| Mon 25 Jun 2001, 0:00 | | Barnato Exploration Limited - Anouncement |
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Disposal by Barnex of its effective 90% interest in Barnex
(Prestea) Limited to Golden Star Resources Ltd.
1. Introduction
Investec Bank Limited is authorised to announce that an agreement,
which is subject to certain conditions precedent, details of which
are set out in paragraph 4.3 below, has been entered into between
Barnex and Golden Star Resources Ltd. ("Golden Star"), in terms of
which Barnex has agreed to dispose of its effective 90%
shareholding in and all its claims against Barnex (Prestea)
Limited ("BPL") to Golden Star ("the disposal"). BPL is the
registered holder of certain mining and prospecting concessions on
the Axim-Konongo Belt, in the western region of Ghana, commonly
known as Prestea ("Prestea").
The consideration is to be settled through:
- the issue of common shares and warrants to new common shares in
Golden Star to Barnex; and
- a gold royalty arrangement between Barnex and Golden Star.
2 Background and rationale for the disposal
In line with Barnex's strategy of maximising shareholder value by
realising the value of its mineral rights and where appropriate,
retaining participation in the exploitation of such mineral
rights, the board of directors of Barnex has decided to dispose of
its interest in Prestea.
In 1999, an agreement to dispose of BPL was concluded with Notesan
(Pty) Limited, an Australian mining company, however the Ghanaian
Government declined to provide the requisite approvals to complete
the disposal. In 2000, Barnex commenced negotiations to dispose of
its interest in BPL, to Golden Star. Prior to concluding a
definitive agreement, the Ghanaian Government purported to
abrogate BPL's mining lease and agreements relating to Prestea.
BPL was informed that the Ghanaian Government would offer certain
compensation for the abrogation. Barnex informed the Ghanaian
Government that this arrangement was not satisfactory to Barnex
and contested the purported abrogation.
In 2001 a new Government was voted into power in Ghana and, after
being approached, the new Minister of Lands, Forests and Mines
responded favourably to discussions on the disposal by Barnex of
its effective interest in BPL. Consequently negotiations between
Barnex and Golden Star have progressed and have resulted in the
conclusion of this agreement.
The disposal consideration will provide Barnex with the
opportunity to retain an effective non-contributory participation
in the exploitation of Prestea.
3. Background to Golden Star
Golden Star is an international gold exploration and mining
company with a diverse portfolio of projects. Its common shares
are listed on the Toronto Stock Exchange and are also traded on
the NASDAQ Over-the-counter Bulletin Board.
Golden Star's primary gold interest is a 70% equity interest in
Bogoso Gold Limited, a company which owns the Bogoso Gold Mine. In
a separate transaction, Golden Star is in the process of
increasing its interest in Bogoso Gold Limited from 70% to 90%.
The Bogoso Gold Mine is situated on the Axim-Konongo Belt, and is
adjacent to Prestea and is therefore optimally positioned to
exploit Prestea. The Bogoso Gold Mine comprises an operating gold
mine and mill facility on two mining leases, mines ore from
several open pits and processes the ore at a processing plant that
it built in 1991. The Bogoso Gold Mine has produced 100 000 to 110
000 ounces of gold per annum since the carbon-in-leach plant was
commissioned in 1991. Gold production for 2000 was 108 643 ounces
at a 64,4% recovery rate, at a cash cost of production of US$201
per ounce. The Bogoso Gold Mine is expected to produce
approximately 65 000 ounces of gold during 2001, primarily from
transitional ores and low grade stock piles, at a total cash cost
of US$206 per ounce at an approximate recovery rate of 64,4%. In
the absence of an agreement on Prestea, mining is expected to
cease mid-year 2001 and thereafter low-grade stockpile material
will be processed, with operations unlikely to continue past early
2002.
