Glencar Mining PLC
23 June 2000
GLENCAR MINING PLC ('Glencar' or 'the Company')
Fully Underwritten Rights Issue of 32,601,489 New Ordinary Shares
of IR2.5p each at Stg12p (Eur0.19) per Share ('the Rights Issue'),
to raise approximately US$5.35 million for the Company.
* Glencar announces that it intends to raise approximately US$5.35 million
(Stg£3.6 million) net of expenses, by way of a Rights Issue of
32,601,489 New Ordinary Shares at Stg12p (Eur0.19) per share.
* New Ordinary Shares will be offered to existing Shareholders on the
basis of 1 New Ordinary Share for every 2 Ordinary Shares held at the
close of business on 26 June, 2000.
* The Rights Issue has been arranged by and is fully underwritten by Davy
Corporate Finance Limited and Williams de Broe PLC.
* The new funds raised will provide additional working capital for
Glencar's goldmine at Wassa in Ghana and will facilitate further
exploration at Wassa and at Glencar's other exploration properties in
Ghana, Uganda and Ireland.
* To enable the Rights Issue to proceed, a circular with a notice
convening an Extraordinary General Meeting, is being posted to
* Glencar's subsidiary poured the first gold bar at the on-site refinery
in January 1999 and by the end of May 2000, approximately 128,500 ounces
had been produced.
* Gold recoveries from the heap leach process were initially slower than
original feasibility study testwork had forecast. However production
for the second six months amounted to 56,000 ounces which when
annualised, represents a production rate closer to current forecast
* The construction of a new Phase 2 heap leach area, which was not
originally to be completed until 2001, was accelerated by almost one
year and by March, 2000 was fully operational.
* Testwork confirms that there are no metallurgical barriers to the
achievement of forecast gold recoveries.
* Approximately 180,000 contained ounces have been mined to the end of
* A revised and updated estimate for the Wassa orebody was completed in
March, 2000 by Satellite Goldfields and shows the Proven and Probable
Reserves at 1 January, 2000 to be 735,000 contained ounces.
* The Board anticipates a significant increase of approximately 190,000
ounces to the Proven and Probable Reserves at Wassa through a redesign
of the pits in as the yet unmined southern and southeastern zones at
Wassa together with a limited additional drilling programme to be
completed by the final quarter of 2000.
* Further exploration work will also be undertaken at Glencar's other gold
exploration properties in Ghana and Uganda and on its base metal
prospecting licences in Ireland at Navan and Kildare.
* Through the use of hedging contracts, the average price received for
gold produced during the first five months of 2000 was US$313 per
ounce against an average price on the spot market for the same period of
* The lower gold price has led to a write down of the carrying value of
Glencar's interest in the Wassa property, which will lead to lower
amortisation charges in the future.
* The Wassa Mine is performing well, with unit mining costs and processing
costs all approximately as forecast.
* A revised debt repayment schedule has been successfully negotiated with
the Group's Senior Lenders based on what the Directors of Glencar
believe to be achievable monthly production forecasts.
For further information please contact:
Mr Hugh McCullough
Glencar Mining plc Tel: 353 1 661 9974
Davy Corporate Finance Ltd Tel: 353 1 679 6363
GLENCAR MINING PLC ('Glencar' or 'the Company')
Fully Underwritten Rights Issue of 32,601,489 New Ordinary Shares
of IR2.5p each at Stg12p (Eur0.19) per Share ('the Rights Issue'),
to raise approximately US$5.35 million for the Company.
On 18 February, 2000, it was announced that the January Rights Issue to raise
approximately US$7.4 million was withdrawn for the reasons set out below in
the section entitled 'Background'. Since that date, substantial progress has
been made by the Company on several fronts. The expectation expressed in the
January Circular that production would improve following the implementation of
the Phase 2 heap leach area has been realised. Daily gold production has
increased by almost 30% over daily production in the first three months of
this year to approximately 300 ounces per day in April and May. Production in
April amounted to approximately 10,000 ounces while May production was
approximately 9,400 ounces.
In addition, progress has been made on ore reserve definition and estimation.
The ore reserve has been recalculated (as at 1 January, 2000) and the
resultant figure of 735,000 ounces amounts to approximately 20,000 ounces more
than that which was anticipated in the January Circular. In addition, the
Directors have a greater degree of confidence concerning the near term
potential for increasing the ore reserve for the reasons set out below under
the heading 'Reserves at Wassa'.
