29th Nov 2007 17:00
Thistle Mining Inc.29 November 2007 Thistle announces Results for the Third Quarter ended September 30, 2007 Toronto November 29, 2007 - Thistle Mining Inc. (AIM: TMG) Overview Thistle Mining Inc. ("Thistle" or the "Company") (AIM: TMG) wishes to announcethat the Company's unaudited Consolidated Financial Statements and ManagementsDiscussion and Analysis ("MD&A") for the nine month period ended September 30,2007 will be filed on SEDAR today. All dollar references in this announcementare in US $. A full copy of the Company's 2007 third quarter report can beobtained from the Company's website www.thistlemining.com. Sale of President Steyn Gold Mines (Free State) (Pty) Ltd ("PSGM") On October 29, 2007, Thistle and Pamodzi Gold Limited ("Pamodzi") (JSE: PZG)entered into a Sale of Shares and Claims Agreement ("SSCA") for the sale toPamodzi of Thistle's direct and indirect interests in PSGM (the "SaleTransaction"). Under the terms of the SSCA, the consideration payable by Pamodzito Thistle will be ZAR240 million (subject to certain adjustments) (the"Purchase Consideration") and will be satisfied through the payment of (i)ZAR100 million (subject to certain adjustments and conditional upon a placementof ordinary shares of Pamodzi (the "Pamodzi Shares"), failing which Pamodzi willallot and issue Pamodzi Shares to Thistle at a 10% discount to the volumeweighted average trading price of the Pamodzi Shares on the JSE over the 30trading days prior to December 1, 2007) (the "Intended Cash Consideration") and(ii) ZAR140 million (the "Participating Loan Consideration") (subject to certainadjustments) applied as a loan, advanced by Thistle to a special purpose vehicle("SPV") wholly owned by Pamodzi Resources (Proprietary) Limited ("PamodziResources"), which indirectly owns 37.9% of Pamodzi. The Purchase Consideration will be adjusted by the difference between PSGM'sworking capital as at June 30, 2007 and its working capital as at the December1, 2007 (the "Effective Date"), subtracted by one half of the outstandingprincipal amount of the loans advanced to PSGM by Casten Holdings Limited ("Casten") and MC Resources Limited ("MC") (who are major creditors andshareholders of Thistle each owning 35% of the outstanding shares of Thistle)from September 26, 2007 to the Effective Date ("Working Capital Loans"),subtracted by all the interest and fees on the Working Capital Loans, subtractedby the reduction in the value of long term assets less long term liabilities, asdefined in the SSCA, not undertaken in the ordinary course of business. At thisstage an adjustment downwards of approximately ZAR 50 million is expected. Of the Intended Cash Consideration, as adjusted, ZAR2 million will be paid toIningi Investments 167 (Proprietary) Limited ("Iningi") pursuant to theagreement between Mindserv (Proprietary) Limited ("Mindserv"), a wholly-ownedsubsidiary of Thistle, and Iningi, by which Mindserv will acquire Iningi's 15%interest in PSGM prior to the Sale Transaction. Completion of the Sale Transaction is conditional on various matters, includingapproval by the South African competition authorities (which approval wasobtained on November 9, 2007) and any applicable regulatory and South Africanexchange control approvals and receipt of shareholder approval by theshareholders of each of Thistle and Pamodzi. In addition for the SaleTransaction to be completed, production at PSGM must exceed 340 kg of gold inNovember 2007. In the event that Pamodzi withdraws from the Sale Transaction, ithas agreed to pay a break fee of ZAR5 million to Thistle, subject to certainlimited conditions. The annual and special meeting of the shareholders to be held on December 13,2007 (the "Meeting"), will, amongst other matters, consider the proposed sale ofPSGM. The Sale Transaction will require approval by two thirds of the votes castby Thistle shareholders at the Meeting. Pamodzi has received assurances from MCResources Limited and Casten Holdings Limited, each owning 35% of theoutstanding shares of Thistle, of their intention to vote for the SaleTransaction. Pamodzi's shareholder meeting to approve the Sale Transaction isexpected to be held on or about December 27, 2007 in Johannesburg, South Africa.The Sale Transaction will require approval by a majority of the votes cast byPamodzi shareholders at the meeting. Thistle has received assurances fromPamodzi Resources, through two of its subsidiaries (which collectively own 37.9%of the outstanding Pamodzi Shares), of its intention to vote for the SaleTransaction. Assuming the shareholders of Pamodzi and Thistle approve the SaleTransaction and all other conditions to the completion are satisfied or waived,Thistle expects that the earliest the Sale Transaction will be completed isDecember 27, 2007 ("Completion Date"). Investment Strategy As the Sale Transaction will divest Thistle of all or substantially all of itsactive business activities, under the AIM Rules for companies, Thistle will,upon