14 Apr 2009 07:00
Proposed Recommended All Share Offer for Oslo listed Wega Mining ASA
Enlarged group to double gold production, attributable reserves and resources
and become a mid-tier gold production company
Avocet Mining PLC (AIM: AVM) ("Avocet" or "the Company") and Wega Mining ASA (Oslo Axess: WEMI) ("Wega") today jointly announce that they have entered into a legally binding transaction agreement pursuant to which Avocet intends to make a pre-conditional, recommended share for share public exchange offer for the entire issued share capital of Wega (the "Offer") and to provide interim financing for completion of Wega's 90 per cent owned Inata Gold Project in Burkina Faso.
The Offer announced today represents the proposed creation of a new mid-tier gold company with annual production approaching 300,000 ounces. It therefore delivers key elements of Avocet's acquisition growth strategy as adopted by management in 2007. In particular, it allows Avocet to increase its gold production at a time when the gold price remains strong, and in the Inata Gold Project, it provides a medium life asset with significant exploration upside in a highly prospective region.
THE ENLARGED AVOCET GROUP
The acquisition of Wega will bring Avocet entry into West Africa, the world's second fastest growing gold district behind China:
* The Inata Gold Project, an open pit and carbon-in-leach (CIL) processing facility due to commence commercial production in Q3 2009, will be one of the largest gold mines in Burkina Faso, with expected average annual gold production of greater than 120,000 ounces over a mine life of 7 years.
* Inata has Reserves of 0.94 million ounces (0.85 million attributable ounces), a Measured and Indicated Resource of 1.4 million ounces (1.3 million attributable ounces) and an Inferred Resource of 0.3 million ounces (0.3 million attributable ounces).
* Wega has an additional 29 exploration licences in Burkina Faso (18), Guinea (10) and Mali (1) with Resources of over 0.6 million ounces, mainly in the Indicated category, at Koulekoun in Guinea.
The combined group will have:
* Three operating gold mines from Q3 2009: Penjom, North Lanut and Inata, with Proven and Probable Reserves of 1.6 million ounces of gold (1.4 million attributable ounces), Measured and Indicated Resources of 3.5 million ounces of gold (3.1 million attributable ounces) and Inferred Resources of 1.9 million ounces of gold (1.4 million attributable ounces).
* Production in FY2011 forecast to be approximately 280,000 ounces of gold.
* One project, Bakan (Indonesia), at the feasibility stage containing 0.3 million ounces in attributable Measured and Indicated Mineral Resources and 0.1 million ounces in attributable Inferred Mineral Resources.
* Two advanced projects, Doup (Indonesia) and Koulekoun (Guinea), with Indicated and Inferred Mineral Resources of approximately 1.2 million ounces of attributable gold at the pre-feasibility stage, including 0.6 million ounces of attributable Inferred Mineral Resources.
* An exciting exploration portfolio in six countries across South East Asia and West Africa with a number of other near-feasibility projects.
* Sufficient cash and the technical resources to bring the Inata Gold Project into production and to restart exploration activities in West Africa.
* A project finance facility of US$65 million of which approximately US$56 million has been drawn to date, together with hedging arrangements pursuant to which 350,000 ounces of gold have been forward sold at an average price of US$958/oz. This hedge position is currently in the money and valued at approximately US$13.6 million based on a gold price of US$880/oz.
TRANSACTION SUMMARY
* Avocet has today subscribed for 61,409,091 new ordinary shares in Wega ("Wega Shares") with a value of approximately US$5 million at a price of NOK 0.55 per Wega Share, representing approximately 15.7 per cent of the enlarged Wega issued share capital (the "Equity Subscription").
* Subject to inter alia Wega shareholder approval, for which an EGM has been convened on 29 April 2009, Avocet will provide a further US$25 million of interim funding to Wega by the issue of a secured loan, convertible into Wega Shares at a price of NOK 0.55 per Wega Share (the "Convertible Loan").
* The Offer, if made, will comprise 0.23 Avocet ordinary shares for each Wega Share and represents:
- A value of NOK 1.59 per Wega Share; based on the closing mid price of Avocet's shares of £0.71 on the AIM market on 9 April 2009, and a NOK/GBP exchange rate of 9.71;
- Consideration of US$78.4 million assuming 100 per cent acceptances;
- A premium of 22.3 per cent to the closing mid market price of Wega Shares on 8 April 2009;
* Avocet has undertaken to make the Offer once certain pre-conditions, including the Wega shareholder approval for the Convertible Loan, have been satisfied or waived. The Offer is also subject to certain closing conditions, including a threshold of greater than 90 per cent acceptances from holders of Wega shares in issue.
* Following completion of the Offer, and assuming all Wega shareholders accept the Offer, existing Wega shareholders will represent approximately 38.4 per cent of Avocet's enlarged issued share capital (excluding treasury shares).
BOARD AND SHAREHOLDER SUPPORT
* The Wega Board of Directors has unanimously recommended that Wega shareholders vote in favour of the Convertible Loan and to accept the Offer.
* Wega shareholders representing 71.8 per cent of Wega's existing issued share capital have given irrevocable undertakings to vote in favour of the Convertible Loan and to accept the Offer. These irrevocable undertakings are not capable of revocation if a competing bid for Wega emerges and, in addition to the Wega Shares now held by Avocet following the Equity Subscription, represent in aggregate approximately 76.2 per cent of Wega's enlarged issued share capital.
