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ST. PETER PORT, Guernsey, June 29 /CNW/ - Avnel Gold Mining Ltd. ("Avnel" or the "Company") (TSX: AVK) is pleased to announce today a best efforts private placement (the "Private Placement") of up to 31,011,000 units of Avnel (the "Units") at a price of Cdn$0.20 per Unit (the "Issue Price"). Each Unit will consist of one ordinary share of Avnel and one-half of one ordinary share purchase warrant (each whole warrant a "Warrant"). Each Warrant will entitle the holder to purchase one ordinary share of Avnel at a price of Cdn$0.35, at any time for a period of 36 months from the date of issue of the Warrants. Dundee Securities Corporation ("Dundee") is the lead agent for the Private Placement and may form a syndicate of agents (the "Agents"). The Company has granted the Agents an option, exercisable up to the closing of the offering of Units under the Private Placement, to sell an additional 4,651,650 Units at the Issue Price (the "Agents' Option"). The gross proceeds of the Private Placement will be approximately Cdn.$6,202,200 (approximately Cdn$7,132,530 if the Agents' Option is exercised in full). Avnel intends to use these proceeds for general corporate purposes.
Concurrently with the closing of the Private Placement, Avnel will equitize all of its outstanding indebtedness through the issuance of Units to the holders of such indebtedness at the Issue Price (the "Debt Equitization"). The total number of Units to be issued in connection with the Debt Equitization will be equal to the total outstanding principal amount of the indebtedness (expressed in Canadian dollars) in the amount of approximately US$13,820,665, plus a portion of the accrued and unpaid interest owing on such indebtedness to closing (expressed in Canadian dollars), being equal to approximately US$133,913 as at June 30, 2010, divided by the Issue Price. The balance of interest owing under such indebtedness, being equal to approximately US$135,453 as at June 30, 2010, will be paid in cash.
"These transactions will eliminate all of Avnel's debt and provide the Company with enhanced financial strength through a debt-free balance sheet to continue working with IAMGOLD Corporation to advance the Company's goal of fully exploring the upside potential at its Kalana mine. In addition, the participation by IAMGOLD in the financing and the commitment of Avnel's two major shareholders to convert all of their debt to equity demonstrates the confidence of each in the future prospects of Avnel," said Howard Miller, the Company's Chief Executive Officer.
As part of the Private Placement, IAMGOLD has agreed to purchase up to 15% of the number of Units to be issued under the Private Placement, conditional upon settlement of definitive documentation and Avnel agreeing to partially waive certain of its standstill rights, granted when Avnel and IAMGOLD entered into their joint arrangements in respect of Kalana, so as to permit IAMGOLD to acquire ordinary shares of Avnel in the market.
The closing of the Private Placement is conditional on the closing of the Debt Equitization and the closing of the Debt Equitization is conditional on the closing of the Private Placement. The Private Placement and the Debt Equitization are expected to close on or about July 15, 2010 and are subject to certain closing conditions, including approval of the Toronto Stock Exchange (the "TSX"). Accordingly, the maturity date of Avnel's outstanding indebtedness will be extended to accommodate the closing of the Private Placement and the Debt Equitization.
An agency agreement will be entered into on customary terms in respect of the Private Placement. The Agents' obligations thereunder will be terminable in certain events customary for a transaction of this size and nature. The Agents will receive a cash commission equal to 7% of the gross proceeds from the sale of Units under the Private Placement. In addition, the Agents will be granted that number of broker warrants (the "Broker Warrants") that is equal to 7% of the number of Units sold under the Private Placement (including on exercise of the Agents' Option). Each Broker Warrant will entitle the holder thereof to acquire one Unit at the Issue Price for a period of 36 months following closing of the Private Placement. In addition, Dundee, as lead agent, will also receive broker warrants (the "Lead Agent Warrants") equal to 1% of the gross dollar amount of the Units issued under the Debt Equitization entitling Dundee to acquire Units at the Issue Price for a period of 36 months following closing of the Private Placement.
The Warrants issued under the Private Placement and the Debt Equitization will have the same terms which will be customary for a transaction of this nature including, standard anti-dilution provisions.
Although the closing of the Private Placement and the Debt Equitization will not result in a change of control of Avnel, the transactions do require security holder approval under the Company Manual of the TSX. The Debt Equitization requires security holder approval because the parties to whom the debt is owing are either insiders of Avnel or affiliates of insiders of Avnel and will receive ordinary shares representing more than 10% of the market capitalization of Avnel and the interests of the holders of the indebtedness may differ from those of other holders of the ordinary shares of Avnel. The Private Placement also requires shareholder approval because Avnel will issue ordinary shares representing greater than approximately 25% of the number of ordinary shares issued and outstanding, on a non-diluted basis, prior to the date of closing of the Private Placement and such ordinary shares are being issued at a discount to the volume weighted-average trading price of the ordinary shares for the five trading days preceding the day the Issue Price was determined by Avnel and the Agents.
A committee of directors of Avnel, independent of management and free from any interest in the transaction, has unanimously recommended to board of directors of the Company that the Company apply to the TSX for an exemption from the shareholder approval requirements for the Private Placement and Debt Equitization on the basis that the Company is in serious financial difficulty and the transaction is designed to improve Avnel's financial situation, on terms reasonable to the Company in the circumstances. The board of directors unanimously agreed with this recommendation.
The Company has applied to the TSX for an exemption from the requirement to seek shareholder approval in accordance with Section 604(e) of the Company Manual of the TSX on the basis the Company finds itself in a state of financial hardship. The TSX has advised Avnel that reliance on this exemption will automatically result in a review to confirm that Avnel continues to meet the TSX listing requirements. Avnel believes that, upon completion of the Private Placement and the Debt Equitization, it will be in compliance with all of the continued listing requirements of the TSX.
