Last checked at 1 Feb 2012 09:41
Hambledon Mining plc ("Hambledon" or the "Company")
Placing of 177,507,699 Placing Shares at 3.25 pence per new Ordinary Share and Notice of General Meeting
1 February 2012
1. Introduction
The Company is pleased to announce that it proposes to raise up to approximately US$9.06 million (US$8.56 million net of expenses) through the issue of 177,507,699 new Ordinary Shares through the Placing at an issue price of 3.25 pence per new Ordinary Share.
The Issue Price represents a discount of approximately 18.75 per cent. to the price of 4 pence per Existing Ordinary Share, being the Closing Price per Existing Ordinary Share on 31 January 2012 (the latest practicable date prior to the date of this announcement).
In addition, the Company announced on 12 January 2012 that the European Bank for Reconstruction and Development ("EBRD") had posted on its website a 'Project Summary Document' relating to a potential US$15.0 million debt facility together with an equity investment of US$3.0 million for the Group to develop the Sekisovskoye underground mining operation. It is also proposed that, on signing the debt facility, EBRD be issued with warrants over up to 30 million new Ordinary Shares.
A Circular has today been posted to Shareholders and will be available shortly from the Company's website at www.hambledon-mining.com.
2. EBRD
The Company has agreed heads of terms with EBRD for the provision by EBRD of a debt facility of US$15.0 million and for EBRD to make an equity investment in the Company by subscribing for approximately 58.8 million new Ordinary Shares at a price of 3.25 pence per new Ordinary Share, raising a further US$3.0 million (with the precise number of new Ordinary Shares being determined by reference to the prevailing £:US$ exchange rate at the relevant time). If such Ordinary Shares are issued, immediately following that issue and assuming that the Placing has completed (but no further Ordinary Shares are issued), EBRD's holding of approximately 58.8 million Ordinary Shares will represent approximately 6.00 per cent. of the issued share capital of the Company.
In addition, it is proposed that EBRD is granted warrants over up to 30 million new Ordinary Shares. If issued, the Warrants will vest immediately. The Warrants will be exercisable at any time before the earlier of (i) the expiry of a period of two years from the date of signature of the proposed EBRD debt facility or (ii) if the price per Ordinary Share exceeds 6.5325 pence for a period of 20 consecutive trading days during such two year period, 45 days from the date on which the Company notifies EBRD that this condition has been met. In either case, any Warrants not exercised within the relevant period will lapse. The exercise price of the Warrants will vary depending on the price of Ordinary Shares in the period following vesting, but will not be less than at a 50 per cent. premium to the EBRD Subscription Price (that is, not less than 4.875 pence per new Ordinary Share). If the Warrants are exercised in full at an exercise price of 4.875 pence per new Ordinary Share up to US$2.30 million will thereby be raised by the Company. On completion of the Placing and the EBRD Equity Investment and if the Warrants are exercised in full (but no further Ordinary Shares are issued) EBRD will hold up to 88,794,708 Ordinary Shares representing approximately 8.79 per cent. of the issued share capital of the Company.
The EBRD debt facility and EBRD Equity Investment are subject to approval by EBRD's operations committee and its board of directors. The Company announced on 27 January 2012 that the approval of the EBRD operations committee had been obtained. Whilst the Directors are confident that board approval will be obtained in February 2012, this cannot be guaranteed. If approved in February 2012, it is anticipated that US$10.0 million of the EBRD debt facility will become available to the Company in May 2012 with the remaining US$5.0 million becoming available when the Company meets certain operational benchmarks, which are expected to occur in late 2012.
The EBRD Equity Investment will not proceed without the Resolution being passed. If the Resolution is not passed and the EBRD Equity Investment is unable to be made it is expected that the proposed US$15.0 million debt facility from EBRD will remain available to the Company.
3. Reasons for the Placing, the EBRD Equity Investment and use of proceeds
Acquisition of Akmola Gold
As announced on 15 September 2011, the Company has entered into conditional agreements for the purchase of a 100 per cent. interest in Akmola Gold, subject to, amongst other things, obtaining certain governmental waivers and consents. Akmola Gold wholly owns two precious metals projects, Tellur and Stepok, which are both situated in central Kazakhstan, some 140 km north of Astana.
It is estimated that these projects have combined resources of approximately 440,000 ounces of gold plus silver and other metals, which the Directors' believe could offer the potential for considerable up-side after further drilling. The Company is required to make a payment of US$2.5 million by 30 March 2012 to the vendors of Akmola Gold plus a permitting fee and associated costs of approximately US$0.5 million to the Government of Kazakhstan. Although negotiations are in progress to obtain a debt facility from EBRD, as mentioned above, and these negotiations have reached an advanced stage, the completion of this debt facility, and therefore drawdown under it, will not be available in time to allow the funds to be used for these payments.
