16th Dec 2016 17:13
LONDON (Alliance News) - Petropavlovsk PLC on Friday said Russia's Alliance Mining Group and Lexor Group SA have advised that they will not seek to extend the agreement over the acquisition of Amur Zoloto LLC beyond its long-stop date of December 31.
Petropavlovsk, AMG and Lexor entered into an agreement to buy Russian gold company Amur Zoloto in April, in an all-share deal worth USD144.0 million.
On Friday, Petropavlovsk said that while both AMG and Lexor's boards notionally support the acquisition, they have advised that they will not seek to extend the agreement beyond December 31 due to the preference of some major shareholders that Petropavlovsk remain focused on unlocking value from the pressure oxidation and underground mining initiatives in the near term.
In addition, both AMG and Lexor have concerns over Petropavlovsk's potential and ongoing contingent liability under its guarantee of IRC Ltd's project finance facility.
IRC, in which Petropavlovsk is a major shareholder, is due to repay USD26 million under its project finance facility this month, but will not be in receipt of the funds until December 29 due to the requirement to seek shareholder approval at its extraordinary meeting on that day.
IRC currently needs USD10 million to supplement its existing cash resources in order to enable it to make the payment. Obtaining the funding is a condition precedent to the implementation of Petropavlovsk's refinancing with one of its lending banks.
"The company is in regular dialogue with IRC and has been informed that IRC expects to make the IRC December payment which is the final pre-condition to the group's refinancing with this bank coming into effect. Implementation of the refinancing, which would result in deferral of its obligation to make a debt repayment on December 20, 2016, is critical to the company's financial condition. If this debt repayment obligation is not deferred Petropavlovsk would then be in breach of its existing facilities," Petropavlovsk said in a statement.
Petropavlovsk added that it will not be progressing discussions regarding an amendment of the proposed acquisition to include the gold assets in Kamchatka of the company's biggest shareholder Renova Group.
Renova had requested in June that Petropavlovsk include the Kamchatka gold assets in the acquisition. On Friday, Petropavlovsk said it will not progress discussions on this matter as it focuses on its corporate strategy which is to focus firmly on optimising its current asset base.
The company said it continues to maximise cash generation from the four operating mines Pioneer, Albyn, Malomir and Pokrovskiy, whilst driving the POX Hub and underground growth development projects to first production, on time and within budget.
Shares in Petropavlovsk closed down 3.0% at 6.80 pence on Friday.
By Karolina Kaminska; [email protected]; @KarolinaAllNews
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