We have also concluded negotiations with the Senior Lenders, CDC, to
reschedule debt and interest repayments such that the repayment schedule
reflects more closely the anticipated gold production profile.
We announce today that we will carry out a Rights Issue to raise approximately
US$5.35 million net of expenses. 32,601,489 New Ordinary Shares will be
issued at Stg12p per share on the basis of 1 New Ordinary Share for every 2
Ordinary Shares held at the close of business on 26 June, 2000 and which
represents a discount of approximately 45 per cent. over the last dealt price
of Glencar Shares on 18 February, 2000 the day before dealing in the shares
was suspended. The Rights Issue has been arranged by and is fully
underwritten by Davy Corporate Finance and Williams de Broe.
To enable the Rights Issue to proceed, an increase in the authorised share
capital would be required in order that the Company has sufficient authorised
but unissued share capital to issue the New Ordinary Shares. The extraordinary
general meeting convened for 18 February, 2000 to sanction the Resolutions was
adjourned until further notice. A notice to reconvene the adjourned
Extraordinary General Meeting, at which Resolutions with respect to, inter
alia, the proposed increase in the authorised share capital and the
disapplication of statutory pre-emption provisions will be voted on, will be
posted to Shareholders today. No new resolutions are contained in the notice
of the adjourned meeting which is convened by seven days notice in accordance
with the Company's Articles of Association.
On 27 January, 2000, Glencar announced that it intended to raise US$7.4
million net of expenses by way of a rights issue, which had been fully
underwritten. It was a necessary precondition that a resolution to increase
the authorised share capital should have been approved at the extraordinary
general meeting convened for 18 February 2000. The January Circular setting
out particulars of the January Rights Issue, progress to date and the
prospects of the Company together with a notice calling the extraordinary
general meeting was sent to shareholders. It was stated in the January
Circular that the proceeds of the funding would facilitate further exploration
within the Wassa Lease and at the Asheba/Kanyankaw property in Ghana and at
Glencar's other exploration properties in Uganda and Ireland and also to fund
the accelerated capital expenditure programme which was then being undertaken
Incorporated in the projections on which this statement was based were
forecasts of the speed of recovery of gold from the heaps in 2000. Shortly
before the date of the extraordinary general meeting, it was discovered that
there was an error in the calculations for the 2000 forecast leading to an
overstatement of the expected production for that year by some 10,000 ounces.
Notwithstanding the fact that this would be recovered over the life of the
project, it would in turn affect the cashflow available to the Company in 2000
to complete the work programme detailed above. Therefore it was not proper to
proceed with the January Rights Issue on the basis of the information given in
the January Circular, and the issue was withdrawn. However, it should be
emphasised that the problem encountered was of a timing nature only and not
one which involved any fundamental metallurgical or other technical issue
impacting on the project economics or viability.
Application was made to the Irish Stock Exchange to have trading in the
Glencar Shares suspended pending clarification of the 2000 production
forecast, which suspension was granted on 18 February, 2000. At the time of
suspension Glencar Shares were trading at EUR0.36, Stg22p or IR28.35p.
Application has been made to the Irish Stock Exchange to have the suspension
lifted and it is expected that dealings in the Ordinary Shares will recommence
on 26 June, 2000.
Glencar's primary activity is the exploration for and production of gold and
certain base metals. Its existing projects include the mining and production
of gold at Wassa in Ghana, exploration for gold in Ghana and Uganda and
exploration for lead and zinc in Ireland, each of which is discussed below.
Glencar, through its subsidiary companies, owns a 59.4% interest in the Wassa
Mine, a major open-pit mine in the Western region of Ghana. All major facets
of the construction of the mine were completed on schedule and on budget by
January, 1999. The Wassa Mine is the latest of a number of new gold mines
which have been brought into production in South West Ghana in recent years.
The mine is a 3 million tonne per annum open pit and heap leach operation.
Glencar has operational and management control of the mine.
Ore is mined at a rate of approximately 8,750 tonnes per day from a series of
interconnecting pits by our contract miners, P.W. Ghana Ltd. utilising O & K
excavators. The ore is trucked to the multistage crushing plant by a fleet of
Caterpillar 777 100 tonne dump trucks. The crushed ore is agglomerated with
cement and the agglomerated ore is stacked on a lined leach area. During
leaching over a period of approximately 360 days, gold is recovered in an
Adsorption Desorption Refinery ('ADR') plant in the form of Dore Bullion bars.
