With about 35.6 million shares outstanding, the takeover bid is worth $142 million provided all shares are tendered. The offer represents a 70% premium over the average trading price of AG’s stock over the past 20 days.
The offer is conditional on Barrick’s acquiring at least 50.1% of AG’s common shares on a fully diluted bases. At presstime, Barrick held 9.9% of the junior’s common shares. The major also holds a 40% interest in AG’s Veladero property in northwestern Argentina.
“The main reason [for the takeover bid], from the point of view of Barrick, is that it helps consolidate our land position in the area,” says Vincent Borg, vice-president of corporate communications for the gold mining giant. “Pascua is economic on a stand-alone basis and the economics of Veladero could be improved by taking advantage of the eventual Pascua infrastructure.”
Barrick owns 100% of the Pascua property in Chile, which is about 6 km northwest of the northern boundary of the Veladero property. As of Dec. 31, 1997, Pascua contained a proven and probable reserve of 194 million tons averaging 0.058 oz. gold per ton, or 11.2 million contained ounces. Ongoing drilling at Pascua is aimed at expanding reserves.
Barrick has also acquired the Lama property, which is adjacent to Pascua on the Argentine side of the border. A 14,000-metre drill program is under way there.
Representatives of Barrick and the company’s financial and legal advisors met at AG’s Vancouver office to inform the junior that a hostile takeover was imminent unless definitive agreements were made.
After a day of unsuccessful negotiations, Barrick made a cash offered to buy all of AG’s shares for $5.50 provided the junior and its principal shareholders entered into “support agreements” that would be followed by “lock-up agreements.” AG rejected the offer.
“We think it’s worth more.” states Sophia Shane, AG’s manager of corporate development, referring to the company and its assets. “Argentina Gold would happily agree to a takeover as long as we make money for our shareholders.” Shane did not specify what price would be acceptable to the company.
Says Borg: “We think a 70% premium to a gold equity these days is a pretty healthy one. Argentina Gold shareholders will look upon that kind of premium as being attractive — it’s cash and it’s in their pocket.”
Barrick says a formal offer will be mailed to all registered holders of AG’s common shares.
For its part, AG says it will continue to hold discussions with other interested parties in the interest of increasing shareholder value.
Denver-based
Drilling is still under way at the Veladero property.
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