Last checked at 5 Apr 2012 18:13
Hambledon Mining plc ("Hambledon" or the "Company")
Progress Update
5 April 2012
Acquisition of Akmola Gold
As announced on 15 September 2011, the Company entered into conditional agreements for the purchase of a 100 per cent. interest in Akmola Gold LLP ("Akmola Gold"). The Company announces that the acquisition of Akmola Gold has not yet been completed, despite the expected completion date of 30 March 2012 having passed, because certain permits and waivers from the Kazakhstan authorities have not yet been received and therefore relevant completion conditions have not been met..
In addition the following factors should be noted:
(i) The state mining company Tau-Ken Samruk has notified the Company that it seeks a pre-emptive interest in Akmola Gold;
(ii) There are on-going discussions with the vendors of Akmola Gold who are seeking to amend the terms of the sale and purchase agreement entered into on 15 September 2011, given the delay to the acquisition completion date; and
(iii) The Company was 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. As a result of the delay, none of these payments have been made.
The Board will update shareholders further as soon as possible when a resolution to the situation becomes clearer.
Tailings Dam 3 ("TD3")
As detailed in the circular to shareholders dated 1 February 2012, the Company was required to carry out repair works to reinstate TD3 to seek to ensure that the foundation was secure for future operation. The cost of such technical assistance and construction materials was estimated at approximately US$0.75 million. This remedial work has now started and is anticipated to be complete by December 2012.
Initial remedial works coupled with detailed site investigation of the impoundment foundation found that additional repair works are required. This will result in a modest increase in repair costs. Estimated total cost of the repair works is now US$1.25 million (US$0.5 million more than the Company originally estimated and set out in the circular dated 1 February 2012). Specialist tailings dam consultants; Golders Associates and SRK, both of the UK, are engaged in the remediation works and site construction supervision. These firms are also engaged in optimising the effluent disposal strategy for 2012 as the existing impoundment capacity is limited and optimal use of the existing facilities is required whilst the TD3 remediation works are carried out.
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 imposed an initial fine in relation to the breach of approximately Tenge 272 million (approximately US$1.83 million). The Company appealed against the level of this initial fine. No specific time period for payment of the fine was stipulated.
The fine associated with the leak in TD3 in November 2011 is the subject of ongoing court action. The legal regime in Kazakhstan lacks clarity in certain areas and the appeal process requires Hambledon to simultaneously work its way through various levels of courts and make payment of fines and penalties which will be returned on the basis of any successful appeal. To date all required fines imposed on the Company by the courts of Kazakhstan have been paid totalling US$3.9 million, with additional costs associated with social development works totalling approximately US$2 million required to be paid throughout 2012. The total fines, penalties and social development costs therefore amount to US$5.9 million being US$4.1 million more than the US$1.83 million that the Company originally estimated and set out in the announcement on 29 December 2011 and the circular dated 1 February 2012. Hambledon has maintained a consistent and transparent approach to all actions with the Kazakhstan authorities and, as far as it is aware, is in full compliance with all court requests, actions and laws with regard to this matter.
The Company expects that the additional remedial work to TD3 will reduce expected gold production for 2012 to 26,000oz from its previous target of 30,000oz.
Equity investment by the European Bank for Reconstruction and Development ("EBRD")
Under the terms of the Subscription Agreement entered into on 21 February 2012 between EBRD and the Company, EBRD conditionally agreed to subscribe for 58,794,708 new ordinary shares (the "EBRD Shares") at a price 3.25 pence per share (that price equalling the placing price per share under the placing announced on 1 February 2012).
The Company announces that all conditions precedent to the Subscription Agreement have been satisfied or waived by EBRD and the Company has given notice to the EBRD to make its equity investment.
The EBRD Shares will be issued as soon as practicable and a further announcement will be made to Shareholders at that time.
EBRD Loan Agreement
Under the terms of the Loan Agreement entered into on 21 February 2012 between EBRD and two of the Company's subsidiaries, Altai Ken-Bayitu LLP ("AKB") and Sekisovskoye LLP ("Seki"), EBRD has conditionally agreed to lend US$15 million in two tranches to AKB and Seki, on a joint and several basis, repayable in quarterly instalments between 10 January 2015 and 10 October 2017. Interest on drawn amounts will be charged at a rate of three months LIBOR plus seven per cent. per annum. The loan ceases to be available for draw down on 21 February 2014.
AKB and Seki have been working towards satisfying the conditions precedent to the Loan Agreement and the Company estimates that this will be achieved by mid April 2012 after which the first tranche of funds, being US$10 million, will be drawn down at the end of April 2012. The availability of the second tranche is subject to meeting a production target of a total of 175,000 tonnes on a quarterly basis being met by the Company.
EBRD Warrant Instrument
As detailed in the announcement on 22 February 2012, EBRD has been issued with non-transferrable warrants over 30 million Shares.
The Warrants are exercisable at any time before the earlier of (i) 21 February 2014 and (ii) if the closing price per Share exceeds 6.5325 pence for a period of 20 consecutive trading days during that 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 Warrants are exercisable in whole or in tranches of no less than 5,000,000 Warrants (or, if less, the amount of Warrants unexercised as at the relevant date).
The exercise price of the Warrants is 4.875 pence per Share (representing a 50 per cent. premium to the Placing Price).
If the Warrants are exercised in full approximately £1.5 million (approximately US$2.3 million) will be raised by the Company.
Production Update
The operational update for the period 1 January 2012 to 31 March 2012 is expected to be announced during the week commencing 16 April 2012.
Tim Daffern, CEO of Hambledon commented:
"Despite our disappointment not to have been able to reach a point where we could announce that we were able to proceed with Akmola Gold LLP, our resolve and determination to continue with the development of the UG mine at Sekisovskoye is maintained. The challenges of resolving the additional remedial works associated with TD3 will constrain the 2012 operations and revised operational plans are being considered to maximise gold production based on the effluent impoundment capacity constraints."
Enquiries:
HAMBLEDON MINING:
Telephone +44 (0)207 233 1462Charles Zorab
FAIRFAX I.S. PLC (NOMAD AND BROKER):
Telephone +44 (0)207 598 5368Ewan Leggat/Katy Birkin
TAVISTOCK COMMUNICATIONS:
Telephone +44 (0)207 920 3150Ed Portman/Jos Simson
Copyright Business Wire 2012