29th Jun 2007 07:00
Avocet Mining PLC29 June 2007 AVOCET MINING PLC DISPOSAL OF ZGC AND EXPANSION IN SOUTH EAST ASIA Avocet Mining PLC ("Avocet" or "the Company") announces that it has signed abinding agreement for the sale of its entire interest in ZGC, its operation inTajikistan, to a wholly owned subsidiary of Zijin Mining ("Zijin"), for a cashconsideration of US$55.1 million, of which US$10 million is deferred andcontingent. Completion is subject to Chinese government approval which isexpected prior to the end of July. The Company also announces that it has agreed to acquire a majority interest ina portfolio of significant gold properties in Indonesia ("the Banda properties"). The initial consideration for the acquisition is 712,000 Avocetshares, with additional shares issued upon publication of defined JORC-compliantresources. In total, the Banda properties represent exploration and miningrights over a combined land position of 410 square kilometres predominantlylocated in North Sulawesi, the location of the Company's North Lanut mine. Thesegold and copper properties include more advanced projects which have previouslybeen reported as containing combined non-JORC compliant resources estimated at2.2 million ounces of gold. Avocet believes significant upside exists on theproperties and has recently commenced exploration on two of the prospects. Further details of both these transactions are appended. Jonathan Henry, Chief Executive Officer of Avocet, commented: "The decision to sell ZGC follows a detailed strategic and operational review ofthe business which Avocet has been conducting since September 2006. The board ofAvocet concluded that the sale of ZGC to Zijin represented the best way forAvocet to maximize the value of its investment in ZGC. I am confident thetransaction will be completed prior to the end of July. The Banda properties acquisition provides tremendous leverage for Avocet toincrease its resource base and develop new reserves over the next few years.Although the properties are all at exploration stage at this time we aim to movea number to the project development stage within a two to three year period. Avocet is now very well placed to focus on its producing mines in Indonesia andMalaysia, as well as expansion in South East Asia, including development of theBakan mine and Banda properties. We are currently reviewing several otheropportunities in the region. Avocet has no debt and after completion of the ZGCsale will have a cash balance of over US$100 million to help achieve thisexpansion." A presentation to analysts to discuss the two transactions will be given todayat 9am at the offices of Buchanan Communications, 45 Moorfields, London EC2Y 9AE(contact: Bobby Morse or Ben Willey). As previously announced the Directors of Avocet will also be hosting apresentation for shareholders and analysts to be given on Wednesday 11th July at11am by Avocet's senior corporate and operational management at the StationersHall, London EC4M 7DD. This will discuss the financial results for the yearended 31 March 2007, which will be announced that morning, together with anupdate on the Company's ongoing growth strategy. ________________________________________________________________________________ For further information please contact: Avocet Mining PLC Buchanan Communications Grant Thornton Corporate Finance Jonathan Henry, Bobby Morse, Partner Fiona Kindness, DirectorChief Executive Officer Ben Willey, Director 020 7383 5100 Mike Norris, 020 7466 5000 Chief Financial Officer 020 7907 9000 www.avocet.co.uk www.buchanan.uk.com www.grant-thornton.co.uk Details of announced transactions Disposal of ZGC In September 2006 the Company announced a strategic review of itsunderperforming ZGC operation in Tajikistan. This review led management toconclude that a disposal was the best way to maximise the value of ZGC forAvocet and to allow the Company to best exploit opportunities currently underevaluation in South East Asia. The transaction will be conducted via the sale of Avocet's wholly ownedsubsidiary, Commonwealth & British Minerals (UK) Limited ("CBML"), which in turnowns a 75% shareholding in the Tajik company JV Zeravshan LLC ("ZGC"), to XinJiang Zijin Mining Company Ltd. ("Xin Jiang Zijin"), a wholly owned subsidiaryof Zijin Mining, a Hong Kong listed company and one of the largest goldproducers in China. The other shareholder in ZGC is the Government of theRepublic of Tajikistan, which fully supports the transaction. The consideration of US$55.1 million includes the assignment to Xin Jiang Zijinof Avocet's outstanding loan to CBML of approximately US$12.4 million. Of thetotal consideration, which is entirely payable in cash, US$45.1 million will bepaid on completion with US$10 million contingent on the granting to ZGC of anexploration or mining licence in relation to certain areas of interest locatedin the vicinity of the current mining operations. Avocet expects to record anexceptional profit of approximately US$20 million on the sale after associatedexpenses, costs and other payments and assuming the receipt of the contingentpayment. Completion