This Dore Bullion is shipped to the Johnson Matthey refinery in the United
Kingdom where the final product is 24 carat gold bullion. The first ore from
the pit at Wassa was mined in October 1998 and the following month saw the
commissioning of the crushing plant and the laying of crushed ore on the leach
area. The first gold bar was poured at the on-site refinery in January, 1999
and by the end of May, 2000, approximately 128,500 ounces had been produced.
Production at Wassa
During 1999 some 3.2 million tonnes of ore was mined at an average grade of
1.75g/t (approximately 180,000 contained ounces). Gold production by year-end
at Wassa was 87,000 ounces, below the initial feasibility study target of
94,000 ounces due to slower recovery of gold from the Phase 1 heap leach area.
However, production for the second six months of 1999 amounted to 56,000
ounces, which when annualised, represents a production rate closer to current
forecast levels. Cash Operating Cost per ounce for the year was $200.
The construction of the new Phase 2 heap leach area, which was not originally
scheduled to be completed until 2001, was accelerated by almost one year and
by March 2000, was fully operational. It is expected that its design will
facilitate significantly greater solution control and management than was
possible utilising the Phase 1 heap leach area, with consequent improvement in
gold production. The impact of early completion of the Phase 2 heap leach
area is reflected in April, 2000 gold production of 10,000 ounces and May,
2000 production of 9,400 ounces.
Recoveries at Wassa
In the January Circular, the issue of gold recoveries from the heaps was
discussed in detail. It was explained that the most significant departure
from the projected performance at the Wassa Mine was the speed at which gold
was being recovered from the heaps. The reason for the slower recoveries was
a combination of adverse topography, leading to lack of sufficient surface
area for spraying and the higher clay content in the ore.
The Phase 2 heap leach area, referred to in the January Circular as being
under construction, has now been completed and was brought into operation on
17 March, 2000. All newly mined ore is now being stacked on the new Phase 2
heap leach area. This leach area has been constructed with more favourable
topography and have been designed to permit significantly greater control and
management of leach solutions. There is less clay content in the ore now
being mined and therefore permeabilities in the heap are expected to improve.
The Company has also commenced construction of a second carbon column train
which will come into operation in early July. This will enable the ADR plant
to treat substantially increased volumes of solution coming from the heaps.
This additional plant capacity will permit the continued leaching of the Phase
1 heap leach area as the Phase 2 heap leach area expands but it will also
assist in keeping gold production up when solution grades fall during periods
of excessive rainfall or during periods when the solution grades are lower due
to lower grade ore being treated.
Reserves at Wassa
A revised and updated reserve estimate for the Wassa orebody was completed in
March 2000 by Satellite Goldfields. The estimate applies to the ore reserve
as at 1 January, 2000 and shows the Proven and Probable Reserves at this date
to be 15.1 million tonnes at 1.52g/t (735,000 contained ounces). The
calculation was based on a new block model which was constructed to
incorporate refined geological interpretations for those zones of the orebody
which have been partially mined during the first 12 months of production.
Mining to date has yielded a large geological and structural database for
these parts of the orebody and the resulting block model is regarded as
significantly more robust than previous block models as a result of the
Company's enhanced knowledge of the geology of the orebody. The reserve
estimate has been independently audited and confirmed by consulting engineers
Steffen, Robertson & Kirsten (UK) Limited, Mining Engineers, Cardiff.
The evolving geological interpretation of the orebody by the Group's personnel
indicated that a redesign of the pits in the as yet unmined southern and
southeastern zones at Wassa was required and the Company is currently engaged
in this exercise. The Board anticipates a significant increase of
approximately 190,000 ounces to the Proven and Probable Reserves at Wassa from
this redesign together with a limited additional drilling programme to be
completed by the final quarter of 2000. This is in addition to any other
ounces that may be expected to be delineated as a result of the planned
exploration work on the various existing exploration targets within the Wassa
Debt Repayment Schedule
A revised debt repayment schedule has been successfully negotiated with the
Group's Senior Lenders based on what the Directors believe to be achievable
monthly production forecasts. This repayment schedule more accurately
reflects the anticipated gold production profile over the next four years.
This revised schedule does not extend the life of the Senior Finance beyond
that which was agreed with the Senior Lenders in January, 2000, but it does
provide for repayments which are now linked to forecast gold production each
quarter rather than being set at a fixed amount per quarter. Since production
will vary from quarter to quarter, depending primarily on the grade of ore
being mined at the time, weather conditions and other factors, the revised
repayment schedule is much more appropriate to the circumstances of the Wassa
orebody. The revised payment schedule is conditional upon the completion of
the Rights Issue.
