Vancouver — As part of a strategy to boost its production profile and market valuation, Northgate Minerals (NGX-T, NXG-X) has launched an unsolicited takeover bid for Aurizon Mines (ARZ-T, AZK-X), a Vancouver-based company poised to resume production later this year at the Casa Berardi gold mine in northwestern Quebec.
Under the terms of the proposed transaction, Aurizon shareholders would receive 0.741 of a Northgate common share for each common share, which implies an offer price of $3.00 per share, based on Northgate’s closing price of $4.05 on May 19, and a 30.5% premium over Aurizon’s closing price that same day.
“We think this is a compelling transaction,” Northgate’s president and chief executive Ken Stowe said during a conference call with analysts. “It creates significant value to shareholders of both companies.”
The combined company would have a market capitalization of more than US$1 billion, and estimated production in 2007 of about 480,000 oz. gold and 84 million lbs. copper from the Kemess South copper-gold mine and the Casa Berardi gold mine.
With the Kemess South deposit nearing the end of its productive life, Northgate plans to develop its nearby Kemess North deposit, now in the permitting phase. The company also plans to carry out an underground exploration program at another advanced asset, the past-producing Young-Davidson gold mine in the Matachewan district of Ontario.
Aurizon, meanwhile, raised $51 million in equity financings last year and closed a $75-million loan early this year to bring its Casa Berardi mine back into production at an annual rate of about 175,000 oz. gold, starting in November.
Aurizon officials were unavailable for comment at presstime.
Northgate plans to send out an information circular to Aurizon shareholders shortly. The offer will remain open for 35 days, and will be subject to acceptance of at least 75% of Aurizon shareholders.
Stowe told analysts that Northgate considers itself undervalued relative to its peers, and expressed confidence that a successful transaction with Aurizon would lead to a “re-rating” at higher multiples for the combined entity.
“The new Northgate would be solidly entrenched as a mid-tier gold producer with amongst the lowest cash costs in its peer group, robust cash flow, and importantly, some organic production growth,” Stowe added. “The financial strength and operating expertise of the combined company would be important to the startup of the Casa Berardi, Young-Davidson and Kemess North operations.”
At presstime, news of the takeover bid drove shares of Aurizon up 38.7% to $3.19, while shares of Northgate fell 3.46% to $3.91.
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