Job Losses Imminent at Bea Mount, As New Canadian Company Takes Over

Report flattering  in local and some international media has disclosed that there is an imminent job lost at the Bea Mountain (Avesoro Resources), in Weaju, Grand Cape Mount County,  western Liberia, where hundreds  of Liberians are expected to be put out of jobs.

According to report , Avesoro Resources (parent company of Bea Mountain), the Company has received on Tuesday, August 21, 2019, an expression of interest from its majority shareholder, Avesoro Jersey Limited (AJL), which wants to acquire the shares in Avesoro it doesn’t already own.

The ‘New Liberty gold Mine,’ is one of the major mining concession in Liberia, with an approximately 2,500 employees and daily workers.

It may be recorded, on July 29, 2009, the Government of Liberia granted a Class A Mining Licence within the Bea Mountain Mineral Development Agreement property. The Bea Mining Licence permits mining within a 478 km2 area which encompasses the ‘New Liberty Gold Mine’. The Government of Liberia holds a 10% free carry interest in the Bea Mining License.

In September 2013 the Government of Liberia ratified a Restated and Amended Mineral Development Agreement for the Bea Mountain Mining Licence covering the 478 km² area which includes the ‘New Liberty Gold Mine’ along with the Ndablama Project, Silver Hills, Gondoja, the Weaju Project and Leopard Rock exploration targets.

According to the information Avesoro Jersey, has a 72.9% stake in the takeover target, has offered £1 (about $1.20) per share of Avesoro Resources, saying that shareholders who own 12.9% of the company have already supported the move.

The Canada-based gold producer said it had formed a special committee, comprising all of its independent directors, to conduct a detailed review and analysis of the offer. They will be helped by legal counsel and financial advisers.

Avesoro Resources said it was now assessing the long-term viability of its Youga gold mine in Burkina Faso, adding it had suspended guidance due to ongoing problems both at that mine and at ‘New Liberty’, in Liberia.

Earlier this month, a security guard at Youga shot and killed an illegal miner found on the premises, which led to a break-in by an armed group of fellow artisanal miners.

The Toronto-based miner had to halt operations as a precautionary measure, but said last week the site had been secured, adding that it had resumed mill and mining operations.

A non-determined number of haul trucks, excavators and auxiliary equipment within Youga’s heavy mining equipment fleet were damaged beyond repair, the company noted.

Operations at its ‘New Liberty mine’, in Weaju, Grand Cape Mount County won’t restart until the beginning of September due to heavy rainfall flooding the pit. Previously, the firm had expected a delay of only about 10 days. As a result, gold shipments from the mine in August will be less than 1,000 ounces, it said.

The outlined disruptions at both mines meant full-year gold output and cost guidance was under review, Avesoro warned. “Previous guidance is suspended pending that review,” it said. The miner had aimed to produce between 180,000 and 200,000 ounces of gold.

Receipt of Non-Binding Acquisition Proposal from Controlling Shareholder

The Company has received a non-binding expression of interest (the “Acquisition Proposal”) from AJL to acquire all of the shares of the Company that AJL does not already own at a price of £1 per Share (the “Proposal Price”).  According to the Acquisition Proposal, AJL’s proposal is supported by holders of an additional 12.9% of the issued and outstanding shares of the Company pursuant to “hard” lock up agreements.  The transaction would be structured as a court-approved plan of arrangement under the provisions of the Canada Business Corporations Act.

The board of directors of the Company has established a special committee (the “Special Committee”) comprised of all of the independent directors of the Company.  The Special Committee has a mandate to conduct a detailed review and analysis of the Acquisition Proposal and to identify and consider alternatives that may be available to the Company, with a view to determining whether it is in the best interests of the Company to support the Acquisition Proposal and the transaction contemplated therein.  The Special Committee has engaged independent legal counsel and is in the process of engaging independent financial advisors to assist with its review.  In particular, the Special Committee plans to obtain an independent valuation that will be required under Canadian Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transactions (“MI 61-101”).  Investors are reminded that the Company is not subject to the UK City Code on Takeovers and Mergers.