Satellite Goldfields and the Company have also reached agreement with CDC
whereby a total of US$3.19 million in interest payments due up to the end of
2000 will be capitalised in the Subordinated Finance and payable with the
balance of the Subordinated Finance, after repayment of the Senior Finance.
Management projections for the Wassa Mine are that for it to break-even in
cumulative cash terms over the life of the mine (after all debt and operating
costs are paid) based on a spot gold price of US$300 per ounce for unhedged
ounces, additional Proven and Probable Reserves of approximately 160,000
ounces will be required in addition to the 735,000 contained ounces being the
latest reserve figures reported on by SRK and referred to under 'Reserves at
Wassa' above. As stated above, the Directors anticipate a greater increase
than this in Proven and Probable Reserves at Wassa by the final quarter of
Current exploration at Wassa
The Group's current exploration programme at Wassa is focussing on definition
of reserves in the vicinity of the current pits and on along strike resource
An extensive programme of trenching has been completed on the Deadmans Hill,
South East and 419 zones. Results of this programme have identified a number
of new targets which will be systematically evaluated by drilling expected to
commence in July, 2000.
Geochemistry, geophysics and trenching have established the continuity of the
broad mineralised zone which stretches for 6km along strike to the southwest
of the currently defined Wassa orebody. Results from the trenching have
confirmed high grade mineralisation for at least 2,000 metres southwestwards
along strike from the Main 1 pit. Trench NR1, for example, is approximately
1,000m southwest of the Main 1 pit and returned assays including an
intersection of 22m @ 2.1g/t including 3m @ 10.33g/t. Current infill
geochemistry and geophysics surveys are defining the anomalous zones and drill
target delineation should be completed by the end of July. Similarly,
progress is being made on the outlining of drill targets on the western
parallel geochemical anomaly which connects the colonial mine workings at
Bawdia Bosso, west of the Wassa Mine, and the artisanal workings at Awheateso
near the southern end of the Wassa Lease.
Exploration work continued on the Wassa Licence held by Satellite Goldfields
separately from the Wassa Lease just north of the Wassa Mine. Reconnaissance
geochemical surveys delineated an anomalous zone, the Adaase zone, on the
eastern half of the Wassa Licence, which the Directors believe represents the
northern extension of the host geology for the Wassa orebody. The western
portion of the Wassa Licence, comprising 50% of the Wassa Licence area, was
relinquished in July 1999 in accordance with Minerals Commission requirements.
The Asheba/Kanyankaw licence is owned jointly by Glencar and Moydow. The
licence area lies in the south west of Ghana, in a very favourable geological
setting just 20 kilometres south of the centre of the Tarkwa goldfields, which
have seen past production of more than 10 million ounces of gold and which
host currently delineated reserves in excess of 25 million ounces of gold,
most of which is contained in two major mines at Tarkwa and Teberebie. The
licence incorporates a number of colonial era mine workings including the old
Asheba and Kanyankaw mines which were significant producing mines during the
period between 1900 and 1930. Both mines have been subject to extensive
Glencar has concluded an agreement with Moydow on the subdivision of the
original licence, which has been renewed recently. The agreement provides
that the licence be subdivided into two approximately equal parts, one
enclosing the Asheba target and the other enclosing the Kanyankaw target.
Application has been made to the Ghanaian authorities to have the licence
divided into these two parts. Glencar has selected the Asheba target as its
preferred licence and, subject to the necessary approvals, the Asheba licence
will be held by Antubia, Glencar's wholly owned, Ghanaian subsidiary.
The agreement provides that each of Antubia and Moydow will have the option to
buy back, for up to, a five year period, a minority interest in the other's
licence, at predetermined prices (up to a maximum of US$2,500,000), which are
based on the extent of drilling incurred by that licence holder at the time of
exercise of the option. The agreement between Glencar and Moydow aims to
ensure that there will be simultaneous, aggressive exploration programmes
carried out on the respective licences over the coming months and due to the
option to buy into the other's licence, success on either programme can
benefit the Group.