remains subject to the approval of the Ministry of Commerceof the People's Republic of China which is expected prior to the end of July2007. Acquisition of majority interest in the Banda properties The Company has secured a 75% interest in nine highly prospective goldproperties mainly located in North Sulawesi where the Company built and operatesthe North Lanut gold mine and expects to develop a second mine at Bakan(1). Intotal, the Banda properties represent exploration and mining rights over acombined land position of 410 square kilometres. The more advanced Banda goldand copper properties have been reported as containing combined non-JORCcompliant resources previously estimated at 2.2 million ounces of gold. Howeverthe Company believes significant upside exists on many of the properties to addto resources over a short period of time. Those Banda properties located inNorth Sulawesi comprise: • a 5th generation Contract of Work (CoW) in the Gorontalo Province to the west of North Lanut and Bakan containing four blocks (see below); • three Kuasa Pertembangan tenements ("KP" - national mining rights) in the Bolaang Mongondow regency. These KPs include Tanoyan and Patung, which contain high-grade gold bearing veins and low-grade gold stockworks that have not yet been evaluated at depth. Tanoyan is located 5 kilometres from Avocet's Bakan project and may have synergies with this project. The third KP is at Kotabunan, which hosts the Doup deposit, as well as several other gold prospects. Doup was explored in the 1980s by Placer and BHP-Utah. Placer estimated a non-JORC resource of 17Mt @ 2.15 g/t Au containing 1.2 million ounces of gold. A full version of this release including a map of the North Sulawesi propertiesacquired can be found on the Company's website (www.avocet.co.uk). Elsewhere, the properties include two KPs in Kalimantan. These are greenfieldinitiatives that include gold-skarn mineralisation at Serantak in WestKalimantan. The Gorontalo CoW comprises four priority blocks containing the most advancedexploration projects as follows: • Pani - a large epithermal gold system measuring 6 x 15 kilometres. Newcrest completed 24 scout drillholes in several prospects with best intercepts including: 17m @ 1.93 g/t Au from 48m, 27.3m @ 1.18 g/t Au from 41m, 2m @ 12.7 g/t Au from 68m, 8m @ 1.49 g/t Au from 26m and 22m @ 0.94 g/t Au from 46m. Pani has the potential to host a very large resource, but this is currently unquantified. The Pani ground holdings exclude a KP area in which Pencari Mining, a TSXV-listed junior, holds an interest. • Totopo - a high-level epithermal gold system, which Newcrest evaluated with 23 scout drillholes. The better intercepts include: 8m @ 13.7 g/t Au from 266m (including 4m @ 25.6 g/t Au), 4m @ 10.4 g/t Au from 202m and 54m @ 0.57 g/t Au from 46m (including 2m @ 7.23 g/t Au). There is potential for high-grade, vein-hosted and low-grade stockwork-hosted resources. • Bolangitang - a sheeted epithermal vein system with a non-JORC resource estimate of 4Mt @ 2.7 g/t Au and 21 g/t Ag containing 0.3 million ounces of gold and 2.7 million ounces of silver. The resource has potential to expand through strike and depth extensions. • Bulagidun - a porphyry copper-gold complex with a non-JORC resource estimate of 35Mt @ 0.6% Cu and 0.6 g/t Au (460 million pounds copper and 0.7 million ounces gold) in one small breccia pipe. The district requires further work to define the global resource potential. Avocet will have a direct 75% ownership interest in the Gorontalo CoW. Avocet's75% interest in the KPs has been secured through contractual arrangements withlocal partners, in return for agreeing to initially fund the projects through tofeasibility study. A 1.5% revenue royalty on any production will be paid to theselling parties. On completion, which is subject to certain Indonesian government approvals,Avocet will issue 712,000 treasury shares to the vendor. These shares will beheld in escrow for 12 months by the selling party. An additional 1,000,000shares may be issued in two stages triggered by the publication of a total500,000 ounce and 1,000,000 ounce JORC-compliant resource. Notes to Editors All references to resources and exploration results have been approved forrelease 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 isa Competent Person as defined by the JORC Code (2004). He has consented to theinclusion of the material in the form and context in which it appears. 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 Asia and equity interests in a number of Canadianlisted exploration and development companies. Zijin is a mining company based in Xiamen, China, and listed on the Hong KongStock Exchange. CIBC World Markets acted as the exclusive financial advisor to Avocet on thetransaction. Zijin was advised by The Balloch Group. -------------------------- (1) PT Avocet Bolaang Mongondow, an 80% subsidiary of Avocet holds a 6thgeneration Contract of Work (CoW) in the Bolaang Mongondow regency, whichincludes the North Lanut mine and the Bakan development project. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
AVM.L