Bema-Arizona Star saga continues

Vancouver – Bema Gold (BGO-T) has decided not to proceed with a share-swap offer for the shares in Arizona Star Resource (AZS-V) it doesn’t already own, four months after it announced its intention to do so. The latest move in the ongoing saga between the two companies has resulted in a surge in the price of Bema Gold’s shares which closed up nearly 5% to $2.72 while the shine was off Arizona Star which moved down sharply (by 7%) to close at $5.10 in heavy trading on the Toronto Venture Exchange.

The companies share a minority interest in the undeveloped Cerro Casale porphyry copper-gold project in Chile which is Arizona Star’s main asset.

Bema cites current market conditions and a desire to focus on its Kupol gold project in northeastern Russia and Refugio in Chile as the reason for its decision, however, it also withdrew its last representative from Arizona Star’s board and elected not to renew its management contract with the junior with which it has been affiliated over the past decade.

Bema’s surprise takeover move in late December came on the heels of a dissident shareholder’s victory at wresting control of Arizona Star away from Bema Gold. Albert Friedberg believed independence from Bema would better serve the shareholders of Arizona Star and initiated a nasty proxy battle.

The company’s dispute mainly centred around the financing and development of Cerro Casale in which Arizona Star has a 25% stake, Bema Gold, 24%, and Placer Dome (PDG-T) the operator, 51%.

Placer controls the future of Cerro Casale which looked like it would be one of its cornerstone projects.

Placer has until the end of this year to decide whether or not to finance the project. Cerro Casale is estimated to cost a hefty US$1.65 billion to develop, of which Placer Dome is responsible for US$1.3 billion.

If Placer decides not to finance then the project will revert back to Bema (51%), and Arizona Star (49%).

Paul Parisotto, President and CEO of Arizona Star says that Bema Gold’s decision against bidding for Arizona Star shares “clearly points to the fact that Bema knew it had no chance of success given the poor performance of its shares over the past four months.”

Parisotto states that “Bema failed to meet the expectations it created when it announced its intention to bid.” He added that he was not aware of any material adverse changes affecting the Cerro Casale project.

Bema, which already owns 5% of Arizona Star’s common shares, had offered to exchange 1.85 of its shares for each share of Arizona Star last December. Bema had seen this as an opportunity to increase its interest in the Cerro Casale deposit, which it believed was on the verge of moving into the development stage.

The deal valued Arizona Star at $283 million at the time, however, with Bema’s share price sinking to about half its value over the last few months, the value has gone down to about $156 million now.

Just last month it looked as though Bema wanted to go ahead with the takeover whether or not Placer Dome decided to develop Cerro Casale.

Discovered by Bema in 1995, Cerro Casale is one of the world’s largest undeveloped porphyry copper projects. It occupies a portion of the Aldebaran property, 30 km south of Bema’s Refugio mine.