TIDMAVM
RNS Number : 0790O
Avocet Mining PLC
22 May 2015
Increase in short term loan arrangement with Elliott and posting
of a Circular, Notice of General Meeting and Notice of Annual
General Meeting
Increase in the short term loan arrangement with Elliott and
posting of the Circular and Notice of General Meeting
Avocet Mining PLC ("Avocet" or "the Company") announces that
further to the Company's announcement of 24 April 2015, Manchester
Securities Corp. ("the Elliott Lender"), an affiliate of the
Company's largest shareholder, Elliott Management Corporation
("Elliott"), which is interested in approximately 27.69% of the
Company's issued share capital (comprising a direct interest in
ordinary shares amounting to approximately 13.51% of the total
voting rights in the Company and a purely economic interest,
without voting rights, in approximately 14.18% of the total number
of ordinary shares with voting rights), has agreed, subject to
certain conditions precedent, to increase the amount available
pursuant to the US$2.1 million loan announced on 24 April 2015
("the Third Elliott Loan Facility") up to, in aggregate, US$2.4
million. The increase is to provide additional working capital to
the Company in respect of finalising the security to be provided to
the Elliott Lender pursuant to the Third Elliott Loan Facility.
In addition, as detailed below, the Company has now agreed the
security to be provided to the Elliott Lender in respect of the
Third Elliott Loan Facility ("the Elliott Security"). The provision
of the Elliott Security is a related party transaction, as defined
in Chapter 11 of the Listing Rules, by virtue of Elliott's interest
in approximately 13.51% of the Company's ordinary shares, and
accordingly, the grant of the Elliott Security requires the
approval of the Company's shareholders, other than Elliott, at a
general meeting. Accordingly, the Company will today post a
circular to shareholders ("the Circular") convening a general
meeting of the Company to be held at 4.00 p.m. on 19 June 2015
("General Meeting"), seeking approval for, inter alia, the grant of
the Elliott Security.
Posting of Notice of Annual General Meeting
The Company also announces that the Notice of Annual General
Meeting 2015 ("AGM") and related forms of proxy will today be
posted to those shareholders who have elected to receive it in hard
copy.
Availability of Circular and Notices of Shareholder Meetings
In compliance with LR9.6.1, a copy of both the Notice of AGM and
the Circular and Notice of General Meeting will shortly be
available for inspection at the Financial Conduct Authority's
National Storage Mechanism website http://www.hemscott.com/nsm.do
and will also be available on the Company's website at
www.avocetmining.com.
The expected timetable of events relating to the Shareholder
Meetings is as follows:
Annual General Meeting General Meeting
-------------------------------------------- ------------------------- ---------------------------------------------
Latest time and date for receipt of a Form 3.30 p.m. on 17 June 2015 4.00 p.m. on 17 June 2015
of Proxy
-------------------------------------------- ------------------------- ---------------------------------------------
Latest time and date for receipt of a CREST 3.30 p.m. on 17 June 2015 4.00 p.m. on 17 June 2015
proxy instruction
-------------------------------------------- ------------------------- ---------------------------------------------
Time of meeting 3.30 p.m. on 19 June 2015 4.00 p.m. on 19 June 2015
or if later, immediately following the AGM on
the same day
-------------------------------------------- ------------------------- ---------------------------------------------
Background to the Third Elliott Loan Facility
The Third Elliott Loan Facility is required to provide funding
for Avocet's corporate activities through to September 2015 in the
absence of alternative sources of financing. As Shareholders are
aware, the Company's Inata mine in Burkina Faso has, as a result of
the weak gold market and Inata's disappointing operational
performance in the last three years, been unable to generate
material additional cash flows for the Company over and above its
obligations pursuant to the Ecobank loan facility. As a result, the
Company initiated a business review in December 2013 to consider
options for maximising the value of its assets for the benefit of
shareholders, including its Inata mine and the adjacent Souma
deposit in Burkina Faso, and its Tri-K development project in
Guinea. This was with a view to repaying the first loan of US$15.0
million provided by the Elliott Lender in March 2013, which is now
repayable on demand. During this period the Company has, other than
the GBP0.7 million placing in August 2014, not been able to raise
sufficient equity to provide funding for its corporate
purposes.
