TIDMASO
RNS Number : 5562J
Avesoro Resources Inc.
20 August 2019
20 August 2019
Avesoro Resources Inc.
TSX: ASO
AIM: ASO
Avesoro Announces Receipt of Non-Binding Acquisition Proposal
from Controlling Shareholder and Operational and Financial
Update
Avesoro Resources Inc (the "Company" or "Avesoro") announces
that it has received a non-binding expression of interest from its
controlling shareholder, Avesoro Jersey Limited ("AJL") to acquire
all of the issued and outstanding shares of the Company not already
owned by AJL. Avesoro also takes this opportunity to provide the
following update on operations at its Youga Gold Mine in Burkina
Faso ("Youga"), and New Liberty Gold Mine in Liberia ("New
Liberty") and the Company's broader financial condition and
financing requirements.
Highlights
-- Company in receipt of a non-binding expression of interest
from AJL to acquire all of the issued and outstanding shares of the
Company that it does not already own at a price of GBP1 per share.
AJL currently holds approximately 72.9% of the Company's common
shares. AJL's proposal is supported by holders of an additional
12.9% of the common shares.
-- Company assessing the longer-term viability of mining
operations at Youga in light of damage sustained to heavy mining
equipment and the low grades currently being achieved.
-- No access to ore at New Liberty anticipated until early
September. Gold shipments in August to be less than 1,000 ounces
from this mine.
-- Production guidance suspended while operations are under review.
-- As a result of operational issues financing requirement has
increased by not less than US$10 million from previous
estimates.
-- Prior to receipt of the acquisition proposal from AJL, the
Company has been negotiating a working capital facility with AJL in
order to provide short term liquidity.
Receipt of Non-Binding Acquisition Proposal from Controlling
Shareholder
The Company has received a non-binding expression of interest
(the "Acquisition Proposal") from AJL to acquire all of the shares
of the Company that AJL does not already own at a price of GBP1 per
Share (the "Proposal Price"). According to the Acquisition
Proposal, AJL's proposal is supported by holders of an additional
12.9% of the issued and outstanding shares of the Company pursuant
to "hard" lock up agreements. The transaction would be structured
as a court-approved plan of arrangement under the provisions of the
Canada Business Corporations Act.
The board of directors of the Company has established a special
committee (the "Special Committee") comprised of all of the
independent directors of the Company. The Special Committee has a
mandate to conduct a detailed review and analysis of the
Acquisition Proposal and to identify and consider alternatives that
may be available to the Company, with a view to determining whether
it is in the best interests of the Company to support the
Acquisition Proposal and the transaction contemplated therein. The
Special Committee has engaged independent legal counsel and is in
the process of engaging independent financial advisors to assist
with its review. In particular, the Special Committee plans to
obtain an independent valuation that will be required under
Canadian Multilateral Instrument 61-101 - Protection of Minority
Security Holders in Special Transactions ("MI 61-101"). Investors
are reminded that the Company is not subject to the UK City Code on
Takeovers and Mergers.
Youga Update
Following the previously reported security incident, Avesoro has
restarted the mill and mining operations at Youga. However,
following a more detailed assessment of the damage incurred to
property during the incident it has now been confirmed that a
number of haul trucks, excavators and auxiliary equipment within
the Heavy Mining Equipment ("HME") fleet were vandalised beyond
repair.
As a consequence, the mining fleet capacity has been
substantially reduced in the short term.
Fortunately, no damage was sustained to the process plant or its
associated facilities with the mining equipment being the focus of
the incident.
As previously announced, Orkun Group Sarl ("Orkun"), the
Company's mining contractor has begun to ship additional HME
comprising five excavators, 15 haul trucks and auxiliary equipment
to Youga, which is expected to alleviate the situation to some
extent.
However, as announced on June 10, 2019, the Company has
experienced significant ore dilution at the Gassore pit at Youga,
and following recent events, the Company is currently assessing the
longer-term viability of ongoing mining operations at Youga and
will make a further announcement in this regard in due course.
New Liberty Update
It was initially assessed that the heavy rain at New Liberty and
resultant flooding of the main pit would result in ore mining being
suspended for a period of ten days to allow adequate dewatering of
the main pit.
As a result of further substantial rainfall and a reassessment
of the situation, it is now anticipated that there could be no
access to ore until early September depending on the amount of
rainfall in the meantime. The mining fleet is continuing to focus
on waste stripping operations during this time. Additionally, due
to limited mill stockpiles, it is expected that gold shipments in
August will be less than 1,000 ounces.
Production Guidance
Gold production and cost guidance for the full year is currently
under review. Previous guidance is suspended pending that review.
