Brisbane-based Norton Gold Fields Ltd will purchase Kalgoorlie's Paddington gold mine from Barrick Gold for $45 million, the company announced today.
Brisbane-based Norton Gold Fields Ltd will purchase Kalgoorlie's Paddington gold mine from Barrick Gold for $45 million, the company announced today.
In an announcement, Norton said it would permit the Aphrodite tenements to be sold to a third party, reducing the purchase price to $39 million. Norton would also acquire all gold in circuit and there will be other working capital adjustments at closing.
Barrick will also invest $1 million in the equity of Norton, subject to certain conditions.
The Kundana plant will be relocated to Queensland for use at Norton's proposed Mount Morgan gold project.
The deal is expected to be completed by June 30 and is subject to Norton shareholder approval and certain approvals by the Western Australian Department of Industry and Resources.
The full text of a company announcement is pasted below
Norton Gold Fields Limited ("Norton" or "the Company") is pleased to announce that it has entered into an agreement to acquire the Paddington Gold Mine at Kalgoorlie, Western Australia, from the Barrick Group ("Barrick"). The agreement is subject to Norton shareholder approval and certain approvals by the Western Australian Department of Industry and Resources.
Seed funding for the purchase of the Paddington Gold Mine and the development of Norton's Mount Morgan Gold Project was arranged by Ten3 Ventures Limited ("Ten3 Ventures"), and has been provided by RAB Special Situations (Master) Fund Limited ("RAB Special Situations Fund"), an investment fund managed by RAB Capital plc ("RAB Capital").
Norton has engaged Patersons Securities to arrange the necessary financing to complete the purchase and further develop the Paddington Gold Mine, conduct an extensive exploration program to increase reserves, and provide working capital.
The Paddington Gold Mine is producing around 150,000 ounces of gold annually The Paddington Gold Mine is one of the largest gold mines and processing plants in Australia, treating over 3.0 million tonnes of ore annually.
Other assets included in the purchase from Barrick include, a portfolio of over 300 exploration tenements covering 1,200 square kilometres and containing 1.4 million ounces of JORC compliant Resources, the 0.7 Mtpa Kundana gold plant presently under care and maintenance, and working capital including stocks and ancillary assets.
Consideration for the purchase is $45 million cash
Contemporaneously with the purchase, Norton has agreed that a portion of the tenement portfolio will be sold to a third party ahead of Norton's acquisition of the Paddington Gold Mine, thereby reducing the net purchase price to $39 million. Norton will also acquire all gold in circuit and there will be other working capital adjustments at closing.
Completion is expected at the end of June, subject to satisfaction of conditions and shareholder approval.
Barrick is to invest in Norton
Norton is also pleased to announce that Barrick, the world's largest gold miner, has elected to invest $1 million in the equity of Norton, subject to satisfaction of certain conditions.
RAB has provided Norton with a bridge loan of $8 million
RAB Capital is a London-based absolute return investment management company, which was founded in 1999 and listed on AIM in March 2004. RAB Capital had US$5.24 billion under management at 31 December 2006. RAB Capital's Special Situations Fund has approximately US$2 billion under management and is one of the world's most successful heavily resource-weighted hedge funds.
RAB Special Situations Fund has provided Norton with an $8 million loan which the Company intends to repay, subject to shareholder approval, by issuing 50,000,000 shares and 25,000,000 two-year options in Norton (exercisable at 20 cents). Part of the loan proceeds has been used to pay a $5 million deposit on the purchase of the Paddington Gold Mine.
Pending repayment, the interest rate on the loan is the higher of 6% p.a. and the cash rate of the Reserve Bank of Australia. Interest is payable, at the election of RAB, in either cash or securities. A redemption premium is payable if the Company does not convert the loan into equity.
Norton has entered into an exclusive agreement with Ten3 Ventures
Ten3 Ventures is a London-based private equity firm, with offices in London and Sydney. Ten3 Ventures is part-owned by RAB and has direct relationships with a number of leading private investors, institutions, and hedge funds.