In the absence of funding from Inata or the capital markets,
loans from the Elliott Lender have therefore been an appropriate
source of funding for the Company while it has been seeking to
conclude its business review and to progress its Tri-K project
towards development. The Board is of the view that the development
of a heap leach mine at Tri-K should add value for shareholders. It
also believes that positive announcements on financing for Tri-K
will be a trigger event in making financing more readily available
for the Company, both for construction of a mine and for corporate
purposes.
The Company announced on 21 January 2015 that it had entered
into a further short term loan with the Elliott Lender for US$1.5
million, which is repayable on demand and was expected to meet the
Company's corporate requirements for approximately three months. As
those funds have now been fully utilised, the Company entered into
the Third Elliott Loan Facility and drew down the initial facility
of US$1.5 million on 24 April 2015 ("Initial Facility"). Following
the draw down of the initial facility, the Company now has loans
with a principal value outstanding to the Elliott Lender amounting
to, in aggregate, US$18.0 million, all of which are repayable on
demand.
The Elliott Lender has requested certain security against
performance of the Company's obligations pursuant to the Third
Elliott Loan Facility. Under the terms of the Third Elliott Loan
Facility, therefore, the passing of the resolutions at the General
Meeting and the finalisation of the Elliott Security are conditions
precedent for the availability of each of the Second Facility and
the Third Facility.
Further information on the Third Elliott Loan Facility
As announced on 24 April 2015, the Company entered into a
further loan with Elliott (the Third Elliott Loan Facility) for up
to, in aggregate, US$2.1 million. The Company today announces that
the Elliott Lender has agreed, conditional upon the passing of the
resolutions at the General Meeting, that the Third Elliott Loan
Facility will be amended such that the amount available pursuant to
the Third Elliott Loan Facility will be increased up to, in
aggregate, US$2.4 million, with the amount available pursuant to
the Second Facility to be increased from US$1.5 million to up to
US$1.8 million. The increase to the Third Elliott Loan Facility is
to provide additional working capital to the Company in respect of
finalising the Elliott Security in respect of any notary,
registration or other costs and associated expenses to be incurred
following the passing of the resolutions.
The Third Elliott Loan Facility for up to, in aggregate, US$2.4
million, comprises three separate facilities, being:
-- an initial facility of US$1.5 million which was drawn down on
24 April 2015 ("the Initial Facility");
-- a second facility, subject to passing of the resolutions and
finalisation of the Elliott Security, of up to US$1.8 million to
provide additional working capital of up to US$0.3 million to the
Company in respect of finalising the Elliott Security and used to
replace the Initial Facility ("the Second Facility"). In the event
that the additional costs of finalising the Elliott Security are
less than US$0.3 million, the amount to be drawn down pursuant to
the Second Facility will be reduced by such amount; and
-- a third facility of, in aggregate, US$0.6 million comprising
three tranches of US$0.2 million each which, following approval of
the Resolutions and finalisation of the Elliott Security may be
drawn down on or about the first business day of each of July,
August and September 2015, at the sole discretion of the Elliott
Lender at the time of each respective draw down request ("the Third
Facility").
Accordingly, the Third Elliott Loan Facility, on the basis the
Company is able to draw it down in full, is expected to provide
funding for the Company's corporate activities through to the end
of September 2015 and is intended to allow the Company to continue
its business review, while exploring longer term funding options,
including enabling the Company to complete its plans for financing
and developing the Tri-K project.
The Initial Facility, which was drawn down on 24 April 2015, is
unsecured while the Second Facility and Third Facility will,
subject to independent shareholder approval at the General Meeting,
be secured as described below. All amounts drawn under the Third
Elliott Loan Facility are repayable on demand and will incur
interest at a rate of 12%.
Following the draw down of the Initial Facility, the Company now
has loans with a principal value outstanding to Elliott amounting
to, in aggregate, US$18.0 million, all of which are repayable on
demand.
Following approval of the resolutions at the General Meeting and
finalisation of the Elliott Security, the unsecured Initial
Facility will immediately be repaid and replaced by the secured
Second Facility. The Third Facility is an uncommitted facility
providing for three draw downs, each of US$0.2 million, on or about
the first business day of each of July, August and September 2015,
at the sole discretion of the Elliott Lender at the time of each
respective draw down request. In the event the resolutions are not
approved, the Company will not be able to draw down the Second
Facility or Third Facility and the Initial Facility will remain in
place.
