Kolar Gold Limited Company Update (2895M)
15 Luglio 2014 - 8:00AM
UK Regulatory
TIDMKGLD
RNS Number : 2895M
Kolar Gold Limited
15 July 2014
KOLAR GOLD LIMITED
Update for shareholders and investors
Since its listing on AIM in June 2011, Kolar Gold's objective
has been to become one of the leading participants in the
developing Indian gold exploration and mining sector. Following the
elections in India earlier this year, the Board of Kolar Gold
believes that the environment for the Company's activities has
improved and remains confident of progress in the future.
The Board reviewed its strategy in 2013, in light of the slow
pace of progress with its gold licence and exploration activities,
and revised its arrangements with its partner, Geomysore Services
India Private Limited ("GMSI"), in order to focus on developing
prioritised, later stage gold exploration and mining licences. At
the same time measures were taken to reduce costs and preserve
cash.
As part of this revised strategy, in August 2013 Kolar Gold
entered into new arrangements with GMSI, which included further
investment at that time and which included Nick Spencer joining the
board of GMSI. In exchange for dissolving the 2011 agreements with
GMSI, the cancellation of a loan of GBP300,000 to GMSI from Kolar
Gold and the investment of GBP700,000, Kolar Gold gained a 30per
cent shareholding in GMSI. This investment gave Kolar Gold direct
exposure to GMSI's extensive portfolio of Indian gold licence
rights and applications, including a new project at Jonnagiri that
did not fall under Kolar Gold's initial 2011 agreements with GMSI.
In October 2013, GMSI was granted a mining licence at Jonnagiri,
the first such grant in India for gold since 2003. Jonnagiri has
720k ounces of JORC Resource and an exploration target of 2-5Moz,
which was validated by a competent person's report conducted by
Mining Associates. GMSI is now working on developing this resource.
Kolar Gold has recently invested $100,000 into GMSI for ongoing
expenses. GMSI continues to discuss its options with the Kolar Gold
Board and third parties with regard to securing future financing
however Kolar Gold has no obligation to make any further
investment. Kolar Gold's holding in GMSI is currently 24.65 per
cent.
In December 2013 Deccan Gold Mines ("DGM"), whose shares are
listed on the Bombay Stock Exchange and which currently has a
market capitalisation of $22m, announced that its board had,
subject to relevant regulatory approvals and consents, given its
in-principle approval for an amalgamation of DGM and Australia
India Resources ("AIR") - the largest shareholder in GMSI. This
merger is proposed under a court approved Scheme of Arrangement in
Mumbai. DGM has a number of gold mining assets, key amongst them
being the Ganajur Prospect Licence, which has 308k ounces of JORC
Resource confirmed by SRK mining consultants and a final stage
mining lease application pending. Upon completion of the proposed
amalgamation DGM will own and control AIR's interests in GMSI.
Additionally the board of DGM has given in-principle approval for
the acquisition of the remaining 62.45per cent equity interests in
GMSI not held by AIR, including Kolar Gold's shareholding in
GMSI.
Since the announcement of the proposed merger, GMSI and DGM have
been preparing their respective companies' valuations and proposed
share swap ratios together with the scheme for approval by the
Indian court. It is Kolar Gold's understanding that the scheme is
almost fully prepared. It is also the understanding of the Board of
Kolar Gold that the merger would require new funding to be raised
to finance the activities of the enlarged group, which it is
anticipated will occur at the completion of the amalgamation, from
the Indian and international capital markets.
The Board of Kolar Gold believes that the proposed merger
between GMSI and DGM and the associated fund raising will create a
unique, significant and potentially well capitalised listed gold
mining and exploration player in India. If the transaction is
completed Kolar Gold will own a proportional stake in the merged,
listed entity. It is likely that Kolar Gold, together with other
major GMSI shareholders, will have the opportunity to invest in the
merged DGM/GMSI entity.
Shareholders should note, however, that the Board of Kolar Gold
has not received any firm proposal for it to consider in relation
to the proposed merger. If and when such a proposal is received the
Board will consider it and advise shareholders of the terms and
what action, if any, it is proposed the Company should take.
Importantly, Kolar Gold has given no commitment or undertaking that
it will participate in the DGM/GMSI funding from its existing cash
resources.
In parallel with this, Kolar Gold continues to work on the
proposed acquisition of Bharat Gold Mines Limited ("BGML"), which
represents a significant and separate opportunity and remains the
second limb of Kolar Gold's strategy. The tender for the
privatisation was expected to be issued before the recent election,
following the 2013 decision of the Supreme Court of India
instructing the Government to proceed with the asset sale and mine
revival. Kolar Gold continues to work in partnership with the BGML
ex-employees and their representative cooperative societies.
Together with the ex-employee unions and societies, Kolar Gold has
a right of first refusal ("ROFR") to acquire BGML and the Company
is preparing for the tender sale process and ROFR counter offer
bid. Kolar Gold is considering its available financing options to
enable participation in the sale process, which is anticipated to
commence later this year. Kolar Gold shareholders may also have the
opportunity to participate in any equity funding for this
project.
Based on Kolar Gold's two key assets - (1) a significant
shareholding in GMSI (24.65%) together with the proposed merger
with DGM; and (2) its preferred position in the anticipated tender
of BGML - Kolar Gold has the ability to play a pivotal role in the
emergence and development of the Indian gold mining sector. Getting
to this point has been a long, complex and resource consuming
journey but the opportunity is clear. Kolar Gold intends to use its
cash resources prudently and in the best interests of all its
shareholders in order to take as full advantage of these
opportunities as is possible. The Board of Kolar Gold has a broad
base of relevant mining, funding and M&A experience and in
addition to proceeding with its stated strategy, reviews the
challenges of doing business in India on an ongoing basis, whilst
balancing these with the cash resources available to the Company.
The remainder of 2014 is likely to be key in the delivery of Kolar
Gold's two clear gold strategies in India and we look forward to
providing a further update on these developments over the months
ahead.
For further information please contact:
Kolar Gold Limited
Nick Spencer / Chris Clowes +61414874491 / +61417197288
N + 1 Singer (Nomad and Joint Broker)
James Maxwell / Jen Boorer +44 20 7496 3000
Pareto Securities (Joint Broker)
Will Slack +44 20 7786 4371
Tavistock Communications
Ed Portman / Nuala Gallagher +44 20 7920 3150
Churchgate Partners
Sumir Bhardwaj +44 7768 696760
ENDS
This information is provided by RNS
The company news service from the London Stock Exchange
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