Ten 3 Ventures has introduced and arranged for Norton to have the opportunity to acquire the Paddington Gold Mine from Barrick. Ten3 Ventures has since been retained to identify and acquire metals and mining interests in Australia exclusively for Norton.
For arranging the acquisition of the Paddington Gold Mine, arranging the seed financing, and generally for its services to Norton, the Company has agreed to issue Ten3 Ventures or its nominee with 20,219,201 shares and 7,744,320 options (exercisable at 20 cents) in Norton.
The Paddington Kundana plant will be relocated to Norton's Mount Morgan Gold Project
Included in the purchase price of the Paddington Gold Mine is a processing plant, now under care and maintenance, which is surplus to requirements at Paddington, with its 3,000,000 tonnes per annum plant. Norton proposes to relocate the Kundana plant to Queensland, for use at Norton's proposed Mount Morgan Gold Project.
This will reduce construction time, capital costs, and risks for Norton's Mount Morgan Project, which has an initial target of treating 4,000,000 tonnes of tailings at an average grade of 1.69 g/t to produce 180,000 ounces of gold over five years.
The relocated Kundana plant will also enable resumption of processing of ore from the Company's Norton gold mine, which has been suspended since October 2006.
The acquisition delivers considerable free cash flow
The Paddington Gold Mine acquisition is central to Norton's strategy of building a portfolio of valuable gold producing assets and tenements with high exploration potential. At $820 per ounce, and assuming production in accordance with the Paddington mine plan, independent engineers have forecast gross revenues of approximately $475,000,000 over the first four years.
There is significant potential at Paddington for further reserves
With approximately 1,200 square kilometres of tenements in a proven goldproducing area, there is significant potential below existing open pits and generally for increasing high grade underground gold Resources by continuing and extending Barrick's exploration program. The Paddington Gold Mine team, which has a demonstrated capability of delivering profitable mining projects year-on-year over the past ten years, will transfer to Norton.
There is early potential to increase Paddington's Classified Resources
By reclassifying the current Resources to JORC, rather than Canadian, standards, there is potential to increase the Resources by upgrading the unclassified mineralisation to classified status.
On-selling of the Aphrodite tenements
The Aphrodite tenements, containing refractory gold, are surplus to Norton's immediate requirements. Accordingly, a sale has been arranged, thereby reducing the effective purchase price for the Paddington Gold Mine from $45 to $39 million.
Shareholder Approval
As soon as practicable, Norton's directors intend to call an Extraordinary General Meeting of shareholders to approve the transaction and related financing.
Summary
The directors believe the proposed acquisition and capital restructuring:
- Offers substantial operating cash flows
- Provides opportunities to further increase reserves
- Affords major exploration potential in a large group of tenements
- Secures RAB Special Situations Fund as a strong partner, which is in a position to assist with further acquisitions
- Provides future potential operating cost savings as Paddington moves from a "big company"
- Enables the Company to protect gold prices at $800 per ounce by purchasing options, whilst leaving all the upside with Norton
- Secures a "head start" for Norton's Mount Morgan Gold Project, resulting in substantial savings of time, money and risk
- Affords an opportunity for an important capital restructuring of Norton, moving the company from a "junior" resource stock to a mid-tier producer
- Provides a platform for growth and expansion of Norton
Statement by the Chairman
"This stunning Paddington transaction", said Norton's Chairman, A. Anthony McLellan, "transforms Norton into a major gold producer with excellent exploration potential, and the opportunity to extend the present substantial gold resources. It resets the capital structure of Norton and gives the company the muscle to make best use of this growth platform to quickly become a major mining house.
Step 1 has been the acquisition of the Mount Morgan Gold Project; Step 2 is the purchase of the Paddington assets. And the Company continues to look at further opportunities to expand.
Additionally, the Paddington Gold Mine acquisition complements the Mount Morgan Gold Project, and also provides a processing facility for the Company's Norton gold mine.
Having previously served as Barrick's President and CEO, it has been a pleasure to now secure this fine asset for the benefit of Norton's shareholders."
A Barrick spokesperson said that Barrick was pleased to be handing over its Paddington Gold Mine and its experienced team to such a professional group, and was looking forward to continuing its relationship with Norton through its investment in the company.