* Datum AS, Wega's largest shareholder which currently holds approximately 31.3 per cent of Wega's existing issued share capital and will hold approximately 12.0 per cent of the enlarged Avocet share capital following the Offer and Equity Subscription (assuming all Wega shareholders accept the Offer and no conversion of the Convertible Loan), has entered into an orderly market arrangement for a period of six months from the date that the Offer is declared unconditional in all respects.
* No further Avocet shareholder approval for the transactions described above is required. However, several of Avocet's institutional shareholders have expressed their support.
* Ambrian Partners and J.P. Morgan Cazenove are providing financial advice to the Board of Avocet in respect of the proposed offer and are also acting as joint brokers.
Commenting on the proposed acquisition and interim financing of Wega, Jonathan Henry, CEO of Avocet Mining, stated:
"The acquisition of Wega provides Avocet with an immediate opportunity to more than double its production and resources in the short term, as well as enter into West Africa, one of the most exciting gold regions in the world. We are confident that combining Avocet's experience in building and developing profitable gold mines and balance sheet strength with the assets of Wega will allow us to achieve our strategic goal of creating a new mid-tier, profitable gold company with significant upside for future growth."
Commenting on the proposed transactions, Hans-Arne L'orange, acting CEO of Wega, stated:
"We are delighted to have reached this agreement with Avocet, which ensures that the Inata Gold Project will receive the needed funding to take it to completion. Avocet has proven its strategic and operating ability over many years, and we are assured that the current Wega shareholders can be a part of a very exciting journey as shareholders in a combined company. In Avocet, Wega has found a great partner to develop our portfolio of assets and our talented team."
This summary announcement should be read in conjunction with the further details of the proposed transactions as set out in the full detailed announcement below.
A presentation summarising the transaction described above and the operations and activities of the enlarged group is available to download from the Avocet website: www.avocet.co.uk
A presentation to analysts by the Avocet management team will be held today at 11:00 am at the offices of Buchanan Communication, 45 Moorfields, London EC2Y 9AE. A live webcast of this presentation can be accessed by logging on at:
http://mediaserve.buchanan.uk.com/2009/avocet140409/registration.asp
A play back of the presentation will be available on the same link, approximately one hour after it concludes.
A parallel conference call facility for international investors and analysts can also be accessed on the numbers below:
UK Toll Free: 0808 109 1498
UK Alternative (Not Toll Free): +44 20 8609 1435
Norway Toll Free: 800 164 90
Pin Code: 622190#
| For further information please contact: | ||||
| Avocet Mining PLC | Buchanan Communications | Ambrian Partners Limited | J.P. Morgan Cazenove | First Securities |
| Financial PR Consultants | Financial Adviser, NOMAD and Joint Broker | Lead Broker and Financial Adviser | Norwegian Financial Adviser | |
| Jonathan Henry, CEO Mike Norris, Finance Director | Bobby Morse Ben Willey Katharine Sutton | Richard Brown Richard Greenfield Andrew Craig | Michael Wentworth-Stanley Sam Critchlow | Geir Lie Stein Hansen Eirik Lilledahl |
| +44 (0) 20 7907 9000 | +44 (0) 20 7466 5000 | +44 (0) 20 7634 4700 | +44 (0) 20 7588 2828 | +47 2323 8000 |
| www.avocet.co.uk | www.buchanan.uk.com | www.ambrian.com | www.jpmorgancazenove.com | www.first.no |
| Wega Mining ASA | Arctic Securities ASA | Pareto Securities AS | ||
| Financial Adviser | Financial Adviser | |||
| Hans-Arne L'orange, CEO | Bjørn Løvenskiold Arne Wenger | Kris Gram | ||
| +47 6751 9002 | +47 2101 3100 | +47 22 87 87 00 | ||
| www.wegamining.com | www.arcticsec.no | www.pareto.no |
This announcement does not constitute an offer for sale or an invitation to subscribe for, or the solicitation of an offer to buy or subscribe for, shares in Avocet or Wega in any jurisdiction where such an offer or solicitation is unlawful and, subject to certain exceptions is not for distribution in or into the United States, Canada, Japan or Australia. The Offer Shares, if issued, will not be registered under the United States Securities Act of 1933 (as amended) or under the securities laws of any state of the United States or qualify for distribution under any of the relevant securities laws of Canada, Japan or Australia, nor has any prospectus in relation to the Offer Shares been lodged with or registered by the Australian Securities and Investments Commission or the Japanese Ministry of Finance. Overseas Shareholders and any person (including, without limitation, custodians, nominees and trustees) who has a contractual or other legal obligation to forward this announcement to a jurisdiction outside the UK should seek appropriate advice before taking any action.
No person has been authorised to give any information or make any representations other than those contained in this announcement and, if given or made, such information or representations must not be relied on as having been so authorised. The delivery of this announcement shall not, under any circumstances, create any implication that there has been no change in the affairs of Avocet or Wega since the date of this announcement or that the information is correct as of any subsequent time. This announcement contains forward-looking statements, which are based on Avocet's and Wega's current expectations and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. These forward-looking statements are subject to risk factors which will be described in an Offer document.
