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Avocet Mining offloads subsidiary in ongoing battle to stop overdue loans from pulling it under (AVM)

Troubled resources firm Avocet Mining (LSE:AVM) has offloaded its Norwegian subsidiary today as part of its ongoing eleventh-hour restructuring efforts. It will sell wholly-owned Wega Mining to a firm called Natholmen AS for $400,000 in cash. The sale marks the latest step in Avocet’s last-minute efforts to cut costs and streamline its remaining assets. The company hopes this will stop it from collapsing into liquidation as it tries to restructure $29m worth of overdue loans with lender Manchester Securities.

Once valued at almost £500m, the share price of gold miner Avocet has degenerated since 2016 after battling to keep open its Burkina Faso-based Inata mine following a row with former workers who seized a shipment of gold. This led to strikes and a halt in Inata’s operations that flawed Avocet’s production and forced it to rely on short-term loans. Despite the support, Inata still suffered from a shortage of critical supplies like chemicals and explosives. Meanwhile, in September last year, unknown attackers killed two paramilitary police officers travelling to the mine, heightening concerns around security.

Last April, Avocet’s chief executive was replaced by Boudewijn Wentink, previously a director with New World Resources, but the new leader failed to stage a turnaround. In May, Avocet was forced to suspend its shares because its accountants needed more time to complete an audit and in October it reported a 49pc drop in first-half revenue as gold output hit the floor.

Last month saw the firm sell off all its assets in Burkina Faso for $4m after weeks of delays. It said this was the only option other than going into liquidation. As the sale involved the disposal of Avocet’s sole trading subsidiary, the firm warned that the remainder of the group could be broken up further and eventually wound down. If this occurs, the firm said shareholders, which include controversial activist investor Elliott Associates, could receive very minimal returns due to its soaring debt.

As a result, the business is currently discussing whether to use the money made from today’s sale to partially repay Elliot.

Disclosure

Author: Daniel Flynn

The author of this piece does not hold shares in the company mentioned.

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