In South America, Golden Star has a 30% equity interest in the
Omai Gold Mine in Guyana and a 50% interest in the Gross Rosebel
Gold Project in Suriname. Golden Star has been at the forefront of
exploration and development in the Guiana Shield and has an
extensive knowledge base of the area. Golden Star plans to expand
its activities through additional development and operating
projects in the Guiana Shield area and elsewhere.
In addition Golden Star has a 73% equity interest in Guyanor
Resources SA, and a portfolio of gold and diamond exploration
properties in South America and Africa.
4 Salient terms and conditions of the disposal agreement
A summary of the material terms and conditions of the disposal
agreement are set out below:
4.1 The disposal consideration
The consideration to be received by Barnex for the disposal is:
- US$2.0 million, which is to be settled by Golden Star through
the issue of 3 333 333 new common shares in Golden Star, at an
issue price of US$0,60 per Golden Star share. The market price of
Golden Star common shares was US$0,63 on the 20th of June 2001,
being the last practicable date prior to the publication of this
announcement;
- the issue by Golden Star of 1 333 333 warrants to acquire new
Golden Star common shares. Each warrant will entitle the holder to
acquire one new Golden Star common share, within 3 years from the
date of issue of the warrant, at an exercise price of US$0,70 per
Golden Star common share; and
- a gold royalty, which will vary with the gold price, in respect
of the first one million ounces of gold production by Golden Star
from all of its operations in Ghana, which currently consist of
Bogoso Gold Limited's existing operations. On fulfillment of the
conditions precedent, Golden Star's operations will include
Prestea. Further details of the gold royalty are set out in
paragraph 4.2 below.
Through the common shares, warrants and the gold royalty
agreement, Barnex will be able to participate in any potential
increase in value of Golden Star as a consequence of the
exploitation of Prestea via an increase in either the gold price
or the value of the reserves of Prestea, while removing the
requirement to provide or arrange the requisite project funding to
bring Prestea into production.
4.2 The gold royalty
Barnex will receive a gold royalty, which will vary with the gold
price, from Golden Star in respect of the first one million ounces
of gold production by Golden Star from The Bogoso Gold Mine and
from Prestea in Ghana. The gold royalty will be payable in cash,
on a quarterly basis, in arrears and will be determined by
multiplying the actual quarterly gold production of Golden Star by
a royalty factor. The royalty factor will be based on the average
gold price for the quarter, and will be paid according to the
following table:
Average Spot Gold Price (US$/oz) Royalty factor (US$/oz)
Less than $260 $6.00
More than $260 but less than $270 $7.20
More than $270 but less than $280 $8.40
More than $280 but less than $290 $9.60
More than $290 but less than $300 $10.80
More than $300 but less than $310 $12.00
More than $310 but less than $320 $13.20
More than $320 but less than $330 $14.40
More than $330 but less than $340 $15.60
More than $340 $16.80
4.3 Conditions precedent
The disposal is subject to the fulfillment of, inter alia, the
following conditions precedent by no later than 30 August 2001, or
such later date as may be agreed to by Barnex and Golden Star:
- waivers and releases granted by the Ghanaian Government in
respect of all past, present and future liabilities and
obligations arising from, relating or attributable in any manner
to Prestea;
- the necessary approval of the disposal by the Ghanaian
Government, including all the necessary consents, permits,
approvals, authorisations and ratifications necessary to perfect
title and therefore security of tenure of Prestea's mineral
concessions and of the required new mining lease covering the
Prestea concession;
- the receipt of all regulatory and other approvals required by
Golden Star to enable it to effectively acquire Barnex's 90%
interest in BPL;
- the Ghanaian Government agreeing to the cancellation of the
current mining lease held by Barnex, the project development
agreement and the main agreement;
- approval of the disposal by Barnex shareholders in general
meeting; and
- the approval of the South African Reserve Bank.
Golden Star will not be entitled to commence mining operations at
Prestea until fulfillment of the conditions precedent.
