THE BOURSE WHISPERER: Aviva Corporation has entered into a binding sale and purchase agreement (SPA) with African Barrick Gold (ABG).
The deal will result in the sale of all Aviva’s Kenyan gold and base metals assets for an initial cash payment of $20 million.
ABG is one of the five largest gold producers in Africa and this acquisition represents its first move into Kenya.
The company is majority owned by New York and Toronto-listed Barrick Gold, the world’s largest gold producer.
“This transaction will ensure Aviva has a strong balance sheet providing considerable flexibility to pursue growth opportunities for shareholders,” Aviva Corporation chief executive officer Lindsay Reed said in the company’s announcement to the Australian Securities Exchange.
“The company is actively reviewing its strategic growth options in relation to its coal-based projects in Botswana.
“We believe this is a very good deal for shareholders, Aviva has spent approximately $8 million on its Kenyan project and looks set to generate a substantial return on its investment in less than two years.
“The certainty of cash compared to the dilutionary impact of funding our gold aspirations at the company’s current market capitalisation was a key driver as to why it is in the best interest of shareholders to sell this asset for what is a significant premium in current market conditions.”
The key terms of the SPA are as follows:
– ABG will acquire all the shares in Aviva Mining Kenya, the company that owns Aviva’s Kenyan assets for $20 million;
– There is a further payment of $10 million due to Aviva if a National Instrument 43-101 compliant indicated resource of 3 million ounces or more is declared over the project areas;
– ABG will fund all the costs that Aviva incurs on the Kenyan assets, based on an agreed work program retrospectively from 1 June 2012, until completion of the SPA. This funding is capped at $1million but can be increased with ABG’s approval;
– In addition, ABG will fund the US$0.1 million for the exercise by Aviva Kenya of its Preliminary Option in terms of the Joint Venture with Advanced Gold. Following the payment of the Preliminary Option exercise price of US$0.1 million, Advanced Gold will grant Aviva Kenya the right to acquire a 51 per cent ownership interest in the mineral rights, owned by Advanced Gold and which are the subject of the Joint Venture Agreement, in consideration for Aviva Kenya incurring further exploration expenditure of US$0.5m in a defined period of 24 months in relation to those mineral rights; and
– If the SPA does not proceed to completion, other than due to a material breach by ABG, Aviva will be required to repay the funding advanced by ABG under the SPA within 90 days.