In addition, the acquisition of Akmola Gold will involve the issue by the Company of new Ordinary Shares to the value of US$2.5 million. This will require Shareholder approval and a general meeting to seek this approval will be convened in due course.
Administrative Fine
On 2 November 2011 the Company announced that it had temporarily suspended operations at its mineral process plant at the Sekisovskoye mine whilst a leak in Tailings Dam 3 was repaired. Operations at the mineral process plant re-commenced on 7 November 2011. The Company estimates that production of gold for November 2011 was reduced by this interruption in operations by approximately 650 oz.
On 29 December 2011, the Company announced that preliminary information had been received from the Chief National Environmental Inspector for Eastern Kazakhstan of the Irtysh Environmental Department regarding a fine for the rupture to the liner in Tailings Dam 3, constituting an administrative offence arising from environmental damage.
The appointed court investigator has imposed an initial fine in relation to the breach of approximately Tenge 272 million (approximately US$1.83 million). The Company has appealed against the level of this initial fine and is confident that it will be reduced. No specific time period for payment of the fine has yet been stipulated. The Company expects to make an appropriate provision in respect of the fine in the Group accounts for the year ended 31 December 2011.
A court hearing on 26 December 2011 was adjourned and is expected to be held in Q1 2012 although no specific date has been stipulated.
It is intended that up to US$1.75 million of the Placing proceeds will be applied towards payment of the fine. If the final sum due is in excess of US$1.75 million then it is expected that the balance will be funded out of the Company's cash reserves.
Tailings Dam 3 Repairs
The remedial works to reinstate Tailings Dam 3 will seek to ensure that the foundation is secure for future operation. This will require the engagement of two specialist British engineering companies and will involve the importation of specialist materials from the UK and Canada. The cost of such technical assistance and construction materials is estimated at approximately US$0.75 million.
Repayment of Alfa Bank facility
At present the Company's operating subsidiaries utilise a working capital facility from Alfa Bank to cover their requirements during the period of reduced gold production in the winter months. This facility is currently drawn down to a level of approximately US$1 million. It is proposed that this facility will be terminated to allow the security over certain plant, property and machinery that is held by that bank to be released. It is intended that security over these assets will be granted in favour of EBRD as part of the collateral for the provision of the proposed EBRD debt facility, further details of which are referred to above. It is expected that US$1.25 million of the Placing proceeds will be used to repay the outstanding amount of approximately US$1 million together with approximately US$0.25 million of accrued interest and other charges and costs associated with the repayment of this facility and the release and transfer of collateral to EBRD.
Change to refining and precious metal sale arrangements
The Government of Kazakhstan has implemented a new law which came into force on 1 January 2012, which requires the Company's production of gold and silver dore to be processed by a Kazakhstan refiner, rather than by the Company's existing refiner, Metalor, which is based in Switzerland. The Government of Kazakhstan has implemented a further new law, also with effect from 1 January 2012, which requires the sale of all such refined gold and silver (all precious metals) to the National Bank of Kazakhstan. The Company has discussed these changes with The Industrial Committee of the Ministry of Industry and New Technologies of the Republic of Kazakhstan and has reached formal agreement with them that the Company can continue to refine its gold and silver dore outside of the Republic of Kazakhstan until 1 January 2013, notwithstanding the implementation of this new legislation. However, once applicable to the Company, the Directors estimate that the legislative changes outlined above will have the effect of delaying the date of payment to the Company for the gold and silver, once refined, by approximately 60 days. The time period between production of the dore and receipt of funds will therefore increase to a total period of approximately 70 days. The Directors believe that this will lead to a significant increase in the Company's working capital requirements in early 2013. The Directors will continue to monitor closely the Company's working capital requirements during this time.
Summary
It is anticipated that the gross proceeds of the Placing and the EBRD Initial Share Subscription of, in aggregate, approximately US$12.06 million will be utilised by the Company as follows:
| £ million | US$ million | ||||
| Payment to the vendors of Akmola Gold LLP by 30 March 2012 | 1.59 | 2.5 | |||
| Akmola Gold permitting fee and associated costs | 0.32 | 0.5 | |||
| Repayment of Alfa Bank working capital facility and associated costs | 0.79 | 1.25 | |||
| Incident fine for Tailings Dam 3 | 1.11 | 1.75 | |||
| Tailings Dam 3 repairs | 0.47 | 0.75 | |||
| Working capital | 3.07 | 4.81 | |||
| Placing expenses | 0.32 | 0.50 | |||
| Total | 7.67 | 12.06 |
Implementation of the Placing and the EBRD Equity Investment is conditional on, inter alia, Shareholders passing the Resolution at the General Meeting. If Shareholders do not pass the Resolution and the Placing or the EBRD Equity Investment does not proceed, the Company will not be able to make the required payments set out above and may not be able to pursue its long term business objectives.