completion of the Sale Transaction, be treated as an "investing company".As a result, it will be required to complete a reverse takeover or implement itsown investing strategy to the satisfaction of the LSE prior to November 22,2008. The Thistle Board has resolved that, of the options available to Thistlemoving forward, Thistle should not be delisted from AIM, wound down or become apassive investor and instead should be used to develop business opportunitiesthat may be available to it, including any that are introduced to it by its twomajor shareholders, Casten and MC. Accordingly at the Meeting, Shareholders willalso be asked, if the Sale Resolution is approved, to consider and approveThistle's proposed investment strategy as set out in this MD&A under the section"Proposed Investment Strategy". Suspension of shares to trading on AIM Following the deterioration in the financial condition of PSGM and theuncertainty relating to Thistle's financial situation, on September 24, 2007 theThistle Board requested the suspension of trading in the Thistle Shares on AIM.A lifting of this suspension is conditional upon Thistle demonstrating to LSEits financial viability, which remains uncertain at this time. Consent Agreement and Receipt and Acknowledgement Deed Thistle, MC, Casten, CGA Mining Limited ("CGA"), Central Asia Gold Limited ("Central Asia") and Toowong Mining B.V. ("Toowong") have entered into a consentagreement dated October 16, 2007 (the "Consent Agreement"). Pursuant to theConsent Agreement, CGA and Central Asia have consented to the transfer byThistle to MC and Casten of the Toowong Shares (directly or indirectly) and theobligations to pay the deferred consideration under the SPA to Thistle have beenterminated and Central Asia has agreed to pay a reduced amount of $4.5 millionto MC and Casten. In addition Central Asia and CGA have provided a full release to Thistle, itsdirectors and officers and all other parties involved in the sale of the MasbateProject from and in respect of all existing or future claims in connection withthe SPA and the acquisition by Central Asia of the interests of Thistle in theMasbate gold mine pursuant thereto. Subsequent to the Consent Agreement, MC, Casten, Thistle and PSGM have enteredinto a receipts and acknowledgement deed dated October 22, 2007 (the "Deed")under which in return for the agreement by Thistle to transfer its (direct orindirect) interest in the Toowong Shares to MC and Casten and to terminate allof its interest in, and not to claim payment of, the deferred consideration, MCand Casten have acknowledged payment by Thistle, and the reduction and set-offagainst the indebtedness owed by Thistle to MC and Casten, of $42,301,781. Thetransfer was completed on October 26, 2007 and as at October 31, 2007 theremaining Indebtedness is estimated at approximately $22.3 million. In addition to being major creditors of Thistle, MC and Casten each own 35% ofthe outstanding shares of Thistle and as a result are each a "related party" ofThistle for the purposes of Ontario Securities Commission Rule 61-501 - InsiderBids, Issuer Bids, Business Combination and Related Party Transactions ("Rule61-501"). Accordingly, the completion of certain of the transactionscontemplated by the Consent Agreement including the transfer of the ToowongShares to MC and Casten and the reduction of, and set-off against, theindebtedness owed by Thistle to MC and Casten under the terms of the Deed, willconstitute a "related party transaction" for the purposes of Rule 61-501. Asnoted in the press releases announcing the financing arrangements betweenThistle and Casten and MC, the Thistle Board concluded that Thistle could relyon the "financial hardship" exemption described in Rule 61-501 from the formalvaluation and minority shareholder approval requirements of Rule 61-501 and thatsuch transactions were fair and reasonable in the circumstances of Thistle. Inreaching these conclusions, the Thistle Board consulted with outside advisors,including Grant Thornton Corporate Finance, its nominated advisor, which tookinto account the Thistle Board's commercial assessment of the arrangements. Going Concern Having reviewed the cash flow forecasts of the Company and its subsidiariesuntil the completion of the Sale Transaction, the Company and its subsidiarieswill not be able to meet its obligations as they fall due absent additionalfunding by MC and Casten. Subsequent to the Sale Transaction, the Company isexpected to meet its corporate overheads and partially reduce the indebtednessowed by Thistle to MC and Casten ("Indebtedness"), which is at the option of MCand Casten immediately due and payable, should the Intended Cash Considerationbe made in cash. Following the Sale Transaction Thistle's only material assetwill be its interest in the Participating Loan. There has been no agreement orunderstanding reached with Casten and MC regarding the assignment of theParticipating Loan for a reduction in the