Shares in West African gold mining and exploration company Avocet Mining jumped sharply on Monday morning after the company announced that it had completed discussions regarding financing with Macquarie Bank and its largest shareholder, Elliott Management, which is the beneficial owner of 27% of the company's shares.
The company said that it had executed financing agreements with both parties.
The completion of the discussions resulted in funding being secured for 2013 activities at the company's key growth projects - Souma and Tri-K [located in Guinea], a reduced hedge book at the company's cash generative Inata gold mine [located in Burkina Faso] and a reduction of the minimum cash balance requirement at Inata's holding company Socit des Mines de Blahouro SA (SMB).
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Key aspects of the finalised arrangements included a new loan facility from Elliott of up to $15m to fund completion of the Tri-K feasibility study and for general corporate activities.
Some 29,020 hedged gold ounces were bought back for a consideration of $20m, representing 17% of the previous total of 173,250 hedged ounces.
Accelerated delivery of the remaining hedged gold ounces was announced, so as to reduce the hedge position to approximately 100,000 ounces by end of 2013 and eliminate it by 2016.
Macquarie's current minimum cash balance requirement for Inata has been reduced from $37m to its previous level of $12m and Souma's planned exploration costs in 2013 of $9m are to be funded out of Inata's cash flow, subject to certain conditions agreed with Macquarie, Avocet Mining reported.
Following the hedge buy-back, the company has a cash balance of $24.3m prior to the initial draw down on the Elliott loan facility.
David Cather, Chief Executive Officer of Avocet Mining, said: "Since announcing our reduced reserve, our objective has been to put in place financing that reduces the burden of Inata's hedge while ensuring sufficient funds are available during 2013 to progress our key projects at Tri-K and Souma. With today's announcement we have achieved this objective."
He added: "Over the rest of the year we will complete the Tri-K feasibility study and Souma drilling programme, and I fully expect Inata's reserves to grow through further metallurgical test work and other initiatives to improve the mine's operating efficiencies. I am therefore confident that by the end of 2013 the Company will have clearly demonstrated the significant value to be realised from its portfolio of quality assets."
Avocet Mining's share price was up 21.33% to 22.75p at 09:59 on Monday following a morning high of 23.51p.
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