Each forward-looking statement speaks only as of the date of the particular statement. Except, as required by the Market Abuse Rules, the AIM Rules for Companies, the London Stock Exchange or by law, the Company and Wega disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in the Company's or Wega's expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.
FULL ANNOUNCEMENT
The Boards of Avocet Mining PLC (AIM: AVM) ("Avocet" or "the Company") and Wega Mining ASA (Oslo Axess: WEMI) ("Wega") today jointly announce that they have entered into a legally binding transaction agreement pursuant to which Avocet intends, subject to certain pre-conditions being met, to make a pre-conditional, recommended share for share public exchange offer for the entire issued share capital of Wega (the "Offer").
In order to provide interim funding for the continued development of Wega's flagship Inata Gold Project in Burkina Faso, Avocet has today subscribed for 61,409,091 new ordinary shares in Wega ("Wega Shares") with a value of approximately US$5 million (the "Equity Subscription") and the parties have entered into a conditional convertible loan agreement ("Convertible Loan Agreement") pursuant to which Avocet will provide an additional US$25 million to Wega.
The making of the Offer is subject to the satisfaction of certain conditions precedent which include:
* the approval at the Wega general meeting to be held on 29 April 2009 (the "Wega EGM") of the Convertible Loan;
* the compliance by Wega in all material respects with the provisions of the transaction agreements to implement the Offer and the satisfaction of all other conditions precedent in the Convertible Loan Agreement; and
* no event of default under the Convertible Loan Agreement has occurred and is continuing.
Emergence of a new mid-tier gold producer
The Offer announced today represents the proposed creation of a new mid-tier gold company with annual production approaching 300,000 ounces. It therefore delivers key elements of Avocet's acquisition growth strategy as adopted by management in 2007. In particular, it allows Avocet to increase its gold production at a time when the gold price remains strong and, in the Inata Gold Project, it provides a medium life asset with significant exploration upside in a highly prospective region.
Avocet's operations are currently exclusively focused in South East Asia, where it operates the Penjom Gold Mine in Malaysia and the North Lanut Gold Mine in Indonesia, both of which were constructed and commissioned by Avocet. With current cash resources of approximately US$70 million and no debt, Avocet has the balance sheet to bring the Inata Gold Project in Burkina Faso into production. A track record of building and developing new mines means that Avocet is able to apply strong technical skills and add value to the Inata Gold Project. In addition, the acquisition of 29 exploration licences in Burkina Faso, Mali and Guinea will enhance Avocet's existing portfolio of exploration projects in Indonesia, Malaysia and the Philippines. Avocet's strong balance sheet and experienced exploration team will allow for a restart of exploration activities in West Africa to create further potential upside value for shareholders. These synergies, and the fact that West Africa is the second fastest growing gold district in the world, make Avocet's diversification into this new geographic region highly attractive.
The acquisition of Wega is expected to create a company with three gold mines in operation from Q3 2009. The Company believes that steady state production of greater than 120,000 ounces per annum from Inata is achievable following its commissioning, contributing to total production forecast to be approximately 280,000 ounces in FY2011. Avocet is targeting production for the enlarged group in excess of 300,000 ounces in FY2013. The acquisition will immediately increase Avocet's attributable Reserves by approximately 146 per cent to 1.4 million ounces and attributable Resources, including Reserves, by approximately 91 per cent to 4.5 million ounces.
Through the acquisition of Wega, Avocet will acquire the following:
The Inata Gold Project - an open pit CIL gold mine in Burkina Faso scheduled to enter production in Q3 2009, in which Wega has a 90 per cent interest in partnership with the Burkina Faso government which holds the balance of 10 per cent. The Inata Gold Project has a US$65 million project facility loan with Macquarie Bank (the "Inata Project Facility") of which approximately US$56 million has been drawn to date. As a requirement of this debt facility, 350,000 ounces of gold production have been sold forward at a weighted average price of US$958/oz. This hedge position is currently in the money and valued at approximately US$13.6 million based on a gold price of US$880/oz.
The Koulekoun Exploration Project - an advanced stage exploration project in Guinea with a NI43-101 compliant Resource of 666,500 ounces (633,175 attributable ounces) based on only part of the mineralised system.
Exploration potential - Wega holds a total of 29 exploration licences in Burkina Faso (18), Guinea (10) and Mali (1).
Merit Mining Corp - 58.1 per cent owned by Wega, a TSX Venture Exchange-listed (TSX-V: MEM) exploration and mining company whose main asset is the Greenwood Gold and Copper Mine in British Columbia, Canada which is currently on care and maintenance.
Metallica Mining - a 36.2 per cent interest in a private Norwegian base metals company with exploration projects in Norway, Kosovo and Portugal.
Following completion of the Offer, Avocet intends to assess the Merit Mining Corp and Metallica Mining investments in the light of prevailing commodity prices, recognising that in the event of a recovery in base metal prices, these may represent upside value.
The Inata Gold Project
Burkina Faso is widely regarded as being a pro-mining country. The country has a stable democracy with President Blaise Compaoré having been re-elected three times. Four gold mines have been opened in Burkina Faso in the past two years with a further two mines in development. Gold mines in Burkina Faso, including Inata, are currently targeting production of around 350,000 ounces per annum, an increase of 500 per cent in the past five years.
