Anvil Mining Limited announced that since the initial announcement of the takeover bid by Minmetals Resources Limited on September 29th 2011, Anvil and MMR have been consulting with various stakeholders in the Democratic Republic of Congo.
During consultations with La Générale des Carrières et des Mines Sarl, Anvil was advised by Gécamines that the completion of the acquisition of Anvil by MMR will result in a review of the financial terms of the lease agreement taking into account the current data on the tonnage of the Kinsevere deposit and the economic balance of the project for all parties and a review of the JV agreement in respect of the Mutoshi Project.
The Kinsevere Project is held as to 95% by a wholly owned Congolese subsidiary of Anvil which in turn holds a lease from Gecamines of the underlying mineral tenures. The remaining 5% interest in the Kinsevere Project is held by a private Congolese company. The Mutoshi Project is an exploration and mining joint venture between a wholly owned Congolese subsidiary of Anvil and Gecamines.
Anvil’s position is that there is no legal requirement for Gécamines’ approval in connection with the proposed change of control under any of its contractual documentation and that no legal right to renegotiate the contractual arrangements arises on the completion of the change of control, although there will be a requirement to give Gécamines a right of pre emption in connection with the Mutoshi Project which MMR and Anvil are fully aware of and intend to comply with. MMR and Anvil have previously agreed that Anvil’s 70% interest in the Mutoshi Project has a value of USD 52.5 million.
Gecamines made a public announcement in early October 2011 that it intends to audit compliance by all of its JV partners with their contractual commitments to Gecamines. During the consultations with Gecamines it advised Anvil and MMR that it believes that the Anvil group is not in compliance with its obligations in respect of the Mutoshi Project for failing to deliver a complementary feasibility study. Gecamines has given the Anvil group 30 days to remedy this alleged failure. Anvil disagrees that it has failed to comply with this obligation, as the relevant documentation was delivered to Gécamines in August 2010. As contemplated by the joint venture documentation for the Mutoshi Project, Anvil is awaiting a response from Gécamines in connection with the feasibility study.
MMR and MMG Malachite Limited, a wholly owned indirect subsidiary of MMR have advised Anvil that the Offeror will not complete the previously announced offer for all of the outstanding common shares of Anvil at a purchase price of CAD 8.00 per share in cash unless the prior consent of Gécamines is obtained on terms satisfactory to MMR and the Offeror.
All of Anvil’s mineral tenures were reviewed by Gécamines and the government of the DRC in connection with the review of mineral tenures conducted in the DRC in 2008. In 2009, following completion of that review Anvil and Gécamines agreed to amended contractual arrangements, including amendments to the royalties payable to Gécamines and substantial additional payments were made to Gécamines by Anvil.
Anvil and its advisors will continue to discuss these matters with Gécamines and MMR. However, in the absence of a solution which does not result in any material amendments to the contractual agreements with Gécamines, there is a risk that MMR and the Offeror may not complete the Offer.
