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Ex Workers at Avocet Mining seize 1,400 oz of gold - Avocet gives capitalism a bad name

By Tom Winnifrith | Monday 24 October 2016


Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.


It is the sort of incident that would have Sir Benjamin Dover fulminating about how you can't trust the natives out in Bongo Bongo land. Workers, who Avocet Mining (AVM) fired in December 2014, have seized 1,400 oz of gold which had been produced at the Inata mine. The incident says a lot about the way Western miners rape and pillage across Africa. I'm with the workers even as Avocet shares crash on worries that it may have a funding issue and that it clearly has breached Stock Exchange rules.

The workers were fired for taking part in what Avocet terms an illegal strike in December 2014. Was it actually illegal? That is another matter. The workers have now got a court order to extract from Avocet's 90% owned subsidiary Société des Mines de Bélahouro SA (SMB). Avocet admits that a court upheld the claim that elements of pay were due, but says that the amount has yet to be determined by a court, and SMB management believes that any amount would be considerably less than the $3.4 million claimed by the workers. SMB is now going to Court to try get the seizure, by Court bailiffs, reversed and hopes for a decision within 1-2 weeks.

Note to LSE Regulation: the seizure took place on 7 October. It is clearly material. Why did Avocet not bother to tell investors until today, October 24? Surely this is a massive breach of listing rules in failing to disclose price sensitive information? Will you penalise Avocet?

The effects of this seizure could be serious. Avocet says that SMB has advised workers and the government that if this matter cannot be resolved promptly, and cash cannot be realised from gold sales in order to pay for running costs of the mine, management will need to consider temporary cessation of operations.

And it gets worse... since this may have a "material adverse effect on SMB's financial position" it may not be able to send any funds to Avocet PLC before receipt of proceeds in connection with the sale of Tri-K to Managem SA, which is expected to take place before the end of the year. Avocet says that means "the Company will need to find alternative sources of funds, which are expected to be approximately US$1-200k per month."

That does not sound good. No wonder, given the fear that there mjay be a small cash shortfall and the blatant breach of market rules in terms of witholding price sensitive information, the shares are off 17% at 69p valuing the company at £144 million.

There is a wider point. If one looks at the last Avocet results we see that in the first six months of the year it paid tax of £79,000 on reported profits of £3.981 million. It is clear that its operations in Burkina Faso are highly profitable since they are - by admission today - remitting material sums back to Avocet's head office. Yet it is clear that, via taxation, the poor people of Burkina Faso are receiving sweet FA from this company. One suspects that SMB is stiffed with enough PLC cross charges to ensure that its profits out in Bongo Bongo land are sweet FA.

You may say but the western miners are providing jobs. But it is clear that there are no labour laws to protect - very badly paid - workers, If they try to strike, Avocet deems the action illegal and fires them. It feels no need to pay sums owed and is quite happy to leave its fired workers to starve, forcing them to take legal action to reclaim cash that is rightfully theirs.

Capitalism is a wonderful way to make the world a better place but only if it operates with a moral dimension. For Western miners to plunder the resources of Africa in a way that gives a minimal amount back to the local peoples in taxes and screws and exploits the workers is just plain wrong. It is the sort of behaviour which creates popular anger out in Bongo Bongo land which can ultimately see the golden goose of the Western robber Barons get well and truly cooked. I share the anger of folks out in Burkina Faso and thus, whatever the financial case for buying Avocet shares, on moral grounds I would not be tempted.

Avocet..you give capitalism a bad name.


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