Indebtedness. As Thistle will nothave the cash necessary to meet the remaining indebtedness owed by Thistle toCasten and MC, Thistle will be required to make arrangements with thesecreditors going forward. Should the completion of the Sale Transaction take place, it is management'sbelief that existing cash resources, the sale of PSGM, cash provided by MC andCasten should they elect to meet future additional funding requests and thewillingness of MC and Casten to enter into an arrangement regarding theassignment of the Participating Loan for a reduction in the Indebtedness, willbe sufficient to meet the Company's anticipated requirements. Accordingly thefinancial statements have been prepared on the basis of accounting policiesapplicable to a going concern. Should MC and Casten decline to advance funds in respect of future additionalfunding requests and/or the proposed sale of PSGM not be successful and / orCasten and MC willingness to enter into arrangement regarding the assignment ofthe Participating Loan for a reduction in the Indebtedness, there is a materialuncertainty which would cast doubt on the ability of the Company and itssubsidiaries to continue as going concerns and, therefore, that they may beunable to realise their assets and discharge their liabilities in the normalcourse of business. Highlights for the quarter ending September 30, 2007 and subsequent events Q3 2007 Q3 2006 9 months 9 months 2007 2006 Fresh Start Fresh Start Fresh Start Fresh Start Sales ($ millions) 21.3 25.7 61.3 68.9Net earnings / (loss) before discontinued operations (9.5) 0.8 (19.9) (4.0)($ millions)Net earnings / (loss) per share before discontinued (0.21) 0.02 (0.43) (0.09)operations ($)Net earnings / (loss) ($ millions) (9.6) 0.7 3.5 (4.3)Earnings / (loss) per share ($) (0.21) 0.01 0.08 (0.09)Cash generated by (used in) continuing operations (2.0) (0.1) (10.5) (3.0)($ millions) Gold sold (000's oz) 31 41 91 112Cash costs ($/oz) 720 518 679 530Total costs ($/oz) 788 542 733 567 • On January 31, 2007, the Company and CGA Mining Limited ("CGA") (ASX: CGX and TSX: CGA) entered into a Sale and Purchase Agreement ("SPA") for the sale toa wholly-owned subsidiary of CGA (the "Purchaser") of 100% of Thistle's shareholding in PGO, a wholly-owned subsidiary of the Company, and its other interests in the Masbate Project. The transaction closed on March 19, 2007. Accordingly the Masbate Project has been classified as a discontinued operation and its financial results are separately disclosed with comparatives restated asappropriate. The gain on the sale of the Company's interest in the Masbate Project amounted to $23.5 million or $0.51 per share. Following this transaction, the Company's total assets exceeded its total liabilities by $1.6million. • Of the US$51 million total consideration payable under the SPA, US$21million was paid in ordinary shares of CGA ("CGA Shares"). At the agreed issueprice of the CGA Shares of A$0.65 per CGA Share and exchange rate of A$:US$1.2686, Thistle received 40,985,538 CGA Shares an approximate 25.4% interest inCGA. In terms of Canadian GAAP this is considered an investment subject tosignificant influence and is accounted for using the equity method. Under theequity method, the original cost of the shares is adjusted for the Company'sshare of post-acquisition earnings or losses less dividends. • On March 20, 2007, the Company paid $26.7 million of the purchaseconsideration to MC and Casten as part payment of short term debt owing.Following this payment, the amount of principal, interest and withholding taxesoutstanding on April 1, 2007 amounted to $54.3 million. • On March 29, 2007 following an unwillingness of MC and Casten to defershort term debt and interest due and payable in terms of the Memorandum ofAgreements entered into on March 28, 2006 and the realization that PSGM wouldnot be able to generate sufficient free cash flows to allow Thistle to meet itsfinancial obligations, Thistle announced that it was in financial hardship andsuspended trading on the AIM market of the London Stock Exchange Plc pendingsatisfactory resolution of this matter. • On April 11, 2007, Thistle entered into a non-binding memorandum ofagreement in respect of the restructuring of indebtedness owing by Thistle to MCand Casten (the "Memorandum of Agreement"). The Memorandum of Agreementcontemplated (amongst other matters) the transfer of Thistle's (direct orindirect) ownership interest in 25.4% of the shares in the capital of CGA (the "Toowong Shares") held through its wholly owned Dutch subsidiary, Toowong MiningB.V. ("Toowong"), to MC and Casten which would result in the reduction ofThistle's indebtedness to MC and Casten. • On 11 May 2007, Thistle entered into a debt standstill agreement with MCand Casten (the "Standstill Agreement") pursuant to which MC and Casten agreed(amongst other matters) that should CGA's consent to the transfer of the ToowongShares to MC and Casten not be obtained by August 11, 2007, the