SE Asian gold mines sold for $200M

Gold miner Avocet Mining is to sell assets in Malaysia and Indonesia for $200 million to private Indonesian mining fund J & Partners, to focus on expanding its West African mines.

London-listed Avocet, which had previously said it might reduce its hedge with the proceeds, said on Friday it had not decided what to do with the cash it will receive. The hedge -- agreeing to sell gold in advance at fixed prices -- forces it to sell gold at well below market prices.

"Questions have come up this morning about our hedge and whether we are going to buy it out and quite frankly we are just going to continue to stick with our (hedging) policy. We have made no decisions on the use of proceeds," chief executive Brett Richards told a conference call.

As of Oct. 31, Avocet had an outstanding hedge of 362,019 ounces at $970 per ounce and was due to deliver 25,000 ounces per quarter. Spot gold rose to a record at around $1,430 earlier this month and currently trades at $1,385.

Avocet, also listed in Oslo, said in June it hoped to reduce its hedge, but the following month said cutting its debt and investing in existing operations were a higher priority.

Avocet, whose main asset is the Inata mine in Burkina Faso, had $37.7 million net debt at the end of the third quarter.



PROSPECTING IN BURKINA FASO, GUINEA

Avocet is to sell the Penjom mine in Malaysia and the North Lanut mine Indonesia in a deal due to be completed in the second quarter of 2011 and resulting in a pretax profit of about $100 million.

"We have some significant land packages in Burkina Faso and in Guinea which are underdrilled and underexplored and we need to understand them," Richards said.

At some point, Avocet might be in the market for acquisitions, but the time was not right.

"We are focusing on West Africa as a potential growth area for us in M&A, however, we are not in a position at this point in time to go out and do a deal," Richards said.

The divestment is subject to a right of first refusal by Indonesian group PT Lebong Tandai, which owns 20 percent of the North Lanut mine in North Sulawesi. It can buy out Avocet's stake for $120 million in cash.

In that case, the deal with J & Partners would be cancelled and Avocet would seek to sell the Penjom mine separately.

The ageing Asian mines have been hit by weaker output and higher costs. Output at Penjom fell 19 percent to 39,150 ounces of gold during the first nine months of the year, while production at North Lanut fell 2 percent to 34,865 ounces.

Cash costs surged 35 percent at Penjom to $907 per ounce and 32 percent to $657 at North Lanut.

The advisers for the deal were Standard Chartered Bank for Avocet and Macquarie Capital for J & Partners.

Avocet's shares were down 0.1 percent to 229.75 pence by mid-morning.

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