The western portion of the concession, which will be held by Glencar,
incorporates not only the old colonial working at Asheba-Cheriaman and Akoko
but also significant small scale workings at Bankarayo, Korokossah and
Saghissi. Since formal production ceased at the Asheba mines in the late
1920s, near surface mineralisation has been worked more or less continuously
by the local galempsey miners, particularly in recent years. The area covered
by the Cheriaman prospect has numerous shafts and adits as well as a series of
three parallel open cut pits the largest of which is approximately 100m long
and 15m deep. At the old Bankurayo mine towards the north west of the
concession the main shaft was 105m deep and a number of levels were developed
at depths of up to 100m.
Limited drilling on the Asheba property to date has focused on the high grade
vein system at Cheriaman where just 8 reverse circulation boreholes and 4
diamond boreholes have been drilled. Best mineralised intersection was 61m @
2.2g/t in 3 combined intersections within a vertical depth of 91m in borehole
RC37. Recent exploration work on the property has yielded encouraging
results, with soil geochemistry and mapping suggesting that the mineralisation
is more extensive than was previously recognised. Of particular significance
is that initial reconnaissance sampling on the edge of the granitic intrusion
south of the Asheba mine has illustrated that the granite itself is
mineralised. This presents an additional previously unrecognised target for a
high tonnage gold deposit within the concession which will be aggressively
explored during the coming months.
The proposed exploration programme incorporates drilling on the previously
untested Akoko, Bankarayo and Korokossah prospects as well as step out
drilling on the Cheriaman mineralisation. Drilling is scheduled to commence
during the third quarter of 2000.
Progress has been made in the past year on the south east Uganda licences
which are wholly owned by a member of the Group subject to a 5% interest held
by an Australian company in a small portion (approximately 25 square
kilometres) of the licensed area. The areas covered by the licences encompass
approximately 570 square kilometres of the northern margin of the Archaean
Lake Victoria greenstone belt which hosts a number of newly discovered major
gold deposits on the southern side of the lake in Tanzania, including the
Geita, Bulyunhulu, Golden Pride and Kukuluma projects. The Migori and Mara
goldfields, which straddle the Kenya-Tanzania border lie approximately 150km
to the south of the licence areas on the eastern side of the lake.
During the first quarter of this year, 156 square kilometres of ground has
been relinquished from Glencar's total ground holding following completion of
reconnaissance geochemical surveys over a 400 square kilometre area. Second
phase geochemical surveys have now been completed by the Group over the
targets identified by the reconnaissance surveys and the current geochemistry,
geophysics and trenching work programme aims at defining drill targets for a
drilling programme expected to commence in 2001. Priority is being given to
the Buinja licence, SEPL 4332, where geochemistry has delineated a number of
targets with gold values up to 1,800ppb.
Glencar's 100% owned subsidiary Rennicks & Bennett Limited holds Prospecting
Licence 1496 in County Meath, Ireland, immediately to the north-west of the
Navan orebody which hosts Europe's largest underground zinc mine, the
Outokumpu owned Tara Mine. At Liscarton, at the southern margin of the
licence, the northern portion of the Navan orebody extends into PL1496. The
Measured Mineral Resource at Liscarton is 1.2 million tonnes at 8.4% zinc and
2.0% lead. At Scallanstown in the north-eastern part of the licence a
satellite deposit, the Scallanstown-Tatestown deposit, straddles the licence
boundary. The Measured Mineral Resource at Scallanstown within PL1496 is
250,000 tonnes at 6.17% zinc and 4.18% lead.
Two deep boreholes totalling 1,044 metres were drilled on the Navan property
during 1999. Low-grade zinc mineralisation was encountered in both holes. One
of the holes encountered a major reverse fault structure, identification of
which presents a new target for the delineation of additional structurally
controlled ore occurrences.
Glencar is reviewing recent announcements by Tara Mines Limited on the
discovery of a new ore zone containing some 13.5 million tonnes of 8.9% zinc
and 1.8% lead to the southwest of the main Navan orebody in the upper part of
the geological strata known as the Pale Beds. This exciting new discovery
occurs much higher in the geological stratigraphy than does most of the
mineralisation previously delineated in the area. The Board views the scale
of the discovery as a very significant indication of the potential for finding
additional reserves of zinc in the vicinity of the Navan orebody. Recent
drilling by the Company encountered zinc mineralisation within this upper
horizon and further evaluation of this target will be carried out in 2000.
The Kildare project is owned 100% by Glencar and consists of 3 Prospecting
Licence areas - PL3662 and PL2512 in Co. Laois and PL2513 in Co. Kildare.