Western Areas, which currently holds an 88.7% interest in Barnex,
intends to vote all of its shares in Barnex in favour of the
resolutions necessary to approve and implement the disposal.
4.4 Warranties
The disposal agreement contains representations, warranties and
covenants, which are customary in this type of transaction.
5 Financial effects of the disposal
5.1 Pro forma financial effects of the disposal on Barnex
The table below sets out the pro forma financial effects of the
disposal on Barnex's earnings per share ("EPS") and net asset
value per share ("NAV"), which has been based on the following
assumptions:
- the gold production from Golden Star's Ghanaian operations in
the "Year ended 31December 2000" column is the actual gold
production from Golden Star's existing Ghanaian operations for the
year ended 31 December 2000 as disclosed in the Form 10-K/A
submitted to the US Securities and Exchange Commission for the
year ended 31 December 2000;
- the forecast gold production from Golden Star's Ghanaian
operations in the "Year ended 31 December 2001" column is the
forecast gold production from Golden Star's existing Ghanaian
operations for the year ending 31 December 2001, as indicated by
the current life of mine plan prepared by Golden Star for the
Bogoso Gold Mine;
- the gold production from Golden Star's Ghanaian operations in
the "Year ending 31 December 2002" column is the current estimate
of gold production from Golden Star's existing Ghanaian operations
as indicated by the current life of mine plan prepared by Golden
Star for the Bogoso Gold Mine;
- the gold production from Barnex's Prestea mineral concession
area in the "Year ended 31 December 2000" column is nil, as no
mining operations were conducted at Prestea for Barnex's account
during the year ended 31 December 2000;
- the gold production from Barnex's Prestea mineral concession
area in the "Year ending 31 December 2001" column is the current
estimated gold production from Golden Star's life of mine plan for
the Prestea mineral concessions for the year ending 31 December
2001, on the basis that Golden Star is able to commence operations
at Prestea during August 2001;
- the gold production from Barnex's Prestea mineral concession
area in the "Year ending 31 December 2002" column is the current
estimate of gold production from Golden Star's life of mine plan
for the Prestea mineral concessions for the year ending 31
December 2002;
- the gold royalty to be received by Barnex in the "Year ended 31
December 2000" column is based on the gold royalty set out in
paragraph 4.2, the actual gold production from Golden Star's
existing Ghanaian operations for the year ending 31 December 2000,
the average gold price for each quarter and the Rand/US$ exchange
rate on the last day of each quarter for the year ended 31
December 2000 and on the assumption that the disposal was
effective
- the gold royalty to be received by Barnex in the "Year ending 31
December 2001" column is based on the gold royalty set out in
paragraph 4.2, on the current estimated gold production from
Golden Star's existing Ghanaian operations as per the current life
of mine plan for the Bogoso Gold Mine for the year ending 31
December 2001 together with the current estimated gold production
from the life of mine plan prepared by Golden Star for the Prestea
mineral concessions for the year ending 31 December 2001, on the
basis that Golden Star is able to commence operations at Prestea
during September 2001, the current gold price of US$272 per ounce
entitling Barnex to a gold royalty of US$8,40 per ounce and the
current Rand US dollar exchange rate of R8,06/US$1,00;
- the gold royalty to be received by Barnex in the "Year ending 31
December 2002" column is based on the gold royalty set out in
paragraph 4.2, on the current estimated gold production from
Golden Star's existing Ghanaian operations as per the current life
of mine plan for Bogoso Gold Mine for the year ending 31 December
2002, together with the current estimated gold production from
Golden Star's life of mine plan for the Prestea mineral
concessions for the year ending 31 December 2002, on the basis
that Golden Star is able to commence operations at Prestea during
September 2001, the current gold price of US$272 per ounce
entitling Barnex to a gold royalty of US$8,40 per ounce and the
current Rand US dollar exchange rate of R8,06/US$1,00;
- the headline EPS and EPS figures in the "before" column are
