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(Sharecast News) - Goldplat announced the signing of a binding term sheet between its subsidiary Gold Mineral Resources (GMR) and Mayflower Capital Investments on Friday, for the sale of Kilimapesa Gold, which owns the assets and licences of the company's Kenyan underground mining operation.
The AIM-traded firm said that under the binding term sheet, GMR has conditionally agreed to sell Kilimapesa to Mayflower for initial consideration of $1.5m (£1.14m), through the issue of shares to that value in Mayflower.
In addition, GMR would be entitled to receive a 1% net smelter royalty on future production from Kilimapesa, capped at $1.5m.
Mayflower has separately entered into an agreement under which it would assign its rights and obligations under the term sheet to a London-listed company provisionally dubbed 'UKco' which would, subject to regulatory and shareholder approvals, seek to complete the acquisition and raise a minimum of $4m of funding for the development of Kilimapesa's operations.
Goldplat said GMR was supportive of Mayflower's plans and strategies for the Kilimapesa operations, and agreed to escrow its shares in Mayflower and UKco for a minimum of 12 months, while Mayflower completed the recapitalisation and restart of the gold mining and processing operations.
The term sheet remained subject to a number of conditions, including the completion of due diligence by both Mayflower and GMR, the receipt of approvals, the finalising of formal agreements, and the raising of equity by UKco of $4m.
Mayflower was paying a $50,000 non-refundable exclusivity fee under the binding term sheet, with the agreements envisaged in the term sheet to be entered into before 30 September.
In the interim, Goldplat said GMR and Mayflower had agreed that Mayflower would invest up to $0.3m, and GMR up to $0.15m into Kilimapesa, as a loan to restart the treatment of artisanal tailings at the processing plant.
The loan would be unsecured and interest free, and repayable out of profits generated from tailings processing after the payment of current and historical creditors.
At 30 June, Kilimapesa had net liabilities of KES 574m (£4.1m), including an intercompany loan from GMR of KES 1.15bn, which would be cancelled, leaving net assets of around £4.1m.
In the year ended 30 June, Kilimapesa made an operating loss of £0.55m on revenue of £1.1m.
It owns a gold mining license and a gold exploration license in Kenya, and undertakes a small amount of tailings reprocessing, although as was announced on 28 July, its activities in Kenya were currently under care and maintenance.
On conclusion of the transaction, all losses and costs associated with Kilimapesa would cease to be borne by the Goldplat Group.
"As indicated to the market it has been our intention to divest from our interests in mining and I am delighted to have entered into this term sheet with Mayflower," said chief executive officer Werner Klingenberg.
"Mayflower already has a team in place in Kenya and with financing, I believe, has the ability to extract significant value from the tenements under the control of Kilimapesa.
"Through its shareholding in Mayflower, Goldplat can continue to benefit from the development of Kilimapesa without being required to provide further finance or management resources."
At 0930 BST, shares in Goldplat were up 7.31% at 7.78p.
22 Feb 2016 11:23