Norseman Gold operates Australia's longest continuously running gold mining operation, having produced over 5.5 million ounces of gold over a period of more than 65 years from its Norseman field located 725km east of Perth, Western Australia.
Investor relations
News
Re Central Norseman Gold
29 March 2007
Davos Resources PLC
29 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 listed
exploration and resource acquisition company, is pleased to announce that it has
raised the necessary finance to acquire Central Norseman Gold Corporation Ltd
('CNGC'), the owner and operator of the Norseman gold mine, Australia's longest
continually running gold operation, which has produced in excess of 5.5 million
ounces of gold since 1937. To fund the acquisition and provide working capital
for the mine, the Company is raising £22 million (before expenses) through the
issue of 220,000,000 Placing Shares at 10 pence per share. Following the
completion of the acquisition the Company will be renamed Norseman Gold plc.
Davos' Chairman, David Steinepreis, said, 'The Central Norseman Gold acquisition
offers potential for major growth in shareholder value. It is Australia's
longest continuously running gold mining operation, having produced over 5.5
million ounces of gold over a period of more than 65 years. It is currently
producing gold from two high-grade underground gold mines and lower grade open
pit stockpiles and the Directors believe that it has a sufficient resource base
together with a portfolio of advanced exploration targets to support continued
future production.
'Ore reserves are estimated to be 1.4 million tonnes at 7.58g/t Au for 347,800
ounces of gold and 14.7 million tonnes at 4.05g/t Au for 1,908,000 ounces of
gold inclusive of reserves respectively. The current mine plan anticipates
production of approximately 90,000 ounces of gold for the period 1 July 2006 to
30 June 2007 and opportunities have been identified to increase production
levels 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 around
the operation and with their expertise and proven ability, I am highly confident
that 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 RSG
Global), has today been sent to shareholders and is available from the Company's
website, http://www.davosresources.com or from the offices of Corporate Synergy Plc, 30
Old Broad Street, London EC2N 1HT.
Definitions used in this announcement are the same as those in the admission
document.
Introduction
On 10 January 2007, the Company announced that it had conditionally agreed, via
its wholly owned subsidiary Davos Gold, to acquire the entire issued share
capital of CNGC from Croesus Mining Ltd ('CMNL') and had placed 61,440,000
Ordinary Shares at 5 pence per share to raise £3,072,000 to fund the Initial
Deposit under the Acquisition Agreement. On 26 February 2007 the Company made a
further announcement providing further details of the Acquisition and the
Initial Deposit Placing and details of a further placing of 28,780,000 of
Ordinary Shares at 5 pence per share to raise £1,439,000 to provide additional
working 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 65
years from its Norseman field located 725km east of Perth, Western Australia.
CNGC is currently producing gold from two high-grade underground gold mines and
lower grade open pit stockpiles and the Directors believe that it has a very
good portfolio of advanced exploration targets to support continued future
production.
In conjunction with the Acquisition, the Company is raising £22,000,000 (before
expenses) 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 and
Re-Admission.
The Company also intends to issue 24,250,000 Consortium Shares, 30,750,000
Management Shares and 26,000,000 Options conditional upon Completion of the
Acquisition. The Management Shares will be issued on the second anniversary of
the Company's re-admission to trading on AIM (or earlier in certain
circumstances).
It is intended that the name of the Company will be changed to Norseman Gold plc
to reflect the Company's new focus as a gold producer. In addition, Vincent
Pendal and Barry Cahill will join the Board on Completion, as Chairman and Chief
Executive Officer respectively. David Steinepreis will step down as Executive
Chairman, 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 that
there will be a fundamental change in the Company's business and the Board, the
Acquisition is classified as a reverse takeover of the Company under the AIM
Rules and therefore requires the approval of the Company's Shareholders at the
EGM.
If EGM Resolutions (1) to (3) are duly passed at the EGM, to be held at the
offices of Watson, Farley & Williams LLP on 23 April 2007 at 10.00 a.m., trading
in the Existing Ordinary Shares will be cancelled and it is expected that the
Enlarged 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 of
developing the exploration programme at the Pine Creek Tenement and making
acquisitions in the natural resources sector.