Exploration to date has delineated a promising zinc/lead target with strong
geochemical and geophysical signatures in a setting which shows strong
geological and structural similarities to the Galmoy and Lisheen deposits, the
two major and currently producing zinc/lead deposits along strike on the trend
known as the Rathdowney Trend.
A shallow diamond coring programme was completed in June, 1999 over this zone
with a total of 870 metres drilled in 17 boreholes near the western boundary
of PL2512. The purpose of the programme was to elucidate the geological
structure in the anomalous area to direct a deeper drilling programme, planned
to commence shortly, which will test the ore development.
The shallow drilling programme provided useful structural data but perhaps
more importantly, the Company found extensive dolomite development together
with pervasive zinc mineralisation. Dolomitisation is usually associated with
Irish zinc orebodies and its presence in the Kildare project associated with
zinc mineralisation is particularly encouraging. Currently, drilling data is
being evaluated by the Company and further testwork on the cores is being
A resistivity survey has been completed recently over the target area to
further delineate the local structure. A deep seismic survey carried out for
oil and gas exploration during the mid-1980s incorporated this part of eastern
Co. Laois. Data from this survey have been acquired and are currently being
interpreted. This will further enhance the Company's knowledge of the geology
of the area prior to commencement of a new drilling programme which is now
scheduled to begin within the next few weeks.
Current Trading and Prospects
Glencar's consolidated accounts for the period ending 31 December, 1999 are
incorporated in the form of an Accountants Report in the Rights Issue document
posted to Shareholders today. This report draws attention to the proposed
Rights Issue and rescheduling of the Group's debt and the confidence of the
Directors that the successful completion of the Rights Issue will provide
sufficient funds to enable the Group to continue trading for the foreseeable
future. Accordingly the Directors consider it appropriate to prepare the
financial statements on a going concern basis and the opinion of the reporting
accountants is not qualified in this respect.
In the January Circular, it was stated that the Directors considered it
prudent to write down the carrying value of the Wassa Mine to reflect the
lower gold price prevailing. It was stated that the amount of the write down
would be in the region of US$57 million. However this has been revised to
US$71 million. This write down is a non cash adjustment to the historic
carrying value of the Wassa Mine in the Glencar accounts. The carrying value
was made up of a number of components, most of which related to a much more
favourable gold price than currently prevails. The writedown is also related
to the remaining reserve, after the extraction of 183,000 ounces. The Board
considers it prudent to provide for a greater writedown at this time, so that
with the anticipated increase in ore reserves, we have a solid base from which
to add value to the Company's assets.
Gold production at Wassa, following the implementation of the Phase 2 heap
leach area, has improved significantly and the Directors expect the improved
production levels to be sustained. All other aspects of the Wassa Project are
The average price received for gold sold during the first five months of 2000
was US$313 per ounce against the average price on the spot market for the same
period of US$285. This price was achieved by rolling back sufficient forward
contracts to cover all current production other than gold loan interest
repayments, rather than selling at the lower prices prevailing on the spot
market. Turnover for the year 1999 was US$26.44 million (1998: nil).
The date for Economic Completion, the point at which the Senior Finance
becomes non-recourse to Glencar, has now been extended by the Senior Lenders
to 30 June, 2001 and, subject to the spot gold price prevailing at the time
and/or the level of ore reserves, the Directors believe that Economic
Completion will be achieved by that date.
Glencar, as guarantor of the Senior Finance, intends to provide an additional
working capital fund of up to US$2.5 million. These funds will be advanced to
Satellite Goldfields as a loan, subordinated to the Senior Finance and the
Satellite Goldfields made its first capital repayment to the Senior Lenders of
6,587 ounces of gold (equivalent to approximately US$2 million) on schedule on
30 September 1999.
As a result of the slower gold recoveries and the accelerated capital
expenditure programme, the scheduled capital payments due originally to Senior
Lenders in December, 1999 and March, 2000 have been deferred to 30 June, 2000
to accommodate the greater working capital requirements at Wassa. The debt
repayment schedule, now agreed, provides for US$3.9 million of debt repayment,
originally due to the Senior Lenders in 2000, to be rescheduled over the three
years of 2001, 2002 and 2003. Interest payable on the Senior Finance,
amounting to approximately 570 ounces per quarter, over the next twelve
months, equivalent to approximately US$170,000 per quarter, is being paid as
it falls due. Interest on the Subordinated Finance, amounting to US$3,194,382
due from July 1999 to December 2000 is being capitalised in the Subordinated
Finance and will now be paid with the balance of the Subordinated Finance,
once the Senior Finance has been repaid in full.