The 90 per cent owned Inata Gold Project is Wega's flagship project. The project is scheduled to be commissioned by Q3 2009. Avocet's revised life of mine plan is for an operation that will produce in excess of 120,000 ounces of gold annually over an initial 7 year life at an average cash cost in the region of US$525/oz. Wega has entered into various hedging arrangements with Macquarie Bank as a result of which a total of 350,000 ounces of gold production has been sold forward at a weighted average price of US$958/oz.
Inata currently has Reserves of 944,000 ounces of gold (849,600 attributable ounces), Measured and Indicated Resources of 1,397,000 ounces of gold (1,257,000 attributable ounces) and an Inferred Resource of 298,000 ounces of gold (268,000 attributable ounces). It is anticipated that additional gold Resources from 10 exploration licences surrounding the 26 km2 Inata Gold Project permit will be defined in due course for incorporation into the life-of-mine plan.
The gold mineralisation at Inata can be traced over a continuous 4 km strike length and occurs within silicified volcaniclastic rocks, porphyries and vein quartz that occur within a large shear zone. The 944,000 ounces of Proven and Probable Reserves will be mined from three principal pit areas: Inata North, Central and South. Three smaller pits will be developed during the life of the project. There are opportunities to increase the Reserves by applying a higher gold price to optimisation studies than the US$550/oz that was used to calculate the Reserves at the time of the Bankable Feasibility Study ("BFS").
The technical parameters outlined in the BFS comply with Canadian National Instrument 43-101 which governs the accuracy of scientific and technical details disclosed by mining companies listed on Canadian security exchanges.
As at 31 March 2009, approximately US$143 million has been spent in the development of the Inata Gold Project which has been funded by a combination of equity and the Inata Project Facility, of which US$9 million remains undrawn. In addition to the remaining balance to be drawn under this facility, which is currently in default (as noted below) and not capable of draw down until satisfaction of certain conditions, Wega has existing cash resources of approximately US$5 million. Avocet estimates an expenditure requirement of up to US$40 million to complete the project over and above Wega's existing cash resources, assuming the draw down of US$9 million under the Inata Project Facility. This is to be funded by the Equity Subscription, the Convertible Loan and the enlarged group's cash resources.
Pre-stripping of waste rock for the first pit (Inata North) has commenced at the mine, development of the haul roads to the waste dump and Run of Mine (ROM) pad is completed, and the ROM pad construction is nearing completion. The first ore blocks are now exposed and awaiting completion of the ROM pad. Associated infrastructure is also progressing well with the tailings dam on schedule and the explosive magazine location determined, cleared and preparation commenced. Avocet believes that mechanical completion and first gold pour will occur in Q3 2009.
Inata Project Facility and Hedging Arrangements
In November 2007, the US$65 million Inata Project Facility referred to above was provided by Macquarie Bank to Wega's 90 per cent owned Burkina Faso subsidiary, Société des Mines de Belahouro S.A. ("SMB"), which is the owner of the Inata Gold Project. Since that date approximately US$56 million has been drawn down to fund the construction of the Inata Gold Project. Delays in the construction of the Inata Gold Project have resulted in certain debt covenant breaches. Avocet and Wega have reached an in-principle agreement with Macquarie Bank in relation to these breaches. Macquarie Bank has indicated that, subject to satisfaction of certain conditions, it expects to be in a position to provide waivers of the breaches of the debt covenants prior to the Wega EGM and launch of the Offer. These waivers, together with the funding contemplated by the Equity Subscription and Convertible Loan Agreement and completion of the Company's takeover of Wega, are expected to result in the Inata Project Facility being brought back into compliance within an agreed timeframe, as a result of which the facility would no longer be in default.
The Inata Project Facility is secured, inter alia, by a first charge over Wega's shares in Resolute (West Africa) Limited ("Resolute"), a wholly owned subsidiary of Wega and the parent company of SMB. As a requirement of the Inata Project Facility, SMB has currently sold forward 350,000 ounces of gold for physical delivery between September 2009 and June 2014 at a weighted average price of US$958/oz. These hedge contracts were entered into and continue to be held for the purpose of delivery in accordance with Wega's expected gold sale requirements. Changes in the value of the hedging arrangement over time are not expected to be accounted for within the Avocet income statement going forward post completion of the Offer.
Financial Information on Wega
Wega will today publish its audited annual results for the year ended 31 December 2008. The preliminary results announced on 27 February 2009 showed that in the year ended 31 December 2008, Wega made a loss of NOK 432 million (US$76.6 million) and as at 31 December 2008, Wega had gross assets of NOK 1.99 billion (US$283.7 million), net borrowing of NOK 221 million (US$31.5 million) and net assets of NOK 1.44 billion (US$205.7 million).
Equity Subscription
In order to provide Wega with immediate access to interim funding for the further development of the Inata Gold Project, Wega has today resolved to issue to Avocet, and Avocet has subscribed for 61,409,091 ordinary shares at a price of NOK 0.55 per ordinary share representing gross proceeds of approximately US$5 million. This represents a discount of 57.7 per cent to the mid market closing price of Wega Shares on 8 April 2009, the last date prior to the signing of the transaction agreements. Following this subscription, the ordinary shares issued to Avocet will represent approximately 15.7 per cent of Wega's enlarged issued share capital.
