TSX: ASO
AIM: ASO
TORONTO, Oct. 16, 2017
/CNW/ - Avesoro Resources Inc. ("Avesoro" or the "Company"), the
TSX and AIM listed West African gold producer, is pleased to
announce that its wholly owned subsidiary Bea Mountain Mining
Corporation ("BMMC") has entered into equipment finance facility
agreements ("Finance Agreements") with Mapa İnşaat ve Ticaret A.Ş.
("Mapa"), a related party of the Company, to facilitate the
purchase of heavy mining equipment ("HME") totaling approximately
US$6.1 million, as detailed
below.
This follows the announcement by the Company on 11 October 2017 of an updated Mineral Resource
and Mineral Reserve estimate for the New Liberty Gold Mine ("New
Liberty") and details of the new mine plan for New Liberty, which
requires the procurement of this additional equipment.
The Company had sought quotes for the HME from a number of
providers, however, due to Mapa's purchasing power it can secure
more competitive terms than can be achieved by the Company
directly.
Mapa is part of the MNG group of companies owned by the
Company's Non-Executive Chairman, Mr Mehmet Nazif Gűnal, and
therefore, entering into the Finance Agreements constitutes a
related party transaction for the Company under the AIM Rules.
Once the expanded mining fleet is complete, the Company expects
to be able to ramp-up to a quarterly gold production rate of 36koz
during 2018.
Equipment to be purchased
The Finance Agreements totaling approximately US$6.1 million, relate to two Sandvik 1500i drill
rigs, one Komatsu PC1250 excavator and four Komatsu HD785 haul
trucks. Delivery to New Liberty is expected to occur in late
October 2017. The loan principal of these agreements includes
a mark-up of 2.5% over the cost incurred by Mapa in procuring the
equipment.
BMMC expects to enter into further agreements with Mapa, on
substantially similar terms to the Finance Agreements, to
facilitate BMMC's purchase of additional new HME including three
Komatsu PC1250 excavators and eight Komatsu HD785 haul trucks along
with some auxiliary equipment for delivery to New Liberty
throughout Q4 2017 and Q1 2018, as required under the updated mine
plan announced by the Company on 11 October
2017. A further announcement will be made as appropriate if
those additional Finance Agreements are entered into.
Financing terms
The equipment finance loans under each of the Finance Agreements
are unsecured, with interest charged at 6.5% per annum on the US$
denominated loan amount of approximately US$3.7 million and 5.5% per annum on the Euro
denominated loan amount of approximately €2.0 million (equivalent
to approximately US$2.4 million). The
loans are repayable in cash in eight equal semi-annual instalments,
the first of which will fall due six months after utilisation of
the loan.
Opinion of the Independent Directors
The independent directors of the Company, consisting of Mr
David Netherway, Mr Jean-Guy Martin and Mr Loudon Owen consider, having consulted with the
Company's Nominated Adviser, that the terms of this transaction are
fair and reasonable insofar as its shareholders are concerned.
Disclosure of smaller related party transactions
Avesoro Jersey Limited ("Avesoro Jersey"), the Company's
majority shareholder, is part of a profitable gold mining group
with producing mines in Burkina
Faso and Liberia,
West Africa (the "Avesoro Holdings
Group"). The Company's Chairman, Mr Mehmet Nazif Günal, is a
successful Turkish entrepreneur who is also Chairman of the MNG
group of companies, which has interests in construction and
contracting, tourism, air carriage, cargo carriage, finance and
energy (the "MNG Group").
Under the umbrella of the MNG Group, Avesoro Jersey and its
associated companies in the Avesoro Holdings Group have operated
their gold mines at significantly lower cost than Avesoro Resources
has been able to historically. Since Avesoro Jersey took control of
the Company in 2016, the Company's new management team has
identified a number of areas where the costs of the Company can be
reduced by taking advantage of the infrastructure, technical
expertise, human resources, experience, procurement expertise,
balance sheet strength and purchasing power of the MNG Group in the
same way as other associated companies do.
In order to maximise the potential benefit to the Company (and
all of its shareholders) of having a supportive and well
capitalised controlling shareholder and associated companies, the
Company has put various arrangements in place to enable the Company
to access various services via Avesoro Holdings and the MNG
Group.
In accordance with the AIM Rules, the Company discloses at this
time, the following smaller related party transactions that it has
entered into during the past 12 months with entities within the MNG
Group:
Administration services provided to the Company
and Avesoro Services (UK) Limited by Avesoro
Services (Jersey) Limited
Over the last 12 months Avesoro Services (Jersey) Limited
("ASJL"), a wholly owned subsidiary of Avesoro Jersey and part of
the Avesoro Holdings Group has provided administrative services to
the Company and Avesoro Services (UK) Limited ("ASUL"), a wholly
owned subsidiary of the Company, including bookkeeping, human
resources administration and general administration
services. These services are recharged to the Company and ASUL
on a monthly basis at a cost of approximately US$15,000 per month which approximates the cost
incurred by ASJL in providing these services. The total value of
these services provided over the last 12 months is approximately
US$0.1 million, payable in cash.
