Anatolia, Avoca to merge

VANCOUVER — A new mid-tier gold producer is on the horizon: Anatolia Minerals (ANO-T) and Avoca Resources (AVO-A) are planning to merge into a new entity named Alacer Gold that should be producing 800,000 oz. gold annually by 2015 from operations in Australia and Turkey.

Under the proposed deal, Avoca investors would receive 0.445 of an Anatolia share for each Avoca share held. After the merger, current Avoca and Anatolia shareholders would each own half of the new company.

Both companies’ boards support the merger, and Pala Investments — the largest shareholder in both companies — gives its blessings.

The deal still, though, requires shareholders to have their say. Specifically, Avoca must obtain approval from its shareholders and from the Australian courts. In Canada, the merger requires majority approval from Anatolia shareholders and may, if the TSX demands it, require a disinterested shareholder majority, whereby Pala would not participate in the vote to approve the issuance of Anatolia shares.

The new Alacer Gold would own interests in two operating gold mines in Australia and one in Turkey. Avoca’s two Australian mines are a result of the company’s rapid expansion since listing as a junior explorer in 2002. The company discovered the Trident gold deposit in late 2004 and it’s now the main source of ore for Avoca’s 100%-owned Higginsville gold operation. Higginsville is expected to produce 190,000 oz. gold in fiscal 2011.

Then, early this year, Avoca took over Dioro Exploration. The acquisition gave Avoca control of South Kalgoorlie, a 1,100-sq.-km land package that includes the Jubilee processing plant. An open-pit mine provides feed to the plant as does the underground Frog’s Leg gold mine, of which Avoca owns 49%.

In Turkey, Anatolia is on the brink of production at its Copler gold mine. The open-pit, heap-leach operation should produce 175,000 oz. gold annually, at a cash cost of US$260 per oz. The project is home to 40.8 million tonnes of oxide reserve grading 1.65 grams gold per tonne and 3.75 grams silver per tonne and the deposit is still open.

With the first ore placed onto the leach pads in July, Anatolia is looking ahead by initiating a prefeasibility study on Copler’s underlying sulphide resource.

Combining those operations should enable Alacer Gold to produce 600,000 oz. gold in 2013, increasing to 800,000 oz. gold in 2015. The company will boast 3.5 million oz. gold in reserves and almost 15 million oz. gold in resources. Alacer Gold will have a market capitalization of roughly US$2 billion.

Alacer Gold’s board of directors will have nine members. Four will come from each of Avoca and Anatolia, while the ninth will be a Pala appointee. Avoca chairman Rob Reynolds will serve as non-executive chairman of Alacer, and Anatolia president and CEO Ed Dowling will be CEO of the new company.

Anatolia shareholders were not particularly impressed with the news, pushing the company’s share price down 60¢ or 8.2% in a day to close at $6.70. Anatolia has a 52- week trading range of $2.01-$7.87 and 139 million shares outstanding. Avoca shares also fell, losing A14¢ or 4.2% to close at A$3.20.