Subject to the above, assuming the Third Elliott Loan Facility
is drawn down in full, the Company would at that time have loans
with a principal value outstanding to Elliott amounting to, in
aggregate, US$18.9 million, all of which would be repayable on
demand.
The Company currently anticipates that the US$1.5 million drawn
down under the Initial Facility on 24 April 2105 will provide the
Company with sufficient funds for its corporate activities through
to the end of June 2015. Accordingly, Shareholders should note that
in the event the Resolutions are not approved at the General
Meeting on 19 June 2015 or in the event that the Elliott Security
is not finalised, while the Initial Facility, which is repayable on
demand, will remain in place, the Second Facility and the further
US$0.6 million available pursuant to the Third Facility will not be
capable of being drawn down. In addition, should the Elliott Lender
not agree to the draw down of one or more of the tranches available
pursuant to the Third Facility, the Company would not receive the
required funds.
Accordingly, if any of the events described in the preceding
paragraph were to occur, the Company would need immediately to seek
to secure alternative sources of funds to enable it to fund its
corporate activities in the period immediately following the
General Meeting. The Directors are unable to provide any assurance
that any alternative financing or re-financing could immediately be
secured or, that if it were secured, it would be on terms as
favourable to the Company or would not result in a substantial
dilution of Shareholders' interests. If no funds were immediately
available, it is highly likely that the Company would cease to be
able to trade, in which circumstances it is unlikely that there
would be any value attributable to Shareholders. Even if financing
were immediately available and the Company were able to continue
trading, the Directors believe that the circumstances of such
financing could result in a material adverse effect on the share
price of the Company.
The Elliott Security
In addition to the guarantees described below, the Second
Facility and Third Facility will be secured, following passing of
the resolutions, by:
-- a share charge in favour of the Elliott Lender granted by the
Company over shares held by the Company in the share capital of
Wega Mining AS ("Wega Norway"), a wholly-owned subsidiary of the
Company in Norway which holds the Group's interests in Resolute
(West Africa) Ltd. ("Resolute") and Wega Mining Guinée SA ("Wega
Mining");
-- a share charge in favour of the Elliott Lender granted by
Wega Norway over shares held by Wega Norway in the share capital of
Resolute, the Group's wholly owned Jersey subsidiary that holds
Avocet's interests in Société des Mines de Bélahouro SA ("SMB") and
Goldbelt Resources West Africa SARL ("GRWA");
-- a share charge in favour of the Elliott Lender granted by
Resolute over shares held by Resolute in GRWA, the Group's wholly
owned Burkina Faso subsidiary that currently holds eight
exploration licences in the Bélahouro district surrounding the
Inata mining licence area;
-- a share charge in favour of the Elliott Lender granted by
Resolute over shares held by Resolute in SMB, the company that
holds the Inata mining licence in Burkina Faso and in which the
Company has a 90% interest;
-- security in favour of the Elliott Lender over intercompany
receivables owed by SMB to the Company;
-- security in favour of the Elliott Lender over intercompany
receivables owed by SMB to Wega Norway;
-- security in favour of the Elliott Lender over intercompany
receivables owed by SMB to GRWA;
-- security in favour of the Elliott Lender over the exploration licences of GRWA; and
-- security in favour of the Elliott Lender over certain assets
of SMB not currently encumbered in favour of Ecobank or subject to
the restrictions on the grant of security contained in the Ecobank
Loan Facility.
Following passing of the resolutions, the Company, Wega Norway,
Resolute, SMB and GRWA will be obliged to grant the above security
and the guarantees described below.
The security arrangements will be subject to board approval by
each of the relevant entities. In the case of SMB, the SMB board
includes representatives of the Government of Burkina Faso. The
Elliott Lender has the right, in its absolute discretion, to waive
any of the security required.
