TORONTO (miningweekly.com) – Vancouver-based Eldorado Gold will offer to buy the just over 80% of Australia's Sino Gold that it does not already own, in a friendly, share-based transaction that will increase the firm's presence in the world's biggest gold-producing nation.
The deal will produce a new intermediate gold producer with a market capitalisation of some C$6,4-billion, Eldorado CEO Paul Wright said.
Separately, Sino Gold and Eldorado are already in a very exclusive club, as international gold miners operating successfully in China, he said on a conference call.
This means that the combined company will have a significant advantage in one of very few regions in the world where gold production is actually increasing, he said.
The Sino Gold acquisition “establishes the new Eldorado as the unequivocal leader among international gold producers operating in China”, Wright told analysts and investors.
Sino Gold investors will be offered 0,55 Eldorado shares for every Sino Gold share held, valuing Sino Gold at around C$2-billion, or A$2,2-billion.
The deal has the backing of both boards.
Eldorado, which currently produces the yellow metal from mines in China and Turkey, bought just under 20% in Sino Gold last month from Johannesburg-based Gold Fields.
Sino Gold operates two mines, including China's second-biggest gold mine. Both companies have development projects in their pipelines.
Altogether, based on current operations, the combined company will produce 550 000 oz of gold from four mines, three of which are in China, increasing to 850 000 oz by 2011, from six mines.
“Clearly this business combination has everything to do with China,” Wright commented.
China became the biggest gold producing nation in 2007, overtaking South Africa, which held the top spot for more than a century.
China is under-explored, geologically prospective and “highly receptive” to gold mining,” Wright said.
“The future of the Chinese gold industry remains very bright.”
The acquisition is expected to close in December and Sino CEO Jake Klein will remain in his position until then, after which he will provide "consultancy services" to Eldorado.
The combined company will have its headquarters in Vancouver but plans to seek an Australian listing.