Gold production for July and August is expected to be c.16,000 oz
and it is therefore anticipated that full year guidance will be
materially reduced from 180,000 - 200,000 koz range announced on
June 10, 2019.
Financing Requirements
The Company announced on July 15, 2019 that its anticipated
funding gap in H2 2019 would be US$10-15 million including the
repayment of US$12.9 million of debt and interest provided by a
related party lender falling due for repayment in 2019.
As a result of the operational difficulties faced at both
operations, the Company now believes that the funding gap for the
balance of the financial year has widened by not less than US$10
million. The cash requirement is under review and will depend on
the revised production and cost guidance. The Company is currently
relying on extended credit from suppliers at each of its mines but
will require an injection of new capital in the near future in
order to be able to satisfy its debts as they fall due.
As disclosed on 8 August 2019, a Letter of Support was provided
to the directors of the Company dated August 7, 2019, by Mr.
Murathan Günal, the principal of AJL. In that letter, Mr. Günal
undertakes to continue to provide such support for a period of not
less than twelve months from the date of the signing of the
Company's interim consolidated financial statements for the six
months ended June 2019 to ensure that the Company can meet its
liabilities as they fall due.
To that end, prior to the receipt of the Acquisition Proposal
the Company has been in negotiations with AJL for the provision of
a further working capital loan (the "New Facility") in order to
alleviate funding concerns and provide sufficient financing for the
Company to continue its operations in the near-term.
The provision of the New Facility would be treated as a related
party transaction pursuant to Rule 13 of the AIM Rules for
Companies and pursuant to MI 61-101.
Negotiations with Banks
As announced on August 8, 2019, the Company is currently in
default under the cross-default provisions of its loan documents
with the Company's lenders, Nedbank Limited and FirstRand Bank
Limited (the "Lenders") which allow the Lenders to accelerate
payment of New Liberty's bank loans before their final maturity
date.
The Company has requested waivers of the Events of Default and
remains in discussions with its Lenders. The Company remains
confident that a waiver or suitable alternative remedy can be
agreed with the Lenders.
In the event that the Lenders decide to accelerate the loan
repayment, they can declare all outstanding principal amounts
(US$71.6m) and accrued interest amounts as immediately payable in
addition to their customary enforcement rights. The effect of the
guarantees given by AJL and the non-executive Chairman requires
their immediate, on demand payment of any amounts due under the
loans.
Contact Information
Avesoro Resources Inc.
Geoff Eyre / Nick Smith
Tel: +44(0) 20 3405 9160
Camarco finnCap
(IR / Financial PR) (Nominated Adviser and Joint Broker)
Gordon Poole / Nick Hennis Christopher Raggett / Scott Mathieson
/ Camille Gochez
Tel: +44(0) 20 3757 4980 Tel: +44(0) 20 7220 0500
Berenberg Hannam & Partners
(Joint Broker) (Joint Broker)
Matthew Armitt / Detlir Elezi Rupert Fane / Andrew Chubb / Ernest
Tel: +44(0) 20 3207 7800 Bell
Tel: +44(0) 20 7907 8500
About Avesoro Resources Inc.
Avesoro Resources is a West Africa focused gold producer and
development company that operates two gold mines across West Africa
and is listed on the Toronto Stock Exchange ("TSX") and the AIM
market operated by the London Stock Exchange ("AIM"). The Company's
assets include the New Liberty Gold Mine in Liberia ("New Liberty")
and the Youga Gold Mine in Burkina Faso ("Youga").
For more information, please visit www.avesoro.com
Certain information communicated in this announcement was, prior
to its publication, inside information for the purposes of Article
7 of Regulation 596/2014.
Forward Looking Statements
Certain information contained in this press release constitutes
forward looking information or forward-looking statements within
the meaning of applicable securities laws. This information or
statements may relate to future events, facts, or circumstances or
the Company's future financial or operating performance or other
future events or circumstances. All information other than
historical fact is forward looking information and involves known
and unknown risks, uncertainties and other factors which may cause
the actual results or performance to be materially different from
any future results, performance, events or circumstances expressed
or implied by such forward-looking statements or information. Such
statements can be identified by the use of words such as
"anticipate", "plan", "continue", "estimate", "expect", "may",
"will", "would", "project", "should", "believe", "target",
"predict" and "potential". No assurance can be given that this
information will prove to be correct and such forward looking
information included in this press release should not be unduly
relied upon. Forward looking information and statements speak only
as of the date of this press release.
