29th Mar 2007 13:30
Davos Resources PLC29 March 2007 Davos Resources plc / Index: AIM / Epic: DVRS / Sector: Natural Resources 29 March 2007 Davos Resources plc ('Davos' or 'the Company') Proposed acquisition of Central Norseman Gold Corporation Ltd (subject to deed of company arrangement) Proposed issues of 30,750,000 Management Shares, 24,250,000 Consortium Shares and 26,000,000 Options Placing of 220,000,000 New Ordinary Shares at 10 pence per share Re-Admission to trading on AIM Proposed change of name to Norseman Gold plc Notice of Extraordinary General Meeting Overview: • Davos is acquiring Australia's longest continually running gold operation, which has produced in excess of 5.5 million ounces of gold since 1937 • Production is currently sourced from two underground mines and processed through a CIL processing plant with a capacity of approximately 700,000 tonnes per annum • The tenements being acquired cover a total area of 689 sq km considered to have excellent exploration potential • The Company is targeting production of 150,000 ounces of gold per annum by 2010 • The Company is raising £22 million (before expenses) through the issue of 220,000,000 Ordinary Shares in the Company ("Placing Shares") at 10 pence per share to pay for the acquisition and to provide working capital • The total consideration for the acquisition is A$66 million plus the assumption of bonds and guarantees of approximately A$5 million. A$44 million is payable in cash of which A$8 million has already been paid as a non refundable deposit • The acquisition is subject to the approval of the Company's shareholders at an EGM which has been scheduled for 23 April 2007 at 10.00 a.m Further to its announcement of 10 January 2007, Davos, the AIM listedexploration and resource acquisition company, is pleased to announce that it hasraised the necessary finance to acquire Central Norseman Gold Corporation Ltd ("CNGC"), the owner and operator of the Norseman gold mine, Australia's longestcontinually running gold operation, which has produced in excess of 5.5 millionounces of gold since 1937. To fund the acquisition and provide working capitalfor the mine, the Company is raising £22 million (before expenses) through theissue of 220,000,000 Placing Shares at 10 pence per share. Following thecompletion of the acquisition the Company will be renamed Norseman Gold plc. Davos' Chairman, David Steinepreis, said, "The Central Norseman Gold acquisitionoffers potential for major growth in shareholder value. It is Australia'slongest continuously running gold mining operation, having produced over 5.5million ounces of gold over a period of more than 65 years. It is currentlyproducing gold from two high-grade underground gold mines and lower grade openpit stockpiles and the Directors believe that it has a sufficient resource basetogether with a portfolio of advanced exploration targets to support continuedfuture production. "Ore reserves are estimated to be 1.4 million tonnes at 7.58g/t Au for 347,800ounces of gold and 14.7 million tonnes at 4.05g/t Au for 1,908,000 ounces ofgold inclusive of reserves respectively. The current mine plan anticipatesproduction of approximately 90,000 ounces of gold for the period 1 July 2006 to30 June 2007 and opportunities have been identified to increase productionlevels to up to 150,000 ounces of gold per annum by 2010. "The team lead by Barry Cahill has already made great strides in turning aroundthe operation and with their expertise and proven ability, I am highly confidentthat Norseman Gold Plc will reward its investors." For further information please contact: David Steinepreis Davos Resources Plc Tel: 07913 402727 Olly Cairns/Romil Patel Corporate Synergy Plc Tel: 020 7448 4400 Guy Wilkes Ocean Equities Ltd Tel: 020 7786 4370 Hugo de Salis St Brides Media & Finance Ltd Tel: 020 7242 4477 An admission document, containing full details on CNGC (including a CPR by RSGGlobal), has today been sent to shareholders and is available from the Company'swebsite, www.davosresources.com or from the offices of Corporate Synergy Plc, 30Old Broad Street, London EC2N 1HT. Definitions used in this announcement are the same as those in the admissiondocument. Introduction On 10 January 2007, the Company announced that it had conditionally agreed, viaits wholly owned subsidiary Davos Gold, to acquire the entire issued sharecapital of CNGC from Croesus Mining Ltd ("CMNL") and had placed 61,440,000Ordinary Shares at 5 pence per share to raise £3,072,000 to fund the InitialDeposit under the Acquisition Agreement. On 26 February 2007 the Company made afurther announcement providing further details of the Acquisition and theInitial Deposit Placing and details of a further placing of 28,780,000 ofOrdinary Shares at 5 pence per share to raise £1,439,000 to provide additionalworking capital for the Company and the Placing. CNGC operates Australia's longest continuously running gold mining operation,having produced over 5.5 million ounces of gold over a period of more than 65years from its Norseman field located 725km east of Perth, Western Australia.CNGC is currently producing gold from two high-grade underground gold mines andlower grade open pit stockpiles and the Directors believe that it has a verygood