arrangementsprovided for in the Memorandum of Agreement would lapse. Following the executionof the Standstill Agreement the suspension of the Company's shares to trading onAIM was restored on May 22, 2007. • On June 27, 2007, MC and Casten agreed to provide a credit line to theCompany for the purpose of funding corporate costs including the cost ofstrategic initiatives relating to PSGM and to provide a contingency in the eventof below forecast performance by PSGM. The credit line was contingent on,amongst others, improved performance at PSGM for each of the months of July andAugust 2007 of not less than 396 kilograms of gold. Unfortunately this level wasnot achieved and as a result MC and Casten have no obligation to extend anyfurther credit and may at their option, declare all amounts owing by Thistle tothem, including the amounts deferred in terms of the Standstill Agreement whichis now of no force or effect, to be immediately due and payable. At presentThistle has not received any notice in this regard. In addition CGA's consent tothe transfer of the Toowong Shares to MC and Casten was not obtained by August11, 2007 and, accordingly, the arrangements provided for in the Memorandum ofAgreement lapsed. • Cash flow used in continuing operations was $2.0 million in the thirdquarter of 2007 compared to $0.1 million used in the third quarter of 2006.Despite the increase in the gold price realized for the third quarter of 2007compared to the third quarter 2006, the decrease in ounces sold and the increasein costs relative to the same period in 2006 resulted in an increase in cashused in continuing operations. • Investment in property, plant and equipment of continuing operations,decreased in the third quarter of 2007 relative to the third quarter of 2006.Total funds invested in continuing operations amounted to $1.4 million in thethird quarter of 2007 and $2.2 million in the third quarter of 2006. The totalinvested in property, plant and equipment of continuing operations for the firstnine months of 2007 decreased to $4.4 million compared to $4.5 million in thecorresponding period for 2006. • Additional financing of $1.19 million was raised in the third quarter of2007 from MC and Casten. Of this amount $0.59 million was advanced to Thistle tomeet corporate overheads and $0.6 million was advanced directly to PSGM as partof the Working Capital Loans which Pamodzi will procure that PSGM will repayafter the completion of the Sale Transaction. In total Casten and MC haveadvanced $4.94 million to the group for the first nine months of 2007 comparedto $0.68 million in the first nine months of 2006. Of the $4.34 advanced toThistle, $0.7 million was applied to funding a cash deficit at PSGM in the firstquarter of 2007, with the balance applied to funding the Philippine operationsand corporate overheads. The $0.6 advanced directly to PSGM in the third quarterwas applied to funding a cash deficit. • The net loss and net loss before discontinued operations for the thirdquarter of 2007 was $9.6 million, or $0.21 per share and $9.5 million, or $0.21per share, respectively, compared to earnings of $0.7 million, or $0.01 pershare, and $0.8 million, or $0.02 per share, in the third quarter of 2006. Netearnings and net loss before discontinued operations for the first nine monthsof 2007 was $3.5 million, or $0.08 per share and $19.9 million, or $0.43 pershare, respectively, compared with the net loss and net loss before discontinuedoperations for the first nine months of 2006 of $4.3 million, or $0.09 per shareand $4.0 million, or $0.09 per share. • Gold sold in the third quarter of 2007 was 31,293 oz, a decrease of 24%compared to the same period in 2006. Production was adversely affected by anumber of issues including the rehabilitation of a seismic event affecting the32 level haulage at No. 1 shaft, the shaft pillar area which was sealedfollowing a fire at No. 2 shaft which was extinguished, No. 3 shaft wasexperiencing difficulty with the free flow of ore from two main ore-passes,power failures experienced at No. 3 shaft due to a faulty pump which led to theflooding of two main power feeder cables and a panel at the national electricitysupplier substation at No. 2 shaft exploded resulting extensive damage to thebuilding and electrical equipment and interruptions for the gold plant and No. 2shaft. • The gold yield from underground sources for the third quarter of 2007averaged 5.00 g/tonne compared to an average of 5.57 g/tonne in the thirdquarter of 2006 and 5.70 g/tonne and 5.43 g/tonne for calendar years 2006 and2005 respectively. The drop off in yield reflects the lack of flexibility thatPSGM has to absorb the production shocks experienced in the first, second andthird quarters of 2007. • Compared to the third quarter of 2006, PSGM's unit cash(1) costs increasedby 39% to $720 per ounce and total costs increased by 45% to $788 per ounce ofgold, respectively. The increase in unit cash cost occurred mainly due toreduction in gold