Avocet Mining will sell it assets to Ghana-based Balaji Group of companies for a total consideration of US$5 million – 2.5 million of which will be payable in cash at completion and the remaining 2.5 million paid by way of deferred payments.
Avocet began negotiations with the creditors of Société des Mines de Bélahouro S.A. (SMB) in April 2017, and has since pursued a consensual restructuring.
On 2 October 2017 Avocet announced that discussions with two potential investors were ongoing, each proposing transactions contingent on a compromise with SMB’s creditors.
As the disagreement among the creditors could not be resolved, one of the two potential investors, the Balaji Group, agreed to acquire Avocet’s Burkina Faso assets without the prior restructuring of approximately $70 million of overdue debt owed by SMB and Goldbelt Resources West Africa S.à.r.l.(Goldbelt) to third party creditors, finance providers, personnel and government, for a consideration that is independent of the outcome of these discussions.
The protracted restructuring process caused by continuing disagreement among the creditors, the deteriorating security situation at the Inata mine, increasing control issues and the exhaustion of all sources of funding has left the company with two options: either to accept the proposal from the Balaji Group for the sale or for SMB and Goldbelt to be placed into liquidation.
The sale of the Burkina Faso assets has been part of a larger restructuring and discussions are ongoing with Avocet’s sole creditor, Manchester Securities Corp. (Elliott) regarding the restructuring of its overdue loans to the company which total $28.7 million (and which are secured, in part, over the shares in Resolute (West Africa), SMB and Goldbelt).
Given the Avocet Mining’s current circumstances and in order to enable the company finally to resolve its affairs, Elliott has agreed to the sale and the payment terms proposed by the Balaji Group and to release its security over the Burkina assets, conditional upon being granted appropriate replacement security over the net proceeds of the sale.
Discussions with Elliott regarding the restructuring of Avocet’s debts will continue after completion of the sale, including the use of the proceeds of the sale for the repayment of debt.
In this context, Avocet will be taking all practicable actions to minimise its costs and streamline its remaining responsibilities, activities and group structure.
As the sale involves the disposal of the only trading subsidiary of the Avocet Group – Wega Mining, a possible impact of the disposal could be that the remainder of the Avocet Group is broken up further in an orderly manner and eventually wound up. If this occurs, it is possible that, given the amount of debt owed by Avocet, there will be very minimal or no returns to Avocet’s shareholders.
Considering the above and the support of Elliott for the transaction, the board of the Avocet Mining believes that the transaction with the Balaji Group is the only transaction capable of implementation, it is not unreasonable and it does not disadvantage any other stakeholder of the company given the high level of debt in the company. It has therefore entered into the agreement with the Balaji group.
Conditional upon a successful restructuring of the Burkina assets after completion of the sale, the Balaji Group has stated that it intends to invest approximately $26 million to bring the Inata gold mine back into full production and develop the Souma deposit.
The Balaji Group’s precious metal division recently acquired the Kalsaka Gold mine in Burkina Faso and it anticipates significant cost synergies following the acquisition of the Inata mine.
Completion of the transaction is expected to occur on 11 January 2018.