TIDMHMB
Hambledon Mining plc ("Hambledon" or the "Company")
Placing of 177,507,699 Placing Shares at 3.25 pence per new
Ordinary Share and Notice of General Meeting
1 February 2012
1.Introduction
The Company is pleased to announce that it proposes to raise up
to approximately US$9.06 million (US$8.56 million net of expenses)
through the issue of 177,507,699 new Ordinary Shares through the
Placing at an issue price of 3.25 pence per new Ordinary Share.
The Issue Price represents a discount of approximately 18.75 per
cent. to the price of 4 pence per Existing Ordinary Share, being
the Closing Price per Existing Ordinary Share on 31 January 2012
(the latest practicable date prior to the date of this
announcement).
In addition, the Company announced on 12 January 2012 that the
European Bank for Reconstruction and Development ("EBRD") had
posted on its website a 'Project SummaryDocument' relating to a
potential US$15.0 million debt facility together with an equity
investment of US$3.0 million for the Group to develop the
Sekisovskoye underground mining operation. It is also proposed
that, on signing the debt facility, EBRD be issued with warrants
over up to 30 million new Ordinary Shares.
A Circular has today been posted to Shareholders and will be
available shortly from the Company's website at
www.hambledon-mining.com.
2.EBRD
The Company has agreed heads of terms with EBRD for the
provision by EBRD of a debt facility of US$15.0 million and for
EBRD to make an equity investment in the Company by subscribing for
approximately 58.8 million new Ordinary Shares at a price of 3.25
pence per new Ordinary Share, raising a further US$3.0 million
(with the precise number of new Ordinary Shares being determined by
reference to the prevailing GBP:US$ exchange rate at the relevant
time). If such Ordinary Shares are issued, immediately following
that issue and assuming that the Placing has completed (but no
further Ordinary Shares are issued), EBRD's holding of
approximately 58.8 million Ordinary Shares will represent
approximately 6.00 per cent. of the issued share capital of the
Company.
In addition, it is proposed that EBRD is granted warrants over
up to 30 million new Ordinary Shares. If issued, the Warrants will
vest immediately. The Warrants will be exercisable at any time
before the earlier of (i) the expiry of a period of two years from
the date of signature of the proposed EBRD debt facility or (ii) if
the price per Ordinary Share exceeds 6.5325 pence for a period of
20 consecutive trading days during such two year period, 45 days
from the date on which the Company notifies EBRD that this
condition has been met. In either case, any Warrants not exercised
within the relevant period will lapse. The exercise price of the
Warrants will vary depending on the price of Ordinary Shares in the
period following vesting, but will not be less than at a 50 per
cent. premium to the EBRD Subscription Price (that is, not less
than 4.875 pence per new Ordinary Share). If the Warrants are
exercised in full at an exercise price of 4.875 pence per new
Ordinary Share up to US$2.30 million will thereby be raised by the
Company. On completion of the Placing and the EBRD Equity
Investment and if the Warrants are exercised in full (but no
further Ordinary Shares are issued) EBRD will hold up to 88,794,708
Ordinary Shares representing approximately 8.79 per cent. of the
issued share capital of the Company.
The EBRD debt facility and EBRD Equity Investment are subject to
approval by EBRD's operations committee and its board of directors.
The Company announced on 27 January 2012 that the approval of the
EBRD operations committee had been obtained. Whilst the Directors
are confident that board approval will be obtained in February
2012, this cannot be guaranteed. If approved in February 2012, it
is anticipated that US$10.0 million of the EBRD debt facility will
become available to the Company in May 2012 with the remaining
US$5.0 million becoming available when the Company meets certain
operational benchmarks, which are expected to occur in late
2012.
The EBRD Equity Investment will not proceed without the
Resolution being passed. If the Resolution is not passed and the
EBRD Equity Investment is unable to be made it is expected that the
proposed US$15.0 million debt facility from EBRD will remain
available to the Company.
3.Reasons for the Placing, the EBRD Equity Investment and use of
proceeds
Acquisition of Akmola Gold
As announced on 15 September 2011, the Company has entered into
conditional agreements for the purchase of a 100 per cent. interest
in Akmola Gold, subject to, amongst other things, obtaining certain
governmental waivers and consents. Akmola Gold wholly owns two
precious metals projects, Tellur and Stepok, which are both
situated in central Kazakhstan, some 140 km north of Astana.
