Avocet Mining (AIM: AVA) climbed in early deals after the company announced that it had agreed to acquire Oslo listed Wega Mining (WEMI) in an all share deal.
Wega Mining’s main asset is a 90% interest in the Inata Gold Project in Burkino Faso which hosts a measured and indicated resource of 1.4 million ounces of gold and is expected to commence production in Q3 2009 at an annual rate of 120,000 ounces per annum. Wega also holds additional exploration ground in Burkina Faso, Guinea and Mali.
As part of the agreed all share transaction, Avocet Mining said that it had already subscribed for approximately 61.4 million shares for US$5 million, giving it a 15.7% stake in Wega Mining. Avocet has also agreed to provide US$25 million - via a convertible secured loan - of interim funding to Wega Mining, subject to shareholder approval. The funds will be used to continue the development of the Inata Gold Project.
Avocet is offering 0.23 of its own shares for each Wega Share, valuing Wega Mining at approximately US$78.4 million.
“The Offer announced today represents the proposed creation of a new mid-tier gold company with annual production approaching 300,000 ounces,” Avocet said.
“It therefore delivers key elements of Avocet's acquisition growth strategy as adopted by management in 2007. In particular, it allows Avocet to increase its gold production at a time when the gold price remains strong, and in the Inata Gold Project, it provides a medium life asset with significant exploration upside in a highly prospective region.”
Datum AS, Wega's largest shareholder, will hold approximately 12% of the enlarged Avocet Mining share capital following the acquisition.
Jonathan Henry, CEO of Avocet Mining, stated:
"The acquisition of Wega provides Avocet with an immediate opportunity to more than double its production and resources in the short term, as well as enter into West Africa, one of the most exciting gold regions in the world. We are confident that combining Avocet's experience in building and developing profitable gold mines and balance sheet strength with the assets of Wega will allow us to achieve our strategic goal of creating a new mid-tier, profitable gold company with significant upside for future growth."