The Existing Directors, having reviewed CNGC (following an introduction by the
Consortium) and considered its long history and future prospects, formed the
view that the Acquisition would offer the potential for major growth in
shareholder value.
(a) The Acquisition
(i) CNGC
CNGC, which was acquired by CMNL in 2002, operates Australia's longest
continuously running gold mining operation, having produced over 5.5 million
ounces of gold over a period of more than 65 years from its Norseman field
located 725km east of Perth, Western Australia.
Following a review by board of CMNL in April 2006, it was concluded that poor
decisions over several years had left CNGC in a very difficult financial and
operational position with the key issue being insufficient ore sources to
maintain its processing plant at full capacity and high costs. As a result, the
production levels were insufficient to meet its full hedging commitments.
In June 2006 the Administrators were appointed over CMNL, CNGC and liquidators
of
CMNL's other subsidiaries.
Under the Administrators, a new management team led by Barry Cahill, who has
agreed to become Chief Executive Officer and a Director of the Company on
Re-Admission, has returned the Norseman Project to a monthly positive cashflow
position.
CNGC is currently producing gold from two high-grade underground gold mines and
lower grade open pit stockpiles. JORC compliant ore reserves and a JORC
compliant resource inventory as of 30 June 2006 were estimated by CNGC to be 1.4
million tonnes at 7.58g/t Au for 347,800 ounces of gold and 14.7 million tonnes
at 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 of
February 2007. The current CNGC mine plan anticipates production of
approximately 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 its
view, the base case scheduled mine production is around 296,000 ounces of gold
as at 1 January 2007, giving the Norseman Project a mine life of around three
years from that date. Very good exploration potential has been identified both
along strike and at depth of the existing mines and there are advanced targets
located close to infrastructure that have the potential to become future ore
sources.
Davos submitted an offer to acquire CNGC in November 2006. Following a period of
negotiation, Davos signed the Acquisition Agreement with the Administrators on 3
January 2007.
The Directors consider that CNGC is an attractive acquisition based on the
following:
• The Directors are confident that the Enlarged Group should be able to
extend the mine life through the conversion of resources into reserves and
identifying additional resources, based on the history of the mine which has
produced in excess of 5.5 million ounces of gold since 1937 with an average
reserve of approximately 240,000 ounces of gold over that period.
• The current mine plan anticipates production of approximately 90,000
ounces of gold for the period 1 July 2006 to 30 June 2007. In the Directors'
opinion opportunities have been identified to increase production levels from
the 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 be
converted into reserves through exploration drilling and capital development.
• The mining operations have currently been returned to a position where
they are producing positive cashflow on a monthly basis following the
appointment of the new management team led by Barry Cahill, and further scope
for cost improvements has been identified. Following the injection of working
capital that the Placing will provide, a plan for capital development,
exploration drilling and acquisition of operational equipment will be
implemented.
(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$36
million due in cash on Completion. The Initial Deposit was funded by the Initial
Deposit Placing of 61,440,000 Ordinary Shares at a price of 5 pence per share to
institutional and other investors to raise £3,072,000 (c. A$7,680,000). The
Group will be required to pay the Further Deposit of A$1.75 million by 29 March
2007 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 30
April 2007. The Deposit is non-refundable save in the circumstances set out in
the admission document.
(iv) Details of the Consideration Shares
The Consideration Shares will be issued credited as fully paid and, immediately
following Re-Admission, will represent approximately 2.01 per cent. of the
Enlarged Share Capital.
The Consideration Shares will, upon issue, rank pari passu in all respects with
the Existing Ordinary Shares, including the right to receive any dividends and
other distributions declared, made or paid following Re-Admission and will be
issued 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 the
Placing.
Pursuant to the terms of the Placing Agreement, each of Ocean Equities and
Corporate Synergy has agreed to use its reasonable endeavours to procure
subscribers for the Placing Shares. The Placing Shares will represent
approximately 55.35 per cent. of the Enlarged Share Capital immediately
following Re- Admission.
The Placing is conditional on, amongst other things, the Conditions being
satisfied.
