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Avocet Mining to Buy Wega Mining for $108 Million

Written By Luke Burgess

Posted April 14, 2009


South East Asian gold miner Avocet Mining PLC [AIM: AVM] announced plans to buy Wega Mining ASA [OSL: WEMI] for appropriately $108 million in a shares and debt deal. The move would create a new mid-tier gold company with annual production approaching 300,000 ounces.

The acquisition of Wega Mining will bring Avocet entry into West Africa, the world’s second fastest growing gold district behind China.

The combined group will have:

  • Three operating gold mines with proven and probable reserves of 1.6 million ounces of gold, measured and indicated resources of 3.5 million ounces of gold, and inferred resources of 1.9 million ounces of gold.
  • Annual production of  approximately 280,000 ounces of gold by 2011.
  • A feasibility-stage project containing 0.3 million ounces in attributable measured and indicated resources and 0.1 million ounces in attributable inferred resources.
  • Two advanced-stage projects containing indicated and inferred resources of approximately 1.2 million ounces of attributable gold at the pre-feasibility stage, including 0.6 million ounces of attributable inferred resources.
  • An extensive portfolio of exploration properties that span six countries across South East Asia and West Africa that include a number other near-feasibility projects.
  • A project finance facility of $65 million, of which approximately $56 million has been drawn to date, together with hedging arrangements pursuant to which 350,000 ounces of gold have been forward sold at an average price of $958 per ounce. This hedge position is currently in the money and valued at approximately $13.6 million based on a gold price of $880 per ounce.  
Commenting on the proposed acquisition and interim financing of Wega, Jonathan Henry, CEO of Avocet Mining, said, “The acquisition of Wega provides Avocet with an immediate opportunity to more than double its production and resources in the short term, as well as enter into West Africa, one of the most exciting gold regions in the world. We are confident that combining Avocet’s experience in building and developing profitable gold mines and balance sheet strength with the assets of Wega will allow us to achieve our strategic goal of creating a new mid-tier, profitable gold company with significant upside for future growth.”

– luke