Morgan:Laverton Gold N.L. - News Release
Proposed merger with Continental Goldfields
Laverton Gold N.L. LAVShares issued 1039973831997-03-21 close $0.3Monday Mar 24 1997News ReleaseMr B.P. Panos reports A new international gold mining and exploration company with assets and investments spanning Australia, Indonesia and South Africa is to be created through a proposed merger between the Australian-based companies Laverton Gold NL and Continental Goldfields, including a South African joint venture with Randgold Exploration, details of which are included below. Laverton and Continental intend to merge, subject to statutory requirements, under a scheme of arrangement. Under the proposals, Laverton will offer four of its shares for every five Continental shares and four new options for every five existing Continental options. The new options will be exercisable at $0.50 and expire on December 31 1998. A new company to be called Transcontinental Resources NL will emerge with immediate direct and attributable production of 130,000 ounces per year of gold from Indonesia and South Africa and a significant portfolio of highly prospective exploration tenements in Indonesia. Laverton brings to the merged group 100% ownership of the low cost Rawas gold mine on the Indonesian Island of South Sumatra. Based on current reserves and resources, the recently commissioned Rawas plant will produce an average of 75,000 ounces of gold per year at a cash operating cost of around US$235 per ounce. Production is hedged at US$406 per ounce for the next one and a half years. It is the company's intention to substantially upgrade production as imminent further drilling increases reserves. There is a current resource of 1.14 million ounces of gold equivalent. The Rawas project also includes 2,145 sq km of highly prospective ground contained in the Rawas contract of work (CoW 1), CoW 2 and an application for CoW 3. Exploration to date has been conducted over just 5 sq km of the Rawas CoW 1 and the longer term strategy is to aggressively explore the wider area where Laverton has already identified a number of significant targets. The Rawas CoW 1 is 60km northeast of the Lebong mining area, which has historically produced over three million ounces of gold and 28 million ounces of silver. Recent discoveries in the Sumatra Arc, such as Way Unggo and the Gunung Pongkor deposit in West Java are characterized by bonanza grades of 12 to 15 g/t gold with extensive underground mining. The geology of Rawas is favourable for hosting similar deposits. Continental is a company listed on the Australian Stock Exchange with net assets as at December 31 1996 of approximately A$34 million. It brings an emerging portfolio of projects and investments in South Africa. These include a 29% stake in Knights Gold Mining, a Johannesburg Stock Exchange listed company which produces around 45,000 ounces of gold a year from the re-treatment of dumps and slimes dams around Johannesburg. As a result of a series of transactions in South Africa, Continental will emerge with a 31% interest in a new South African company (Newco South Africa) in which the progressive mining house Randgold, currently capitalized at R1.3 billion, will have a 49% interest. Newco South Africa will be formed as a linked equity and dividend share company which will allow funds to be released on a pre-tax basis to unitholders. It is anticipated that the company will b capitalized at R205 million through the contribution of R95 million cash by Randgold, R5 million by Continental and the balance by the acquisition of Knights' assets, including approximately R50 million in cash. It is proposed that Newco South Africa will list on the Johannesburg Stock Exchange. Newco South Africa will acquire the gold treatment operations of Knights by way of an issue of Newco units valued at R105 million to Knights' shareholders. The balance of Continental's interest in Newco South Africa will come through its participation in that issue. Under the terms of an agreement between Continental and Randgold, Newco South Africa will be used as the vehicle to acquire gold retreatment operations in the Witswatersrand in South Africa. Initially, Newco South Africa will have approximately R150 million in cash reserves, which will be used for capital acquisitions and expansions. Continental, Randgold and RMP Properties have agreed in principle that Newco South Africa will acquire the existing gold recovery business, including existing processing plants, from RMP. The parties have made substantial progress in negotiating the terms of that acquisition. Upon completion of the acquisition of the Knights' operations, RMP assets and the current RMP gold production, Newco South Africa will emerge with an annual gold production of 175,000 ounces. In addition, a feasibility study is being carried out to determine the viability of an expansion of the retreatment operations which will have the potential to increase production dramatically. This would be achieved through the treatment of low grade dumps totalling more than one billion tonnes located in the West Rand through the construction of a new processing plant. In May 1996 Continental acquired 25% of the issued capital of the South African company Transvaal Gold mining and Estates Ltd from Randgold. Recently the company has received an offer from Key Gold, a Canadian registered company, to acquire all of its shareholding in TGME. On completion of this transaction, the proposed sale will represent a profit of approximately US$1 million to Continental. The rationale for disposal by Continental of its equity in TGME is to allow Continental to concentrate on the Randgold joint venture and to provide for the potential acquisition of an Australian gold mining asset which is currently under review. Existing cash in Continental plus receivables amounts to A$23 million. Dundee Bancorp, a major Toronto-based investment fund under the chairmanship of Mr Ned Goodman, will emerge as a significant equity holder in the merged group. This will be achieved by the disposal of the current cross-shareholdings of Continental and Laverton shares and options held by the respective entities to Dundee Bancorp, together with an exchange of Transcontinental shares for Dundee Bancorp's right in the Newco South Africa. The assets described above will underpin immediately annual equity gold production of 140,000 ounces for Transcontinental. However, the new company's strategy is to expand this to 300,000 ounces per year as quickly as possible by aggressively exploring its extensive Rawas tenements in Indonesia, by expanding production in South Africa, and by pursuing the acquisition of producing gold assets in Australia and elsewhere. The board of Transcontinental Resources will be complemented by the addition of two Canadian representatives of Dundee Bancorp. The board of Newco South Africa will will consist of five directors from each of Transcontinental and Randgold. This transaction brings benefits to both Laverton and Continental shareholders. Laverton will emerge with production of 130,000 ounces per year, the existing funds held by Continental, and cash flow from the South African operations which will provide immediate funds for the commencement of an aggressive exploration program within the Rawas and other contracts of work. Continental will gain access to the highly prospective Indonesian contracts of work and will share in the increased production. It is anticipated that Transcontinental will be absorbed by a new Canadian company which will apply for listing on the TSE and will also seek a dual listing on the Australian Stock Exchange. A Canadian home exchange listing is expected to increase demand for the new stock through increased Canadian institutional investment, while at the same time allowing its Australian shareholders the ability to trade their stock within Australia. (c) Copyright 1997 Canjex Publishing Ltd. canada-stockwatch.com
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