Davos pays $71m for Croesus assets, plans dual listing

AIM-listed Davos Resources Plc has agreed to pay more than $71 million for the key assets of failed group Croesus Mining NL, whose remnants are also subject to a recapitalisation offer from company rehabilitators Ascent Capital Holdings Pty Ltd.

Under the deal struck by administrators Vincent Smith and Bryan Hughes from Pitcher Partners, Davos will pay $66 million in a mixture of cash and shares as well as assume a $4.8 million liability to the state government to take control of Australia's longest operating gold mine in Norseman.

An $8 million deposit has been paid from the estimated $44 million cash component of the deal, with the balance understood to be convertible notes - though none of the parties would comment on the details of deal until the creditors' report was distributed.

At the time Croesus collapsed under the weight of its hedge book it had a market capitalisation of $100 million and liabilities of about $75 million when the administrators were called in on June 26. Mr Smith said secured creditors Macquarie Bank and NAB would take most of the funds.

Subject to creditor approval, Davos will buy all the shares in Croesus' wholly owned subsidiary company, Central Norseman Gold Corporation Ltd together with some Croesus Group assets to be transferred into CNGC prior to completion of the share sale.

Davos chaiman David Steinepreis, who also represents Ascent, said the bidding process was competitive but he believed the Davos offer was better priced because it understood the mine best through the expertise of Barry Cahill who has been running the operation for the administrators.

Mr Steinepreis said Mr Cahill will become CEO of Davos, which will be renamed to something akin to Norseman Gold, and become dual-listed on the ASX.

"He has been key to us understanding the assets, where they have come from and what the future is," he said.

"The mine has improved every month since August."

Davos was floated on AIM in October and doesn't own an operating mine.

Mr Steinepreis also represents Ascent, though he said the two deals were negotiated separately.

Under the recapitalisation deal, Ascent will pay $800,000 for the Croesus shell and a number of lesser assets such as some royalty interests and two joint ventures, one in platinum and the other a gold project with KCGM.

Below is the full announcement from the administrators:

Share Sale Agreement

I refer to the previous announcement lodged with the Australian Stock Exchange on 19
September 2006 regarding Croesus entering into a Deed of Company Arrangement, and
also regarding the negotiations with parties interested in the recapitalisation/restructure of
Croesus and/or an acquisition of all or part of the assets of Croesus and its subsidiaries
(together "Croesus Group").

As a result of the Deed Administrators receiving a number of indicative proposals from
interested parties, a short list of 8 parties was identified for the conduct of detailed due
diligence at the Croesus Group's Norseman operations. Following detailed due diligence
by these parties, in early November 2006, three final offers were received for the
acquisition of the Croesus Group's Norseman operations. After extensive negotiations
with each of these parties, and a detailed documentation process, on Wednesday 3
January 2007 Croesus executed a Share Sale Agreement ("SSA") with Davos Gold Pty
Ltd (a subsidiary of UK AIM Listed company Davos Resources PLC) and Davos
Resources PLC (together "Davos Companies") for the sale of all the shares in Croesus'
wholly owned subsidiary company, Central Norseman Gold Corporation Limited
(Subject to Deed of Company Arrangement) ("CNGC") together with some Croesus
Group assets to be transferred into CNGC prior to completion of the share sale.

CNGC owns and operates Australia's longest operating gold mine in Norseman, Western
Australia and these operations have continued during the course of the Administration
and Deed of Company Arrangement. The purchase consideration for CNGC and the
associated assets to be transferred to CNGC is A$66M plus the assumption of the liability
in connection with Department of Industry and Resources performance bonds and
guarantees for the Norseman project totaling approximately A$4.81M. This
consideration is payable in the form of cash, shares in Davos Resources PLC and
convertible notes to be issued by Davos Resources PLC, with the notes
redeemable/convertible from March/April 2008 through to March/April 2011.

The completion of the sale under the SSA is subject to a number of conditions, primarily
the creditors of CNGC and Croesus agreeing to vary the CNGC Deed of Company
Arrangement and, if necessary, the Croesus Deed of Company Arrangement,
respectively, in order to facilitate the sale; Foreign Investment Review Board approval;
and the approval of Davos Resources PLC shareholders. Davos Gold Pty Ltd has paid a
cash deposit of A$8.00M and, subject to the terms of the SSA, this deposit will become
non-refundable. Subject to satisfaction of the conditions to the SSA, completion under
the SSA is scheduled for 30 March 2007 (although this may be extended at the election of
the Davos Companies, and subject to a number of conditions, to April 2007), at which
time ownership of CNGC (and, therefore, control of its operations) will transfer to Davos
Gold Pty Ltd. Davos Gold Pty Ltd has advised Croesus that CNGC's operations at
Norseman will continue after completion, with all employees of CNGC at completion
retaining their employment.

Recapitalisation Proposal

As part of the expressions of interest process commenced shortly after the appointment of
Administrators on 23 June 2006, interested parties were requested to lodge proposals for
the restructuring of the Croesus Group, or any of the companies within the Croesus
Group including Croesus. At the same time as the Davos Companies lodged an offer for
the purchase of CNGC and its Norseman operations, Ascent Capital Holdings Pty Ltd
("Ascent") (a party associated with the Davos Chairman Mr Steinepreis) also lodged a
proposal for the recapitalisation of Croesus.

This recapitalisation proposal has since been detailed in a Recapitalisation Deed and this
Recapitalisation Deed was also executed by the Deed Administrators and Ascent on
Wednesday 3 January 2007. Ascent proposes to pay the sum of A$800,000 (being
A$700,000 for the benefit of secured creditors and A$100,000 for the benefit of
unsecured creditors of Croesus); to consolidate the existing capital of Croesus on a 1 for
15 basis, and cause Croesus to issue new shares to raise a minimum of A$1.6M. Whilst
the abovementioned SSA is not conditional upon the successful completion of the
Recapitalisation Deed, the Recapitalisation Deed is conditional upon the successful
completion of the SSA. In addition, the Recapitalisation Deed is conditional upon the
creditors of Croesus voting in favour of a varied Deed of Company Arrangement to
facilitate the recapitalisation, as well as shareholder approval (at separately convened
meetings), and other matters, including the ASX giving its approval to the reinstatement
of the trading of the Croesus shares, as well as other relevant approvals in accordance
with the ASX Listing Rules and the Corporations Act.

If the Recapitalisation Deed and the proposed variations to the Croesus Deed of Company
Arrangement are approved by both creditors and shareholders, and the other conditions
are satisfied, then the Recapitalisation Deed should result in a greater return to creditors
than would be the case in the liquidation of Croesus, and the shareholders of Croesus
should benefit from the reinstatement to the ASX of the trading of Croesus shares.

Creditor Meetings

As a result of executing the SSA and the Recapitalisation Deed, the Deed Administrators
are now preparing reports to creditors for both Croesus and CNGC. The reports will have
attached to them the proposed varied Deeds of Company Arrangement and associated
Creditor Trust Deeds. It is anticipated the reports will be dispatched to creditors within
the next 2 - 3 weeks, with creditors meetings convened to discuss the contents of the
Reports and the SSA by no later than 15 February 2007.