Agreement to Purchase Gold Assets in Chukotka
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This announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) No 596/2014 ("MAR"). Market soundings, as defined in MAR, were taken in respect of the Placing, with the result that certain persons became aware of inside information, as permitted by MAR. That inside information is set out in this announcement. Therefore, those persons that received inside information in a market sounding are no longer in possession of inside information relating to the Company and its securities.
NEITHER THIS ANNOUNCEMENT NOR ANY PART OF IT CONSTITUTES AN OFFER TO SELL OR ISSUE OR THE SOLICITATION OF AN OFFER TO BUY, SUBSCRIBE OR ACQUIRE ANY SECURITIES IN ANY JURISDICTION IN WHICH ANY SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL AND THE INFORMATION CONTAINED HEREIN IS NOT FOR PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES, AUSTRALIA, NEW ZEALAND, CANADA, JAPAN, THE REPUBLIC OF SOUTH AFRICA OR ANY JURISDICTION IN WHICH SUCH PUBLICATION OR DISTRIBUTION WOULD BE IN BREACH OF ANY APPLICABLE LAW OR REGULATION.
Agreement to Purchase Gold Assets in Chukotka
Highland Gold Mining Limited ("Highland Gold" or the "Company", AIM: HGM) today announces that the Company has signed a Subscription Agreement (“the Agreement”) to acquire from Cyprus-registered Aristus Holdings Ltd. a 100% interest in three companies (the “Target Companies”), owning one operating gold mine and two significant licence areas in the Russian region of Chukotka (the “Acquisition”).
The consideration payable pursuant to the Acquisition is US$91m, with approximately US$78.7m to be satisfied by the issue of 38,621,343 ordinary shares of £0.001 each, and the balance by the assumption of approximately US$12.3m of net debt.
The assets covered by the agreement include:
- Valunisty, an operating gold mine and processing plant with annual production of 31 koz (2017);
- The Kanchalano-Amguemskaya Square LLC (“KAS”) licence, which covers territory surrounding Valunisty and hosts several satellite deposits including the operating Gorny open pit and Zhilny deposit; and
- Kayenmivaam (“Kayen”), an exploration licence with several promising target deposits, located 130 km to the southeast of Kinross Gold’s Kupol mine
Total audited Ore Reserves and Mineral Resources, reported in accordance with JORC (2012), for Valunisty and KAS are:
- Proven and Probable Ore Reserves of 3.4 Mt at 5.1 g/t Au equivalent (4.6 g/t Au and 49.3 g/t Ag) (554 koz Au equivalent); and
- Indicated and Inferred Mineral Resources of 17.6 Mt at 3.0 g/t Au equivalent (2.4 g/t Au and 58.5 g/t Ag) (1.72 Moz Au equivalent), as at 1 January 2018.
Chukotka is one of Highland Gold’s core operating regions and hosts the Company’s premier development project, Kekura, as well as the Klen development project. The region is an established gold producer with such projects as Kinross’s Kupol and Dvoinoye and Polymetal’s Mayskoye mine.
Certain shareholders of HGM (the “Concert Party”) who already hold a combined 37.4% of shares in Highland Gold, all indirectly hold shares in Aristus Holdings Limited, including Executive Chairman Eugene Shvidler and Non-Executive Director Valery Oyf, thereby classifying the deal as a related-party transaction under the AIM Rules for Companies. The Independent Directors of the Company, Mr Duncan Baxter, Mr Colin Belshaw and Mr Terry Robinson consider, having consulted with the Company's Nominated Adviser, that the terms of the Acquisition are fair and reasonable insofar as its shareholders are concerned.
The Acquisition will result in an increase in the total holding of the Concert Party and Aristus Holdings Limited to approximately 44% of the shares of Highland Gold, and the Acquisition has therefore been made conditional on the approval by a majority of Highland Gold shareholders unaffiliated with the Concert Party of a waiver of the obligation that would otherwise arise under Rule 9 of the Takeover Code to make an offer for those shares in the Company not already held by the Concert Party. This will be voted upon at an Extraordinary General Meeting (EGM) to be held on 24 May 2018. The transaction is also subject to approval by Russia’s Federal Antimonopoly Service (FAS) and Foreign Investment Advisory Council (FIAC). Completion is expected by the end of 2018.
Commenting on the Agreement, Highland Gold CEO Denis Alexandrov said: “This acquisition adds a fourth operating mine, Valunisty, to our portfolio as well as positive upside potential in the surrounding KAS licence area, all in a familiar region with existing mining infrastructure. The transaction is structured in such a way as to be immediately value-accretive to the benefit of all our shareholders.”
The Company has today published a presentation and summary Ore Reserves and Mineral Resources report for the Valunisty Project which are available on the Company’s website at: http://www.highlandgold.com. The Company intends to post a Circular to Shareholders today containing further details of the proposed Acquisition outlined in this announcement which will be available on the Company’s website shortly thereafter.
Gold equivalent calculations for Valunisty use Au price of US$ 1,250 /oz (95% recovery), Ag price of US$ 16 /oz (75% recovery) and coefficient of 0.01011.
Gold equivalent calculations for Gorny use Au price of US$ 1,250 /oz (93% recovery), Ag price of US$ 16 /oz (75% recovery) and coefficient of 0.01032.
Gold equivalent calculations for Zhilny use Au price of US$ 1,250 /oz (91% recovery), Ag price of US$ 16 /oz (85% recovery) and coefficient of 0.01196.
Information contained in this release has been taken from the Ore Reserves & Mineral Resources summary report for the Valunisty Project, prepared in compliance to JORC (2012) by CSA Global.
FOR FURTHER INFORMATION PLEASE CONTACT:
Highland Gold Mining Ltd.
John Mann, Head of Communications
+ 7 495 424 95 21
Duncan Baxter, Non-Executive Director
+ 44 (0) 1534 814 202
Numis Securities Limited
(Nominated Adviser and Joint Broker)
John Prior, James Black, Paul Gillam
+44 (0) 207 260 1000
BMO Capital Markets
Jeffrey Couch, Neil Haycock, Pascal Lussier Duquette
+44 (0) 207 236 1010
Peat & Co
+44 (0) 207 104 2334