Convertible Loan Note
On 22 March, 1999, the Company executed a US$3 million zero coupon convertible
loan note repayable within a five-year period to Standard Bank. Standard Bank
has the option of conversion of the loan note into Glencar Shares at any time
during the note's five-year life at the price per share of EUR0.70 (IR55p) and
may convert all of, or part of, the note and the premium into Glencar Shares.
This price per Glencar Share will be adjusted following the Rights Issue to
Eur0.59 (IR46p). These funds were originally intended to be used largely for
exploration on the Group's exploration properties in Ghana, Uganda and Ireland
but, due to increased working capital requirements at Wassa, only
approximately US$250,000 has been spent to date for this purpose and a balance
of US$1.6 million remains of which US$350,000 is held in cash and the balance
is due to the Company from Satellite Goldfields.
At 1 June, 2000, the Company had forward contracts with Standard Bank for the
sale of some 127,956 ounces of gold at a price of US$324 per ounce. At that
time, some 108,252 ounces of gold had already been sold under similar forward
contracts at an average price of US$317 per ounce. These contracts mature at
the rate of approximately 4,500 ounces per month from February, 2001 to June
2003. In addition, the Company has an outstanding gold loan of 85,633 ounces
of gold repayable over the next four years. Interest on this gold loan,
averaging approximately 570 ounces of gold per quarter, for the next twelve
months is also payable.
The terms of the Company's hedging agreement with the bank, including agreed
credit limits, provide that if spot gold exceeds at least US$346 per ounce,
margin calls may be made by Standard Bank against the hedge contracts
outstanding at that time.
During the first four months of 1999 gold traded in the range between US$278
and US$294 per ounce. In May, 1999, the UK Treasury announced that it would be
selling more than half of its gold reserves. By mid July, 1999 the price had
retreated to a twenty year low of US$252.80 per ounce and remained depressed
until September, 1999.
On 26 September, 1999, a joint announcement was issued by the European Central
Bank together with 14 European Central Banks including the Bank of England and
the Swiss National Bank stating that agreement had been reached to limit their
collective sales of gold to 2,000 tonnes over a five year period and that, at
the same time, they would not expand their gold lending to the market ('the
Following the announcement the gold price rose to US$325 per ounce in early
October, 1999. As calm returned to the market the price drifted into the
US$280 to US$300 range, ending the year at US$290 per ounce. As a result the
average price for the year, was US$279 per ounce compared with US$294 per
ounce during the previous year.
In early February of this year, Placer Dome, a large North American producer,
announced that it had suspended its hedging activities in expectation of
improving gold market sentiment and reduced producer hedging. A gold price
rally ensued but this was not sustained and the price of gold has since traded
in the range between US$270 and US$290 per ounce.
Details of the Rights Issue
The New Ordinary Shares will be offered to Qualifying Shareholders in the
1 New Ordinary Shares for every 2 Ordinary Shares
held by Qualifying Shareholders on the register at the Record Date and so on
in proportion for any greater number of Ordinary Shares held, except that
fractions of New Ordinary Shares will not be allotted. Fractional entitlements
which would otherwise arise will not be allotted to Qualifying Shareholders
but will be aggregated, and the resulting New Ordinary Shares will be sold in
the market, nil paid, for the benefit of the Company.
The New Ordinary Shares will be in registered form and will, when issued and
fully paid, rank pari passu in all respects with the Ordinary Shares,
including the right to receive all dividends and other distributions
thereafter declared, paid or made.
Application has been made to the Irish Stock Exchange for permission for the
New Ordinary Shares to be admitted to the Exploration Securities Market of the
Irish Stock Exchange. It is anticipated that dealings, nil paid, will
commence on 4 July, 2000. It is emphasised that no application is being made
for the New Ordinary Shares to be admitted to the Official List of the Irish
USE OF PROCEEDS
The net proceeds raised from the Rights Issue will amount to approximately
US$5.35 million and will be applied both to strengthen the Group's working
capital position and to engage in further exploration activity as set out
Wassa working capital 2.50
Wassa exploration 1.00
Asheba/Kanyankaw exploration 1.00
Uganda exploration 0.15
Kildare exploration 0.25
Navan exploration 0.10
The following is a summary of these major expenditure areas. The exploration
programmes are expected to be carried out over the next eighteen months.
