Perseus stands firm on OreCorp bid, targets Newmont assets

Perseus reported that it had $US642m net cash as at December. Picture: David Gray/AFP

African gold miner Perseus is holding the line in its resolve to outlay $258m for OreCorp, arguing the greater amount of money it is handing over to gain approval for the project is its way of effectively sweetening the deal.

The $2.8bn Australian-listed Perseus is in acquisition mode as it also lines up to compete for Newmont’s Akyem gold mine in Ghana, which is up for sale through investment bank Citi and could be worth close to $1bn.

Information memorandums are now out in the market for the sale process of the asset that is capable of producing 422,000 ounces annually.

That will be second on its to do list, but first is muscling Silvercorp Metals out of the way to gain full OreCorp control.

Both Silvercorp and Perseus each have about 20 per cent of OreCorp with takeover bids on the table.

The Silvercorp scrip offer values the target at 53.4c per share based on a 20-day volume weighted average price of its shares, said the independent expert.

Its offer closes Friday.

Perseus is offering 55c cash a share and while an independent expert agreed it was superior from a price perspective, it backed the Silvercorp offer because it had approval to develop OreCorp’s Nyanzaga Project in Tanzania – a mine that is expected to producing peak gold production of 295,000 ounces of gold per annum.

Yet that’s since changed, with Perseus also gaining approval.

However, it needed to offer the Tanzania government an extra 4 per cent project ownership to get a deal across the line in addition to the 16 per cent it had already put forward.

The argument from Perseus is that with the economic benefits less compelling with the extra money it has had to offer up to get approval, it’s effectively a way it is sweetening its bid.

Then there’s the fact that Silvercorp is listed in Canada, so shareholders are not receiving stock in an Australian company, and Silvercorp owns mines in China, which could be an unattractive jurisdiction to some shareholders.

Perseus has made it known that it would not sell its shares into the Silvercorp offer, creating a blocking stake to the goal of getting to 90 per cent, where Silvercorp can delist the business and automatically take full ownership.

Working for Perseus is Sternship Advisers, while Silvercorp is advised by Canaccord and CIBC is advising OreCorp.

Silvercorp first emerged with its offer last year that included 15c of cash and 0.0967 Silvercorp shares, and then it implied a price of 60c a share.

It has now fallen back to about 57c.

Perseus has three operating gold mines in West Africa, including two in the Cote d’Ivoire and one in Ghana, and is awash with cash after its operations have produced huge amounts of gold at a time the price for the commodity remains strong.

Perseus, the fourth largest gold miner on the ASX, reported a 21 per cent increase in its net profit for the six months to December on the previous corresponding period to $US164.7m.

It expects to generate more than 491,000 ounces of gold for the year to June with $US642m of net cash at December.

OreCorp holds an 84 per cent interest in the Nyanzaga Gold Project.