TIDMAVM
RNS Number : 0736M
Avocet Mining PLC
10 October 2016
10 October 2016
Joint Venture with Managem over the
Tri-K project in Guinea
Overview
Avocet Mining PLC ("Avocet" or "the Company") today announces
that it has entered into a conditional Joint Venture agreement
regarding its gold project in Guinea, known as Tri-K, with a
subsidiary of Managem SA ("Managem"), a Moroccan mining group
listed on the Casablanca stock exchange.
Tri-K currently has a measured and indicated gold mineral
resource of 2.0 million ounces (41.3Mt at 1.51g/t) and an inferred
gold mineral resource of 1.0 million ounces (25.2Mt at 1.26g/t)
(0.5 g/t cut off). In 2013, Avocet announced a proven and probable
reserve of 0.48 million ounces (7.9 Mt at 1.89g/t) as part of a
feasibility study based on a heap leach operation. In March 2015, a
mining permit for the Tri-K project was granted by the Guinean
government.
Managem has agreed conditionally to acquire an initial minority
interest in the Tri-K project which will increase to a majority
interest of up to 70%, on completion of an agreed work programme
and subject to meeting certain milestones.
Managem has committed conditionally to a total investment of at
least US$14.0 million, consisting of an initial cash payment to
Avocet of US$4 million, and a commitment to undertake a works
programme costing at least US$10 million, in order to deliver,
within 24 months, a Bankable Feasibility Study ("BFS") for a
Carbon-in-Leach ("CIL") operation at the site, with an Ore Reserve
of at least 1 million ounces. If the Ore Reserve defined in the BFS
is less than 1 million ounces, Managem's ownership will be limited
to 60%. Avocet retains the option to repurchase from Managem its
equity and intragroup loans associated with the project and resume
full ownership, should the work programme not be completed.
David Cather, Chief Executive Officer of Avocet Mining PLC,
commented:
"We are pleased to be able to join forces with a group with
Managem's track record and capabilities, particularly in Guinea. We
have been looking to raise financing for the Tri-K project for some
time during a difficult period for the mining sector as a whole as
well as for Guinea in particular (including the ebola crisis), and
we are therefore delighted to confirm that this project is now able
to move forwards.
The Managem proposition is particularly attractive for both
parties, as the CIL project it envisages will be considerably
larger than the heap leach operation set out in the initial
feasibility study. Both parties have worked closely to finalise the
terms of the transaction, and have been fully supported by the
Guinean government, notably through the recent extension to the
deadlines for work to commence at the site.
Completing this transaction will also herald a major milestone
in Avocet's turnaround strategy with one of its three primary
assets now having a clear development route to production at Tri-K
and we look forward to working closely with Managem to achieving
this medium term goal by 2020".
Imad Toumi, Chairman and Chief Executive Officer of Managem,
commented:
"We are pleased to sign this agreement as we consider Tri-K
project to be a high quality and advanced gold opportunity that
will strongly contribute to our strategic development objectives in
Africa.
Besides, Guinea is a friendly country, and together with Avocet,
we have received strong support and encouragement from the Guinean
government.
Our ambition is to develop a large-scale gold mining operation
in the Mandiana prefecture".
Transaction details
The proposed financing will be completed in two stages, as
follows:
-- First Closing
In return for an initial cash payment of US$4 million, Avocet
will transfer the entity holding its interest in the Tri-K mining
and exploration permits into Manacet SA, a Joint Venture (whose
equity is to be shared 60%:40% between Avocet and Managem), as well
as transferring 40% of the intragroup loans associated with the
project (amounting to approximately US$14 million) to Managem.
Avocet will use the US$4.0 million consideration for debt
repayment and general working capital purposes. Transaction fees
and associated restructuring costs are expected to be approximately
US$1.5 million.
-- Second Closing
Managem will, following completion of the First Close, undertake
an agreed work programme, expected to be completed within 12
months, which will consist of at least US$10 million of drilling,
analysis and documentation work to facilitate an anticipated
increase in the Ore Reserves and completion of a Bankable
Feasibility Study ("BFS") for a Carbon-in-Leach ("CIL") operation
at the site.
On successful completion of these objectives, Managem's interest
in the project will increase to 70% of the equity and loans
associated with Tri-K (subject to Ore Reserves increasing to at
least 1 million ounces - otherwise the ownership increase will be
limited to 60%).
The proposed financing is conditional upon, inter alia, approval
by Avocet's shareholders, Managem's competent body and the Guinean
government, and that the consent of Manchester Securities Corp.
(Avocet's principal lender, which holds security over the group's
interests in Tri-K and is an associate of Elliott Management,
Avocet's largest shareholder) has not been withdrawn.
The form of a mining convention ("Mining Convention") has been
agreed in principle with the Guinean government and, subject to
being signed and ratified by the Guinean parliament, confirms that
the Mining Permits and Exploration Licences for the project will be
assured.
It is anticipated that First Close will take place by the end of
2016, with Second Close to be completed by the end of 2017.
Once the BFS has been completed, both parties will work together
to secure the financing for the construction project which, under
the terms of the Mining Convention, must be completed, and
production commenced, within 42 months of the date of ratification
of the Mining Convention by the Guinean parliament.
Managem will be the operator of the project and will therefore
be responsible for all work undertaken during the feasibility study
period, the construction period, and during production. Managem
will use subsidiaries within the Managem group to provide services
to the operation where appropriate, including drilling and
metallurgical testwork, EPCM and construction services, and other
support and administrative functions, as necessary.
