Nordgold NV, the Russian gold producer that controls three-quarters of High River Gold Mines Ltd., said it will bid for the remaining shares in an offer valuing the Canadian miner at about $1.2 billion.
Nordgold, spun off from steelmaker OAO Severstal this year, will offer C$1.40 ($1.38), or 0.285 global depositary receipt, for each High River share, it said today in a statement. The GDR offer represents a 17 percent premium to the price on July 17 and a 30 percent premium to the three-month average, it said.
High River, based in Toronto, operates in Nordgold’s main areas of focus in Russia and West Africa. The acquisition will allow Nordgold, controlled by billionaire Alexey Mordashov, to increase its tradable shares, or free float, after the company’s London-traded GDRs slumped 37 percent since the spinoff.
A swap may raise the number of shares traded and held by minorities to about 23 percent, Chief Executive Officer Nikolai Zelenski said on a conference call. He said he expects the majority of High River minority holders to favor the share swap over cash. About a third of High River minorities have already agreed to swap their stock for Nordgold GDRs, according to the statement.
“The low liquidity of the shares is the main reason why Nordgold trades at a 50 percent discount to its global competitors,” said Alexei Morozov, a UBS AG analyst. Minority holders account for about 10 percent of the company, compared with a targeted 17 percent when Severstal announced the spinoff.
Nordgold GDRs dropped as much as 4 percent in London to $4.80, and traded at $4.95 as of 1:54 p.m. local time. High River closed at C$1.23 yesterday in Toronto.
Nordgold, which increased second-quarter output 6 percent from the previous three months to 165,300 gold equivalent ounces and reduced 2012 production target by 10 percet to as much as 770,000 ounce, will use existing cash to fund the bid, which will be open for 35 days after it’s mailed to shareholders. The company didn’t specify a date.
Nordgold has appointed Jefferies International Ltd. and Troika Dialog as advisers.