It is estimated that these projects have combined resources of
approximately 440,000 ounces of gold plus silver and other metals,
which the Directors' believe could offer the potential for
considerable up-side after further drilling. The Company is
required to make a payment of US$2.5 million by 30 March 2012 to
the vendors of Akmola Gold plus a permitting fee and associated
costs of approximately US$0.5 million to the Government of
Kazakhstan. Although negotiations are in progress to obtain a debt
facility from EBRD, as mentioned above, and these negotiations have
reached an advanced stage, the completion of this debt facility,
and therefore drawdown under it, will not be available in time to
allow the funds to be used for these payments.
In addition, the acquisition of Akmola Gold will involve the
issue by the Company of new Ordinary Shares to the value of US$2.5
million. This will require Shareholder approval and a general
meeting to seek this approval will be convened in due course.
Administrative Fine
On 2 November 2011 the Company announced that it had temporarily
suspended operations at its mineral process plant at the
Sekisovskoye mine whilst a leak in Tailings Dam 3 was repaired.
Operations at the mineral process plant re-commenced on 7 November
2011. The Company estimates that production of gold for November
2011 was reduced by this interruption in operations by
approximately 650 oz.
On 29 December 2011, the Company announced that preliminary
information had been received from the Chief National Environmental
Inspector for Eastern Kazakhstan of the Irtysh Environmental
Department regarding a fine for the rupture to the liner in
Tailings Dam 3, constituting an administrative offence arising from
environmental damage.
The appointed court investigator has imposed an initial fine in
relation to the breach of approximately Tenge 272 million
(approximately US$1.83 million). The Company has appealed against
the level of this initial fine and is confident that it will be
reduced. No specific time period for payment of the fine has yet
been stipulated. The Company expects to make an appropriate
provision in respect of the fine in the Group accounts for the year
ended 31 December 2011.
A court hearing on 26 December 2011 was adjourned and is
expected to be held in Q1 2012 although no specific date has been
stipulated.
It is intended that up to US$1.75 million of the Placing
proceeds will be applied towards payment of the fine. If the final
sum due is in excess of US$1.75 million then it is expected that
the balance will be funded out of the Company's cash reserves.
Tailings Dam 3 Repairs
The remedial works to reinstate Tailings Dam 3 will seek to
ensure that the foundation is secure for future operation. This
will require the engagement of two specialist British engineering
companies and will involve the importation of specialist materials
from the UK and Canada. The cost of such technical assistance and
construction materials is estimated at approximately US$0.75
million.
Repayment of Alfa Bank facility
At present the Company's operating subsidiaries utilise a
working capital facility from Alfa Bank to cover their requirements
during the period of reduced gold production in the winter months.
This facility is currently drawn down to a level of approximately
US$1 million. It is proposed that this facility will be terminated
to allow the security over certain plant, property and machinery
that is held by that bank to be released. It is intended that
security over these assets will be granted in favour of EBRD as
part of the collateral for the provision of the proposed EBRD debt
facility, further details of which are referred to above. It is
expected that US$1.25 million of the Placing proceeds will be used
to repay the outstanding amount of approximately US$1 million
together with approximately US$0.25 million of accrued interest and
other charges and costs associated with the repayment of this
facility and the release and transfer of collateral to EBRD.
Change to refining and precious metal sale arrangements
The Government of Kazakhstan has implemented a new law which
came into force on 1 January 2012, which requires the Company's
production of gold and silver dore to be processed by a Kazakhstan
refiner, rather than by the Company's existing refiner, Metalor,
which is based in Switzerland. The Government of Kazakhstan has
implemented a further new law, also with effect from 1 January
2012, which requires the sale of all such refined gold and silver
(all precious metals) to the National Bank of Kazakhstan. The
Company has discussed these changes with The Industrial Committee
of the Ministry of Industry and New Technologies of the Republic of
Kazakhstan and has reached formal agreement with them that the
Company can continue to refine its gold and silver dore outside of
the Republic of Kazakhstan until 1 January 2013, notwithstanding
the implementation of this new legislation. However, once
applicable to the Company, the Directors estimate that the
legislative changes outlined above will have the effect of delaying
the date of payment to the Company for the gold and silver, once
refined, by
approximately 60 days. The time period between production of the
dore and receipt of funds will therefore increase to a total period
of approximately 70 days. The Directors believe that this will lead
to a significant increase in the Company's working capital
requirements in early 2013. The Directors will continue to monitor
closely the Company's working capital requirements during this
time.