portfolio of advanced exploration targets to support continued futureproduction. In conjunction with the Acquisition, the Company is raising £22,000,000 (beforeexpenses) through the issue of 220,000,000 Placing Shares at 10 pence per share.The Placing is conditional upon, inter alia, completion of the Acquisition andRe-Admission. The Company also intends to issue 24,250,000 Consortium Shares, 30,750,000Management Shares and 26,000,000 Options conditional upon Completion of theAcquisition. The Management Shares will be issued on the second anniversary ofthe Company's re-admission to trading on AIM (or earlier in certaincircumstances). It is intended that the name of the Company will be changed to Norseman Gold plcto reflect the Company's new focus as a gold producer. In addition, VincentPendal and Barry Cahill will join the Board on Completion, as Chairman and ChiefExecutive Officer respectively. David Steinepreis will step down as ExecutiveChairman, but will remain on the Board as an Executive Director. Due to the size of the Acquisition in relation to the Company and the fact thatthere will be a fundamental change in the Company's business and the Board, theAcquisition is classified as a reverse takeover of the Company under the AIMRules and therefore requires the approval of the Company's Shareholders at theEGM. If EGM Resolutions (1) to (3) are duly passed at the EGM, to be held at theoffices of Watson, Farley & Williams LLP on 23 April 2007 at 10.00 a.m., tradingin the Existing Ordinary Shares will be cancelled and it is expected that theEnlarged Share Capital will be admitted to trading on AIM on 24 April 2007. Background to and reasons for the Proposals Background The Company was admitted to trading on AIM on 23 October 2006 with a strategy ofdeveloping the exploration programme at the Pine Creek Tenement and makingacquisitions in the natural resources sector. The Existing Directors, having reviewed CNGC (following an introduction by theConsortium) and considered its long history and future prospects, formed theview that the Acquisition would offer the potential for major growth inshareholder value. (a) The Acquisition (i) CNGC CNGC, which was acquired by CMNL in 2002, operates Australia's longestcontinuously running gold mining operation, having produced over 5.5 millionounces of gold over a period of more than 65 years from its Norseman fieldlocated 725km east of Perth, Western Australia. Following a review by board of CMNL in April 2006, it was concluded that poordecisions over several years had left CNGC in a very difficult financial andoperational position with the key issue being insufficient ore sources tomaintain its processing plant at full capacity and high costs. As a result, theproduction levels were insufficient to meet its full hedging commitments. In June 2006 the Administrators were appointed over CMNL, CNGC and liquidatorsof CMNL's other subsidiaries. Under the Administrators, a new management team led by Barry Cahill, who hasagreed to become Chief Executive Officer and a Director of the Company onRe-Admission, has returned the Norseman Project to a monthly positive cashflowposition. CNGC is currently producing gold from two high-grade underground gold mines andlower grade open pit stockpiles. JORC compliant ore reserves and a JORCcompliant resource inventory as of 30 June 2006 were estimated by CNGC to be 1.4million tonnes at 7.58g/t Au for 347,800 ounces of gold and 14.7 million tonnesat 4.05g/t Au for 1,908,000 ounces of gold inclusive of reserves respectively.Since 30 June 2006, CNGC has produced around 55,000 ounces of gold to the end ofFebruary 2007. The current CNGC mine plan anticipates production ofapproximately 90,000 ounces of gold for the period 1 July 2006 to 30 June 2007. RSG Global has reviewed the CNGC reserve statement and mine plan and, in itsview, the base case scheduled mine production is around 296,000 ounces of goldas at 1 January 2007, giving the Norseman Project a mine life of around threeyears from that date. Very good exploration potential has been identified bothalong strike and at depth of the existing mines and there are advanced targetslocated close to infrastructure that have the potential to become future oresources. Davos submitted an offer to acquire CNGC in November 2006. Following a period ofnegotiation, Davos signed the Acquisition Agreement with the Administrators on 3January 2007. The Directors consider that CNGC is an attractive acquisition based on thefollowing: • The Directors are confident that the Enlarged Group should be able toextend the mine life through the conversion of resources into reserves andidentifying additional resources, based on the history of the mine which hasproduced in excess of 5.5 million ounces of gold since 1937 with an averagereserve of approximately 240,000 ounces of gold over that period. • The current mine plan anticipates production of approximately 90,000ounces of gold for the period 1 July 2006 to 30 June 2007. In the Directors'opinion opportunities have been identified to increase production levels fromthe mining operations to up to 150,000 ounces of gold per annum by 2010.However, to achieve this level of production will require resources to beconverted into reserves through exploration