The ordinary shares issued to Avocet will not be listed on Oslo Axess until a listing prospectus has been issued, but will otherwise rank pari passu in all other respects with Wega's existing ordinary shares.
Convertible Loan Agreement
Subject to the conditions precedent set out below, Avocet has further committed to provide additional interim funding for the Inata Gold Project by the provision of a US$25 million convertible loan.
The advancement of funds pursuant to the Convertible Loan Agreement is inter alia subject to the following conditions precedent:
* The approval of the Convertible Loan at the Wega EGM;
* Macquarie Bank's consent; and
* The security arrangements as described below being duly perfected.
Wega is to repay the Convertible Loan, together with all outstanding interest, in full on the date which falls 6 months following the Wega EGM (the "Maturity Date"). Wega may not repay the Convertible Loan in whole or in part prior to the Maturity Date without the approval of Avocet.
The Convertible Loan is to bear interest at a rate of 12.5 per cent per annum which is to be paid in arrears on the Maturity Date.
The Convertible Loan principal may be converted, at the sole option of Avocet, in whole or in part, into new Wega ordinary shares at a conversion price of NOK 0.55 per ordinary share. Were the Convertible Loan to be converted in full, Avocet would hold 368,454,546 Wega Shares representing approximately 52.8 per cent of the Wega issued share capital as enlarged by the Equity subscription and the conversion of the Convertible Loan. The Convertible Loan may only be converted if Avocet launches the Offer, in the event of a material breach of the transaction agreement by Wega or upon the occurrence of any event of default under the Convertible Loan Agreement which is continuing.
The Convertible Loan is to be secured by:
* A second priority charge (ranking after Macquarie Bank's primary charge in respect of the Inata Project Facility) over intercompany loans in the amount of approximately US$70 million provided by Wega to SMB; and
* A second priority pledge (ranking after Macquarie Bank's primary charge in respect of the Inata Project Facility) over the entire issued share capital of Resolute.
Any change of control, defined as any transaction whereby a party other than Avocet (including persons acting in concert) acquires more than a 50 per cent interest in Wega, constitutes an event of default under the Convertible Loan Agreement.
Prior to repayment of the Convertible Loan, Avocet will have a first right of refusal to provide any further debt or equity financing to Wega and its subsidiaries.
Proposed Offer
If the Offer is made, Wega shareholders will receive 0.23 ordinary shares of Avocet for each Wega share in the Offer. This represents a value of NOK 1.59 per Wega share based on the closing price of Avocet's shares on the AIM market on 9 April 2009 of £0.71, and with a NOK/GBP exchange rate of 9.71 and values the aggregate of the Wega's outstanding and issued shares at approximately US$78.4 million (NOK 521 million). This corresponds to a 22.3 per cent premium to the Wega closing price on Oslo Axess on 8 April 2009.
Assuming 100 per cent acceptance of the Offer, Wega shareholders will own approximately 38.4 per cent of Avocet's ordinary shares post transaction (excluding treasury shares).
Once the pre-conditions to the Offer are either satisfied or waived, Avocet intends to dispatch a voluntary exchange offer document in accordance with the Norwegian Securities Trading Act and other relevant legislation (the "Voluntary Offer Document") and expects to have it approved by Oslo Børs to commence the Offer period in mid May 2009, with an initial offer period of two weeks.
The Offer will not be made and a formal offer document will not be circulated to Wega shareholders if the approval required for the Convertible Loan to be drawn down under the Convertible Loan Agreement is not forthcoming.
Completion Conditions
The Offer, if made, will be subject to the following closing conditions:
* A minimum acceptance condition of that number of Wega Shares which, together with any Wega Shares directly or indirectly owned by Avocet at closing, represents more than 90 per cent of Wega's outstanding share capital;
* That the unanimous recommendation of the Offer made by Wega's Board has not been withdrawn or modified;
* That there has been no material adverse change including, inter alia, in respect of the terms of or withdrawal of, the Inata Project Facility; and
* That the business of Wega has in all material respects been conducted in the ordinary course of business.
Each and all of the above conditions are capable of waiver at the sole discretion of Avocet.
Wega Board Recommendation
The Wega Board of Directors unanimously recommends that Wega shareholders vote in favour of the resolutions to be proposed at the Wega EGM to approve the terms of the Convertible Loan and to accept the Offer.
On completion, one director of Wega is expected to be invited to join the Board of Avocet.
Irrevocable Undertakings
Avocet has received irrevocable undertakings from certain Wega shareholders representing 236,058,678 Wega Shares to vote in favour of the Convertible Loan at the Wega EGM and to accept the Offer. These irrevocable undertakings represent approximately 71.8 per cent of Wega's existing issued share capital and in addition to the Wega Shares now held by Avocet following the Equity Subscription described above, represent in aggregate approximately 76.2 per cent of Wega's enlarged issued share capital. The irrevocable undertakings to vote in favour of the Convertible Loan and to accept the Offer are not capable of revocation if a competing bid for Wega emerges.
The Wega shareholders providing irrevocable undertakings include Datum AS, Wega's largest shareholder, which holds 103,017,342 Wega Shares, representing approximately 31.3 per cent of the existing issued ordinary share capital of Wega.
