B2Gold Corp. (BTO), the Vancouver-based miner that has announced at least one acquisition in each of the past three years, agreed to buy Papillon Resources Ltd. (PIR) for about $570 million to gain control of its Fekola gold project in Mali.
Holders of Perth, Australia-based Papillon will receive 0.661 shares of B2Gold for each share they own, equating to a value of about A$1.72 ($1.59) apiece, the companies said in a statement today. The price represents a 53 percent premium to the 20-day volume weighted average prices of the stocks as of May 23, the last day Papillon’s shares traded before B2Gold made its offer.
B2Gold, which produced 366,000 ounces of gold last year from three mines in Nicaragua and the Philippines, plans to develop Fekola as its next mine after completing the Otjikoto project in Namibia later this year. The combined company may produce more than 900,000 ounces from five mines by 2017.
The transaction “provides Papillon shareholders with the opportunity to gain immediate exposure to a significant, growth orientated and profitable producer with diversified operations whilst still retaining material exposure to the upside potential of Fekola,” Mark Connelly, chief executive officer of Papillon, said in the statement. “B2Gold’s track record of successful mine development and operation, coupled with its balance sheet, cash flows and funding capacity will de-risk the development of Fekola.”
The acquisition is the latest in a heating up merger market for gold mining companies. Excluding B2Gold, there have been 10 gold deals bigger than $100 million announced or completed this year, with a total value of $5.5 billion, according to data compiled by Bloomberg, up from $4.3 billion in the same period last year. Gold’s 28 percent drop in 2013 spurred large producers to sell less profitable mines, while other companies are seeking to take advantage of a decline in equity values in the industry to add reserves and production.
B2Gold shareholders will own about 74 percent of the combined company and Papillon holders will own 26 percent. The transaction requires approval from shareholders of both companies.
A 2013 study showed Fekola may produce an average of 306,000 ounces of gold annually over its life and cost about $292 million to build, Papillon said in a March 6 filing. Operating costs were estimated at $580 per ounce.
B2Gold’s financial advisers are Canaccord Genuity Corp. and Raymond James Ltd., its Canadian legal counsel is Lawson Lundell LLP and its Australian legal counsel is K&L Gates LLP. Papillon’s financial adviser is Macquarie Capital, its Australian legal counsel is Hardy Bowen and its Canadian legal counsel is Stikeman Elliott LLP.
B2Gold dropped 3.4 percent to C$2.53 at the close in Toronto.
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