All amounts outstanding under the Second Facility and/or the
Third Facility will be supported by a guarantee and indemnity from
Wega Norway, Resolute, SMB and GRWA. Any such indemnities granted
by any member of the Group will be limited in the manner set out in
Clause 13.4 of the Facility Agreement (which provides that
indemnities shall be limited to the extent required to comply with
paragraph 10.2.4 of the Listing Rules of the FCA). The guarantee
and indemnity granted by Wega Norway will also be limited in a
similar manner to that included in Clause 15.10 of the First
Elliott Loan Facility (which provides that the guarantee and
indemnity shall be limited if required by the provisions in Chapter
8 III of the Norwegian Companies Act 1997).
Financing for the remainder of 2015
Assuming the resolutions are approved at the General Meeting and
that the Third Elliott Loan Facility is drawn in full as it becomes
available, the Directors believe that the Company will have
sufficient funds available to it for its corporate activities until
the end of September 2015. During this time the Company expects to
complete its plans for financing and developing the Tri-K project
in Guinea and that the programme of exploration drilling and
metallurgical test work at Souma in Burkina Faso, which commenced
in April 2015, will be completed.
The Board believes that the activities at Tri-K and Souma should
generate value for the Group during the period up to the end of
September 2015 that will help underline the significant value to be
realised from the Group's portfolio of assets. It also believes
that undertaking the value-generative initiatives at Tri-K and
Souma should assist the Group in its discussions regarding future
financing, both for development of its projects and for corporate
purposes including repaying the Elliott Loans, which are repayable
on demand. With this in mind, the Company will continue to explore
the options available to secure longer-term funding for the
remainder of 2015 and beyond. However, as with any company, the
ability of the Group to secure new financing in the future is
dependent on a number of factors, including general economic,
political and capital market conditions, and credit availability
and accordingly there can be no certainty that the Company will be
able to raise the necessary funds for its corporate activities or
for the development of its projects.
Proposed amendment to the Company's articles of association and
consideration of Section 656 of the Companies Act
The Circular also includes details relating to the proposed
amendment of the Company's articles of association, to be approved
at the General Meeting, to enable the Company to secure further
debt funding and ensure a sufficient level of permitted borrowings
going forward to satisfy the Group's current and future
requirements, which includes the ability to draw down the Second
Facility and the Third Facility. In the event that shareholders do
not approve the amendment to the Company's articles, the Company
would be prevented from obtaining future debt funding that might be
critical to the Company and the Directors would regard that as an
indication that shareholders were unwilling to support a further
increase in the Company's debt and, as a consequence, they would
not proceed to draw down the Second Facility or Third Facility. In
such circumstances, the Directors would be obliged to seek
alternative sources of funding for the Company as described above,
but without recourse to further debt.
In addition, the Circular also includes information relating to
the consideration of section 656 of the Companies Act, following
publication of the Group's financial results for the year ended 31
December 2014 which showed that the Company's net assets are now
less than half of its called up share capital, and what steps
should be taken by the Company, if any, to deal with the
situation.
Further details of these matters are set out in the
Circular.
FOR FURTHER INFORMATION PLEASE CONTACT
Avocet Mining PLC Bell Pottinger J.P. Morgan Cazenove Strand Hanson Limited
Financial PR Consultants Corporate Broker Sponsor
David Cather, CEO Daniel Thöle Michael Wentworth-Stanley Richard Tulloch
Mike Norris, FD Andrew Emmott
+44 203 709 2570 +44 20 2772 2500 +44 20 7742 4000 +44 20 7409 3494
NOTES TO EDITORS
Avocet Mining PLC ("Avocet" or the "Company") is an unhedged
gold mining and exploration company listed on the London Stock
Exchange (ticker: AVM.L) and the Oslo Børs (ticker: AVM.OL). The
Company's principal activities are gold mining and exploration in
West Africa.
In Burkina Faso the Company owns 90% of the Inata Gold Mine. The
Inata Gold Mine poured its first gold in December 2009 and produced
86,037 ounces of gold in 2014. Other assets in Burkina Faso include
eight exploration permits surrounding the Inata Gold Mine in the
broader Bélahouro region. The most advanced of these projects is
Souma, some 20 kilometres from the Inata Gold Mine.
In Guinea, Avocet owns 100% of the Tri-K Project in the north
east of the country. Drilling to date has outlined a Mineral
Resource of 3.0 million ounces, and in October 2013 the Company
announced a maiden Ore Reserve on the oxide portion of the orebody,
which is suitable for heap leaching, of 0.5 million ounces. As an
alternative, the potential exists to exploit the entire 3.0 million
ounce Tri-K orebody via the CIL processing method. The Company
announced on 2 April 2015 that an exploitation permit had been
awarded for Tri-K.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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