Avocet Mining : Agreed the sale of its Burkina Faso assets

Avocet has agreed

the sale of its Burkina Faso assets

Avocet ('Avocet' or the 'Company') announces today that it has entered into an agreement to sell all of its assets in Burkina Faso, including the Inata gold mine, together with certain receivables of the Company's group to the Balaji Group of companies (the 'Balaji Group') for a total consideration of USD 5 million (the 'Sale'). Of this consideration, USD 2.5 million will be payable in cash at completion and USD 2.5 million will be paid by way of deferred payments.

Completion of the transaction is expected to occur on 11 January 2018, conditional upon the satisfaction of a condition as described below.

INTRODUCTION

Since Avocet began negotiations with the creditors of Société des Mines de Bélahouro S.A. ('SMB') in April 2017, it has pursued a consensual restructuring. The Company announced on 2 October 2017 that discussions with two potential investors were ongoing, each proposing transactions contingent on a compromise with SMB's creditors.

As the disagreement among the creditors could not be resolved, one of the two potential investors, the Balaji Group, agreed to acquire Avocet's Burkina Faso assets without the prior restructuring of approximately USD 70 million of overdue debt owed by SMB and Goldbelt Resources West Africa S.à.r.l. ('Goldbelt') to third party creditors, finance providers, personnel and government, for a consideration that is independent of the outcome of these discussions.

The protracted restructuring process caused by continuing disagreement among the creditors, the deteriorating security situation at the Inata mine, increasing control issues and the exhaustion of all sources of funding has left the Company with two options: either to accept the proposal from the Balaji Group for the Sale or for SMB and Goldbelt to be placed into liquidation.

The sale of the Burkina Faso assets has been part of a larger restructuring and discussions are ongoing with Avocet's sole creditor, Manchester Securities Corp. ('Elliott') regarding the restructuring of its overdue loans to the Company which total USD 28.7 million (and which are secured, in part, over the shares in Resolute (West Africa) Ltd ('Resolute'), SMB and Goldbelt).

THE BALAJI GROUP

The Ghana-based Balaji Group (www.balajigroup.org) states an annual turnover of USD 300 million. Its precious metal division recently acquired the Kalsaka goldmine in Burkina Faso and it anticipates significant cost synergies following the acquisition of the Inata mine.

Conditional upon a successful restructuring of the Burkina assets after completion of the Sale, the Balaji Group has stated that it intends to invest approximately USD 26 million to bring the Inata gold mine back into full production and develop the Souma deposit.

TRANSACTION DETAILS

The transaction with the Balaji Group comprises a sale by Wega Mining AS ('Wega Mining'), a wholly-owned subsidiary of Avocet, of the entire issued share capital of Resolute to Greater Success Global Limited, a member of the Balaji Group (the 'Purchaser'), for USD 1 in cash, pursuant to a share purchase agreement entered into on 18 December 2017 (the 'Agreement'). As this is a sale of a distressed company, the shares are being sold on an 'as is/where is' basis, i.e.no warranties (other than with regard to title and capacity) are being given by Wega Mining in the Agreement.

Resolute is the sole shareholder of Goldbelt and the majority shareholder in SMB, which holds the Inata mining licence. The sale of Resolute therefore represents the disposal by the Company of all of its assets in Burkina Faso, including the Inata goldmine. Completion of the Sale is conditional upon the execution by Elliott of a deed of release to release its security over the Company's assets, including the shares of Resolute, SMB and Goldbelt (the 'Condition').

In addition, the transaction involves the novation by Avocet and Wega Mining to the Balaji Group of certain receivables owed to them by SMB and Goldbelt for cash consideration of USD 2,499,999, to be paid at completion, and for a consideration of USD 2.5 million to be satisfied by deferred payments over a period of seven years. The obligation to pay the deferred consideration will be guaranteed by the Purchaser and by the chairman of the Balaji Group personally.

In advance of the sale, and in consideration of Wega Mining signing the Agreement, the Balaji Group has transferred USD 500,000 to its solicitors in London as a deposit. This deposit will be paid to Avocet whether completion of the Sale occurs (in which case it will form part of the cash consideration) or if completion of the Sale does not occur for any reason other than the Condition not being satisfied.

USE OF PROCEEDS

Given the Company's current circumstances and in order to enable the Company finally to resolve its affairs, Elliott has agreed to the Sale and the payment terms proposed by the Balaji Group and to release its security over the Burkina assets, conditional upon being granted appropriate replacement security over the net proceeds of the Sale.

Discussions with Elliott regarding the restructuring of Avocet's debts will continue after completion of the Sale, including the use of the proceeds of the Sale for the repayment of debt. In this context, Avocet will be taking all practicable actions to minimise its costs and streamline its remaining responsibilities, activities and group structure.

As the Sale involves the disposal of the only trading subsidiary of the Avocet Group, a possible impact of the disposal could be that the remainder of the Avocet Group is broken up further in an orderly manner and eventually wound up. If this occurs, it is possible that, given the amount of debt owed by Avocet, there will be very minimal or no returns to Avocet's shareholders.

APPROVAL OF TRANSACTION

Considering the above and the support of Elliott for the transaction, the board of the Company believes that the transaction with the Balaji Group is the only transaction capable of implementation, it is not unreasonable and it does not disadvantage any other stakeholder of the Company given the high level of debt in the Company. It has therefore entered into the Agreement with the Balaji Group.

The transaction does not require shareholder approval.

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NOTES TO EDITORS

Avocet Mining PLC ('Avocet' or the 'Company') is an unhedged gold mining and exploration company listed on the London Stock Exchange (ticker: AVM.L) and the Oslo Børs (ticker: AVM.OL). The Company's principal activities are gold mining and exploration in West Africa.