TORONTO, Oct. 5 /CNW/ - Thistle Mining Inc. ("Thistle" or the "Company")
Update on Forecast Gold Sales
The Company wishes to announce a downward revision to the forecast gold
sales of its subsidiary President Steyn Gold Mines (Free State) (Pty) Ltd
("PSGM") for 2007 from the previous forecast made in August 2007 of 132,600 oz
to 123,500 oz. The adjustment follows flooding of the number 3 shaft bottom
due to pump failures restricting the ability of the shaft to hoist and an
explosion at the national electricity supplier's substation at number 2 shaft
resulting in extensive damage to the building and electrical equipment and
significant downtime at both number 2 shaft and the Gold Plant. Management
sees these production problems as being of a short term nature.
Due to the reduction in the forecast sales and the strengthening of the
ZAR relative to the US$, cash and total costs for 2007 are now forecast to be
between $670 and $680 per ounce and $715 and $725 per ounce respectively,
assuming an average exchange rate of 7.12 ZAR:US $ for 2007. Cash cost per
ounce sold is not a recognized measure under Canadian GAAP.
The production problems have necessitated additional funding during
September 2007 of $1.192 million by Casten Holdings Limited ("Casten") and MC
Resources Limited ("MC") which money was advanced to PSGM on September 28,
2007. PSGM will pay interest at prime plus 2% per annum and the loan is to be
secured against assets of PSGM. As Casten and MC each own 35% of the
outstanding shares of Thistle and are the Company's major creditors, this
additional funding constitutes a related party transaction for the purposes of
the AIM Rules. As such, the independent directors have concluded that,
following consultation with the Company's nominated adviser, Grant Thornton,
that the terms of the additional funding are fair and reasonable insofar as
Thistle's shareholders are concerned. In giving its advice, Grant Thornton has
taken into account the directors' commercial assessment.
Suspension of shares to trading on AIM
Following the deterioration in the financial condition of PSGM and the
uncertainty relating to the Company's financial situation, the Company's Board
of Directors requested the suspension of trading in the Company's common
shares on the AIM Market of the London Stock Exchange on September 24, 2007. A
lifting of this suspension is conditional on the Company being able to
demonstrate its financial viability, which remains uncertain at this time.
The Directors consider it appropriate to maintain the suspension of the
Company's shares pending clarification of the Company's financial position.
Acceptance of letter of intent regarding revised terms of an offer by
Pamodzi Gold Limited
At a meeting held on September 20, 2007 Thistle executives informed
executives of Pamodzi Gold Limited ("Pamodzi") (JSE: PZG) of production
problems experienced at PSGM and that, absent funding from MC and Casten for
September 2007, PSGM would not be able to meet its immediate liabilities as
they fell due.
Upon confirmation from Pamodzi that they remained willing to proceed with
a transaction but on revised terms, MC and Casten provided PSGM with
$1.192 million in funding on September 28, 2007. Subsequent to these
discussions Thistle received a revised offer in a letter of intent from
Pamodzi on October 1, 2007. On October 2, 2007 (the "Acceptance Date") and
following deliberations by the Company's Board of Directors, Thistle notified
Pamodzi of its acceptance of the terms of the revised letter of intent.
Under the terms of the revised letter of intent the purchase
consideration for all the direct and/or indirect interests in PSGM payable to
Thistle (on its behalf and on behalf of all other holders of such interests)
will now be ZAR250 million (Two Hundred and Fifty Million South African Rands)
(approximately US$ 35.7 million (Thirty Five Million Seven Hundred Thousand
United States Dollars)) at an exchange rate of ZAR 7.00 to the US$ (the
"Purchase Consideration"). The transaction is conditional on matters normal
for a transaction of this kind but includes a requirement that production at
PSGM exceed 340 kgs in each of October and November 2007 respectively.
The Purchase Consideration is to be satisfied through the payment on
completion of ZAR 100 million (One Hundred Million South African Rands) in
cash (conditional on a placement of shares of Pamodzi) and ZAR 150 million
(One Hundred and Fifty Million South African Rands) to be paid in convertible
interest bearing debt securities (the "Pamodzi SPV Securities") issued by a
special purpose vehicle wholly owned by Pamodzi Resources Limited (the "SPV")
which will acquire a specified number of ordinary shares in Pamodzi (the
"Pamodzi Gold Shares") for an amount of ZAR 150 million (One Hundred and Fifty
Million South African Rands).
The cash portion of the purchase consideration will be adjusted upwards
or downwards (as the case may be) by the difference between the net working
capital of PSGM as at 30 June 2007 and as at the completion date of the
transaction. In addition the cash portion of the purchase consideration will
be adjusted downwards by one half of the aggregate working capital loans
advanced to PSGM by Casten and/or MC and all the interest and fees related
thereto. At this stage an adjustment downwards of between ZAR 30 million and
ZAR 50 million in the cash portion of the consideration is expected.
On or after May 31, 2009 (or in limited circumstances, prior thereto),
Thistle will be entitled to repayment of the outstanding debt under the
Pamodzi SPV Securities including interest and an agreed percentage of any
increase in the value of the Pamodzi Gold Shares held by the SPV. This will be
settled by way of a transfer of Pamodzi Gold Shares to Thistle or out of the
proceeds of a sale of the Pamodzi Gold Shares.
In the event that Pamodzi withdraws from the proposed transaction it has
agreed to pay a break fee of ZAR5 million (Five Million South African Rands)
to Thistle, subject to certain limited conditions.
Although Pamodzi and Thistle are confident that they will be able to
conclude required transaction agreements and secure regulatory approval within
a three month period there can however be no assurance that these discussions
will result in a transaction.
Should negotiations proceed as planned, it is envisaged that a meeting of
the Company's shareholders to consider the proposed sale of PSGM will take
place during late November 2007 in Toronto. A meeting of Pamodzi shareholders,
as required, will be held in Johannesburg at or about the time of the meeting
of the Company's shareholders to consider the proposed sale and purchase of
It is anticipated that subject to regulatory approval Pamodzi will assume
operational control of PSGM during December 2007.
The Company's Board of Directors is considering using the proceeds of the
sale primarily to meet the Company's outstanding debt obligations and will be
considering the future direction of the Company and discussing this with the
Forward Looking Information: This press release may contain or refer to
forward-looking information based on current expectations. Forward-looking
statements are subject to significant risks and uncertainties, and other
factors that could cause actual results to differ materially from expected
results. These forward-looking statements are made as of the date hereof and
the Company assumes no responsibility to update or revise them to reflect new
events or circumstances.
For further information:
For further information: Anton Kakavelakis, Group Financial Controller +
27-57-391-9026 or email to email@example.com; Gerry Beaney, Maureen Tai or
Troy MacDonald, Grant Thornton Corporate Finance at +44 (0) 207-383-5100