As outlined above under Current Trading and Prospects, it is intended that
US$2.5 million from the current issue will be set aside as additional working
capital for Wassa.
A further US$1 million will be spent on exploration on the Wassa Lease, mainly
on diamond and reverse circulation drilling. The targets to be drilled are
those in the southwest and west of the lease area which have been delineated
by surface geochemistry and trenching.
Diamond and reverse circulation drilling will be carried out on the
Asheba/Kanyankaw licence, once permission is granted by the Minerals
Commission to subdivide the existing licence into two parts. Glencar intends
to carry out approximately US$1 million of drilling and geological studies on
the Asheba portion of the subdivided licence.
Further geochemical and geophysical studies will be completed on our Ugandan
licences before commencing a drilling programme during 2000. Further
exploration on these licences is projected to cost approximately US$150,000.
It is intended to commence a drilling programme on our Kildare licences in the
next few weeks. Significant zinc/lead targets have been defined by previous
exploration and expenditures of up to US$250,000 are planned for these
licences over the coming eighteen months.
EXPECTED TIMETABLE OF PRINCIPAL EVENTS
Record Date for Rights Issue 26 June, 2000
Latest time and date for receipt of
completed Forms of Proxy 4.15 pm 1 July, 2000
Time and date of Extraordinary General
Meeting 4.15 pm 3 July, 2000
Provisional Allotment Letters despatched 3 July, 2000
Dealings expected to commence in the New Ordinary
Shares, nil paid and Ordinary Shares marked ex-rights 4 July, 2000
Latest time and date for splitting,
nil paid 3.00 p.m. 22 July, 2000
Latest time and date for acceptance and
payment in full 3.00 p.m. 24 July, 2000
Latest time and date for splitting, fully paid 3.00 p.m. 14 August, 2000
Latest time and date for registration of
Renunciation, fully paid 3.00 p.m. 16 August, 2000
Definitive Share Certificates for New Ordinary
Shares to be despatched not later than* 28 August, 2000
* (except where the Ordinary Shares are held in a CREST account,
in which case, the New Ordinary Shares subscribed for will be credited
to such CREST accounts)
For further information please contact:
Mr Hugh McCullough
Glencar Mining plc Tel: 353 1 661 9974
Davy Corporate Finance Ltd Tel: 353 1 679 6363
DEFINITIONS USED IN THIS ANNOUNCEMENT
'CDC' CDC Group plc, formerly Commonwealth Development
'Dore Bullion' an impure alloy of gold and silver produced at a
mine which will be refined offsite to high purity
Directors or the board of directors of the Company.
'Glencar' or 'the Glencar Mining plc.
'January Circular' the ESM Particulars relating to Glencar and
comprising a prospectus under the European
Communities (Transferable Securities and Stock
Exchange) Regulations, 1992 of Ireland which was
published on 27 January, 2000 pursuant to the
January Rights Issue.
'January Rights Issue' the rights issue by the Company details of which
were set out in the January Circular and which was
withdrawn on 18 February, 2000.
'Moydow' Moydow Mines International plc.
'Ordinary Shares' Ordinary Shares of IR2.5p each in the capital of
'Phase 2 heap leach an area of approximately 200,000 sq. metres which
area' is specifically engineered and designed to
accommodate the stacking of mined and crushed ore
'Proven Reserves' that portion of an in-situ resource which
technical and economic studies have shown to be
mineable at a profit under specified economic
conditions expressed in terms of the tonnage and
grade of the material that would be mined and
'Probable Reserves' an indicated resource on which sufficient
technical and economic studies have been carried
out to demonstrate that it can justify extraction
at the time of the determination and under
specific economic conditions. The estimate is
supported by a study of the economics and
practicality of working deposit but not by a full
feasibility study. Grades and tonnages are
expressed in terms of material that would be mined
'Rights Issue' the issue of 32,601,489 New Ordinary Shares to
Qualifying Shareholders by way of rights.
'Satellite Goldfields' Satellite Goldfields Limited, Glencar's 59.4 per
cent. indirectly owned subsidiary.
'Senior Finance' the loan by the senior lenders to Satellite
Goldfields of 92,219.987 ounces of gold equivalent
to US$27.5 million.
'Senior Lenders' Standard Bank London Limited and any other
financial institution party to certain loan
'Shareholders' holders of issued Ordinary Shares.
'Wassa Mine' or 'Wassa' the operating gold mine at Wassa, Ghana.