Oromin turns friendly to Teranga offer

Teranga Gold (TSX: TGZ; US-OTC: TGCDF; ASX: TGZ) and Oromin Explorations (TSX: OLE) have found an amicable way for Teranga to acquire whatever Oromin equity it doesn’t already own.

Teranga’s previous all-share offer has been upped to 0.60 shares of Teranga for each Oromin share from the former offer of 0.582 Teranga shares. That means Teranga will now be handing over 71.2 million shares rather than 69.1 million. 

While it isn’t a significant amount more, it was enough to entice Oromin’s management and board to endorse the offer. Those individuals collectively hold 8.1% of Oromin shares, and that equity is now locked-up in favour of the proposal. 

The other key player in the transaction is Iamgold (TSX: IMG; NYSE: IAG), which is a big investor in Oromin. Iamgold had already entered a lock-up agreement with Teranga to tender its 16,088,636 Oromin Shares, which is 11.7% of Oromin’s stock, and has agreed to extend that agreement. 

Teranga itself already holds 18,699,500 Oromin shares, or 13.6% of the company’s equity, so there shouldn’t be any doubt about how that block will vote.

When Teranga’s shares, Iamgold’s shares and Oromin’s officer and board member shares are taken together, Teranga has 45,899,577 Oromin shares, or 33.4%, of the company’s equity already voting for the deal.

The motivation behind Teranga’s pursuit of Oromin is its interest in the higher-grade gold at the Oromin Joint Venture Group’s (OJVG) open-pit reserves in Senegal.

Teranga holds the Sabodala mine next door to OJVG, and lower grades and higher cost at Sabodala make OJVG particularly attractive.

OJVG is hosted in an orogenic greenstone belt and has reserves totalling 28 million probable tonnes grading 2.59 grams gold for 2.34 million contained oz. It has indicated resources of 75 million tonnes grading 1.56 grams gold per tonne for 3.8 million contained oz. OJVG’s resource also includes 16.5 million tonnes of heap-leach material at an average grade of 0.84 gram gold.

Teranga’s Sabodala mine sits 650 km southeast of Senegal’s capital, Dakar and has been in operation since 2009. The company says bringing OJVG into the fold will boost earnings, free cash flow and net asset value.

Oromin holds a 43.5% interest in OJVG with Bendon International holding another 43.5% stake. The joint venture status is a complication as Bendon has a lawsuit that is seeking compensation for what it says is an improper offer and takeover bid. Bendon also claims that the joint venture agreement gives it the ability to oust the operator of the project, which would be Teranga if the deal goes through, once there is a change of control.

Part of Teranga’s revised offer ensures that Oromin will assist Teranga against Bendon’s litigation.