Orderly Market Agreements
Datum AS, Wega's largest shareholder which will hold approximately 12.0 per cent of the enlarged Avocet share capital following the Offer (assuming all Wega shareholders accept the Offer), has entered into an orderly market arrangement for a period of six months from the date that the Offer is declared unconditional in all respects.
Shareholder Support
No further Avocet shareholder approval for the transactions described above is required. However, several of Avocet's institutional shareholders have expressed their support.
Oslo Listing
Wega has been listed on the Oslo Stock Exchange since May 2007 and has approximately 1,200 mainly Norwegian shareholders. Avocet will consider the merits of a secondary listing on the Oslo Stock Exchange following completion of the Offer.
Expected Timetable of Principal Events
| Transaction announced and Wega EGM Notice dispatched | 14 April 2009 |
| Wega EGM | 29 April 2009 |
| Voluntary Offer Document sent to Wega Shareholders | Mid May 2009 |
| Closing of offer period | Early June 2009 |
Further details in relation to the timetable for the Offer will be set out in the Offer Document expected to be sent to Wega Shareholders by mid May 2009 should the EGM approval for the Convertible Loan be given by Wega Shareholders. The minimum period for which the Offer must remain open under the Norwegian Securities Trading Act is two weeks.
Avocet's Existing Business
The Company will announce its Q4 FY2009 production and cost figures at the end of April together with an update of the business.
NOTES TO EDITORS
About Avocet
Avocet is a mining company listed on the AIM market of the London Stock Exchange (Ticker: AVM). The Company's principal activities are gold mining and exploration in Malaysia (as 100 per cent owner of the Penjom mine, the country's largest gold producer), and Indonesia (as 80 per cent owner of the North Lanut gold mine and Bakan project in North Sulawesi). The Company has a number of other advanced mining and exploration projects in South East Asia.
The Penjom gold mine is Malaysia's largest gold producer and was developed by Avocet after applying modern technology to grass roots exploration in an area of historic mining. The mine was commissioned in December 1996 with Reserves of 223,000 ounces. Successful resource development, particularly over the last five years, means Penjom has produced over one million ounces of gold to date and still has nearly one million ounces of Resource. This Resource is expected to grow further following a major drilling programme in the coming year which includes deep drilling to help assess the potential for underground mining in the near future, where areas of high grade ore are known to exist. In November 2005, the Company announced a significant increase in Penjom's life of mine plan to over half a million ounces, which resulted in the design of a much larger pit to allow the additional ounces to be mined. Over the last two years Penjom has expanded its mining and plant capacity accordingly. Avocet was able to overcome initial problems of highly carbonaceous ore at Penjom by developing unique processing systems including complex gravity circuits and resin-in-leach (RIL) technology. These processes have potential applications at other carbonaceous orebodies.
The North Lanut gold mine in North Sulawesi, Indonesia, was developed by Avocet from the exploration stage and has produced over 200,000 ounces since it was commissioned in 2004. In 2002 Avocet purchased its 80 per cent interest in PT Avocet Bolaang Mongondow (PT ABM), an Indonesian company holding a 6th generation Contract of Work (CoW), from Newmont Mining Corporation. The North Lanut gold mine is located within the CoW, which includes exploration and mining rights over approximately 50,000 hectares in an area highly prospective for gold. An Indonesian company, PT Lebong Tandai, owns the remaining 20 per cent.
About Wega
Wega is an Oslo based international mining company focused on exploring, developing and operating gold deposits. The company currently operates in Guinea, Burkina Faso, and Mali. Wega trades on Oslo Axess (Ticker: WEMI).
Wega's main asset is the Inata Gold Project in northern Burkina Faso, West Africa, of which Wega became the owner as a result of the acquisition of Goldbelt Resources in 2007. The Inata Gold Project is currently under construction, with first gold production expected in Q3 2009, and full steady state production in FY2011. Inata will produce greater than 120,000 ounces of gold over an initial 7 year mine life. Wega's other assets include the following:
Exploration
Wega holds a total of 29 exploration licences in Burkina Faso (18), Guinea (10) and Mali (1).
Through its 100 per cent owned local Burkina Faso subsidiaries Wega holds 18 exploration licences for 3,500 km2 in Burkina Faso. These licences are strategically positioned within two highly prospective gold districts: Belahouro in the north surrounding the Inata Gold Project where Wega has a number of satellite deposits that have the possibility to increase Inata's 1.7 million ounces of gold Resources significantly; and the Hounde Greenstone Belt in the southwest of the country which hosts the Mana Gold Mine (total Resources of 3.1 million ounces of gold). One other gold and base metal exploration licence, the Ouedogo Licence, occurs in the south-central part of Burkina Faso.
Wega has been active in Guinea since 2005 and has declared an initial NI43-101 compliant resource estimate for its Koulekoun Project of 666,500 ounces within part of the mineralised system. A large gold-in-soil anomaly and initial RC drill results are also encouraging at the Kodieran Project, 23 km south of Koulekoun.
Merit Mining Corp - Greenwood Gold and Copper Mine
Wega holds 58.1 per cent of Merit Mining Corp, a TSX Venture Exchange-listed (TSX-V: MEM) exploration and mining company. Merit Mining Corp owns, among other projects, the high-grade gold-copper Lexington-Grenoble deposits (Greenwood Gold and Copper Mine) in British Columbia, Canada and has an option to acquire 100 per cent of the J&L gold-silver-zinc-lead project.
