TORONTO (miningweekly.com) – Canadian miner B2Gold on Tuesday announced that it had struck an agreement with ASX-listed Papillon Resources which would see the companies merge in an all-scrip deal valued at about $570-million.

The deal would give B2Gold access to Papillon’s (meaning butterfly in French) Fekola gold deposit in Mali, lifting the company’s compliant measured and indicated resources by 25%.

The two firms have agreed to exchange 0.661 of a B2Gold common share for each Papillon ordinary share held.

The offer represented a purchase price of about A$1.72 a Papillon share.

Papillon had been in a trading halt, which was extended into a suspension of trading on the ASX, since May 26, after B2Gold delivered an indicative nonbinding proposal days earlier, which included a proposed merger ratio.

While the Papillon shares had not been trading since May 23, the B2Gold share price had fallen since that date owing to a combination of the gold price volatility and media speculation surrounding the transaction.

The merger would be implemented by way of a scheme of arrangement under the Australian Corporations Act 2001, and when completed, would result in existing B2Gold shareholders owning 74% and former Papillon shareholders owning about 26% of the company.

The merger adds attributable measured and indicated resources of 4.18-million ounces grading 2.40 g/t gold and inferred resources of 459 000 oz grading 1.91 g/t gold.

B2Gold is expecting to produce between 395 000 oz and 400 000 oz of gold in 2014 from three operating mines in Africa, and expects growth to more than 900 000 oz of gold by 2017 from five operating mines.

B2Gold is expecting to produce about 550 000 oz of gold by 2015, after its low-cost Otjikoto mine, in Namibia, starts up at the end of this year.

“We are excited about the merger with Papillon as it will add the high-grade Fekola project to our rapid growth as a profitable gold producer. We believe this merger will bring great value to all shareholders and we congratulate Papillon's strong technical team on advancing the impressive Fekola project to a robust prefeasibility study and look forward to working together to advance the project to production," B2Gold president and CEO Clive Johnson said.

B2Gold's financial advisers include Canaccord Genuity Corp and Raymond James. Lawson Lundell is the company's Canadian legal counsel and its Australian legal counsel is K&L Gates.

Papillon's financial adviser is Macquarie Capital. Its Australian legal counsel is Hardy Bowen and its Canadian legal counsel is Stikeman Elliott.

FEKOLA PROSPECTS

A prefeasibility study (PFS) completed on the Fekola project has confirmed a large-scale, low-cost and robust project.

The project hosts a mineral resource of 54.97-million tonnes, grading 2.38 g/t gold.

Envisaged is an openpit mine and conventional carbon-in-leach processing circuit to process four-million tonnes a year during steady-state production.

Average production of 306 000 oz/y of gold is expected over the life of the mine, which is estimated at nine years.

Contract miners will be used, thus eliminating the need for capital expenditure (capex) on fleet.

The estimated capex for the mine, process plant and associated infrastructure is $254-million.

Papillon has started early site clearing of the plant site and mine services area at its Fekola project.

The company has identified several key areas, mainly in earthworks, to advance Fekola towards production before a formal final investment decision is made, following the release of the definitive feasibility study (DFS). These works would reduce the potential for delays, particularly the impact of the wet season, once formal construction had started.

Papillon launched the DFS on Fekola in March this year and would build on the technical and economic results achieved in the PFS.

Papillon had secured a mining permit over the Fekola gold project, which would be valid for 30 years.

B2Gold’s TSX-listed stock was trending lower on Tuesday, shedding 6.11% to C$2.46 apiece.