By Kishori Krishnan
South Africa-based Gold Fields Ltd (NYSE:GFI) has disposed of its minority stake in Vancouver-based Eldorado Gold Corp (TSX:ELD) for the equivalent of C$323 million or $11.61 per share.
That’s below Thursday’s closing price of C$12.30 on the Toronto Stock Exchange, but about $1.30 above Eldorado’s stock price in June, when Gold Fields acquired the shares. Eldorado shares dipped 18 cents or 1.5 per cent in early trading Friday.
The Gold Fields stake represented about seven per cent of Eldorado’s outstanding shares. It had received the shares when Eldorado bought its 19.9 per cent stake in Sino Gold Mining Ltd in June.
Gold Fields said it retains a top-up right negotiated with Eldorado. The right allows Gold Fields to receive an additonal payment if Eldorado pays a higher price to another seller for an additional five per cent or larger stake in Sino Gold.
Eldorado announced last month that it would acquire the rest of Sino Gold through a stock swap valued at about C$2 billion when it was announced August 26. In the world’s biggest gold-producing country, one Canadian miner now reigns supreme. Eldorado Gold Corp’s all-stock deal to buy Sino Gold Mining Ltd, which values Sino at about $2-billion, creates the dominant foreign gold producer in China and positions the company for more Chinese growth.
It is the culmination of a long-term strategy for Eldorado chief executive Paul Wright, who first moved into China in 2004 because he saw that it was vastly unexplored and was on the cusp of becoming a critical location in the global gold industry.
Today, China produces nearly 300 tonnes of gold. It is also the only country in the top three where production rose in 2008.
Despite those statistics, China has proven to be a tough nut to crack for foreign gold companies. None of the majors have any serious presence there, and there have been some high-profile failures. Eldorado though has made it work.
Under the terms of that deal, shareholders of Australia-based Sino Gold will receive 0.55 of an Eldorado share for each share they own. Based on Thursday’s closing price, that’s worth C$6.77. A merger of the two companies will create a multinational gold produer with a combined stock value of about $6.4 billion. The combined company would maintain headquarters in Vancouver with a major office based in Sydney.
The deal, which is still subject to regulatory and court approval, is slated to close in December. Gold Fields said Friday it will use proceeds of from the sale of its Eldorado shares for debt repayments.
Canadian miner Silvercorp Metals Inc has also has been producing precious metal mines in China.
Courtesy: www.goldinvestingnews.com