Youga Update

Following the previously reported security incident, Avesoro has restarted the mill and mining operations at Youga. However, following a more detailed assessment of the damage incurred to property during the incident it has now been confirmed that a number of haul trucks, excavators and auxiliary equipment within the Heavy Mining Equipment (“HME”) fleet were vandalized beyond repair. As a consequence, the mining fleet capacity has been substantially reduced in the short term.

Fortunately, no damage was sustained to the process plant or its associated facilities with the mining equipment being the focus of the incident.

As previously announced, Orkun Group Sarl (“Orkun”), the Company’s mining contractor has begun to ship additional HME comprising five excavators, 15 haul trucks and auxiliary equipment to Youga, which is expected to alleviate the situation to some extent.

However, as announced on June 10, 2019, the Company has experienced significant ore dilution at the Gassore pit at Youga, and following recent events, the Company is currently assessing the longer-term viability of ongoing mining operations at Youga and will make a further announcement in this regard in due course.

New Liberty in Liberia Update

It was initially assessed that the heavy rain at New Liberty and resultant flooding of the main pit would result in ore mining being suspended for a period of ten days to allow adequate dewatering of the main pit.

As a result of further substantial rainfall and a reassessment of the situation, it is now anticipated that there could be no access to ore until early September depending on the amount of rainfall in the meantime. The mining fleet is continuing to focus on waste stripping operations during this time. Additionally, due to limited mill stockpiles, it is expected that gold shipments in August will be less than 1,000 ounces.

Production Guidance

Gold production and cost guidance for the full year is currently under review. Previous guidance is suspended pending that review. Gold production for July and August is expected to be c.16,000 oz and it is therefore anticipated that full year guidance will be materially reduced from 180,000 – 200,000 koz range announced on June 10, 2019.

Financing Requirements

The Company announced on July 15, 2019 that its anticipated funding gap in H2 2019 would be US$10-15 million including the repayment of US$12.9 million of debt and interest provided by a related party lender falling due for repayment in 2019.

As a result of the operational difficulties faced at both operations, the Company now believes that the funding gap for the balance of the financial year has widened by not less than US$10 million. The cash requirement is under review and will depend on the revised production and cost guidance. The Company is currently relying on extended credit from suppliers at each of its mines but will require an injection of new capital in the near future in order to be able to satisfy its debts as they fall due.

As disclosed on 8 August 2019, a Letter of Support was provided to the directors of the Company dated August 7, 2019, by Mr. Murathan Günal, the principal of AJL. In that letter, Mr. Günal undertakes to continue to provide such support for a period of not less than twelve months from the date of the signing of the Company’s interim consolidated financial statements for the six months ended June 2019 to ensure that the Company can meet its liabilities as they fall due.

To that end, prior to the receipt of the Acquisition Proposal the Company has been in negotiations with AJL for the provision of a further working capital loan (the “New Facility”) in order to alleviate funding concerns and provide sufficient financing for the Company to continue its operations in the near-term.

The provision of the New Facility would be treated as a related party transaction pursuant to Rule 13 of the AIM Rules for Companies and pursuant to MI 61-101.

Negotiations with Banks

As announced on August 8, 2019, the Company is currently in default under the cross-default provisions of its loan documents with the Company’s lenders, Nedbank Limited and FirstRand Bank Limited (the “Lenders”) which allow the Lenders to accelerate payment of New Liberty’s bank loans before their final maturity date.

The Company has requested waivers of the Events of Default and remains in discussions with its Lenders. The Company remains confident that a waiver or suitable alternative remedy can be agreed with the Lenders.

In the event that the Lenders decide to accelerate the loan repayment, they can declare all outstanding principal amounts (US$71.6m) and accrued interest amounts as immediately payable in addition to their customary enforcement rights.  The effect of the guarantees given by AJL and the non-executive Chairman requires their immediate, on demand payment of any amounts due under the loans.(Source Avesoro Resources

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