Summary
It is anticipated that the gross proceeds of the Placing and the
EBRD Initial Share Subscription of, in aggregate, approximately
US$12.06 million will be utilised by the Company as follows:
GBPmillion US$ million
Payment to the vendors of Akmola 1.59 2.5
Gold LLP by 30 March 2012
Akmola Gold permitting fee and associated costs 0.32 0.5
Repayment of Alfa Bank working capital 0.79 1.25
facility and associated costs
Incident fine for Tailings Dam 3 1.11 1.75
Tailings Dam 3 repairs 0.47 0.75
Working capital 3.07 4.81
Placing expenses 0.32 0.50
Total 7.67 12.06
Implementation of the Placing and the EBRD Equity Investment is
conditional on, inter alia, Shareholders passing the Resolution at
the General Meeting. If Shareholders do not pass the Resolution and
the Placing or the EBRD Equity Investment does not proceed, the
Company will not be able to make the required payments set out
above and may not be able to pursue its long term business
objectives.
4.Terms of the Placing
The Company has conditionally placed 177,507,699 Placing Shares
at 3.25 pence per Placing Share with certain existing and new
institutional and other investors to raise approximately US$9.06
million before expenses. The Placing is not being underwritten.
Tim Daffern and Jeffrey O'Leary, each being Directors, are
Placees in respect of 50,000 and 92,308 Placing Shares
respectively.
Application will be made to the London Stock Exchange for the
Placing Shares to be admitted to trading on AIM. It is expected
that such Admission will become effective and that dealings will
commence at 8.00 a.m. on 20 February 2012.
The Placing is conditional, amongst other things, on the
following:
(A) the Placing Agreement not being terminated prior to
Admission and becoming otherwise unconditional in all respects;
(B) Admission becoming effective on or before 8.00 a.m. on 20
February 2012 (or such later date and/or time as the Company and
Fairfax may agree, being no later than 5.00 p.m. on 5 March 2012);
and
(C) approval of the Resolution (without material amendment) at
the General Meeting to be held at the offices of Fairfax I.S. PLC
at 46 Berkeley Square, Mayfair, London, W1J 5AT at 11.30 a.m. on 17
February 2012.
5.Current trading
The operations at Sekisovskoye continue to perform
satisfactorily. The mineral process plant achieved record levels of
throughput in 2011. This has been primarily as a result of the
investment in the refurbishment of infrastructure during 2011
funded by the proceeds of the placing and open offer in March 2011.
The open pit mine and attendant machinery fleet has been the
subject of significant investment in 2011 with considerable waste
removed which has enhanced the Company's excavation efficiencies
and productivity.
The construction of Tailings Dam 4 and changes to effluent
deposition are well advanced and were undertaken at a cost of
approximately US$1.5 million. The expansion and refurbishment of
the engineering workshops have been completed at a cost of
approximately US$0.75 million. The open pit mining machinery fleet
has been expanded and refurbished and this has been completed at a
cost of approximately US$4 million. The design and permitting of
the expanded electrical reticulation has been completed at a cost
of approximately US$1 million, with installation scheduled for Q4
2012.
Despite these advances the operations continue to have high cash
costs which are related primarily to the low grade of ores treated
in 2011 (a consequence of moving the significant quantities of
excess waste in the open pit and commensurate processing of low
grade ores whilst the waste was extracted) and the high cost of
handling the large quantities of waste. The operations are now
better placed to benefit from these investments in 2012.
The commencement of underground mining at Sekisovskoye marks the
transition to a combined open pit and underground operation for the
next three years. The development of the underground mine was
completed ahead of schedule and under budget and is a credit to the
dedication of the Company's site employees. The expansion of the
underground mine in 2012 should see the Company attain its target
of increasing gold production
Production update in respect of the three months from 1 July
2011 to 30 September 2011 (unaudited):
July August September Total Average
Milled tonnes (dry) 77,632 69,591 69,268 216,491 -
Gold grade (g/t) 0.73 1.20 1.25 - 1.05
Contained gold (gms) 56,593 83,230 86,618 226,441 -
Contained gold (oz) 1,819 2,675 2,784 7,278 -
Gold recovery (%) 82.24 84.01 82.01 - 82.75
Recovered gold (oz) 1,496 2,247 2,283 6,026 -
Recovered silver (oz) 3,257 4,135 3,495 10,887 -
The unaudited production figures for the 12 months from 1
January 2011 to 31 December 2011 are as follows:
Total
Milled tonnes (dry) 744,416 t
Gold grade (g/t) 1.09 g/t Au
Contained gold (gms) 811,287
Contained gold (oz) 26,083
Gold recovery (%) 81.2%
Recovered gold (oz) 21,092
Recovered silver (oz) 37,004
6.General Meeting
For the purposes of effecting the Placing and the EBRD Equity
Investment, the Resolution will be proposed at the General Meeting.
Set out at the end of the Circular sent to Shareholders today, is
the Notice of General Meeting which is to be held at the offices of
Fairfax I.S. PLC at 46 Berkeley Square, Mayfair, London, W1J 5AT at
11.30 a.m. on 17 February 2012. The full text of the Resolution is
set out in that notice. Implementation of the Placing is
conditional, inter alia, on Shareholders passing the
Resolution.