Forward looking statements or information in this press release
include statements regarding the Acquisition Proposal and the
transactions contemplated thereby, the Company's funding
requirement increasing for H2 2019; statements regarding the timing
and delivery of additional HME to Youga; and statements regarding
the pit dewatering and timing of the mining of ore at New
Liberty.
In making the forward looking information or statements
contained in this press release, assumptions have been made
regarding, among other things: general business, economic and
mining industry conditions; interest rates and foreign exchange
rates; the continuing accuracy of Mineral Resource and Reserve
estimates; geological and metallurgical conditions (including with
respect to the size, grade and recoverability of Mineral Resources
and Reserves) and cost estimates on which the Mineral Resource and
Reserve estimates are based; the supply and demand for commodities
and precious and base metals and the level and volatility of the
prices of gold; market competition; the ability of the Company to
raise sufficient funds from capital markets and/or debt to meet its
future obligations and planned activities and that unforeseen
events do not impact the ability of the Company to use existing
funds to fund future plans and projects as currently contemplated;
the stability and predictability of the political environments and
legal and regulatory frameworks including with respect to, among
other things, the ability of the Company to obtain, maintain, renew
and/or extend required permits, licences, authorizations and/or
approvals from the appropriate regulatory authorities; that
contractual counterparties perform as agreed; and the ability of
the Company to continue to obtain and retain qualified staff
(including employees and contractors) and equipment in a timely and
cost-efficient manner to meet its demand.
Actual results could differ materially from those anticipated in
the forward-looking information or statements contained in this
press release as a result of risks and uncertainties (both foreseen
and unforeseen) and should not be read as guarantees of future
performance or results and will not necessarily be accurate
indicators of whether or not such results will be achieved. These
risks and uncertainties include customary completion risks for
transactions similar to the Acquisition Proposal, and it is
specifically noted that the Acquisition Proposal is a non-binding
expression of interest and there is no guarantee that the Company
will enter into binding agreements in respect of the Acquisition
Proposal, or that it will be completed on the terms set out in this
press release or at all. Other risks are those normally incidental
to exploration and development of mineral projects and the conduct
of mining operations (including exploration failure, cost overruns
or increases, and operational difficulties resulting from plant or
equipment failure, among others); the inability of the Company to
obtain required financing when needed and/or on acceptable terms or
at all; risks related to operating in West Africa, including
potentially more limited infrastructure and/or less developed legal
and regulatory regimes; health risks associated with the mining
workforce in West Africa; risks related to the Company's title to
its mineral properties; the risk of adverse changes in commodity
prices; the risk that the Company's exploration for and development
of mineral deposits may not be successful; the inability of the
Company to obtain, maintain, renew and/or extend required licences,
permits, authorizations and/or approvals from the appropriate
regulatory authorities and other risks relating to the legal and
regulatory frameworks in jurisdictions where the Company operates,
including adverse or arbitrary changes in applicable laws or
regulations or in their enforcement; competitive conditions in the
mineral exploration and mining industry; risks related to obtaining
insurance or adequate levels of insurance for the Company's
operations; that Mineral Resource and Reserve estimates are only
estimates and actual metal produced may be less than estimated in a
Mineral Resource or Reserve estimate; the risk that the Company
will be unable to delineate additional Mineral Resources; risks
related to environmental regulations and cost of compliance, as
well as costs associated with possible breaches of such
regulations; uncertainties in the interpretation of results from
drilling; risks related to the tax residency of the Company; the
possibility that future exploration, development or mining results
will not be consistent with expectations; the risk of delays in
construction resulting from, among others, the failure to obtain
materials in a timely manner or on a delayed schedule; inflation
pressures which may increase the cost of production or of
consumables beyond what is estimated in studies and forecasts;
changes in exchange and interest rates; risks related to the
activities of artisanal miners, whose activities could delay or
hinder exploration or mining operations; the risk that third
parties to contracts may not perform as contracted or may breach
their agreements; the risk that plant, equipment or labour may not
be available at a reasonable cost or at all, or cease to be
available or resign, or in the case of labour, may undertake strike
or other labour actions; the inability to attract and retain key
management and personnel; and the risk of political uncertainty,
terrorism, civil strife, or war in the jurisdictions in which the
Company operates, or in neighbouring jurisdictions which could
impact on the Company's exploration, development and operating
activities.
Although the forward-looking statements contained in this press
release are based upon what management believes are reasonable
assumptions, the Company cannot provide assurance that actual
results or performance will be consistent with these
forward-looking statements. The forward looking information and
statements included in this press release are expressly qualified
by this cautionary statement and are made only as of the date of
this press release. The Company does not undertake any obligation
to publicly update or revise any forward looking information except
as required by applicable securities laws.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
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