drilling and capital development. • The mining operations have currently been returned to a position wherethey are producing positive cashflow on a monthly basis following theappointment of the new management team led by Barry Cahill, and further scopefor cost improvements has been identified. Following the injection of workingcapital that the Placing will provide, a plan for capital development,exploration drilling and acquisition of operational equipment will beimplemented. (ii) Principal terms of the Acquisition Under the terms of the Acquisition Agreement: 1. the Company has conditionally agreed, through Davos Gold, to acquire the entire issued share capital of CNGC for a total consideration of: • A$44 million in cash; • A$2 million to be satisfied by the issue of 8,000,000 Ordinary Shares at 10 pence per share; and • A$20 million to be satisfied by the issue of the Convertible Loan Notes; 2. Completion is conditional on the Conditions being satisfied; 3. the total consideration will be payable on Completion; 4. the total consideration shall be adjusted shortly following Completion by allocation of employee entitlements, outgoings, trade creditors and debtors, which is estimated to provide an approximate A$1.9 million credit to the Company; and 5. the Company must, with effect from Completion, organise for the provision of bonds, by financial institutions, to the DOIR. The current bonds in place amount to around A$5,000,000 and are subject to review. It is estimated that the new bonds to be put in place will total approximately A$5,400,000. (iii) Details of the cash payment The Initial Deposit of A$8 million has been paid, leaving a balance of A$36million due in cash on Completion. The Initial Deposit was funded by the InitialDeposit Placing of 61,440,000 Ordinary Shares at a price of 5 pence per share toinstitutional and other investors to raise £3,072,000 (c. A$7,680,000). TheGroup will be required to pay the Further Deposit of A$1.75 million by 29 March2007 to extend the time period for fulfilling the Conditions to 15 April 2007,or subject to clause 4.9 of the Acquisition Agreement, to not later than 30April 2007. The Deposit is non-refundable save in the circumstances set out inthe admission document. (iv) Details of the Consideration Shares The Consideration Shares will be issued credited as fully paid and, immediatelyfollowing Re-Admission, will represent approximately 2.01 per cent. of theEnlarged Share Capital. The Consideration Shares will, upon issue, rank pari passu in all respects withthe Existing Ordinary Shares, including the right to receive any dividends andother distributions declared, made or paid following Re-Admission and will beissued credited as fully paid. (b) The Placing (i) Details of the Placing The Company is proposing to raise £22,000,000 (A$55,000,000), before expenses,through the issue of 220,000,000 Placing Shares at the Placing Price. David Steinepreis has subscribed for 1,000,000 Ordinary Shares as part of thePlacing. Pursuant to the terms of the Placing Agreement, each of Ocean Equities andCorporate Synergy has agreed to use its reasonable endeavours to procuresubscribers for the Placing Shares. The Placing Shares will representapproximately 55.35 per cent. of the Enlarged Share Capital immediatelyfollowing Re- Admission. The Placing is conditional on, amongst other things, the Conditions beingsatisfied. The Placing Shares will, upon issue, rank pari passu in all respects with theExisting Ordinary Shares and the Consideration Shares, including the right toreceive any dividends and other distributions declared, made or paid followingRe-Admission and will be issued credited as fully paid. (ii) Use of Proceeds A summary of the proposed application of the net proceeds from the Placing isset out below: Acquisition consideration (including the Further Deposit) A$36,000,000*Stamp duty A$3,250,000Bonds A$5,400,000**Norseman Project investment A$5,750,000***Total A$50,400,000 *Subject to adjustment. ** The Directors currently estimate bonds required on Completion to be up toA$5,400,000. Current Bonds in place amount to around A$5,000,000. *** Includes approximate amounts allocated to exploration, capital development,working capital and operational equipment. The expenditure proposals above are based on the current intentions andestimates of the Company and remain subject to reassessment. (c) Other issues of Ordinary Shares and Options Subject to Completion, the Company has agreed to: 1. issue 30,750,000 Ordinary Shares (the Management Shares) to certain Directors, including Barry Cahill, David Steinepreis and Vincent Pendal and key management (or their associates); 2. issue 24,250,000 Ordinary Shares (the Consortium Shares) to the Consortium; 3. grant 11,000,000 Options to Barry Cahill and key management (or their associates), exercisable for a period of 3 years from the date of their grant at a price of 12.5p per Ordinary Share and 10,000,000 Options to employees, exercisable for a period of 3 years from the date of their grant at a price of 10p per Ordinary Share; and 4. grant 5,000,000 Options to Ocean Equities, exercisable for a period of 3 years from Completion at a price of 12.5p per Ordinary Share. These Ordinary Shares and Options will be