TIDMMNC
RNS Number : 0339I
Metminco Limited
14 June 2017
AIM ANNOUNCEMENT 14 June 2017
INVESTOR Q&A - SALE OF LOS CALATOS
1. Why sell Los Calatos when we are currently taking it through feasibility?
The Company is focussed on delivering near term shareholder
value. Developing Los Calatos in the current environment has proven
highly challenging for the Company as a junior miner. The CD
Capital deal last year was important as it removed the financial
burden of Los Calatos whilst enabling us to focus on generating
value elsewhere. Selling the Company's interest in Los Calatos at
this point allows the Company to realise value and deploy that cash
to continue to advance the Miraflores Gold Project where we see
significant near term value accretion through mine development and
gold production.
2. Doesn't US$5m undervalue our stake in Los Calatos and not
take into consideration its future value?
In the longer term the answer may be yes but the sale price is a
reflection of the current market. There is no guarantee that Los
Calatos will eventually be developed into a producing mine and so
holding onto that stake has risks as well as potential
opportunities. After detailed consideration, the Board formed the
view that monetising the value of the Company's' interest in the
Los Calatos Project now would benefit existing shareholders more
than the previously proposed in specie distribution of shares. Most
likely it would be some years before shareholders would benefit
from the Los Calatos Project, whereas cash from its sale can flow
into the Miraflores Gold Project and benefit shareholders in the
short term, while also minimising dilution from equity raisings to
fund the Miraflores Gold Project.
3. Have you approached other parties about buying our stake in the project?
The Company has explored many other options prior to agreeing to
sell our stake in Los Calatos. CD Capital is a natural buyer.
4. What effect will this have on the Company's share price?
We cannot comment or speculate about what impact this
transaction may have on the share price but the Board views this
transaction as a positive event as it will allow the Company to
continue to invest in assets it controls.
5. What will you do with the cash raised?
As we have said in the announcement the funds will be applied to
advancing the Miraflores Gold Project towards a decision to build a
mine.
6. What is the long term strategy now after the sale of Los Calatos?
The long term strategy is to become a mid-tier gold producer. We
have a serious chance of achieving this with the Miraflores deposit
and the wider Quinchia Gold Portfolio. There have been a number of
recent deals in Colombia that demonstrate the value of the Cauca
region, which is becoming more prospective and attractive to
investment.
7. Is management considering a further sale of assets?
The Company is focussed on its Colombian gold assets and has no
plans to sell its 100% interest in the Quinchia Gold Portfolio.
8. Has the Company come out cash positive from the sale?
The US$ 5 million net will significantly strengthen our balance
sheet and avoid the need to do a dilutive equity financing in the
short term.
9. Does the Company have any option on the asset in the future?
After the sale the Company will not retain any interest in the
Los Calatos Project.
10. Do you believe this was the optimum sale time for Los
Calatos?
Copper prices have been rising since the beginning of October
2016 however as with everything there are uncertainties. Completion
of the Los Calatos Feasibility Study, which is some way off is a
critical point for de-risking the project and potentially
facilitating a release of capital to shareholders. The Board, after
taking into consideration the opportunity for the Company to become
a gold producer in the near term, believes it is a good time to
release our equity in the Los Calatos Project and re-deploy it to
advance our strategy of becoming a gold producer in the near
term.
11. What is the In Specie Distribution all about and why is it
so complex?
An in specie distribution is when a company issues stock instead
of paying cash. As per the Investment Agreement with CD Capital,
the Company is to use its "best endeavours" to distribute at least
90% of its holding in Hampton Mining Pty Ltd (Hampton) to its
shareholders within six months (In Specie Distribution). Hampton is
a wholly owned subsidiary of Metminco which was to hold 100% of the
Company's interest in LCH (owner of the Los Calatos Project). There
have been various tax and other matters outside the control of the
Company which delayed the planned In Specie Distribution and made
it more complex than envisaged. Further, the cost of the In Specie
Distribution is estimated to be in excess of A$500,000, and
possibly as much to as A$1m in the first year to effect the
distribution.
12. Why did the Company decide to sell LCH and not distribute to
its shareholders?
The planned In Specie Distribution as reflected in the Company's
share price did not receive the support from investors anticipated
by the Board, and proved more complex at tax, legal and funding
levels than anticipated. Under the circumstances the Board decided
to sell its interest in the Los Calatos asset to fund the ongoing
work for the development of the Miraflores Gold Project. The Board
believes that advancing Miraflores will ultimately be more value
accretive to shareholders than a cash distribution.
