AVM.L Regulatory News (AVM)

3 Oct 2007 07:00

Avocet Mining PLC03 October 2007 Avocet Mining PLC 3 October 2007 RESTRUCTURING OF GOLD COLLAR POSITION TO ACHIEVE EXPOSURE TO THE GOLD SPOT PRICE FOR 2008 AND 2009 US$25 MILLION CREDIT FACILITY IN PLACE Avocet Mining PLC ("Avocet" or "the Company") announces that it has improved theterms of its existing gold collar(1) position with the result that all of itsgold sales will be on spot terms during the period of increasing pricesanticipated in the medium term, while ensuring significant downside protectionagainst prices falling below US$600/oz through the use of put options. By September 2007, under the previous structure, options over 170,000 ounces hadlapsed as the gold price had traded upwards but between the previous US$450/US$700 per ounce collar strike prices. Under the terms of this restructuring; • Call options over 190,000 ounces, at the rate of 10,000 ounces per month, will be exercisable at the new price of US$755/oz between January 2010 and July 2011. • Put options over 460,000 ounces, at the rate of 10,000 ounces per month, will be exercisable at the new price of US$600/oz between October 2007 and July 2011. Therefore, between now and January 2010, the Company's gold sales will be at thehigher of US$600/oz or spot prices for 10,000 ounces per month. The amendedcollar transaction was entered into for zero cash consideration. No margin callsapply. Avocet produced 178,318 ounces of gold in the year ended 31 March 2007 and45,727 ounces in the first quarter ended 30 June 2007. The transaction counterparty is Macquarie Bank, the Company's principal banker. The Company also announces that Macquarie Bank has recently committed a US$25million revolving credit facility to the Company for general corporate purposes.Given the Company's cash balance of approximately US$110 million at the end ofSeptember 2007 (at 31 March 2007: US$65 million), the Company does notanticipate drawing down this facility in the short term. Jonathan Henry, Chief Executive Officer of the Company, commented on thistransaction: "This restructuring allows Avocet to benefit from the widely anticipatedincrease in gold prices for the remainder of 2007 and 2008. In addition, therevised put options have moved our minimum price received up to US$600 per ouncethereby underpinning the profitability of the business should the gold pricefall below this level before July 2011. We continue to work with Macquarie Bankas one of our principal bankers and we are delighted that they have offered us aUS$25 million facility. This, together with the cash held on our balance sheet,will allow for the Company's continued expansion." ________________________________________________________________________________ For further information please contact: Avocet Mining PLC Buchanan Communication Grant Thornton Corporate FinanceJonathan Henry, Chief Executive Officer Bobby Morse, Partner Fiona KindnessMike Norris, Finance Director Ben Willey, Director 020 7728 3414020 7907 9000 020 7466 5000www.avocet.co.uk www.buchanan.uk.com www.grant-thornton.co.uk Notes to Editors 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 andexploration in Malaysia (as 100% owner of the Penjom mine, the country's largestgold producer), and Indonesia (as 80% owner of the North Lanut gold mine andBakan project in North Sulawesi). The Company has a number of advanced miningand exploration projects in South East Asia and owns significant interests inDynasty Gold and Monument Mining, both Toronto Venture Exchange listed companieswith interests in Western China and Malaysia, respectively. -------------------------- (1) In January 2006 Avocet restructured its previous hedge position byeliminating forward sales over 18,000 ounces at US$312/oz and establishing anoption collar by purchasing 360,000 put options (the ability to sell at acertain price, exercisable on specific dates) with a strike price of US$450/ozand selling a similar number of call options (the ability for a third party topurchase from the Company at a certain price, exercisable on specific dates)with a strike price of US$700/oz. At 24 September 2007, options over 170,000ounces had expired without being exercised, leaving 190,000 ounces unexpiredprior to the restructure announced today. This information is provided by RNS The company news service from the London Stock Exchange