Avocet sells SE Asian assets for $200m

UK mining firm Avocet Mining PLC announced on Friday that it has signed a binding agreement for the conditional sale of its South East Asian assets to J&Partners, L.P., a private Cayman Islands company, for a cash consideration of US$200 million.

The South East Asian assets include the Penjom mine in Malaysia; the North Lanut mine and Bakan project in North Sulawesi, Indonesia; and a number of exploration properties in Indonesia.

J&Partners, L.P. is a mining fund established by Jimmy Budiarto, a member of the Indonesian family that in November 2009 sold its interest in Indonesia's second largest mining contractor, PT Bukit Makmur Mandiri Utama (BUMA). The principals in J&Partners are Jimmy Budiarto and Chris Hui, former Head of Investment Banking for Barclays Capital in China and Hong Kong, the company said.

Completion is conditional on government agency approvals and other conditions precedent, with the result that completion is not guaranteed. The transaction with J&Partners is also subject to certain rights of first refusal (ROFR) held by minority interest parties, the exercise and outcome of which cannot easily be predicted. PT Lebong Tandai (LT), which is controlled by Indonesian mining magnate Jusuf Merukh, owns a 20 per cent interest in PT Avocet Bolaang Mongondow (ABM) and holds a ROFR over the company's 80 per cent interest in ABM. ABM holds the Contract of Work for the North Lanut mine and Bakan project.

?The transaction with J&Partners is the result of a strategic review of the company's business in South East Asia aimed at maximising the value of the assets for Avocet's shareholders. Its completion would leave Avocet as a West African gold producer with a clear strategy of growth in that region, holding no further assets in South East Asia,? the company said.

The binding agreement has been reached after a four month period of technical and legal due diligence. As part of this transaction J&Partners has paid an initial consideration of $10 million into an escrow account. A second tranche of $100 million is due to be paid into escrow at the end of February and the remaining consideration is payable upon completion. Total consideration is US$200 million on a cash free and debt free basis.

In the event that LT elected to exercise its ROFR, it would be required to complete the acquisition of Avocet's interest in ABM for US$120 million in cash by 21 March 2011, in order to match the cash amount agreed with J&Partners. In this instance, the transaction with J&Partners would lapse and Avocet would retain Penjom and the other exploration assets, together with $120 million proceeds from the sale of ABM.

Standard Chartered Bank has acted as financial adviser to Avocet on this transaction. J&Partners were advised by Macquarie Capital (Singapore) Pte. Limited.

The principal assets contained within the agreement are as follows: (i) 100% interest in the Penjom mine in Malaysia, (ii) 80% interest in ABM, which holds the Contract of Work for the North Lanut mine and the Bakan exploration project, (iii) 51% interest in the Izin Usaha Pertambangan (IUP) for the Seruyung exploration property; (iv) 60% interest in the IUP for the Doup exploration property; (v) 75% interest in PT Gorontalo Sejahtera Mining, including the Pani prospect, (vi) 100% interest in PT Avocet Mining Services, and (vii) 100% interest in Avocet Mining (Malaysia) OHQ Sdn. Bhd.(alex)