On December 3, 2008 Merit Mining Corp announced that, due to the steep decline in commodity prices, ongoing difficulties achieving targeted mine grades and mill recoveries at Greenwood, and difficult market conditions, it was necessary to file a Notice of Intention to Make a Proposal (the "Notice") under the Bankruptcy and Insolvency Act (BIA). All of Merit Mining Corp's operations are currently on care and maintenance.
Metallica Mining AS
During 2008, Wega established Metallica Mining AS, a base metals company. Wega transferred its three main base metal assets to the new entity for NOK 54.8 million, namely shares in Nussir AS, Maepa SA (Portugal) and Repparfjord exploration licences in Norway. Following the creation of Metallica Mining AS, NOK 20 million was raised from new investors. Wega distributed 5.1 million of its shares, representing an interest of 37.7 per cent in Metallica Mining AS, to its shareholders. After distribution, Wega retains an interest of 36.2 per cent in the new company.
COMPETENT PERSON STATEMENTS
This announcement insofar as it relates to Avocet's Mineral Resources has been reviewed and approved for release by Mr Peter Flindell, BSc (Hons) MAusIMM, Chief Geologist for Avocet, who has more than 20 years experience in the field of activity concerned and is a Competent Person as defined by the JORC Code (2004). He has consented to the inclusion of the technical information in this announcement in the form and context in which it appears.
This announcement insofar as it relates to Avocet's Reserves has been reviewed and approved for release by Mr Eric Vesel, B.Eng (Mining), MAusIMM, Chief Operating Officer for Avocet Mining PLC, who has more than 20 years experience in the field of activity concerned and is a Competent Person as defined by the JORC Code (2004). He has consented to the inclusion of the technical information in this announcement in the form and context in which it appears.
All references to Penjom's Ore Reserves and Mineral Resources are as at 31 March 2008. All references to North Lanut's Ore Reserves are as at 31 March 2008 and Mineral Resources are as at 30 September 2008.
The information in this announcement relating to Inata Gold Project Mineral Resource estimation is based on information compiled by John Haywood, who was a Principal Consultant of Ravensgate, and was a Member of the AusIMM at the time the resource estimate was completed; and by Dr Peter Turner, MAusIMM, who is the Vice President Business Development of Wega. John Haywood and Peter Turner have sufficient experience relevant to the exploration data, style of mineralisation and type of deposit under consideration and to the activity which they are undertaking to qualify as Qualified Persons as defined by the Canadian National Instrument 43-101. John Haywood and Peter Turner consent to the filing of the written disclosure in the announcement with securities regulatory authorities.
The information in this announcement relating to Inata Gold Project Reserve estimation is based on information compiled by Steve Craig, MAusIMM, who is a Principal and Mining Engineer of Orelogy; and by Collin Ellison, who was the Chief Executive Officer of Goldbelt Resources Ltd, and a member of the AusIMM at the time the reserves were estimated. Steve Craig and Collin Ellison have sufficient experience relevant to the exploration data, style of mineralisation and type of deposit under consideration and to the activity which they are undertaking to qualify as Qualified Persons as defined by the Canadian National Instrument 43-101. Steve Craig and Collin Ellison consent to the filing of the written disclosure in the announcement with securities regulatory authorities. The Inata Gold Project Reserves were originally estimated on 30 July 2007 for the Bankable Feasibility Study and no revisions have been made to the cost parameters since then.
Scott Wilson was retained by Wega to prepare a Canadian National Instrument 43-101 compliant report on the Koulékoun Project in the Republic of Guinea in 2008. Scott Wilson reviewed the exploration data for the Koulékoun gold exploration project and independently estimated Mineral Resources in accordance with the definitions as set out in the Canadian Institute of Mining (CIM) Definition Standards on Mineral Resources and Mineral Reserves ('CIM definitions') as adopted by the CIM Council in December 2005. Overall project review and preparation of the Report was carried out by Helen Oliver, Scott Wilson Senior Geologist and Chartered Geologist and Fellow of the Geological Society. David Rennie, P. Eng, Scott Wilson Consulting Geological Engineer, supervised the resource estimation work. Electronic copies of borehole logs and chemical analyses were supplied by Michael Gareau, EVP Exploration of Wega. Drillhole, topographic and other exploration data was also provided with a data cut-off date of 30 June 2008. The information in this announcement relating to mineral resource estimation for the Koulékoun Project is based on information presented in the Koulékoun Canadian National Instrument 43-101compliant report dated September 2008. Helen Oliver and Michael Gareau have sufficient experience relevant to the exploration data, style of mineralisation and type of deposit under consideration and to the activity which they are undertaking to qualify as Competent Persons as defined by Canadian National Instrument 43-101. Helen Oliver and Michael Gareau consent to the filing of the written disclosure in the announcement with securities regulatory authorities.
