20 7766 +44 20 7466 5000 +44 7872 604783 7634 +47 2101
7676 4700 +44 20 7588 2828 3100
www.avocet. www.buchanan.u www.ambr www.jpmorgancazen www.arctic
co.uk k.com ian.com ove.com sec.no
-------------------------------------- ----------------------------------------- ----------------------------------- ------------------------------------------- ------------------------------------
Notes to Editors
Avocet Mining PLC ("Avocet" or "the Company") is a gold mining
company listed on the AIM market of the London Stock Exchange
(Ticker: AVM.L) and the Oslo Bors (Ticker: AVM.OL). The Company's
principal activities are gold mining and exploration in Burkina
Faso (as 90 per cent owner of the Inata gold mine), Malaysia (as
100 per cent owner of the Penjom gold mine, the country's largest
gold producer) and Indonesia (as 80 per cent owner of the North
Lanut gold mine and Bakan project in North Sulawesi).
Background to operations
The Inata deposit presently comprises a Mineral Resource of 1.84
million ounces and a Mineral Reserve of 1.08 million ounces. Inata
poured its first gold in December 2009 and has now reached a
production rate in excess of 12,000 ounces per month. Other assets
in West Africa include exploration permits in Burkina Faso (the
most advanced being the Souma trend at Belahouro with a Mineral
Resource of 561,100 ounces), Mali and Guinea (the most advanced
being the Tri-K gold exploration project with a Mineral Resource of
666,500 ounces).
Penjom is Malaysia's largest gold mine and was developed by
Avocet in an area of historic alluvial mining. The mine is located
in Pahang State, approximately 120 km north of the country's
capital, Kuala Lumpur.
North Lanut in North Sulawesi, Indonesia, was developed by
Avocet from the exploration stage and has produced over 300,000
ounces since it was commissioned in 2004. North Lanut is located
within a Contract of Work, which includes exploration and mining
rights over approximately 50,000 hectares in an area highly
prospective for gold. Avocet holds an 80 per cent interest and an
Indonesian company, PT Lebong Tandai, owns the remaining 20 per
cent.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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