1 October 2018

Unaudited Interim Results

for the six months ended 30 June 2018

Avocet Mining PLC ("Avocet" or "the Company") today announces its unaudited interim results for the six months ended 30 June 2018. These results are discussed under the section headed operational and financial results for the first six months ended 30 June 2018 on page 3.

In the first half of 2018 management continued to pursue their primary strategic objective: the refinancing and restructuring of the Group.

The completion of the sale of Avocet's subsidiaries in Burkina Faso on 8 February 2018, and of the disposal of its wholly-owned Norwegian entity Wega Mining and its subsidiaries on 16 March 2018, are part of this larger restructuring effort, and took place against the background of on-going discussions between the Company and its sole creditor Elliott Management ("Elliott") regarding the restructuring of its overdue loans.

Following these transactions the Company's stake in the Tri-K development is its only asset. In light of Avocet's board remaining responsibilities and its continued efforts to minimise costs, the size of the board was no longer considered appropriate and it was reduced from five to two members on 19 March 2018.

On 5 September 2018, the Company has transferred a further 30 per cent of its Tri-K gold project in Guinea to Managem SA ("Managem"), a Moroccan mining group listed on the Casablanca stock exchange, under the October 2016 agreement Avocet had entered into with Managem.

Outlook

At the corporate level, the loans of US$29.9 million as per 30 June 2018 from Manchester Securities Corp (an affiliate of Elliott), the Company's largest shareholder) remain an unsustainable debt burden. Elliott's loans have been due since 2013. Discussions with Elliott regarding the restructuring of Avocet's debts continue.

A possible outcome of these discussions could be that the Avocet Group is broken up further in an orderly manner and eventually wound up. If this occurs, it is expected that, given the amount of debt owed by Avocet, there will be very minimal or no returns to Avocet's shareholders.

At the moment Avocet has sufficient funds for at least the next twelve months as of the date of signing of the report, at the current and expected rate of spending, provided that the capital and interest on the Elliott's loan will not have to be paid in that period.

The Directors consider that, at the date of signing the Report, the Company is a going concern. Their considerations are explained more fully in note 1 to the financial statements.

 

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NOTES TO EDITORS

Avocet Mining PLC ("Avocet" or the "Company") is a gold mining and exploration company listed on the London Stock Exchange (ticker: AVM.L) and the Oslo Børs (ticker: AVM.OL). The Company's principal activity is gold exploration in Guinea, West Africa: the Tri-K project.

 

OPERATIONAL AND FINANCIAL RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2018

In 2018, the sales of the assets and liabilities that were held for sale in 2017 were completed.

Burkina Faso sale

The transaction with the Balaji Group comprised the sale by Wega Mining AS ("Wega Mining"), a wholly-owned subsidiary of Avocet, of the entire issued share capital of Resolute West Africa ("Resolute") to Greater Success Global Limited, a member of the Balaji Group, for US$ 1 in cash. As this was a sale of a distressed company, the shares were sold on an "as is/where is" basis, i.e. no warranties (other than with regard to title and capacity) were given by Wega Mining in the Agreement.

Resolute was the sole shareholder of Goldbelt and the majority shareholder in SMB, which holds the Inata mining licence. The sale of Resolute therefore represents the disposal by the Company of all of its assets in Burkina Faso, including the Inata goldmine.

In addition, the transaction involved the assignment by Avocet and Wega Mining to the Balaji Group of certain receivables owed to them by SMB and Goldbelt for a cash consideration of US$ 2,499,999, and for a consideration of US$ 2.5 million to be satisfied by deferred payments over a period of seven years. The obligation to pay the deferred consideration is guaranteed by the Purchaser and by the chairman of the Balaji Group personally. Elliott has security over the deferred payments.

All assets and liabilities in Burkina Faso were classified at year-end as assets held for sale, as the entities were sold in the first quarter of 2018 and the decision to sell the entities was taken before 31 December 2017. The assets of the disposal group are classified as held for sale and presented separately in the statement of financial position. Liabilities are classified as held for sale and presented as such in the statement of financial position.

Wega Mining sale

On 16 March 2018, the Company announced that it had completed the disposal of one of its subsidiary companies, the wholly-owned Norwegian entity Wega Mining AS and certain intercompany receivables of the Group to Natholmen AS for a total consideration of US$ 400,000 in cash - like the recent sale of its Burkina Faso subsidiaries, the disposal of Wega Mining is part of that larger restructuring effort - taking place against the background of on-going discussions between the Company and its sole creditor Elliott regarding the restructuring of its overdue loans. Elliott agreed to the Disposal and to release its security over the shares in Wega Mining and its subsidiaries.

Tri-K update

On 10 October 2016, Avocet announced that it had entered into an agreement with Managem, under which Managem would ultimately hold an interest of 70 per cent in the project conditional upon (a) an initial payment of US$4 million for 40 per cent of the project and related shareholder loans, (b) the completion of a US$10 million work programme, and (c) the production of a bankable feasibility study for an operation with a reserve of at least 1 million ounces.

On 22 May 2017, Avocet received from Managem US$4 million for 40 per cent of the project and related shareholder loans as part of the first closing.

On 3 August 2018, Managem sent the Company an overview of the work programme, the costs incurred as part of that programme, and a feasibility study indicating a reserve of approximately 1.1 million ounces.

On 5 September 2018 the Company transferred a further 30% of Avocet's stake in the Tri-K project to Managold as well as the related shareholder loans. A discussion is ongoing between the parties regarding the costs incurred as part of the work programme.

Results for the period

The result for the first half year of 2018 was US$ 25.2 million compared with a loss of US$5.4 million in the first half year of 2017, mainly due to Avocet's disposals in the first quarter of the year.

DIRECTORS' RESPONSIBILITY STATEMENT

We confirm that to the best of our knowledge:

·      The condensed set of financial statements has been prepared in accordance with IAS 34 'Interim Financial Reporting' as adopted by the EU;

·      The interim management report includes a fair review of the information required by:

i)   DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and

ii)  DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last annual report that could do so.

By order of the Board

BOUDEWIJN WENTINK                                            

Chief Executive Officer                          

 

⁽¹⁾       Adjusted EBITDA represents earnings before exceptional items, finance items, taxation, depreciation, amortisation and impairments.  EBITDA is not defined by IFRS but is commonly used as an indication of underlying cash generation.

   

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION