Batero Gold targets CB Gold in friendly deal

Less than a month after rejecting a hostile takeover offer from Red Eagle Mining (TSXV: RD; US-OTC: RDEMF), CB Gold’s (TSXV: CBJ; US-OTC: CBHDF) board of directors is recommending to shareholders that they accept a takeover offer from Batero Gold (TSXV: BAT; US-OTC: BELDF).

CB Gold says Batero’s offer represents a 44% premium to its closing share price of 5¢ on July 23, and a 9% premium over the current implied value of Red Eagle’s bid for the company in June, based on closing share prices on July 23. All three companies have gold projects in Colombia.

Batero is advancing its wholly owned flagship Batero-Quinchia project and finished a preliminary economic assessment in November 2013. Red Eagle is developing its wholly owned and fully permitted Santa Rosa project, with construction scheduled this year and production next year.

Both companies are interested in CB Gold’s early stage Vetas gold project, where at least 11 small underground mines were in production before the company acquired the property in 2009.

The 10 sq. km project near the village of Vetas in northeastern Colombia is 400 km northeast of Bogota and less than 100 km from Bucaramanga, the capital city of the department of Santader. The project is also 10 km south of the California-Vetas mining district, which contains Eco Oro Minerals’ (TSX: EOM) Angostura silver-gold deposit.

Since September 2009, CB Gold has collected over 2,000 samples at Vetas from surface and from 6 km of underground workings.

Under Batero Gold’s takeover offer, Batero would acquire all of CB Gold’s outstanding shares in exchange for 0.3056 of a Batero share and $0.0275 in cash for each share of CB Gold. The offer represents a 5¢ value per share of CB Gold, or a $9-million equity value.

Batero has also agreed to buy 11.5 million CB Gold shares in a private placement at 5¢ per share. CB Gold says it would use the money to fund working capital, including pending liabilities and general corporate purposes.

So far directors, officers and other significant CB Gold shareholders, who together hold 19.5% of the company’s outstanding shares, have agreed to enter into lock-up agreements with Batero.

Fabio Capponi, CB Gold’s CEO, was unavailable for an interview before press time. But in prepared remarks laid out in a press release, the mining executive said the financing strengthens the company’s balance sheet “and allows us to move towards the creation of a well-financed and technically solid player in the junior mining space.” He also said the terms of Batero’s takeover offer are “superior” to the “inadequate” hostile offer from Red Eagle.

Under Red Eagle’s offer unveiled on June 30, each CB Gold common share would be exchanged for 0.162 of a Red Eagle Mining common share, valuing CB Gold at $8.4 million based on Red Eagle’s 20-day, volume-weighted, 31¢ average share price. Red Eagle said its takeover proposal represented a 46% premium to CB Gold’s 20-day, volume-weighted average share price of 3.5¢ per share.

Roger Moss, Batero’s president and CEO, could not be reached for comment before press time. But in prepared remarks, Moss described the Vetas project as a “significant opportunity” for Batero, with “strong grades and excellent exploration upside.” Moss — a geologist who helped find the multi-million ounce Navachab gold deposit in Namibia — noted that Batero has been evaluating accretive acquisitions for several quarters, and that he believes Vetas has “near-term and high-grade production potential.”

The Vetas project is characterized by low to medium sulphidation and epithermal mineralization with high-grade quartz vein structures and lower-grade, disseminated stockwork zones, possibly owing to emplaced multiple porphyry systems, CB Gold says. Porphyry-related mineralization covers an area of 700 by 700 metres.

If Batero acquires the company, CB Gold’s shareholders will gain exposure to Batero’s Batero-Quinchia project, 190 km northwest of Bogota. The La Cumbre oxide deposit is one of the project’s three porphyry deposits, and is  its largest.

La Cumbre has measured and indicated resources of 108.1 million tonnes grading 0.59 gram gold per tonne and 1.7 grams per tonne silver. Inferred resources add 11.1 million tonnes averaging 0.48 gram gold and 1.3 grams silver. 

According to the 2013 preliminary economic assessment, at a base case of US$1,400 per oz. gold, Batero-Quinchia would have a seven-year mine life, with annual average production of 56,000 oz. gold and 117,000 oz. silver. Initial capital costs were estimated at US$97.3 million, including a US$16.2 million contingency, and a post-tax payback of 30 months.