AMARA Mining would be unlikely to recommend to shareholders a higher offer for the company because its proposed merger with Australian firm, Perseus Mining, was the best outcome in the current market.
“If there was to be a takeover of the company it would have to be at a huge premium and that is not likely,” said John McGloin, CEO of Amara Mining. “We don’t want to be selling at the moment,” he said.
Perseus Mining unveiled an all-scrip bid for Amara worth $85m on February 29. The logic for the merger – in which Perseus is offering 0.68 per new Perseus share and 0.34 of a Perseus warrant for every Amara share – is that the two companies can pool their resources in Cote d’Ivoire and Ghana.
The offer values Amara at 14.6 pence per share which at the time of the offer represented a 45% premium to its then trading price. Amara is current trading at 13.25p/share after halving in value from 15p in April to 7.50p prior to the bid being made public.
McGloin said the pressure on the share price, the market trough, and consequent difficulties raising capital meant that a developing the company’s projects alone would be highly dilutive to shareholders.
Amara is developing the 203,000 ounce a year Yaoure project in Cote d’Ivoire which initially carried a development cost of about $440m. A recently completed prefeasibility study, however, lowered the capital cost to $334m after Amara decided to build a smaller plant producing less gold but at a higher yield.
“The combined company will be a 400,000 to 450,000 oz/year gold producer for a number of years. It will be a really good engine to drive growth but we need to get the momentum up and develop a good view on where the market is going,” said McGloin.
Perseus operates the Edikan gold mine in Ghana, a low grade operation that McGloin said would stand the combined entity in good stead. Perseus carries no debt. Cash flow from Edikan would help finance Yaoure.
The prospects of having the merger approved by his shareholders were good, according to McGloin who added that he had received irrevocable support from about 10% of the firm’s register. A further 20% of shareholders had provided indicative support by letter whilst the balance were consulted during the BMO gold conference last week.
“We hope to have the deal wrapped up by mid-April,” said McGloin who added that he would relinquish executive duties once the merger was complete. The company would be run by Perseus Mining CEO, Jeff Quatermaine.