4. Terms of the Placing
The Company has conditionally placed 177,507,699 Placing Shares at 3.25 pence per Placing Share with certain existing and new institutional and other investors to raise approximately US$9.06 million before expenses. The Placing is not being underwritten.
Tim Daffern and Jeffrey O'Leary, each being Directors, are Placees in respect of 50,000 and 92,308 Placing Shares respectively.
Application will be made to the London Stock Exchange for the Placing Shares to be admitted to trading on AIM. It is expected that such Admission will become effective and that dealings will commence at 8.00 a.m. on 20 February 2012.
The Placing is conditional, amongst other things, on the following:
(A) the Placing Agreement not being terminated prior to Admission and becoming otherwise unconditional in all respects;
(B) Admission becoming effective on or before 8.00 a.m. on 20 February 2012 (or such later date and/or time as the Company and Fairfax may agree, being no later than 5.00 p.m. on 5 March 2012); and
(C) approval of the Resolution (without material amendment) at the General Meeting to be held at the offices of Fairfax I.S. PLC at 46 Berkeley Square, Mayfair, London, W1J 5AT at 11.30 a.m. on 17 February 2012.
5. Current trading
The operations at Sekisovskoye continue to perform satisfactorily. The mineral process plant achieved record levels of throughput in 2011. This has been primarily as a result of the investment in the refurbishment of infrastructure during 2011 funded by the proceeds of the placing and open offer in March 2011. The open pit mine and attendant machinery fleet has been the subject of significant investment in 2011 with considerable waste removed which has enhanced the Company's excavation efficiencies and productivity.
The construction of Tailings Dam 4 and changes to effluent deposition are well advanced and were undertaken at a cost of approximately US$1.5 million. The expansion and refurbishment of the engineering workshops have been completed at a cost of approximately US$0.75 million. The open pit mining machinery fleet has been expanded and refurbished and this has been completed at a cost of approximately US$4 million. The design and permitting of the expanded electrical reticulation has been completed at a cost of approximately US$1 million, with installation scheduled for Q4 2012.
Despite these advances the operations continue to have high cash costs which are related primarily to the low grade of ores treated in 2011 (a consequence of moving the significant quantities of excess waste in the open pit and commensurate processing of low grade ores whilst the waste was extracted) and the high cost of handling the large quantities of waste. The operations are now better placed to benefit from these investments in 2012.
The commencement of underground mining at Sekisovskoye marks the transition to a combined open pit and underground operation for the next three years. The development of the underground mine was completed ahead of schedule and under budget and is a credit to the dedication of the Company's site employees. The expansion of the underground mine in 2012 should see the Company attain its target of increasing gold production
Production update in respect of the three months from 1 July 2011 to 30 September 2011 (unaudited):
| July | August | September | Total | Average | |||||||
| Milled tonnes (dry) | 77,632 | 69,591 | 69,268 | 216,491 | - | ||||||
| Gold grade (g/t) | 0.73 | 1.20 | 1.25 | - | 1.05 | ||||||
| Contained gold (gms) | 56,593 | 83,230 | 86,618 | 226,441 | - | ||||||
| Contained gold (oz) | 1,819 | 2,675 | 2,784 | 7,278 | - | ||||||
| Gold recovery (%) | 82.24 | 84.01 | 82.01 | - | 82.75 | ||||||
| Recovered gold (oz) | 1,496 | 2,247 | 2,283 | 6,026 | - | ||||||
| Recovered silver (oz) | 3,257 | 4,135 | 3,495 | 10,887 | - |
The unaudited production figures for the 12 months from 1 January 2011 to 31 December 2011 are as follows:
| Total | ||
| Milled tonnes (dry) | 744,416 t | |
| Gold grade (g/t) | 1.09 g/t Au | |
| Contained gold (gms) | 811,287 | |
| Contained gold (oz) | 26,083 | |
| Gold recovery (%) | 81.2% | |
| Recovered gold (oz) | 21,092 | |
| Recovered silver (oz) | 37,004 |
6. General Meeting
For the purposes of effecting the Placing and the EBRD Equity Investment, the Resolution will be proposed at the General Meeting. Set out at the end of the Circular sent to Shareholders today, is the Notice of General Meeting which is to be held at the offices of Fairfax I.S. PLC at 46 Berkeley Square, Mayfair, London, W1J 5AT at 11.30 a.m. on 17 February 2012. The full text of the Resolution is set out in that notice. Implementation of the Placing is conditional, inter alia, on Shareholders passing the Resolution.
