LAC, Bond deal only needs minority shareholders’ OK

LAC Minerals’ (TSE) new sweeter offer for the remaining shares of 64.7% owned Bond International Gold (TSE) it doesn’t already own was recently approved by directors of both companies.

Under the offer, LAC is proposing to exchange 0.71 of its own common shares for each outstanding share of BIG, compared with the 0.53 offered in February.

As the new offer has the verbal backing of influential New York banker Goldman Sachs & Co., analysts expect minority shareholders to signal their approval at a special meeting called to consider the offer, Aug. 20.

Based on the July 5 closing price of $9 for LAC shares, the offer values Bond at $6.39 compared to $5.63, the level at which Bond shares traded in New York on the same day. There are currently 57.6 million issued Bond shares, of which 37.3 million are held by LAC.

Should the merger go ahead, LAC will automatically become North America’s fourth largest gold producer with annual output of over one million ounces from 13 mining operations in North and South America.

While directors of LAC and Bond acted on advice from an independent committee in approving the merger offer, it is still subject to a completion of the Arrangement Agreement. It must also be approved by the majority of minority shareholders representing 75% of the shares represented in person or by proxy at a special shareholders’ meeting.

Shareholders of record as of July 19, 1991, will be eligible to vote on the merger proposal at that meeting and a proxy circular is scheduled to be mailed out to all shareholders on July 17.

Analysts including Midland Walwyn Capital Inc.’s Michael Jalonen considered LAC’s original offer of 0.53 of a share for each share of Bond to be too low because it didn’t take into consideration reserves at the El Indio gold mine in Chile, one of five gold mines held by Bond.

At year-end, El Indio hosted 12.2 million tons grading 0.14 oz. gold per ton of proven and probable reserves. It also accounted for 34% of the 628,859 oz. produced by BIG in 1990.

By contrast, LAC’s share of production from six mines last year was 401,959.

The new offer is considered generous by Jalonen, who claims it should allow LAC to concentrate its own mines including the Bousquet No. 2 in Quebec which analysts are scheduled to visit July 15-16.