Highland Gold Mining Limited (HGM.L,HGHGF.PK) on Friday said it has agreed to acquire LLC Klen in Russia for $69 million in cash less any assigned loans. The shares are currently trading around 7 percent lower on the London Stock Exchange.
LLC Klen holds the mining and exploration rights to the Klen gold deposit and the surrounding Verkhne-Krichalskaya property located in the Chukotka autonomous region in north eastern Russia.
The company noted that the deal is classified as a related party transaction as LLC Klen is a subsidiary of an entity that is associated with Primerod International Limited, a substantial shareholder in Highland Gold.
The Directors of the company, with the exception of Eugene Shvidler, Olga Pokrovskaya and Eugene Tenenbaum connected with Primerod, consider the terms of the transaction to be fair and reasonable.
Highland Gold said it will fund the deal from its cash resources. The acquisition is subject to approval by the Russian anti-monopoly authorities which is a condition precedent.
Highland Gold Chairman Eugene Shvidler said, "The Klen addition is an important extension of Highland's asset base and will have an immediate impact on the Company's resources. Production is scheduled to commence in 2015 and will benefit prospective output. We believe that the Klen operation could benefit significantly from the exploration potential of the Verkhne-Krichalskaya area."
Highland Gold are currently trading at 97.25 pence, down 6.75 pence or 6.49 percent in London.
In pre-market activity in the U.S., shares are currently at $1.64, down $0.26 or 13.79 percent.
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