IMPORTANT INFORMATION
This announcement does not constitute an offer for sale or an invitation to subscribe for, or the solicitation of an offer to buy or subscribe for, shares in Avocet or Wega in any jurisdiction where such an offer or solicitation is unlawful and, subject to certain exceptions is not for distribution in or into the United States, Canada, Japan or Australia. The Offer Shares, if issued, will not be registered under the United States Securities Act of 1933 (as amended) or under the securities laws of any state of the United States or qualify for distribution under any of the relevant securities laws of Canada, Japan or Australia, nor has any prospectus in relation to the Offer Shares been lodged with or registered by the Australian Securities and Investments Commission or the Japanese Ministry of Finance. Overseas Shareholders and any person (including, without limitation, custodians, nominees and trustees) who has a contractual or other legal obligation to forward this announcement to a jurisdiction outside the UK should seek appropriate advice before taking any action.
No person has been authorised to give any information or make any representations other than those contained in this announcement and, if given or made, such information or representations must not be relied on as having been so authorised. The delivery of this announcement shall not, under any circumstances, create any implication that there has been no change in the affairs of Avocet or Wega since the date of this announcement or that the information is correct as of any subsequent time. This announcement contains forward-looking statements, which are based on Avocet's and Wega's current expectations and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. These forward-looking statements are subject to risk factors which will be described in an Offer document.
Each forward-looking statement speaks only as of the date of the particular statement. Except as required by the Market Abuse Rules, the AIM Rules for Companies, the London Stock Exchange or by law, the Company and Wega disclaim any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in the Company's or Wega's expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.
Ambrian Partners Limited (which is regulated in the UK by the Financial Services Authority) is acting exclusively for Avocet as financial adviser, nominated adviser and broker and no one else (including the recipients of this announcement) in connection with the arrangements described in this announcement and will not be responsible to anyone other than the Company for providing the protections afforded to customers of Ambrian Partners Limited or for advising any other person in connection with the arrangements described in this announcement. Ambrian Partners Limited makes no representation, express or implied, with respect to the accuracy or completeness of any information contained in this announcement and accepts no responsibility for, nor does it authorise, the contents of, or the issue of this announcement, or any other statement made or purported to be made by the Company, or on its behalf, in connection with the Company or any or the other arrangements described in this announcement and accordingly disclaims all and any liability whatsoever whether arising out of tort, contract or otherwise which it might otherwise have in respect of this announcement or any other statement.
J.P. Morgan Cazenove (which is regulated in the UK by the Financial Services Authority) is acting exclusively for Avocet and no one else (including the recipients of this announcement) in connection with the arrangements described in this announcement and will not be responsible to anyone other than the Company for providing the protections afforded to customers of J.P. Morgan Cazenove or for advising any other person in connection with the arrangements described in this announcement. J.P. Morgan Cazenove makes no representation, express or implied, with respect to the accuracy or completeness of any information contained in this announcement and accepts no responsibility for, nor does it authorise, the contents of, or the issue of this announcement, or any other statement made or purported to be made by the Company, or on its behalf, in connection with the Company or any or the other arrangements described in this announcement and accordingly disclaims all and any liability whatsoever whether arising out of tort, contract or otherwise which it might otherwise have in respect of this announcement or any other statement.
First Securities (which is regulated in Norway by the Kredittilsynet) is acting exclusively for Avocet and no one else (including the recipients of this announcement) in connection with the arrangements described in this announcement and will not be responsible to anyone other than the Company for providing the protections afforded to customers of First Securities or for advising any other person in connection with the arrangements described in this announcement. First Securities makes no representation, express or implied, with respect to the accuracy or completeness of any information contained in this announcement and accepts no responsibility for, nor does it authorise, the contents of, or the issue of this announcement, or any other statement made or purported to be made by the Company, or on its behalf, in connection with the Company or any or the other arrangements described in this announcement and accordingly disclaims all and any liability whatsoever whether arising out of tort, contract or otherwise which it might otherwise have in respect of this announcement or any other statement.
Arctic Securities ASA (which is regulated in Norway by the Kredittilsynet) is acting exclusively for Wega and no one else (including the recipients of this announcement) in connection with the arrangements described in this announcement and will not be responsible to anyone other than Wega for providing the protections afforded to customers of Arctic Securities ASA or for advising any other person in connection with the arrangements described in this announcement. Arctic Securities ASA makes no representation, express or implied, with respect to the accuracy or completeness of any information contained in this announcement and accepts no responsibility for, nor does it authorise, the contents of, or the issue of this announcement, or any other statement made or purported to be made by Wega, or on its behalf, in connection with Wega or any or the other arrangements described in this announcement and accordingly disclaims all and any liability whatsoever whether arising out of tort, contract or otherwise which it might otherwise have in respect of this announcement or any other statement.
Pareto Securities AS (which is regulated in Norway by the Kredittilsynet) is acting exclusively for Wega and no one else (including the recipients of this announcement) in connection with the arrangements described in this announcement and will not be responsible to anyone other than Wega for providing the protections afforded to customers of Pareto Securities AS or for advising any other person in connection with the arrangements described in this announcement. Pareto Securities AS makes no representation, express or implied, with respect to the accuracy or completeness of any information contained in this announcement and accepts no responsibility for, nor does it authorise, the contents of, or the issue of this announcement, or any other statement made or purported to be made by Wega, or on its behalf, in connection with Wega or any or the other arrangements described in this announcement and accordingly disclaims all and any liability whatsoever whether arising out of tort, contract or otherwise which it might otherwise have in respect of this announcement or any other statement.