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This month we highlight the position of Bezant Resources. In October Bezant announced that it had granted Gold Fields an option to purchase its flagship copper/gold Mankayan Project. The Mankayan Project covers a total of 534 hectares in the Guinaoang area in the Mankayan-Lepanto mining district, approximately 240 kilometres north of Manila, in the Republic of the Philippines.

Under the terms of the option agreement Gold Fields would make a non-refundable, upfront cash payment of US$7 million.  A further cash sum of US$63 million is payable, on exercise of the option, to acquire the entire issued share capital of Asean (the Mankayan Project holding company).  Gold Fields can exercise this option any time until 31 January 2013.

Bezant shareholders approved this option agreement at the end of October and the Company has made further comments on the deal and its future plans in Final results issued on 21 November.

At the time of writing Bezant’s shares are trading at 27 pence giving the Company a market cap of £17.5 million.

Return of cash

Taking a look at Bezant’s results shows the company had £4.4 million in cash at 30 June 2011. Since that time the Company has received the $7 million upfront payment from Gold Fields.

Going forward, Bezant’s main exploration focus is at its Eureka copper and gold project in Argentina, but it is the potential cash inflow from its Gold Fields option agreement that gives hope for shorter term gains for shareholders.

In the 2011 final results Bezant stated what would happen to the cash if Gold Fields proceeded with the deal:

"In the event that the Option is exercised and the sale and transfer of the issued shares in Asean is completed the Company anticipates that approximately 50% of the gross sale proceeds will potentially be available for distribution to Shareholders.  A return of cash to Shareholders will be subject, inter alia, to obtaining professional advice from our financial, legal and tax advisers and prevailing exchange rates at the appropriate time, and taking into account the view of Shareholders at that time (as appropriate). Of the 50% of funds retained, all taxes will be paid out of this sum with the remainder being retained to progress the Company's copper/gold exploration portfolio."  

The Company also made comments about the probability of the deal proceeding:

“There can of course be no certainty that Gold Fields will exercise the option, but given their current level of financial commitment to the Philippines in relation to Lepanto Consolidated Mining Company's adjacent Far Southeast project, your Board currently considers that there is a good probability that the option will be exercised.  Notwithstanding the latter, your Board also believes that the receipt of the non-refundable upfront cash payment of US$7 million significantly enhances the Company's financial position in the current very uncertain global economic climate.”

approximately 50%.....

....for Shareholders

AimZine Comment

This is an interesting situation where Bezant believes that there is a “good probability” of their receiving a further $63 million from Gold Fields. If they do, the Company is proposing to return $35 million to shareholders which we calculate to be approximately £21.8 million i.e. somewhat higher than the market cap. Once such cash was returned the Company would still have a very healthy balance sheet to develop its existing projects and future projects.

Obviously the risk is that Gold Fields do not take up their option but even then Bezant has sufficient funds to develop Mankayan further whilst it seeks alternative partners.

As always, the purpose of this Snippet column is to highlight a particular situation worthy of further research and monitoring.

 Copyright © Aimzine Ltd 2011

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