TIDMHMB
Hambledon Mining plc ("Hambledon" or the "Company")
Progress Update
5 April 2012
Acquisition of Akmola Gold
As announced on 15 September 2011, the Company entered into
conditional agreements for the purchase of a 100 per cent. interest
in Akmola Gold LLP ("Akmola Gold"). The Company announces that the
acquisition of Akmola Gold has not yet been completed, despite the
expected completion date of 30 March 2012 having passed, because
certain permits and waivers from the Kazakhstan authorities have
not yet been received and therefore relevant completion conditions
have not been met..
In addition the following factors should be noted:
(i) The state mining company Tau-Ken Samruk has notified the
Company that it seeks a pre-emptive interest in Akmola Gold;
(ii) There are on-going discussions with the vendors of Akmola
Gold who are seeking to amend the terms of the sale and purchase
agreement entered into on 15 September 2011, given the delay to the
acquisition completion date; and
(iii) The Company was 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. As a result of the delay, none of
these payments have been made.
The Board will update shareholders further as soon as possible
when a resolution to the situation becomes clearer.
Tailings Dam 3 ("TD3")
As detailed in the circular to shareholders dated 1 February
2012, the Company was required to carry out repair works to
reinstate TD3 to seek to ensure that the foundation was secure for
future operation. The cost of such technical assistance and
construction materials was estimated at approximately US$0.75
million. This remedial work has now started and is anticipated to
be complete by December 2012.
Initial remedial works coupled with detailed site investigation
of the impoundment foundation found that additional repair works
are required. This will result in a modest increase in repair
costs. Estimated total cost of the repair works is now US$1.25
million (US$0.5 million more than the Company originally estimated
and set out in the circular dated 1 February 2012). Specialist
tailings dam consultants; Golders Associates and SRK, both of the
UK, are engaged in the remediation works and site construction
supervision. These firms are also engaged in optimising the
effluent disposal strategy for 2012 as the existing impoundment
capacity is limited and optimal use of the existing facilities is
required whilst the TD3 remediation works are carried out.
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 imposed an initial fine in
relation to the breach of approximately Tenge 272 million
(approximately US$1.83 million). The Company appealed against the
level of this initial fine. No specific time period for payment of
the fine was stipulated.
The fine associated with the leak in TD3 in November 2011 is the
subject of ongoing court action. The legal regime in Kazakhstan
lacks clarity in certain areas and the appeal process requires
Hambledon to simultaneously work its way through various levels of
courts and make payment of fines and penalties which will be
returned on the basis of any successful appeal. To date all
required fines imposed on the Company by the courts of Kazakhstan
have been paid totalling US$3.9 million, with additional costs
associated with social development works totalling approximately
US$2 million required to be paid throughout 2012. The total fines,
penalties and social development costs therefore amount to US$5.9
million being US$4.1 million more than the US$1.83 million that the
Company originally estimated and set out in the announcement on 29
December 2011 and the circular dated 1 February 2012. Hambledon has
maintained a consistent and transparent approach to all actions
with the Kazakhstan authorities and, as far as it is aware, is in
full compliance with all court requests, actions and laws with
regard to this matter.
The Company expects that the additional remedial work to TD3
will reduce expected gold production for 2012 to 26,000oz from its
previous target of 30,000oz.
Equity investment by the European Bank for Reconstruction and
Development ("EBRD")
Under the terms of the Subscription Agreement entered into on 21
February 2012 between EBRD and the Company, EBRD conditionally
agreed to subscribe for 58,794,708 new ordinary shares (the "EBRD
Shares") at a price 3.25 pence per share (that price equalling the
placing price per share under the placing announced on 1 February
2012).
The Company announces that all conditions precedent to the
Subscription Agreement have been satisfied or waived by EBRD and
the Company has given notice to the EBRD to make its equity
investment.
The EBRD Shares will be issued as soon as practicable and a
further announcement will be made to Shareholders at that time.
EBRD Loan Agreement
Under the terms of the Loan Agreement entered into on 21
February 2012 between EBRD and two of the Company's subsidiaries,
Altai Ken-Bayitu LLP ("AKB") and Sekisovskoye LLP ("Seki"), EBRD
has conditionally agreed to lend US$15 million in two tranches to
AKB and Seki, on a joint and several basis, repayable in quarterly
instalments between 10 January 2015 and 10 October 2017. Interest
on drawn amounts will be charged at a rate of three months LIBOR
plus seven per cent. per annum. The loan ceases to be available for
draw down on 21 February 2014.
AKB and Seki have been working towards satisfying the conditions
precedent to the Loan Agreement and the Company estimates that this
will be achieved by mid April 2012 after which the first tranche of
funds, being US$10 million, will be drawn down at the end of April
2012. The availability of the second tranche is subject to meeting
a production target of a total of 175,000 tonnes on a quarterly
basis being met by the Company.
EBRD Warrant Instrument
As detailed in the announcement on 22 February 2012, EBRD has
been issued with non-transferrable warrants over 30 million
Shares.
The Warrants are exercisable at any time before the earlier of
(i) 21 February 2014 and (ii) if the closing price per Share
exceeds 6.5325 pence for a period of 20 consecutive trading days
during that 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 Warrants are exercisable in whole or in tranches of no
less than 5,000,000 Warrants (or, if less, the amount of Warrants
unexercised as at the relevant date).
The exercise price of the Warrants is 4.875 pence per Share
(representing a 50 per cent. premium to the Placing Price).
If the Warrants are exercised in full approximately GBP1.5
million (approximately US$2.3 million) will be raised by the
Company.
Production Update
The operational update for the period 1 January 2012 to 31 March
2012 is expected to be announced during the week commencing 16
April 2012.
Tim Daffern, CEO of Hambledon commented:
"Despite our disappointment not to have been able to reach a
point where we could announce that we were able to proceed with
Akmola Gold LLP, our resolve and determination to continue with the
development of the UG mine at Sekisovskoye is maintained.The
challenges of resolving the additional remedial works associated
with TD3 will constrain the 2012 operations and revised operational
plans are being considered to maximise gold production based on the
effluent impoundment capacity constraints."
Enquiries:
HAMBLEDON MINING:
Telephone +44 (0)207 233 1462Charles Zorab
FAIRFAX I.S. PLC (NOMAD AND BROKER):
Telephone +44 (0)207 598 5368Ewan Leggat/Katy Birkin
TAVISTOCK COMMUNICATIONS:
Telephone +44 (0)207 920 3150Ed Portman/Jos Simson
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