Background to Tri-K
Tri-K is a project in northeast Guinea with a total Mineral
Resource of 3.0 million ounces. In 2013, Feasibility Study work
completed on the basis of a heap leach development of only the
oxide portion of the orebody showed that the project can support a
7 year life of mine, producing an average of 55,000 ounces of gold
per year. A maiden Ore Reserve of 480,000 ounces (7.9 million
tonnes grading 1.89 g/t Au) was also announced as part of the
feasibility study. A mining permit was awarded in March 2015.
Tri-K Mineral Reserves and Resources as at 31 December 2015
Gross Attributable
------------------------- -------------------------------------------- --------------------------------------------
Tonnes Grade (g/t) Contained ounces Tonnes Grade (g/t) Contained ounces
------------------------- ----------- ------------ ----------------- ----------- ------------ -----------------
Ore Reserves
------------------------- ----------- ------------ ----------------- ----------- ------------ -----------------
Proven - - - - - -
------------------------- ----------- ------------ ----------------- ----------- ------------ -----------------
Probable 7,909,000 1.89 480,000 7,909,000 1.89 480,000
------------------------- ----------- ------------ ----------------- ----------- ------------ -----------------
Ore Reserves Total 7,909,000 1.89 480,000 7,909,000 1.89 480,000
------------------------- ----------- ------------ ----------------- ----------- ------------ -----------------
Mineral Resources
------------------------- ----------- ------------ ----------------- ----------- ------------ -----------------
Measured - - - - - -
------------------------- ----------- ------------ ----------------- ----------- ------------ -----------------
Indicated 41,300,000 1.51 1,998,000 41,300,000 1.51 1,998,000
------------------------- ----------- ------------ ----------------- ----------- ------------ -----------------
Measured + Indicated 41,300,000 1.51 1,998,000 41,300,000 1.51 1,998,000
------------------------- ----------- ------------ ----------------- ----------- ------------ -----------------
Inferred 25,200,000 1.26 1,020,000 25,200,000 1.26 1,020,000
------------------------- ----------- ------------ ----------------- ----------- ------------ -----------------
Mineral Resources Total 66,500,000 1.41 3,018,000 66,500,000 1.41 3,018,000
------------------------- ----------- ------------ ----------------- ----------- ------------ -----------------
Notes:
1. The table above reports the Mineral Resource above a 0.5 g/t Au cut-off.
2. Avocet currently owns 100% of the Tri-K permits through its
wholly-owned subsidiary, Wega Mining Guinée SA, however under the
terms of the Guinean Mining Code is obliged to transfer the Mining
Permit to a subsidiary in which the Government holds a 15% free
carry interest. This transfer will be completed as a part of the
contemplated transaction.
3. The Ore Reserve relates to the Heap Leach operation described
in the 2013 Feasibility Study. The proposed BFS to be completed by
Managem will be for a larger CIL operation.
Financial information regarding Tri-K
As at 30 June 2016, the latest date to which balance sheet
information on the group has been published, Tri-K had gross assets
of approximately US$19.1 million.
For the year ended 31 December 2015, the latest financial year
for which the group has published an income statement, Tri-K
reported a loss after taxation of approximately US$0.9 million (H1
2016: loss after taxation US$0.5 million).
Until the Second Close, Manacet SA will be recognised as a
subsidiary of Avocet and its financial results will continue to be
consolidated in the group's financial reporting together with a
miniority interest with regard to the interests of Managem and the
Guinean government in Tri-K. Following the Second Close, Manacet SA
will cease to be recognised as a subsidiary and will be accounted
for an associate. From that point, the group's financial reporting
will include only Avocet's share of the profits of Manacet SA.
About Avocet Mining PLC
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
74,755 ounces of gold in 2015. Other assets in Burkina Faso include
five 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.
The Company also holds an interest in the Tri-K project in
Guinea. Today, the Company has announced that it has disposed of
40% of the project to Managem, a Moroccan group listed on the
Casablanca stock exchange, which will increase upon completion of a
bankable feasibility study for a CIL plant at the site, the
incurring expenditures of at least US$10 million, and the enlarging
of the ore reserve, to 70% (in the event of an increase of the
reserve to 1 million ounce or more) or 60% (if less than 1 million
ounces).
About Managem SA
Managem SA ("Managem") is a Moroccan mining company publicly
listed on the Casablanca Stock Exchange and majority-held by
Société National d'Investissement (SNI), a Moroccan investment
holding company.
Managem owns 9 operating base metals and precious metals mines
in Morocco and sub-Saharan Africa. In addition, Managem has a
successful track-record in gold discoveries and development in
Morocco, Niger, Burkina Faso & Guinea.
Beyond conventional mining exploitation, Managem has an
integrated business model with services ranging from engineering
and technical expertise (through its subsidiary REMINEX) to
drilling and shaft sinking works (through its subsidiary TECHSUB).
In addition, Managem owns a Research & Development centre
providing supporting services to its operations since 1986.
The information contained within this announcement is deemed by
the Company to constitute inside information as stipulated under
the Market Abuse Regulation (EU) No. 596/2014.
FOR FURTHER INFORMATION PLEASE CONTACT
Avocet Mining PLC Bell Pottinger Strand Hanson J.P. Morgan Cazenove
Financial PR Consultants Sponsor Corporate Broker
================= ========================= ==================== =========================
David Cather, CEO Daniel Thöle Andrew Emmott Michael Wentworth-Stanley
Jim Wynn, FD Richard Tulloch
----------------- ------------------------- -------------------- -------------------------
+44 20 3709 2570 +44 20 3772 2555 +44 (0) 20 7409 3494 +44 20 7742 4000
This information is provided by RNS
The company news service from the London Stock Exchange
END
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