sales by 24%, expenditure on upgrading electricalinfrastructure at Number 3 shaft, increases in the cost of labour of 13.8% whichtook effect at the June 2006 month end and the higher winter electricity tariffsfor June to August 2007. • The Company realized an average price of $676 per ounce of gold in thethird quarter of 2007, which is US$4 per ounce less than the market average spotprice of $680 for quarter. The price realized is $58 per ounce higher than thatrealized in the third quarter of 2006. • Gold production at PSGM continues to be challenging due to a lack ofoperational flexibility compounded by infrastructure problems. PSGM's goldproduction in 2007 is anticipated to be approximately 122,000 oz, at a cash costand total cost of approximately $685 to $695 per oz and $735 to $745 per ozrespectively assuming an exchange rate of 7.00 ZAR:US $. For further information, contact: Anton Kakavelakis, Group Financial Controller + 27 57 391 9026 or email to [email protected] Gerry Beaney or Troy MacDonald Grant Thornton Corporate Finance at +44 (0) 207 383 5100 This news release contains forward-looking statements with the meaning ofapplicable securities laws including amongst others, statements made or impliedunder the headings "Overview", and "Highlights for the quarter ending September30, 2007 and subsequent events" above relating to the Company's objectives,strategies to achieve these objectives, future cash flow and financingrequirements, and similar statements concerning anticipated future events,results, circumstances, performance or expectations that are not historicalfacts. Such forward-looking statements reflect the Company's current beliefs andare based on information currently available to management. These statements arenot guarantees of future performance and are based on the Company's estimatesand assumptions that are subject to risk and uncertainties inherent in thebusiness of the Company including those discussed in the Company's materialsfiled with the Canadian securities regulatory authorities from time to time,which could cause the actual results and performance of the Company to differmaterially from the forward-looking statements contained in this news release.Those risks and uncertainties include, among other things, risks related to: themining industry (including operational risks in exploration development andproduction; delays or changes in plans with respect to exploration ordevelopment projects or capital expenditures; the uncertainties involved in thediscovery and delineation of mineral deposits, resources or reserves; theuncertainty of mineral resource and mineral reserve estimates and the ability toeconomically exploit mineral resources and mineral reserves; the uncertainty ofestimates and projections in relation to production, costs and expenses; theuncertainty surrounding the ability of the Company to obtain all permits,consents and authorizations required for its operations and activities;competition for the acquisition, exploration and development of mineralinterests; and health and safety and environmental risks), the risk of gold andother commodity price and foreign exchange rate fluctuations; the ability of theCompany to fund the capital and operating expenses necessary to achieve thebusiness objectives of the Company; the uncertainty associated with commercialnegotiations and negotiating with foreign governments; the risks associated withinternational business activities; the dependence on key personnel; the abilityto access capital markets; the indebtedness of the Company; and labour relationsmatters. Material factors or assumptions that were applied in drawing aconclusion or making an estimate set out in the forward-looking statementsinclude that the general economy remains stable, the demand and price of goldcontinues to increase and the Rand remains strong against the US$. It is alsoassumed that there will be no major disruptions in production including failureof infrastructure, seismic activity, underground fires and labour unrest. TheCompany cautions that this list of factors is not exhaustive. Although theforward-looking statements contained in this news release are based upon whatthe Company believes are reasonable assumptions, there can be no assurance thatactual results will be consistent with these forward-looking statements. Allforward looking statements in this news release are qualified by thesecautionary statements. These forward-looking statements are made as of the datehereof and the Company, except as required by applicable law, assumes noobligation to update or revise them to reflect new information or the occurrenceof future events or circumstances. -------------------------- (1) Cash cost per ounce sold is not a recognized measure under Canadian GAAP.A reconciliation to the cost of sales per ounce is included under South AfricanOperations. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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