13 Nov 2009 12:28
AVOCET MINING PLC
SALE OF INTEREST IN MERIT MINING
Avocet Mining PLC ("Avocet" or "the Company") announces that, together with its wholly owned subsidiary, Wega Mining AS ("Wega Mining"), it has entered into a conditional agreement with privately held Infinity Gold Mining Inc. ("Infinity") to sell its entire interest in Merit Mining Corporation ("Merit"), a TSX Venture Exchange listed company, for a cash consideration of up to CDN$7 million ("Agreement").
The Company, through Wega Mining, currently owns 2,250,781 common shares of Merit ("Merit Shares") representing approximately 58% of the outstanding Merit Shares, and a convertible debenture (the "Wega Convertible Debenture") in the amount of approximately CDN$3 million (including interest). The Wega Convertible Debenture is currently convertible into approximately 643,180 Merit Shares, however as announced by Merit on 2 November 2009, Merit has proposed to settle all of its outstanding convertible debentures, including the Wega Convertible Debenture, in exchange for newly issued Merit Shares (the "Settlement Proposal"). Under the Settlement Proposal, the Wega Convertible Debenture would be settled for approximately 12.6 million new Merit Shares (if the conversion occurs on 30 November 2009).
The purchase price to be paid for the Merit Shares, subject to any adjustments required in the event of a conversion of the Wega Convertible Debentures issued by Merit, is CDN$1.5871. If the conversion does occur as proposed by Merit, the purchase price will be adjusted to reflect and account for the increase in the number of issued and outstanding Merit Shares. If the conversion occurs on 30 November 2009, the number of shares acquired by Infinity will be adjusted such that the purchase price will be CDN$0.4627 per Merit Share. The actual adjustment will depend on the number of Merit Shares issued on the conversion, which in turn depends on the date that the conversion occurs.
Infinity has agreed, subject to a number of conditions, to purchase all of the Merit Shares held by Wega Mining, as well as the Wega Convertible Debenture if the Settlement Proposal is not consummated.
Under the Agreement, Infinity has the option to acquire up to approximately 19.95% of Merit from Wega Mining in three tranches over the 80 days following the date of the Agreement, subject to the completion of diligence and arranging financing. In addition, subject to the prior satisfaction of a number of conditions, including the execution of additional lock up agreements, satisfactory arrangements with certain employees, the absence of a material adverse change in respect of Merit and Infinity having arranged sufficient financing, Infinity has agreed that within 120 days from the date of the agreement it will make an all-cash offer (the "Offer") to acquire all of the outstanding Merit Shares, and Wega Mining has agreed to tender its remaining Merit Shares to the Offer.
Prior to the take up of any shares under the Offer, in certain circumstances Avocet may be entitled to repurchase the Merit Shares sold to Infinity for the original price less CDN$1,000,000 and in other circumstances Infinity may be entitled to sell those Merit Shares back to Avocet for the original price less CDN$500,000.
If a superior proposal to acquire Merit is made by a third party, Avocet will either not have the right to withdraw its shares from the Offer in certain circumstances or, if Avocet can withdraw its Merit Shares from the Offer, Avocet will have to pay to Infinity the difference between the Offer price and the amount Avocet realises in any superior proposal. Avocet has also agreed that, except in limited circumstances, it will not vote the Merit Shares of Wega Mining in favour of any superior proposal to acquire Merit or any issuance of Merit Shares or convertible securities.
Jonathan Henry, Chief Executive Officer, commented:
"Our interest in Merit Mining was acquired earlier this year as part of the Wega Mining takeover. The Merit investment is non-core to our strategy of becoming a mid-tier gold producer, we are therefore working closely with Infinity to complete this transaction as expeditiously as possible."
| For further information please contact: | |||||
| Avocet Mining PLC | Buchanan Communications | Ambrian Partners Limited | J.P. Morgan Cazenove | Arctic Securities | First Securities |
| Financial PR Consultants | NOMAD and Joint Broker | Lead Broker | Financial Adviser | Financial Adviser | |
| Jonathan Henry, CEO Mike Norris, FD Hans-Arne L'orange, EVP Investor Relations & Business Development | Bobby Morse Katharine Sutton | Richard Brown Richard Greenfield | Michael Wentworth-Stanley Anish Patel | Arne Wenger Kim Galtung Døsvik | Stein Hansen Eirik Lilledahl |
| +44 20 7907 9000 | +44 20 7466 5000 | +44 20 7634 4700 | +44 20 7588 2828 | +47 21013100 | +47 2323 8000 |
| www.avocet.co.uk | www.buchanan.uk.com | www.ambrian.com | www.jpmorgancazenove.com | www.arcticsec.no | www.first.no |
Notes to Editors
Avocet Mining PLC ("Avocet" or "the Company") is a mining company listed on the AIM market of the London Stock Exchange (Ticker: AVM). On 15 October 2009, the Company announced its decision to apply for a listing on the Oslo Stock Exchange ("OSE") in addition to its existing admission to trading on AIM. The Company's principal activities are gold mining and exploration in Malaysia (as 100 per cent owner of the Penjom gold mine, the country's largest gold producer), Indonesia (as 80 per cent owner of the North Lanut gold mine and Bakan project in North Sulawesi) and Burkina Faso (as 90 per cent owner of the Inata gold project currently in the latter stages of construction and commissioning). The Company has a number of other advanced exploration projects in South East Asia and West Africa.
Background to operations
Penjom is Malaysia's largest gold producer and was developed by Avocet after applying modern technology to grass roots exploration in an area of historic alluvial mining. The mine is located in Pahang State, approximately 120 km north of the country's capital, Kuala Lumpur. The mine was commissioned in December 1996 with reserves of 223,000 ounces. Successful resource development means Penjom has produced over one million ounces of gold to date and still has nearly one million ounces of resource. Over the last two years Penjom has expanded its mining and plant capacity with plant throughput increasing from 570,000 to over 700,000 tonnes per annum to compensate for decreasing mined grades.
North Lanut in North Sulawesi, Indonesia, was developed by Avocet from the exploration stage and has produced over 270,000 ounces since it was commissioned in 2004. Avocet purchased an 80 per cent interest in PT Avocet Bolaang Mongondow, an Indonesian company holding a 6th generation Contract of Work ("CoW"), from Newmont Mining Corporation in 2002. North Lanut 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. The Company has a number of other advanced development and exploration projects in Indonesia.
The Inata gold project in Burkina Faso, West Africa, was purchased by Avocet as a result of the acquisition of Wega Mining ASA ("Wega Mining") which was completed in June 2009. Inata is currently in the latter stages of construction and commissioning, with first gold production expected before the end of January 2010, and full steady state production in 2011. Inata is expected to produce greater than 120,000 ounces of gold per annum over an initial 7 year mine life. Other assets acquired from Wega Mining include exploration licences in Burkina Faso, Guinea and Mali (the most advanced being the Tri-K gold exploration project in Guinea with a resource of 667,000 ounces), and a 35.6 per cent interest in base metals company, Metallica Mining ASA.