Technical and managerial services provided to ASJL
by the Company and ASUL
Over the last 12 months, the Company and ASUL have provided
technical and managerial services to ASJL to support the other gold
mines operated by Avesoro Jersey, the Youga, Balogo and Kokoya gold
mines. These services are recharged to ASJL on a monthly basis
at a mark-up of 5% over the cost incurred by the Company and ASUL
in providing these services. The total value of these services
provided over the last 12 months is approximately US$0.4 million, payable in cash.
Management, procurement and operational assistance provided
to ASLI by BMMC
On 6 September 2016, the Company
announced the novation of the mining services contract between BMMC
and MonuRent (Liberia) Limited,
together with all underlying supplier contracts to Atmaca Services
(Liberia) Inc. ("ASLI"), a
Liberian company wholly owned by MNG Gold Jersey Limited (now
renamed Avesoro Jersey Limited). That contract was terminated on 6
December 2016. Whilst the mining services contract was under
the ownership of ASLI, various managerial, procurement and
operational services were provided by BMMC, and a fee of
US$2.0 million was charged by BMMC to
ASLI in respect of this, based on expected third party costs for
similar services, payable in cash.
Travel services provided to BMMC by MNG
Turizm ve Ticaret A.Ş.
Over the last 12 months, MNG Turizm ve Ticaret A.Ş. ("MNG
Turizm"), a member of the MNG Group of companies, has provided
travel agency services to BMMC. MNG Turizm is a commercial travel
agency and the prices paid by BMMC are the same as those paid by
their arms-length customers. The total value of these services
provided over the last 12 months is approximately US$0.04 million, payable in cash.
Drilling services provided to BMMC by
Zwedru Mining Inc.
Over the last 12 months, Zwedru Mining Inc., a wholly owned
subsidiary of Avesoro Jersey, has provided diamond and reverse
circulation drilling services to BMMC. These services are
provided on an arms-length basis at a rate of US$40-85 per metre, a rate significantly more
favourable than BMMC has previously been able to obtain from other
third-party providers. The total value of these services
provided over the last 12 months is approximately US$0.4 million, payable in cash.
Technical and procurement services provided to BMMC by
MNG Orko Madencilik A.Ṣ.
Over the last 12 months, MNG Orko Madencilik A. Ṣ. ("MNG Orko"),
a member of the MNG Group of companies, has provided technical and
procurement services to BMMC including geological consulting,
mining engineering consulting, environmental consulting services
and procurement assistance. These services are recharged to
BMMC on an annual basis at a mark-up of between 5 and 10% over the
cost incurred by MNG Orko in providing these services. The
total value of these services provided over the last 12 months is
approximately US$0.35 million,
payable in cash.
Charter jet services provided to BMMC by MNG
Gold Liberia Inc.
Over the last 12 months, BMMC has chartered flights from MNG
Gold Liberia Inc. ("MNGGL"), a member of the MNG Group of
companies. BMMC undertook a benchmarking exercise and agreed
an hourly rate to be paid to MNGGL in respect of these services and
is charged US$3,000 per flying
hour. The total value of these services provided over the last
12 months is approximately US$0.08
million, payable in cash.
Framework agreement
The Company is currently finalising a framework services
agreement to cover the provision of similar services in the future
and a further announcement to this effect will be made in due
course.
About Avesoro Resources Inc.
The Company's assets include the New Liberty Gold Mine in
Liberia (the "New Liberty Gold
Mine", "New Liberty" or the "mine") which has an estimated proven
and probable mineral reserve of 7.4 Mt with 717,000 ounces of gold
grading 3.03 g/t and an estimated measured and indicated mineral
resource of 9.6 Mt with 985,000 ounces of gold grading 3.2 g/t and
an estimated inferred mineral resource of 6.4 Mt with 620,000
ounces of gold grading 3.0 g/t. The foregoing Mineral Reserve
and Mineral Resource estimates and additional information in
connection therewith will be set out in an NI 43-101 compliant
Technical Report for the New Liberty Project to be filed on
SEDAR.
The New Liberty Gold Mine is located within the Southern Block
of the 100% owned Bea Mountain mining licence. This licence covers
478 km² and has a 25 year, renewable, mineral development
agreement. The Bea Mountain mining license also hosts additional
gold projects of Ndablama, Gondoja, Weaju and Leopard Rock which
host indicated and inferred mineral resources. The Company also
owns the Yambesei (473 km2), Archaen West (56
km2), Mabong (36.6 km2) and Mafa West (15.6
km2) licences, in addition to a gold exploration permit
in Cameroon.
SOURCE Avesoro Resources Inc.