Minorco offers $6.6 billion for Consolidated Goldfields

Luxembourg-based Minorco has commenced what promises to be a titanic bidding war by announcing a $6.6 billion(US) offer for all the outstanding shares of Consolidated Goldfields of London.

Minorco already holds a 29% interest in the British resource giant whose assets include a 50% stake in New York-based Newmont Mining, North America’s largest gold producer.

The Luxembourg company’s major shareholders include Anglo American Corp. of South Africa and diamond giant De Beers Consolidated Mines.

But ConsGold has already hinted that it will reject the 13.06 pounds per share bid. “It lacks commercial justification,” a Cons Gold director has said.

The offer comes a day after Minorco reported 1988 net earnings of $775 million(US) or $4.55 per share, a sharp increase from $122 million or 72 cents per share announced in 1987. Minorco ended the year with $890 million in cash.

The bid also comes just two weeks after ConsGold announced its intention to sell off its South African mining assets. ConsGold is the second largest producer of gold in the Western World next to Anglo American Corp. It is also a major producer of construction materials.

“Minorco obviously wants to buy the whole package and handle the sale themselves,” said William White, senior vice-president, corporate finance at Merrill Lynch in Toronto.

“If someone is successful in taking over ConsGold, they would probably sell Newmont to finance the acquisition,” he said.

In a bid to reduce a long-term debt load which recently stood at $1.9 billion, Newmont has dealt away a number of assets including 4.1 million shares of E.I. Du Pont de Nemours and a 34% stake in Sherritt Gordon (TSE).

But with reserves standing at 302.6 million tons of grade 0.049 oz gold per ton in 16 Carlin, Nev., deposits, Newmont’s 90%-owned subsidiary Newmont Gold is planning to produce 1.6 million oz gold in 1991. That would make Newmont a prize catch despite its huge debt load.