The Placing Shares will, upon issue, rank pari passu in all respects with the
Existing Ordinary Shares and the Consideration Shares, including the right to
receive any dividends and other distributions declared, made or paid following
Re-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 is
set out below:
Acquisition consideration (including the Further Deposit) A$36,000,000*
Stamp duty A$3,250,000
Bonds 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 to
A$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 and
estimates 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 market
arrangements. The Management Shares will be issued on the second anniversary of
the Company's re-admission to trading on AIM (or earlier in certain
circumstances).
(d) Financial effects of the Acquisition and the Placing
Following Re-Admission and Completion of the Acquisition, the Enlarged Group
will have approximately A$10.5 million of cash in the bank with which to fund
the development of the Norseman Project, after allowing for the effect of the
adjustments.
Directors
Existing Directors:
David Steinepreis, Executive Director, aged 50
David Steinepreis is a Chartered Accountant and former partner of KMG
Hungerfords (now KPMG) where he specialised in strategic corporate advice and
taxation for listed companies. He entered commerce as a director, adviser and
major shareholder of a number of listed companies in the gold, diamonds, oil and
new mining technology sectors. He is a director of Monitor Holdings Ltd, RMG
Limited, 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. He
has previously been a director of Ascent Resources plc and Uranium Resources
plc, companies listed on AIM. He is also chairman of Ascent Capital. Following
Re-Admission David Steinepreis will become an Executive Director with primary
responsibility 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 Cape
Town. He is the finance director of Mercator Gold plc, listed on AIM. He gained
his experience as financial manager at mining and chemicals operations in
Namibia, Botswana, Ghana and Bulgaria. He was previously the finance director of
Oxus Gold plc and Navan Mining plc, companies listed on AIM. He is currently a
director 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 both
the industrial and mining sectors in Australia. He is currently the chairman of
Brandrill Ltd, a company listed on the ASX, and a director and a major
shareholder of Oakvale Capital Ltd, a company registered in Australia, which
provides independent advice on financial risk management to a range of leading
companies, government authorities and institutions throughout Australia. During
the past five years he also served as Chairman of Austral Coal Limited and
Perilya Limited, companies listed on the ASX. He is a foundation/life member of
the Kalgoorlie Mining Hall of Fame.
Barry Cahill, Chief Executive Officer, aged 43
Barry Cahill is a mining engineer with over 20 years' experience in operational
mining and management throughout Australia. He has had extensive experience in
the management of underground and open pit mines as both a mining contractor and
an operator, including the Leinster nickel mine and the Broken Hill base metal
mine. His area of expertise has an emphasis on the recovery of poorly performing
operations to a profitable standard particularly in narrow vein underground
mines. Barry Cahill has been an executive director of a number of public
companies including managing director of Australian Mines Limited, a company
listed 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 the
management 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 regional
exploration work at the Pine Creek Tenement. Since December 2006, no further
work has been undertaken at the Pine Creek Tenement due to the Company focusing
its efforts on the Acquisition. Application has also been made for another
exploration licence and the results of this are awaited.
CNGC
Details of CNGC's current trading and prospects are set out in paragraph 7 of
Part II of the admission document.
Following completion of the Acquisition, the Company's primary business will be
developing CNGC's Norseman Project. The Directors also intend to continue with
the development of an exploration programme at the Company's Pine Creek
Tenement; however the Directors do not consider that, following completion of
the Acquisition, this activity will be of a core nature.
Dealings and trading
Application will be made to the London Stock Exchange for the Existing Ordinary
Shares to be re-admitted to trading on AIM and for the New Ordinary Shares to be
admitted to trading on AIM. Re-Admission of the Existing Ordinary Shares and,
subject to the Conditions being satisfied, admission of the New Ordinary Shares
to trading on AIM is expected to take place on or around 24 April 2007. The
Ordinary Shares are in registered form.
**ENDS**
Notes:
The information in this announcement as it relates to geology, geochemistry and
geophysics, has been reviewed by Barry Cahill who is a Competent Person as
described in Part two of the AIM Guidance Notes for Mining, Oil and Gas
Companies.
This information is provided by RNS
The company news service from the London Stock Exchange
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