Barnex's headline EPS and EPS for the year ended 31 December 2000,
as per the Barnex audited financial statements for the year ended
31 December 2000;
- the EPS and headline EPS in the "after" column are based on the
assumption that the effective date of the disposal was 1 January
2000. Earnings and headline earnings for the year ended 31
December 2000 have been adjusted to exclude the results of the
operations that are being disposed of and to take into account the
profit on disposal, the royalty that would have been earned on a
quarterly basis, based on the actual gold production from Golden
Star's existing Ghanaian operations for the year ended 31 December
2000, the average gold price for each quarter and the Rand/US$
exchange rate on the last day of each quarter as well as the
interest that would have been earned on the royalty received at an
after tax rate of 7,31%. The profit on disposal was calculated
using the Rand/US$ exchange rate ruling on 1 January 2000;
- the NAV per share in the "before" column is the NAV from
Barnex's audited financial statements for the year ended 31
December 2000; and
- the NAV per share in the "after" column is based on Barnex's NAV
per share in the audited financial statements for the year ended
31 December 2000 and the assumption that the disposal was
effective from 31 December 2000. The balance sheet has been
adjusted to exclude the assets and liabilities of the operations
to be disposed of and to take into account the profit on disposal
and the investment in Golden Star. The investment was calculated
using the total consideration of US$2.0 million, being the value
of the common shares to be received from Golden Star as part of
the disposal consideration, converted at the Rand/US$ exchange
rate ruling on 31 December 2000.
Year ended Year ending Year ending
31 December 31 December 31 December
2000 2001 2002
Gold production from
Golden Star's Ghanaian
operations, (ounces)
* from Golden Star's
existing Ghanaian
operations 108 643 65 000 Nil
from Prestea's mineral
concession area nil 50 000 150 000
Total gold production
(ounces) 108 643 115 000 150 000
Gold royalty to be
received by Barnex in
respect of production by
Golden Star's Ghanaian
operations, in R000's 6 813 7 786 10 156
Before After % change
Headline EPS, (headline
loss per share) (cents) (2,85) 13,01 556
EPS, (loss per share)
(cents) (2,85) 24,63 964
NAV per share (cents) 54,02 70,11 30
Barnex shareholders are advised that mineral exploration and
mining in general is inherently risky, consequently the actual
results of Golden Star's production could differ from the
production estimated in Golden Star's current life of mine plans
for both Bogoso and Prestea.
In addition Golden Star has made a statement of limited liquidity
and capital resources and its common shares have recently been
delisted from the American Stock Exchange ("AMEX") due to its
share price consistently trading below US$1,00 per share,
continuing losses and total shareholder equity below the AMEX
minimum. This may have an impact on Golden Star's ability to raise
funds in the US market, through equity or debt sources.
5.2 Shares to be acquired in Golden Star
The 3 333 333 Golden Star common shares to be issued to Barnex as
part of the disposal consideration, will represent 8,0% of the
number of Golden Star common shares in issue after taking into
account the issue of these Golden Star common shares to Barnex.
5.3 Value of the gold royalty
Based on the current gold price of US$272 per ounce, the planned
gold production by Golden Star's Ghanaian operations as indicated
by Golden Star's current life of mine plans together with the gold
production indicated in Golden Star's feasibility study on Prestea
the value of the gold royalty has been estimated at US$8,4
million.
6. Further documentation
An announcement setting out further details including the date of
the general meeting of Barnex shareholders relating to the
disposal will be published in the press in due course. A circular
which is subject to approval of the Securities Regulation Panel
and the JSE Securities Exchange South Africa which will
incorporate the notice of the general meeting of Barnex
shareholders, is in the course of preparation and will be mailed
to Barnex shareholders in due course.
Johannesburg
22 June 2001
Corporate Adviser
Investec Bank Limited
Attorneys
Deneys Reitz Attorneys
Sponsor
Investec Securities Limited
Reporting accountants
KPMG