13. What guarantee is there that the Company will use the funds
raised to increase shareholder value, why not make a dividend of
the cash received to shareholders?
The Board is of the opinion that the benefit to shareholders in
advancing the Miraflores Gold Project towards a development
decision will create far greater shareholder value than a short
term dividend. The Company is focussed on advancing the Miraflores
Gold Project and will be publishing a feasibility study in the
third quarter 2017. Our focus is on this gold asset and the cash
will be deployed to its advancement for the benefit of all
shareholders.
14. Will my holding in Metminco to be further diluted?
The sale of Los Calatos will greatly assist in minimising the
dilution of shareholders in Metminco as we advance the Miraflores
Gold Project towards production. Whilst it is possible that there
may be a need for a future equity raise that will dilute existing
shareholders, this transaction means that an equity raise is not
required for the foreseeable future, thereby postponing any future
dilution until a decision or mine.
15. Why not raise funds as opposed to monetise interest in the
Los Calatos Project?
At the current share price the dilution to current Metminco
shareholders would be significant when funding via an equity
capital raise. By monetising Los Calatos, dilution to shareholders
is minimized.
16. What is the status of the Los Calatos project?
CD Capital has commenced with an in-fill drilling program.
17. When is the Company aiming to have an operating cash
flow?
The Company is aiming to have the Miraflores Gold Mine commence
production in the first half of 2019, subject to EIA approval.
18. What is the timing for the Company to commence gold
production and what additional funding will be needed?
The Company aims to have the Miraflores Gold Mine commencing
production in the first half of 2019, subject to EIA approval. The
Company is fully-funded to a decision to mine with completion of
the Miraflores Feasibility Study scheduled during third quarter
2017 and the Environmental Impact Study scheduled to be submitted
by the end of 2017. Additional funding will be required to finance
the construction and early operational phase of the Project.
19. What does the sale mean for the value of my shares?
The sale price is approximately equal to the current market
capitalisation of Metminco and therefore underpins the current
value of the shares with no value ascribed to the other assets in
the Company.
20. As a management team are you confident you will make a
success of the Quinchia Gold Portfolio?
The Quinchia Gold Portfolio is a high quality gold asset in a
region which is increasingly becoming more prospective and
attractive to investment. As a management team we are confident in
our ability to deliver our ambition of becoming a gold producer in
the near term and delivering sustained value for all our
stakeholders.
Metminco Limited ABN Suite 401, 6 Help Street,
43 119 759 349 Chatswood, NSW, 2067
ASX Code: MNC.AX; AIM Tel: +61 (0) 2 9460 1856;
Code: MNC.L Fax: +61 (0) 2 9460 1857
www.metminco.com.au
For further information,
please contact:
METMINCO LIMITED
Phil Killen Office: +61 (0) 2
9460 1856
NOMINATED ADVISOR AND
BROKER
RFC Ambrian
Australia
Will Souter / Nathan Office: +61 (0) 2
Forsyth 9250 0000
United Kingdom
Charlie Cryer Office: +44 (0) 20
3440 6800
JOINT BROKER
SP Angel Corporate Finance
LLP (UK)
Ewan Leggat Office: +44 (0) 20
3470 0470
PUBLIC RELATIONS
Camarco
United Kingdom
Gordon Poole / Tom Huddart Office: + 44 (0) 20
3757 4997
--------------------------- --------------------
Forward Looking Statement
All statements other than statements of historical fact included
in this announcement including, without limitation, statements
regarding future plans and objectives of Metminco are
forward-looking statements. When used in this announcement,
forward-looking statements can be identified by words such as
"anticipate", "believe", "could", "estimate", "expect", "future",
"intend", "may", "opportunity", "plan", "potential", "project",
"seek", "will" and other similar words that involve risks and
uncertainties.
These statements are based on an assessment of present economic
and operating conditions, and on a number of assumptions regarding
future events and actions that, as at the date of this
announcement, are expected to take place. Such forward-looking
statements are not guarantees of future performance and involve
known and unknown risks, uncertainties, assumptions and other
important factors, many of which are beyond the control of the
Company, its directors and management of Metminco that could cause
Metminco's actual results to differ materially from the results
expressed or anticipated in these statements.
The Company cannot and does not give any assurance that the
results, performance or achievements expressed or implied by the
forward-looking statements contained in this announcement will
actually occur and investors are cautioned not to place undue
reliance on these forward-looking statements. Metminco does not
undertake to update or revise forward-looking statements, or to
publish prospective financial information in the future, regardless
of whether new information, future events or any other factors
affect the information contained in this announcement, except where
required by applicable law and stock exchange listing.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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