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Avocet agrees sale of its Burkina Faso assets

Published by , Assistant Editor
Global Mining Review,

Avocet has entered into an agreement to sell all of its assets in Burkina Faso, West Africa, including the Inata gold mine, together with certain receivables of the company’s group to the Balaji Group of companies for a total consideration of US$5 million. US$2.5 million of this will be payable in cash at completion and US$2.5 million will be paid by way of deferred payments.

Completion of the transaction is expected to occur on 11 January 2018, conditional upon the satisfaction of a condition as described below.

Since Avocet began negotiations with the creditors of Société des Mines de Bélahouro S.A. (“SMB”) in April 2017, it has pursued a consensual restructuring. The company announced on 2 October 2017 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 US$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 US$28.7 million (and which are secured, in part, over the shares in Resolute (West Africa) Ltd (Resolute), SMB and Goldbelt).

The transaction with the Balaji Group comprises a sale by Wega Mining AS (“Wega Mining”), a wholly-owned subsidiary of Avocet, of the entire issued share capital of Resolute to Greater Success Global Limited, a member of the Balaji Group for US$1 in cash, pursuant to a share purchase agreement entered into on 18 December 2017 (the “Agreement”). As this is a sale of a distressed company, the shares are being sold on an “as is/where is” basis, i.e. no warranties (other than with regard to title and capacity) are being given by Wega Mining in the Agreement.

Resolute is the sole shareholder of Goldbelt and the majority shareholder in SMB, which holds the Inata mining licence. The sale of Resolute therefore represents the disposal by the company of all of its assets in Burkina Faso, including the Inata goldmine. Completion of the sale is conditional upon the execution by Elliott of a deed of release to release its security over the company’s assets, including the shares of Resolute, SMB and Goldbelt.

In addition, the transaction involves the novation by Avocet and Wega Mining to the Balaji Group of certain receivables owed to them by SMB and Goldbelt for cash consideration of US$ 2 499 999, to be paid at completion, and for a consideration of US$ 2.5 million to be satisfied by deferred payments over a period of seven years. The obligation to pay the deferred consideration will be guaranteed by the purchaser and by the chairman of the Balaji Group personally.

In advance of the sale, and in consideration of Wega Mining signing the agreement, the Balaji Group has transferred US$500 000 to its solicitors in London as a deposit. This deposit will be paid to Avocet whether completion of the sale occurs (in which case it will form part of the cash consideration) or if completion of the sale does not occur for any reason other than the condition not being satisfied.

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