If Shareholders do not pass the Resolution, the Placing will not
proceed and neither will the EBRD Equity Investment.If the
Resolution is not passed and the EBRD Equity Investment is unable
to be made it is expected that the proposed US$15.0 million debt
facility from EBRD will remain available to the Company.
Tim Daffern, Chief Executive Officer of Hambledon stated:
"The Company recognises and appreciates the considerable support
for Hambledon's business plan from both existing and new
institutional shareholders in this oversubscribed fundraising. Both
the institutional placing and the proposed EBRD funding are highly
valued by the Directors of the Company.We look forward to updating
all Shareholders with further strong news flow in 2012.
Hambledon can now look forward to the future with a strong
balance sheet and a broader shareholder list, including the EBRD
and several highly respected investment management groups. With the
support of the proposed EBRD debt facility and the new equity
raised in the Placing, Hambledon is well positioned to become a
well funded multiple deposit Kazakhstan focussed gold play.
The expansion of the Sekisovskoye underground mine remains
central to the Hambledon Group's growth in gold production,
augmented by the Akmola Gold acquisition that nears completion.It
is intended that the Sekisovskoye process plant will act as a hub
for processing gold from the Tellur project which will leverage the
Group's cash generation and gold production. We look forward to
updating Shareholders shortly in relation to final EBRD board
approval for the debt and equity investment and completion of the
Akmola acquisition."
Enquiries:
HAMBLEDON MINING:
Telephone +44 (0)207 233 1462
Charles Zorab
FAIRFAX I.S. PLC (NOMAD AND BROKER):
Telephone +44 (0)207 598 5368
Ewan Leggat/Katy Birkin
TAVISTOCK COMMUNICATIONS:
Telephone +44 (0)207 920 3150
Ed Portman/Jos Simson
DEFINITIONS
"Admission" the admission of the Placing Shares
to trading on AIM becoming
effective in accordance
with the AIM Rules;
"AIM" the AIM market operated by
the London Stock Exchange;
"AIM Rules" the AIM rules for companies
published by
the London Stock Exchange
(as updated
from time to time) governing
the admission
to and the operation of AIM;
"Akmola Gold" Akmola Gold LLP, a limited
liability partnership
organised under the
laws of Kazakhstan;
"Circular" the circular dated 1 February
2012 posted to shareholders
detailing the Placing
and other matters;
"Closing Price" the closing middle market
quotation of
a share as derived from the AIM
Appendix to the Daily Official List
of the London Stock Exchange;
"Company" Hambledon Mining plc;
"EBRD" European Bank for Reconstruction
and Development;
"EBRD Equity Investment" together, the EBRD Initial
Share Subscription
and the proposed issue
of the Warrants;
"EBRD Initial Share Subscription" the proposed subscription
for approximately
58.8 million new
Ordinary Shares by EBRD at the
EBRD Subscription Price;
"EBRD Subscription Price" 3.25 pence, being the price per
Ordinary Share to be paid
by EBRD under the EBRD Initial
Share Subscription;
"Fairfax" Fairfax I.S. PLC, nominated adviser
and broker to the Company;
"General Meeting" the general meeting of
the Company convened
for 11.30 a.m. on 17 February
2012, notice of which is set out
at the end of the Circular;
"Group" the Company and its subsidiaries;
"Issue Price" 3.25 pence per new Ordinary Share;
"Kazakhstan" the Republic of Kazakhstan;
"London Stock Exchange" London Stock Exchange plc;
"Notice of General Meeting" the notice convening
the General Meeting
set out at the end
of the Circular;
"Ordinary Shares" ordinary shares of 0.1p each in
the capital of the Company;
"Placees" investors in the Placing;
"Placing" the conditional allotment
at the Issue
Price of the Placing Shares
to the Placees as further described
in this announcement;
"Placing Shares" the 177,507,699 new
Ordinary Shares to
be issued pursuant to the Placing;
"Placing Agreement" the conditional agreement dated
1 February 2012 between
the Company and Fairfax
relating to the Placing;
"Resolution" the resolution set out in the
Notice of General Meeting;
"Shareholder" a person recorded as a holder
of Ordinary Shares
in the Company's register
of members;
"UK"or"United Kingdom" the United Kingdom of Great
Britain and Northern
Ireland its territories
and dependencies; and
"Warrants" the warrants to subscribe
for up to 30 million new
Ordinary Shares proposed
to be issued to EBRD.
The following exchange rates have been used throughout this
announcement:
GBP1:$1.57
US$1:KZT(Tenge)148.37
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