DUAL-listed Alacer Gold is selling its minority stake in the Frog’s Leg mine as well as two exploration projects near Kalgoorlie for $141 million, following the completion of a major strategic review.
The company has entered into a binding asset sale and purchase agreement with La Mancha Resources Australia for its 49 per cent interest in Frog’s Leg; its 24.5 per cent interest in the Lake Greta joint venture; and its 40 per cent share in the Avoca JV.
Once the acquisitions are completed, La Mancha will own 100 per cent of Frog’s Leg and continue as operator.
Under the deal, Alacer will also provide La Mancha will toll milling services for 18 months using its Jubilee processing facility at its south Kalgoorlie operations, bringing the total value of the transactions to $166 million.
In a statement, Alacer president and chief executive David Quinlivan said 2013 would be a “back-to-basics” year for the company from an operational perspective, as it focussed on gold production to maximise free cash flow.
“In Turkey, we are very excited at having identified a superior, staged project development approach that should yield far better project returns.
“The decision to take a staged approach to the development of Copler demonstrates our disciplined approach to project development and risk management,” he said.
Alacer has an 80 per cent operating interest in the Copler mine in eastern Turkey. In Australia, improved cash flow will come from mining higher grade zones while the company, which trades on both the ASX and the Toronto Stock Exchange, continues its extensive exploration programs in the country’s richest gold belt.
“The sale of the Frog’s Leg mine crystallises full value for Alacer’s none controlling minority interest, and the cash realised will be used to repay debt and return capital to shareholders,” Mr Quinlivan said.
Alacer will distribute US$70 million to shareholders as a “special dividend.”
“I’m confident that the new operating philosophy will provide greater operational predictability and should allow Alacer to deliver on its guidance,” Mr Quinlivan said.
The company is expecting to produce 330,000 to 365,000 troy ounces of gold for 2013.
In a separate statement, La Mancha chief executive Sebastien de Montessus said his company was moving “rapidly” towards becoming a strong mid-tier gold producer. “This deal marks a key milestone for La Mancha’s new development strategy, which aims to increase the current gold production four-fold to reach 500,000 ounces per year by 2016,” he said.
Having reached critical size at its Australian mining complex, La Mancha will construct a new $100 million carbon-in-leach processing plant, which should be operational by the middle of next year.
According to the company, the investment will result in additional savings of about 50 per cent in treatment costs.