If Shareholders do not pass the Resolution, the Placing will not proceed and neither will the EBRD Equity Investment. If the Resolution is not passed and the EBRD Equity Investment is unable to be made it is expected that the proposed US$15.0 million debt facility from EBRD will remain available to the Company.
Tim Daffern, Chief Executive Officer of Hambledon stated:
''The Company recognises and appreciates the considerable support for Hambledon's business plan from both existing and new institutional shareholders in this oversubscribed fundraising. Both the institutional placing and the proposed EBRD funding are highly valued by the Directors of the Company. We look forward to updating all Shareholders with further strong news flow in 2012.
Hambledon can now look forward to the future with a strong balance sheet and a broader shareholder list, including the EBRD and several highly respected investment management groups. With the support of the proposed EBRD debt facility and the new equity raised in the Placing, Hambledon is well positioned to become a well funded multiple deposit Kazakhstan focussed gold play.
The expansion of the Sekisovskoye underground mine remains central to the Hambledon Group's growth in gold production, augmented by the Akmola Gold acquisition that nears completion. It is intended that the Sekisovskoye process plant will act as a hub for processing gold from the Tellur project which will leverage the Group's cash generation and gold production. We look forward to updating Shareholders shortly in relation to final EBRD board approval for the debt and equity investment and completion of the Akmola acquisition.''
Enquiries:
HAMBLEDON MINING:
Telephone +44 (0)207 233 1462
Charles Zorab
FAIRFAX I.S. PLC (NOMAD AND BROKER):
Telephone +44 (0)207 598 5368
Ewan Leggat/Katy Birkin
TAVISTOCK COMMUNICATIONS:
Telephone +44 (0)207 920 3150
Ed Portman/Jos Simson
DEFINITIONS
| "Admission" | the admission of the Placing Shares to trading on AIM becoming effective in accordance with the AIM Rules; | |
| "AIM" | the AIM market operated by the London Stock Exchange; | |
| "AIM Rules" | the AIM rules for companies published by the London Stock Exchange (as updated from time to time) governing the admission to and the operation of AIM; | |
| "Akmola Gold" | Akmola Gold LLP, a limited liability partnership organised under the laws of Kazakhstan; | |
| "Circular" | the circular dated 1 February 2012 posted to shareholders detailing the Placing and other matters; | |
| "Closing Price" | the closing middle market quotation of a share as derived from the AIM Appendix to the Daily Official List of the London Stock Exchange; | |
| "Company" | Hambledon Mining plc; | |
| "EBRD" | European Bank for Reconstruction and Development; | |
| "EBRD Equity Investment" | together, the EBRD Initial Share Subscription and the proposed issue of the Warrants; | |
| "EBRD Initial Share Subscription" | the proposed subscription for approximately 58.8 million new Ordinary Shares by EBRD at the EBRD Subscription Price; | |
| "EBRD Subscription Price" | 3.25 pence, being the price per Ordinary Share to be paid by EBRD under the EBRD Initial Share Subscription; | |
| "Fairfax" | Fairfax I.S. PLC, nominated adviser and broker to the Company; | |
| "General Meeting" | the general meeting of the Company convened for 11.30 a.m. on 17 February 2012, notice of which is set out at the end of the Circular; | |
| "Group" | the Company and its subsidiaries; | |
| "Issue Price" | 3.25 pence per new Ordinary Share; | |
| "Kazakhstan" | the Republic of Kazakhstan; | |
| "London Stock Exchange" | London Stock Exchange plc; | |
| "Notice of General Meeting" | the notice convening the General Meeting set out at the end of the Circular; | |
| "Ordinary Shares" | ordinary shares of 0.1p each in the capital of the Company; | |
| "Placees" | investors in the Placing; | |
| "Placing" | the conditional allotment at the Issue Price of the Placing Shares to the Placees as further described in this announcement; | |
| "Placing Shares" | the 177,507,699 new Ordinary Shares to be issued pursuant to the Placing; | |
| "Placing Agreement" | the conditional agreement dated 1 February 2012 between the Company and Fairfax relating to the Placing; | |
| "Resolution" | the resolution set out in the Notice of General Meeting; | |
| "Shareholder" | a person recorded as a holder of Ordinary Shares in the Company's register of members; | |
| "UK" or "United Kingdom" | the United Kingdom of Great Britain and Northern Ireland its territories and dependencies; and | |
| "Warrants" | the warrants to subscribe for up to 30 million new Ordinary Shares proposed to be issued to EBRD. |
The following exchange rates have been used throughout this announcement:
£1:$1.57
US$1:KZT(Tenge)148.37
Copyright Business Wire 2012