[miningmx.com] — GOLD One International’s transformation from gold junior to mid-tier status has gained momentum as a Chinese consortium penned an offer for the company, with promises of more corporate activity to follow.
CEO Neal Froneman on Monday announced the takeover whereby the consortium, led by China’s Baiyin Nonferrous Group, would acquire at least 60% of Gold One and inject A$150m into the firm – cash Froneman said would not lie idle as the company sought to turn the resources of acquisition target Rand Uranium into profits.
The consortium would also give Gold One better access and clout for future funding options, given Gold One’s new association with sizeable players in Asian markets.
The bidding consortium consisted of Baiyin (60% stake), the China-Africa Development Fund (30%) and Long March Capital Group (10%). Baiyin is a large-scale mining and smelting group founded in 1954 based in China’s Gansu province. The China-Africa Development Fund was the first equity fund to focus on direct investments from China to Africa, while Long March is an advisory firm focusing on Chinese investments in foreign resource firms.
Gold One would maintain its ASX and JSE listings, with a future listing on the Hong Kong Securities Exchange being mooted. Froneman and the existing management team have signed “attractive incentive offers’ to stay at the firm for the next three to five years.
Gold One’s immediate capital needs consist of the $250m needed for the Rand Uranium transaction. Froneman also said the group planned to invest an additional R200m in Rand Uranium’s gold assets during the first 18 months following the acquisition, aiming to knock 20% off underground operating costs.
Although the group has earmarked a $210m debt facility to pay for Rand Uranium, the A$150m injection would give it more options.
“I don’t think that a company our size should have too much debt on its books,’ said Froneman. “The (A$150m) cash would give us a lot more flexibility.’
The group’s Ventersburg project would also need capital for future developments.
However, Froneman made the scale of Gold One’s future intentions plain when he said the company would “pursue an internal and external growth profile, driven by an entrepreneurial and ambitious spirit’.
This was affirmed by the chairperson of the China-Africa Development Fund, Mr Zhao, who said the consortium wished to see Gold One becoming “one of the largest gold companies’ and “to be in the top five within the industry’.
DEAL STRUCTURE
The consortium already owns 17.7% of Gold One, acquired in April at A$0.53 per share.
The next step would consist of the placement of 375 million shares at A$0.40 (R2.97) each in exchange for the A$150m. The consortium would own between 37% and 43% of Gold One following the share placement, depending on whether the holders of Gold One’s convertible bonds chose to exchange their bonds for shares.
In the following phase, the consortium would make an offer for 100% of Gold One’s remaining shares in issue at A$0.55 (R4.08), with a preference to reach between 60% and 75%. The cash offer, together with the share placement, would give Gold One an implied market value of around R4.4bn.
The offer would represent a premium of 27.9% above the previous closing price on the ASX (21.9% on the JSE) and 25.1% on the 30-day volume-weighted average price (27.1% on the JSE).
Should the consortium not reach 60% shareholding following the cash offer, more shares would be issued at A$0.53 each to achieve the minimum threshold.
Also, should Gold One not reach its stated production target of 120,000oz for 2011, the bidders would be offered a “claw back’ comprising a placement of new shares up to a maximum of 492 million shares.
The anticipated implementation of the deal is end-September 2011.