subject to lock-ins and orderly marketarrangements. The Management Shares will be issued on the second anniversary ofthe Company's re-admission to trading on AIM (or earlier in certaincircumstances). (d) Financial effects of the Acquisition and the Placing Following Re-Admission and Completion of the Acquisition, the Enlarged Groupwill have approximately A$10.5 million of cash in the bank with which to fundthe development of the Norseman Project, after allowing for the effect of theadjustments. Directors Existing Directors: David Steinepreis, Executive Director, aged 50 David Steinepreis is a Chartered Accountant and former partner of KMGHungerfords (now KPMG) where he specialised in strategic corporate advice andtaxation for listed companies. He entered commerce as a director, adviser andmajor shareholder of a number of listed companies in the gold, diamonds, oil andnew mining technology sectors. He is a director of Monitor Holdings Ltd, RMGLimited, Toodyay Resources Ltd and WAG Ltd all of which are listed on the ASX;North River Resources plc which is listed on AIM and Leopard Minerals plc. Hehas previously been a director of Ascent Resources plc and Uranium Resourcesplc, companies listed on AIM. He is also chairman of Ascent Capital. FollowingRe-Admission David Steinepreis will become an Executive Director with primaryresponsibility for overseeing the financial affairs of the Enlarged Group. Michael de Villiers, Non-Executive Director, aged 44 Michael de Villiers qualified as a Public Accountant with Ernst & Young in CapeTown. He is the finance director of Mercator Gold plc, listed on AIM. He gainedhis experience as financial manager at mining and chemicals operations inNamibia, Botswana, Ghana and Bulgaria. He was previously the finance director ofOxus Gold plc and Navan Mining plc, companies listed on AIM. He is currently adirector of Ariana Resources Plc, Mercator Gold Plc and Island Gold plc. Proposed Directors: Vincent Pendal, Chairman, aged 61 Vincent Pendal has extensive experience in banking and corporate finance in boththe industrial and mining sectors in Australia. He is currently the chairman ofBrandrill Ltd, a company listed on the ASX, and a director and a majorshareholder of Oakvale Capital Ltd, a company registered in Australia, whichprovides independent advice on financial risk management to a range of leadingcompanies, government authorities and institutions throughout Australia. Duringthe past five years he also served as Chairman of Austral Coal Limited andPerilya Limited, companies listed on the ASX. He is a foundation/life member ofthe Kalgoorlie Mining Hall of Fame. Barry Cahill, Chief Executive Officer, aged 43 Barry Cahill is a mining engineer with over 20 years' experience in operationalmining and management throughout Australia. He has had extensive experience inthe management of underground and open pit mines as both a mining contractor andan operator, including the Leinster nickel mine and the Broken Hill base metalmine. His area of expertise has an emphasis on the recovery of poorly performingoperations to a profitable standard particularly in narrow vein undergroundmines. Barry Cahill has been an executive director of a number of publiccompanies including managing director of Australian Mines Limited, a companylisted on the ASX. He is a member of the Australasian Institute of Mining &Metallurgy and a member of the Australian Institute of Company Directors.Following Re-Admission Barry Cahill will take overall responsibility for themanagement of the Norseman Project. CNGC has approximately 200 personnel working at the Norseman Project. Current trading and prospects Davos Following the Company's admission to AIM, the Company undertook some regionalexploration work at the Pine Creek Tenement. Since December 2006, no furtherwork has been undertaken at the Pine Creek Tenement due to the Company focusingits efforts on the Acquisition. Application has also been made for anotherexploration licence and the results of this are awaited. CNGC Details of CNGC's current trading and prospects are set out in paragraph 7 ofPart II of the admission document. Following completion of the Acquisition, the Company's primary business will bedeveloping CNGC's Norseman Project. The Directors also intend to continue withthe development of an exploration programme at the Company's Pine CreekTenement; however the Directors do not consider that, following completion ofthe Acquisition, this activity will be of a core nature. Dealings and trading Application will be made to the London Stock Exchange for the Existing OrdinaryShares to be re-admitted to trading on AIM and for the New Ordinary Shares to beadmitted to trading on AIM. Re-Admission of the Existing Ordinary Shares and,subject to the Conditions being satisfied, admission of the New Ordinary Sharesto trading on AIM is expected to take place on or around 24 April 2007. TheOrdinary Shares are in registered form. **ENDS** Notes: The information in this announcement as it relates to geology, geochemistry andgeophysics, has been reviewed by Barry Cahill who is a Competent Person asdescribed in Part two of the AIM Guidance Notes for Mining, Oil and GasCompanies. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Norseman Gold