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TORONTO (miningweekly.com) – Vancouver-based Red Back Mining's proposed acquisition of Moto Goldmines should benefit both sets of shareholders, says RBC Capital Markets analyst Cailey Barker.
The companies announced on Monday that each outstanding common share of Moto will be exchanged for 0,45 of a common share of Red Back.
Red Back Mining owns two gold mines, Chirano in Ghana and Tasiast in Mauritania, as well as some projects in Ghana, and Moto owns 70% of the large Moto gold project in the Democratic Republic of Congo (DRC).
Barker said that he views the acquisition price as “reasonable” and in line with other recent transactions.
“Red Back's operational experience and strong balance sheet should provide the clout necessary to put the world-class Moto gold project into production."
The only possible negative implications depend on whether Red Back is big enough to be able to wear the “risk and negative attention” that comes with operating in the DRC.
The deal requires approval from Moto shareholders, and Barker advises shareholders to vote in favour of the deal.
He believes that Moto would have struggled to develop the project on its own, “given the logistical and financial challenges”.
Further, Barker does not see deal risk or expect competing bids, given the premium being offered by Red Back, as well as the limited number of other potential buyers that would be willing to take on the DRC.
The agreement also includes a commitment by Moto not to solicit or initiate discussions concerning alternative transactions, a break fee of C$15,3-million and a right for Red Back to match any competing bids.