In addition, due to the participation of insiders of the Company in the Debt Equitization, the Debt Equitization is a related party transaction for the purposes of Multilateral Instrument 61-101 and the Company is relying on exemptions from the formal valuation and minority approval requirements of such instrument on a determination of financial hardship. A material change report in connection with the Debt Equitization will be filed less than 21 days before the closing date of such transaction. This shorter period is reasonable and necessary in the circumstances as the Company wishes to complete the transaction in a timely manner.
There are currently 81,893,392 ordinary shares of Avnel issued and outstanding. The Company will issue approximately 35,662,650 ordinary shares (representing approximately 43.5% of the Company's current outstanding share capital) and approximately 17,831,325 Warrants pursuant to the Private Placement (assuming full exercise of the Agents' Option) and approximately 72,124,235 ordinary shares (representing approximately 88.1% of the Company's current outstanding share capital) and approximately 36,062,117 Warrants pursuant to the Debt Equitization. On a combined basis, on the closing of the Private Placement (assuming full exercise of the Agents' Option) and the Debt Equitization, the Company will issue approximately 107,786,885 ordinary shares (representing approximately 132% of the Company's current outstanding share capital) and approximately 53,893,442 Warrants.
Each of Elliott International L.P., Elliott Associates L.P., Manchester Securities Corp. and the Fern Trust will receive ordinary shares under the Debt Equitization as the holders of the debt being repaid pursuant thereto. Each of Elliott International L.P., Elliott Associates L.P. and the Fern Trust are currently insiders of the Company by virtue of each such entity holding greater than 10% of the Company's currently issued and outstanding ordinary shares and each will continue to be an insider of the Company after completion of the Private Placement and Debt Equitization. As an affiliate of Elliott International L.P. and Elliott Associates L.P., Manchester Securities Corp. will also be an insider of Avnel pursuant to the Company Manual of the TSX after completion of the Private Placement and Debt Equitization. Elliott International L.P., Elliott Associates L.P., Manchester Securities Corp., and their affiliates are collectively referred to hereafter as the "Elliott Group".
On closing of the Private Placement (assuming full exercise of the Agents' Option) and the Debt Equitization, the aggregate shareholdings of the Elliott Group will increase from approximately 45,123,254 ordinary shares (approximately 55% of the currently issued and outstanding ordinary shares) to approximately 86,353,874 ordinary shares (approximately 45.5% of the post-closing issued and outstanding ordinary shares) and the aggregate shareholdings of the Fern Trust will increase from approximately 23,868,331 ordinary shares (approximately 29% of the currently issued and outstanding ordinary shares) to approximately 54,761,946 ordinary shares (approximately 28.8% of the post-closing issued and outstanding ordinary shares).
Assuming all Warrants issued on closing of the Debt Equitization and Private Placement are exercised in full (assuming full exercise of the Agents' Option, the Broker Warrants and Lead Agent Warrants) and there are no other changes to the shareholdings of the entities referred to above, the aggregate shareholdings of the Elliott Group will be approximately 106,969,184 ordinary shares (approximately 43.0% of the issued and outstanding ordinary shares) and the aggregate shareholdings of the Fern Trust will be approximately 70,208,754 ordinary shares (approximately 28.3% of the issued and outstanding ordinary shares).
About the Company
Avnel is a producing gold mining company operating the Kalana gold mine and is engaged in the exploration of the Kalana Exploitation Permit and Fougadian exploration permit.
Avnel's principal asset is an 80% interest in Société d'Exploitation des Mines d'Or de Kalana ("SOMIKA"). SOMIKA is the holder of a 30-year exploitation permit encompassing 387.4 sq. km. around and to the south of the operating Kalana gold mine in South West Mali. Avnel also holds the Fougadian exploration permit covering an area of 150 sq. km. which lies to the South of the main Kalana exploitation permit.
The securities being offered have not been, nor will they be, registered under the United States Securities Act of 1933, as amended, and may not be offered or sold in the United States or to, or for the account or benefit of, U.S. persons absent registration or an applicable exemption from registration requirements. This press release shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of the securities in any state in which such offer, solicitation or sale would be unlawful.
This release includes certain statements that may be deemed "forward-looking statements". All statements in this release, other than statements of historical facts are forward-looking statements. Specifically, all statements regarding the proposed terms, timing, use of proceeds and completion of the Private Placement and Debt Equitization and Avnel's future compliance with the TSX listing requirements are forward-looking statements that involve various risks and uncertainties. Although Avnel believes the expectations expressed in such forward-looking statements are based on reasonable assumptions, such statements are not guarantees of future performance and actual results or developments may differ materially from those in the forward-looking statements. Factors that could cause actual results to differ materially from those in forward looking statements include market prices, continued availability of capital and financing, results of due diligence reviews by parties to the Private Placement and Debt Equitization and general economic, market or business conditions. Investors are cautioned that any such statements are not guarantees of future performance and actual results or developments may differ materially from those projected in the forward-looking statements. Specifically, there is no assurance the Private Placement and Debt Equitization will be completed. Avnel does not assume any obligation to update or revise its forward-looking statements, whether as a result of new information, future events or otherwise.
SOURCE Avnel Gold Mining Ltd.
For further information: For further information: Howard Miller, Chief Executive Officer, Phone +44 207 589 9082 or 416.726.8194, Email: Howard@hbmiller.co.uk, Website: www.avnelgold.com