Century Mining announces hostile takeover bid for Sulliden Exploration

In the latest twist of a bitter four-year legal battle over a gold property in Peru, Century Mining (CMM-V, CMNZF-O) has declared its intention to make a hostile all-share takeover bid of its court opponent Sulliden Exploration (SUE-T, EXSDF-O).

Century says it will offer Sulliden shareholders 0.72 of a Century common share for each Sulliden share.

The offer values Sulliden at $0.41 per common share a premium of 51% based on the volume-weighted average trading price for the previous 20 trading days for Sulliden shares on the Toronto Stock Exchange and for Century shares on the Toronto Venture Exchange.

The saga began when Sulliden purchased the Shahuindo property in 2002 from Compania Minera Algamarca S.A. for US$4.13 million. Century purchased Algamarca soon afterwards, and launched a suit declaring the contract for the property transfer was invalid.

In the latest court decision in August, the Commercial Chamber of the Superior Court of Lima ruled in favour of Algamarca, declaring that an arbitral agreement granted in Sullidens favour in 2006 was invalid. The concession is going back into Algamarcas name this week, Century says.

Sulliden is now appealing that decision.

The courts have yet to rule on the actual validity of the transfer agreement. A decision is expected in early 2008.

We have won the last two rounds and there will be another decision on the [validity of the] transfer agreement in January, Margaret Kent, chairman, president and chief executive officer of Century, told The Northern Miner.

If Sulliden loses that then they will appeal it, and they will appeal it back in the same court that we just won in the superior court. Were in a no-lose situation.

Whoever loses the next round, Kent said, will pursue an appeal dragging the court case on for another two years.

We are extending the olive branch to Sulliden saying: Guys, we want to get on with it, we want to build a gold mine, she said. We want to get on with life and we think that Sulliden shareholders would like to get on with life.

With Sullidens 73 million shares outstanding, Centurys bid at $0.41 per share would value Sulliden at about US$30 million.

In the past, Century has valued the contested Shahuindo property at between US$300 million and US$400 million.

When asked whether Century was offering too little for Sulliden, Kent said: Whether Shahuindo is worth US$200 million, US$300 million or US$500 million, remember, Sulliden shareholders will now be Century shareholders so if Centurys shares go up, Sulliden will win too.

We just bought the shares of Algamarca, which we claim are the owners of Shahuindo, for US$31 million, so were saying we paid US$31 million for Algamarca so well pay Sulliden the same about US$30 million, she added

Kent emphasized that Century was not buying Shahuindo, it was paying this money to settle the litigation.

Explained Kent: We own Shahuindo but we want to build a mine so to do that were prepared to offer them this ability to grow with us, to experience the upside that Shahuindo gives everybody.

Kent noted that the deal would give Sulliden shareholders a chance to be part of a highly liquid, mid-tier gold producer and to benefit from the huge upside in Centurys stock price.

They will also benefit from Centurys substantial gold resources at its San Juan property and its Rosario de Belen properties in Peru, as well as its Lamaque property in northern Quebec.

If they dont tender into this bid where are they going to be in two years?,” she said. “Theyre still going to be sitting in a court in Peru.

John Kearney, Sullidens president and chief executive, said the move didnt come as a complete surprise, but declined to comment further.

They say they have announced their intention to make a bid but I guess well wait to see the bid if they make it.

But he also pointed out that since purchasing the property in 2002, Sulliden had completed extensive drilling and exploration and doubled the resource.

We have a 3,000-metre drilling program ongoing right now under exploration permits issued to Sulliden by the Ministry of Mines in Peru.

Kearney said Sulliden would release a statement on the proposed hostile takeover next week.

Shahuindo has an indicated resource of 38 million tonnes grading 0.95 gram gold per tonne and 22.99 grams silver, or 1.2 million oz. gold and 28 million oz. silver. The inferred resource is 17.2 million tonnes grading 0.62 gram gold per tonne and 12.83 grams silver, or 342,000 oz. gold and 7 million oz. silver.

Shahuindo is situated 25 km north of Barrick Golds Alto Chicama and 70 km south of Newmont Minings Yanacocha mines in northern Peru.