Newcrest Mining, the country’s biggest gold miner (and Number 4 in the world) has flexed its muscles and expanded its domination of the local industry.
Via a side deal with two smaller miners, it will end up taking an initial 38% stake in the merging Catalpa Resources and Conquest Mining.
There will be a capital raising as well, but the end result will be the ending of St Barbara’s $350 million bid for Catalpa, which was first revealed in May.
All up, a $1.1 billion locally-listed goldminer, controlled by Newcrest, will be created.
Newcrest’s holding will fall to around 33% when the merged company issues shares to raise $150 million in new capital.
Details were announced in this statement to the ASX yesterday by Catalpa and Conquest and the separate statement from Newcrest.
The news saw Newcrest shares lose 49c, or 1.3%, to $37. Catalpa shares (CAH) slumped more than 15%, or 26.5c, to $1.44 as the market realised the St Barbara bid was dead.
In contrast to those losses, Conquest shares lost 2c, or 4.4%, to 43c, so it was seen as the winner.
The post merger capital raising will be a pro-rata renounceable entitlement offer to “suitably capitalise the significantly enlarged merged entity, ensuring financial flexibility for development of the asset portfolio and to fund growth opportunities”, the statement said yesterday.
After the raising and based on recent stock prices, the market value of the company would be more than $1.1 billion, according to yesterday’s statements.
Several hours after the three-way deal was revealed to the market, Catalpa issued a statement which revealed that discussions with St Barbara had been terminated.
The earlier combined statement from Catalpa and Conquest justified the deal along the following lines.
It said the merger would see the "Creation of a leading growth-focused Australian mid-cap gold producer with five Australian gold projects, a defined growth pathway, significant exploration potential and a strong financial position".
The combined group profile would have forecast production of "approximately 294,000 ounces of gold in FY11 (ranking the Merged Entity as a top five Australian gold producer) increasing to 400,000 to 450,000 ounces of gold equivalent by 2013:
"Resources: Approximately 7.1 million ounces of gold equivalent. Reserves: Approximately 3.6 million ounces of gold equivalent, Significant exploration potential above defined Reserves and Resources;
"Cash post proposed equity raising in excess of A$200 million with modest debt of approximately A$61 million;
"Size and flexibility to enable an aggressive approach to growth opportunities and Proven entrepreneurial and operational management team with highly complementary skill sets."
The companies said the merger and Newcrest deal will happen along the following lines:
"First there will be an all scrip merger of equals of Catalpa and Conquest by Scheme of Arrangement with Conquest shareholders to be issued new Catalpa shares in a ratio of 0.30 new Catalpa shares for each Conquest share held;
"The concurrent acquisition from Newcrest of 100% of Mt Rawdon and 70% of Cracow in exchange for a 38%5 interest in the Merged Entity (pre-equity raising).
"Existing Conquest options will either to be exchanged for equivalent options in the Merged Entity on equivalent terms or converted into shares in Conquest prior to the Scheme taking effect.
"The proposed equity raising of approximately A$150 million to be launched by the Merged Entity shortly after implementation of the two transaction steps outlined above via a pro-rata renounceable entitlement offer
"At Catalpa and Conquest’s request, Newcrest will not participate in the equity raising. As a result, its entitlements will be offered for sale in conjunction with the equity raising and its interest will be diluted to approximately 33%5 of the Merged Entity.
"The equity raising provides the opportunity for the Merged Entity to broaden its investor base while also providing existing Catalpa and Conquest shareholders the opportunity to participate," the statement said.
